Tariff fight threatens trade negotiation

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November 2005

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Tariff fight threatens trade negotiation
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Tariff fight threatens trade negotiation
The failure of the European Union and the United States to agree on the future of trade subsidies has worrying implications for the upcoming World Trade Organization talks, according to a statement from the Catholic Agency for Overseas Development (CAFOD), a London-based relief and development organization. Despite a series of meetings—the first in London, the second two in Geneva—the big guns of the WTO (U.S., E.U., India, Brazil, and Japan) are still at loggerheads about the need to cut global trade tariffs.

This means that expectations for the crucial WTO ministerial meeting on trade at Hong Kong in December are in danger of being scaled down—leaving little hope for a breakthrough on setting fairer trade rules. CAFOD trade policy analyst Matt Griffith says the disagreement is based simply upon the E.U. and U.S. giving very little away on agricultural subsidies, but asking for a great deal in other areas of negotiations.

“The E.U. and U.S. have been trying to take, but have not been prepared to give. Such destructive behaviour has pushed the WTO to the brink, and risked creating a global trading system that was even more imbalanced against the interests of poor countries.”

EU Trade Commissioner Peter Mandelson has insisted that it is up to countries such as Brazil and India to reciprocate with the cutting of their tariffs on industrial goods and services as an “incentive” for Brussels to go further on agriculture. But earlier in the week the Indian trade minister Kamal Nath accused the EU of demanding a “pound of flesh” from poorer countries by using agricultural subsidies as a bargaining chip.

"The WTO is not about free trade but about fair trade," Nath said. "Small family farms are competing with the massive ranches of developed countries [riding] on the back of large [government agriculture] subsidies."

According to Griffith, “The chances of a major final 'deal' at Hong Kong, always remote, now look impossible. Chances of a pro-development breakthrough are on ice at the moment.

“On the positive side this means that the chances of a dramatic failure, and also a dramatic bad deal, are also scaled down. Hong Kong looks like being a smaller 'hurdle'—thus reducing pressure and possibly producing more sensible outcomes."

“Given that many developing countries concerns have not yet been adequately addressed, this may not be a bad thing," Griffith said. "There is also a very audible message from developing countries - the EU and the US need to drop their aggressive negotiating agendas if they expect to contribute to success at the WTO.”

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