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| Looming deadline for WTO’s Development Round has big implications for international biofuel trade |
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| Tuesday, 27 June 2006 | |
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The European Commission is preparing for a crucial ministerial meeting this week in Geneva. The outcome of this meeting will be decisive in determining the success of the Doha Development Round. The success (or otherwise) of the negotiations will impact directly on the international biofuels trade. This trade is rapidly expanding and consists of biofuel made from palm oil and Jatropha Curcas (primarily Malaysia, Indonesia, India, Nigeria and Thailand) and sugar-cane ethanol producers such as Brazil. These are members of the G20 group of developing countries, which are pressing developed nations at the meeting to lower what they see as barriers to their agricultural exports. After only minor advances were made in Hong Kong in December 2005, time is beginning to run out for negotiators to reach a deal on the full modalities of the final agreement.
In a speech made in London on Friday 23rd June 2006, Commissioner for Trade, Peter Mandelson reminded his public of what was at stake with the current negotiations, underlining the huge cost of a failure. He urged all WTO members to make concessions in order for a final deal to be struck, stressing that a truly beneficial deal for developing countries will not be achieved by simply improving access to the EU’s agricultural market.
The timeline for reaching a final agreement is severely constrained because, under the US Trade Promotion Act (TPA) of 2002 which expires mid 2007, Congress must either accept or refuse the end result of the negotiations. Past that date, Congress will resume its power to amend the agreement as much as it wants, severely diminishing chances of acceptance. In order for the text to be presented to Congress in time, a final text must be reached before the end of 2006, which means that full modalities for agricultural and industrial trade opening must be reached before the end of July, when the WTO closes for the summer break. There is a common understanding that agreement must be reached on these points before other important issues, such as services liberalisation, trade facilitation and the revision of WTO rules on anti-dumping, can be tackled. The key players in the debate are the EU, US and the G20 group of developing countries. Their demands are interlinked and each player will have to make a step towards the other if an agreement is to be reached:
Although the main debate has stalled on the issues of agricultural and industrial trade liberalisation, many studies point to the fact that the main gains for developing countries will be derived from services liberalisation and trade facilitation, which still need to be discussed. Numerous studies have been presented in the last few months, assessing the economic impact of the Doha Round. Although they are all based on the same methodology, their results vary enormously. This is due to different assumptions on how markets react and on what the final outcome of the Round will be. The report from the Carnegie Institute finds that “any of the plausible trade scenarios will produce only modest gains”, increasing global GDP by less than 0.2%. It suggests that about 90% of the gains for developing countries would come from the liberalisation of trade in manufactured goods. The World Bank study, on the other hand, argues that agricultural liberalisation (including domestic support and cuts in export subsidies) could provide over two thirds of the total income gains. Two other studies, from CEPII (Paris' leading institute in international economics) and the Swedish National Board of Trade give a more balanced view, showing that the majority of the gains could be generated by tariff cuts in industrial products (around 60%) but that agricultural opening will also be beneficial (around 40% of the gains). The European Commission presented an overview of these different studies and underlined the fact that all studies show that the economic benefits linked to services or trade facilitation are potentially the most important in the Round. Commissioner Mandelson also underlined that the largest benefits for developing countries are likely to come, not from market access, but from work on trade facilitation (the reduction of trading costs), which could more than double the overall economic gains. Next steps in the trade round:
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