Examination of Witnesses (Questions 440-455)
Dr Miguel Rodriguez Mendoza and Mr Trineesh Biswas
11 JULY 2008
Q440 Lord Haskins: In the event of
the whole situation being put on ice, do you think there is any
risk that the dispute settlement system, which has held up remarkably
well, might in any way be damaged if there was a failure at this
stage?
Dr Mendoza: I would say that the dispute
settlement system will go hand-in-hand with the WTO. If the WTO
is a strong organisation and keeps moving forward the WTO dispute
settlement system will move forward and will continue playing
the important role it now is. As you said, it has functioned remarkably
well with a lot of integrity and efficiency and this is something
we have to preserve. Quite honestly, I do not think that the replacement
of negotiations by litigation is an option, it would have serious
limitations. A WTO in crisis would imply that sooner or later
there would also be a dispute settlement system in crisis.
Q441 Chairman: Much the same point
was made by Monsieur Lamy, that it will just stop. If there is
no longer a negotiation proceeding but only a court proceeding,
the court practice gets further and further away from the reality.
Dr Mendoza: Exactly.
Chairman: That is a very interesting point.
Q442 Lord Moser: You have had quite
a lot of experience within the Doha Round. Still looking at the
prospects that you have talked about for the next stage, looking
at it not so much from the point of view of the USA but an ordinary
LDC, et cetera, is there a general problem that people in those
countries think, "We have been around this before year after
year after year, there are no new arguments really. There's a
new global situation, et cetera" and they have just lost
their appetite for more negotiations? In your view, would that
be a barrier to progress, not exactly boredom but cynicism in
a way, "We've done all this before"?
Dr Mendoza: There may be something of
that. It is what we call here in Geneva "negotiating fatigue"
in the sense that after so many years of meetings and unmet deadlines,
at some point negotiators start to think they may be wasting their
time. I would not characterise the situation at present as one
of negotiating fatigue. That happened perhaps a year ago when
the situation was really bad and some meetings were convened that
did not produce any results, but not now. My understanding is
that since a few months ago most countries have really engaged
in the negotiations and are firmly engaged in trying to reach
an agreement. That is why they have devoted so much time and have
had meetings almost every day, including weekends, to try to hammer
out these understandings. For the LDCs, a Doha deal should not
be a problem, not only because they will not be asked to make
any particular or serious commitments but because the understanding
will be that they will be helped by everybody in implementing
their commitments. The situation of the LDCs is very well-known
and all seem to be prepared to help them.
Mr Biswas: If I might add something.
I think the proliferation of bilateral and regional trade agreements
all over the world increased even before the Doha Round, which
has been in troubled times for about five years now. It has been
called various things, a spaghetti bowl of overlapping trade agreements
in the West and a noodle bowl of trade agreements in Asia. Although
this might sound very appetising, apparently it is anything but,
especially for businesses and in Asia where the array of interlocking
agreements with different Rules of Origin and bureaucratic requirements
is particularly dizzying. There are a lot of anecdotal stories
about businesses opting to actually export under the WTO MFN tariffs
just because the cost of complying with the red tape requirements
of a bilateral trade deal are not worth it.
Q443 Lord Moser: I have not quite
understood your last point.
Mr Biswas: Say you are a business in
the Philippines, and I do not know if this is true about the agreement
with Japan, but the Philippines and Japan just signed a free trade
agreement which in theory should liberalise merchandise trade.
Suppose the bureaucratic requirements for getting your products
to qualify for the tariff concessions made by Japan under the
bilateral agreement, to prove that your products qualify for those
tariff concessions, might involve filling out various forms that
are much more complicated than simply exporting your goods to
Japan under multilateral rules and paying the tariffs bound at
the WTO. Apparently many businesses are finding this is the case.
While there very much may be a loss of appetite for another grand
multilateral Trade Round at the WTO at this time, it seems plausible
that business leaders might eventually get sick of the alternative
as well, which seems to be bilateral deals with Rules of Origin
and other arcane requirements.
Q444 Lord Trimble: That depends on
whether there are significant variations in Rules of Origin.
Mr Biswas: Very much so.
Q445 Lord Trimble: Apparently it
depends upon that, and that may be so with regard to existing
bilateral agreements, but it does not follow that will always
be the case. The point you make about the complexity and the expense
will vary depending on the size of the business, the resources
of the business and the nature of the trade.
Mr Biswas: Very much so.
Q446 Lord Trimble: What you are saying
is if we get a situation where the large trading partners, EU,
the US, ASEAN, deal together bloc to bloc with common arrangements
and simplified arrangements for each bloc to deal with, that might
avoid the problems that are occurring in your spaghetti/noodle
bowls. If that develops, and the large blocs will trade quite
cheerfully with each other, the areas that will be left out will
be the less developed countries.
Mr Biswas: I could not agree more.
Q447 Lord Trimble: This shows the
danger of continuing to create difficulties within the multilateral
context.
Mr Biswas: Absolutely.
Q448 Lord Moser: What Lord Trimble
has just said and what you have said, how does the WTO deal with
this conflict that you are explaining so well?
Mr Biswas: In terms of what Lord Trimble
just said, if the US and EU and ASEAN, and a couple of other major
traders, were able to actually resolve their differences amongst
each other there is no reason why they would not be able to resolve
them at the WTO within the framework of a larger multilateral
deal. That would be the ideal.
Chairman: Thank you. I find that a very useful
point. I had not quite seen the interaction.
Q449 Lord Maclennan of Rogart: Dr
Mendoza, I have to confess to finding it really rather difficult
to understand what is the impact anticipated of the rise in prices
of agricultural products and fuel upon the prospects of these
negotiations succeeding. I read conflicting advice and information.
For example, there was an interesting article a couple of weeks
ago by two Indian economists from Columbia University about how
the rise in price will render the Agricultural Bill in the United
States rather meaningless in terms of the subsidies because actually
they are going to be outstripped anyway. On the other hand, there
is some risk of increased protectionism in the developing countries
in this situation. I would very much like to hear what you think
about that.
Dr Mendoza: As you have said, it is a
very confusing situation. What we are witnessing now, on the one
hand, is countries dismantling their tariff barriers, developing
countries, to mitigate the increase in food prices and this is
happening in a number of countries. On the other hand, we are
also seeing some food producers, developing countries, establishing
export controls to somehow safeguard their own populations from
the impact of these prices or from the scarcity of resources or
food security. The situation is confusing. This is not a new protectionism
overall; on the contrary, the food prices are leading to some
measures of trade liberalisation but, on the other hand, it may
be a new form of protection in cases of the barriers imposed by,
say, the Argentinean Government on crops. How that will impact
on the current negotiations is difficult to predict. A few weeks
ago we had one of the European countries indicating that perhaps
the solution would be to implement a common agricultural policy
all over the world. That is one view. I wonder whether this is
feasible. Certainly a successful conclusion of the negotiations
will help in liberalising the food markets and, on the other hand,
by eliminating the current distortions to international trade
and agriculture making it possible for many developing countries
to devote resources to increase their food production. Maybe Trineesh
would like to add on this.
Mr Biswas: In reference to that article
from the other day, I think all they were saying was that the
way US farm programmes work is they pay out more when prices are
low and pay out less when prices are high. Right now prices are
so high that US subsidy payments to farmers are quite low. They
were saying that in theory this should enable the US to offer
significant farm subsidy concessions at the WTO. Of course, as
all of you know, farm reform is a politically painful thing. In
terms of the risk of protectionism, the term bears some examination.
Generally, protectionism refers to high barriers, whereas right
now in the current food price scenario many developing countries
in particular that have jealously guarded their farm tariffs are
actually applying zero tariffs and still finding it hard to buy
rice. From a certain standpoint that is not protectionist at all.
However, what is happening is panicky policy making and panicky
policy making is rarely good for long-term solutions. A lot of
countries have thrown up export bans or other restrictions out
of their desperation to avoid food riots. I notice that you have
copies of the FT and surely you saw Nicolas Sarkozy's comments
the other day in which he somehow decided that Mandelson's offer
at the WTO, which is almost entirely consonant with the CAP reform
that EU members have already agreed, would savage European agricultural
production, take it down by 20 per cent, increase starvation,
God knows what. This is not smart long-term policy making and
that is what seems to be happening. What the Indian economists
were appealing for was some good sense, that cool heads should
prevail when setting trade policy.
Chairman: Thank you very much, Mr Biswas. Colleagues,
we have about two minutes if I have managed to suppress anybody's
questioning.
Q450 Lord Haskins: Can I just follow
up on this. I agree with you on this in the short-term but, on
the other hand, behind food prices can be an opportunity, and
you have mentioned one, the US Farm Bill becomes less politically
contentious than it was. There is another one that if you can
make the case for more trade liberalisation in food that is going
to enable the world to move food from the areas which have got
surpluses to the areas which are short and perhaps bring prices
down.
Mr Biswas: Yes, and hopefully create
incentives to once again invest in agricultural productivity and
water conservation in the developing world.
Q451 Lord Haskins: Is that argument
being made here at the moment?
Mr Biswas: The Doha agenda was set in
2001 and modified in 2004. It is notoriously hard to change. I
think it was tooled to rein in subsidies. If an agreement can
be struck with that alone then I think a lot of people would be
grateful and they could move on to tackling other concerns.
Q452 Lord Haskins: Monsieur Lamy
yesterday was saying very pointedly that the WTO cycle is a 15
year cycle and the political cycle tends to be four or five years
uncoordinated across the world, and the economic cycle can be
ten or 12. You are saying that this new situation on food was
not anticipated?
Mr Biswas: Very well said.
Q453 Lord Woolmer of Leeds: I come
back to your comments, Mr Biswas, about the bilaterals. If I understood
you correctly, and I do not know if it is the view of the Centre,
the increased number of bilaterals is a cause for concern for
some businesses, particularly SMEs I would have thought, and eventually
this might lead to a backlash, as it were, to a renewed belief
and faith in multilateralism, so somewhere between where we are
now and that point there may be a tipping back towards the benefits
of multilateralism. Given the cycles you have talked about, how
do you see the next five or six years post-Doha if it comes around?
Do you see any continuing trend towards more and more bilaterals?
Do you think that in this 14-15 year cycle of multilateralism
within a few years you can see a renewed energy to multilateralise
the bilaterals? In other words, will the growth of bilaterals
become a cause for going back to multilaterals?
Mr Biswas: I think bilaterals are likely
to continue. The WTO is certainly thinking about multilateralising
bilateralism. It had a big meeting on the subject last year. It
is a plausible scenario that bilaterals will continue and then
there will be pressure to multilateralise them. What I would be
nervous about is that multilateral co-operation does not seem
to be doing very well these days. This is not to suggest that
this is an area of global conflict, it is not, it is just that
the multilateral problems that we need to deal with are increasingly
complex to the extent that multilateral co-operation is increasingly
unequal to the task. Climate change is probably a far better example
than trade. If bilateral agreements do continue to proliferate
in the next 15 years I hope that multilateral rule-making will
be equal to the task of integrating them into a more harmonious
whole.
Q454 Lord Woolmer of Leeds: The growth
could weaken the future of WTO?
Mr Biswas: Yes.
Q455 Lord Woolmer of Leeds: It could
do. I was just seeking your judgment, will the growth in bilaterals
continue and will it weaken the long-term position of WTO or,
in your view, within a realistic timeframe will it be a cause
for renewed energy to do something about the bilaterals? That
balance was the issue I was exploring.
Dr Mendoza: We have to differentiate
between a situation in which bilaterals go on and the WTO gets
paralysed and a situation in which bilaterals go on but the WTO
is healthy and moving forward. In the latter case I do not see
major problems with bilaterals because somehow there will be a
way to make them compatible with WTO rules, but if the WTO is
weakened because of the failure of the Doha negotiations, if it
stops moving forward, then bilaterals will come to be seen as
alternatives to the WTO. They are not seen as alternatives today
no matter how bad they may be for the multilateral trading system
currently. This is a key distinction. Bilaterals are here to stay,
regional agreements are not going to disappear all of a sudden,
they will stay and may continue to have a role in the future,
it depends on what happens in the US in the coming elections.
I do not see major problems in bilaterals between the EU and ACP
countries, but I would see big problems if at some point there
is a bilateral between the US and EU. That would be the end of
the multilateral trading system. The WTO would not survive a bilateral
or, as you mentioned, a trilateral between the US, the EU and
ASEAN. That would be the end of the WTO as we know it. As I said,
it all depends on what happens with the WTO.
Chairman: Thank you very much, that is most
interesting. Thank you both very much for coming.
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