Quasi-fatal blow to Doha deal

THESE are not happy times for international trade negotiators. Their struggle to clinch a new global trade liberalisation deal — known as the Doha round of trade talks — was already an uphill one due to endless acrimonious bickering among key trading nations, including the US, the European Union, China and India.

The mood in international trade circles is now becoming even grimmer as hopes that a Doha deal could be hammered out by the end of the year appear to have been given a quasi-fatal blow by the turmoil in world financial markets and uncertainty over the trade policies of the next US president.

European Union governments also appear to be adding to the gloom.

Many view the surprise departure from Brussels last week of EU Trade Commissioner Peter Mandelson — now a member of British Prime Minister Gordon Brown’s cabinet — as a sign that the 27-nation bloc has not only lost interest in the Doha discussions but believes that both the round and the multilateral trading system, as embodied by the World Trade Organisation (WTO), are well and truly doomed.

US officials have criticised the EU move to change trade commissioners at a crucial juncture in the Doha talks. Similar complaints have been made by developing countries.

EU officials deny that Mandelson’s decision to go back to London is any reflection of the bloc’s commitment to the WTO and multilateral trade. However, just like their US counterparts, EU negotiators are working hard to conclude bilateral free trade deals with a host of countries, including India, South Korea and the Association of Southeast Asian Nations.

Critics say many of these bilateral free trade agreements are ‘trade light’ arrangements which are prompted more by foreign policy and strategic considerations than by economic goals. Dr Razeen Sally of the London School of Economics recently denounced such accords as “dirty” FTAs which did little to advance the cause of economic and trade liberalisation.

Dr Sally also warned that the current financial crisis could lead to an upsurge in protectionism and economic nationalism.

However, if the cards were played correctly, the financial downturn could help governments to “concentrate their minds” on trade liberalisation as a tool for economic renewal.

WTO director general Pascal Lamy has voiced similar concerns about the impact of the financial chaos on world trade but said recently that activity in emerging countries may provide some relief.

“If the American and European economies are affected, thank God there are still big engines of growth in emerging countries,” Lamy said, adding that measures such as the US government’s efforts to pass a massive financial rescue plan were important “in the short term”. But “in the medium and long term it is more complicated because regulation is needed at a world level … just as for commercial exchanges.” Despite Lamy’s hopes that Asia will help ease the impact of the financial crisis, a quick recent visit to Geneva — the WTO’s headquarters — by this correspondent revealed an overarching sentiment among trade negotiators that the going is getting tougher. Fears of protectionism, especially in the US and the EU, are particularly acute.

Negotiators are also unsure of the impact on the Doha talks of the US presidential election. But most agree that whatever its colours, the new US administration is unlikely to be ready for serious negotiations before spring next year.

In addition, although most EU governments are informally backing US presidential hopeful Barack Obama, many also fear that the Democratic senator will not be ‘trade-friendly’ and could therefore put the final nails in the coffin of the Doha talks.

Mandelson’s decision to leave Brussels for London is also adding to the mood of dejection among trade experts. While the EU trade chief was not universally liked in Geneva — or indeed in Brussels — his critics admit that he fought hard for free trade, open markets and trade liberalisation, making enemies — especially in France — in the process.

Some of Mandelson’s most turbulent days in Brussels were in the summer of 2005, when a surge in Chinese apparel shipments, following the end of global quotas, resulted in an EU-Sino safeguard accord that for months led to delays and market confusion. The fiasco was labelled Mandelson’s ‘bra wars’ by the European press.

A number of western diplomats said Mandelson’s decision to move on might have been influenced by calculations that the Doha talks “would not be concluded on his watch.” Certainly, the EU trade chief said he was “heartbroken” when the Doha discussions failed — yet again — at the end of July.

His constant battles with EU governments may also have contributed to his decision to jump the Brussels ship. During his time in Brussels, Mandelson faced running battles over trade policy with recalcitrant EU member states and negotiating partners.In essence he was caught in the crossfire between a more protectionist group of largely southern European member states, often including France and Italy, and a more free-trading northern European faction, including Britain and the Nordics.

The internal fights were mostly about EU offers to make fairly modest cuts in agricultural tariffs in the Doha talks but Mandelson was also criticised for not being tougher on Chinese imports. He is being replaced by Baroness Cathy Ashton of Upholland. Her appointment must still be approved by the European Parliament, however.Ashton, a 51-year-old economist, previously held junior ministerial positions in the departments of education and skills, constitutional affairs, and justice. She was responsible for the successful passage of the Lisbon Treaty — to replace the bloc’s failed constitution — through the House of Lords.

The hope in Brussels and Geneva is that she will be as effective in getting agreement on that still elusive Doha deal. ¦ The writer is Dawn’s correspondent in Brussels.