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World
Print Edition> World
UPDATED: August 10, 2008 No.33 AUG.14
Cotton and Banana Issues
International trade talks collapse again over conflicts between developed and developing countries
By WANG LIJUN & ZHOU SHIJIAN
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A serious problem with the multilateral trading system dominated by the United States and developed WTO members in Europe is that it does not give enough consideration to the interests of developing members and cannot protect their interests effectively. Chinese Commerce Minister Chen Deming has pointed out that major developed members are the biggest beneficiaries of the current round of WTO talks, because they have preserved their agricultural subsidies to a large extent. They should fully understand the concerns of developing members and should not throw up barriers to addressing these concerns, he adds.

Cotton and bananas were the main issues that hindered the progress of the negotiations. While refusing to eliminate its heavy subsidies to American cotton farmers, the United States demanded that developing members cut their import tariffs on cotton. Every year, the United States spends $3 billion to $4 billion subsidizing its 25,000 cotton farmers. Millions of African cotton farmers do not receive any government subsidies. How can they compete with their American counterparts? America's huge cotton subsidies have distorted the international cotton trade and are illegal. Unlike these subsidies, developing members' limited tariffs are a legitimate means to ensure farmers' livelihoods.

An active player

China's subsidies to farmers are much lower than WTO provisions. Its average agricultural tariff is also lower than that of developed members. Developed member states have no reason whatsoever to blame China.

As a developing country, China is duty-bound to work with other developing members to effectively protect their lawful interests. With the concerted efforts of developing members, the WTO scrapped the textile quotas that had been in place for more than four decades on January 1, 2005, incorporating textiles within the framework of free trade.

China plays a dual role in the WTO both as its largest developing member and a big trader. When it entered the world trade body at the end of 2001, its trade volume stood at $509.7 billion, accounting for 4 percent of the world total. In 2007, its trade volume jumped to more than $2.1 trillion, taking up 7.7 percent of the world total and making China the world's third biggest trader after the United States and Germany. In order to safeguard its rights and interests and promote steady development of the world economy and trade, China is obligated to make greater contributions to the multilateral trading system. During the Geneva talks in July, China became one of the core drafters of WTO rules for the first time. The move was necessary because world trade rules will be inadequate and unfair unless China takes part and has a say in their formulation.

Since its inauguration in November 2001, the Doha Round has encountered a series of setbacks from Doha to Geneva and from Cancun to Hong Kong. In retrospect, the previous eight rounds of multilateral trade talks all underwent difficulties, with each being more difficult and time-consuming than the previous one in general. A case in point is the Uruguay Round, which lasted almost eight years. The Doha Round involves 153 members and covers many fields including industry, agriculture, services, and intellectual property rights. The numbers of members involved and areas covered are much larger than in previous rounds. As the WTO follows the principle of consensus, it was inevitable that consultation would become more difficult. A number of deadlines were set and missed for the Doha Round. Talks also stalled several times but were later resumed.

Trade liberalization represents the trend of the times and the aspirations of people around the world. No country wants to jeopardize the multilateral trading system, as that would benefit no one. In this sense, setbacks are only normal. They can prompt members, especially developed members, to reexamine their strategies to prepare for the future resumption of the talks. In the end, they will come up with an agreement that all of them can accept, but none is perfectly satisfied with.

Wang Lijun is an associate professor at the Capital University of Economics and Business. Zhou Shijian is a senior research fellow at the Center for U.S.-China Relations, Tsinghua University

 

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