IMF Asks More Flexibility from Brazil and G20 and Their Rich Counterparts

International Monetary Fund’s chief economist, Raghuram Rajan called on the 148 country members of the World Trade Organization, WTO, to show more "flexibility" so an agreement can be reached this week in the Hong Kong ministerial meeting.

"What we need is for all sides to show flexibility; what we need is more negotiations and less initial positions, otherwise we’d be facing a lost opportunity", said the IMF economist addressing a panel of journalists in Paris.

Brazil’s Minister of Foreign Relations, Celso Amorim, sent a message to worried Brazilian members of the industrial sector that all Brazil will do at the Hong Kong meeting is present a proposal to lower the average import tariff for the sector from 10.8% to 9.9%.

Amorim called the offer significant but well within reason. He explained that Brazil intended to use the flexibility clauses that WTO norms permit as a tool and maintain higher tariffs in sensitive sectors.

Amorim went on to say that the Brazilian offer would remain on the table only if the European Union and the United States make positive offers regarding market access and farm subsidy reductions. He insisted there had to be some kind of parity.

"Developing countries will reduce industrial sector import tariffs if there is an equivalent counterproposal for farm produce in developed nations," said the Minister.

Amorim had earlier called on the different groups of developing nations to unite, in order to make possible the advancement of negotiations at the World Trade Organization (WTO).

"The G20 message is for unity. I’m convinced that only by preserving our unity and strengthening our natural coalition, we will be able to ensure the accomplishment of the Doha Agenda," said Amorim during the African Union’s Ministerial Conference on the WTO Negotiations, at the end of November.

The G20 is a group of developing nations, led by Brazil, which negotiates fairer rules for agricultural international trade.

Liberalization

Trade ministers will meet this week, December 13/18, in Hong Kong for talks on a global trade liberalization deal, but deadlock over the key issue of farm subsidies has left little hope of significant progress.

Expectations for the biennial World Trade Organization (WTO) ministerial meeting have been progressively downgraded following months of finger-pointing and arguments between the main protagonists.

The talks were supposed to sign off on an overall agreement whereby developed countries would open up their agriculture markets in return for free access for their industrial goods and services in the developing world.

The European Union, the United States, India, Brazil and Japan have all come up with proposals in the run-up to the six-day meeting that opens Tuesday, but they have been unable to break the deadlock.

"Benefits of an agreement are under estimated", said Mr. Rajan because industrialized countries would have greater access to the "services and products" of developing countries, and these would have greater facilities to rich countries’ markets with "an overall increase among nations in the southern hemisphere."

However he admitted that for poor countries the elimination of reduction of rich countries’ tariffs could effectively become an elimination of the preferential rights they currently enjoy, and therefore of their exports.

It is hoped a deal in Hong Kong would prevent a repeat of the debacle at the previous WTO ministerial meeting in Cancun, Mexico, in 2003, which ended in acrimony.

A political compromise in Hong Kong would also keep alive the so-called Doha Round of free trade negotiations launched in Qatar in 2001, and maintain hopes the round could be concluded next year as planned with a global free trade agreement.

Subsidies

The build-up to the Hong Kong talks has been marked by bitter exchanges and growing calls for the European Union to offer bigger cuts in the huge subsidies it gives to its farmers. The EU commission has offered agricultural tariff cuts of between 35 and 60%, with the overall average to be reduced from 22.8 to 12.2%.

Washington meanwhile has offered cuts of 55% to 90%, contrasting its willingness to bite the bullet with the EU’s reluctance to make the hard choices for a global trade accord.

EU Trade Commissioner Peter Mandelson has also demanded that in exchange for concessions on farm trade, emerging market countries in particular must allow greater access for EU industrial products and services.

The EU, which is being heavily leaned on by France not to go any further, argues that other nations are not moving far enough on access for industrial goods. Brussels also says it has an obligation to protect farmers in former European colonies, who receive preferential trading with Europe.

Developing nations have been pressing both the EU and the United States to reduce tariffs and subsidies, arguing that until they do farmers in poor countries will be unable to compete fairly in world markets.

The United States has also called for all nations to make compromises, but it has warned the EU that without progress on agriculture the developing world would never embrace change on other fronts.

EU Trade Commissioner Peter Mandelson has already admitted that achieving a new trade deal at Hong Kong is unlikely, despite his concern at how this could be perceived.

"I have a real fear that if they [the talks] fail … we will be giving many people less confidence in the international system, less to hope for and that could be very alienating for many people in the world and therefore very dangerous not only for them but for the rest of us as well," said Mr Mandelson.

WTO boss Pascal Lamy has also already suggested that no final agreement will be possible at Hong Kong, and that talks will instead continue into 2006.

This article appeared originally in Mercopress – www.mercopress.com.

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