WTO talks fail - now what?

December 21, 2005

The December 13-18 WTO Ministers Summit was attended in Hong Kong by 6,000 delegates of the 149 member countries of the WTO, 2,000 non-governmental representatives, and 4,000 journalists. The Ministers meet every two years.

In this meeting, participants did not achieve their mission, which was to finalize the specific trade proposals outlned in the last conference in Doha, Qatar, in 2001. They would then have had until July to write the first draft, and until the end of 2006 to finalize the document. This would have been the guiding document for actual negotiations which would take place next year.

Some things were agreed upon:

• All agricultural subsidies will be eliminated by 2013.
• All export subsidies for cotton will be eliminated in developed countries in 2006.
• The 32 least developed countries will immediately be given duty-free and quota-free trade access to the developed countries.
  

The sticking point is that the developed countries are having trouble overcoming objections from powerful agricultural lobbies, and so can’t commit to specific dates. In response, the developing countries won’t commit to opening their markets to service industries.

The various chairs of the committees will meet throughout the next three months to prepare for another Ministers meeting in April, where the trade proposals will again be taken up.

What it Means:
At the 2001 conference, WTO members agreed that five specific areas were to be negotiated by January, 2005: agriculture, manufacturing, services, how trade disputes will be settled and intellectual property protection.

Agreement on the final proposals, however, has been postponed again and again. The current deadline is the end of 2006. The December ministerial conference was supposed to outline the proposals clearly enough so that they could be put into writing by July, then edited, discussed and finalized by December 2006. Even if the proposals are agreed upon in April, it doesn’t give much time to meet the July deadline for the written draft.

Action Steps:
Successful negotiations would mean lower prices for food in the U.S. The longer trade talks continue unsuccessfully, the more bilateral trade agreements will occur. This is good for the countries that are aggressively pursuing them...South America, China, Japan, the Middle East, other Far Eastern countries. It is less good for large cap U.S. multinationals, who are being shut out of these negotiations bit by bit.

This is yet again another trend that supports including international and emerging market mutual funds over large cap U.S. funds in your retirement portfolio. Sadly, it is also another reason that very small economies, mostly in Africa, don’t stand a fighting chance in global markets.

Source: WTO web site