THE FUTURE OF THE ROUND
46. We asked Lord Mandelson, Secretary of State
for Business, why the negotiations in which he had participated
had not reached agreement. He told us that while the talks did
not meet their objective of agreeing the modalities, "substantial
progress" had been made on reducing agricultural tariffs:
"we agreed … in respect of agriculture that the proposed
reductions in agricultural trade barriers … would be set
at an average of at least 54% with the highest tariffs enjoying
the greatest cuts, in the case of the European Union something
in the region of 70%." "Significant indications"
had been offered in services negotiations (Q 594).
47. The breakdown of the Geneva Ministerial was
not accompanied by rancour, and the leaders of the G20 countries
have called for further talks and an agreement by the end of this
year. However the appointment of a new Commissioner in Europe
and the change in administration in the United States may create
uncertainty among trade participants. Some witnesses did not see
political uncertainty as a great concern, noting that the 1992
US Presidential election had not prevented progress towards completion
of the Uruguay Round in 1993. Lord Mandelson, Secretary of State
for Business, did not expect the 2009 Indian elections to impact
upon their stance (Q 614).
48. Speaking after the end of the Ministerial,
Celso Amorim, Brazilian Foreign Minister, said "people say
we should preserve what we have, but it is not in our power. Life
goes on. Protectionist interests will again present themselves.
It will be very difficult to keep this intact."[25]
Mr Thomas MP, Under-Secretary of State for Trade and
Consumer Affairs, agreed: he predicted that the failure to agree
a deal would be a "major boost to the protectionist mood
music" (Q 555).
49. In evidence given as European Commissioner
for Trade, before the Ministerial, Lord Mandelson was blunt about
the implications of a complete failure of the Round. He noted
it would be the first trade Round not to conclude in a positive
way and more significantly, it would send a signal to the developing
world that the developed countries were greedy, selfish and unable
to recognise the implications of globalisation and the "shift
of economic power from West to East" (Q 245). Globalisation
had created a "multi-polar" economic world which required
new relationships, a new sort of political management and new
definitions of reciprocity; the world had not yet adjusted to
these (Q 259). Ambassador Stephenson, Chair of the WTO Negotiating
Group on Market Access, was concerned that the mandate for the
Round was becoming increasingly disconnected from current issues,
making an agreement even more difficult (Q 498).
50. We detected a sense of weariness among participants
and observers of the negotiations. Those we met in Geneva prior
to the Ministerial were understandably reluctant to discuss the
implications of the Ministerial concluding without agreements
or admit to a sense of frustration, but Dr Mendoza described
the phenomenon of "negotiating fatigue", in which participants
believe they are wasting their time through lack of progress and
stop tabling their own offers. He was confident that the Doha
Round had got through a bout of fatigue and participants were
engaged in the negotiations (Q 442). Professor Lehmann
had observed a similar cynicism at meetings such as the World
Economic Forum annual meeting (Q 472), and Ambassador Falconer,
Chair of the WTO Negotiating Group on Agriculture, said the length
of the Round had been "frustrating" as it was now crowding
out discussions on more pressing questions (Q 509).
51. In early November, after President-elect
Obama's victory in the USA, and the sharp decline in the global
economy, we asked Lord Mandelson, in his role as Secretary of
State for Business, what he believed the prospects for the Round
were. He told us that "the Doha deal is more urgent than
ever given the financial crisis. We need to demonstrate to the
world our commitment to open markets and our rejection of protectionism;
otherwise we would make the present turmoil and dramas even more
serious and long-term in their impact" (Q 600). He said
that the meeting of G20 leaders on 15 November should "send
a very strong signal" that a further WTO Ministerial meeting
should be held and agreement reached before President Bush's term
expires in January 2009 (Q 601). Participants at the meeting
did agree to strive for a conclusion to the round this year.
52. We also asked Lord Mandelson about the likely
policies of the new Democratic administration in the United States
and to contrast the present economic situation with that which
led to the 1930 Smoots-Hawley Act which raised US tariffs on 20,000
items. Lord Mandelson noted that there were protectionist tendencies
within the Democratic party, but that the Party had "different
policy emphases … Mr Obama has a pro-market approach,
including government action to shape markets and distribute their
fruits more fairly … Inevitably, however, he and others in
the Democratic party are concerned by the impact of globalisation
on American workers and American industry. This could lead to
Democrats becoming more sceptical about the virtues of free trade."
He said that the Government would encourage the new administration
to adopt a non-protectionist policy (Q 602).
53. We were relieved to hear that the economic
downturn had not led to protectionist measures in the UK's major
trading partners (Q 602).
54. We are disappointed that the Doha Round
is yet to reach a successful conclusion and are concerned that
a global recession will increase pressure for protectionist measures.
We therefore welcome the decision of the leaders of the G20 countries
to use their November summit as a springboard towards further
Ministerial meetings on the Doha Round. We commend the UK Government,
Lord Mandelson (in his former role as Commissioner for Trade)
and the Commission for their work to date. We welcome Commissioner
Ashton's announced commitment to work to revitalise the multilateral
talks at the start of her tenure as Commissioner for Trade.
55. We call on the Government and the Commission
to make every effort to ensure that the positive rhetoric arising
from the G20 summit is translated into action and a successful
conclusion to the Round. The Government should also work with
the incoming administration in the United States to emphasise
the importance of trade liberalisation.
56. We agree with the British Bankers' Association's
assessment that the services sector as the "engine"
of economic growth in the EU (p 107). We are concerned
about the pace of services negotiations, especially as this is
the area in which the UK has the most to gain from the Doha Round.
Services negotiations require more attention because of the range
of issues involved. We would encourage the business community
to be more vigorous in advocating the completion of the Round.
57. The Singapore issues should be revisited
outside of the Doha Round.
58. A Round in which WTO members bound tariffs
at existing applied tariff rates would not be a failure: we do
not take the current, historically low, levels of tariffs for
granted. The embedding of current low levels of protection at
a time when the global economy is facing a turbulent period featuring
volatile raw material prices and a likely economic contraction
would be a very real gain.
59. We would prefer to see continued reform
of the Common Agricultural Policy for its own sake, although further
reductions in agricultural support would also allow the EU to
offer still larger cuts in agricultural tariffs. Although it was
at the periphery of the area of dispute in this summer's talks,
the EU retains a central position in international trade negotiations
and will need to maintain and strengthen its role as a promoter
of liberalisation.
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