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ADDRESS BY DENNIS RICHARDSON
AUSTRALIAN AMBASSADOR TO THE UNITED STATES
TO THE CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE
WASHINGTON DC
14 FEBRUARY 2006
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The Negotiating Challenges Ahead for the DOHA Round
• To identify the steps needed to conclude the Doha round successfully, we need to step back from the day-to-day rhetoric of the negotiations, and look at the Round in its broader strategic context.
• It is useful to remind ourselves why we are engaging in negotiations.
• The answer is straightforward – to expand global trade opportunities, to continue the progressive reform of international trade distortions, lower tariffs and eliminate subsidies, in order to create new opportunities for higher and more broadly based world economic growth.
• An additional aspect of the Doha round, is its particular attention to improving the prospects for developing countries to expand their participation in global trade.
• In particular, the round aims to enhance opportunities for developing countries to profit from their competitive advantage, while addressing the adjustment issues that arise during their transition to more open trade.
• In debating the characteristics of a successful round two, important strategic factors have to be addressed; the risks of protectionism and changing patterns in international trade.
• Protectionist pressures are inevitable in democratic societies.
- But the key to economic progress, and the test of leadership, is to summon the political will to address protectionist pressures at home, rather than manipulate them for tactical advantage in a trade negotiation.
- President Bush made this point clearly in the State of the Union address, “In a complex and challenging time, the road of isolationism and protectionism may seem broad and inviting -- yet it ends in danger and decline”. Such leadership is to be welcomed.
- I know that USTR Portman and US Secretary of Agriculture Mike Johanns are concerned to rebuff protectionist pressures in the United States and to lead international efforts to expand trade. And I know their commitment is shared by many in US business.
• The Doha round offers plenty of scope for countries to create solutions that increase trade opportunities, and give governments the means to manage the process of adjustment to increased competition.
- But we are on a slippery slope if we get these two priorities the wrong way around, and put protection of weak or uncompetitive sectors ahead of an outcome that expands trade.
• Another relevant factor in assessing what’s needed for a successful Doha round, is that the composition of world trade is changing.
• Developing countries – particularly large developing countries – are the future growth engines of the world economy.
• As the demography of Europe and Japan changes to a smaller, older population in the coming decades, and as economic growth continues to lift incomes in East Asia and elsewhere, the patterns of demand for goods and services around the world will inevitably shift.
• Accelerating economic growth in developing countries is in our own interests, because such countries are the future markets for our goods, technology, capital and know how.
• As a consequence, the Doha round must be concerned with the challenge of integrating developing countries more fully into international trade.
- Successive historical studies have shown that countries that increase their trade – both exports and imports - increase their rates of long term economic growth, productivity and per capita income.
- The more important point is that the Doha round must address trade barriers that impede developing country access to world markets, while also committing developing countries themselves to policies that encourage their openness to trade.
• In view of the dangers of creeping protectionism and the imperative of integrating developing countries into the world trading system, the case for an ambitious Doha round outcome is very strong indeed.
• Political leadership is necessary to steer the negotiation towards a zone where a deal can be struck.
• Ministerial discussions in Davos last month accepted the need for movement on all issues – agriculture, industrials and services.
• The United States put forward a comprehensive proposal on agriculture that was an important step forward in the leadup to the Hong Kong Ministerial.
- It built on earlier reform proposals by the G20 and work by the Cairns Group to sustain ambition across the board.
- The EU’s subsidy reform proposals are useful but in the critical area of market access their offer falls far short of what is necessary.
- Now is the time for leadership from the EU, to make a market access proposal that will actually liberalise its agricultural markets.
• Similarly, on industrials and services, a substantive outcome is required. It is in our interests. We need to see more forthcoming offers from leading developing countries on this front.
• We cannot afford delay in concluding the negotiations. Trade Promotion Authority will expire on 30 June 2007 and the political reality is we will need to wrap up the negotiations before then, or risk the Doha round drifting for several years. Trade politics is not in a healthy state but the economic imperatives for liberalization will not go away.
• The Round has made important progress. There is still a long list of issues to be resolved, but it is a finite list.
- We have frameworks in place that could – not will, but could – produce substantial new market access in agriculture and industrial products
- CAP reform in the EU, and the US negotiating proposal, raise the possibility of substantially cutting the current high levels of trade distorting farm subsidies – but more is needed to achieve real reform
- The agreement to eliminate agricultural export subsidies by 2013 will finally rid world trade of these disruptive policies.
- The recent decision at the Hong Kong Ministerial to give least developed countries expanded duty free and quota free access, and increase “aid for trade” gives the poorest a bigger stake in world trade.
• These are all positive developments. But we have to convert them into a satisfactory deal.
• On services, we need to have a more genuine engagement from all parties that recognizes the potential of services liberalization, to spur growth throughout all of our economies regardless of our level of development.
• We need to move ahead on a discussion of sectoral liberalization on a plurilateral basis.
• On industrial goods, we need to address the relative disparity in average applied levels between the 2.9% average merchandise tariff in developed countries and the 10% tariffs in developing countries (World Bank figures).
- We see signs that key players may be willing to be more pragmatic regarding the market access formula, in particular the narrowing of the scope of exceptions. This is encouraging and should be built upon.
• Agriculture remains the most distorted sector of world trade and therefore the critical political driver of the Doha round. And in this area, market access is the critical issue. It is also the area where developing countries have so much to gain.
• The World Bank has measured that market access reform could create over 90% of the welfare gains to the world economy from the Doha Round. Agricultural market access is the lagging sector in world trade reform. The Uruguay Round did little to cut agricultural protection. It is also the area where everyone, except for a few determinedly protectionist countries and the EU, is looking for movement.
• On agriculture, we need to recapture and build on the advances in the negotiations from the US proposal.
- ABARE estimated that the US agriculture negotiating proposal would increase global agricultural exports by over $40 billion a year, or close to 7 per cent.
- By comparison, the EU’s proposal on the table would only add around 1 ½ per cent to agricultural trade.
• The setting of a date to eliminate export subsidies is a major achievement. Now we need to work on narrowing the substantial gaps between positions on the levels of ambition for tariff cuts and subsidy reductions.
- One way to start this process could be to clarify the terms of the so-called “sensitive product” exception, with a skeptical eye. The current EU proposal to place 8% of products in this basket is unacceptable. The World Bank estimated that even if 2% of products were declared sensitive it would eliminate much of the economic gain for agriculture.
- More generally, we need to avoid creating new mechanisms to block market access such as geographic indications. Agricultural export interests in Australia, the United States, and our colleagues in the Cairns Group cannot accept new excuses to keep markets closed.
• Ultimately the key unresolved issue in the Doha round is the level of ambition. We believe that looking at the round as whole, with a strategic perspective, provides convincing arguments for a major political commitment to reach for the highest level of ambition, with limited pragmatic ways to accommodate adjustment pressures.