Collapse of Potsdam talks

The collapse of Potsdam talks, aimed at salvaging global trade negotiations, has put the future of WTO's Doha Round in jeopardy. According to news reports, trade ministers from the United States and European Union, representing the rich nations' interests, and Brazil and India representing the developing world, have been quick to blame the other side for the collapse of Potsdam round.
The trouble-some round has further dimmed the chances of the World Trade Organisation concluding a deal by the end of July. At the core of the logjam lies the larger issue of how far to open up agricultural and industrial markets, and cut rich nations' farm subsidies. However, despite virtual collapse of the talks, the participating ministers have claimed that the Doha Liberalisation Round is not dead.
WTO boss Pascal Lamy has, meanwhile, warned that failure to secure a breakthrough by August could put the six-year-old negotiations on hold for several more years or even lead to a total collapse. Lamy's warning conjures up a prospect no WTO member would relish.
Launched in the Qatari capital in late 2001, the Doha Round, which was intended to lift millions of people out of the poverty trap by encouraging more inter-state trade, has been dogged by problems from the very start, mainly over agriculture which is a highly sensitive political issue in almost every WTO member state.
Washington has demanded that any deal that significantly cuts US farm subsidies must open up new export markets around the world in agriculture, manufacturing and services. Brazil and India, on the other hand, maintain that Washington is not prepared to go far enough to warrant additional concessions on their part in manufacturing goods or in lowering the barriers to imports of US farm goods.
In a related development, leading US and European manufacturers have warned that they will not support any accord that does little to open up the developing countries to additional exports. Trade officials have, however, opined that regardless of the final outcome at Postdam, negotiators will continue to work at WTO headquarters in Geneva.
The US President has meanwhile faulted Brazil and India for the snags that have precipitated the Potsdam logjam. There is a perception among some analysts that in many ways the WTO is a victim of its own success. Paradoxically enough, its problems have stemmed from successful conclusion of the Uruguay Round in 1986. Analysts believe that four broad trends now seem to have set the alarm bells ringing.
First, WTO is in danger of regulatory overload, and a creeping standards harmonisation agenda. Detailed prescriptive regulations are intended to bring the developing country standards up to the developed country norms. The TRIPS accord on intellectual property has set the precedent for pressure to harmonise labour, environment, food safety and product standards. This intrusion in domestic policies and institutions of the developing world is largely seen as an undesirable act.
Economically, it raises the developing countries' costs out of proportion to comparative advantages, and has a negative effect on labour-intensive exports, while politically it goes too far in curtailing national regulatory autonomy. Second, legalisation of WTO is a double-edged sword. Dispute settlement has by and large worked well so far.
However, given its quasi-automaticity, governments have a higher incentive to fill in regulatory gaps in WTO agreements through litigation. This is a slippery area. Third, WTO is becoming increasingly politicised. Even more worrisome are its deeper internal fissures.
The huge expansion of its membership since the late 1980s has made decision-making unwieldy. And rhetoric and point scoring seems to have substituted for serious decision-making.
Many analysts believe that the Doha Round can achieve its objectives only through a strategy focused on market access. Tackling direct border barriers and core non-border regulatory barriers to trade in both the developed and developing countries promises by far the best welfare gains, especially for the developing countries.
Hence negotiations on core market access to agriculture, non-agriculture goods and services are far more important for development than all other aspects of the Doha Round put together. Now that Potsdam talks have practically collapsed, there is a need for all stakeholders to demonstrate flexibility from their respective positions, in a last ditch effort to salvage global talks.