[OUTLOOK]A key trade meeting to beginBy the end of July, members of the World Trade Organization will probably accept new guidelines for the negotiation of global trade reforms in agriculture, industrial products and services.
That will revive the Doha Round, which has been moribund since the failed ministerial meeting in Cancun, Mexico, last September. But it will be only the next significant step of a long negotiating process that will extend for two years or more, when much harder decisions will need to be made to reduce high trade barriers and trade-distorting subsidies as part of the final package of agreements.
Restarting the trade talks will require commitments from major trading nations ― developed and developing alike ― to negotiate significant changes in current policies that protect industries and farmers from foreign competition.
As one of the world’s leading trading nations, Korea will have to contribute its fair share. Only the poorest countries will be exempted from new WTO reforms.
The largest part of the decisions taken will involve what needs to be done in agriculture, since many countries have been unwilling to negotiate on other subjects until there are signs of commitments from the major traders that their farm trade barriers will be reduced significantly.
WTO members also seem likely to jettison talks on three of the “Singapore issues” (investment, competition policy, and government procurement) that were pushed strongly by Korea and others at the Cancun meeting. New negotiations will be launched, however, on customs reform and other so-called “trade facilitation” measures.
In agriculture, the WTO guidelines will require the elimination of export subsidies, substantial reductions in domestic farm programs that distort prices and production decisions, and tariff cuts and quota increases that expand trade opportunities for foreign suppliers.
While the exact amounts will be subject to intense negotiations in the coming years, the decisions taken this month will, if all goes well, lead to significant farm reforms later this decade.
“Sensitive products” will be spared the full thrust of these reform initiatives, but they will not be excluded as they effectively were in the last round of trade talks, the Uruguay Round. For the United States and European Union, this means that protection of beef, dairy, and sugar producers must be scaled back from current levels. Japan and Korea will also need to open, at least to some extent, new trading opportunities for foreign suppliers of rice and beef.
It is hard to see how the United States, Europe, and Japan (among others) can accept sharp cuts in their farm support without new liberalization in key areas of trade in goods and services. So these negotiations will have to accelerate rapidly to yield the requisite results.
In industrial products, the best result would be forthcoming if the negotiators agreed to accept the U.S. proposal to eliminate tariffs by 2015 (with some exceptions or longer implementation periods for developing countries). Instead, WTO members probably will agree to work from the text developed during the Cancun meeting but never seriously discussed.
Developing countries will not be asked to cut as deeply or quickly as developed countries, but they will also have to slash their extremely high tariffs. WTO members may also agree to remove tariffs completely on a sector-by-sector basis.
In services, the talks have barely progressed ― even though the WTO negotiations in this area actually preceded the launch of the Doha Round. Most countries have not even tabled offers. This issue won’t block consensus next week in Geneva, but lack of progress in services trade liberalization would make a final deal highly unlikely.
Of course, my assessment may prove to be overly optimistic. There is a real possibility that the current Geneva talks will break down just as the earlier talks in Cancun did. In that event, all bets are off for the Doha Round, since talks will stall for at least another year until new trade teams in Washington and Brussels decide whether it is worth the effort to try to negotiate a joint deal with almost 150 countries.
Failure would cost more than lost trading opportunities, which would be substantial. The drift toward regionalism would accelerate further; the failure at Cancun already has spurred dozens of new regional trade talks, particularly in East Asia.
If these pacts are not implemented in parallel with multilateral reforms in the WTO, they will pose a much greater threat of trade diversion and thus trade conflict. Perhaps most troubling, the WTO’s reputation would be seriously tarnished. After the Cancun fiasco, concerns would surely arise regarding whether the existing institution is still the best forum for international trade negotiations.
Because the costs of another failure potentially are so great, I do not foresee countries blocking consensus on the WTO decisions that await action next week. The Doha Round will be back in business, though the hard work is still to come.
Korean policymakers will face tough decisions in the next two years and would do well to start planning now for the reforms ahead.
* The writer is a senior fellow at the Institute for International Economics.
by Jeffrey J. Schott