Volume 7, No. 7, August-September-October, 2006


Collapse of the WTO Trade Talks & Intensifying Economic Contention


The deadline earlier set for the conclusion of the Doha Round of Trade negotiations was the last Hong Kong Ministerial meet. That failed. Then April 30 was set for completing the negotiations. This was again postponed to end June demanding a "heightened sense of urgency". But the mini-Ministerial Meet in Geneva in June was abruptly terminated amidst growing animosity with no date fixed for any further negotiations. It was vague when the next meeting would take place with negotiators saying it may take six months or even a year. For the present, the Director General of the WTO has been given the task to bring the negotiators closer to an agreement.

The main point of contention is the question of agricultural subsidies in which the very draft presented for discussion had 760 points of difference (bracketed). The main point of conflict is between the US and EU on agricultural subsidies and also between the developed countries and the underdeveloped countries. The main cause for the collapse of the talks was the USís aggressive posture and its total intransigence towards negotiations. From all appearances it came with the intention to directly sabotage the talks.

The US not only refused to reduce its agricultural subsidies it put forward a defacto increase in subsidies amounting to $3 billion. At the same time they demanded of the EU and the underdeveloped countries to cut their import tariffs to upto 90% on farm products, manufacturing goods and services. The US took a very aggressive stand that it wants real market access for its farmers, for its industrial producers and for its service sector. At the same time it was not prepared to reduce even by one dollar its proposed $22 billion subsidy on agricultural products. Its present subsidy is $19 billion and the demand was to reduce it to $12-13 billion; in effect the US demanded an increase in its subsidy while demanding other countries reduce their subsidies on all products by as much as 90%.

This was not Ďnegotiationsí it amounted to sabotage of the WTO talks as the one-sidedness was crude and blatant. It was like holding talks at the point of a gun. In fact from the very start it was the US inflexibility that smashed the talks. While all the other five delegations (EU, Japan, Britain, Brazil and India) made their offer to break the deadlock, the US blamed Brazil and India for being inflexible and the EU for refusing to open up farm markets.

And now with the sabotage successful the very Doha Round is in danger of collapse. One of the key factors in the urgency for achieving a consensus soon is that the USís Fast Track Authority to get trade pacts passed in Congress expires in mid-2007. If nothing is agreed to by then it is unlikely that the WTO will survive.

The main reason for the USís increasingly aggressive posture is the impending recession in its economy and the burgeoning trade deficit (coupled with the rising budget deficit). Goldman Sachís recent report said that the conditions in the world economy and the US economy in particular are worsening. The root cause for the 2001 recession has not gone away but has been temporarily postponed but the burst technology bubble being replaced by the real estate bubble. This too is on the verge of busting. Besides the USís trade deficit has doubled in this period. These are the main reasons for the USís aggressive policies in trade negotiations.

This, the US is seeking to achieve by sabotaging the WTO and going for Free Trade Agreements (FTAs) at a bilateral and regional level where its arm-twisting methods are likely to be more successful. In FTAs with underdeveloped countries, it has imposed labour and environmental standards, free capital flows, and other such conditions which would have been impossible in the WTO deal. In all its FTAs, the US provides duty free treatment for garment imports only if it the garments are made from cloth exported by the US. Besides the US has continued with its protectionist polices, introducing bills violating WTO rules. For example one such recent proposal was to slap an import duty of 27% on Chinese goods if it failed to revalue its currency. It is for all these reasons that the US focuses more on FTAs and gives lower priority to the WTO.

And as the crisis in the US economy deepens and its trade deficit grows the contention with other economic powers will intensify. Today not only is the EU a major contender other centers of trade conflict are growing like that of the SCO (Shanghai Cooperation Organisation). The SCO is emerging as a counterweight to the US in their region. The SCO controls a large part of the worldís oil and gas reserves. They have already agreed on 125 joint projects related to trade and investment and have set up seven specialist panels to coordinate cooperation in fields such as customs, transportation, investment promotion, energy and telecommunications. Beijing recently announced a $ 900 million loans for other SCO countries in the form of preferential buyerís credits for SCO members that buy Chinese goods. In addition bilateral trade between Russia (whose membership of the WTO is still being opposed by the US) and China has soared to reach $30 billion in 2005 ó a 37% increase over the previous year. Besides China and Russia both have huge trade surpluses.

Is it then any wonder that the US should be desperate for markets and will flex its muscle ó military or otherwise ó to seize markets on its own. And in the process if the WTO acts as a stumbling bloc let it be peacefully buried. Anyhow with the growing regional trade blocs the WTO is bound to reduce in its significance, if not meet its demise.

Also as the crisis in the world economy deepens the contention for markets will get all the more fierce and each of the major imperialist players will put more emphasis on trade blocs of its own and the WTO will become superfluous. This trend can also be seen to be growing not only by the US but also the EU, Russia and even Japan to a lesser extent. In the phase after the collapse of the Soviet Union and the end of the cold war the imperialists needed the WTO for a joint offensive of finance capital to prize open the markets of the backward countries to an unprecedented extent. This it achieved in the name of globalization, and the WTO helped this process. Then, with superpower contention having disappeared (with the collapse of the Soviet Union) collusion of the imperialists was the major factor and they were able to jointly launch their attack on the backward countries. But now the situation is changing; and as the economic crisis deepens contention is growing, at least in the sphere of trade. In such a scenario the WTO would have outlived its usefulness to the imperialists as a whole. This is already clear in the USís attitude.




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