SUCCESS OR FAILURE AT ST. PETERSBURG

A year ago at Gleneagles in Scotland, the G8 group of the strongest industrialised economies, met in a spirit of hope and generosity and agreed to attack the problems of poverty in Africa. That meeting was overshadowed by the murderous attacks on London’s rail system by home-grown terrorists. Despite this, splendid commitments were made to increase development assistance by direct aid, cancellation of debt, and a promise to conclude the Doha Development Trade round. There have been modest increases in real aid, good decisions to cancel debt, but little movement on opening markets through the Trade round which will return more to poor countries than ‘aid’, and will provide added growth for developed countries who are the major importers of goods from poor countries.

Last week’s G8 meeting in St. Petersburg, a great opportunity for President Putin to showcase Russia as an energy super power, was side-tracked by outside events in the Middle East. Israel’s overwhelming response to Hezbollah attacks dominated the summit. It was right and proper that leaders took the opportunity to talk and try to plan peace. Alongside the G8 leaders, leaders were also invited from China, India, Brazil and South Africa, and the heads of the United Nations, World Bank and World Trade Organisation. It was hoped that this unique grouping would give some direction and impetus to unlock the deadlock of the Trade talks because Ministers and Ambassadors in Geneva have made little progress. During difficult times, before we launched the Doha round, as Director-General of the WTO, I attended a G8 meeting and obtained the intervention of leaders who were very helpful. It worked. This time Director-General Pascal Lamy would have done the same. Leaders agreed to urge several weeks’ extension to present, self-imposed deadlines and gave the Director-General a mandate to push future consultations, something he had anyway.

Key Ministers from Australia, Brazil, India, China, Japan and the U.S. have agreed to meet twice in July – here’s the best opportunity to make specific progress. But something has to give. Simply, in agriculture the U.S. will have to move on domestic support, code-phrase for ‘local subsidies’, and the EU on market access. Equally, major developing countries such as China, India and Brazil will have in return to make commitments to provide openings in other sections of their markets. Timelines, the sequence of change is important. Here could be the trade-off. Adding an extra 5 or 10 years for the introduction of subsidy cuts or market openings gives more adjustment space and assists with the politicians who face elections in the U.S. this year, and France next year. Provisions already exist for developing countries to phase in reforms. Another 5 years seems a lot now but we can spend 5 years discussing whether the timeline could be 5 or 10 years. This pushes reform beyond the next 2 elections for most countries. It’s no good postponing all reform for a decade but should allow for it to gradually phase in. Otherwise we will have an appalling repeat of the textiles agreement when rich countries did little until the last year of the agreements, then complained of the damage to domestic interests which they knew for a decade would happen. One time-bomb that’s crept back into the negotiations that was beaten back with a baseball bat during the Uruguay round and the Doha launch is ‘special and sensitive products’ which some fear could mean rice, cotton, sugar, cheese or butter. This needs to make very specific or the loopholes created could make much of the round meaningless and clog the system, already under strain.

In trade diplomacy there’s a dreadful phrase, "constructive ambiguity", this is useful at times because it allows negotiations to creep forward with all sides appeasing local interests by different interpretations. There must now be no misunderstandings.

This deal can be done – what’s stopping it? Privileged, overpaid domestic interests that cost taxpayers dearly. Will it be done? Yes, but when and how meaningful will the reforms be? The bigger danger is knowing how precious multilateralism is for global growth and how fundamental the WTO’s unique, binding disputes mechanism is to global stability; capitals may cut a modest deal, go home with grand headlines, mission accomplished, and undertake to have another go in 10 years. Politicians will bask in superficial success, privileged interests and anti-globalisers feel vindicated, but then the action will move to inferior and potentially disruptive regional and bilateral deals that always favour the rich.