Agriculture toughest test yet for WTO

A lack of convergence on key issues ahead of the talks meant that progress was always going to be difficult, writes Marc Coleman, Economics Editor, in Hong Kong.

The WTO is in many ways a victim of its own success. It began in 1994 as a more comprehensive and effective successor to the general agreement on trade and tariffs (Gatt). In their combined 60-year history, the two organisations have achieved drastic improvements in free trade across a wide range of goods and, more recently, services. The most dramatic improvements were achieved at the conclusion of the Uruguay round of talks in 1994. The present Doha round is clouded in pessimism.

Having significantly liberalised most markets, agriculture remains a last bastion of protectionism. It is relatively easy to eliminate tariffs on manufacturing goods as happened in the Uruguay round.

Manufacturing is a business and manufacturers in many countries were not enthusiastic about the tariff reductions that followed the Uruguay round.

But manufacturing is not a way of life and farming is. Compared to other producers, farmers are clustered in strong rural communities who seem them as critical to their economic interests.

That makes them more politically powerful than manufacturers. And they are nowhere more powerful than in the EU. A European Commission fact sheet points out that there are 11 million farmers in the EU, compared to two million in the US. That's a hell of a lot more votes.

The EU went through a process of reforming the CAP, but did so at a time before it knew agriculture was going to be a major issue for WTO talks.

Now it is asking for concessions from the US and other countries in return for these reforms.

As far as the US is concerned, those reforms are history and new commitments are needed from the EU before the US will agree to measures relating to development.

For example, the US is opposed to unconditional elimination of export duties for the least developed countries (LDCs) as proposed by the EU. Bangladesh is an LDC, but as far as the US is concerned it is a world superpower in the field of textiles that is already wiping out US jobs even with export duties in place.

The US wants gains elsewhere before it will agree to this. Thus countries like Bangladesh, which have genuine comparative advantages that any just trading system would allow them to exploit, find themselves caught in diplomatic crossfire.

If the WTO talks fail, it should not be a bad reflection on the ministerial conference. The conference has been competently run by both the director general and the Hong Kong authorities. But it has come up against what was always going to be its toughest test.

And, as Peter Sutherland points out on this page, a lack of convergence on key issues in advance of the talks meant that progress was always going to be difficult.

If one criticism can be levelled at the WTO it is the manner in which it has bundled issues together.

The development round implies a desire to help the poorest countries. But progress on "aid for trade" and "everything but arms" - initiatives from the US and EU respectively to help LDCs - has been tied together with issues like improving access of developed country firms to services markets in countries like Brazil.

The lack of a clear border between the countries that are stuck in a very undeveloped position and those who are in fact developing at some speed may yet prove to be the Achilles heel of the talks.

The WTO may simply have tried to do too much in one go.