AG CHAIR PREPARING TO REVISE TEXT, AS LAMY SAYS 'HOUR OF TRUTH RAPIDLY APPROACHING'

The chair of the troubled Doha Round agriculture talks has given Member governments until 2 November to iron out their differences. After that, he will put together a detailed new potential draft deal for make-or-break final negotiations, guessing where consensus might lie on issues for which negotiators fail to point the way to compromise.

"We're moving incrementally in the right direction, albeit three years later than we should have," New Zealand Ambassador Crawford Falconer told delegations on 19 October, reporting on the week's consultations with a representative group of 36 countries.

This incremental (but nonetheless rare) progress has been the product of intensive discussions since early September. On the most crucial issues in the negotiations, however - future caps on farm subsidy spending, for instance - governments remain deadlocked, leaving Falconer with a great deal of guesswork.

With time running out for a deal - it is widely believed that a breakthrough is needed before the end of the year for the Doha Round to have a chance of being saved from a potentially indefinite hiatus - Falconer defended his decision to cut consultations short. Not only were negotiators largely repeating their positions, he told them "there's no point in saying you've got seven weeks because you'll take 23."

The chair was not being unkind. When the Doha Round talks were launched in late 2001, the deadline for agreeing on formulae and figures for cutting agricultural subsidies and tariffs - what governments are trying to do now - was March 2003. The entire round was originally supposed to be wrapped up by the end of 2004.

Falconer emphasised that he would allow discussions to continue past 2 November if negotiators started to make meaningful new concessions. Some developing countries - Cuba, Paraguay, the Philippines and Venezuela - had asked for the chair's consultations to continue an additional week or two. They suggested that fewer delegations were likely to find themselves shut out from Falconer's 36-Member 'Room E' consultations than from a potential ministerial-level meet to hammer out an accord on the most controversial issues in the talks.

The new draft that Falconer is to issue will revise the potential agreement he presented to Members in July. In particular, it is expected to flesh out the specific parameters for a number of issues that were not dealt with in great detail in the earlier text. These include future provisions for the 'special products' that developing countries will be able to shield from the full force of tariff reduction, and the 'special safeguard mechanism' to help them protect vulnerable farmers from import surges. These issues have been contentious, pitting exporters eager for more market access such as the US and Malaysia against countries wary about major displacement in their agricultural sectors.

Falconer pointed out to Members that when revising his text, there were two options for dealing with issues on which they remain far apart: for them to come up with compromises on their own, or for him to guess what an acceptable agreement might look like. In the event of the latter, he warned, it was probable that half of his guesses would be wrong.

Unless Members found the text to be at least tolerable, extremely fraught negotiations would ensue. "The prospect of imminent death will focus your minds wonderfully," he told negotiators, expressing hope that they would finally be motivated to find common ground.

Common ground was in very short supply, said one official, expressing concern that Falconer would have to essentially draft the new text on his own, with no help from Members, and that the text could contain significant ambiguities even when sent to ministers.

Another delegate noted that Falconer risked ending up in the same situation as the chair of the industrial goods negotiations, whose July draft text met a frosty response from many developing countries, bringing those talks to a near-standstill. Although the New Zealander's initial paper had not raised virulent opposition, the official said that extreme care would be necessary to strike a balance on issues such as the special safeguard mechanism, on which there was no agreement whatsoever. "He has to be very careful not to sink the paper," the source noted.

Geneva-based trade diplomats draw a distinction between the 'political' questions that can only be resolved at the ministerial level - subsidy spending caps, say - and lesser (though often related) issues that they can clarify themselves. The ongoing talks are aiming to settle a large number of still-unresolved technical issues in order to leave ministers a manageable number of 'political' questions to finalise.

Even on the technical issues, negotiators say progress has been modest indeed, with the principal advance simply to bring differences into more precise relief. For instance, although Members have more or less agreed to use domestic consumption as a basis for calculating import quota expansion for the 'sensitive' agricultural commodities eligible for lower-than-normal tariff cuts, they disagree on the methodology used to determine consumption levels. The EU and other reluctant importers want to be able to pinpoint protection on very specific products, and not use up their allotment of sensitive products on others - something which exporters predictably oppose. Falconer told Members that he would have to determine the matter himself if they failed to sort out their differences.

After a pause in the agriculture talks this week, Falconer is planning to resume consultations for a final week between 29 October and 2 November. Negotiators expect him to circulate his draft text some time after the middle of next month. It will be accompanied by a linked draft deal on industrial goods, as well as draft documents for further negotiations on rules and services.

Lamy: "hour of truth" is fast approaching

In theory, if Members seem to have an agreement within reach, ministers could be summoned to Geneva to finalise a deal in December.

Is this likely? Many Geneva-based trade negotiators are pessimistic. Divisions remain wide, notably on how deeply developing countries like Argentina, India, and South Africa should have to cut their industrial tariffs in return for the agricultural reforms the US and the EU deem acceptable.

Brazilian WTO Ambassador Clodoaldo Hugueney this week told Agence France Presse that "the situation is currently extremely dangerous." Brazil is one of a group of many developing nations complaining that the industrial goods draft text would require them to cut tariffs more deeply than rich countries. "If the [new] texts are unbalanced, there will be a risk of failure, and this will be a definitive failure," Hugueney warned.

Nevertheless, WTO Director-General Pascal Lamy insists that a development-friendly Doha deal remains "doable." He told an International Monetary Fund (IMF) meeting on 20 October that "very encouraging progress" had been made. However, he warned that "the hour of truth is very rapidly approaching," and that the "next few weeks" would probably represent governments' "last chance to move this round to a successful conclusion."

Also at the World Bank-IMF summit in Washington, African finance ministers called for a "speedy conclusion" to the Doha Round, with "deep cuts in agricultural subsidies and tariffs by advanced economies… [and] reduced non-agricultural tariffs by all countries."

Even if negotiators reach a deal by the end of the year, it is not clear that the deeply unpopular George W. Bush administration will be able to win approval for it -- in an election year to boot -- from a hostile Congress in which both parties appear increasingly uncomfortable about economic globalisation. After that, the US campaign in 2008, followed by Indian elections in 2009, are widely expected to put the Doha Round on ice indefinitely.

In any event, sources report that delegations are engaged in informal talks on a near-continuous basis, often with the participation of senior capital-based officials. They say that the intensity and seriousness of the discussions is unprecedented in this round. Tactical positioning continues, with governments repeatedly stressing their commitment to reaching an agreement, hinting that they will make the necessary concessions if only their trading partners to the same. What remains to be seen is whether the positioning is preparation for the Doha Round end-game, or the blame game.

ICTSD reporting; "Brazil warns WTO talks in 'extremely dangerous' phase," AGENCE FRANCE PRESSE, 23 October 2007; "WTO's Lamy says Doha deal possible, time is short," REUTERS, 20 October 2007; "Doha Round negotiators face "last chance" to salvage talks: Lamy," AGENCE FRANCE PRESSE, 20 October 2007; "Africa calls for "speedy conclusion" of Doha trade talks," PANAFRICAN NEWS AGENCY, 21 October 2007.