Hong Kong: promise or burial of a successful Doha Development Agenda?

31 January 2006

Christine Lagarde, French Minister for Trade, addressed a Breakfast Policy Briefing on "Hong Kong: promise or burial of a successful Doha Development Agenda?" organised by the European Policy Centre in cooperation with the French Ministry for Trade. The meeting was chaired by EPC Chief Policy Analyst Antonio Missiroli.

Antonio Missiroli opened the event by saying that it was very timely given December’s ministerial meeting in Hong Kong and more recent discussions on the Doha round at the World Economic Forum in Davos. He noted that France and Italy had been classified as "trade pessimists" by a recent German Marshall Fund survey, a reference to both countries’ fears about the social and economic impact of global trade liberalisation.

Christine Lagarde said "creative thinking" was needed in the Doha round of negotiations. The key outcome of the Hong Kong ministerial meeting was that a collapse of the four-year Doha round of talks had been averted. Instead of arguing over whether the meeting had been a failure or success, she said, "we should simply welcome the results that keep us going on in our difficult journey". Although the meeting did not agree on firm deadlines or modalities, it "gave us some guidance on how to progress"

The French Trade Minister noted progress in WTO members’ efforts to open up markets to least developed countries, although the US and Japan were committed to only doing so for 97% of trade flows from the poorest nations. The US had not made a strong enough commitment on cotton, since massive amounts of financial support would continue to domestic American cotton farmers to the detriment of cotton producers in Africa.

On agriculture, the WTO meeting had agreed to an "acceptable" date of 2013 for an end to export subsidies, after the EU resisted "pressure from all corners" to set a 2010 deadline for eliminating them. In addition, there was agreement that this commitment applied to all forms of farm support, including export credits, food aid and the auditing of the activities of state-trading enterprises. A reduction in domestic farm subsidies was also agreed.

In contrast, progress on non-agricultural market access (NAMA) was extremely limited, with some arguing that the discussions on industrial goods had actually gone backwards. Ms. Lagarde insisted that there must be "parallelism" between the "levels of ambition" in the farm sector and for manufactured goods. In the services sector, she said, "we barely avoided a disaster".

The Hong Kong Declaration included hopes of ending the negotiations by the end of 2006, with modalities being agreed at the end of April, but Ms. Lagarde warned that time was running out if WTO members were to meet that deadline.

She said it was fascinating how the WTO discussions had moved from being a tango involving two key players - the EU and the US - while the rest followed, to a waltz, including key developing countries in the Group of 20 (G20). WTO discussions had now become a square dance with the arrival of the G90 developing nations group. "My hope is that square dancing which is organised and leads to results does not turn into gesticulation," she said.

While some players in Hong Kong, including Brazil, had managed to forge an "unpredictable alliance" with the US and also managed to keep "sanity and stability" in the G20 despite members’ diverging interests on issues such as agriculture, the EU had been isolated. "We all felt it - we felt a little bit overwhelmed by the pressure but nonetheless we resisted it," said Christine Lagarde.

Referring to the lessons to be drawn from the Hong Kong ministerial meeting, she said it was clear that the EU was the "engine" on issues related to development and least developed countries. It was also obvious that the scope of WTO negotiations was not fully settled and that WTO members did not agree on the concept of development. More worryingly, the "spirit of Doha - the idea of a single undertaking - has weakened a bit."

The role of developing countries in the WTO was changing, with some like Brazil and India gaining influence and others either losing ground or losing interest in the talks. Ms. Lagarde said the growing influence of the G20 developing nations was confirmed in Hong Kong. However, the group was not just a "trade coalition", but was engaged in a "geopolitical project that goes beyond trade". This allowed group members to overcome their differences over farm trade liberalisation.

She argued that the "rising influence of Brazil" in the WTO was responsible for the "over emphasis" on agriculture throughout the Hong Kong talks. However, "the EU was able to maintain its position and remained united despite the pressures".

Pascal Lamy, the WTO’s new Director General, had enforced a strict method of negotiations and engaged countries with a "bottom up approach". While this method was good on paper, it did not reflect the economic power of individual states.

And although the Hong Kong meeting had preserved the possibility of reaching a balanced agreement, nothing was guaranteed and enormous work was still needed, especially because many large emerging countries were still reluctant to go beyond "paper cuts" when it came to opening markets for services and industrial goods.

Ms. Lagarde argued that the EU was doing its bit to open up global farm trade, pointing to its "very bold offer" last October to open up its markets for agricultural goods, which "triple our beef imports and divide by five our butter exports". However, it was also important that developing nations opened up their markets to each other.

One problem was that "big emerging states" refused to make a distinction between their trade priorities and the needs of the least developed states. However, there must be a difference between the treatment meted out to Ghana, which has a per capita GDP of 320 dollars, and Brazil, with a per capita GDP of 3,100 dollars.

Informal contacts between trade ministers at the Davos World Economic Forum had shown that "there might be willingness to move away from posturing to more serious offers". But in some parts of the world, countries were focusing on bilateral trade agreements rather than the multilateral WTO framework. "In France, we don't believe this is the ideal route," said Ms. Lagarde.

The EU must make its expectations "crystal clear" and would not accept a "Yalta of agricultural markets led by Brazil and the US to the detriment of the EU". Europe must not sacrifice its fundamental objectives to get a deal, but it must also adopt a "coalition strategy" to avoid the threat of isolation. It should focus on making its message clear and articulate, and strengthen its credibility by continuing bilateral discussions with others at the diplomatic and trade level.

In conclusion, Ms. Lagarde said the Hong Kong meeting was both "a promise and a burial". Negotiators were still trying to secure a deal by 2007, although that could slip to 2010. But there was also the burial of the naïve view that the WTO’s 150 members were in full agreement on how to move forward.