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Global Trade

July 30, 2008

The World Trade Organization's most recent round of talks collapsed under an agriculture dispute between the US and India. The cost of failure will be high, warns DW's Karl Zawadzky.


The renewed failure of the WTO negotiations goes along nicely with the global economic slump. Current business won't be affected, of course, but the sinking global economy really could have used a boost.

Lowering customs duties and quotas and doing away with hidden trade restrictions would provide exporters with additional opportunities. Since this would increase competition, consumers could enjoy lower prices.

World Trade Organization experts have calculated that further liberalizing trade would have led to an additional annual profit of 110 billion euros ($173 billion) in the industrialized countries -- and to an additional 220 billion euros in developing and emerging countries. That's well worth the trouble.

Europe also responsible for failed talks

Unfortunately, the negotiations failed because the US and India couldn't agree on protection mechanisms for poor farmers in the opening of markets, which has garnered support all around.

Karl Zawadzky
Karl ZawadzkyImage: DW

China largely maintained a closed posture, as it usually does in the WTO but, similar to the Indian trade minister, demanded a low threshold for customs duties on agricultural imports in order to protect poor farmers.

The US rejected this demand because it wants free access for its cotton, soy beans and other agricultural products to the emerging and developing markets.

But it would be too easy to blame the US and India for the failure of the negotiations. The European Union was anything but agreed. France, in particular, did not support the European Commission's offer to reduce European agricultural subsidies by 80 percent in order to significantly improve sales potential for developing countries on the European market.

The German government, on the other hand, was prepared to accept cuts in the agricultural sector in return for better chances in developing markets for the export of cars, machines, chemical products and pharmaceuticals.

Differences among developing, emerging countries

All global trading partners would benefit from lowering customs duties and reducing quotas and hidden trade restrictions -- of course, the strong trading blocs more so than the developing countries.

In order to mend this inequality, the world's poor at the start of the Doha Round were promised a "Development Round." This means that the poor countries should be disproportionately favored in the trade liberalization process, as well as the opening of service sector markets like foreign banks and insurance companies.

The developing countries demanded that this promise be kept. They're right. But the Third World has since become quite differentiated. Emerging countries with increasing competitiveness, like China, India and Brazil, have very different problems and interests from poor countries in Africa.

Thus, it's not very convincing when emerging countries act as spokesman for the poorest developing countries and reject concessions in the areas where they are fully competitive with industrial goods and services.

No chance for success until 2010

The WTO negotiations didn't fail because of a technical detail like the threshold for customs duties in protecting poor farmers. They failed because they took place at the wrong time.

The American president won't expect the farmers to accept massive subsidy cuts just before the presidential elections. In this respect, the American delegation welcomed the conflict with India.

Next year, the new administration in Washington will just be settling in, elections will take place in India and the European Commission will be re-appointed, so another attempt at a successful Doha Round doesn't make sense until 2010.

Until then, the major trading partners will try to gain advantages with bilateral trade agreements. That won't only be to the disadvantage of the poorer countries but will also speed up the WTO's gradual loss of significance.

Particularly at a time of global economic downturn, nothing is more important than a bit of momentum, which would boost world trade via lower customs duties and opened markets.

The price of failure in the WTO negotiations is having to forego an increase in prosperity and the weakening of the multilateral system.

Karl Zawadzky is DW-RADIO's business editor (kjb)

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