Tuesday, July 29, 2008

World trade talks collapse over ag subsidies, tariffs

Seven years of World Trade Organization negotiations aimed at lowering trade barriers collapsed today over bids by China and India to let them and other developing countries raise tariffs on farm products to protect their own farmers from surges in imports or drops in prices.

Such protections are common, but "are rarely used and reflect only a minute portion of the billions of dollars in manufacturing, farm and services gains the WTO's Doha trade round was supposed to create," Bradley Klapper reports from Geneva, Switzerland, for The Associated Press. "It was all the more disappointing because the talks made greater progress than they had in years on issues such as farm subsidies and manufacturing tariffs — which were responsible for scuttling previous high-level trade efforts."

All sides bemoaned the collapse. "In the face of global food price crisis, it is ironic that the debate came down to how much and how fast could nations raise their barriers to imports of food," said U.S. Trade Representative Susan Schwab, who called the China-India proposal "blatant protectionism." Prospects for an early resumption of the talks do not appear good. Klapper reports that pressure for a deal was higher than ever "because of the likelihood that the United States and other key trading partners would lose interest amid administration changes over the next couple of years." (Read more)

UPDATE, July 30: European Union trade chief Peter Mandelson told John W. Miller of The Wall Street Journal that the collapse leaves the talks in limbo for "the foreseeable future." Miller adds, "The setback could also signal an end to some 60 years of continuous expansion of global free-trade deals, some trade diplomats and experts said." Miller writes, "None of the major players in the talks saw enough gain in a deal to make it worth selling any significant sacrifices to skeptical populations back home."

Miller reports that "The two sides couldn't agree ... on where to set the threshold for any import surge that would trigger the clause. The U.S. wanted to set the trigger at a 40 percent jump. China and India wanted the trigger set much lower, at a 10 percent increase." Key crops at issue were cotton, rice and sugar.

The long-term impact of the failure could be significant. "It could weaken the authority of the WTO, which also plays a key role in settling trade disputes between countries. And it could make even bilateral deals harder to strike," Miller writes. "In Washington, Tuesday's failure is likely to energize critics of free trade, who've already managed to scuttle much smaller U.S. deals with Colombia and Panama this election year." (Read more)

India Trade Minister Kamal Nath, who got most of the blame for scuttling the talks, defended himself in a telephone interview with The Washington Post: "I come from a country where 300 million people live on 1 dollar a day and 700 million people live on 2 dollars a day. So it is natural for me, and in fact incumbent upon me, to see that our agricultural interests are not compromised. You don't require rocket science to decide between livelihood security and commercial interests." For the Post story by Anthony Faiola and Rama Lakshmi, click here.

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