Irresistible meets immovable

By BRIAN FALLOW

Trade Negotiations Minister Jim Sutton says it now looks unlikely the Doha Round of world trade talks will be concluded by the agreed target date of the end of next year.

On the face of it the round - New Zealand's No 1 trade policy priority - is in trouble. World Trade Organisation members could not agree on a framework for more agricultural talks, which are central to the round, by the deadline of last Monday.

The parallel talks on the General Agreement on Trade in Services (Gats) are regarded with widespread suspicion.

And then there is the more-than-usually bad-tempered state of international relations in general and transatlantic relations in particular.

Prime Minister Helen Clark said on Monday that the breakdown in multilateralism over Iraq "does have ripple effects into other areas, including trade, and it is very important that we work to minimise those effects".

Not surprisingly, the Trade Liberalisation Network takes a more sanguine view. Executive director Suse Reynolds says trade rounds do not usually show steady linear progress. Rather, pressure builds until movement is inevitable.

There is cause for optimism that real progress could be made on agriculture this time because, unlike previous rounds, it is not just a matter of arm-wrestling between the United States and Europe.

"The developing countries have really staked their claim on this round and have said they are not going to let the round succeed unless they get some serious benefits," Reynolds said.

Sutton said New Zealand, together with the rest of the Cairns Group of agricultural exporting nations, has been pushing for an outcome in line with the Doha mandate on agriculture, which calls for substantial improvements in market access, the elimination of export subsidies and substantial reductions in trade-distorting domestic support.

The draft agreement that the chairman of the agriculture talks, Stuart Harbinson, put on the table went some way towards meeting that mandate, Sutton said.

"We are ready to negotiate on that text. But some WTO members, especially the Europeans and Japan, are not prepared to move beyond their old protectionist positions."

Such comments draw protestations of injured innocence from Brussels.

The European Union, after all, has offered cuts in export subsidies, tariffs and domestic support even if they fall well short of what the Cairns Group or US are seeking.

"It is not only our export subsidies which can be viewed as trade-distorting," said EU Agriculture Commissioner Franz Fischler on Monday.

"What about bogus food aid, export credits and the pricing practices of certain state trading enterprises?"

Another sore point with the Europeans is the Harbinson draft's exclusion of non-trade concerns, which take into account the environment, rural development and animal welfare.

The setback in agriculture talks will increase cynicism about the prospects of pulling off the "grand bargain" that is thought to offer the best hopes of a successful outcome to the Doha Round.

The idea is that the Europeans and other industrialised countries will demand significant opening of services markets in return for concessions on agricultural trade.

Council of Trade Unions secretary Paul Goulter said he did not expect any progress until WTO trade ministers next met in Cancun, Mexico, in September.

Cancun would be a hothouse environment, with enormous pressure to strike a deal.

"Developing countries are very wary about the whole thing," Goulter said.

"The current sate of the agriculture negotiations show how hard this is going to be."

The Government tabled its initial offer under the Gats talks - essentially its response to the commitments sought from New Zealand by other countries - on Monday.

The CTU had called for a delay, saying there had not been enough time for consultation and debate.

It is less than two months since the Government disclosed the requests that had been made of New Zealand in the Gats talks.

In the event, the offers in response rebuffed most of those requests.

New Zealand is not willing to scrap the requirement for Overseas Investment Commission approval (rarely withheld as it may be) for foreign purchases of land or companies worth more than $50 million.

Nor is it willing to scrap the Kiwi Share provisions that stop an overseas firm owning more than 49 per cent of Telecom, or limits on the number of foreign directors on its board.

In education, it had been asked to extend the existing commitment - limited to private institutions - to "the full range of higher education services". No deal.

Instead, it has sought to mollify concerns about the robustness of the provision that excludes from Gats' ambit services supplied "in the exercise of governmental authority" - defined as services not supplied on a commercial basis or in competition with anyone.

The Government is attaching to its offer a declaratory statement that it takes the relevant article of the Gats to "allow a Government to provide, regulate or fund (including through subsidisation) public services such as public education, public health and social welfare services in the manner it determines best meets broader policy objectives".

But Auckland University law professor Jane Kelsey says these assurances will not be written into New Zealand's schedule of commitments, so they have no legal standing.

"There is no promise to protect environmental services [including water and wastewater], which the Europeans are desperate to have included. These may end up on the table when the negotiations get really tough."