06.22.07

G4 Process: Discussions between four key Members of the World Trade Organization (WTO) – the United States, the European Union, Brazil, and India – on the Doha Development Agenda (DDA) broke down Thursday, June 21. Trade ministers from the so-called G4 countries began meetings on June 19 in Potsdam, Germany and were expected to continue meeting through the weekend to try to reach a basic agreement on how much tariffs and agricultural subsidies will be cut as part of the global trade negotiations launched in Doha, Qatar in 2001. However, the negotiations broke down after the third day, calling into question the possibility of completing any type of deal before the end of 2007.

The G4 countries have met several times in recent months to come up with a package of tariff cuts to agricultural and manufactured goods and reductions in agricultural subsidies that all four could agree to. Although any deal would have to be agreed to by the full Membership, these four players in global trade were meeting with the understanding that an agreement them could then be taken to the larger membership of the WTO for approval and modification.

More than Agriculture: Although past breakdowns of talks among groups of WTO Members have been largely focused on agriculture, this breakdown was a result of disagreements over cuts to both agricultural subsidies and tariffs on manufactured goods. Recent discussions have often resulted in an impasse between the United States and the European Union over how much the US would be able to cut agricultural subsidies in exchange for how much the EU would be willing to cut agricultural tariffs. However, the Potsdam meetings broke down largely along developed country versus developing country lines with the US and EU asking Brazil and India for greater cuts to tariffs on manufactured goods and India and Brazil calling for greater cuts to US agricultural subsidies.

What Next? After the breakdown in G4 talks, WTO Director-General Pascal Lamy announced that negotiations would resume in Geneva immediately, saying “This negotiation is an endeavour among the 150 Members of the WTO. I now call on the members of the G4 to contribute to the multilateral negotiating process, which will continue as of today in Geneva.” The Chairs of the WTO Negotiating Groups on Agriculture and Manufactured Goods will issue papers outlining possible scenarios for agreement before the end of June in the hope that these ideas can move the process forward before the end of July and the WTO’s annual summer break. This larger process will be much slower and runs the risk of getting mired in traditional negotiating positions that have produced little progress since the launch of negotiations in 2001.

What does this mean for Africa? The lack of a Doha deal means that trade-distorting farm subsidies and high tariffs that impact African countries will be much more difficult to remove. If no agreement is reached, large economies such as the EU, US, and Japan are likely to focus more on bilateral and regional free trade agreements, which risk leaving Africa further behind.

At the same time, the development dimension of the negotiations has not been sufficiently addressed to date. Africa needs greater opportunities in the global market for its products in order to be able to use trade to lift itself out of poverty. With this in mind, the elements below should form the basis of a trade and development deal for Africa either within or outside of the Doha round.

• Elimination of unfair farm payment programs in developed countries that distort prices and enable rich countries to sell their products at artificially low prices in poor countries. If disciplines on these programs cannot be agreed through Doha negotiations, countries can limit and eliminate the programs that impact poor countries the most – in areas like cotton, corn, fruits and vegetables, wheat and rice through the U.S. Farm Bill and the European Common Agricultural Policy.
• Lower tariffs and fewer barriers for products that Africa has the capacity to produce, like textiles and apparel, sugar and cotton. Without an opportunity to eliminate these barriers through the Doha round, greater access is possible through existing tariff preference programs such as Europe’s Everything But Arms (EBA) program and the U.S. African Growth and Opportunity Act (AGOA).
• Development assistance (or “aid for trade”) that helps Africa to overcome challenges such as a lack of roads, ports, telecommunications networks, and weak government institutions involved in trade. At the recent G8 summit in Heiligendamm, Germany, G8 donors reiterated an old commitment to increase aid for trade assistance to all developing countries to $4 billion by 2010. However, research shows that African countries need approximately $12-13 billion annually in order to address these constraints.
• Policy space that provides access to mechanisms that ensure that as African countries integrate into the multilateral trading system they do not compromise their national economic development priorities.