WASHINGTON, 2 August 2004 — A deal reached on Saturday to salvage world trade talks holds out the hope of fairer farm trade while boosting confidence in the global economy, trade experts said.
The accord hashed out in Geneva puts the talks back on track after a bitter collapse nearly a year ago in Cancun, Mexico that raised questions about the future of the World Trade Organization as a negotiating forum.
If countries had failed again this week “the talks would have been dead in the water,” said Jeffrey Schott, a senior fellow at the Institute for International Economics.
The World Bank has estimated a new world trade agreement could lift 140 million people out of poverty by 2015.
While negotiators are at least a year or two from final agreement, the framework agreed on Saturday keeps the door open for an ambitious pact to slash tariffs on farm and industrial goods, substantially cut rich country farm subsidies and make it easier for banking, insurance and other service industry firms to work across borders, analysts said.
The interim agreement sets the stage for a new agreement on customs procedures, which have not been updated since the 1940s. Success could reduce shipping delays that are estimated to raise the cost of doing business in some countries by 5 percent.
Gawain Kripke, a policy specialist for Oxfam, a development group, said he welcomed the interim agreement even though it fell short in many areas.
“We would have liked to have seen stronger commitments of reform from wealthy countries and less pressure on the poorer countries to make concessions,” Kripke said.
The framework focuses special attention on the US cotton program, which has been in the spotlight for more than a year because of complaints by West African countries that huge subsidies to US growers have hurt their farmers.
Although US negotiators blocked the West Africans’ demands for separate talks on cotton, the commodity is highlighted in the text as an example of how rich country subsidies can hurt the developing world.
“US cotton producers are going to scream bloody murder,” said one agricultural trade policy expert who asked not to be identified. But the framework provided enough flexibility for the United States to give cotton farmers “a soft landing”, he said.
Other sections of the framework point farm trade talks in a favorable direction for the United States. The section on domestic subsidies suggests the European Union and Japan, which spend more than the United States to support their farmers, will have to make bigger cuts, the trade analyst said.
The framework commits the EU to eliminating farm export subsidies in exchange for the United States disciplining the use of export credits and food aid.
The text also keeps alive the possibility of an ambitious agreement that would lower farm tariffs around the world. “Even if developing countries get better treatment, they still have to make some tariff cuts” and rich countries will not be able to shield politically sensitive commodities from further market openings, the trade analyst said.
The accord sets the stage for negotiations aimed at substantially reducing tariffs on industrial goods that make up more than 75 percent of world merchandise trade.
Frank Vargo, vice president for international trade at the National Association of Manufacturers, said the interim draft wisely delayed many of the most difficult decisions on industrial goods until later in the negotiations. “The biggest tariffs are in the least developed countries. Until they recognize that it’s in their best interest to cut them, that’s not going to happen,” Vargo said.
Countries are expected to continue striking bilateral trade deals like the recent one between the United States and Australia.
But the WTO talks offer the biggest payoff, said Sarah Thorn, trade director for Grocery Manufacturers of America, which represents companies such as PepsiCo and Kellogg’s.
“Getting the tariffs down between Australia and Japan are just as important to us as getting down the tariffs between the US and Japan,” Thorn said.
