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Doha World Trade Talks Failure - Reason to Buy Gold?
Geneva July 2006
One of the recurring themes from experts worldwide is that the breakdown of WTO talks points to maintained or increased protectionism, which is a threat to the global economy. For discussion about why this is bullish for gold, please see our further comments below the news items.

U.S. & E.U. Blamed for Breakdown
America and Europe appeared to be blaming each other in acrimonious accusals of intransigence.
A quick scan of news headlines reveals:

  • Key Trade Players to Meet After WTO Talks Suspension
  • Insults Fly in the Dust of Doha
  • Managing Globalization: Why Trade Talks Do Little for the Poorer Countries
    Daniel Altman International Herald Tribune
  • US Insists It Was Not At Fault In Trade-talk Collapse, Cites France
  • Body Blow to World Poor as World Trade Organisation Talks Sink
    Christian Aid
  • South Africa: Country Rues Missed Chances After WTO Talks Collapse
  • Church Agencies Dismayed and Angry as World Trade Talks Collapse
  • Why the United States Left the WTO Trade Negotiating Table
    Farm Futures
  • Failure of Global Trade Talks Is Traced to the Power of Farmers
    New York Times
  • EU Blames US for Collapse of World Trade Talks
  • World Trade Talks Collapse
    After the collapse of world trade talks in Geneva today, ActionAid looks at the future for the global trading system. Doesn't this mean that Africa won't get a trade deal to help make poverty history?
  • NGOs hit U.S., EU Over Trade Talks Collapse
  • Time to Form a New People's Trade System: ActionAid
  • WORLD TRADE TALKS FAIL
    The world was on the brink of a fresh outbreak of trade wars and protectionism yesterday after five years of fraught negotiation over a new trade deal ended in failure. Hopes that a new agreement would create $300bn (£162bn) of wealth and drag millions of people out of poverty were in tatters after a meeting of the major powers dissolved into bitter acrimony. - London Independent
  • World Trade Talks Collapse a Blow to the Poor say Christian groups
  • SA's Regret at WTO Talks Collapse
    GOVERNMENT has expressed deep regret at the collapse of world trade talks and warned of growing instability in the global trading system if talks failed to resume soon.
More Detailed Reports
We have selected a few reports which contain more detailed information:
  • World Business Groups Urge Early Resumption of WTO Talks
    Eight business groups from Australia, Brazil, the European Union, Japan and the United States issued a joint statement Wednesday urging an early resumption of global trade talks under the World Trade Organization.
    The suspension of the Doha Round of global trade talks could "result in the loss of opportunities for WTO members to gain the tremendous benefits that accrue from trade liberalization," said the eight groups, including the Japan Business Federation, also known as Nippon Keidanren.
    "In order to avoid this situation, we strongly hope that the negotiation will resume as early as possible," they said.
    The eight also include the Business Council of Australia, Brazil's National Confederation of Industry, the Confederation of European Business and the National Association of Manufacturers of the United States.
    Ministerial talks among six key WTO players July 23-24 in Geneva broke down, leading to the suspension of the Doha Round. The six are Australia, Brazil, the European Union, India, Japan and the United States.
  • US Domestic Politics Hit WTO?
    REUTERS
    WASHINGTON: A battle for control of the US Congress may have contributed to the collapse of world trade talks this week by making the Bush administration reluctant to offer deeper farm subsidy cuts, analysts said.
    "The administration didn't want to be perceived as putting those subsidies on the chopping block," said Viji Rangaswami, a trade and development associate at the Carnegie Endowment for International Peace and former congressional aide.
    The world trade talks, known officially as the Doha Development Agenda, began nearly five years ago with the goal of helping poor countries prosper from trade.
    They collapsed on Monday after a weekend meeting between the United States, the European Union, Brazil, India, Japan and Australia failed to resolve long-standing differences.
    Despite the demands of many nations, Washington refused to offer deeper cuts in the subsidies it pays farmers. US trade officials said they were prepared to deal but other countries were not offering steep enough tariff cuts to warrant a new US move.
    The impasse spared the Bush administration from striking a potentially unpopular deal in farm country just a few months before congressional election in November. The United States now spends about $20 billion annually on trade-distorting farm subsidies.
    It has offered to cut its WTO allowance for the main US farm subsidy programs by 60 percent to $7.6 billion but trading partners say other elements of the proposal would still allow Washington to spend about $23 billion each year.
    Democrats, hoping to capitalise on President George W Bush's low approval ratings and public concern about the Iraq war, have their sights on capturing control of the Senate and the US House of Representatives from Republicans.
    "There's always a political calculation that goes into (negotiating) decisions," said Greg Mastel, chief international trade adviser for Miller and Chevalier, a Washington law firm. EU, Brazilian and Indian resistance to cutting farm tariffs is driven by domestic politics as well, he said.
  • World Trade Talks Suspended
    By Richard Waddington and William Schomberg, Reuters
    GENEVA (Reuters) - Global free trade talks collapsed on Monday after nearly five years of on-off haggling and resuming them could take years, officials and diplomats said.
    The suspension of the World Trade Organisation's (WTO) Doha round, which was expected to be announced formally by WTO chief Pascal Lamy later on Monday, came after major trading powers failed in a last ditch bid to overcome differences on reforming world farm trade, which lies at the heart of the round.
    "The WTO negotiations are suspended," Indian Commerce and Industry Minister Kamal Nath told journalists. When asked how long the suspension could last, he replied: "Anywhere from months to years," he said.
    Lamy had warned members of the so-called G6 late on Sunday that he would halt the Doha Development Agenda -- launched in 2001 to ease poverty and boost the global economy -- without a quick end to the deadlock, diplomats said earlier.
    But 14 hours of talks between the six -- the United States the European Union, Brazil, Australia, Japan and India -- yielded no breakthrough in slashing farm subsidies and lowering agricultural tariffs.
    The United States said the EU and other WTO members that it calls "protectionist" had not done enough to lower farm tariff barriers to allow it to move further on subsidies.
    But EU Trade Commission Peter Mandelson pointed a finger at the United States, telling journalists Washington "was unwilling to accept or indeed to acknowledge the flexibility shown by others".
  • WTO Talks Collapse: Where Next for World Trade?
    The WTO director-general, Pascal Lamy said the failure of the negotiations sent a "strong negative signal for the future of the world economy amidst the danger of a resurgence of protectionism".
    The South African chief negotiator Xavier Carim called the failed talks a "serious setback" and pointed to the "huge" opportunity cost it implies, particularly for developing countries. A World Bank study in 2005 estimated that global free trade in agriculture would generate gains of US $287 billion, of which $86 billion will accrue to developing countries.
  • World Trade Talks Collapse in Geneva
    The latest bid to break the deadlock in world trade talks has collapsed after the US launched a bitter attack on its partners over farm subsidies.
  • Business Archive. Farm Subsidy Impasse Ends World Trade Talks
    GENEVA -- WTO members called a halt to more than five years of commerce liberalization talks Monday as differences over farm aid proved unbridgeable.
    Pascal Lamy, director-general of the World Trade Organization, said a deal billed as a recipe for lifting millions of people worldwide out of poverty would not be reached by the end of the year, and there was no new timetable for completing the round.
    "We are in dire straits," Lamy said after six of the WTO's most powerful members failed to agree on steps toward liberalizing trade in farm products and manufactured goods. He said he did not intend to propose any new deadlines.
    The 25-nation European Union criticized U.S. intransigence over agricultural subsidies for the breakdown, while the United States blamed Brazil and India for being inflexible on cutting barriers to industrial imports and the EU for refusing to make deeper cuts in its farm import tariffs.
    Last week, presidents and prime ministers from the Group of Eight leading industrialized countries called a new trade deal a top priority. But that promise did not translate into real negotiating action during two days of meetings facilitated by Lamy between Australia, Brazil, the EU, India, Japan and the United States.
    Analysts have warned that a failure of the Doha round, launched in Qatar's capital in 2001, will lead to more bilateral trade pacts between nations, which are not expected to bring as many economic benefits as the multilateral deal.
  • EU Producers Relieved at Collapse of World Trade Talks
    DAN BUGLASS, July 26 2006, Newsquest (Herald & Times) Limited.
    The collapse of the World Trade Organisation talks on moves to liberalise international commerce came as no great surprise to seasoned observers.
    Farmers throughout the European Union will, for the most part, breathe a sigh of relief as they believe any further moves to free up markets would be to their cost. Andy Robertson, chief executive of NFU Scotland, was in Brussels last week, where he held informal discussions with EU Trade Commissioner Peter Mandelson.
    Robertson said: "Mandelson is a pretty shrewd operator, and I think he understood after briefing from officials of the importance of agriculture to the rural economy right across Europe. It seems clear that he was not prepared to give any more ground." The position of the recently- appointed UK minister David Milliband remains unclear, but Chancellor of the Exchequer Gordon Brown and the Treasury want to see spending on agriculture dramatically reduced.
    However, the real problem with the WTO is the attitude of the US government. Washington never ceases to berate Brussels for spending more than £30bn each year on agricultural support, but fails to mention the extent to which it helps its own farmers.
    Robertson said: "Ten years ago, the US was spending $7.5bn (£4bn) on farming support each year. The latest proposals are to raise that figure to $22.6bn - if that's not trade distortion, then I don't know what is."
    Meanwhile, EU Agriculture Commissioner Mariann Fischer Boel has given clear indications that there will be a "health check" on the Common Agricultural Policy with deliberations likely to commence next year.
    NFUS has made it clear that it has no problems with this as long as it comprises "a reasonable debate and a transparent regime". One change that the UK is likely to argue for a wider window when fixing the rate of exchange when calculating the single farm payment.
    Currently the rate is dependent on the value of the euro relative to sterling on September 30. That might just prove to be advantageous this year with the pound tending to weaken against the euro, but that could change if the Bank of England was to raise its base rate, as some City analysts have forecast.
    However, Brussels will likely exert considerable pressure on the French government to fall in line with the basic principles of CAP reform, which decreed that there should be no link between production and support.
    The collapse of the World Trade Organisation talks on moves to liberalise international commerce came as no great surprise to seasoned observers.
    Farmers throughout the European Union will, for the most part, breathe a sigh of relief as they believe any further moves to free up markets would be to their cost. Andy Robertson, chief executive of NFU Scotland, was in Brussels last week, where he held informal discussions with EU Trade Commissioner Peter Mandelson.
    Robertson said: "Mandelson is a pretty shrewd operator, and I think he understood after briefing from officials of the importance of agriculture to the rural economy right across Europe. It seems clear that he was not prepared to give any more ground." The position of the recently- appointed UK minister David Milliband remains unclear, but Chancellor of the Exchequer Gordon Brown and the Treasury want to see spending on agriculture dramatically reduced.
    However, the real problem with the WTO is the attitude of the US government. Washington never ceases to berate Brussels for spending more than £30bn each year on agricultural support, but fails to mention the extent to which it helps its own farmers.
    Robertson said: "Ten years ago, the US was spending $7.5bn (£4bn) on farming support each year. The latest proposals are to raise that figure to $22.6bn - if that's not trade distortion, then I don't know what is."
    Meanwhile, EU Agriculture Commissioner Mariann Fischer Boel has given clear indications that there will be a "health check" on the Common Agricultural Policy with deliberations likely to commence next year.
    NFUS has made it clear that it has no problems with this as long as it comprises "a reasonable debate and a transparent regime". One change that the UK is likely to argue for a wider window when fixing the rate of exchange when calculating the single farm payment.
    Currently the rate is dependent on the value of the euro relative to sterling on September 30. That might just prove to be advantageous this year with the pound tending to weaken against the euro, but that could change if the Bank of England was to raise its base rate, as some City analysts have forecast.
    However, Brussels will likely exert considerable pressure on the French government to fall in line with the basic principles of CAP reform, which decreed that there should be no link between production and support.
    The collapse of the World Trade Organisation talks on moves to liberalise international commerce came as no great surprise to seasoned observers.
    Farmers throughout the European Union will, for the most part, breathe a sigh of relief as they believe any further moves to free up markets would be to their cost. Andy Robertson, chief executive of NFU Scotland, was in Brussels last week, where he held informal discussions with EU Trade Commissioner Peter Mandelson.
    Robertson said: "Mandelson is a pretty shrewd operator, and I think he understood after briefing from officials of the importance of agriculture to the rural economy right across Europe. It seems clear that he was not prepared to give any more ground." The position of the recently- appointed UK minister David Milliband remains unclear, but Chancellor of the Exchequer Gordon Brown and the Treasury want to see spending on agriculture dramatically reduced.
    However, the real problem with the WTO is the attitude of the US government. Washington never ceases to berate Brussels for spending more than £30bn each year on agricultural support, but fails to mention the extent to which it helps its own farmers.
    Robertson said: "Ten years ago, the US was spending $7.5bn (£4bn) on farming support each year. The latest proposals are to raise that figure to $22.6bn - if that's not trade distortion, then I don't know what is."
    Meanwhile, EU Agriculture Commissioner Mariann Fischer Boel has given clear indications that there will be a "health check" on the Common Agricultural Policy with deliberations likely to commence next year.

Why Bullish For Gold?
Anyone who has read this page so far should also consider getting hold of a copy of the book Wake Up
, which explains in great detail why the authors believe investors are in for a rough ride, and should consider action to protect their wealth. One of their chief concerns is that protectionism damages overall world trade, and one of their recommended actions is for individuals to "buy some gold coins".
They also make the argument that keeping poor countries poor adds to discontent, encouraging war and terrorism.
Although the arguments about protective tariffs harming overall global trade are almost universally accepted, nevertheless, local interests and lobby groups with vested interests often prevail in getting trade barriers maintained. These usually have the effect of protecting inefficient industries to continue to prosper, subsidised by government, and therefore taxpayer's money. This is usually because politicians see their need to get themselves re-elected as more important than long term economic benefit.
As the global economy appears to be heading for a potential crash, there is all the more reason why subsidies and trade barriers should be removed, but all the more likelihood that greed and self-interest will see them maintained and raised.

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