Seven years of protracted trade negotiations between WTO members have ended as divisions between the US and India proved intractable.
Eventually the iron-grip of international realism proved too large an obstacle to overcome, with each trading bloc suspicious of the others and unwilling to compromise their goals.
The decisive schism emerged over a “special safeguard mechanism” which India – acting on behalf of the G33 group of developing economies – insisted was an essential piece of protectionism for their farmers.
It allows them to raise tariff levels on cotton and rice in response to temporary surges in cut-price imports, thus maintaining stability and equity for local producers. Without such a measure local farmers see price driven down, and poverty inevitably following. This, said US trade representative Susan Schwab, was “unconscionable” and would represent a step backwards. Her view was that in return for the previously unheard of co-operation from the west in this round of talks, all tariffs on such basic, globally produced goods must be lifted.
The talks themselves were focused on the liberalisation of international trade, and all parties knew that compromise would be inevitable. The EU seemed willing to reform its Common Agricultural Policy - reducing some of its subsidies by up to 80% in the process – although France had threatened to reject such a dramatic deal. In return, the west wanted developing economies to open up to their goods.
The deal proposed by the developing nations would have led to a cut in tariffs of over 50%, and thus a $130bn a year saving for the global economy.
The protection measure proposed by India – and fully supported by China, as well as the other G33 nations – was a response to familiar problems involving the dumping of excess produce on third world markets. It was, said India, unthinkable that they would leave their poor farmers at the mercy of the whims of global trade. As nations with so many subsistence farmers the G33 group were well within their rights to demand a safeguard against the flooding of their markets – and bold to stick rigidly to it.
The result of such flooding, as has been seen in so many third world countries, is a persistently low price and erratic production.
For the US this was simply another example of the protectionism they sought to avoid. Little attention was paid to the separation between permanent tariffs which inevitably harm global efficiency and the emergency nature of this demand. It should also be noted that it is largely the US and EU that are responsible for the dumping of over-produced imports, and so it is they who have most to gain from their continuance.
Pascal Lamy, the head of the WTO and overseer of the talks, said that: “members have let slip through their fingers is a package worth more than $130bn a year in tariff savings.”
