News

Make or break time on subsidies

John Tsang

Thursday, 08 December 2005

The World Trade Organization Sixth Ministerial Conference opens in just four days at the Convention and Exhibition Centre.
This is the biggest event in Hong Kong since reunification and, in terms of complexity, probably the most challenging event Hong Kong has ever staged. As host, we've got to get it right.
We have a dedicated team, putting in very long hours working out plans and contingencies for all the possible scenarios that might take place when you have more than 11,000 individuals accredited to a conference and another 10,000 or more on the streets protesting about that very conference.
The outcome of what may or may not happen inside the conference hall will have a great significance in the medium and longer term on the shape of the world economy.
Negotiations leading up to the ministerial conference have been fraught with difficulties. They always are. That is the nature of trade negotiations.
The main sticking point has come in the area of agriculture, where many countries, both in the developed and developing world, are arguing over the levels of reduction in farm subsidies and tariff barriers in the rich countries such as the United States and the European Union.
The Americans have put a bold reform offer on the table, conditional on it being matched by the other big players, notably the EU. But the Europeans' counter offer has been poorly received, with most other WTO members saying it does not go nearly far enough. Whether or not the EU will go any further next week, or even early next year, is moot.
The issue is crucial because this round of negotiations is all about helping the poor economies get a better and bigger share of world trade, particularly in agriculture.
Many of the developing and least developed economies rely almost exclusively on farming for their exports, and in some cases have a single agricultural product, such as cotton, sugar or bananas.
That's why so much emphasis has been placed on this issue in what is formally known as the Doha Development Agenda. And because of this, progress in agriculture negotiations has been linked to other important agenda items, like services, industrial tariffs and a number of significant development matters.
All of these items are on the table in Hong Kong next week, when ministers from the WTO's 148 member economies - it will actually become 149 with the accession of Saudi Arabia - sit down to thrash out solutions to some knotty problems. They will need to do this in a form that will enable us to drive forward into next year so that we can conclude the round by the end of 2006.
Why the end of 2006? The US president's so-called fast track authority on trade agreements expires in early 2007, and nobody expects it to be renewed by Congress.
So we must come up with a credible package by the end of next year to meet that deadline.
Given the political situation in the US, and the presidential election cycle, it's hard to see another fast-track approval getting through Congress for probably another five years. That puts even more pressure on the ministers to show political will and global vision in next week's meeting. As chairman of the ministerial, I see myself as the honest broker bringing together all the conflicting and often contradictory interests and agendas of the member economies.
This is a difficult but necessary task because the WTO is a member-driven organization. All decisions are taken by consensus. In WTO-speak, nothing is agreed until everything is agreed.
This makes decision-making awkward and time consuming, but it has the virtue of being both democratic and legally-binding on members once agreement is reached.
Hand wringing and breast beating are all part of the negotiating process.
I have been a public official long enough not to be starry-eyed. It's just that when I see problems, I look for solutions.
Last weekend I returned from a whirlwind trip to Brussels and Geneva. In Brussels I attended a meeting of the G90 group of trade ministers of the developing and least developed economies. I had separate bilateral meetings with a number of those ministers as well. In Geneva, I attended the last meeting of the WTO's General Council, which adopted a draft Ministerial Declaration to be presented to the ministers at next week's conference.
In my view, it contains the bones of an agreement that would take us forward to next year.
When I addressed the General Council, I assured members that, as the conference chairman, I would insist on a transparent and inclusive process.
I also made the point that as a member-driven organization, it is up to the members to make or break this conference. We must exercise our collective responsibility to make it a success.
I certainly believe the pre- conference atmosphere is not bad. It is true that we have not traveled as far down the track as we would have hoped, essentially because of the roadblock over agriculture. But in Brussels and Geneva, I sensed a strong mood for progress. Now that the ministerial is upon us, WTO members by and large want to see a credible outcome in Hong Kong.
If I am right about the atmospherics, and the desire to do a deal, what we will need now is the political will to turn that into something tangible.
We'll know by the end of next week whether or not that political will is there. Precisely what shape the outcome will take I cannot say.
I believe, however, that Hong Kong will not end in failure as did Cancun or Seattle. Another failure would come pretty close to destroying the WTO's credibility for years to come. The fallout from that would mean increasing bilateralism in world trade deals, the only result of which would be further imbalance between rich and poor. Frankly, that path can lead to instability on a global scale.
Look at the other side of the coin: a successful Doha Development Round. The World Bank estimates and that it could add US$300 billion (HK$2.34 trillion) annually to the global economy over the next decade to the year 2015. It has the potential to bring 140 million people who live on less than US$2 a day out of their miserable existence. Sixty million of these wretchedly poor people live in sub-Sahara Africa alone. Agriculture is the only export of many of these poor countries.
Do we really want to tell them that protecting a relatively small number of farmers in rich and prosperous countries is more important than giving them the means to trade their way to a better life for themselves and their children?
Source: The Standard