launch prospects for the doha round

there are a number of reasons to believe that the doha round will experience a wobbly launch in geneva, and proceed to meander aimlessly for most of the year. given the factors reviewed below, there is a significant likelihood that the 5th wto ministerial conference to be held in mexico next year will be a critical meeting for the multilateral trading system.

wto secretariat carousel

in december 2001, the wto secretariat was thrown into a reorganisation ostensibly to position it to better manage its myriad responsibilities, including supporting the new round of negotiations. given the ministerial plea for a rapid launch by the end of january, the timing of this reorganisation is bound to have heads shaking, and eyes rolling. reorganisations are deceptively simple to initiate, but often take months to settle out the finer points of recast roles and responsibilities at senior and junior levels.

though it is hard to imagine such a change could have occurred without informal consultations with dr. supachi, there is no indication that any consideration was given to his views on the reorganisation plan or its timing. accordingly, the wto secretariat almost certainly will be subject to a reappraisal by dr. supachi in september 2002.

it bears recalling that the previous director-general, renato ruggiero, retired in april 1999. at the same time, the terms of the four serving deputies director-general expired and these officials left the organisation.

after intensive consultations among members, on july 22 1999 a consensus was reached to appoint mr. mike moore of new zealand as director-general. mr. moore is serving a three-year term, from september 1 1999 to august 31 2002. he will be succeeded by dr. supachai panitchpakdi of thailand, who will serve from september 1 2002 to august 31 2005.

after consulting with wto members, on november 3, 1999 director-general moore announced the selection of four deputies director-general: mr. ablasse ouedraogo of burkina faso, mr. miguel rodriquez mendoza of venezuela, mr. paul-henri ravier of france, and mr. andrew stoler of the united states. the terms of service of the deputies director-general expire september 30, 2002.

in effect, the top level management of the wto day to day apparatus can be expected to be replaced on or about october 1 2002, if not earlier. this view implies that the secretariat can expect the duration of routine functioning to amount to six months in 2002 (ie. roughly from april to september, inclusive). from an organisational perspective, the 5th wto ministerial conference to be held in 2003 will be the decision point for the fate of the doha round.

timing issues

the french presidential elections are expected to be called for sometime in april 2002, offering a further slowing of movement in the spring. it will be recalled that france was able to hold out on acceptance of the doha agriculture text until there was improvement in the language associated with negotiation objectives on export subsidies.

in addition, the us congressional elections slated for november 5 2002 could become bound up with foreign markets and the domestic economy. the 2002 primaries begin in california on march 5, and continue through the september 21 primary in hawaii. there are senate races in 34 states this year. in the us case, the democratic party is hoping to make gains at the expense of the republican party in the house and senate by distancing themselves from the bush administration's trade agenda, including trade promotion authority. this could mean that president bush may have a longer wait than originally envisioned in washington for the tpa. in turn, there might be a related lack of acceleration among trading partners working in geneva on the new round.

the immediate timing issue of concern of course is whether wto members will be able to agree soon on the structure of the trade negotiation committee and the negotiation plan for the doha round. this is supposed to be agreed upon by the end of january, but thus far indications are there may be delays in store.

structuring negotiation mechanisms

there has been a steady stream of ministers and senior trade officials into geneva to lobby for their views on how to best structure the negotiations. the first formal discussion among wto members occurs january 28 at the first meeting of the trade negotiations committee (tnc). more than two months after the doha ministerial conference directed the establishment of the tnc, there is no consensus on negotiation modalities, or the selection of chairpersons for negotiating groups.

reflecting the atmosphere at doha, there is a considerable gulf between developed and developing country views on the authority, role, and control of the tnc. this may be an unpleasant reminder that the much lauded confidence-building measures touted since the seattle debacle have yielded little of enduing value. for the most part, the responsibility for this situation falls squarely on the quad and their wto minions.

with the role of the tnc and selection of its chairperson still up in the air, it is no surprise that the selection of negotiating group chairs is a battleground as well. it is a battleground in the sense that therer are contending positions on how the negotiation mandate should be reflected at the negotiating group level. apart from the agriculture, and services groups, opinions vary widely on the scope for other negotiating groups, and their specific terms of reference. it is also a battleground in that there is an informal competition shaping up among potential candidates for the chairperson roles of the negotiating groups.

as for the chair of the tnc itself, it is likely to draw to the wto director-general. this choice ultimately is not a question definitively settled by gatt precedent so much as it is guided by enlightened self-interest among wto members, the majority of which are developing countries looking beyond this year.

all things considered, the wto membership will be locked in debate over the negotiation structure and modalities for some time to come. it is unlikely to be resolved before the end of february at the earliest. it bears recalling that many developing country delegations at doha took the calculated risk of agreeing to a round with the view that the launch struggle was not resolved november 14.

economic initiatives

there are economic conditions and developments also bearing on the new round. on january 1, 2002, euro notes and coins were introduced in all 12 euro-zone member states (belgium, germany, greece, spain, france, ireland, italy, luxembourg, the netherlands, austria, portugal and finland), and replace their respective national notes and coins. the euro will face a significant challenge this year in maintaining its value vis-�-vis the us dollar. considering that the eu economy has suffered a rapid deterioration over the past year, the main economic policy objectives in 2002 will be to avoid a prolonged downturn, and to revitalise the economy.

the ec's autumn 2001 forecasts indicate that a dramatic change in economic conditions in the eu resulted primarily from two factors: (1) the accumulation on a global scale of adverse supply (oil prices) and demand shocks (dramatically slower international trade growth), triggering in turn a global economic slowdown; and (2) domestic demand has weakened.

according to eurecom, the monthly bulletin of eu financial and economic news for december 2001, euroland inflation is expected to return below 2% by the beginning of 2002. decelerating growth, slowing producer price inflation, and falling oil and commodity prices suggest a continuation of the downward trend. this situation points to a year in which european economic policy will focus on initiatives to restore domestic demand, and build a domestically driven recovery, in the event the global marketplace remains in the doldrums longer than expected.

september 11 repurcussions exacerbated the developing economic slowdown in the autumn, and raised uncertainty worldwide, further depressing consumption and investment in global markets. indications suggest that a mild recovery in the us may take shape during the first quarter of 2002. many financial observers are beginning to assume an optimistic posture regarding a sustainable us recovery in the second half. though encouraging, the general picture for the year is one of very modest gains across the global economy.

the eu also has difficult investment attraction issues to address in 2002. specifically, there are substantial performance challenges to be addressed in attracting domestic and foreign investment by creating a more receptive policy and legislative environment. in addition, there are labour market issues associated with productivity, skills development, and organisational change management that have not been adequately grasped, despite the frequent reports of new thinking by the eu business elites.

western hemisphere challenges

the united states has several significant challenges to address this year in the western hemisphere. the key issue will be to determine whether life can be breathed into the faltering negotiations for a free trade area of the americas. in addition to the skepticism of brazil, which has dogged the process from the beginning, there are new sources of difficulty. specifically, the political and economic collapse of argentina has sent a shudder through the region, and brought into question behind closed doors the utility of a "democracy clause" in such circumstances.

to be sure, the argentine situation is a crisis of global import, and the most urgent priority will be the restoration of socio-economic stability to the country. certainly, the argentine government will not be able to play a useful role in the ftaa process until the economy is on a positive and sustainable track. that is almost certainly not going to occur in 2002, simply because the process of stabilising a state's financial and commercial regime is, to paraphrase mao, not a dinner party. in effect, argentina is likely to undergo increasing turmoil as the year progresses. bear in mind, the country is on its fifth president since the default crisis began.

the us has chosen tactically to engage the central american states in the process of negotiating a free trade agreement this year. while there are some preliminary hurdles to overcome, there is little doubt the us will use this initiative as a touchstone during 2002 to demonstrate its continuing commitment to the western hemisphere. whether a central american fta will help to push along the process to achieve the ftaa on schedule remains to be seen.

finally, the us trading relationship with canada - the single most important trading relationship for both countries - is in growing disrepair. at the top of the list is the inability of the parties to find a basis to settle the long running dispute over softwood lumber exports from canada to the us. in addition, there is another us investigation underway on canadian wheat board practices. the canadian government has also been lobbying the bush administration to be exempted from the antidumping duties to be imposed on foreign steel late next month. other more regional concerns, like the pei export potato trade, remain essentially subject to arbitary us decisions on market access.

eu - us relationship pressures

despite widespread happy-talk at the conclusion of the doha ministerial, the deep rift in trade perceptions between the us and the eu is bound to confound progress in 2002 toward a rapid start on the agreed upon negotiation agenda. specifically, the ongoing efforts by the us steel industry to firewall the american market continue to provoke outrage in developed and developing countries alike. the bush administration will decide before march whether to accept the us international trade commission's recommendation to apply a duty on steel products of up to 40 percent.

duties at this level could, if implemented, virtually close the us market for imports of steel from the rest of the world. a 40 percent duty could keep as much as nine million tons of steel from entering the us market. by creating such a large overhang in supply, world markets would see prices depressed further. mexico and canada have threatened to follow the us example if necessary to protect their own domestic producers. algoma steel, a canadian producer received an infusion of c$50 million in december 2001 to forestall plant closures.

though unfortunate, the fact is that the us steel lobby has been able to amend us antidumping legislation over the years to enhance their level of protection. this should remind negotiators that the antidumping dossier is one of the most important agenda items for the doha round.

on january 14, 2002, the world trade organization found in favour of the eu on the foreign sales corporation case involving tax breaks for us exporters. the case determined that us legislation introduced to replace the original law that allowed american companies to establish offshore subsidiaries (foreign sales corporations) to reduce their us income tax is in effect also a prohibited export subsidy. the appellate body decision has opened the way for the eu to impose up to $4 billion in trade sanctions.

the eu might choose to conduct us-style carousel retaliation and impose sanctions on politically and economically vulnerable american products. as part of the agreement between the eu and the us on procedures to handle the dispute, the next step in the procedure will be the automatic reactivation of the wto arbitration procedure to decide on the amount of countermeasures the eu would be entitled to request authorisation to impose.

the arbitrators' report is expected by march 28. anytime after circulation of the arbitration report, authorisation of the dsb to impose countermeasures for the amount found by the arbitrator may occur. eu action may be taken anytime after final dsb countermeasures authorisation. thus, it is possible that the us - eu relationship will be under growing pressure from powerful lobbies on both sides by the spring of 2002.

asia pacific considerations

on the asia front, the news this year could be dominated by the growing presence of the people's republic of china in the commercial calculations of virtually all countries in the region. the trade calculus goes beyond market access to include the scope for serious trade frictions arising due to faulty, delayed, or sandbagged implementation of the wto accession protocol. the us and the eu for example might find that the insurance and automobile indistries are potential first priority sectors for trade and investment disputes with china.

incoming wto director-general dr. supachai panitchpakdi, speaking at the institute of southeast asian studies forum january 8 in singapore noted that china's accession to thewto is a reminder for southeast asian countries to continue with economic reforms or risk being left behind in the global marketplace. economic reforms in southeast asian countries will help propel economic partnerships with china. closer economic partnerships with china would mean the region would become less dependent on partners outside the region.

china's strategic currency response during the 1997-1998 financial crisis sent a strong signal that china recognised the central role of southeast asia in its own economic future. by the same token, southeast asia has a vital interest in diversifying away from reliance on japanese investment, and secure a sound basis for its own long-term growth fashioned on a basis that may be more equitable in the long run.

while china is still a long way off from overtaking the united states as the region's most important export market, preparing the groundwork for closer cooperation will ready the region for its inevitable growing clout. china and asean (association of southeast asian nations) are bound to become more intertwined commercially and economically. the china-asean free trade area (fta) that was proposed in november 2001 could be a key focal point for discussions this year. though china and asean have agreed to a 10-year time frame to set up the free trade zone, there is reason to believe that negotiations will be given priority by both sides.

when an agreement has been concluded, the resulting free trade area will be the world's biggest fta, covering two billion consumers with a gross domestic product of two trillion dollars. this could have a profound impact on direct investment flows. asean and chinese companies, as well as us, european and japanese companies probably will be willing to invest heavily in an integrated regional market.

development round outlook for 2002

in view of the economic and political considerations enumerated above, the launch phase of the doha round of multilateral trade negotiations will be very difficult. with competing regional negotiations fora, disagreements over the interpretation of the doha declaration, and an inadequate basis for cross-sectoral trade-offs, negotiations progress on the wto front in 2002 will be hard won. the 5th wto ministerial slated for mexico next year already is shaping up as the most crucial of meetings for the future of the multilateral trading system.

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