The EU Aims to Avoid a Stalemate at WTO Talks

The European Union is frustrated. It makes concessions, opens up it markets, but is still called responsible for the fact that global trade negotiations are sluggish and accused of rowing against the tide in the run-up to the WTO trade conference in Hong Kong from December 13 to 18.

"We are offering to reduce subsidies that distort trade by 70 percent," said EU Trade Commissioner Peter Mandelson, referring to an offer the EU made on October 28. "We can do that thanks to reforms that have already been decided and put into place."

He says there is no reason to doubt the motives, or behavior, of the EU, and that the bloc's accommodation in trade matters has not been appreciated by its trading partners.

The blame game

Mandelson's critique is aimed fairly squarely at the group of developing nations, the so-called G-20, and especially at the group's mouthpiece, Brazil.

The Brazilians have been at odds with the EU for years over agricultural policy. Indeed, it was the complaint they filed with the WTO that forced the EU to reform its highly subsidized sugar industry. But now Brazil is arguing the EU suggestions don't go far enough to improve market access for top Brazilian exports like beef.

"How can they think that they don't see a decided advantage when we we're willing to lower our highest tariff rate by 60 percent?" asked the deputy departmental head of the EU agricultural section, Flavio Coturini.

The EU offer in the agricultural sector for the Hong Kong conference consists of three parts:

1. To completely abolish EU export subsidies.

2. To reduce other rated subsidies by 70 percent, especially those seen as distorting free trade.

3. To reduce agricultural tariffs by as much as 60 percent.

However, some eight percent of products should be exempt from this reduction. Brussels would like to protect its so-called "sensitive goods" from foreign competitors. Beef falls within this category, which angers the South Americans, since they see a potentially large market for their beef in Europe.

Hard fronts

There won't be any further concessions, according to the EU Commission, the bloc's executive body. In exchange for their agricultural largess, the EU calls for concessions by other countries in the areas of services and industrial goods.

"There must be real economic gains, new streams of commerce," said David O'Sullivan, the EU's director-general for trade. "We think our suggestions provide that. We expect similar concessions from our negotiating partners. And to be honest, what the Brazilians have offered us regarding non-agricultural goods doesn't really provide better market access for the products that we are interested in."

But Brazil and its foreign minister Celso Amorim are still playing poker, saying that before they comply with EU demands, the bloc needs to offer a more attractive agricultural deal.

"There will be no counter offers," said an irritated Mandelson. "There are no possible deals during these negotiations if the only topic is market access in the agricultural sector. That is the problem."

The state of negotiations in the run-up to Hong Kong is not great. The working paper put forward by the WTO director Pascal Lamy is vague and inconcrete. Analysts say many of these issues should have been settled over two years ago. But conflicting demands have lead to a stalemate.

The EU wants to break out of its isolation and is trying to bring the poorest countries over to its side by means of a development package. But poor countries would actually gain very little from improved EU market access, since they are already allowed to export most of their goods to the bloc without paying duty.

Opportunity lost?

Peter Mandelson is now trying to increase pressure on Brazil to keep the WTO talks from ending in failure.

"That would ruin a huge economic opportunity," he said, "It would also be very harmful to the WTO and could turn back the clock on global multilateralism."

"I believe that Europe carries a greater responsibility than others do to bring this round (of talks) forward and that is what we're going to do."

While he is not counting on a breakthrough in Hong Kong, he says it is crucial to codify what has already been accomplished. Perhaps the hoped-for breakthrough could then come at the next ministerial conference in the spring of 2006.