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Multilateral trade system at crossroads

WASHINGTON -- The World Trade Organization and global trade itself are at a critical crossroads, with one last chance to salvage the Doha Round of talks. Failure would be disastrous for the WTO, would be particularly harmful to the least-develope...

WASHINGTON -- The World Trade Organization and global trade itself are at a critical crossroads, with one last chance to salvage the Doha Round of talks. Failure would be disastrous for the WTO, would be particularly harmful to the least-developed countries and could lead to a breakdown of the multilateral trade system.

The Doha Round of talks began in November 2001 with the goal of reaching an agreement by Jan. 1, 2005. Unlike previous trade rounds, which were led by the United States and Europe, Doha was to be driven by a development agenda. It promised special benefits to developing countries, such as improved access to developed nations' agriculture and textiles markets and affordable medicines for diseases such as AIDS. It also included more direct involvement in negotiations by countries with emerging economies, such as Brazil and India.

No success yet

Yet every forum has proved unsuccessful, from key meetings with trade ministers of the 150 WTO members in September 2003 to informal negotiations among different groups of countries, most recently the United States, the European Union, Brazil and India this summer in Germany. The European Union and the United States, after years of wrangling, presented an agreement to substantially reduce EU tariffs on farm imports and U.S. domestic agricultural subsidies in return for lower tariffs in the developing world on manufactured products and greater market access for services. Brazil and India rejected this on behalf of the Group of 20 developing countries.

If the talks fail, many proposals to help developing countries will be lost. These include the elimination of agricultural export credits from the developed world and reduced EU and U.S. trade-distorting subsidies. The trend among EU countries and the United States toward bilateral free-trade agreements with stronger developing nations will accelerate, to the great disadvantage of the poorest nations. A successful WTO agreement could add nearly $300 billion to world income.

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There are many reasons for the impasse. Agriculture, the most politically sensitive trade issue, is at the core of negotiations, and implementing a "development agenda" in the context of trade talks has proved difficult. There are new players, and the key emerging countries have refused to allow the U.S.and the EU to impose it on them.

A step taken

A critical step was taken in July when key WTO committees proposed a framework with ranges of reductions in trade barriers. In agriculture, the WTO committee recommends slashing the U.S. cap on annual trade-distorting support to $13 billion from over $16 billion and cutting the highest EU farm tariffs significantly. They also propose a range of cuts in developing countries' industrial tariffs.

These proposals provide a sound basis for negotiations this month, but the talks are unlikely to be successful without an additional push at the top. The United States and the European Union need to make one last effort to reduce their agricultural subsidies; Brazil needs to reduce its industrial tariff barriers; India must be willing to open its agricultural market; and G-20 members must recognize their responsibilities to open their markets.

Future at stake

WTO Director-General Pascal Lamy is the only one who can force the recalcitrant countries to bridge the remaining gaps. He must make them recognize that the future of the institution, barely a decade old, is at stake.

Similar dire circumstances arose during the Uruguay round of talks, in which we were involved. After the trauma of a failed "final" ministerial meeting in December 1990, Arthur Dunkel, then director general of the General Agreement on Tariffs and Trade, precursor of the WTO, submitted his own final proposal. While most countries openly opposed it, they ended up building a compromise on what became known as the "Dunkel text." After many failed initiatives in the Doha Round, it is time for Lamy to guide members to a middle ground. No country will want to be seen as having sabotaged the WTO. The sooner a "Lamy text" is on the table, the better for the WTO, for open trade and for a rules-based multilateral trading system

Editor's Note: Eizenstat held several senior positions in the Carter and Clinton administrations, including ambassador to the European Union and deputy secretary of the Treasury. Paemen was the EU ambassador to the United States. They are co-chairmen of the European-American Business Council.

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