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Robert
Zoellick, freshman appointee to the post of United States' Trade
Representative, is a man with a mission. Early into his tenure, he has
been assigned the challenging job of winning universal support for the
highly controversial new Round of world trade negotiations. He has a
tight deadline too: the next ministerial meeting at Doha, Qatar in
November. Success in this effort depends on his ability to soften two
principal targets. One is the European Union, that is unwilling to
cutback significantly on its support to agriculture, and is willing to
even talk about the matter only if a whole range of new issues ranging
from protecting the environment to reducing foreign investment
regulations and implementing a competition policy are implemented. The
other is the group of developing countries, led by the "like-minded
five", which includes India, Pakistan, Egypt and Malaysia, that has held
that no new Round should be considered before a review of the impact of
the Uruguay Round (UR) agreement is made and a number of inadequacies in
its implementation are addressed.
Of these targets, the EU appeared the more difficult nut to crack.
Getting it to budge on agricultural support would be difficult, given
the crucial role of such support for its farming community. What is
more, with the US having provided the lead, the EU has been reforming
its Common Agricultural Policy to shift from forms of support that
obviously affect prices and trade, to other ostensibly "decoupled" forms
of support, such as income transfers and "deficiency payments". In the
UR, the US and the EU had come together and manoeuvred to keep such
forms of support out of the definition of "trade-distorting" subsidies.
Thus, though the total subsidy provided to American and European
farmers, a figure captured in the OECD's computations of the "producer
subsidy equivalent", has remained high and even increased over the
1990s, these countries claimed to be meeting their Uruguay Round
commitments with regarding to reducing tariff support and subsidies
provided to their agricultural sector. Further, in an effort to
completely legitimise such support to agriculture, the US and EU had
ensured the inclusion of a "peace clause" in the Uruguay Round Agreement
on Agriculture (AoA) that decreed that no disputes could be raised
regarding the "green-box policies" and other AoA conforming support and
subsidy measures, during the phase when the agreement was being
implemented.
The results of these features of the UR, are now proving a thorn in the
flesh of Mr. Zoellick. The American farming community is unhappy over
the high support afforded to European farmers, despite the massive
support it receives from its own government. And the Cairns group of
agricultural exporters, which includes Australia and Argentina among
others, is keen on enforcing its one point programme when it comes to
world trade: the complete freeing of trade in agricultural products. The
end-July meet of trade officials in Geneva, was the occasion chosen by
Zoellick to try and convince the EU that it must give on this matter. In
this effort he found an ally in Pascal Lamy, EU Trade Commissioner and
reported long term friend, who is busy working out the quid pro quo
needed to win the support of EU members for progress on agricultural
trade front. In the event Lamy has come up with a long list of issues
that need to be discussed along with reduction of support for
agriculture. These include regulation to protect the environment,
competition policies and multilateral rules governing investment. Thus
the next stage in world trade negotiations should, in its view, not be
just about reducing tariffs on manufactures further and reducing
trade-limiting forms of support to agriculture, but rather a
comprehensive new Round that brings in issues that have hitherto been
substantially delinked from trade.
The EU stance is both a loss and a gain for Zoellick. A loss because it
seeks to bring in issues such as competition policy and environmental
protection, that are unlikely to be popular at home. Giant American
corporations, that straddle world markets and zealously guard their turf
through means fair and foul, as Microsoft has done, would not be too
happy if regulations that limit their spread into Europe through mergers
and acquisitions are to be discussed. The EU's notion of environmental
protection, which includes ensuring food safety, by keeping out
genetically modified foods for instance, has already upset American
farmers who account for a large share of acreage under GM crops. And
these fresh demands to use such grounds to limit trade come at time when
US farmers would have to give in to the Cairns group's call to reduce
income support.
But this loss is no unmixed blessing, since it brings with it the
assurance that if some at least of these issues are included in the
negotiating agenda, the all-important EU would be willing to go along
with the American desire for a new round of trade negotiations. Having
registered this gain, Zoellick set out on a whirlwind tour, that brought
him to India, with the aim of neutralising the developing country block
opposed to a new round before UR implementation issues are discussed. In
this effort, Zoellick has three grounds on which to bargain. The first
is the claim that any advance on the agricultural front could be of
benefit to developing countries that can also demand that some of the
other inadequacies of the UR should be addressed in the new round. The
second is that with him having won EU support, it is unlikely that the
new round can be stalled for long. This would condemn opponents of the
round to isolation. In an address to industrialists at New Delhi, he in
fact warned that India is likely to be left behind and would lose out at
the coming Doha ministerial conference, if it stuck to its opposition to
a new trade round. Finally, in New Delhi, he combined the demand for
support for a new round with the promise of cooperation on sensitive
issues like counter-terrorism, nuclear non-proliferation and human
rights. This is nothing but a veiled threat of political boycott if
India did not fall in line.
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