World economy fears prompt trade deal push

Reuters, 28/01/2008

Fears about the world economy seem to have convinced trade ministers to make a final push to clinch a deal this year in the long-running Doha round to open up global trade.

As aftershocks of the subprime debacle in the United States ripple through financial markets and cloud the business outlook, trade ministers are aware of the fresh blow to confidence - and growth - that failure to deliver a Doha deal could entail.

Add to that the likelihood that it will be hard to get a deal through Congress once a new US administration takes office in 2009, and the race is on to complete the round this year - with ministers eyeing a broad deal in March or April.

"With the gloomy economic outlook in the developed countries the conclusion of this round will be a shot in the arm for the global economy," said Indian Trade Minister Kamal Nath at the World Economic Forum in the Swiss ski resort of Davos.

Nath and other ministers emerged from a lunch with the head of the World Trade Organisation (WTO), Pascal Lamy, on the sidelines of the forum on Saturday talking of a new resolve and momentum in the talks, launched in the Qatari capital in 2001 to boost the world economy and help poor countries.

US Trade Representative Susan Schwab said the United States, like other key players, was committed to a deal in 2008, although some countries were still holding back.

"Hopefully they will become more enthusiastic when they see the tremendous potential for a vote of confidence in the global economy that a successful global round would bring -- and the very real dangers and lost opportunity that a failed Doha round would mean for the global economy," she said.

Some countries have argued that President George W. Bush's administration would not be able to deliver a deal in its last, and potentially lame-duck, year.

But the consensus now is that this year is the best chance.

NECESSITY, OPPORTUNITY

"I think now this fog has disappeared," Lamy said. "They've cleared the air. They've been -- including the president -- they've been rather clear that they want the deal in '08."

"We have a window of necessity which is also a window of opportunity," Brazil's Foreign Minister Celso Amorim said.

The talks have been bedevilled by differences among rich and poor countries about how much to cut farm and industrial tariffs and subsidies, and how to handle the many exceptions that different countries want for domestic political reasons.

Agriculture makes up only 8 percent of world exports, but is the key to a deal because of its importance for developing countries, where between 50 and 80 percent of the population work in farming, versus 2-4 percent in developed countries.

The chairman of agriculture talks at the WTO in Geneva is due to issue a revised negotiating text around the end of this month. That will be followed by similar new texts for industry, services and topics such as anti-dumping rules.

Factor in a few more weeks to review the revised papers, and then for diplomats to start making trade-offs between the different sectors, and ministers from the WTO's 151 members could meet to bed down an outline deal in Geneva around Easter, which falls this year in late March.

That is the last possibility for a ministerial meeting if the deal is to be done this year, as it would take up to eight months of hard technical work, and further negotiations, to translate the outlines into specific tariff rates and subsidies.

TRADE-OFFS FOR TRADE

Lamy put this timetable to ministers at Saturday's lunch, and Swiss Economy Minister Doris Leuthard said all accepted it.

The ministers are not about to sacrifice their ambitious targets to open up trade in interests of a quick deal.

"The minute one country seems to approach a low-ambition outcome, there is a negative death-spiral that takes place, so no, we cannot and should not do that," said Schwab.

But she acknowledged that in a negotiation the United States would not get everything it wanted.

Brazil's Amorim said states were not far apart on numbers, but it was important that developing countries get the same understanding for the treatment of their fledgling industries as rich countries are seeking for sensitive farm products.

And India's Nath noted it was very much in the interest of rich countries to ensure a deal was good for developing states.

"It's important that the content of this round leads to healthy economies in developing countries now because developing countries, many of them, are really the engines of growth of the global economy," he said.

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