Jul 3, 2008

Has Sarko Killed The WTO Round?

We have been worried about the Sarkozy-Mandelson tensions. Now we are reading reports such as this

July 2 (Bloomberg) -- French President Nicolas Sarkozy's condemnation of how European Union Trade Commissioner Peter Mandelson is handling global trade talks may cause the already teetering negotiations to collapse.
``This definitely has the potential of being the final straw that broke the camel's back in the round,'' Joe Guinan, a trade analyst at the German Marshall Fund of the U.S., said by telephone today from Brussels.
World Trade Organization negotiators are trying to clinch a deal that lowers barriers to commerce and promotes trade in developing nations.
On June 19, Sarkozy blamed Mandelson and his approach to trade and globalization for Ireland's ``no'' vote in the referendum on an EU constitution. On June 30, he accused him of seeking approval for WTO proposals that, according to Sarkozy, would cut the EU's agricultural production by 20 percent and its exports by 10 percent and mean the loss of 100,000 jobs.
``His aim may not be to bring down the talks per se, but his defiance towards Mandelson may contribute to this outcome,'' said Carin Smaller, a Geneva-based trade specialist for the Institute for Agriculture and Trade Policy.
Sarkozy's remarks prompted Mandelson to tell the British Broadcasting Corp. last night that the French president is undermining the trade talks and that Europe's negotiating position is being weakened. While Sarkozy's comments may have been more acrimonious than those of other European leaders, he's not alone in panning Mandelson's performance and questioning the direction of WTO talks that began in Doha, Qatar in late 2001.
Lack of Unity
Ireland, Italy, Poland and Lithuania expressed misgivings about the latest WTO proposals on agriculture and industrial goods last month, saying the 27-nation EU is giving up more than it's getting. They say Europe is compromising more on cutting farm aid than developing nations such as Brazil and India are on opening their markets to European products and services.
``Over the course of the Doha negotiations, a growing number of member states have become weary about the commission giving concessions at unstrategic moments and seemingly not getting much in return,'' Smaller said. ``The EU negotiating position is certainly weaker, but the disunity was there before Sarkozy'' assumed leadership of the EU yesterday.
There has been a ``pretty surprising level of opposition from political leaders and from key constituencies that could have been expected to support the round,'' Guinan said. ``Now arguments are coming forward from non-agricultural business interests around Europe that this is an unbalanced package. This has given Sarkozy and the French a real opportunity.''
`False Assumption'
WTO negotiations, now in their seventh year, have moved in fits and starts as governments try to complete an agreement that would offer the first mandated cuts in farm subsidies by the EU, the U.S., Japan and other rich nations.
The impact in Europe of the proposals now being discussed in Geneva would be far less negative than portrayed by Sarkozy, said Peter Power, Mandelson's spokesman.
The French president's figures are based on a ``false assumption'' because they're based on what would have happened had the EU accepted all the demands of a group of developing countries led by Brazil, he told journalists in Brussels today.
``We will never agree to the full demands of the G-20,'' Power said. ``The figures he is parading are not valid on the basis of the current discussions in Geneva.''
Based on the current WTO proposal, ``the negative effects on EU agriculture production would amount to a decrease on average by 1.1 percent, whilst employment in agriculture would come down by 2.5 percent by the end of the Doha implementation period in 2014,'' the commission said in a statement yesterday. This forecast was presented to EU governments in March, the commission said.
The whole multilateral trading system may be threatened if WTO talks collapse, Guinan said.
``This begins to open up cracks in the WTO system itself and we can't rule out a resort to protectionist measures,'' he said. ``Sarkozy may be playing with fire.''

This report was on Bloomberg