Help Break Trade Talks Deadlock, Us Urges China

The Age

Friday September 7, 2007

By Tim Colebatch, Economics Editor, Canberra

US PRESIDENT George Bush has urged his Chinese counterpart Hu Jintao to use China's influence with developing countries to break the deadlock on the Doha Round.

In bilateral talks on the margins of the APEC summit yesterday, the leaders of the world's two biggest economies agreed it was essential that after six years of negotiations, the Doha Round be pushed to a successful conclusion, and they promised to do their bit to achieve it.

President Bush today is expected to pledge that the US will show flexibility to achieve an outcome that genuinely opens up new trade flows.

But US Trade Representative Susan Schwab played down any prospect of the President announcing a new offer to reduce US farm subsidies, which remain a stumbling block. The Doha Round was launched in 2001 with the aim of completing a wide-ranging agreement to liberalise trade in farm products, manufactures and services by the end of 2004. It has missed almost every deadline, and is now almost three years overdue.

Negotiators resumed talks in Geneva this week on what is meant to be the final assault to bridge the gaps still dividing the parties.

These include getting the US to make bigger cuts to farm subsidies, Europe and Japan to make bigger cuts to farm tariffs, and developing countries such as India, China and Brazil to slash the tariffs protecting their manufacturers.

Ms Schwab argues that China would be the biggest beneficiary of any agreement. So far China has left India and Brazil to represent developing countries, but both countries are reluctant to cut their manufacturing tariffs, largely because they fear Chinese goods will swamp them.

President Hu told the APEC business summit yesterday that the round was now at a critical juncture, but pointed the finger at the major developed countries.

He said these countries should be "demonstrating more sincerity and taking the lead in showing more flexibility on key issues such as reducing agricultural subsidies and tariffs".

But later in the day both presidents agreed to do more. "President Bush talked about our willingness to be flexible to achieve that outcome, and the importance we place on China being a positive force and fully engaging in the talks," Ms Schwab told journalists.

"It was evident that President Hu understood this. He noted that in a successful round, developed and developing countries alike would be winners, but in a failure of the Doha Round, everyone would be a loser."

Ms Schwab said President Bush would make it clear in a speech to the business summit today that the US would continue to show the flexibility needed to bring the round to a successful conclusion.

"The biggest question before us is whether the big growing economies of the world - Brazil, China, India - will come back to the negotiating table willing to compromise," she said.

Ms Schwab said both presidents also discussed China's undervalued currency, the source of much of its economic strength.

President Bush urged China to move faster towards letting markets set the yuan's value, while President Hu pledged China would continue allowing the currency to rise, and would also stimulate domestic demand to try to reduce its bulging trade surplus.

Australian Trade Minister Warren Truss said the determination was there to complete the round.

"The challenge is to deal real, commercially useable trade opportunities for business to do what it does well - selling to the world," he said.

Tom Donohue, president of the pro-trade US Chamber of Commerce, urged ministers not to endorse an agreement that appeared to liberalise trade barriers, but was so worded that it would leave the real barriers in place.

"This has to be an agreement which creates new trade flows," Mr Donohue said. "Our governments have to be prepared to make tough decisions to get there, and then tough action to implement it."

Indonesian Trade Minister Mari Pangestu said the window for a deal was open for only a few weeks. But she pledged that if others showed leadership and "the political will to move beyond their constituencies", then Indonesia would play its role, as co-ordinator of the G33 (the developing countries trying to protect subsistence farmers).

© 2007 The Age

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