Adam Subes MBA 674 Dr.

Bridwell 11/1/10

Time Ticks Away on the Doha Agenda In November of 2001, the World Trade Organization (WTO) launched the Doha Round also known as the Doha Development Agenda. The main objective of this proposal was to lower trade barriers around the world. In particular, the Doha Round would aid the economies of the developing nations (led by China, Brazil, India, South Korea and South Africa) by increasing global trade and expanding their economic wealth to bring them closer to the developed nations (led by the European Union, United States and Japan). It has been nine years to the day since this proposal, and although progress has been made between the two sides, they have been deadlocked in their negotiations on certain issues. One of the main focal points of the impasse has to do with agricultural production within the developed countries. I firmly believe that if the developed countries of the WTO agree to diminish or remove their protective import tariffs and subsidies on agricultural products, along with loosening their stands on other issues, the Doha Development Agenda will be passed in a timely manner. This will result in the spread of globalization and greater economic wealth for the developing countries of the world. The WTO (a worldwide organization consisting of 153 nations) came to fruition in 1995 at the Uruguay Round, after replacing the General Agreement on Tariffs and Trade (GATT). Since its existence, the WTOs primary responsibility has consisted of supervising international trade by making sure that all nation states comply with the rules agreed upon in trade treaties. This is accomplished by setting up guidelines for negotiating and formalizing trade agreements. If a dispute happens to occur, there is a resolution process aimed at enforcing participants to adhere to the WTO agreements that their governments previously signed. Over the years, the WTO has been a major player for nations that desired a more open business economy with fewer trade barriers as well as the ability to invest more freely between countries. In all likelihood, the

globalization of both markets and production would not have advanced as far as it has without the presence of this organization. Since its inception, the WTOs focus was geared towards leveling the playing field between the developing and already developed nations. In November of 1999 in Seattle, Washington, the WTO had a conference to introduce the millennium round. At this meeting, the WTO planned to reduce barriers to cross-border trade in agricultural products as well as trade and investment services. However, talks ended days later as members of the WTO were unable to come to an agreement over two important topics. First and foremost, the U.S and the EU had contrary beliefs on eliminating subsidies to agricultural exports. While the U.S was all for ceasing subsidies, the EU wanted to keep them and wasn't willing to budge on their stance. The other roadblock was the United States desire to enforce labor rights into the law of world trade. The U.S wanted the WTO to impose tariffs on goods from countries which didnt live up to the U.S standards of fair labor practice. However, the developing nations saw right through the United States ploy, and viewed this solely as a way for the U.S to legally restrict imports from poorer nations. Essentially, the United States panned to outwit the representatives of the developing nations, but when their plan was foiled, talks broke off between both sides. While meetings inside came to a standstill, it was the events that transpired in the streets that took the world by storm. Activists and labor unions from across the world protested on the streets claiming that the WTO was nothing but an undemocratic institution that was usurping the national sovereignty of member states and making decisions of great importance behind closed doors. To avoid a similar situation that occurred in Seattle, the WTO postponed their next ministerial conference until 2001 in the more isolated location of Doha, Qatar. At this

conference the WTO discussed major issues which had come to the forefront of global trade and soon became known as the Doha Round. Some issues included but were not limited to an increase in antidumping policies, protectionism in agriculture, the lack of protection for intellectual property rights in certain nations, the high tariff rates on nonagricultural goods and services in nations, the special and differential treatment between the two groups of countries and the implementation of agreements that were reached at earlier dates. The talks surrounding the Doha Agenda were originally slated to last three years so a January 1, 2005 deadline was put in place. Nine years later, theres been a resolution on certain topics in the agenda such as the U.S antidumping rules and countries with large pharmaceutical divisions giving into the demands of developing nations on the issue of drug patents. However, it seems apparent that the focal points of the Agenda have yet to see much progress and it could be a while longer before the developing and developed nations of the world can come to a consensus on a new treaty. From 2003 onwards, the WTO continued having their inaugural conference with hopes of advancing their talks for the Doha Agenda. In 2003, the WTO met in Cancun with hopes of coming to an agreement on the objectives of the Doha Round. These talks were unsuccessful after members couldnt come to a resolution on the agricultural issues. Little did they know, but the inability to resolve agricultural issues would become the focal point of the Agenda. It became widespread rumor that some countries showed up in 2003 with zero intention of negotiating. Instead of showing the will to listen to other countries thoughts and ideas for tradeoffs, these countries stood their firm ground keeping their own demands as a number one priority. In 2004, as talks resumed between the nations in Geneva, there appeared to be a turning point in negotiations when the EU, U.S, Japan and Brazil committed to eliminating all agricultural export subsidies and lowering tariff barriers. The WTO members also reached the

July Framework Agreement which gave guidelines for completing the Doha Round negotiations. At the closing of the meetings in Geneva the deadline to complete negotiations for the Doha Agenda would be extended for the first but not last time. In 2005, all the countries reconvened in Hong Kong to resume talks with two notable events taking place. Pascal Lamy (director of the WTO) along with the help of representatives of the worlds governments established a 2013 deadline for the elimination of subsidies on agricultural exports. The second event of importance was the industrialized nations agreeing to open up their markets and allow quota and tariff free imports from the still developing nations. The combination of these two events appeared to be a step in the right direction. It now seemed like the developed countries were caving in a bit and finally showing some flexibility to work with their less developed counterparts. At the conclusion of this conference, Pascal Lamy in referring to comprehensive global free trade rules said, I now believe it is possible, which I did not a month ago. In 2006 the WTO met once again in Geneva. All progress that had been made up to that point came crashing down in a heartbeat. As an agreement to reduce farm subsidies and lower tariffs was unable to be reached, Pascal Lamy took it upon himself to officially suspend the negotiations surrounding the Doha Round. It was apparent that the more advanced countries were unwilling to budge on their stand when it came to subsidies and tariffs. I believe that this group of nations felt as though they would lose entirely too much money if they compromised with the other countries. Most importantly they felt that reducing tariffs on foreign agricultural products would hurt their economies as their domestic agricultural markets would suffer greatly. After almost a year away from negotiations, the WTO returned to talks with intentions of completing the Doha Round in 2007 in Potsdam. Once again however, the talks came to an impasse as the United States, EU, India and Brazil couldnt come to an agreement over opening up agricultural and industrial

markets in certain countries along with how to cut the farm subsidies in the richer nations. The issue with agricultural subsidies and tariffs was becoming a repetitive standstill point for the completion of the Doha Agenda. The WTO returned to Geneva in 2008 only to have negotiations stall once again over disagreements about protection for Indian and Chinese farmers. The United States publicly voiced their criticism towards countries like Brazil and India. Indias commerce minister responded to the criticism saying Im not risking the livelihood of millions of farmers. The problems with the negotiations for the Doha Agenda seemed to stem from the stubbornness of both the developed and developing nations. Although at times they looked flexible and willing to compromise with each other on their demands, in the end they both refused to budge. None of the countries wanted to be on the wrong side of the Doha Round and therefore found it more beneficial to not come to an agreement as opposed to winding up on the short end of the deal. Just a week after the Geneva conference, the negotiations for the Doha Agenda officially collapsed, mainly over agricultural trade issues between the U.S, India and China. As is usually the case when things go wrong, peoples tendencies are to look for someone to put the blame on and this would follow suit with the Doha Round negotiations. It immediately became a blame game as the U.S and EU blamed India for the failed talks, while India claimed that the United States bullheaded attitude was the cause. India insisted that their opinion of the United States using the poor countries in the world as sacrificial lambs for their own commercial and economic interests was backed by over 100 nations in the WTO. Recently, the United States has become the focal point of the WTO as members have been trying to convince them to soften their stance on both the subsidies and tariffs.

As the WTO moves into the next decade, unresolved issues related to Doha are constantly being worked on with hopes of advancing negotiations and finally passing the Doha Round. The WTOs antidumping rules have been in effect since the mid nineties mainly for certain sectors of the economy like metal industries, chemicals, plastics and machinery. They allow countries to impose antidumping duties on foreign goods being sold cheaper than at home, or below their cost of production, so long as domestic producers can show that they are being harmed. However, countries figured out a way to take advantage of a loophole in these rules, as there was no clear specification of what dumping actually consisted of. There have been theories alike which claim countries are using antidumping actions as a method of protecting their domestic producers. Some reasons for high antidumping laws in the US could be a nations want to protect a large number of their domestic goods and services. One has to look no further for where this would be evident then the recent economic recession that is still ongoing in the states. If the US was in large economic troubles, one of the most effective ways to work its way out would be to allow less of the cheaper foreign goods to be sold in the country. This in turn would force citizens to buy the more expensive home grown products which would re-distribute money back into the struggling economy. While helping countries climb out of a recession, the antidumping actions could have cons, as some countries might be inclined to abuse the laws and use them to their advantages. For example, the EU might implement an antidumping action on a product such as electrical equipment to keep their domestic electrical equipment (which is priced higher), safe from competitors. This would negatively affect the developing countries trying to export electrical equipment to the EU at a cheaper price. As a result the poorer countries will remain poor as they struggle to get their product to penetrate other markets. Parts of these

negotiations were eventually settled when the U.S gave into pressure from nearly every country to renegotiate their antidumping rules. Another unresolved issue and by far the biggest sticking point in the Doha Round negotiations relates to high levels of tariffs and subsidies in the agricultural sector. This is commonly referred to as protectionism in agriculture and the problem revolves mostly around the developed nations of the world. The problem here is that the developed countries have larger tariffs on their agricultural than non-agricultural products and that government subsidies account for a high percentage of agricultural production. This is done to protect domestic farming from foreign competition. The combination of the tariffs and subsidies warps the production and international trade of the agricultural products causing prices to rise for consumers and encouragement to overproduce products which are largely subsidized. The developing and already developed nations share different opinions about the protectionism of agriculture. The advanced nations believe in the current system they have because they feel the need to protect their agriculture from competition which is coming from developing nations with low cost producers. However, the developing nations feel like the little man as they are the ones getting screwed over since it is too expensive for their cheaper agricultural products to make it into the foreign markets. Therefore these countries are actively voicing their opinions for reforms which would allow them more access to the protected markets of the developed countries. The WTO has estimated that the removal of tariff barriers along with subsidies could increase overall world trade, lower prices for consumers and raise global economic growth. All three of those results sound like they would help the economy of the overall world. Therefore, I believe that the resolution of this issue boils down to the selfishness of the developed nations and their ability to sacrifice some of their own money towards the greater good of the world.

One of the issues responsible for the deadlock which is often overlooked is the protection of intellectual property. The Trade-Related Aspects of Intellectual Property Rights, also known as TRIPS, forces countries within the WTO to enforce patents of at least 20 years and copyrights of at least 50 years. The main reason these rights were created was to protect intellectual property within all nations of the WTO. Without these rights, the drive to innovate new products and ideas would greatly diminish throughout the world. For example, if the United States were to invent some groundbreaking technology they would have sole possession of the rights to this technology for a certain amount of years. Without TRIPS however, a country like China may want a piece of all the money being made on the new technology in the U.S and could do so by marketing knock-offs of the patented American technology. Depending on how successful the fakes were, there would be decreased export opportunities in China for the Americans new technology. Another outcome would depend on the success that China has in marketing the imitation technology to other countries. If they can successfully market the faux technology to other nations, this would essentially take away customers from the United States, the innovators of the product. One of the last major issues that need to be agreed upon is related to the market access and tariff rates of the nonagricultural goods and services. High tariff rates are still ongoing for specific imports from the developing nations into the developed nations. The result of this is limited market access which is similar to a closed economy and less economic growth. The WTOs ultimate goal is to completely get rid of tariffs making a more equal playing field for the less developed nations. With the regards to the TRIPS, there has been some closure in the field of pharmaceuticals. The WTO came to an agreement which said that a member country of the WTO could export pharmaceutical products made under compulsory licenses to leastdeveloped and certain other members.

There are also some minor issues with the Doha Round that need to be dealt with like the implementation of issues and the problem of special and differential treatment. Some developing countries have said that they have had problems implementing earlier agreements with the developed nations due to the lack of assistance from the WTO. This problem of implementing agreements takes on the classic role of big guy versus little guy and is essentially the bigger guy or the developed nations bullying the little guy around. The developing countries have also made claims stating that they didnt fully understand the language of the original agreements and now feel like they have been taken advantage of by the stronger developed countries. While the WTO and the rest of the world sits and waits, one can only hope for negotiations to eventually resume and the Doha Round to finally be passed. The deadlocked negotiations have resulted for many reasons. The stubbornness of some countries showing no desire to move on their stances of certain issues, combined with the shear selfishness of others has resulted in a supposed three year negotiations stretching out to almost ten years. If countries like the United States and the EU would simply sacrifice some of their own prosperity and wealth to help the poorer countries of the world become more developed, then the problems would be instantly solved. It seems as though the countries are playing a deadly game of chicken as they refuse to move on things such as lowering tariffs and agricultural subsidies. But in the game of chicken someone loses and it is usually the one who stays put the longest. I think that if talks do not resume within the next year, the power countries of the world could be risking their future relationships with the less developed nations in terms of trade, information and the worst case scenario, war. Therefore, I believe that negotiations must be jump started again and countries like the United States must show some sort of flexibility with what the developing

nations are asking for. If not, the world will remain divided for a long period of time between the developing and advanced countries of the world.

References
Hill, C. W. L. (2011). International Business Competing In The Global Marketplace 8E The Political Economy of International Trade, 6, 217-223. http://en.wikipedia.org/wiki/Doha_Development_Round Doha Development Round. http://euractiv.com/en/trade/wto-doha-development-round/article-157082 The WTO Doha Development Round (2006). http://www.oecd.org/document/45/0,3343,en_2649_37431_35738477_1_1_1_37431,00.html The Doha Development Round of Trade Negotiations. http://www.wto.org/english/news_e/news10_e/dda_brochure_nov10_e.pdf Workshop on Recent Analyses of the Doha Round. http://www.wto.org/english/tratop_e/dda_e/ddadraft_31jul04_e.pdf