Rush To Secure World Trade Deal

The Age

Friday June 27, 2008

Tim Colebatch, Economics Editor, Canberra

WORLD Trade Organisation chief Pascal Lamy has summoned trade ministers to Geneva for one more try to push the never-ending Doha Round trade negotiations over the line before the US and Europe change governments.

!Mr Lamy launched what could be his last chance to steer the Doha Round to an agreement, inviting about 35 ministers to meet on July 21 to try to crack the issues blocking a deal to liberalise world trade.

!Trade Minister Simon Crean, one of the 35, welcomed Mr Lamy's decision to bite the bullet, which Australia had been urging.

"Calling a meeting is a bold call, but the right one," he said. "If we don't secure a deal on these core issues of the round now, the talks may drift for some time."

!After seven years of negotiations, repeated missed deadlines, and negotiators trying to fit square pegs in round holes, others doubt a deal is possible.

!While the gaps have narrowed in agriculture, a deep rift separates negotiators on cuts to manufacturing tariffs. The West, including Australia, insists that developing countries make big tariff cuts on top of those already made since the last trade agreement in 1995.

!But with China keeping its currency well below market levels to boost exports, developing countries fear that big tariff cuts would see Chinese goods swamp their own industries.

!The Geneva talks are the last chance to secure a global trade deal while the Bush Administration holds power. Next year, the US and the European Union will change administrations, forcing a hiatus in negotiations until the new rulers settle in.

!Organisation of Economic Co-operation and Development figures show one reason why agricultural talks are now easier. Farm subsidies in the West have shrunk as rising world prices have reduced the need for them.

!The OECD estimates that direct subsidies to farmers have shrunk by +euro+30 billion ($A50billion), or 14%, between 2005 and last year, with the US, EU and Japan all easing off. US direct subsidies to farmers have fallen to 10% of the value of farm output, compared with 22% in the mid-1980s.

They are now far outweighed by indirect subsidies, such as subsidised irrigation, marketing and promotion, and taxpayer-financed research and development.

!European and Japanese direct subsidies have declined by roughly a third as a share of farm output since their peak in the mid-1980s, and have shifted from price supports to payments unrelated to production. But they are still far higher than in the US, paying for 26% of output in Europe and 45% in Japan.

!In Australia, drought relief since 2005 has seen subsidies rise - but only to 6% of output, the smallest in the OECD, apart from New Zealand (1%).

KEY POINTS

WTO chief launches bid to get agreement on world trade before governments change.

Trade Minister Simon Crean welcomes Pascal Lamy's bold move.

© 2008 The Age

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