Last Minute WTO Deal Saves Face

World trade negotiators were able to avoid leaving the key World Trade Organization (WTO) ministerial meetings in Hong Kong empty handed after forging a last minute deal on Sunday, Dec. 18.

The deal, among other things, sets a date for elimination of farm export subsidies by wealthy nations and offers duty-free access to most exports from least developed nations.

However, while Sunday’s agreement kept the talks from being a clear failure, no one was calling them a success. Everyone involved agrees there is still much work to be done toward reaching a new world trade agreement.

For one thing, no real progress was made on the contentious issue of farm import tariffs, which is critical to reaching any final world trade agreement.

"Until and unless we see a breakthrough on reducing tariffs ... we will not be able to see the agriculture negotiations come together. Without that we won't be able to see the whole round come together," U.S. Trade Representative Rob Portman told Reuters News Service in a Sunday interview.

WTO Director-General Pascal Lamy estimated on Sunday that the WTO’s Doha round of trade talks was now 60 percent complete. Lamy told a news conference that before the Hong Kong meeting, negotiators were 55 percent of the way towards completing the Doha round.

Sunday’s agreement falls far short of the delegates' original objective for the Hong Kong talks -- which was to produce a detailed outline for a final trade agreement that would conclude the Doha round by the end of 2006.

In an effort to push toward that goal, the agreement does set April 30, 2006, as the new deadline for working out detailed formulas for cutting farm and industrial tariffs and subsidies. But whether that deadline can be met is very uncertain since previous such deadlines have been missed.

Just what did WTO negotiators agree to on Sunday? And who will be most affected by the provisions of the agreement?

For one thing, negotiators agreed to eliminate agricultural export subsidies by the year 2013. This represents a concession by the EU, the largest user of such export subsidies, but Brussels did hold out against pressure from Brazil and other developing nations to eliminate subsidies by 2010, the date proposed in the U.S. farm trade reform plan.

According to the agreement, rich countries must eliminate all export subsidies on cotton in 2006 and step up efforts to eliminate other forms of government support for farmers. The early elimination of cotton subsidies was a concession made by the U.S. to West African cotton growers. The cotton subsidy cuts will be a tough sell in Congress. The U.S. avoided committing to further cuts to its other farm subsidy programs.

The Hong Kong agreement calls for wealthy countries to allow duty-free and quota-free imports of at least 97 percent of products from so-called Least Developed Nations, which will be given special allowances for meeting market opening requirements.

This will benefit the poorest nations in the world, but they had sought duty-free status for 100 percent of their imports. The 3 percent exemption was included after the U.S. and Japan raised objections to removing duties on certain sensitive products. The U.S. raised concerns about textile imports from Bangladesh and Japan raised concerns about rice imports.

Editors note: Richard Brock, The Corn and Soybean Digest's Marketing Editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.

To see more market perspectives, visit Brock's Web site at www.brockreport.com.