26 March 2006

Little more than a month is left before the World Trade Organisation's April 30 deadline to reach a framework agreement in the Doha development round. Such an agreement is essential if a final trade deal is to be struck by the end of the year. All parties must recognise that the time for posturing is over, that the hard decisions must be made now and that the US and the European Union must act in concert to save the talks. It is time for the transatlantic business community to come off the sidelines and engage directly with governments to help break the impasse.

With all the distractions from the Boeing-Airbus dispute, the Dubai Ports World controversy, the threat that the US and France will begin to close their markets to foreign investment and the vocal opposition to globalisation, we must not lose sight of the bigger picture. Trade plays an essential role in our globally integrated economy and is essential to sustain growth.

For the EU and the US, a strong Doha round is an imperative. They are the world's leading exporters of services and industrial goods. Our economies are well positioned to benefit from increased trade but high industrial tariffs, non-tariff barriers, customs bottlenecks and restrictions on services imports and investments especially in big emerging markets such as India and Brazil limit this potential.

The services sector in particular offers a tremendous opportunity. Although this sector makes up nearly two-thirds of global gross domestic product, it accounts for only 20 per cent of global exports. Clearly, trade in services has plenty of room to grow. Given the strength of the services sector in the EU and US each enjoys a trade surplus in services of more than $50bn ($40bn) a breakthrough services agreement should be a priority.

But it is not only the EU and US that would benefit from a successful Doha round. Already, developing nations have won big concessions. More than 95 per cent of products from poor developing nations will come into the EU, US and other developed markets duty-free. While more needs to be done, trade distorting agricultural subsidies and high tariffs that keep out developing country products are being significantly reduced. Those who encourage developing countries to block progress in the Doha round do a disservice to those countries. Every study has shown that developing nations that have opened their markets to trade and investment have grown faster than those whose markets remain closed. It is encouraging that higher income developing countries such as India and Brazil are beginning to recognise the value of a Doha agreement to their own development. They should lead others towards a deal that includes a strong industrial and services component.

Despite the obvious benefits, the WTO negotiations have opponents. Governments should find ways to help people deal with difficult transitions. But to freeze the status quo is not the path to global prosperity. Trade ministers around the world have been waiting for others to make the next move, saying they have already put substantial offers on the table. This has become a prescription for stalemate. But Pascal Lamy, WTO director-general, had it right last month when he said: "All the key players know they will have to move. The EU knows it will have to move on agriculture market access, the US knows it will have to move on agriculture domestic support and emerging countries like Brazil, India or South Africa know they will have to move on industrial tariffs and services. And the good thing is that all of them have said they will move 'in concert'. All this makes me believe we could soon start to see the shape of a final deal."

That said, a final deal remains elusive. The days are gone when the EU and US could reach an agreement as with the Uruguay round and expect other nations simply to go along with it. But it remains true that unless the EU and US can settle differences over agriculture and demonstrate leadership, other members will not act "in concert". The Doha round is a negotiation in which all parties must make tough decisions and accept compromises to "give" in order to "get".

Should Doha fail, perhaps the biggest losers would be developing countries. They would lose the duty free access for the overwhelming majority of their products tentatively agreed to. Likewise, they would find their cultural products less likely to gain access in the industrial world. The poorest countries would suffer a further loss because the implosion of multilateral discussions would lead the EU, US and Japan to accelerate bilateral free trade agreements with selected countries .

The developed world and the world economy in general would also be losers. Multilateral tariff reductions act as a massive worldwide tax cut, stimulating economic growth and jobs, which would be lost without a Doha deal. The EU and US would lose market opening opportunities for their service industries. A failure would send out protectionist shock waves. As co-chairmen of the European-American Business Council, representing 55 leading European and American businesses, we urge Brussels and Washington to work together to ensure success.

The next few weeks will be critical. It is time to get serious and pick up the pace of negotiations. The Doha round is simply too important to let it fail.

The writers are co-chairmen of the European-American Business Council and were involved in negotiating the Uruguay WTO round. Mr Eizenstat served as US ambassador to the EU; Mr Paemen as EU ambassador to the US

By Stuart Eizenstat and Hugo Paemen

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