Im an optimist on Doha, and Ill explain why.
Its been said that an optimist is someone who hasnt
heard the news. Im an optimist because Ive heard
the news. The buzz behind the scenes is that the political will
has actually changed quite dramatically.
Im optimistic because the Doha round negotiators now
realize that we are in the final phase, and we have to get down
to settling the thing. There are lots of issues on the table
already. Many things have already been done with a view to
getting developing countries on board.
In the earlier negotiations and throughout the history of
the general agreement on tariffs and trade (GATT), the view has
been to get developing countries on board, to indulge them
because though they dont amount to a hill of beans
in terms of world trade you still want them in the GATT
or in the international negotiations. Down the road,
theyll graduate, become better off, and its good to
have them inside your system. And the same attitude right now
applies to the least developed countries. The point is,
theres so much on the ground now that I think
theres a vested interest in not letting it go. So
thats one reason for optimism.
The other reason is this. Take India. Indians have been
misled by Oxfam and economists like Joseph Stiglitz into
thinking that theres $1 billion-worth of subsidies in the
EU and US per day $360 billion-worth a year. If that
were true, I would become a pessimist too, because you
couldnt really do anything about that.
Many people believe this propaganda, which is really
harmful. And then you divide it by the number of cows. [Oxfam
notes that the average European cow gets a $2-per-day subsidy.
Meanwhile, it claims 800 million people live on less than a
dollar a day.] Why not take the number of people in the media
and divide that by the number of cows? It really is a
meaningless arithmetic; there is no economics there.
But the only subsidies that matter externally are trade
distorting ones. The FischlerLamy reforms [to subsidize
land use rather than agricultural produce] present a compelling
way to turn a lot of distorting subsidies into non-distorting
subsidies. So we should celebrate that.
We have been telling India, including trade minister
Kamal Nath, that the situation is not that bad if we can
actually negotiate. Weve been telling the Americans the
same. On agriculture, theres no way you can get them to
liberalize now, as the Americans would like, because Indian
elections are coming soon, and theyre therefore very risk
averse. But I believe that if the Americans can move a little,
something can be done by way of reciprocal baksheesh.
My recommendation has been that its probably better to
collect an IOU from the Indians on agriculture, with a little
gesture of some kind, to say this is not doable right now. But
the Americans have a very similar problem right now with
On manufacturing, US trade negotiator Susan Schwab is being
unreasonable. India has reduced tariffs in manufacturing quite
substantially over the last five years, hugely from the 1991
level of about 75% to now about 9%. The current Indian average
tariff for manufacturers is about 9%. Nobody mentions that.
Susan Schwab is deliberately ignorant and doesnt take
this into account. Even then, India could probably go a little
further. Theyve continually been bringing it down. There
are no lobbies in India against manufactured tariffs
The Americans are acting like India is a highly
protectionist country, saying India hasnt done anything,
theyre not going to do anything, and so on: thats
simply giving the wrong vibes.
Meanwhile, the US farm sector has two problems. Democrats
are waiting to take power, and the Republicans are traumatized
about losing it. Neither party can take on the farm lobby
before the election because everybody wants the farm vote. The
farm lobby insists that India be forced to open up their
markets. So they go for sectoral reciprocity. They want
movement within agriculture.
The US has been spending on average $15.6 billion over the
last five years on subsidies. The upper bound which
theyre looking for is $22 billion. But theyre
willing to cut back as far as $17 or 18 billion. That is not
enough, but they cant do more because nobody wants to
risk the farm vote.
My proposal is this: we should push for the Fischler-Lamy plan
to apply to the US. That way they can have their subsidies at
$22 billion or whatever while changing the
composition of subsidies. Reduce trade-distorting subsidies by
half, turning them into Fischler-Lamy type non-distorting
subsidies so-called green box subsidies. Change the
composition but not the total, but cut the total distorting
subsidies by half, which is really what matters for Cairns
Group [developed nations excluding the US and EU] and India and
so on. If you do that, youre really left with, say, only
$10 billion distorting subsidies.
President Bush cant go and tell his party and people
that hes going to cut farm support, but he can say that,
while hes supporting them wholeheartedly, the US will
shift about $8 to 10 billion out and pay them in some other way
maybe linked to environment. If we do that, Im
quite sure that India will give more ground. This is where the
outlines of a deal are possible.
It has to be handled in a way that meets the concerns of the
US congressman. Once these ideas sink in, there is the
possibility of a deal theres reason for optimism.
Where theres no reason for optimism is in getting this
round settled before the US election. It can move quickly after
the election though, and it will still have taken less time
than the Uruguay trade round, but the point is were so
close, there are so many people.
The other reason is this: if the US doesnt go in for
Doha, it has to do bilateral trade deals. If it doesnt do
Doha and if it doesnt have fast-track authority [the
power that the US president has to negotiate agreements that
Congress can approve or disapprove but cannot amend], they
cant do bilaterals either. But they need fast-track for
the complex bilaterals like Cafta. I think the fast-track for
Doha will piggyback on the ones for the bilaterals. Im
not worried about fast-track; itll come. Self-interest
will lead them into doing fast-track. In the end, sense will
prevail, and we can actually package a deal together.
When you look at how this can be solved, I think
theres enough there, and a last minute dash is possible.
I wasnt that optimistic before, but you know, once you
start looking at the issues and where you can get a movement, I
think both India and the US are going to be able to move. They
are the main players along with Brazil. India has a better
rapport with the US. If the US and India really accommodate
each other along those lines and do some more, then we have the
possibility of a genuine compromise. I think I see those two as
critical players right now. Theyre definitely going to be
able to do it.
Jagdish Bhagwati, former advisor to the WTO and UN, was
in conversation with Taimur Ahmad