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Lack of concessions on subsidy cuts blamed for failure of negotiations

WASHINGTON, DC – 06/22/07 – Despite the collapse of the latest talks among key World Trade Organization (WTO) governments, the US is not giving up on multilateral trade negotiations, say two top US government officials.

“The United States remains deeply committed to providing leadership to help advance the World Trade Organization and the rules-based multilateral trading system from which we benefit greatly,” said US Trade Representative Susan Schwab and Agriculture Secretary Mike Johanns in a joint statement released this morning.

The pair said the US is “deeply disappointed” that the talks among senior officials of the so-called G-4 Group – the US, the European Union (EU), Brazil, and India – aimed at reviving the stalled WTO process broke down when the Brazilian and Indian delegations walked away from the negotiating table.

The talks – held this week in Potsdam, Germany – brought the so-called G-4 group together to narrow the differences, mostly on agricultural issues, that have hampered the negotiations almost from their 2001 launch.

At issue is how far developed countries should go in cutting their farm subsidies and lowering their tariffs and to what degree developing countries should open their markets to industrial goods, farm products and services.

The lack of progress on specifics related to those issues and many missed deadlines prompted the suspension of the WTO negotiations known as the Doha Development Round in July 2006.

Briefing the press via telephone, Schwab and Johanns said the US has demonstrated flexibility both in its willingness to reduce its own trade-distorting farm subsidies and in the level of tariff cuts it expected from other countries.

But, as Johanns put it, “we stretched, did everything we could to bring about an agreement, and they grabbed.”

Nevertheless, Johanns said, he and Schwab were surprised by the decision of Brazilian Foreign Minister Celso Amorim and Indian Commerce Minister Kamal Nath because the talks within the G4 were making progress in recent months on many controversial issues.

Those issues included food aid and sensitive products that would be subject to different rules than most other products.

“We feel like the rug was pulled from under our feet,” said Johanns.Amorim and Nath blamed the US and the EU and their “numbers” for the collapse of the talks, according to news reports.

Officials close to the talks reportedly said earlier this week that the US indicated it would limit its farm subsidies to $17 billion. But Brazil balked, insisting on cuts somewhere below $15 billion.

On Wednesday, the same officials said that the EU showed flexibility on the sensitive topic of farm tariffs, but that India held firm in refusing to drop its barriers protecting its agricultural sector from foreign competition.

India insisted that 20% of its farm tariffs face no or only minimal cuts, they said. Johanns had previously said such an outcome would shield up to 95% of what India imports from cuts.

“It was useless to continue the discussion, given what was on the table,” Amorim told reporters. "It is a setback, let us not hide it.”

Schwab said that the Doha Round never will achieve its explicit goals of spurring economic growth and development and helping to lift people out of poverty “unless new trade flows are created.”

Those trade flows, she said, will not be generated “unless and until there is sufficient new-market access in agriculture and manufacturing and services,” adding tariff-reduction proposals concerning manufactured goods offered by Brazil and India were “insufficient in this respect.”

Schwab and Johanns said Brazil and India were expected to represent not only the interests of large emerging markets but also those of less developed countries.

That never happened, they said.

"We had two countries, India and Brazil, which I don't think really chose to negotiate," Johanns said.

The least developed countries will be the biggest losers if the Doha Round is not concluded successfully, Schwab said.

Praising the EU for making a “significant contribution” to the round, Schwab said the United States still is committed to the negotiations and will continue to pursue a meaningful deal.

“The G4 may not ever be able to reach convergence, but … it doesn’t mean the end of the round,” she said.

Schwab said she and Johanns will travel to WTO headquarters in Geneva to talk to other interested countries, the chairmen of the negotiating committees and the WTO director-general about a possible way to revive the talks.

Commenting on the breakdown of the talks, EU Trade Commissioner Peter Mandelson said the development “places a very major question mark on the ability of the wider membership of the WTO to complete this round. It does not in itself mean that the negotiations cannot be put back on track.''

Mary Irace, vice president of trade and export finance at the National Foreign Trade Council (NFTC) in New York, expressed disappointment in the failure of the talks.The NFTC is one of the largest and oldest trade promotion organizations in the country.

“We were hopeful that the G-4 countries would reach agreement to enable the negotiations to move to their final stage,” she said.

“There is too much at stake in the multilateral trading system to allow these trade negotiations to fail or to go into a deep freeze. The developing countries stand to lose the most if the Doha Round fails.”

To be successful, she said, future negotiations “must be concluded at a high level of ambition.”

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