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The WTO’s Troubled ‘Doha Negotiations’

Authors: Eben Kaplan, and Claire Calzonetti
December 9, 2005
This publication is now archived.

What are the Doha negotiations?

At the November 2001 Ministerial Conference in Doha, capital of the Persian Gulf state of Qatar, the World Trade Organization (WTO) agreed to a new round of trade negotiations aimed at furthering trade liberalization while giving developing nations more access to the global markets. Dubbed the Doha Development Agenda (DDA) and billed by rich nations as a way to address global poverty, the Doha agenda was to be negotiated in September 2003 at a ministerial conference in Cancun, Mexico. But the conference devolved into four days of wrangling over farm subsidies between rich and poor nations, causing the talks to collapse and leaving the future of the Doha round in jeopardy. Negotiations remained sidetracked until an August 1, 2004, framework agreement resurrected the talks. The lapse caused the WTO to miss its initial January 2005 deadline for completion of the Doha agenda and a new target was set for the end of 2005 at the December ministerial meeting in Hong Kong. However, days before the meeting in Hong Kong, newly elected WTO Director-General Pascal Lamy pushed the target deadline to early 2006 over concerns the Hong Kong conference may not produce an agreement.

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What will be discussed in Hong Kong?

The most hotly contested issue at the Sixth WTO Ministerial Conference, scheduled for December 13-18, 2005, is likely to be agricultural trade, the same issue that derailed the 2003 ministerial conference in Cancun. At the core of this debate are the agricultural subsidies that the United States and European Union (EU) member nations pay their farmers. Many trade experts say such subsidies contribute to worldwide poverty by lowering global prices for cotton, sugar, rice, and other crops that constitute many of the world's poorest nations' primary income sources. The United States has expressed willingness to reduce or even discontinue its subsidies if Europe will do the same. The EU has yet to move much on the issue, weighed down by French recalcitrance on the matter. However, the EU recently agreed to reduce sugar subsidies, which paid European sugar farmers about three times the world price. The issue of subsidies is daunting enough that trade ministers from several key WTO members—the United States, Australia, Brazil, the EU, India, and Japan—found it necessary to meet ten days ahead of the Hong Kong conference in order to discuss tactics. The ministers shared concerns for poorer nations, but failed to agree on a solution. The G90, a group of developing countries, also met in advance of the conference to discuss their strategy.

Why are agricultural subsidies such a big issue?

Many of the world's poorest nations have few exports to offer besides basic agricultural products, says Isaiah Frank, the William L. Clayton professor of international economics at the Paul H. Nitze School of Advanced International Studies in Washington. These countries are hard-pressed to compete against richer nations, such as the United States, the EU, and Japan that support farmers with subsidies. This assistance—estimated by the Organization for Economic Cooperation and Development to be around $300 billion annually—increases the supply of basic agricultural goods on the world market, thus lowering their prices. Critics of subsidies explain them like this: The average EU cow is said to receive a $2.20 daily subsidy, more than the daily wage of 20 percent of the world's population.

Poorer nations cannot afford to subsidize, but they try to protect their farmers in other ways. For example, tariffs on agricultural goods are often even higher in poor countries than in rich ones. Getting rid of tariffs would help increase agricultural trade between poor nations, free-trade advocates say, just as dropping tariffs in the developed world would expand trade by opening more markets to Third World goods. The World Bank estimates loosening trade barriers could increase developing nations' exports by $190 billion over the next ten years.

Wealthier nations stand by their subsidies because without them, many farmers in the developed world would be out of business. Farmers and corporations that engage in farming have considerable political clout in the United States and other developed nations, and have convinced lawmakers to maintain the subsidies. Some governments subsidize farms for national security reasons, saying they do not want to rely on other nations for food. Others mention cultural concerns, including a desire to keep traditional styles of agriculture alive. This is especially true in parts of Europe, where some farm products—French cheeses, for example—have become entwined with the national cultural identity.

What has changed in the debate over agricultural subsidies since the Cancun meeting?

The fundamental conflict over farm subsidies has not changed, leaving agricultural trade disputes a major obstacle to the Doha negotiations. One thing that has changed is the public's impression of subsidies, in large part due to the efforts of groups opposed to the practice. "The public education campaign has progressed," says Jane Thery, deputy executive secretary of the Organization of American States. "Many more people have the impression that subsidies go to the wealthiest [portion] of the agricultural sector in the United States."

Is the Hong Kong Ministerial Conference likely to produce an agreement on subsidies?

Probably not. The United States has indicated it will cut subsidies only on the condition that other developed nations do the same. Some experts suggest the U.S. offer was made with the expectation of rejection in Europe. The Bush administration, already on shaky political ground, can ill afford to lose the support of the agricultural lobby. The offer itself is less than it seems, merely shifting agricultural subsidies into another sector in what observers see as "a veiled agreement to do nothing," says Thery.

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Op-Ed

The Fall of Doha

Author: Jagdish N. Bhagwati
Handelsblatt

Jagdish Bhagwati writes that the Doha round's failure at the hands of U.S. negotiators forebodes the return of protectionism.