The World Trade Organisation and global trade itself are at a critical crossroads, with one last chance to salvage the Doha round of talks. Failure would be disastrous for the WTO, particularly to the least-developed countries and could lead to a breakdown of the multilateral trade system.

The Doha round of talks began in November 2001 with the goal of reaching an agreement by Jan 1, 2005. Unlike previous trade rounds, which were led by the United States and Europe, Doha was to be driven by a development agenda. It promised special benefits to developing countries, such as improved access to developed nations’ agriculture and textiles markets and affordable medicines for diseases such as AIDS.
The EU and the US, after years of wrangling, presented an agreement to substantially reduce EU tariffs on farm imports and US domestic agricultural subsidies in return for lower tariffs in the developing world on manufactured products and greater market access for services. Brazil and India rejected this on behalf of the Group of 20 developing countries.

There are many reasons for the impasse. Agriculture, the most politically sensitive trade issue, is at the core of negotiations, and implementing a “development agenda” in the context of trade talks has proved difficult. There are new players, and the key emerging countries have refused to allow the US and the EU to cut a deal and impose it on them.

But despite all the fits and starts, the countries are much closer to the parameters of an agreement than it might appear. A few billion dollars of additional reductions in EU agricultural tariffs and US agricultural subsidies would put Brazil, India and the developing world to the test of addressing their high industrial tariffs by binding their actual applied rates so they can never be raised, shaving their highest “bound” tariff rates and allowing greater access for key service industries in developed nations. The problem is the lack of political will from all key countries to go the last mile.

A critical step was taken in July when key WTO committees proposed a framework with ranges of reductions in trade barriers. In agriculture, the WTO committee recommends slashing the US cap on annual trade-distorting support to $13 billion from over $16 billion and cutting the highest EU farm tariffs significantly. They also propose a range of cuts in developing countries’ industrial tariffs.

These proposals provide a sound basis for negotiations this month, but the talks are unlikely to be successful without an additional push at the top. The major players will not do what they know needs to be done unless everyone moves together. The US and the EU need to make one last effort to reduce their agricultural subsidies; Brazil needs to reduce its industrial tariff barriers; India must be willing to open its agricultural market; and G-20 members must recognise their responsibilities to open their markets.

WTO Director-General Pascal Lamy is the only one who can force the recalcitrant countries to bridge the remaining gaps. He must make them recognise that the future of the institution, barely a decade old, is at stake.
Similar dire circumstances arose during the Uruguay round of talks, in which we were involved. After the trauma of a failed “final” ministerial meeting in December 1990, Arthur Dunkel, then director general of the General Agreement on Tariffs and Trade, precursor of the WTO, submitted his own final proposal. While most countries openly opposed it, they ended up building a compromise on what became known as the “Dunkel text”. After many failed initiatives in the Doha round, it is time for Lamy to guide members to a middle ground. The sooner a “Lamy text” is on the table, the better for the WTO, for open trade and for a rules-based multilateral trading system.

(The writers are co-chairmen of the European-American Business Council)