For the foreseeable future, Washington holds the key to any possible conclusion of the Doha negotiations. The US insists that much is in the hands of other participants, through the level of ambition in the concessions they are prepared to offer. That is certainly part of the equation. However, a mix of political developments on a number of fronts – in Washington, in the American primary election process and the US presidential election – will determine whether or not, even with the best intentions on all sides, the very slim hopes for a deal can materialise in anything like the limited timeline canvassed in Geneva.

From the Farm Bill proposed by the US Administration on 31 January 2007 emerged two versions: one approved by the US House of Representatives on 27 July 2007 and one by the Senate on 14 December 2007. Currently, the new Farm Bill is both seriously delayed and still in question. The Administration, unhappy with the House and Senate versions (which fail to significantly cut subsidies, control spending or promote trade), has cast a presidential veto threat. The Farm Bill, as approved by Congress, offers little by way of reform of subsidy programmes. The US Congress is also facing other significant trade issues on which it may or may not choose to act, including three Free Trade Agreements, trade adjustment assistance for displaced workers, and trade relations with China. All these are on top of any question of renewing the President’s “fast track” negotiating authority so that a potential Doha agreement can be ratified. In the background, the 2008 presidential election campaign is moving into fast gear, with trade perhaps not a dominant theme but certainly not absent.

The situation is perverse for all concerned; it could be likened to “Catch 22”: on the one hand, for “fast track” to be granted, some signals of progress in the negotiating process are essential. On the other hand, for negotiators to move in Geneva, more certainty on the renewal of the “fast track” is a must. And what will a new President and Congress in 2009 signify for the fate of the Doha Round? Much remains to be seen as 2008 advances. Outlined below are some issues for reflection.

I. Farm Bill – Delayed and Unhelpful

1. In Geneva, the nature and impact of a new Farm Bill has long been assumed critical to the development of US positions in the Doha Work Programme (DWP) negotiations, notably with respect to reduction commitments on domestic support. Initially, the US Administration fought hard for reform and hoped the Bill would open the way for cutting subsidies (such as reduced payments to individual farmers and limiting support for certain commodities) or, at least, revised assistance programmes that could credibly be placed in the Green Box. With the passing of a draft Bill in the House of Representatives in July 2007 and the emergence of a Senate version in December 2007, it became clear that no substantial changes can be expected to the commodity programmes contained in the 2002 Farm Act. In any event, there remains a strong disinclination among members of Congress from farm states as well as from some very strong agricultural lobbies, to agree to farm policies “dictated” by the WTO. In fact, a foreseeable Doha deal is expected to have few short-term consequences for US farmers. Nonetheless, uncertainty over potential changes in existing support programmes creates unpredictability as farmers seek to make planting decisions. One way or another, some security in funding expectations will be needed urgently by early 2008.

2. Programme support for individual products and commodities [note 1] ends, in practice, at the conclusion of their respective marketing years and these vary widely; that for milk, for instance, ends 31 December while those for different grains end in April, May or even later. However, the 2002 Farm Act itself expired in October 2007. One fear has been that in the absence of either new legislation or a decision to roll over current programs, the original farm legislation from the 1930s and 1940s would be called into play. These laws would entail very different – and probably WTO-inconsistent – support instruments, a more restricted coverage of commodities but vastly higher levels of support for certain commodities, notably milk. The threat appeared to have been at least partially avoided by the announcement, on 12 December 2007, by House and Senate leaders, that they would propose a prolongation of authority for most 2002 programs until March 15, 2008.

3. Despite veto threats, the House of Representatives USD 284 billion version of the new Bill passed in July 2007 by a largely partisan 231-191 vote. Treatment of the similar Senate version, when it emerged from committee, was delayed by a squabble over several hundred amendments – germane to the legislation or not – that members wished to consider “on the floor” of the (full) Senate. A procedural agreement [note 2] to go ahead with a limited number of amendments for consideration was reached on 7 December 2007. The Bill passed the Senate on a 79 to 14 vote.

4. Thus, as 2008 begins, Congress has both the Senate and House versions of the new Farm Bill on the table. These have to be consolidated into a single agreed Bill through a House/Senate “conference”, a process that could take several weeks. Such a Bill would then be passed to the President for signature. However, the President has already announced that he is ready to veto both current versions of the legislation on the grounds that they threaten to breach budgetary (“baseline”) limits or raise taxes (by USD 22.4 billion according to the White House). Farm groups insist that the USD 280 billion earmarked in the budget baseline for the years 2007-12 will not be adequate. Much of that sum is mandatory spending on school lunches, food stamps and other nutrition programs, unrelated to WTO obligations. Some observers believe the President may be bluffing on his veto threat – the Republican Party may not want to annoy farmers in an election year. But the most enthusiastic sponsors will seek a vote on the conference version of the Bill that is “veto proof” Certainly, the Senate vote looked veto-proof [note 3].

5. In the meantime, some important issues for members of Congress to grapple with when they get into conference remain. At the easier end of the spectrum, the two versions have differing target prices [note 4] and loan rates [note 5] for the covered commodities. For the most part, these are the same as or slightly above those in the 2002 Act, a fact that has attracted criticism from the White House. In the case of upland cotton they are slightly down in the House version but the commodity benefits from its own special arrangements.

6. Another question at issue in the conference is the revenue ceilings below which individual farmers can receive commodity programme support. The original Senate Agriculture Committee draft would progressively bring down the current 2002 Act limit from USD 2.5 million a year to USD 750,000. However, one key amendment, defeated during the floor debate, would have reduced the ceiling to USD 250,000. This may be pursued in the conference process. The House Bill would provide a USD 1 million ceiling.

7. Provisions on bio-fuels will also potentially impact the Doha negotiations (which so far have managed to avoid addressing openly and seriously what is clearly the biggest challenge to world food production facing members at present). Supposedly dovetailing with separate energy legislation, the Senate Farm Bill provides USD 2.8 billion for bio-fuel development, including the use of cellulose as a raw material for ethanol production alongside ever-increasing corn inputs. This year, some 6.5 billion gallons of ethanol will be produced in the US. Currently planned processing capacity will reach 12/13 billion gallons a year by end-2009. Some senators have been talking about 36 billion gallons of cellulose and corn-based ethanol production by 2022.

8. The Senate Bill seeks to deal with the shortfall in processing capacity and the need to review gasoline/ethanol blending standards (less gasoline, more ethanol) to open up further opportunities for US farmers. In the process, US exports of grain are expected to give way to growing demand for domestic bio-fuel production. This does not mean, of course, that the present tariff on imported ethanol in the US will be revised downwards through the DWP negotiations, notwithstanding OECD findings that only Brazil is currently capable of producing economically viable and environmentally sustainable ethanol.

II. US: a Target for Dispute Settlement Cases in Agriculture

9. With no final passage of a Farm Bill in prospect before February 2008 (and possibly later), nor much chance that it will provide substantive impetus to the Doha negotiations, the question that arises is: are current dispute settlement challenges likely to make a difference? In principle, they should, but timing and unwillingness in Congress to legislate in a manner consistent with Dispute Settlement Understanding (DSU) findings will probably not bring much aid to Geneva in the short term. On the other hand, Congress will have to come to grips with the possibility that WTO complaints may culminate in heavy retaliatory measures.

10. The “cotton” case brought by Brazil against the US [note 6] has already condemned a variety of support programmes. On two measures, found by the panel and Appellate Body to operate as export subsidies (“Step 2” payments and certain export credit instruments), the US has taken some action. However, three key elements of the commodity support programmes were found to have caused serious prejudice to Brazil’s interests (under Article 6.3(c) of the Agreement on Subsidies and Countervailing Measures): marketing loan programme payments, market loss assistance payments and countercyclical payments. The US has put forward no measures either to remove the adverse effects of these programmes on the cotton market or remove them as recommended by the dispute settlement panel. An interim report by the original panel under DSU Article 21.5 (October 2007) found grounds against the US on implementation. Earlier, Brazil had assessed the prejudice at over USD 1 billion a year and indicated it might take compensatory action against the US in the services and/or TRIPS areas. While Brazil clearly has restrained itself from proceeding in this manner while the Doha negotiations are live, it could easily move ahead in pressing its claims if the situation were to change.

11. Two more recent cases [note 7] brought by Canada and Brazil, that moved forward in the Dispute Settlement Body (DSB) on 17 December 2007 as a decision to establish a single panel [note 8], would go to the heart of the US domestic subsidies issue by challenging the extent to which Washington has observed its Aggregate Measurement of Support (AMS) limits over the past decade. Although the belated US notification [note 9] of its AMS figures for 2002-2005 claimed that spending consistently fell within the USD 19.1 billion ceiling (under Uruguay Round commitments), Canada and Brazil both consider that the misclassification of certain commodity programmes, notably as Green Box, has obscured higher real levels of spending in the Amber Box. Were a panel to uphold the Brazilian and Canadian claims, then offers made by the US on domestic support in the Doha negotiations would be questioned and the Congress would eventually be faced with a challenge to reform support programmes at a more fundamental level than is the case at present.

12. Progressively, the agricultural DSU cases and panel/Appellate Body findings are piling up and presenting US legislators, as well as the Administration, with big headaches. Although cases can be dragged out for several years, there comes a point where a choice must be made: implement or let US firms suffer the consequences. There is, of course, a further choice too negative to contemplate: to ignore the WTO rulings completely. But if the US were to take that road, the future of the institution and the rules-making system would be in question. Congressional sentiment was made clear very recently when the Senate overwhelmingly rejected an amendment to the Farm Bill that would have made certain programmes – notably countercyclical payments – more WTO-consistent. Hence, the interest in Washington in finding some acceptable path in the Doha negotiations that reduces the WTO legal risk but does not require too much legislative or reform effort at the cost of the support of farm lobbies.

III. “Fast track”, Dim Prospects

13. Each of these considerations that require striking a balance between domestic legislative/political interests and multilateral trade obligations factors into the issue that is seen as critical to any comprehensive resolution of the Doha negotiations: will the US Administration persuade Congress to provide the President Trade Promotion Authority (TPA) or “fast track” [note 10]? However, these are not the only elements; the mixture of political and commercial interests that will ultimately determine Congressional attitudes is complex and not always predictable.

14. Nobody doubts that any US Administration must have fast track authority to conclude the round and get the results through Congress. Right now, the challenge is for US officials to convince their negotiating partners in Geneva that even if the authority is not currently available – it expired in June 2007 – it will be sometime in 2008 when, they insist, the Doha Round can be concluded. Some participants point out, reasonably, that putting their last, and best, cards on the table in order to conclude deals on agriculture and NAMA modalities (leave aside the detailed commitments that are meant to follow) is difficult when there is no confidence that “fast track” will be forthcoming. There can be no guarantee – because the Administration cannot determine what Congress will decide – that concessions made now will not be followed later by new demands as the Congressional price for granting TPA.

15. Confidence is low, for several reasons. Perhaps the most important is that there is now a Presidential election campaign in process which will not conclude until next November (see below). However, even if the race to the White House is a dominant influence on trade politics in the US for the moment, there are other factors that will impact the willingness of Congress to provide fast track and act on any Doha deal.

16. The first is the issue of ambition. Naturally, that is a question for all participants in the DWP negotiations. In the US, however, no trade deal will move through the Congress successfully unless there is the weight of industrial, farming and services lobbies behind it. To put it mildly, each of these powerful groups is, for the moment, sceptical of what will emerge from the negotiations. That is not to say they would not support a disappointing package; for many large US firms, the value of the multilateral trading system is unquestioned and they will push hard for it to be protected, particularly in the face of more protectionist sentiment among US politicians and public.

17. At the same time, lobbies and everyone else concerned with trade in Washington already have their hands full. Under previous fast track authority a free-trade agreement with Peru passed both houses of Congress late in 2007 and President Bush signed implementing legislation on 14 December 2007. That leaves three pending Free Trade Agreements (FTAs): with Colombia, Panama and Korea. All are problematic but, as of now, the Administration wants to see all three pass before President Bush leaves office. Given the Peru precedent, each of them will take considerable legislative time and huge effort by the groups that supposedly will gain from them. There is a variety of other trade Bills facing Congress – dormant or otherwise. Arguably, it is already unrealistic to expect Congress to devote yet further time to trade legislation in the remainder of the pre-election period.

18. Just as worrisome is the price that Congress would put on fast track authority. TPA is unlikely to be granted in isolation; contrary to much wishful thinking in Geneva, it would be packaged with other provisions (particularly, but not exclusively environmental and labour standards or exchange rate policy), some of which may be highly controversial and potentially damaging to the trading system.

19. For instance, would members of Congress require the inclusion of legislation on what some see as the abuse of the yuan/dollar exchange rate by China? That could present a big problem in the WTO. More broadly, there might be demands to toughen up further the enforcement of US trade remedy laws; again, notably with respect to China. Intellectual property rights enforcement may also be an issue, once again with China as the principal target. Further, if it is not legislated separately in advance, Trade Adjustment Assistance – aid to workers affected by trade and globalisation – would be a likely requirement.

20. Added together with other measures, it all makes for a significant Bill and much legislative time. To pass speedily, it also requires a degree of bipartisanship between Democrats and Republicans that has not been evident recently and is unlikely to be, more so in an election year.

21. Timing is also an issue. Let us assume the most favourable – and probably unrealistic – proposed timetable in Geneva. This would entail agreement on agriculture and NAMA modalities in March. Detailed schedules would be drawn up by members over the following months, submitted and verified. In the same timeframe the services negotiations would be required to conclude with schedules of commitments tabled. Presumably, the rules negotiations would be brought to a conclusion also, along with those other DWP dossiers that remain outstanding. The entire package would need to be adopted and signed at a Ministerial meeting in September or October.

22. It is just conceivable, though extremely unlikely, for a Doha package to pass Congress if US legislators decided to consider it immediately before the election (4 November 2008) or during a “lame duck” session, sometime between the election and early January 2009 when the new Congress is inaugurated. However, for this scenario to work, fast track legislation would have to be passed earlier. That requires even more favourable circumstances in which the Congress and lobbies are confident of the specific market access opportunities the Doha schedules provide; the services sector is content with key concessions in its areas of interest; the more protectionist wing of Congress is satisfied that US trade remedy laws are not being undermined and farm-state congressmen are happy that their farmers will not lose out. These ask a lot of negotiators in Geneva. It also requires very fast action in Congress in the sensitive period prior to the party conventions (late August and early September) when presidential candidacies are formally adopted.

IV. Presidential Election: What the Candidates Say

23. As in most other countries, what candidates say during US election campaigns and what they actually do on taking office can be vastly different. Nevertheless, electoral populism has tended to be a negative towards globalisation and trade. In recent years, even if opinion polls continue to show most Americans regard trade as important and positive for the nation, the trend is towards more negativism. A recent poll [note 11], conducted in some 35 developed and developing countries, showed Americans less enthusiastic about trade than citizens of any other surveyed country. Only 59 per cent of those questioned considered growing trade ties as good for the US. That was a 19 percentage point drop on the result reported for 2002. Asked about the impact of trade on the US, 53 per cent of Democrats and 64 per cent of Republicans saw it as good; 65 per cent and 31 per cent respectively viewed it as bad.

24. It would hardly be surprising, therefore, if candidates, at this stage, were taking their lead from polls, with Democrats sounding wholly negative on trade and Republicans somewhat ambivalent. In fact, that is not entirely the case. As can be seen from extracts from campaign speeches and positions (Annex), nobody is talking the language of pure protectionism. While Democrats are stressing environment and labour rights as well as the need for adequate enforcement of US trade remedy laws and trade adjustment mechanisms for US workers, Republicans are largely favourable to globalisation and the continued search for trade deals.

25. Hillary Clinton attracted criticism for remarks to the Financial Times, on 1 December 2007 by apparently questioning the value of the Doha negotiations. A closer reading of the interview transcript, however, shows the gist of her remarks to be that, like most new presidents, she would “take stock” of the situation on trade, including both FTAs and Doha. If that is to suggest that the global environment in which trade negotiations take place may not be the same in 2009 as in 2001, then she may not be entirely wrong.

26. Naturally, in the coming month or so the trade debate may be forgotten or it may be driven towards extremes as the campaigns for primary votes take place. However, the major states will all vote by early February, after which the likely candidates from each party should be clear. With only two candidates in the field from opposing parties, the excesses of the earlier part of the campaign will probably be forgotten and more carefully considered positions on issues like trade should dominate. It remains to be seen whether that will provide some oxygen for the DWP negotiations and Congressional action on any outstanding trade business.

V. Is 1993 the Right Analogy?

27. If it turns out that the best scenarios for the Doha negotiations do not work out in 2008, should negotiators assume that the negotiation is lost as the US Administration changes? Is a Democrat President and Administration automatically the coup de grace for the WTO? This often appears to be the assumption in Geneva, either because it is actually believed to be the case or because it is a useful means of giving credibility to the 2008 deadlines.

28. The first point to make is that the US will not be the only important player in the Doha talks to have a change of administration in the next couple of years. India’s general election takes place in 2009, as will those of Japan, South Africa, Germany and possibly the United Kingdom, among others. The EU Commission will also change late in 2009.

29. Moreover, there is a useful precedent to consider in the conclusion of the Uruguay Round. President Bill Clinton – a Democrat following a Republican – was inaugurated in January 1993. Although the Draft Final Act (or Dunkel Draft Text) was on the table in Geneva, the Uruguay Round was largely moribund. Convinced that the Round was worth having, Clinton sought from Congress, and was granted, a nine month extension of “fast track” authority until 15 April 1994, specifically to conclude the GATT negotiations. The Marrakesh Ministerial Conference, at which the final results of the Round were signed, was held just prior to the deadline, allowing the Administration to present the deal to Congress for consideration under “fast track” rules. Despite considerable doubts among legislators – notably on sovereignty issues – the agreement was passed by Congress in December 1994, one month before the WTO came into being.

30. That precedent should give some reason for optimism that the DWP negotiations do not necessarily face certain death in January 2009. It must be noted, however, that the situation now is not quite that of 1993. For a start, when Bill Clinton went to Congress, existing “fast track” authority had not expired, as is the case now, and needed merely to be extended. Second, 95 per cent of the Uruguay Round deal was done when Congress considered the extension; members had a clear idea of what they would lose if the deal failed. It is not clear now that an agreement on agricultural and NAMA modalities would be sufficiently impressive for a Democrat-led Congress in 2008 to move on the TPA. Third, there was very considerable pressure from US business for a Uruguay Round deal and the negotiating authority necessary to conclude it. Business support is, at present, narrower and less clear for the Doha negotiations. Fourth, in 1993 a Democrat President was dealing with a Democrat-controlled Congress. That may again be the case in 2009. However, in 2008, a Republican President may ask, but a Democrat Congress is under no obligation to deliver, or even consider.

VI. Conclusion

31. While the future of the DWP negotiations remains in the hands of all participants, most of whom have domestic political difficulties with trade policy issues, it is clear that for the next twelve months all eyes will be on Washington. The negotiations cannot terminate without US willingness and Congressional acceptance. The essence of the problem is simple: US political leaders on both sides and most major industrial lobbies know they need a broad-based and ambitious deal on market opening in each of the three principal Doha dossiers if TPA is to be granted and a Congressional vote on the final deal is to be successful. That will be the case before 4 November 2008, and after. On the other hand, few delegations in Geneva will have the confidence to put significant additional concessions on the negotiating table while there is uncertainty about whether any conceivable outcome will be attractive in the political cauldron of Washington.

32. These are the underlying dynamics of the Doha negotiations. In another context, such a situation was once referred to as “Catch 22”.

Acronyms

Annex

The following paragraphs contain some representative quotes on trade from Presidential candidates seen as favourites at the time of writing.

Hillary Clinton (Democrat) Keynote economic speech, November 2007.

“And when it comes to trade, we're going to have real, enforceable standards and protections for our workers and our environment. And unlike the current president, I will make trade enforcement a top priority again. We're going to have a manufacturing policy, because I don't believe we can remain a great country with a strong economy if we don't make things in America. And I'm going to focus on making sure that we continue to do so.”

Barack Obama (Democrat) Speech to the United Auto Workers Union, 13 November 2007.

“We're not going to stop globalization in its tracks, but we shouldn't be standing idly by while American jobs are shipped overseas. It's time to put Main Street ahead of Wall Street when it comes to trade. The only trade agreements I believe in are ones that put workers first - because trade deals aren't good for the American people if they aren't good for working people. That's why I opposed CAFTA. That's why I oppose the South Korea Free Trade Agreement. That's why I voted to block Mexican trucks from entering this country. And that's why we need to amend NAFTA.”

John Edwards (Democrat) Campaign website and Iowa speech, 16 December 2007.

“Enact smarter trade policies: Iowa has seen the results of unfair trade – losing more than 17,000 jobs in the last six years due to growing trading deficits with China. Be a tough negotiator, unafraid to reject bad deals: the American position in trade negotiations has been formulated behind closed doors with help from corporate lobbyists. Under the "fast track" procedure, Congress could not amend the resulting deals. Not surprisingly, trade deals include special privileges for American multinational corporations but not protections for worker rights. Edwards believes that all of our trade partners should be required to enforce at least the core labor rights defined by the International Labor Organization. Edwards will pursue these goals through linkage to U.S. trade preference programs, any new bilateral trade agreements, and future World Trade Organization negotiations.”

Rudy Giuliani (Republican) Campaign website:

“Aggressively Advance Free Trade: Rudy will tear down the walls to free trade and create new markets for American-made products. He will protect America's innovations and intellectual property by enforcing our trade agreements aggressively. Reenact the Presidential Fast-Track Trade Promotion Authority and complete the Doha Development Round.”

Mike Huckabee (Republican) Campaign website:

“I believe in free trade, but it has to be fair trade. We are losing jobs because of an unlevel, unfair trading arena that has to be fixed. Behind the statistics, there are real families and real lives and real pain. I believe that globalization, done right, done fairly, can be a blessing for our society. As the Industrial Revolution raised living standards by allowing ordinary people to buy mass-produced goods that previously only the rich could afford, so globalization gives all of us the equivalent of a big pay raise by letting us buy all kinds of things from clothing to computers to TVs much more inexpensively”.

Mitt Romney (Republican) Free- Trade platform and announcement of a Trade Policy Advisory Group, 1 November 2007.

“America and Iowans must reject the Democrats' policies of retreat from the world. Denying America the ability to negotiate to open markets while our competitors gain advantages is no strategy. Rejecting negotiations to drive open markets will not benefit Iowa's workers, farmers, companies and small businesses. The President needs Trade Promotion Authority (TPA) to open markets for America. We cannot afford to fall behind as China and others cut deals that hurt American exports and jobs. There are already over 300 agreements in the world that do not include the United States and place U.S. exports at a disadvantage.”

Note 1: The core programs are price and income support programmes for grains, oilseeds, fibre, dairy, and sugar. (return to text)

Note 2: The process is known as “cloture” which limits the number of amendments for debate. (return to text)

Note 3: A President's veto may be overridden by a two-thirds majority vote in both chambers, beginning with the chamber of origin of the bill, with a quorum present. (return to text)

Note 4: Target prices are particularly relevant to “countercyclical payments” on which there have been Dispute Settlement Understanding (DSU) rulings in the cotton case. (return to text)

Note 5: Farmers may receive a loan from the government at a commodity-specific loan rate by pledging as collateral their production of the commodity. They may repay the loan at a lower repayment rate during the loan period whenever market prices are below the loan rate, resulting in a marketing loan gain to farmers. (return to text)

Note 6: United States – Subsidies on Upland Cotton (DS267). (return to text)

Note 7: United States – Domestic Support and Export Credit guarantees for Agricultural Products (DS365) and United States – Subsidies and Other Domestic Support for Corn and Other Agricultural Products (DS357). (return to text)

Note 8: A second request for a panel was expected at the December 17 DSB meeting. (return to text)

Note 9: Notification of the United States concerning domestic support commitments for the marketing years 2002, 2003, 2004 and 2005, WTO, G/AG/N/USA/60. (return to text)

Note 10: Trade Promotion Authority - also referred to as “fast track” – provides that Congress will consider trade agreements within mandatory deadlines, with a limitation on debate and without amendment, as long as the President meets conditions set out in the law. (return to text)

Note 11: The Pew Global Attitudes Survey, released 4 October 2007. www.pewglobal.org. (return to text