After five years of negotiations, the Doha Round has run into sand. For this the US and EU are primarily responsible – the former for not reducing agriculture subsidies and the latter for not reducing tariffs on farm imports.

While world trade in agriculture accounts for about 10 per cent of total trade, the distortions here are deepest. The US and EU subsidise their farmers to the tune of $360 billion a year, several times more than the sum of all export subsidies.

In contrast, the Cairns group of farm and dairy exporters, comprising 17 countries led by Australia, account for 25 per cent of world agriculture trade, but their producers manage with little or no props.

If farm subsidies have become the cornerstone of WTOnegotiations, it is in no small measure due to the effortsof the Cairns group. It is now generally accepted that WTO talks cannot make headway in other areas, unless the US and

EU deal with distortions in agriculture trade. The onuson the US and EU stems not only from the magnitude of their farm subsidy, but also from the principles of the Doha Development Round. The Doha Round, conceived in 2001, was seen as ameans for least developed countries to trade their way out of poverty; for years, aid had crippled rather than raised the productive potential of LDCs.

WTO talks were based on the principle that the US and EU, by virtue of being developed entities, should show the way in cutting subsidies and tariffs. Developing countries were allowed more leeway in this respect to protect livelihoods, while being expected to cut tariffs in manufacturing over time.

However, the Doha Round is a shaken edifice today.

If G6 talks (among Australia, Brazil, India, Japan, US and EU) have fallen apart, it is also because the developing worldhas been slow to cut subsidies in manufacturing and liberalise investment norms in services. The time has come for India and Brazil to be a little flexible. India can certainly lift curbs on foreign investment in areas such as legal services, auditing,higher education and management consultancy without breaking into a sweat. It still has an inverted tariff structure – higher tariffs for raw materials and intermediates than finished goods – which can be corrected.

If the Cairns group leads by example in agriculture, so canIndia by liberalising services. The US and EU would then truly run out of excuses. WTO, which runs on one-country-one-vote basis, is about as democratic as a multilateral organisation can get. Let’s save it.

<B>From India

Source: Editorial

© Times of India</B>