May 26, 2006 2:41PM

Doha Round: Curb Your Enthusiasm

In a sure sign of how desperate negotiators are to get a signal that something—anything—is going to come of the Doha Round of global trade talks, there has been much ado this week about the revised “offer” that the European Union has made on agricultural market access, one of the necessary elements in a successful deal.

Even the Australians—usually one of the most reliable critics of European agricultural policy—have welcomed the sign of flexibility.

But what would this offer mean exactly? There doesn’t seem to be a whole lot to get excited about. For a start, no numbers were mentioned. The message from EU trade commissioner Peter Mandelson, delivered by David O’Sullivan, director general of the EU’s trade directorate, merely said that "if, and only if, key partners also put something worthwhile on the table—the EU will be prepared to enhance further its current agricultural offer.”

The EU’s current agricultural offer would certainly benefit from some enhancing. Its last substantive offer in October 2005 proposed cuts to developed country farm tariffs that fall far short of the demands of the United States, the Cairns Group of agricultural exporting countries, and even the more modest demands from the G-20 developing countries. In a press interview prior to the official statement, O’Sullivan was somewhat more detailed about the EU’s bottom line, saying that they would be willing to “move towards, but certainly not as far as, the G-20 position.”

The lack of numbers was no deterrent to deputy U.S. trade representative and WTO ambassador Peter Allgeier expressing his indifference. According to him, the EU’s proposal “would not be nearly sufficient…for there to be new trade flows.” That benchmark seems a sensible one: surely new trade flows should be the ultimate aim of trade liberalization talks.

I wonder if O’Sullivan talked to French president Jacques Chirac before he made his tentative and conditional offer of flexibility. The French have been blamed for the obstinacy so far shown by the EU, and their attitude can be gleaned from this comment from President Chirac to Brazilian television: “[The] three areas to which we’ve attached the greatest importance [are]: industry, services and, above all, the aid and interests of the poor countries with which Europe has very strong ties and who could be the victims of the WTO’s actions.”

Even overlooking the unnecessary and inflammatory swipe at the WTO, Chirac’s comments must be seen as a cynical attempt to exploit former colonies' so-called "dependence" on non-reciprocal preference rates. Despite research from the World Bank and the WTO that shows that most of the risks from preference erosion (the loss of competitive advantage, enjoyed by preference beneficiaries, that results from non-disriminatory—or "most-favoured-nation"—trade liberalization) are limited to a few items in a few markets and that developing countries will gain significantly from reducing their own tariffs, many preference recipients, encouraged by some NGOs, are threatening to block consensus on a final agreement if their “needs” are not addressed.

Instead of issuing statements that inflame such tensions, maybe President Chirac should step up consultations with French services and manufacturing bodies and find out how they would feel about the failure of the trade talks. Then he should pick up the telephone and call Mandelson.

Maybe then we’ll see an offer to get excited about.