| THE DIFFICULT ART OF CONCLUDING WHAT WAS
The experience of the Doha Round and the EU-Mercosur negotiations
by Félix Peña
English translation: Isabel Romero Carranza
A decade after being launched the Doha Round and the
bi-regional negotiations between Mercosur and the European Union (EU)
are still not producing any concrete signs of a prompt conclusion.
Regarding the Doha Round, there is currently a strong
impression that the "window of opportunity" that seemed to have
opened up at the beginning of he year is now closing down. Several observers
and analysts agree in that the existing obstacles could be surmounted
by a strong and honest political will that goes beyond the repeated declarations
made at the summits of the highest political level. One option would be
to procure a less ambitious agreement and, as a trade-off, to initiate
a new stage of multilateral negotiations using more innovative methodologies
and introducing different multi-speed and variable geometry negotiation
There are no signals either of any concrete progress towards the conclusion
of the negotiations between Mercosur and the EU this year. A similar situation
to that which led to the October 2004 failure seems to be happening again.
The political drive has apparently dissipated and, if still present, is
not clearly visible. Additionally, there are factors that could introduce
an unnecessary rigidity in the negotiations such as, for example, the
interpretation of the scope that the free trade commitments should have.
With leadership at the highest political level -such as that which led
to re-launching the negotiations last year in Madrid- and with flexibility
in the interpretation of the requirements of the WTO rules, it would seem
feasible to avoid some of the existing obstacles. A less ambitious agreement
that opens the door to a long term process with greater strategic intent
could prove better than a new failure in the negotiations.
Both the Doha Round and the EU-Mercosur negotiations are dragging their
feet. A decade after their launch neither trade negotiation is giving
off any concrete signals of moving forward towards a prompt conclusion.
They seem to be avoiding success inasmuch as they are resisting failure.
Towards mid-April the perspectives for the conclusion of the Doha Round
during this year were dismal (on this regard see the article entitled
"WTO Negotiators Eye "Soft Landing"", ICTSD, Bridges
Weekly Trade News Digest, volume 15, number 13, April 14, 2011, on http://ictsd.org/i/news/bridgesweekly/104413/).
The impression that the "window of opportunity" that seemed
to have opened up at the beginning of the year is now closing down was
Among others, a working group from the Evian Group (see the reference
in the Recommended Reading Section of this Newsletter) alerted, in its
February meeting, of the possible consequences of the failure to fulfill
the objective of concluding the negotiations by the end of this year.
It pointed out that only a joint effort of all the parties interested
in an effective multilateral international trade system would make it
possible to successfully conclude the negotiations during this year. This
would imply a strong political and business leadership.
On this regard, the working group pointed out that "it is important
that the business community understand the systemic implications of the
framework in which they will evolve if short-term incentives and quarterly
balance sheets dominate their approach to the multilateral trade regime".
It added that "the private sector has much to lose from the absence
of an agreement - with a spiral chain which could take the form of continued
export subsidies, no discipline on domestic support, no tariff cuts in
manufacturing, no agreement on cotton, no progress on trade facilitation,
credibility damage, and an overall unpredictable environment". These
would be some of the hidden costs of a scenario in which the Doha Round
failed or entered a long period of stagnation -which could be the same
or eventually worse-.
The report mentions the risk that the rules of the multilateral international
trade system become relatively obsolete, due to the speed of the trend
towards preferential trade agreements and the deep changes in world trade
caused by the evolution towards multiple modalities of productive articulation,
both at a global and regional scale.
The Evian Group working group identified the main sensitivities and obstacles
that would hinder the conclusion of the multilateral negotiations this
year (on this regard there seems to be certain consensus among observers
and analysts). These are: the degree of ambition and the sector priorities
with regards to the access of markets, especially among the five main
protagonists (the US, the EU, China, India and Brazil); the political
assets necessary to present a multilateral agreement to voters and parliaments
within a context of unemployment and of the perception of economic vulnerabilities
originated by external economic competition; and an insufficient willingness
to commit within a prevailing climate of mutual mistrust. However, at
the same time, there is a confirmation that countries perceive the benefits
that could be reaped from a success in the negotiations or, otherwise,
the systemic consequences of their collapse.
Many observers and analysts agree in that the existing obstacles could
be overcome by a strong and real political will that goes beyond the repeated
declarations by the G20 or, most recently, of the BRICS group that met
in Sanya, China, in April (for the final declaration of the Sanya Summit
on April 14 2011, go to http://news.xinhuanet.com/).
A more reasonable option would be to lower the ambitions of the agreement
to be reached and, as a trade-off, to start a new stage of multilateral
negotiations that uses more innovative methods and introduces different
multi-speed and variable geometry negotiating modalities (refer to our
2007 article on http://www.felixpena.com.ar/).
With regards to the EU-Mercosur negotiations, no signals that would indicate
any concrete progress leading to their conclusion this year could be observed
after the March meeting of the Bi-regional Negotiations Committee held
in Brussels. At times, it would seem that the situation is similar to
that which led to the failure of October 2004.
One explanation of this state of affairs could be the insufficiency of
the political livelihood required to conclude a complex and unique trade
negotiation. This is so because it involves thirty-one countries grouped
in two blocks with different institutional densities, relative powers
and interests. Additionally, within each block there are diverse economic
interests, which sometimes can even be contradictory.
In view of a situation that seems to be repeating itself the question
that comes up is why was the negotiation re-launched last year at the
Madrid Summit in the first place. It would be safe to say that nobody
would voluntarily participate in a negotiating table unless there was
an interest of achieving something. A halted negotiation is not willingly
resumed knowing that in a short time it will come to a standstill once
The answer could be that when the negotiation was re-launched there was
sufficient "oxygen" coming from the highest political level.
This was brought in by the governments of Argentina and Spain in charge
of the respective pro-tempore presidencies of each block. At the same
time, there were strong economic interests on the European side in favor
of a preferential agreement with a regional space that, in spite of the
insufficiencies of its integration process, is attractive for hefty competitors
such as China and the US. Moreover, the road towards a bilateral agreement
with Brazil was closed, at least at that moment.
The initial political drive seems to have faded on both sides of the
Atlantic. Or if it still exists it is imperceptible. For a time it was
recaptured by President Lula, who was occupying Mercosur's pro-tempore
presidency during the second semester of last year. Yet the main weakening
can be observed in Europe which is still -and maybe for a long time- under
the effects of the financial shock of 2008. Furthermore, several European
governments are plagued by their own internal dilemmas. They are going
through a period dominated by uncertain elections and by bewildered, if
not outright frightened, public opinions. The events of Northern Africa
do not contribute to change this scenario. On the contrary they seem to
have accentuated defensive reflexes.
On the European side the negotiation has remained in the hands of officers
with an apparent will but with insufficient political weight. Nobody at
the highest political level is expressing with conviction "this negotiation
interests me". Those making the most noise -this is part of the game-
are the agricultural interests opposed to the progress of the negotiation.
Or what is practically the same; they subject it to the increasingly uncertain
conclusion of the Doha Round.
In our opinion an additional factor is generating an unnecessary rigidity
in this bi-regional negotiation. This is the alleged demand that a bi-regional
free trade agreement, such as the one that is sought, must contemplate
at least ninety percent of reciprocal trade. It is claimed that it is
required by article XXIV of the GATT when it prescribes that the coverage
of a free trade agreement should comprise "substantially all the
trade". For those who support this idea it would be necessary to
comply with it so that the resulting agreement is not vulnerable within
the scope of the WTO.
However this is not what the GATT article expresses. In any case it is
a possible interpretation in view of its ambiguity, an interpretation
that seems to prevail in Brussels. It is influenced by the precedent that
the smaller percentages could have in other EU trade negotiations (among
which one of the most relevant is the one being carried out with India
and of which there is scarce information).
However there are other valid interpretations reflected by a long-standing,
unfinished debate among member countries and also among experts on the
criteria to be used to interpret such an imprecise text. Depending on
the interpretation used the percentage of trade could be reduced to seventy
percent or even less (for an analysis of the interpretation of the requirements
of article XXIV, paragraph 8 of the GATT, consult the work by Kyle W.Bagwell
and Petros C. Mavroidis (editors),"Preferential Trade Agreements.
A Law and Economics Analysis", Cambridge University Press, Cambridge
2011; and by Sangeeta Khorana, Nicholas Perdikis, May T.Yeung and William
A.Kerr "Bilateral Trade Agreements in the Era of Globalization. The
EU and India in Search of a Partnership", Edward Elgar, Cheltenham-Northampton,
2010. Refer also to the report by Robert Scollay and Roman Grynberg cited
in the Recommended Reading Section of this Newsletter).
This is no trivial issue. A more flexible interpretation of the commitment
assumed through the GATT would enable to find a balance in the bi-regional
negotiation to contemplate the existing sensitivities on both sides. These
are most intense precisely because some European governments are facing
election processes in the midst of the perception of a growing economic
This is but one example of an important tangle in the negotiation that
will require the involvement of the highest political levels in order
to be untied. The necessary "oxygen" could be obtained if a
distinction is made between the degree of ambition of the preferential
commitments that are to be assumed in the agreement that is signed and
that of the long term objectives of the bi-regional association that is
established. Evolutionary clauses would later help continue with the following
steps when the circumstances and needs allow it. It would thus be a "two
step agreement" with a "built-in-agenda" (see a proposal
along these lines in the report of the Mercosur Chair entitled "Concluding
the EU-Mercosur Agreement", edited by Alfredo Valladäo, Chaire
Mercosur, Science-Po, Paris 2004 and, in particular, the Introduction
by Félix Peña and Patrick Messerlin, pages 13 to 20, on
Formulated when the negotiation was approaching its first standstill
-that of October 2004- and the results of the Doha Round were also viewed
with uncertainty, the proposal of splitting the bi-regional negotiation
drafted within the framework of the Mercosur Chair seems to preserve its
validity in spite of the time elapsed and, at the very least, as a sort
of "Plan B". In fact the current scenario, even when different,
can also be characterized by the convergence of a bi-regional negotiation
lured by paralysis and a Doha Round negotiation that sails, yet one more
time, in the midst of a strong uncertainty regarding its outcome.
Concluding what was started ten years ago continues to pose a challenge
for these negotiations. In both cases a failure could still be prevented
by a strong political drive, flexibility and technical creativity. Confirming
a failure would have high costs in both cases.
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Félix Peña Director
of the Institute of International Trade at the ICBC Foundation. Director
of the Masters Degree in International Trade Relations at Tres de Febrero
National University (UNTREF). Member of the Executive Committee of the
Argentine Council for International Relations (CARI). Member of the Evian
Group Brains Trust. More