Trade representatives talk before a head of delegations meeting at the WTO headquarters in Geneva
Denis Balibouse  /  Reuters
U.S. Trade Representative Robert Zoellick, Brazil's Foreign Minister Celso Amorim, EU Trade Commissioner Pascal Lamy and India's Minister for Commerce and Industry Kamal Nath  talk before a head of delegations meeting at the WTO headquarters in Geneva.
updated 8/1/2004 12:38:23 AM ET 2004-08-01T04:38:23

World Trade Organization members on Sunday agreed on the basis for a new global trade accord, vowing to end export subsidies on farm products and cut import duties across the world.

"This is really a good day for the world economy, for Europe and especially developing countries," said European Union Agriculture Commissioner Franz Fischler.

Top officials from a wide range of countries were equally enthusiastic about the deal approved by a consensus of the 147-nation body shortly after midnight, opening the way for full negotiations to start in September.

They agreed that developing countries had won a place at the table, wringing concessions from the industrialized powers.

"Developed countries have recognized that agricultural trade with a heavy subsidy component is not free trade," Indian Trade Minister Kamal Nath said. But Nath said the United States, European Union and other developed countries also will benefit by removing heavy agricultural subsidies from their budgets.

Brazilian Foreign Minister Celso Amorim said the framework was "a good deal for everybody." "It's a good deal for trade liberalization. It is also a good deal for social justice ... with the elimination of subsidies," Amorim said.

European Union trade chief Pascal Lamy acknowledged, "The time is past when the WTO was run by the most powerful nations in the world. They can no longer do whatever they want. Developing countries have managed to create a balance of power."

The approval followed a breakthrough Saturday when some 20 countries representing different interest groups approved the framework for a legally binding treaty. U.S. Trade Representative Robert Zoellick called the accord "a crucial step for global trade."

"There's a lot of work yet to be done, but today's framework is a milestone," Zoellick said. "We have agreed to make historic reforms in global agriculture trade."

Fischler said the negotiations would result in "a push to the world economy, promote agricultural trade and give better chances to the poor."

"It is incredibly important for Canada and for the world," Canadian Trade Minister Jim Peterson said. "We have a historic opportunity to get rid of agricultural subsidies and open up the world, particularly the developing world."

The document commits nations to lowering import duties and reducing government support in the three major areas of international trade -- industrial goods, agriculture and service industries such as telecommunications and banking. The deal will set back in motion the long-stalled "round" of trade liberalization treaty talks launched by WTO members in Doha, Qatar, in 2001, but delayed by the collapse of the body's ministerial meeting in Cancun, Mexico, last year.

WTO Director-General Supachai Panitchpakdi, who had mediated the negotiations since the collapse in Cancun, was ecstatic.

"It is really a historic moment for this organization for we have proof again that when our members set their heads and minds together we can overcome all kinds of obstacles," he said.

The negotiators agreed to eliminate export subsidies and other forms of government support for farm exports. The deal includes a "down payment" that would see an immediate 20 percent cut in the maximum permitted payments by rich nations.

The highest agricultural import tariffs will face the biggest cuts, although no figures have yet been agreed upon. Nations will have the right to keep higher tariffs on some of the products they consider most important.

The biggest sticking point apparently was how to handle those farm products on which a group of 10 countries, including Japan and Switzerland, want to maintain higher import tariffs to protect domestic producers.

"What we regret is that some of the G10 concerns haven't fully been taken into account," said Swiss President and Economics Minister Joseph Deiss, who heads the G10. "The liberalization process will put additional economic pressure on our farmers." But, Deiss added, "This will be a key step for the opening of the world economy and this will be of benefit for all countries."

Tariffs on industrial products also will be cut according to a formula, but the exact details have yet to be established. Developing countries will have longer to make the changes.

The deal also approves the launch of new negotiations on trade facilitation -- "further expediting the movement, release and clearance of goods" by streamlining customs procedures.

Economic theory says reducing barriers to trade and allowing the market to dictate who produces a good and what they charge for it will boost the global economy. A recent University of Michigan study found that cutting global trade barriers by one-third would boost the world economy by $613 billion -- the equivalent of adding a country the size of Canada to the world.

Nations are reluctant to agree to big cuts in some areas because free trade also creates losers, and entire industries can be devastated in some countries if they are opened to foreign competition.

So trade rounds tend to be slow and laborious affairs. This week's deal is referred to as a "framework" -- it sets out a series of principles for liberalization, but stops short of the details. Those must be negotiated in further talks which negotiators hope will conclude in Hong Kong late next year, with the agreement coming into force in 2006.

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