World Trade Organization: Congress Faces Key Decisions as Efforts
to Reach Doha Agreement Intensify (05-MAR-07, GAO-07-379).	 
                                                                 
President Bush has identified the success of global trade talks  
launched in Doha, Qatar, in November 2001 as one of the United	 
States' top trade policy priorities. Known as the Doha		 
Development Agenda, the talks are an important means of spurring 
global growth and development. Completing the talks in 2006 was  
considered essential for an agreement to qualify for streamlined 
congressional consideration under the U.S. Trade Promotion	 
Authority. However, the talks collapsed in late July 2006 in the 
face of wide differences over the extent of agricultural reform  
and how best to promote economic development in poor countries.  
Efforts to break the deadlock continue. Given the tenuous state  
of this central plank of U.S. trade policy, GAO updated its	 
series of prior reports. In this report, we assess (1) the	 
overall status of the Doha Round negotiations now and the	 
progress that had been made prior to and since the breakdown of  
the talks, (2) the substantive divisions among key World Trade	 
Organization (WTO) members that led to an environment of deadlock
and the eventual suspension of the negotiations, and (3) the	 
possible economic and other ramifications if the round is not	 
concluded satisfactorily.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-379 					        
    ACCNO:   A66492						        
  TITLE:     World Trade Organization: Congress Faces Key Decisions as
Efforts to Reach Doha Agreement Intensify			 
     DATE:   03/05/2007 
  SUBJECT:   Agricultural industry				 
	     Agricultural programs				 
	     Developing countries				 
	     Economic policies					 
	     Foreign trade agreements				 
	     Import restriction 				 
	     International organizations			 
	     International trade				 
	     International trade restriction			 
	     Subsidies						 
	     Tariffs						 
	     Trade policies					 
	     Doha (Qatar)					 
	     WTO Doha Development Agenda			 

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GAO-07-379

   

     * [1] 

          * [2]Results in Brief
          * [3]Background
          * [4]Doha Talks Resumed after Months of Suspension, but No Breakt

               * [5]Lack of Progress in Negotiations Prompted
                 Director-General L
               * [6]Although Enthusiasm for Resuming Talks Varied during the
                 Sus

          * [7]Persistent Disagreements on Agriculture and Development Cont

               * [8]The United States Calls for the EU and Developing
                 Countries

                    * [9]The United States and the EU Remain Divided on
                      Overall Agric
                    * [10]Number and Treatment of Sensitive and Special
                      Products Remai

               * [11]The EU and Developing Country Groups Say the U.S. Offer
                 Does
               * [12]WTO Members Are Divided by Underlying Conflict on
                 Expectatio

                    * [13]Intent of the Doha Development Agenda Was to Help
                      Developing
                    * [14]Developing Countries Have Diverse Trade Interests,
                      Yet Maint
                    * [15]Trade Liberalization Poses Particular Challenges
                      for Some De
                    * [16]Many Developing Countries Are Wary of Opening
                      Markets
                    * [17]United States Is a Strong Advocate for Trade
                      Liberalization

               * [18]Members Agree to Help Developing Countries Adjust to and
                 Ben

          * [19]Participants Have Contrasting Views on Implications of Doha'

               * [20]Without a Doha Agreement, Potential Economic Gains Might
                 Not

                    * [21]Doha Focused on Largest Remaining Barriers to World
                      Trade
                    * [22]Extent of Potential Economic Gains May Not Be
                      Realized witho
                    * [23]Some Economic Gains Could Be achieved without a
                      Doha Agreeme

               * [24]Some Warn That WTO's Role Could Be Undermined by
                 Prolonged D
               * [25]Congress Faces Pivotal Decisions in 2007 on Whether to
                 Renew

                    * [26]TPA Renewal Considered Vital for Concluding Doha
                      Deal
                    * [27]Shape of the 2007 Farm Bill Could Affect (and Be
                      Affected by
                    * [28]Some Advocate Agricultural Reform Despite Doha
                      Delay
                    * [29]Opponents of Reform

          * [30]Conclusions
          * [31]Agency Comments and Our Evaluation

     * [32]Appendix I: Objectives, Scope, and Methodology
     * [33]Appendix II: GAO Contact and Staff Acknowledgments

          * [34]GAO Contact
          * [35]Staff Acknowledgments

     * [36]Related GAO Products

          * [37]Commodities
          * [38]Farm Program Payments and Payment Limitations
          * [39]Conservation
          * [40]Crop and Revenue Insurance
          * [41]Food Aid
          * [42]Agricultural Trade
          * [43]Doha Round Negotiations

               * [44]Order by Mail or Phone

Report to Congressional Requesters

United States Government Accountability Office

GAO

March 2007

WORLD TRADE ORGANIZATION

Congress Faces Key Decisions as Efforts to Reach Doha Agreement Intensify

GAO-07-379

Contents

Letter 1

Results in Brief 2
Background 4
Doha Talks Resumed after Months of Suspension, but No Breakthrough Is in
Sight 9
Persistent Disagreements on Agriculture and Development Contribute to the
Impasse 13
Participants Have Contrasting Views on Implications of Doha's Impasse 35
Conclusions 52
Agency Comments and Our Evaluation 53
Appendix I Objectives, Scope, and Methodology 55
Appendix II GAO Contact and Staff Acknowledgments 58
Related GAO Products 59
Commodities 59
Farm Program Payments and Payment Limitations 60
Conservation 60
Crop and Revenue Insurance 62
Food Aid 62
Agricultural Trade 63
Doha Round Negotiations 64

Tables

Table 1: U.S. Reform Proposal on Domestic Support and Estimated Domestic
Spending Outlays for 2005 25
Table 2: Estimated Economic Effect of a Potential Doha Multilateral Trade
Agreement 37

Figures

Figure 1: Summary of WTO Agriculture Agreement Boxes 7
Figure 2: Differences between Bound and Applied Tariffs in Developing and
Developed Countries 16
Figure 3: Government Payments for U.S. Farm Programs, 1996-2005 46

Abbreviations

CAP Common Agricultural Policy
CRS Congressional Research Service
EU European Union
FAPRI Food and Agricultural Policy Research Institute
FTA free trade agreement
GATT General Agreement on Tariffs and Trade
G-6 Group of 6
G-8 Group of 8
G-10 Group of 10
G-20 Group of 20
G-33 Group of 33
G-110 Group of 110
LDC least-developed country
SSG special 
SSM special safeguard mechanism
TPA U.S. Trade Promotion Authority
TRQ tariff-rate quota
UNCTAD United Nations Conference on Trade and Development
USTR Office of the U.S. Trade Representative
USDA U.S. Department of Agriculture
WTO World Trade Organization

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United States Government Accountability Office

Washington, DC 20548

March 5, 2007

The Honorable Jim McCrery
Ranking Minority Member
Committee on Ways and Means
House of Representatives

The Honorable Wally Herger
Ranking Minority Member
Subcommittee on Trade
Committee on Ways and Means
House of Representatives

In November 2001, the World Trade Organization (WTO) launched a new round
of global trade negotiations at Doha, Qatar. The negotiations cover a
broad range of issues, including agriculture, nonagricultural (industrial)
market access, and services. Officially known as the Doha Development
Agenda, the talks are the latest in a series of negotiating "rounds" among
WTO members, which now number 150 nations and customs territories.
President Bush identified completing the talks as a major U.S. trade
policy priority for 2006. On July 24, 2006, after 5 years of negotiations
and a deadlock on issues of agriculture reform and on how best to support
development by the WTO's poorest members, WTO Director-General Pascal Lamy
called for an indefinite suspension of the negotiations in spite of the
July 1, 2007, expiration of the U.S. Trade Promotion Authority (TPA). TPA
streamlines congressional approval of trade agreements, and its expiration
has served as a de facto deadline for the WTO talks.

Considering the tenuous state of this central plank of U.S. trade policy
and the possible implications for the global trading system, we updated
our series of reports on the WTO negotiations.1 In this report, we assess
(1) the overall status of the Doha Round negotiations now and the progress
that had been made prior to and since the breakdown of the talks, (2) the
substantive divisions among key WTO members that led to an environment of
deadlock and the eventual suspension of the negotiations, and (3) the
possible economic and other ramifications if the round is not concluded
satisfactorily.

1GAO, World Trade Organization: Limited Progress at Hong Kong Ministerial
Clouds Prospects for Doha Agreement, [45]GAO-06-596 (Washington, D.C.:
Apr. 26, 2006); World Trade Organization: Global Trade Talks Back on
Track, but Considerable Work Needed to Fulfill Ambitious Objectives,
[46]GAO-05-538 (Washington, D.C.: May 31, 2005); World Trade Organization:
Cancun Ministerial Fails to Move Global Trade Negotiations Forward; Next
Steps Uncertain, [47]GAO-04-250 (Washington, D.C.: Jan. 15, 2004); and
World Trade Organization: Early Decisions Are Vital to Progress in Ongoing
Negotiations, [48]GAO-02-879 (Washington, D.C.: Sept. 4, 2002).

To address these objectives, we met with and obtained documents from a
wide range of WTO, U.S., and foreign government officials as well as a
cross section of selected academic experts and private sector groups
(including agricultural commodity groups, business associations, and civil
society groups) in Washington, D.C., and Geneva, Switzerland. We also
attended the September 2006 WTO Public Forum in Geneva. We conducted our
work from June 2006 through February 2007 in accordance with generally
accepted government auditing standards.

Results in Brief

A successful conclusion of the global trade talks remains uncertain,
although resumption of the talks was recently achieved after a 6-month
hiatus in the negotiations. WTO Director-General Lamy decided to suspend
negotiations in late July 2006 after key members proved unable to break
the impasse over agriculture. In the months after the December 2005 Hong
Kong ministerial meeting, WTO members had made headway on issues such as
trade facilitation and reforming WTO "rules" on regional trade agreements
and antidumping. However, there was no breakthrough on the key decisions
needed to produce market access schedules to liberalize trade in
agriculture, manufactured goods, and services--where most of Doha's
trade-creating gains were expected. Eleventh-hour involvement by world
leaders proved insufficient to overcome resistance to reform and satisfy
key players' demands for a balanced, mutually beneficial outcome. A series
of high-level pronouncements of commitment to a full resumption of the
talks were made since the July suspension finally culminating in formal
across-the-board resumption of the talks in February 2007. However,
changes in position have yet to materialize.

Substantive differences over agriculture and philosophical differences
over development precipitated the negotiations' collapse. The talks broke
down in July due to persistent disagreement over agricultural market
access and levels of domestic support for agriculture among key players,
such as the United States, the European Union (EU), and developing
countries led by Brazil and India. The United States is insisting on
sizable market access gains through larger overall cuts in tariffs than
the EU or developing countries are willing to accept. It also wants to
sharply limit the percentage of specific agricultural products that the EU
and developing countries can shield from full tariff liberalization. The
United States insists that only ambitious market access gains will permit
it to offer further reductions in domestic support. The EU and developing
countries believe that U.S. support levels should be reduced below current
spending, and they have bristled at perceived U.S. pressure that they
reciprocate for support cuts with "dollar-for-dollar" gains in market
access. In addition, behind the deadlock on agriculture lies a perhaps
more fundamental conflict among WTO members about what a "development
round" means and how best to spur development in less-developed countries.
The disagreement centers on how trade liberalization contributes to
development and to what extent developing countries should be expected to
open their markets. U.S. negotiators emphasize the development benefits of
removing trade barriers, while many developing countries reject the idea
of paying for U.S. subsidy reform and fear the potential social and
economic consequences to poor populations of lowering their own barriers
to imports. As a result, agreement on how to satisfy developing countries'
demands for protection without codifying exceptions that would sharply
limit market access gains has thus far eluded negotiators. Nevertheless,
WTO members have moved forward with plans to provide additional
trade-related assistance to developing countries.

Participants and experts express varying views on the ramifications of
Doha's possible failure for the global and WTO member economies, the world
trading system, and U.S. trade policy. Some participants and experts warn
of forgone economic gains, a weakened multilateral trading system, and
dimmed prospects for congressional renewal of TPA and reform of U.S. farm
programs. First, they warn, the economic gains projected to result from a
Doha agreement, for both the world overall and the U.S. economy in
particular, would not be realized. Second, the multilateral trading system
could face intense pressures if WTO members' frustrated expectations and
ill will spill over into regular WTO work, result in more trade disputes,
or divert energies toward more exclusive regional trade deals. Finally,
they argue that the leadership the United States has historically shown in
the global trading system is being questioned and could be tested if poor
Doha prospects cause Congress to balk at renewing TPA and reforming U.S.
farm programs. Yet, others suggest that the ramifications in all three
areas may be much more limited. First, some of the desired economic gains,
which are relatively modest to begin with, could still be secured by other
means, such as unilateral liberalization. Second, some of the countries
most resistant to liberalization at the WTO showed some willingness to cut
barriers in other contexts since July. Third, in the United States, debate
is already occurring over the terms of extension of TPA and whether to
proactively reform or continue subsidies associated with the 2002 Farm
Bill. Nevertheless, the on-going impasse of the Doha talks has effectively
placed Congress at the center of the controversy because what the United
States does in 2007 on TPA and Farm Bill renewal is widely seen as pivotal
to the WTO and its role in the trading system.

We provided a draft of this report to the Office of the U.S. Trade
Representative (USTR) and the Departments of Agriculture (USDA), Commerce,
and State. USTR and USDA provided technical comments, which we
incorporated where appropriate. State and Commerce had no comments on the
draft report.

Background

The WTO was established as a result of the Uruguay Round of trade
negotiations on January 1, 1995, as the successor to the General Agreement
on Tariffs and Trade (GATT). Based in Geneva, Switzerland, the WTO is led
by a Director-General and administers agreed-upon rules for international
trade, provides a mechanism for settling disputes, and serves as a forum
for conducting trade negotiations. WTO membership has increased since
1995, and there are currently 150 WTO member nations and customs
territories with widely diverse levels of economic development. Global
trade negotiations occur in periodic comprehensive "rounds," in which a
large package of trade concessions among members is developed and
ultimately agreed on as a single package; this process requires
simultaneous agreement on all issues. Countries often negotiate as members
of groups loosely named after the size of their membership,2 such as the
Group of 10 (G-10),3 the Group of 20 (G-20),4 the Group of 33

2For example, the G-20 now has more than 20 members and the G-33 has more
than 40 members.

3G-10 members are Bulgaria, Iceland, Israel, Japan, Liechtenstein,
Mauritius, Norway, South Korea, Switzerland, and Chinese Taipei.

4G-20 members are Argentina, Bolivia, Brazil, Chile, China, Cuba, Egypt,
Guatemala, India, Indonesia, Mexico, Nigeria, Pakistan, Paraguay, the
Philippines, South Africa, Tanzania, Thailand, Uruguay, Venezuela, and
Zimbabwe.

(G-33),5 and the Cairns Group6--groups that represent key negotiating
positions on agriculture issues. Moreover, the EU negotiates on behalf of
all of its member nations. USTR negotiates on behalf of the United States,
in regular consultation with Congress, executive branch agencies, and
official private sector advisors, among others.

At Doha, Qatar, in November 2001, WTO members reached consensus to launch
the Doha Development Agenda or Doha Round,7 the ninth round of trade
liberalizing negotiations since the trading system's founding in 1947. The
Doha ministerial declaration established a work program with a number of
negotiating areas, and members set specific goals for each area and
negotiating groups to achieve them.8 The Doha declaration also put a
special emphasis on addressing the needs and interests of developing
countries in the negotiations. Of the Doha negotiating areas, agriculture
remains the top issue for many participants and has been described as the
lynchpin of the Doha negotiations. Reform of agriculture was first added
to the trading system in the last (Uruguay) round, but domestic and export
subsidies and tariff barriers remained. In July 2004, WTO members reached
a framework agreement that established certain principles and agreed means
for reform in agriculture as well as other Doha work areas.

5G-33 members are Antigua and Barbuda, Barbados, Belize, Benin, Botswana,
China, Cote d'Ivoire, Cuba, Democratic Republic of Congo, Dominican
Republic, Grenada, Guyana, Haiti, Honduras, India, Indonesia, Jamaica,
Kenya, Madagascar, Mauritius, Mongolia, Mozambique, Nicaragua, Nigeria,
Pakistan, Panama, Peru, the Philippines, Senegal, South Korea, Sri Lanka,
St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname,
Tanzania, Trinidad and Tobago, Turkey, Uganda, Venezuela, Zambia, and
Zimbabwe.

6Cairns Group members are Argentina, Australia, Bolivia, Brazil, Canada,
Chile, Colombia, Costa Rica, Guatemala, Indonesia, Malaysia, New Zealand,
Paraguay, the Philippines, South Africa, Thailand, and Uruguay.

7For additional information on the fourth ministerial conference and the
Doha Development Agenda, see [49]GAO-02-879 .

8There are currently 16 negotiating areas in the Doha work program:
implementation-related issues and concerns; agriculture; services; market
access for nonagricultural products; trade-related aspects of intellectual
property rights; trade facilitation; WTO rules; dispute settlement
understanding; trade and environment; electronic commerce; small
economies; trade, debt, and finance; trade and transfer of technology;
technical cooperation and capacity building; least-developed countries;
and special and differential treatment. Originally, the Doha declaration
set forth 3 other potential negotiating areas (that is, transparency of
government procurement, interaction between trade and competition policy,
and relationship between trade and investment).

The Doha Round for agriculture commits countries to lower barriers in
world agricultural markets and sets forth three "pillars" for agricultural
trade reform related to (1) export competition programs (export
subsidies), (2) domestic support (subsidies and other assistance to
farmers), and (3) market access (including tariffs and tariff-rate quota
(TRQ) levels that limit imports).9 Regarding domestic support, one of the
main premises of the existing WTO Agreement on Agriculture is whether
government programs that support agriculture are trade distorting: Does
the program affect trade by changing production levels, market prices,
and/or export or import levels? In general, under the WTO agreement,
domestic support programs that distort trade were limited and reduced,
while programs that do not distort trade were exempt from alteration.
Domestic support programs have been classified into categories called
"boxes" based, in part, on the extent to which the programs are thought to
be trade distorting. These boxes are called Green Box, Amber Box, and Blue
Box. The Doha negotiations aim to lower levels of trade-distorting support
in the Amber and Blue Boxes. Figure 1 provides a summary of the boxes.

9Under a TRQ, a lower "in-quota" tariff applies to a limited quantity of
imports, while a higher, often prohibitive, "over-quota" tariff applies to
any imports that exceed the quota.

Figure 1: Summary of WTO Agriculture Agreement Boxes

Agriculture reforms were an important issue at the most recent WTO
ministerial conference, held in Hong Kong, China, in December 2005, where
ministers sought to make progress in the negotiations.10 However, as we
noted in our April 2006 report,11 limited progress in the negotiations
since mid-2004 and missed milestones in 2005 caused WTO members to lower
expectations for the Hong Kong ministerial. New agriculture proposals were
made in October 2005 in an effort to reinvigorate the talks, but the
proposals revealed wide gaps in the positions of the United States, the
EU, and other key players. The agenda at the Hong Kong ministerial shifted
from making decisions on core areas12 of the negotiations to focusing on
narrower initiatives, particularly in agriculture and development, that
could help the talks move forward, if only marginally. Members made the
following commitments and also set new deadlines for needed decisions at
the Hong Kong ministerial. Notably, they agreed to

10The Hong Kong ministerial was the sixth since the establishment of the
WTO in 1995. Ministerial conferences are convened at least every 2 years,
and the outcome is reflected in a fully agreed-upon ministerial
declaration.

11 [50]GAO-06-596 .

12The six core areas are agriculture, development, nonagricultural market
access, rules, services, and trade facilitation.

           o eliminate all forms of agricultural export subsidies by 2013;

           o eliminate, for developed countries, all forms of export
           subsidies for cotton in 2006;

           o establish duty-free and quota-free access for at least 97
           percent of the tariff lines of developed countries' imports from
           least-developed countries (LDC)13 by 2008 or by the start of
           implementation of the Doha agreements;

           o complete the round in 2006;

           o reach "modalities"--the formulas, thresholds, dates, and other
           numerical benchmarks that members will commit to meet when they
           revise their WTO schedules of subsidy and tariff commitments--for
           cutting tariffs and subsidies for agricultural and industrial
           goods and set disciplines on food aid, export credits, state
           trading, and other aspects of export competition by April 30,
           2006; and

           o submit national schedules of commitments embodying the
           modalities for agriculture and industrial goods and present
           revised offers for liberalizing trade in services by July 31,
           2006.

           Nevertheless, with nearly all tough decisions put off until 2006,
           the tension between members' original high ambitions and the TPA14
           time frame had become acute, as we noted in our last report on
           this matter.15 The expiration of TPA on July 1, 2007, which
           enables the President to present a final Doha agreement to
           Congress for an "up-or-down" vote within a fixed period of time,
           has served as the de facto deadline for the round. Due to various
           U.S. TPA-related notification and consultation requirements,
           concluding the negotiations in 2006 was essential for a Doha
           agreement to qualify for streamlined congressional consideration
           under TPA.
			  
			  Doha Talks Resumed after Months of Suspension, but No Breakthrough
			  Is in Sight

           On July 24, 2006, WTO Director-General Pascal Lamy suspended the
           global trade talks over an impasse in the agriculture
           negotiations, despite some progress before the July 2006
           suspension. Prior to the suspension, world leaders made an appeal
           for flexibility and movement, but it proved insufficient to
           overcome the deadlock. During the suspension, countries professed
           commitment to the talks and urged their resumption, but these
           failed to bridge their differences. Nevertheless, as a result of
           these pronouncements, WTO Director-General Lamy announced a "soft
           re-launch" of the negotiations at the working level in
           mid-November. An informal ministerial meeting among some WTO
           members was held on January 27, 2007, on the margins of the World
           Economic Forum meetings held in Davos, Switzerland. Although no
           breakthrough was announced, key participants emerged more hopeful
           for progress in the near term. On February 7, 2007,
           Director-General Lamy announced in his report to the WTO General
           Council that talks had resumed fully.
			  
			  Lack of Progress in Negotiations Prompted Director-General Lamy
			  to Suspend Talks in Late July 2006

           On July 24, 2006, Director-General Lamy announced the indefinite
           suspension of the Doha negotiations after the Group of 6 (G-6)16
           key WTO players failed to break a deadlock over agriculture that
           had prevailed, largely unabated, since prior to the Hong Kong
           ministerial. According to Lamy, unblocking the negotiations would
           require parallel movement by key players on what he refers to as
           the "triangle of issues":17 that is, the United States would have
           to agree to further cut its payments to domestic farmers; the EU18
           would have to agree to increase other countries' access to its
           agricultural markets; and advanced developing countries, such as
           Brazil and India, would have to agree to lower tariffs on
           manufactured goods. This would enable WTO members to reach an
           agreement on modalities. Lamy said such movement could only occur
           in concert, but each group continued to insist that others move
           first. Lamy classified the suspension period as a "time out to
           review the situation, time out to examine available options, and
           time out to review positions."

           Following the December 2005 Hong Kong ministerial, members made
           important progress on some issues. For example, at Hong Kong, WTO
           members authorized the chair of the negotiating group on rules to
           produce a draft text to serve as the basis for final negotiations.
           Negotiators reviewed numerous proposals in an attempt to narrow
           members' positions in these areas. However, although the chair
           reported that he could meet this mandate, he was not able to do so
           because of the suspension. In addition, the negotiating group on
           trade facilitation continued to make good progress in reviewing
           proposals for expediting the movement of traded goods. However,
           due to the lack of agreement over agriculture that persisted
           despite intense efforts at both the political and technical level,
           WTO members have not been able to move forward on key decisions in
           other areas of the negotiations that would lead to market access
           schedules to liberalize trade in agriculture, manufacturing goods,
           and services--where the bulk of Doha's trade gains are
           anticipated.

           Before the suspension of the talks, trade negotiators met in
           Geneva in late June 2006 for high-level meetings that failed to
           unlock the negotiations. However, it was agreed at these meetings
           that Director-General Lamy would take a more proactive role as a
           catalyst "to conduct intensive and wide-ranging consultations" to
           achieve agricultural and nonagricultural modalities. Prior to
           these meetings, Lamy had publicly suggested a "20-20-20" formula
           as a possible resolution to the impasse that called for (1) the
           United States to accept a ceiling on domestic farm subsidies under
           $20 billion; (2) the use of the G-20 proposal of 54 percent as the
           minimum average cut to developed country agricultural tariffs; and
           (3) a tariff ceiling of 20 for developing country industrial
           tariffs--in other words, a "Swiss" formula with a coefficient of
           20 for reducing developing country industrial tariffs by cutting
           higher tariffs more than lower ones.19 This proposal was
           criticized by all sides and was not officially discussed or
           adopted.

           Days before Director-General Lamy suspended the talks, he made an
           eleventh-hour appeal directly to world leaders at the G-8 summit
           at St. Petersburg, Russia.20 Lamy said the leaders needed to act
           to avert a "failure" in the nearly 5-year-old negotiations by
           providing their trade negotiators "further room for negotiation"
           to finalize figures for subsidy and tariff cuts in agriculture and
           industrial products. He also told the leaders that, in his
           estimation, the differences between members were not
           insurmountable--on the order of a few percentage points more than
           the concessions already proposed. "The problem is not technical,
           but political," he said--members were asking too high a price for
           the additional benefits demanded. In response to Lamy's appeal,
           the G-8 leaders stated that they were in favor of a trade deal and
           would give the necessary flexibility to their trade negotiators to
           secure a deal. The G-8 leaders also issued a statement calling for
           WTO members to work with "utmost urgency for conclusion of the
           Round by the end of 2006" and promising "renewed commitment to
           pursue a high level of ambition in all areas of the negotiations
           with a view to reaching a meaningful and balanced outcome."
           However, the leaders' involvement proved unsuccessful in
           overcoming the differences on trade issues; the flexibility some
           had pledged and others had apparently expected to be forthcoming
           did not materialize. Instead, less than 1 week later, a short,
           acrimonious G-6 meeting quickly dissolved into a collapse that
           prompted Lamy to suspend the talks.21 Despite the talks' February
           2007 resumption, the suspension all but ensured that any eventual
           agreement will not be reached in time for consideration under the
           current TPA.
			  
			  Although Enthusiasm for Resuming Talks Varied during the
			  Suspension, Talks Resumed in February 2007

           After the July suspension, numerous countries declared their
           commitment to the round and desire for a resumption. These
           statements largely did not go beyond reiterating commitment and
           blaming one another for the breakdown. Nevertheless, it could be
           argued that the statements clarified to some extent what a
           desirable Doha agreement would entail in practice.

           In our interviews with various WTO members and officials in Geneva
           and Washington, D.C., we noted disagreement over whether a
           near-term resumption of talks was likely or desirable. At our late
           September meetings in Geneva, country officials said that while
           the impasse was regrettable, they expected that the talks could be
           resumed in the near future. However, they also universally
           expressed a sense that reengaging prior to the November 2006 U.S.
           election was fruitless because U.S. political commitments to
           agriculture reform and to leadership at the WTO were seen as vital
           to closing a Doha deal. Several foreign government officials were
           adamant that more must be put on the table regarding agriculture
           and development to make Doha worthwhile. Nevertheless, there was a
           sense that technical work on certain knotty issues would be
           productive in the interim. Upon our return to Washington, however,
           we found officials and business persons less optimistic that talks
           would resume soon and not always convinced that they should
           resume.

           A growing sense that prolonging the suspension was not desirable
           and members' pronouncements of commitment prompted WTO
           Director-General Lamy to announce a "soft re-launch" of the
           negotiations at the working level in mid-November. This informal
           restart of the talks consisted of quiet diplomacy in capitals and
           chair-centered informal meetings in Geneva. Lamy also encouraged
           chairs of negotiating groups to carry out contacts and
           consultations as they judged most appropriate, to increase the
           opportunities for participants to begin to test each other's
           positions again and explore possible options to take the
           negotiations ahead. Lamy warned members that the "window of
           opportunity" to negotiate is limited--"there must be significant
           progress by the early spring if we are to have a chance of
           finishing the round next year." An informal ministerial meeting
           among some WTO members was held on January 27, 2007, on the
           margins of the World Economic Forum meetings being held in Davos,
           Switzerland. Although no breakthrough was announced, key
           participants emerged more hopeful for progress in the near term.
           U.S. Trade Representative Schwab reported "a new sense of optimism
           and momentum" and hope that, with hard work and good faith, WTO
           members would find the will and the way to produce results that
           alleviate poverty and stimulate growth through new trade flows. On
           February 7, 2007, Lamy announced that the Doha talks had resumed
           fully, across the board.
			  
			  Persistent Disagreements on Agriculture and Development
			  Contribute to the Impasse

           Underlying the breakdown in July 2006 were fundamental and
           persistent differences on agriculture between the United States,
           the EU, and developing country groups. As the world's largest
           exporter of agricultural products, the United States insists on
           obtaining greater access to markets in the EU and other leading
           agricultural trading partners than have been offered to date.
           Behind this issue is a significant disagreement over how much
           countries can shield "sensitive" or "special" products from tariff
           reduction. At the same time, key negotiating partners,
           particularly the EU and the G-20 developing country group, argue
           that the United States must improve on its October 2005 offer to
           cut its agricultural subsidies (domestic support) for them to
           commit to greater market access. Specifically, countries contend
           that certain domestic support provided by the United States
           distorts trade, and that the U.S. proposal does not translate into
           real cuts in program spending. Beyond the deadlock on agriculture,
           WTO members are divided by an underlying conflict about what a
           "development round," as the Doha Round is characterized, should
           accomplish.
			  
			  The United States Calls for the EU and Developing Countries to
			  Increase Market Access to Balance Further Domestic Support
			  Reductions in Agriculture

           With forecasted agricultural exports of over $77 billion in 2007,
           the United States seeks greater market access for farm products in
           the current Doha Round from both developed and developing
           countries. The United States considers increased market access an
           essential factor in balancing its proposed reductions in domestic
           support programs. Increased access into developing countries is
           especially significant since these markets, characterized by high
           growth in income, population, and urbanization, are the fastest
           growing U.S. markets for agricultural products such as livestock
           products and feeds, fruits, vegetables, and processed products.
           Moreover, market access barriers such as tariffs account for the
           largest share of agricultural policy distortions worldwide22--they
           are the trade barriers most widely used by countries, directly
           affecting market prices for both consumers and producers.23
           Agricultural products still face significant tariff barriers in
           both developed and developing countries. Until the Uruguay Round
           negotiations, agriculture had not been a part of the multilateral
           trade negotiations, so it has not had the same opportunity for
           liberalization as manufactured products. As a result, the Doha
           declaration and July 2004 framework agreement called for
           significant cuts in agricultural tariffs so that meaningful trade
           liberalization could be realized. The prevalence of high tariff
           barriers in agriculture can be characterized as consisting of (1)
           a small number of tariff lines protecting the bulk of domestic
           production in certain countries, particularly developed countries
           (known as tariff peaks); (2) processed or higher value products
           that have higher tariffs (known as tariff escalation) as compared
           to bulk products; and (3) a large proportion of tariff lines that
           have much larger WTO "bound" tariffs than the tariffs countries
           actually apply (or
           "applied tariffs"), especially in developing countries.24,25 This
           difference is often referred to by negotiators as "water" in the
           tariff. Moreover, U.S. officials say U.S. exporters face high
           tariffs on numerous products in key markets such as the EU, Japan,
           and India.

           Currently, the United States has lower bound agricultural tariffs
           than the EU and much lower bound tariffs than the advanced
           developing countries. For example, the U.S. average bound
           agricultural tariff is 12 percent, compared with 16 percent for
           the original 15 EU countries, a 105 percent average among South
           Asian countries, and a global average of 62 percent.26, 27 The
           worldwide applied tariff average is much lower (19 percent), and
           because tariff cuts are negotiated from the bound rates, fairly
           significant cuts may be required to achieve actual tariff
           reductions in the Doha Round. Figure 2 illustrates the large
           differences between bound and applied agricultural tariff rates in
           developing countries compared with developed countries.

13The WTO recognizes as LDCs those countries that have been designated as
such by the United Nations. Since 1971, the United Nations has denominated
LDCs as "a category of States that are deemed highly disadvantaged in
their development process...facing more than other countries the risk of
failing to come out of poverty." In its 2003 review of LDCs, the United
Nations identified LDCs as countries with a 3-year average estimate of
gross national income per capita under $900, among other criteria.

14Title XXI of the Trade Promotion Authority (TPA) Act of 2002 (Pub. L.
No. 107-210) gives the president the authority to conclude trade deals
around the world and to submit legislation approving and implementing the
agreement subject to an up-or-down vote by Congress, using expedited
procedures within a fixed time period. To qualify, the President must
notify Congress of his intent to enter a Doha agreement and request the
U.S. International Trade Commission to provide him and Congress with an
assessment of its likely effect by April 1, 2007, and any agreement
resulting from the Doha negotiations must be entered into by the President
before July 1, 2007. Expedited consideration is also contingent on the
President's compliance with requirements for consultations with and
notices and reports to Congress before, during, and after negotiation of
the agreement. In negotiating the Doha Round on behalf of the United
States, the Office of the USTR is guided by the goals outlined by TPA,
including overall and principal objectives and promotion of certain
priorities.

15 [51]GAO-06-596 .

16G-6 members are Australia, Brazil, the EU, India, Japan, and the United
States.

17The "triangle of issues" refers to the balance between agricultural
market access, agricultural domestic support, and nonagricultural market
access. The third side of the triangle is developing country tariff cuts
for nonagricultural goods. The idea is to achieve some sort of "balanced
ambition" within and across key issues in the round that involve
preparation of binding country-specific schedules of commitments.

18EU members are Austria, Belgium, Bulgaria, Cyprus, Czech Republic,
Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland,
Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland,
Portugal, Romania, Slovak Republic, Slovenia, Spain, Sweden, and the
United Kingdom.

19The "Swiss formula" is a nonlinear mathematical formula that (1)
produces a narrow range of final tariff rates from a wider set of initial
tariffs and (2) specifies a maximum final rate, no matter how high the
original tariff. A key feature is a number (the coefficient) that is
negotiated and plugged into the formula to determine the maximum final
tariff rate. The formula is so-named because it was first proposed by
Switzerland in the 1970s in the Tokyo Round of trade negotiations.

20In addition to leaders of the G-8 nations (i.e., Canada, France,
Germany, Italy, Japan, Russia, the United Kingdom, and the United States),
leaders from Brazil, China, the EU, India, Mexico, and South Africa, as
well as the heads of the African Union and the Commonwealth of Independent
States, were present.

21Our understanding is that the talks collapsed after expectations from
all sides were not fulfilled. According to observers and officials, during
the last formal negotiating meeting in Geneva last July, many countries
had come to the table expecting that the United States would announce an
improved offer on domestic subsidy cuts. However, they were very
surprised, and reportedly some countries were even offended, when the
United States did not produce the expected offer. The United States for
its part, however, apparently decided not to improve its offer because, on
the basis of the limited flexibility for movement other members had
signaled, it felt that its negotiating partners were unwilling or not
ready to reciprocate with meaningful market access concessions. In
addition, there was a sense among U.S. negotiators that they had
effectively run out of time under TPA, given its various notification and
consultation requirements.

22USDA estimated that agricultural tariffs accounted for 52 percent of
world price distortions, compared with 31 percent due to domestic
subsidies, 13 percent due to export subsidies, and 4 percent due to the
interaction among these policies.

23Although most economists believe that liberalizing market access
barriers would provide the most gains from trade, some recent studies show
that domestic subsidies can be quite trade distorting by way of
cross-subsidization, exit deterrence (i.e., keeping otherwise
uncompetitive or unprofitable farmers in production), risk reduction, and
wealth effects such as higher land prices.

24Kym Anderson, Harry de Gorter, and Will Martin, "Market Access Barriers
in Agriculture and Options for Reform," Trade, Doha, and Development: A
Window into the Issues, Richard Newfarmer (ed.), World Bank (2006),
chapter 6.

25WTO bound tariffs are the maximum tariff rates that WTO members may
impose on imports, as agreed to in the Uruguay Round Agreement on
Agriculture. Applied tariffs are the rates countries actually charged on
imports and typically are the annual tariff rates published by national
customs authorities for duty administration purposes. Applied tariffs may
be below or equal to bound tariffs, but may not exceed them.

26USTR reports that the EU-25 average bound tariff rate is 24 percent.

27It should be noted that, in fact, members' tariffs are only bound at the
WTO at the detailed, product-specific or "tariff line" level and not all
tariffs are "ad valorem" or set as a percentage of import value. As a
result, data on average bound tariffs are indicative in nature and may
differ, depending on such factors as how the averages are calculated
(e.g., a simple average of the rates over the number of lines or a
trade-weighted basis) and whether any attempt is made to estimate tariffs
that would be charged for those lines subject to "specific" rates, such as
2 cents per pound.

Figure 2: Differences between Bound and Applied Tariffs in Developing and
Developed Countries

  The United States and the EU Remain Divided on Overall Agricultural Tariffs
  Cuts

Compared with other key negotiating proposals, the U.S. proposal of
October 2005 offered the largest overall reductions in the central
component of market access, the overall tariff reduction formula. WTO
members have agreed to cut agriculture tariffs by use of a tiered
approach, whereby members' tariffs will be divided into tiers and then cut
by agreed percentages, with the higher percentage cuts in the higher
tiers. The negotiating parties, however, still need to agree on the
thresholds for the tiers, the cuts that will apply, and the number of
tariff lines or products that will be shielded from the formula cuts.
Specifically, the United States proposed tariff cuts in the tiers for
developed countries of 55 to 90 percent, compared with a 35 to 60 percent
cut proposed by the EU and a 45 to 75 percent cut proposed by the G-20.28
According to USTR, these represent a 66 percent average cut by developed
countries for the U.S. proposal, a 54 percent average cut for the G-20
proposal, and a 39 percent average cut for the EU proposal. Since the Hong
Kong ministerial, the EU has signaled a willingness to move closer to the
G-20 position on tariff cuts. Press articles that GAO corroborated with
several official sources cite this movement in average tariff cut by the
EU as about 10 percentage points more than its previous offer, or about a
50 percent average cut. Nevertheless, the United States did not consider
this movement to be adequate, since the signaled offer came less than
halfway between the U.S. and the EU offers and was achieved through
cutting tariffs on goods that the United States does not export, such as
tropical products. Moreover, U.S. officials did not consider the G-20
proposal to be a true middle ground because, among other things, it
envisaged higher tariff thresholds for each tier, which translates into
lower cuts overall. For example, the G-20 set the threshold of the
"highest tier," which will undergo the greatest liberalization, at more
than 70 percent (with a 75 percent tariff reduction), whereas the United
States set it at more than 60 percent (with an 85 to 90 percent tariff
reduction). The tariff cuts for developed countries are important in their
own right, and they are also important because they will be the base from
which developing countries will cut their tariffs. In general, it is
assumed that developing countries' tariff cuts will be two-thirds those of
developed countries, so the higher the developed country tariff cuts, the
higher the developing country cuts.29

  Number and Treatment of Sensitive and Special Products Remain Major Points of
  Contention

Unlike the EU and certain developing country groups, the United States
seeks to sharply limit the number of both sensitive and special products
and calls for greater liberalization of these products. Sensitive products
are ones that all countries can designate to face tariff cuts that would
be lower than the overall tariff reduction, in return for TRQ expansion.
The special product category is only for developing countries and would be
subject to lower cuts or possibly exempt from tariff reductions. WTO
members agreed in principle to these exemptions as part of the July 2004
framework, but are still discussing the scope of these exemptions. At the
Hong Kong ministerial, members agreed that developing country members will
have the flexibility to self-designate an "appropriate" number of tariff
lines as special products guided by indicators based on the criteria of
food security, livelihood security, and rural development needs.

28The United States also has offered the lowest tariff cap of 75 percent,
compared with the higher cap of 100 percent offered by the EU and the
G-20.

29According to some U.S. negotiators that we spoke with, while it is a
working assumption in the negotiations that developing country tariff cuts
will be roughly two-thirds of developed countries, this has not been
formally agreed to, nor is there agreement on how it would work in
practice. They warn that with more complex modalities and subelements of
the tiers, some proposals would mean this fraction could be reduced to
something much smaller, or, for example, two-thirds of two-thirds or
four-ninths of the original developed country tariff cut.

The issue of sensitive products has set the EU, the G-10, and certain
developing countries against countries that want expanded market access,
such as the United States and members of the Cairns Group. Members differ
over the number of sensitive products and their treatment. Regarding the
number, the current U.S. proposal offers a 1 percent exemption for
sensitive products, while the EU has proposed up to 8 percent of tariff
lines as sensitive. In the run-up to the July 2006 meetings, however,
there were some indications that the EU could move to an offer of 4 to 5
percent as sensitive products. However, studies have shown that exempting
sensitive products from some or all trade liberalization could severely
limit the overall level of market access into a country. For instance, the
World Bank estimated that if even 2 percent of tariff lines avoided
meaningful new access, about 75 percent of the gains from the Doha Round
could be lost.30 As for their treatment, while WTO members have agreed
that some liberalization through TRQ expansion will be required, the
United States proposes a methodology or modality that would expand TRQs to
a greater extent than proposed by the EU. Notably, the United States is
proposing to use domestic consumption rather than imports (which the EU
advocates) as the base for TRQ expansions. The EU maintains that
consumption fails to account for a product's "sensitivity"; the United
States and others counter that the level of imports is artificially
depressed due to trade restrictions. Recently, some parties, particularly
the G-10 and the EU, have come forward with "hybrid" approaches, basing
these levels on both consumption and existing TRQ levels.

Similarly, there is currently a wide gap between countries' proposals on
the number and treatment of "special" products--products that developing
countries can self-designate for more lenient tariff cuts guided by
indicators based on the criteria of food security, livelihood security,
and rural development needs. Developing countries consider special-product
flexibility essential to the success of their poverty-reduction and rural
development strategies. The United States would prefer to see very few
special products allowed--specifically, about 5 tariff lines--and would
prefer that these be subject to greater liberalization through tariff
reductions or TRQs than proposed by developing country members. Developing
countries argue, however, that 5 tariff lines may not even allow countries
to designate one product as "special." For example, milk products cover
from 8 to 37 tariff lines, depending upon which country's tariff schedule
is used. The G-33 developing countries are proposing at least 20 percent
of their tariff lines designated as special products, which could range
from 130 to 300 tariff lines in key exporting countries. The U.S.
Secretary of Agriculture has termed this a "nonstarter" for the United
States, and WTO officials we spoke with suggested it is unacceptable to
many other members. The G-33 also proposed that tariffs for half of these
products would not be reduced at all, and the other half would be
liberalized little (by 10 percent). The United States, on the other hand,
would like to see increases in market access over time for special
products. According to several stakeholders, one of the major problems in
the negotiations was that very little attention or analysis was devoted to
this issue until just before the process broke down last July. Moreover,
emotions have run high: demanders have insisted that the livelihood of
their large, rural populations is an important social and development
issue that is not negotiable, while exporting nations have termed these
commercially significant "loopholes" that could easily be abused.

30Kym Anderson and Will Martin, World Bank, "Agricultural Trade Reform and
the Doha Development Agenda," World Economy, vol. 28, no. 9 (September
2005). However, the study also states that much of this could be recouped
if WTO members agreed to caps on tariffs.

Further complicating these issues is uncertainty about which products of
export interest to the United States would be selected as sensitive or
special by countries. Negotiations have been sequenced in such a way that
WTO members would not know which products would be designated "special"
until after the modalities were agreed upon and then applied by countries
to their detailed tariff schedules. Yet, knowing these designations is
critical to determining the likely U.S. gains from liberalization.
Nevertheless, several studies have attempted to identify potential
sensitive or special products in key markets, confirming the importance of
product selection:

           o On sensitive products, an analysis by the Food and Agricultural
           Policy Research Institute (FAPRI)31 used the following three
           criteria for identifying "sensitive" products: (1) commodities
           with high levels of protection, (2) commodities of high economic
           value, and (3) situations where implementing tariff reductions,
           such as those required for nonsensitive products, results in
           larger increases in imports and reductions in prices than the
           additional amount of imports resulting from the required TRQ
           expansion for sensitive products. The authors concluded that the
           following products were likely to be designated as sensitive: rice
           in Japan, South Korea, and the Philippines; sugar in the United
           States and the EU; and butter in the United States. The authors
           explained that the impact on U.S. agricultural production, trade,
           and prices was strongly affected by the choices made regarding
           sensitive products and the rules regarding TRQ increases for these
           products.

           o For special products, while certain broad criteria have been
           agreed to, such as food and livelihood security, the indicators or
           basis for the designation of these products are broad, hard to
           measure, and only indicative rather than binding in nature.32
           Since the top U.S. exports into developing markets are
           concentrated in a relatively few products, an analysis done by
           USDA found that having only 5 percent of tariff lines designated
           as special and exempted from tariff cuts could mean that 90
           percent or more of U.S. exports to these countries would not be
           liberalized. The WTO Secretariat came up with similar results in
           an analysis for the negotiating group chair. While not directly
           addressing their trade relevance to the United States, a series of
           independent country studies, done by the International Centre for
           Trade and Sustainable Development in collaboration with local
           researchers, suggests that an "appropriate" number of special
           products would probably range from 6 to 20, and on average
           represent about 10 percent of a country's agricultural tariff
           lines. In these studies, the products most commonly selected as
           special products were beef, chicken, corn, milk and dairy
           products, onions, pork, potatoes, rice, tomatoes, and some
           vegetable oils.33

           In addition to the issues of sensitive and special products, the
           United States is equally concerned about the special safeguard
           mechanism (SSM)--designed to allow countries to temporarily
           increase import duties to deal with surges in import volumes or
           rapid declines in import prices. Under the Uruguay Round, the
           special safeguard (SSG) pertains to countries, primarily developed
           countries, that opted for tariffication (where quotas were
           converted to tariffs).34 In the Doha Round, developing countries
           have insisted that they need access to a similar mechanism, or the
           SSM, on the basis of their particular food and livelihood security
           and rural development needs. Other WTO members have accepted this
           in principle, but believe that there should be a link between
           these provisions and the extent of liberalization already
           undertaken. More specifically, the G-33 group believes that all
           products, including special products, should be eligible for the
           SSM, while the United States, Canada, Australia, and others argue
           that only products that are liberalized should be eligible. Other
           major differences between the proponents of the SSM and other
           countries include the remedy or the additional tariff allowed, the
           safeguard's duration, and the trigger that would enable the
           special safeguard. According to one U.S. official that we spoke
           with, the United States is primarily concerned that the price- and
           volume-based triggers for the SSM could too easily be set off and
           that conditions giving rise to them are hard to predict. There
           also is disagreement between negotiating parties about the status
           of the present SSG. While most of the G-33, the Cairns Group, and
           the United States agree that it should be eliminated, other
           groups, such as the EU and the G-10, do not want to see the
           present SSG eliminated. In other words, the latter groups think
           both developed and developing countries should have access to the
           SSG.
			  
			  The EU and Developing Country Groups Say the U.S. Offer Does Not
			  Cut Domestic Support Sufficiently

           In contrast to market access, the United States is on the
           defensive on domestic support for agriculture. The United States
           proposed reductions in domestic support in its October 2005 offer,
           but the EU and developing countries believe that U.S. support
           levels should be further reduced below current spending. 35 They
           are also concerned that the proposal contains "water" that could
           enable the United States to increase spending in the future.
           Moreover, there is contention over whether there is a
           "dollar-for-dollar" trade-off being demanded between market access
           and domestic support by the United States in the negotiations.

           While many believe agriculture is a unique sector that requires
           certain safety nets, economic studies have shown that production
           and trade-distorting subsidies can depress commodity prices on
           world markets.36 In the WTO, these policies are categorized
           according to the extent to which they are considered to distort
           trade, with Amber Box (as measured by the so-called aggregate
           measure of support) being the most trade distorting, Blue Box
           trade distorting to a lesser extent, and Green Box minimally or
           not trade distorting. The Uruguay Round capped and reduced
           spending in the Amber Box below the level spent in the base period
           of 1986 through 1988 (a period of relatively high supports
           resulting from depressed market prices), but permitted unlimited
           spending on policies that meet the Blue Box and Green Box
           criteria. In addition, members were given a "buffer" to provide
           product- and nonproduct-specific subsidies equal to 5 percent or
           less of the value of production (for developed countries) that was
           deemed "de minimis" and thus not counted against the Amber Box
           ceiling.37 However, if product- or nonproduct-specific de minimis
           support exceeds this threshold level by even one dollar, it all
           must be accounted for as Amber Box. Because of the large
           differences between the level of support permitted by the Uruguay
           Round Agreement on Agriculture and the actual spending since then,
           a gap called "water" has emerged that means even fairly large
           reductions in proposed ceilings may have little to no actual
           impact on policy. Moreover, as part of the July 2004 framework
           agreement, the United States secured WTO members' commitment to
           expand the new Blue Box to include "programs that do not require
           production," such as the countercyclical payments established by
           the 2002 Farm Bill, and to set its ceiling at 5 percent of the
           value of production.38 Another innovation of the Doha Round is the
           widening of support that would be disciplined in the concept of
           the "overall trade-distorting support," which is the sum of the
           Amber Box, the permitted de minimis, and the Blue Box support.

           During the last several years that they notified to the WTO,39 the
           Congressional Budget Office estimated the total levels of average
           annual domestic support to agriculture (Amber Box, Amber Box de
           minimis, Blue Box, and Green Box) for the United States, the EU,
           and Japan were $71 billion, $87 billion, and $29 billion,
           respectively, amounting to about 84 percent of world domestic
           support.40,41 However, mainly because their agricultural sectors
           are very large, the EU, the United States, and Japan individually
           provide smaller rates of domestic support than some other
           countries as a percentage of the value of their total agricultural
           output, each averaging a rate of about 37 percent from 1998
           through 2002.42 Under the Uruguay Round, the final bound ceiling
           for Amber Box support to be reached when its results were fully
           phased in by year-end 2001 was substantially higher for the
           EU--about $82.9 billion compared with $19.1 billion for the United
           States. However, since this period, a comparison of the amounts
           and composition of domestic support has become much more complex
           because of a variety of factors, including (1) the United States
           has not notified domestic support to the WTO since 2001, and the
           EU has only recently notified its support for years 2002-03 and
           2003-04 (see footnote 40); (2) recent changes in domestic farm
           policies by both the United States and the EU; and (3) EU
           enlargement--that is, the addition of 10 new member countries in
           2004. For instance, the 2002 U.S. Farm Bill added to program
           spending in the Amber and Green Boxes, including, among other
           things, higher marketing loan rates; the countercyclical program;
           fixed direct payments; and increased environmental program
           spending, such as the Conservation Security Program. In the EU,
           with the Common Agricultural Policy (CAP) reforms of 2003 and
           2004, the trend has been away from Amber Box price support
           programs and Blue Box programs (in this case, direct payments that
           are commodity-specific) and more toward Green Box supports, such
           as the introduction of "single-farm" payments. However, the CAP
           reforms would leave import barriers unchanged and export subsidies
           would be reduced only in response to limited support price
           reductions and lower export levels.

           The major criticism of the October 2005 U.S. offer on domestic
           support was that the level of overall trade-distorting
           support--which includes the sum of Amber Box, Amber Box de
           minimis, and Blue Box support--did not represent a "real" cut in
           actual program spending and should be reduced. Specifically, while
           the reduction in the Amber Box limit would probably require
           certain program changes under the current U.S. proposal, trading
           partners believe that the cut proposed for U.S. overall
           trade-distorting support does not represent a "real" cut from
           current levels. Per the U.S. proposal, this support would be
           reduced 53 percent, while the EU and the G-20 countries proposed
           reductions of 60 and 75 percent, respectively. As table 1 shows,
           the U.S. offer would bring this level to about $22.5 billion after
           5 years. However, in 2005, actual support for these programs was
           estimated at about $19.7 billion. Allowing higher U.S.
           trade-distorting domestic support ceilings after the Doha Round is
           implemented than is presently spent is not acceptable to many WTO
           members. Key U.S. stakeholders in the negotiations, however, argue
           that the ceiling should not be set at or below the level of
           support in 2005 (or any one year) because the nature of the
           programs is such that payments vary from year to year, depending
           on market conditions. Moreover, the de minimis ceilings themselves
           fluctuate annually with the value of production. Finally, the
           United States and other WTO members disagreed on the base period
           to be used for setting the new product-specific caps for Amber
           Box--the United States would prefer 1999 to 2001 as the base (when
           U.S. support was higher due to lower U.S. crop prices), whereas
           other negotiating parties prefer 1995 to 2000 as the base (which
           includes both low and high support years).

31FAPRI, "U.S. Proposal for WTO Agriculture Negotiations: Its Impact on
U.S. and World Agriculture," Center for Agricultural and Rural
Development, CARD Working Paper 05-WP 417 (December 2005).

32For example, according to a proposal by the G-33 on special products, an
indicator may be that "a significant proportion of the domestic production
is produced by vulnerable populations such as tribal communities, ethnic
groups, women, aged people, or disadvantaged producers."

33These 11 country studies and their methodologies are available at
http://www.ictsd.org and include the countries of Barbados, Ecuador,
Fiji Islands, Honduras, Papua New Guinea, Pakistan, Peru, the Philippines,
Sri Lanka, and Vietnam. These studies used a set of food security,
livelihood security, and rural development indicators similar to those
proposed by the G-33 and took into account variables such as the current
levels of protection, including the difference between the bound and
applied tariff rates, as well as import vulnerability.

34However, the present SSG is available to all WTO members (both
developing and developed) that have them listed in their country
schedules.

35In this report, we refer to spending and domestic support similarly.
However, both of these, including the term "spending," do not necessarily
translate into taxpayer-financed support to farmers, but may be due to the
difference between an administered price and a market price.

36World Bank, Global Economic Prospects: Realizing the Development
Progress of the Doha Agenda 2004 (2003), chapter 3.

37The de minimis level for developing countries is 10 percent of the value
of production under the Uruguay Round. In the United States, examples of
nonproduct-specific de minimis support include programs for crop insurance
subsidies and grazing subsidies.

38In the current Blue Box (as with the Green Box), as set forth in the
Uruguay Round Agreement on Agriculture, the amount of permissible
subsidies is not limited. However, in the Doha July 2004 framework
agreement, it was decided that these payments would be capped at less than
5 percent of a country's total value of agricultural production based on a
historical period to be determined. Also, as part of the Agreement on
Agriculture, subsidies that would otherwise qualify as Amber Box are
classified as Blue Box when they require farmers to limit production, such
as in a marketing quota or land set-aside. However, in the 2004 framework
agreement, the definition of the Blue Box was broadened to include "direct
payments that do not require production" if, for example, such payments
are based on fixed or unchanging bases or yields. This would allow the
United States to include countercyclical payments in this classification.

39Member countries are required to notify or submit documents to the WTO
each year that detail their expenditures on domestic government support to
their agriculture sectors. The notifications, submitted annually, include
the aggregate measure of support, an index of the monetary value of a
country's support to its commodity- and noncommodity-specific support
policies that are considered trade distorting. In addition, these
notifications also include Green Box and Blue Box support policies, which
are not presently subject to reduction commitments.

40The averages for the United States and the EU are estimates from 1998
through 2001, whereas Japan's estimate of average domestic support is for
1998 through 2002. The United States has not notified its annual levels of
domestic support to the WTO since 2001, and Japan has not done so since
2002. Recently, according to USDA, the EU has notified its levels of
domestic support for 2002-03 and 2003-04. The Congressional Budget Office
notes that a caveat to these estimates is that most countries report their
subsidies in currencies other than dollars, and the office converted to
dollars using exchange rates so that the numbers from different countries
could be compared in a common unit of measure. However, over time,
exchange rates can fluctuate, and using dollars for other countries'
support levels could be misleading because of exchange rate changes.

41Congressional Budget Office, Policies That Distort World Agricultural
Trade: Prevalence and Magnitude (August 2005), 22, table 12.

42Policies That Distort World Agricultural Trade, 18.

Table 1: U.S. Reform Proposal on Domestic Support and Estimated Domestic
Spending Outlays for 2005

Dollars in billions                                                        
                                                 October 2005 U.S.            
                                                      proposal                
                                                                       Actual 
                                         Present Percentage              2005 
Support component                     ceiling        cut Ceiling  spending 
Amber Box ceiling (Uruguay Round                                           
final bound total)                      $19.1      (60%)    $7.6     $12.5 
Blue Box ceiling (per July 2004                                            
framework agreement; based on 2005                                         
U.S. production value)                    9.6       (50)     4.8       5.0 
Product-specific de minimis               9.6       (50)     4.8       0.2 
Nonproduct-specific de minimis            9.6       (50)     4.8       2.0 
Overall trade-distorting support        $47.9      (53%)   $22.5     $19.7 

Source: GAO analysis of USDA data.

Note: Data analysis using information on bound levels and base levels of
Amber Box, Blue Box, and de minimis; October 2005 percentage cuts and
proposed ceiling levels from the U.S. proposal; and unofficial USDA
estimates for 2005 outlays.

Members also are concerned that the U.S. proposal would enable it to
increase "de minimis" support. As seen in table 1, there is significant
"water" between bound levels of support and actual support in both the
product-specific and nonproduct-specific de minimis categories. Other
countries are quick to point out that the United States could potentially
expand programs under this category in the future. But U.S. officials say
that this category is the least used, and since it is based on
year-to-year production value, it is a risky category to rely upon.
Moreover, the de minimis level may be higher in the U.S. proposal because
Congress wants flexibility to decide what to do with U.S. farm programs in
the 2007 Farm Bill.

While welcoming proposed U.S. cuts in spending under the new Blue Box,
other key players want additional disciplines. The October 2005 U.S.
proposal would reduce the cap on Blue Box spending from 5.0 to 2.5 percent
of the total value of agricultural production based on a historical period
to be determined. This reduction translates into about a $5 billion
ceiling, whereas the 2002 Farm Bill allows as much as $7.6 billion in
countercyclical payments. Recent spending on countercyclical payments
suggests that the proposal on Blue Box would not constrain spending in
most years, but would provide a cap in low-priced years.43 Nevertheless,
other member countries continue to press for disciplines (i.e.,
product-specific caps) to ensure that Blue Box payments actually have
minimally trade-distorting effects.

As shown in table 1, the U.S. offer would reduce the ceiling for Amber
Box, the most trade-distorting support, by 60 percent--from about $19.1
billion to $7.6 billion. These cuts are significant and would require some
changes to present U.S. programs, since unofficial estimates of Amber Box
support in the United States was about $12.5 billion in 2005. Examples of
Amber Box programs include marketing loan benefits and milk and sugar
price supports. However, the extent to which these programs would have to
change depends on future commodity prices. If prices were high, the
programs may require only small changes. However, larger changes might be
required if prices were lower because current programs would lead to
greater spending. A recent study by FAPRI estimating the effects of the
U.S. offer on U.S. farm programs demonstrated that the offer would require
some significant cuts or changes to the 2002 Farm Bill provisions for
Amber Box and Blue Box support. Specifically, this study suggests that
these reductions to the Amber Box and new Blue Box could translate into
about an 11 percent cut in loan rates (reducing loan deficiency
payments)44 and a 7 percent cut in target prices (reducing countercyclical
payments). However, in both scenarios of the FAPRI models, most farmers
would experience increased overall crop and livestock receipts due to
higher demand and prices caused by lower tariffs, the expansion of TRQs,
and the removal of export subsidies worldwide.

43Countercyclical payments are made to participating producers when the
marketing year average price received by farmers for a covered commodity
is less than the target price. Target prices are set in legislation and
apply only to the covered commodities of barley, corn, grain sorghum,
oats, peanuts, rice, soybeans and other oil seeds, upland cotton, and
wheat. After being eliminated in the 1996 Farm Bill, target prices were
restored under the 2002 Farm Bill.

Although not officially supported by the United States, the EU and
developing countries have complained that the United States would like to
see "dollar-for-dollar" compensation in market access (tariff cuts) in
exchange for further reducing its domestic support levels. The EU trade
commissioner did so publicly at the time of the July breakdown, and
various foreign government officials did so in our September meetings in
Geneva. Moreover, according to a recent United Nations Conference on Trade
and Development (UNCTAD) report, which covered the suspension of the Doha
talks, other WTO members from developing countries do not believe that
this "dollar-for- dollar" equivalence between domestic subsidy reductions
and market access is acceptable.45 The UNCTAD report noted that some
countries believe that since domestic support is inherently trade
distorting, a "dollar-for-dollar" exchange is not possible, and greater
reductions in domestic support are required.

However, both U.S. officials and the Farm Bureau deny that they are
insisting on a strict "dollar-for-dollar" trade-off. A USDA official
explained that the United States is seeking rough parity among the three
pillars of agricultural reform and needs to see broadly commensurate U.S.
market access gains. According to this U.S. official, the notion of a
"conversion rate" between the pillars of market access and domestic
support came about as a result of an analysis by the American Farm Bureau
Federation. An August 2006 article by the Farm Bureau's chief economist
indicated that the federation had analyzed the extent to which market
access gains could be used to offset the adverse affects on U.S. producers
of domestic support reductions and found that trade gains from a 50
percent reduction in tariffs would offset a 50 percent reduction in
domestic support.46 The article further indicated that the United States'
October 2005 proposal appears to meet the criteria of generating enough
trade gains to offset the proposed reductions in domestic support. Farm
Bureau officials told us that the bureau's position is that it has to see
a positive balance--or at least not a negative balance--between cuts in
domestic support versus gains from market access. Specifically, the net
impact on U.S. farm income of losses from cuts in U.S. domestic support
should be fully offset by gains in U.S. farm income driven by cuts in
foreign tariffs or other improvements in foreign market access, but would
depend on the specific products involved.

44A loan deficiency payment is the amount by which the loan rate (the
price per unit at which the government provides nonrecourse or recourse
loans to farmers by the Commodity Credit Corporation) exceeds the posted
county price or prevailing world market price, and thus is equivalent to
the marketing loan gain that could alternatively be obtained for crops
under loan. Loan deficiency payments are available for barley, corn, dry
beans, grain sorghum, honey, lentils, mohair, oats, rice, small chickpeas,
soybeans and other oilseeds, upland cotton, and wool.

45UNCTAD, Report of the Trade and Development Board on Its Fifty-Third
Session, Volume I, Trade and Development Board, Fifty-Third Session
(Geneva, Switzerland: Oct. 11, 2006).

WTO Members Are Divided by Underlying Conflict on Expectations from a
"Development Round"

Another issue facing WTO members is an underlying conflict about their
fundamental expectations from the Doha Round--a round that originated with
the intention of focusing on the interests and needs of developing
countries. Despite this shared objective, the views of developed and
developing country members often diverge on the desired outcome of a
"development round." Developing countries are playing a more pivotal role
than in past rounds and have maintained a show of solidarity at critical
moments, despite their diverse interests. Two developing countries that
have informally led the developing country camp--Brazil and India--are now
included in the inner circle of the Doha negotiations because of their
major role in world trade as well as their leadership roles. Recent
economic studies generally confirm that some developing countries face
particular challenges in trade liberalization related to worker
displacement, and that a few are likely to lose overall from a Doha
agreement. The United States and other developed countries tend to
emphasize the benefits of opening markets, while generally developing
countries tend to be wary of the economic and social effects of lowering
their own trade barriers. All agree that developing countries should
receive assistance to adjust to and benefit from trade liberalization.

46Robert E. Young, "The Coming Tug of War: Forces Moving the 2007 Farm
Bill," Journal of Agriculture and Applied Economics (August 2006).

  Intent of the Doha Development Agenda Was to Help Developing Countries Benefit
  from Trade

WTO members began the Doha talks with the intention of helping developing
countries benefit from international trade. Although the Doha ministerial
declaration did not define specific outcomes from the negotiations for
developing countries, it referred often to addressing issues of interest
to developing countries and providing assistance to them. The preamble to
the Doha declaration explicitly addressed the development objective of the
round, as follows:

"We recognize the need for all our peoples to benefit from the increased
opportunities and welfare gains that the multilateral trading system
generates. The majority of WTO Members are developing countries. We seek
to place their needs and interests at the heart of the Work Programme
adopted in this Declaration. ...We shall continue to make positive efforts
designed to ensure that developing countries, and especially the
least-developed among them, secure a share in the growth of world trade
commensurate with the needs of their economic development."

Without this emphasis, several foreign officials we met with in Geneva
told us, the round might never have been started, because many developing
countries had ongoing difficulties in implementing the Uruguay Round
agreements and said they were not prepared to make new commitments.

WTO members mean different things when they refer to the "development
dimension" of the Doha negotiations. Many developing countries express a
concern about ensuring that trade rules are applied fairly to all
countries. They see the Doha Round as an opportunity, even a promise, to
redress trade rules that they believe particularly harm poor countries.
For example, at the Hong Kong ministerial, Pakistan's Commerce Minister
defined development as "synonymous with the end of discrimination against
developing countries." This concern is focused on trade barriers imposed
by developed countries in sectors of particular interest to developing
countries, such as agriculture and textiles and apparel.

  Developing Countries Have Diverse Trade Interests, Yet Maintain Solidarity in
  the Doha Negotiations

Developing countries--which now make up some two-thirds of WTO's
membership and a growing share (over one-quarter) of world trade--have
diverse trade interests in the Doha negotiations. Some countries have
strong offensive interests in gaining more access to world markets for
their exports in certain sectors, such as Brazil in agriculture and China
in manufactured goods; while others express primarily defensive interests
in protecting their industries and markets from imports, such as the
island countries that consider themselves part of the "small and
vulnerable economies" group. Some countries have a combination of
interests, such as India, which has offensive interests in services and
defensive interests in agriculture.

Despite their different trade interests, developing countries have
organized into a newly assertive force since they precipitated the
collapse of WTO's Cancun Ministerial in 2003 and have displayed public
solidarity at key points in the negotiations. Their common link is the
demand for a development focus in the talks. They also insist that
agriculture be negotiated first before they are willing to resolve other
issues of interest to developed countries--that is, manufactured goods and
services. They have demonstrated relative unity in the Doha Round by
adopting elements of various groups' key concerns in joint public
statements. For example, at the Hong Kong ministerial, several developing
country coalitions came together as the informally named "G-110" to draw
attention to a number of shared, general demands, such as the removal or
reduction of trade-distorting subsidies and the extension of duty-free,
quota-free access to LDCs.47 In September 2006, G-20 ministers and
officials met with the coordinators of the G-110 coalitions, plus others,
to discuss the suspension of the negotiations. Their joint statement
described the suspension as "an unacceptable situation for all developing
countries," reiterated their "shared interest in a pro-development
outcome" for the round, and highlighted "the indivisibility of such a
development agenda." Developing countries have largely avoided
divisiveness so far by not jointly addressing issues on which there is
dissension, such as the details of special-product designation. As the
architect of these gatherings, Brazil has modified its aggressive
agricultural negotiating stance in the talks to accommodate the defensive
interests of other developing countries, primarily because it highly
values its role as the G-20 leader. China also has stood with the
developing countries in the G-20 and the G-33, despite urging by the
United States and others for it to step away from the pack and assert its
interests in market access.

  Trade Liberalization Poses Particular Challenges for Some Developing Countries

A primary rationale driving the Doha liberalization agenda is the belief
that international trade can benefit a country's overall growth and
development. International trade increases competition and specialization,
provides greater access to technology, and expands export markets,
enabling some producers to achieve economies of scale. Over time, a more
liberal trading regime may reduce costs on both imported manufacturing
inputs and exported final products, creating incentives to invest in new
production. Greater integration with the global economy may also spur
foreign investment, providing additional capital for development and
growth of the local economy.

47This statement was made on behalf of the G-20; the G-33; LDCs; the
African Group; the Small Economies; and the African, Caribbean, and
Pacific Group of States.

However, trade liberalization also can involve significant adjustment
costs. These costs may include unemployment in sectors that are not
internationally competitive, may include fiscal reform as governments
heavily dependent on trade taxes shift toward income or production taxes,
and may contribute to worsening of inequality. Developing countries also
may face some specific challenges, such as greater instability due to
volatile export markets and an increased reliance on international debt to
finance trade deficits. Finally, trade is not the only factor affecting a
country's economy or the only means of increasing its growth. For example,
human capital development through education and the strengthening of
institutions and the rule of law also play important roles in a country's
economic development.48

Economic models of the potential effects of a Doha agreement generally
predict overall benefits for most developing countries. However, these
models find that some developing countries in sub-Saharan Africa and the
Mediterranean region may actually lose overall from a Doha agreement, due
to several factors (see the discussion of these models in the next section
of this report). First, developing countries in these regions generally
benefit already from preferential access into the U.S. and the EU markets
that could be eroded under a Doha agreement. Second, U.S. and EU
agricultural subsidies tend to reduce the price of certain agricultural
products on the world market. While this can harm domestic agricultural
producers in developing countries, it benefits those countries that import
more food than they export. Many of these net-food importers are in
sub-Saharan Africa. Third, potential special and sensitive product
exemptions previously discussed in this report would limit the scope of
liberalization. When these exemptions are factored in, the gains from Doha
that otherwise would have been possible and that would have offset some of
the other losses, do not materialize.

  Many Developing Countries Are Wary of Opening Markets

In part for these reasons, many developing countries are wary of
undertaking broad liberalization for imports. While they want to share in
the growth of global trade by increasing their exports, they fear the
negative economic and social effects of relaxing their own trade barriers.
They hold that their development needs would best be met by limiting the
degree and speed with which they open their markets in the Doha Round.

48For more discussion of the potential benefits and challenges of trade
liberalization for developing countries, see GAO, Foreign Assistance: U.S.
Trade Capacity Building Extensive, but Its Effectiveness Has Yet to Be
Evaluated, [53]GAO-05-150 (Washington, D.C.: Feb. 11, 2005), appendix IV.

Protecting large numbers of poor people who make a living in industries
that may have difficulty competing internationally is a priority for many
developing countries. India, with over 600 million poor rural farmers, has
been one of the most vocal countries on this issue. India has defended
special and differential measures and the G-33's demand to allow
developing countries to protect a relatively large percentage of
agricultural products through special-product designation. The African,
Caribbean, and Pacific Group of countries, which receive preferential
access to the EU and are often dependent on a few export products, have
repeatedly called for the negotiations to soften the impact of erosion of
preferences. Specifically, they would like to preserve "a commercially
meaningful preference margin" by identifying products potentially affected
and having countries that provide preferences apply smaller tariff cuts
over a longer time. However, some developing countries are vigorous
advocates of trade liberalization to achieve development goals and have
objected to such efforts to limit market access in developing countries.
Costa Rica and Colombia, for example, spoke out to WTO members at the time
of the July collapse, criticizing both developed and developing countries
for a lack of flexibility.

Some trade experts agree that developing countries should be given the
latitude (or "policy space") to develop their economies before being
expected to remove their trade protections. They maintain that each
country's development needs are specific and trade rules need to be
flexible. They also point out that most developed and advanced developing
countries achieved economic growth by using strategic trade barriers at
certain points in their history. These experts, and most developing
countries, advocate for trade liberalization to be undertaken over years,
or even decades, in phases that allow their economies to grow before
opening markets fully.

  United States Is a Strong Advocate for Trade Liberalization

In contrast, the United States is one of the most outspoken advocates for
trade liberalization. U.S. negotiators emphasize that lifting trade
barriers and opening markets is essential to making economic gains from
trade agreements. They point out that about half of the estimated benefits
to developing countries from a Doha agreement come from liberalization by
other developing countries. Thus, aside from its own commercial interests
in more open markets overseas, the United States maintains that developing
countries would benefit from an ambitious Doha agreement that leads to
significant market opening by all parties, except LDCs. U.S. officials
acknowledge that liberalization involves adjustment costs, but they state
that these costs are typically short term and can be mitigated through
social safety nets. They agree that developing countries should receive
assistance to address transition issues and take advantage of trade
opportunities.

Members Agree to Help Developing Countries Adjust to and Benefit from Trade
Liberalization

WTO members already plan to give developing countries flexibility in
complying with WTO agreements, through what are called special and
differential treatment provisions. While the full extent of these
flexibilities has yet to be decided, these provisions would apply to most
aspects of an agreement, including agriculture, manufactured goods, and
services. For example, the flexibilities are likely to allow developing
countries to make smaller tariff cuts and phase them in over a longer
time. WTO members also have decided that WTO's poorest
members--LDCs--would be exempted from most liberalization commitments in a
Doha agreement.

Although the future of the Doha Round is uncertain, WTO members also have
decided to move ahead with providing increased "Aid for Trade" to help
developing countries take advantage of trade opportunities, regardless of
the outcome of the current negotiations. The WTO Secretariat, individual
members, and international organizations have provided technical and
financial assistance for years to help developing countries and LDCs meet
existing WTO obligations; participate in the negotiations; and build
institutional, human, and physical capacity to benefit from the trading
system. The level of such assistance has increased since the start of the
Doha Round, but international consensus has recently arisen that these
resources need to grow and become better coordinated.

During 2006, WTO members endorsed recommendations from two task forces on
improving assistance. One task force, charged at Hong Kong with developing
ways to "operationalize" Aid for Trade, outlined policies for identifying
and fulfilling trade-related needs of developing countries. Its report
recommendations focused on coordinating resources and activities at the
national, regional, and global levels and strengthening monitoring and
evaluation to ensure effectiveness and accountability by both donors and
recipients. The task force and Director-General Lamy urged WTO members and
other stakeholders to carry out the recommendations as soon as possible,
underscoring that Aid for Trade was not tied to the Doha Round and should
be considered a complement to, and not a substitute for, a multilateral
trade agreement. The report stressed that additional, predictable sources
of funding were necessary and urged Lamy to "clarify" the Aid for Trade
pledges made at the Hong Kong ministerial. The United States had pledged
to double its trade-related assistance for developing countries to $2.7
billion a year by 2010, the EU had said it would commit 2.0 billion euros
a year by 2010, and Japan offered to provide $10.0 billion from 2006
through 2008.

The second task force recommended strengthening a program called the
"Integrated Framework" that provides assistance specifically to LDCs in
the early stages of building trade capacity.49 Earlier evaluations of this
program showed it had generally failed in integrating trade into
countries' development plans and in providing adequate resources. The task
force estimated that about $400 million would be needed over 5 years to
finance the recommended actions.

USTR officials hope to make the Aid for Trade and Integrated Framework
recommendations more concrete and workable. Some major decisions on the
enhanced Integrated Framework, such as clarifying the legal status of a
new executive secretariat and trust fund and their relationship with the
WTO, are still pending. Regarding Aid for Trade, the WTO will provide only
limited assistance, but Director-General Lamy would like it to play an
important--and new--role in coordinating and monitoring assistance
provided by bilateral and multilateral donors. U.S. officials said there
is a high level of commitment among WTO members to move forward on both
initiatives and, in particular, to make the enhanced Integrated Framework
operational early in 2007. They said that making progress on these efforts
is important to maintaining credibility with developing countries and
ensuring that these countries begin to see more benefits from the trading
system.

49The Integrated Framework for Trade-Related Technical Assistance to
Least-Developed Countries, launched in 1997, is sponsored by six
multilateral agencies: the International Monetary Fund, the World Bank,
the WTO, the International Trade Center, UNCTAD, and the United Nations
Development Program. Its goals are to help LDCs integrate trade priorities
into their national development plans and encourage coordination of
assistance to LDCs for these priorities.

Participants Have Contrasting Views on Implications of Doha's Impasse

Participants and experts express varying views on the ramifications of
Doha's possible failure for the global and WTO member economies, the world
trading system, and U.S. trade policy. Some participants and experts warn
of forgone economic gains, a weakened multilateral trading system, and
dimmed prospects for both congressional renewal of TPA and reform of U.S.
farm subsidies. Others say the ramifications on all three fronts may be
much more limited. What the United States does in 2007 is expected to
prove pivotal for the WTO and U.S. trade leadership.

Without a Doha Agreement, Potential Economic Gains Might Not Be Realized

The Doha Round has the potential to break new ground in the liberalization
of agriculture trade, while opening up new areas of services and goods
trade. A range of economic studies predict that both the global economy as
a whole and the United States as a nation would gain overall from the
multilateral trade agreement envisaged. However, if the Doha Round fails,
these potential economic gains would not be realized. Some of these
benefits could be achieved through unilateral actions, such as a reduction
in domestic subsidies or through regional free trade agreements (FTA). But
the resulting gains would likely be more limited for the United States
than the already relatively modest gains estimated from a Doha agreement.

  Doha Focused on Largest Remaining Barriers to World Trade

Some officials and observers of the Doha Round point out that the
negotiations have included significant groundbreaking liberalization in
agriculture and could potentially expand market access significantly in
other areas. WTO Director-General Lamy is not alone in arguing that what
has already been notionally agreed to in the Doha Round is significant in
terms of reform and liberalization and in some areas would go beyond what
was achieved in the last (Uruguay) round of global trade talks. By the
December 2005 Hong Kong ministerial, WTO members had agreed to phase out
export subsidies altogether and to provide duty-free, quota-free access to
LDCs for at least 97 percent of tariff lines. The Uruguay Round resulted
in some liberalization of agriculture and services markets, and set a
baseline of rules as well as subsidy and market access levels. In the Doha
Round, across-the-board "formula" cuts are being discussed for both
agriculture and manufactured goods that would apply to most WTO members
and most tariff lines, although the depth of these cuts is still under
debate. This approach to cutting barriers is more encompassing than that
employed in the Uruguay Round and means more trade will be secured by WTO
disciplines. Increased market access in core services such as financial
services and telecommunications, as well as steps to streamline the
transit and clearance of goods, are also expected to produce tangible
gains.

  Extent of Potential Economic Gains May Not Be Realized without a Doha
  Agreement

An international trade agreement reducing trade barriers and subsidies
would economically benefit the United States and the world economy,
overall, according to economic models.50 Although some individuals and
groups within countries could be made worse off (such as farmers who lose
their subsidies), the net effect on the world economy and the United
States individually would likely be positive.51 For example, a recent
World Bank study estimated that a potential Doha agreement could (under a
certain scenario) increase worldwide real income by about $96 billion
annually by 2015 and increase U.S. real income by about $5 billion
annually. Other models offer similar predictions on the overall positive
effect on the world and the United States, although the benefit magnitude
varies. Table 2 shows the results of four recent studies that rely on the
most recent tariff and trade data available and model likely Doha
outcomes.52

50This means that the resulting changes in the production, prices and
wages, and trade would result in greater economic welfare than without
these changes. The economic studies discussed below generally measure
increased economic welfare in terms of real (i.e., inflation-adjusted)
income gains for the economy, as a whole.

51In addition, not all countries are predicted to gain from a potential
Doha agreement. In a previous section of this report, we discuss some of
the developing countries and regions that could potentially lose
economically and the reasons that this may occur.

52For additional discussion on economic models of trade negotiations and a
list of previous economic studies, see our prior study, [54]GAO-05-538 ,
appendix V.

Table 2: Estimated Economic Effect of a Potential Doha Multilateral Trade
Agreement

U.S. dollars in                                                            
billions                                                                   
                           Annual change in real income after an agreement is
                                              implemented
                                                        Developed  Developing 
Economic study            World    United States     countries   countries 
Carnegie Endowment,       $58.6             $6.5         $28.5       $30.1 
2006a                                                                      
Centre d'Etudes            23.2              4.0          18.3       (0.8) 
Prospectives et                                                            
d'Informations                                                             
Internationales, 2004                                                      
(trade liberalization                                                      
in agriculture only)b                                                      
International Food         54.7    Not available          32.0        22.7 
Policy Research                                                            
Institute, 2006c                                                           
World Bank, 2006d          96.1              4.9          79.2        16.1 

Source: GAO analysis of studies listed in notes a through d.

Note: Since the final results of a Doha agreement are not known, modelers
estimate the degree of liberalization they think is likely. We chose, for
illustration purposes in this table, those scenarios that represented the
modelers' baseline scenario for a likely Doha agreement. However, many
times modelers include multiple scenarios that represent different
potential scenarios (e.g., tariff cuts of 20 percent versus 40 percent) to
show how different agreements affect each economy. For details on the
exact specification used by each model, as well as a comparison of other
scenarios, refer to the original studies.

aSandra Polaski, Winners  and Losers: Impact of the Doha Round on
Developing Countries (Washington, D.C.: Carnegie Endowment for
International Peace, 2006).

bAntoine Bouet, Jean-Christophe Bureau, Yvan Decreaux, and Sebastien Jean,
"Multilateral Agricultural Trade Liberalization: The Contrasting Fortunes
of Developing Countries in the Doha Round," Paper 2004-18 (Paris, France:
Centre d'Etudes Prospectives et d'Informations Internationales, November
2004). "Developing countries" in this table combines "developing
countries" and the "poorest countries" from this model.

cAntoine Bouet, Simon Mevel, and David Orden, "Two Opportunities to
Deliver on the Doha Development Pledge," Research Brief No. 6 (Washington,
D.C.: International Food Policy Research Institute, July 2006).

dKym Anderson, Will Martin, and Dominique van der Mensbrugghe, "Market and
Welfare Implications of Doha Reform Scenarios," in Kym Anderson and Will
Martin (eds.), Agricultural Trade Reform and the Doha Development Agenda
(Washington, D.C.: World Bank, 2006).

These estimated gains, although positive, are relatively modest relative
to the size of the U.S. and world economies. For example, the increase of
$4.9 billion annually for the U.S. economy estimated by the World Bank
represents only 0.03 percent of the U.S. economy, and the estimated gains
globally represent less than one-quarter of 1 percent of the world
economy. However, as we noted in our last report, real income gains of $50
billion to $90 billion annually are roughly comparable to global aid flows
in recent years.53 Countries might gain additional benefits from trade
liberalization due to productivity improvements and increased investment
as the economy becomes more efficient and competitive. These "dynamic"
gains from trade liberalization are modeled in some studies and can double
or triple the estimated economic gains over time.54

53Kimberly Ann Elliot, "Can Doha Still Deliver on the Development Agenda?"
Policy Brief No. PB06-5 (Washington, D.C.: Institute for International
Economics, June 2006).

The estimated gains also are not uniform within and across countries. As
is well known, trade liberalization creates winners and losers. The
studies we reviewed suggest the following:

           o For developed economies such as the United States, the EU, and
           Japan, some of the largest expected benefits from a Doha agreement
           come from liberalization of their domestic agriculture markets.
           However, these changes can create challenges for the producers of
           the specific agricultural products that lose protection and
           subsidies. Outside of agriculture, there has been concern in the
           United States and other developed economies over the effect of
           competition from large developing economies, such as China and
           India, on domestic manufacturing and services workers.55 A Doha
           agreement may increase this competition; however, it also may help
           to create relatively better access for U.S. producers in these
           markets.

           o For developing economies, the expected benefits and costs of a
           potential Doha agreement vary widely. For example, in the World
           Bank and Carnegie studies, both Brazil and China are expected to
           gain from Doha overall, but for different reasons. Brazil benefits
           from greater market access in agriculture, while China benefits
           largely from greater access in manufacturing. On the other hand,
           both studies show that Mexico is likely to lose somewhat from a
           Doha agreement due to the erosion of its preferential access to
           the U.S. market under the North American Free Trade Agreement.
           Some lesser developed countries in Sub-Saharan Africa and the
           Mediterranean region also could be made worse off overall by a
           Doha agreement due to preference erosion and higher imported food
           prices.

           o Studies by international economists show that global poverty is
           likely to be reduced overall after a Doha agreement, but some
           countries may actually experience an increase in poverty.56

           The most recent economic models, such as those highlighted in
           table 2, generally estimate lower benefits from trade
           liberalization than previous models. Earlier economic models
           relied on tariff and trade regime data that did not fully include
           benefits that many countries already received through preferential
           trade programs (such as the U.S. African Growth and Opportunity
           Act) and FTAs. Thus, the models overestimated liberalization
           benefits resulting from trade liberalization since they include
           some liberalization that had already occurred. For example, a 2002
           World Bank study estimated real income gains from a Doha agreement
           that were significantly larger than a similar scenario estimated
           in the previously mentioned 2006 study. Although the models had
           similar assumptions and methodology, they differed in their
           underlying data on current trade protections that countries
           faced.57
			  
			     Some Economic Gains Could Be achieved without a Doha Agreement

           Some of the economic gains expected from a Doha agreement could be
           achieved unilaterally or through regional FTAs. However, these
           gains may be difficult to implement outside of a comprehensive
           agreement like Doha and would probably result in lower benefits.
           For example, the majority of economic gains for the United States
           (about $3 billion of the $5 billion) are due to the reduction in
           export subsidies and domestic support payments to farmers, on the
           basis of the World Bank model.58 Although certain U.S. farmers
           benefit from these federal government payments, overall they cause
           distortions and cost the federal government and taxpayers more
           than the benefits received by those particular farmers. The United
           States could unilaterally reduce its own subsidies and achieve
           some of the expected gains. However, politically it may be
           difficult for the United States to reduce these programs without
           similar reductions by the EU and other major subsidizers that
           often compete with U.S. producers.

           The United States also would derive gains from greater market
           access abroad--whether agricultural products, manufactured goods,
           or services--but this depends on other countries' willingness to
           lower trade barriers. Regional agreements such as FTAs continue to
           be vigorously pursued and may provide some of the same market
           access that could be achieved at the WTO, but by their nature
           involve fewer benefits because they cover fewer countries and less
           trade.59 In addition, negotiations with larger U.S. trade partners
           under the Free Trade Area of the Americas, which includes Brazil,
           have not advanced recently, and the United States does not have
           current negotiations under way with Japan and the EU.
			  
			  Some Warn That WTOï¿½s Role Could Be Undermined by Prolonged Doha
			  Delay, but Others See July Offer as a ï¿½Bad Dealï¿½

           Some participants and observers said the impact of the July
           negotiations' collapse on the WTO would depend on the length of
           the suspension. A short pause was seen as inevitable and possibly
           useful. A prolonged lapse was seen by many as likely to harm the
           WTO as an institution and the global trading system generally.

           The consequences of failing are considerable, some fear. Seeking
           to stress this, Director-General Lamy likened Doha's precarious
           state to a disease putting the WTO's "economic lungs, political
           heart, and systemic bone structure" at risk. Specifically, he
           explained, failure to conclude the talks would deprive WTO members
           of the economic stimulus created by trade liberalization; the
           WTO's political legitimacy would be questioned if it is unable to
           address issues of fairness that concern many members; and the
           WTO's value and functioning would be weakened if bedrock
           principles of nondiscrimination are eroded and the system bears
           the brunt of resolving conflicts among members. More recently,
           Lamy warned that Doha's failure could fuel a political backlash by
           developing countries against the United States and other developed
           nations.

           Others share the concern that WTO's authority and integrity could
           be weakened. In a recent business-sponsored poll, more than 70
           percent of 1,060 economic experts surveyed said they were
           "concerned" or "very concerned" about Doha's collapse in July.
           Among other things, these experts predicted rising protectionism
           and diminished export opportunities at a time when global economic
           growth prospects are "clouded."60 Others warn that:

           o The number and intensity of trade disputes could rise.

           o Frustration could spill over into regular WTO work.

           o Regional deals such as FTAs could proliferate, which may create
           trade, but they carry risks--such as discriminatorily distorting
           trade against nonparticipants and further marginalizing the
           poorest WTO nations.

           Already, since June, nine new disputes have been initiated at the
           WTO; several ongoing disputes have intensified; and more disputes,
           particularly on agriculture, are considered likely. For example,
           Canada just initiated the first stage of WTO dispute settlement
           against U.S. corn subsidies. Regionally, the EU has shifted its
           stance from focusing primarily on the WTO to renewed pursuit of
           bilateral free trade deals. India also has actively pursued
           bilateral agreements, despite its professed fears over significant
           liberalization in the WTO context.

           Some U.S. and foreign officials and other observers are less
           concerned about adverse effects on the trading system from Doha's
           collapse. Among other things, they argue that:

           o The WTO will remain central regardless.

           o The WTO can withstand the uncertainty of the present deadlock.

           o Waiting for a better package and political timing is sensible.

           o Other options for liberalization, such as unilateral
           liberalization, FTAs, and WTO accessions, are available, if second
           best.

           o A bad deal would have been worse for the trade system.

           In general, U.S. government officials, congressional leaders, and
           business representatives we consulted remain convinced that what
           was on offer by others in July 2006 was a "bad deal" that would
           have been detrimental to U.S. interests and to the trading system.
           Certain foreign officials we spoke with also expressed somewhat
           similar sentiments, in that they said holding fast to Doha's
           ideals and holding out for more significant results was preferable
           to accepting existing offers. Indeed, some see insistence on more
           liberalization as a welcome sign of determination to ensure the
           WTO's continued relevance and promoting growth potential.

           Breaking the Doha impasse, many participants and trade experts
           agree, depends on political will and timing. The desire by key WTO
           members to move forward with liberalization without a Doha
           agreement is seen by some as a good sign. For example, UNCTAD's
           long-standing, but elusive, goal of liberalizing trade among
           developing countries moved somewhat closer to realization with a
           recent announcement that developing countries had agreed to cut
           applied tariffs up to 30 percent.61 Yet, as some commentators have
           pointed out, agriculture is politically sensitive in virtually all
           countries, large and small, developed and developing. In the
           United States, for example, the sensitivity involves reducing
           payment support to farmers or large agricultural interests that
           have come to rely on these payments. In other countries, just
           increasing market access to other countries is of social and
           political concern. In France, for example, in addition to the
           economic implications, farming has special social and cultural
           dimensions that make liberalization of the sector a particularly
           sensitive issue. As a result, observers believe that it may be
           difficult for the EU to offer market access concessions given the
           French presidential elections in mid-2007. In developing
           countries, moreover, rural farming populations are typically the
           poorest and have the least access to other types of jobs and
           income.

           Creating a healthier negotiating dynamic also is considered key to
           breaking the Doha impasse. A noticeable lack of trust among key
           WTO players appears to be contributing to the difficulty in
           striking a compromise. This may help explain why developing
           countries have refused to break ranks and insisted that the
           agriculture issue must be resolved first, before industrial goods
           and services are negotiated. Unlike past times when Doha
           breakthroughs have occurred, the United States and the EU have
           been at odds since before the Hong Kong ministerial. A number of
           countries say they are unwilling to "go first" in making offers or
           concessions, for fear that the other members will "pocket" these
           offers without providing enough in return. Since the July
           collapse, U.S. Trade Representative Schwab has sought to establish
           a better basis for progress with counterparts, yet stressed that
           "you first" tactics and artificial deadlines have not worked and
           should not be repeated.

           Other groups with an interest in the negotiations said that the
           pause provided a welcome opportunity to refocus. For example, the
           United Nations' Food and Agriculture Organization stated "the Doha
           Round collapsed because of a fundamental lack of fairness in its
           vision, its process, and its projected outcomes." It urged that
           "when negotiations restart, the Doha Round should truly be a
           development round approached in a broader and participatory
           way...that deals seriously with supply side capacity and related
           investment needs for the least-developed countries." Despite
           predicting that a Doha agreement may not be completed until 2009
           or after, one of the Carnegie Endowment's trade specialists
           suggests relief, rather than alarm, is appropriate.62 She argues
           that rebuilding a bipartisan consensus in the United States in
           favor of trade liberalization and reorienting WTO talks to deal
           with what she believes are well-founded demands for flexibility by
           developing countries and with worldwide fears of job loss will
           provide a better foundation for an eventual Doha deal.
			  
			  Congress Faces Pivotal Decisions in 2007 on Whether to Renew Trade
			  Promotion Authority and the 2002 Farm Bill

           The uncertainty over whether the WTO talks will progress is
           occurring at a time when Congress faces key decisions. Two of
           these decisions in 2007 are seen as bellwethers of U.S. intentions
           at the WTO: that is, TPA and the Farm Bill.
			  
			  TPA Renewal Considered Vital for Concluding Doha Deal

           Congressional renewal of TPA is considered essential to finalizing
           a Doha deal. U.S. trade officials argue that TPA is vital to keep
           the United States "in the game" at global talks and to conclude
           bilateral and regional FTAs. Such agreements are negotiated on the
           United States' behalf by the President and USTR. Under TPA,
           Congress must vote up or down on any negotiated trade agreement
           within a fixed period of time. Present authority expires on July
           1, 2007, and without TPA, U.S. trade partners may be reluctant to
           seal "their best deal" if there is a concern that Congress would
           avoid acting on the legislation or demand that parts of the
           agreement be renegotiated. However, President Bush formally asked
           Congress to renew TPA on January 31, stating that "the only way
           America can complete Doha and make headway on other agreements is
           to extend Trade Promotion Authority." Such renewal will require
           congressional passage of new legislation. Key congressional
           leaders are now debating the terms and goals for renewal.

           Prospects for passing new TPA legislation remain uncertain, but
           are considered stronger if a Doha agreement is in sight. U.S.
           Trade Representative Susan Schwab has stressed that bipartisanship
           on trade has prevailed in the past and is possible in the future.
           Several leading U.S. agriculture and business groups say they will
           fight for TPA renewal. To this end, an umbrella group called Trade
           for America was launched in February 2007 to represent the
           interests of U.S. companies and trade associations that want TPA
           renewal. Among the concerns expressed about present TPA by current
           Chairs of the House Ways and Means and Senate Finance Committees,
           for example, is that Congress has not always been sufficiently
           consulted by the executive branch in recent trade negotiations.
           Other concerns include fears over U.S. job losses and inadequate
           worker adjustment mechanisms; laxness in recent approaches to
           enforcing trade agreements and managing currency imbalances; and
           the need to do more to prevent a race to the bottom in terms of
           U.S. wages and labor and environmental protections. Still, having
           more hope for success at the WTO--and tangible gains for U.S.
           interests--is considered key to mobilizing support for TPA.
			  
			  Shape of the 2007 Farm Bill Could Affect (and Be Affected by)
			  Dohaï¿½s Prospects

           The lack of progress of the Doha negotiations could affect the
           likelihood of U.S. agricultural subsidy reform in 2007. Several
           aspects of the Farm Bill expiring in September 2007 pertain to
           subsidies covered by the WTO that are being discussed in the Doha
           Round. The administration and some farm groups are among those
           urging reform despite Doha's collapse. They say reform is needed
           to make U.S. programs less vulnerable to challenge under existing
           WTO rules and could help the United States in Doha negotiations.
           Others, including several influential farm groups, think renewing
           the 2002 Farm Bill largely intact is desirable in its own right or
           advisable until the United States secures a more level playing
           field with key partners in terms of subsidies and trade barriers.

           The United States is already obligated under existing WTO
           agreements to ensure that its farm programs conform with
           agreed-upon restrictions.63 The 2002 Farm Bill was considered by
           some to be a setback to global agricultural reform because, among
           other things, it reestablished the link between income support
           payments and market prices. In part as a result, the present Farm
           Bill is projected by the Congressional Research Service (CRS) to
           result in $21.975 billion in commodity-specific support in fiscal
           year 2006.64 The amount and distribution of government
           expenditures for all U.S farm programs, from the introduction of
           the 1996 Farm Bill that implemented U.S. Uruguay Round commitments
           until the present, are shown in figure 3. The general depiction is
           of payments in subsequent years that were higher than 1996 and
           1997. Ad hoc emergency payments contributed to increases from 1999
           to 2001, with the largest payments for all programs occurring in
           2005.

           Figure 3: Government Payments for U.S. Farm Programs, 1996-2005

           Note: Data do not include miscellaneous payments; payments for
           peanuts and tobacco have been combined; and marketing loan and
           loan deficiency payments have been combined. Also, note that these
           are all government payments, irrespective of the "boxes" that they
           may be related to within the WTO context.

           As explained in a previous section, official U.S. proposals tabled
           in the Doha Round would, if ultimately agreed to by WTO members,
           involve substantial change in some U.S. agricultural policies that
           would require statutory changes to the Farm Bill.65 While the
           President was in a position to make such proposals at the WTO in
           2005 and seeks to influence the legislative debate in 2007, it is
           Congress that writes the Farm Bill.
			  
			  Some Advocate Agricultural Reform Despite Doha Delay

           Since July's suspension, the Secretary of Agriculture has
           continued to emphasize the administration's commitment to
           reforming U.S. farm programs in 2007 to ensure that they are
           "equitable, predictable, and beyond challenge." The Secretary
           disagrees with those who say the breakdown of the Doha
           negotiations makes it advisable for the United States to stick
           with its present policies, saying policies encouraging free trade
           and market access will be of benefit to U.S. farmers, regardless.

           Five of the reasons offered involve trade or trade agreements, as
           follows:

           o Trade is important to U.S. agriculture. Exports of high-value
           products, such as hides, nuts, and dried fruit, have been
           outpacing domestic demand for two decades.66 Regarding bulk
           commodities, three-fourths of U.S. cotton production, nearly
           one-half of U.S. wheat and rice crops, and one-third of U.S.
           soybean and tobacco production are exported.

           o WTO rules are important to this trade's continuation and growth.
           A former USDA official recently noted that "as the largest
           agricultural exporter, the United States benefits most from a
           rules-based trading system," and that "the WTO provides the only
           rules applying to agricultural products adhered to worldwide."
           Although U.S. farm interests have made known their frustration
           about ongoing difficulties in selling to foreign markets for
           products ranging from poultry to rice, these WTO rules and the
           WTO's binding dispute settlement system have been used to
           successfully challenge some barriers to U.S. exports, such as
           unjustified bans on beef, apples, and biotechnology crops, and
           duties on high-fructose corn syrup.

           o Key aspects of the current U.S. agriculture subsidies have
           already been successfully challenged at the WTO, and more
           challenges are likely. In September 2006, Brazil secured a formal
           WTO review of U.S. compliance with the WTO's adverse ruling in the
           Brazil cotton dispute and said it will seek up to $3 billion in
           retaliation regarding prohibited subsidies and $1.037 billion in
           retaliation regarding actionable subsidies if noncompliance is
           found. Some of the needed changes to the marketing loan and
           countercyclical payment programs were expected to be dealt with in
           the 2007 Farm Bill.67 In late October, CRS concluded that all
           major U.S. commodity program crops are potentially vulnerable to
           challenge at the WTO, after analyzing existing U.S. WTO
           obligations, the criteria applied in the WTO's cotton ruling, and
           U.S. spending under the 2002 Farm Bill and other legislation.68
           Oxfam and others suggest that more cases are being readied, with
           rice among the U.S. products targeted by other nations. If these
           prove successful, the United States would be obligated to change
           or face retaliation, without offsetting concessions from others.

           o Market-opening commitments the United States has made under the
           North American Free Trade Agreement and the Central
           American-Dominican Republic Free Trade Agreement may make the
           present U.S. sugar program--which relies on import restrictions to
           keep domestic price levels above world prices--unworkable, USDA
           suggests.

           o A former USDA official and U.S. agriculture negotiator said "the
           best hope for an eventual WTO agreement may be changes in U.S.
           domestic farm policy for the 2007 Farm Bill." For example, some
           argue that shifting toward Green Box spending, which does not
           distort prices, production, and trade, would give U.S. negotiators
           more room for maneuver on domestic supports at the WTO.

           A number of farm groups and other agricultural policy experts also
           see an immediate need for change. They support reforming the Farm
           Bill in 2007, rather than extending it in its current form,
           despite Doha's delay. In addition to echoing the Secretary's
           views, specific reasons for reform include the need to (1) address
           the distortions that our current policies may cause in production
           and trade and (2) establish agricultural policy that allows
           farmers to make long-term economic decisions. The commodity title
           is the focus of many proposals for change, with some farm groups
           seeking expanded support and others seeking less. Groups such as
           the National Corn Growers Association, National Association of
           Wheat Growers, and American Soybean Association believe
           adjustments to commodity programs are needed to make them more
           beneficial to their producers and, in some cases, more compliant
           with current WTO provisions. Other farm groups, academics, and
           agricultural experts seek to minimize the farm sector's reliance
           on product-specific, trade-distorting (Amber Box) programs, such
           as price supports or loan deficiency payments, with proposals that
           include, among other approaches, (1) environmental and land
           stewardship programs that reward farmers for the environmental
           services they provide;69 (2) direct payment programs that would
           not be linked to specific types of production, so as to comply
           with Green Box standards;70 (3) whole farm, revenue insurance
           approaches to a farm safety net that would cover all
           commodities;71 and (4) buy-out programs, similar to the present
           buy-out programs for tobacco and peanuts.72 Moreover, there are
           calls for reductions or alterations in the marketing loan programs
           and countercyclical payments to make them less susceptible to WTO
           challenge.

           As this report was going to publication, USDA offered a new
           proposal for the 2007 Farm Bill. The administration has proposed
           several changes that, according to USDA, could, on balance, make
           farm programs potentially less market distorting and less likely
           to face WTO challenge. For a number of commodities, the proposal
           lowers or shifts payments away from those that are linked to
           present market prices and toward greater fixed payments. Major
           portions of the administration's proposal include:

           o Basing marketing loan rates on actual commodity market prices in
           recent years; specifically, by setting loan rates equal to 85
           percent of a 5-year Olympic average (the last 5 years minus the
           high and low prices), which has the effect of reducing them. In
           addition, they would also be subject to a maximum level. This
           would particularly affect cotton loan rates, which have come under
           a great deal of scrutiny at the WTO.

           o Continuing support of the sugar and dairy programs, counted as
           part of the Amber Box at the WTO, in a similar manner as in the
           current Farm Bill. Specifically, for dairy, the proposal maintains
           the current support price of milk at $9.90 per hundredweight and
           reauthorizes the Milk Income Loss Contract Program, a
           countercyclical program for dairy, while basing it on reduced and
           historical payment rates. For sugar, the proposal continues price
           supports for raw and refined sugar at their current levels through
           the use of the sugar TRQ as well as the reinstatement of domestic
           marketing allotments when imports exceed 1.532 million short tons.

           o Increasing the amount of direct payments by $5.5 billion, which
           are potentially classified at the WTO as Green Box. Along with
           this change is a proposal to remove the "fruit and vegetable"
           planting restriction on program crop acres that are considered
           base acres for determining a farmer's direct payments--in response
           to the WTO cotton ruling's discussion of direct payments'
           compliance with WTO rules.

           o Changing the current countercyclical payment program to a
           revenue-based program that would pay out when market revenue
           (commodity yield times market price) falls below a target level.
           However, revenue would not be based on the individual farmer's
           revenue, but would be calculated from a national average yield for
           the crop times the higher of the national season-average market
           price or the marketing loan rate.

           o Ending the "three-entity rule," which permits farmers to
           establish corporations and other entities that allow the amount of
           payments received to exceed statutory limits. In contrast to the
           current Farm Bill, the proposal links the payments to an
           individual and sets the payment limit at $360,000. To receive
           commodity program payments, a farmer must meet a new bound on
           Adjusted Gross Income (wages and other income minus farm expenses
           and depreciation), which has been reduced from $2.5 million to a
           new limit of $200,000.

           o Including an additional $7.8 billion for conservation
           programs--to simplify and consolidate conservation programs, and
           to create a new Environmental Quality Incentives Program and a
           Regional Water Enhancement Program.

           While USDA's Farm Bill proposal has been welcomed in some quarters
           and accepted as a contribution to the congressional debate,
           trading partners have generally urged even more ambitious reform,
           and some U.S. farm groups continue to prefer programs in the 2002
           Farm Bill.

           GAO reports concerning 21st century challenges and commodities
           highlight other reasons to consider certain reforms in 2007.73 For
           example, we have reported extensively on the U.S. cotton program,
           which is one of the most highly supported farm programs, and added
           to the policy debate on dairy, peanuts, rice, and sugar. We also
           have reported on U.S. food aid, payment limitations, crop
           insurance, revenue insurance, and conservation programs. (For a
           list of these reports, see the Related GAO Products section at the
           end of this report.) In a November 17, 2006, letter, the
           Comptroller General of the United States identified the integrity
           and equity of federal farm programs as one of several suggested
           areas for oversight for the incoming 110th Congress. Among other
           things, the Comptroller General noted that more than $25 billion
           is spent annually by the federal government on subsidies and on
           disaster and conservation payments for farmers, but just 10
           percent of the recipients collect 70 percent of the benefits.
           Moreover, we have found that each year thousands of producers
           falsely collect crop insurance, while individuals with limited
           involvement in farming qualify for subsidy payments and evade
           payment limits.74
			  
			  Opponents of Reform

           Nevertheless, many groups want to extend the present Farm Bill
           largely "as is" or with minor changes. The program is popular, and
           keeping U.S. leverage could better position it to pursue future
           cuts in foreign barriers, some say. Farm groups such as the
           American Farm Bureau Federation, the National Farmers Union, the
           National Cotton Council, and the USA Rice Federation, among
           others, have proposed extending the 2002 Farm Bill in its current
           form. These groups' reasons are diverse, although two common
           arguments for extending the bill have emerged: (1) the bill's
           current farm programs are beneficial to producers and merit
           extension and (2) delays in the Doha negotiations make Farm Bill
           reform impractical. Several groups recognize the level of support
           the current Farm Bill enjoys among farmers and cited the benefits
           of current farm policy as a reason for extension. USDA notes that
           debate over U.S. farm support typically involves diverse
           stakeholders with varying goals, such as price and income support
           and higher or more stable prices. Given the limited progress in
           the Doha talks, a number of organizations have asserted that U.S.
           lawmakers cannot accurately predict the outcome of trade
           negotiations and, therefore, are not in a position to make
           appropriate changes to the Farm Bill. Such groups generally
           believed an extension of the 2002 Farm Bill would maintain the
           United States' negotiating leverage and increase its probability
           of achieving reductions in other nation's agricultural subsidies
           and tariffs, notably in key markets like the EU. Nevertheless,
           some farm groups said they would support minor changes to the bill
           to comply with current trade rules or would support additional
           changes at a more appropriate future date.

           The view that it would be unwise to "get ahead" of WTO was echoed
           in our meetings with some U.S. officials. In addition, some U.S.
           industrial manufacturing interests and agriculture interests that
           do not receive subsidies under the Farm Bill told us that they see
           cuts in U.S. farm subsidies as the major bargaining chip the
           United States has to play in the Doha Round. Thus, they advised
           holding onto this leverage until there is greater certainty of
           U.S. export gains, especially since active support by U.S.
           agriculture interests has been key to congressional passage of any
           trade legislation.
			  
			  Conclusions

           Despite calls from a variety of voices around the world to
           successfully resolve the remaining issues in the negotiations, the
           future of the Doha Development Round remains highly uncertain. Our
           research suggests that the breakdown in the talks in 2006 had both
           political and practical dimensions, which was perhaps not
           surprising given the sensitivity of the issues involved; the
           building tension between members' original ambitions; their
           overall lack of progress in achieving them; and the tight,
           unmovable timetable associated with the U.S. Trade Promotion
           Authority. Agricultural trade has proven highly sensitive, in part
           because it is one of the last remaining areas of protection to be
           tackled by the WTO. Developed nations such as the United States,
           the EU, and Japan have complex programs that provide different
           combinations of domestic support, export subsidies, and import
           restrictions such as tariffs and quotas. While these programs may
           well be costly to these nations' overall welfare, they have proven
           to be beneficial to powerful interests and are strongly supported
           by those groups. Moreover, key players are seeking not only to
           reduce the barriers left during the last round, but to redress
           perceived disparities among them. An even more fundamental
           disagreement between developed and developing nations surrounds
           the relationship between trade and development. While the Doha
           Development Agenda recognizes the benefits and welfare gains from
           a more open multilateral trading system, certain developing
           nations remain unconvinced by research showing that a large share
           of projected benefits from a more open trading environment would
           come from opening markets in other developing countries, as well
           as in removing their own trade barriers.

           Given the sensitive and complex nature of the issues and the
           fundamental disagreements between major groups within the
           negotiations, WTO deadlines have proven to be ineffective in
           moving negotiations to closure. External events are potentially
           more meaningful, but they sometimes add further complexity to the
           process. The end of TPA in July 2007 creates uncertainty about the
           prospects of any WTO agreement that might be achieved, as well as
           potentially closes out the series of bilateral negotiations the
           United States has under way. Congressional action on the Farm Bill
           also complicates the WTO negotiations, as many resist major
           changes to the Farm Bill or are unwilling to do so in advance of a
           global WTO agreement. As a result, a successful negotiation now
           not only requires an agreement that creates sufficient gains to be
           distributed among 150 diverse nations, but also requires a
           willingness by Congress to actively support those talks through
           renewed TPA and in the details of a new Farm Bill.
			  
			  Agency Comments and Our Evaluation

           USTR and USDA broadly agreed with our draft report, but provided
           us with several technical comments and issue characterizations,
           which we incorporated in the report as appropriate. Overall, USTR
           asked us to reflect somewhat more diversity of developing
           countries' demands and positions, based on their experience in
           negotiating with them on both agriculture and nonagricultural
           market access issues. We added some material to reflect this. The
           Departments of Commerce and State had no comments.
			  
54Economic models of international trade agreements have inherent
limitations. Although they are useful to compare the relative magnitude of
various policy changes (such as trade liberalization) and identify the
likely winners and losers from such changes, they are not intended to
forecast the actual economic situation in the future since other changes
(e.g., technology) will occur. In addition, models vary in the degree to
which they account for adjustment costs, institutional and market
structures in individual countries, and other details that can affect the
outcomes for specific groups and regions. For more discussion of the
strengths and limitations of these models, see [134]GAO-05-538 , appendix
V.

55For more discussion of these issues, see recent GAO work on the issue of
offshoring, including Offshoring: U.S. Semiconductor and Software
Industries Increasingly Produce in China and India, [135]GAO-06-423
(Washington, D.C.: Sept. 7, 2006), which includes a list of all GAO work
on the subject.

56For example, see Ann Harrison (ed.), Globalization and Poverty (Chicago,
IL: University of Chicago Press, 2006); and Thomas Hertel and L. Alan
Winters, Poverty and the WTO: Impacts of the Doha Development Agenda
(Washington, D.C.: World Bank, 2006).

57World Bank, Global Economic Prospects 2002: Making Trade Work for the
Poor (Washington, D.C.: World Bank, 2002).

58However, other models find that greater benefits come from other
sectors. For example, in the Carnegie Endowment model, the United States
gains relatively more from various trade liberalization scenarios due to
manufacturing liberalization than from agricultural liberalization. Also,
studies that include services liberalization (although difficult to model)
generally show large gains from greater services market access abroad for
the United States and other developed countries. This is consistent with
the U.S. service industry's own analysis.

59Regional agreements tend to be customs unions or FTAs, which either
eliminate tariffs among partners completely or on substantially all trade
among them, thereby reducing tariffs among partner countries more than is
likely under a multilateral Doha agreement. However, regional agreements
also can divert trade to less-efficient suppliers and may still exclude
sensitive sectors.

60The poll was sponsored by the International Chamber of Commerce and the
Ifo Institute for Economic Research at the University of Munich and
reported on Dec. 5, 2006.

61This is known as the Global System of Trade Preferences or GSTP.

62Sandra Polaski, "The Future of the WTO," Carnegie Endowment for
International Peace Policy Outlook (September 2006).

63The United States is already obligated at the WTO to keep its farm
spending within limits negotiated as part of the Uruguay Round Agreement
on Agriculture that became effective January 1, 1995. Specifically, WTO
rules state that domestic support programs that do not meet specified
criteria intended to ensure that they have "no, or at most minimal,
trade-distorting effects or effects on production" are to be measured and
then reduced and capped. The current U.S. ceiling for such Amber Box
programs is $19.1 billion, but the U.S. potentially has about another
$20.0 billion in allowed spending if it qualifies for de minimis
exemptions. Regarding export subsidies, the United States is only allowed
to provide them if they were properly notified and do not exceed specified
levels. Should another WTO member choose to challenge it, U.S. farm
support spending in excess of these limits could be found to constitute a
violation of WTO obligations of the Agreement on Agriculture. Moreover,
with the expiration of the "peace clause" in 2004, if another WTO member
demonstrated that such spending was causing or threatening serious
prejudice to its interests, it would violate WTO obligations under the
Subsidies and Countervailing Measures Agreement, regardless of whether it
falls within or below the established spending caps. The peace clause
refers to Article 13 of the Agreement on Agriculture, which protects
countries using subsidies that comply with the agreement from challenges
under other WTO agreements.

64Randy Schnepf and Jasper Womach, Potential Challenges to U.S. Farm
Subsidies in the WTO: A Brief Overview, CRS (Oct. 25, 2006), 5, table 2.

65For a discussion of the possible need for changes to U.S. export
subsidy, food aid, and domestic support programs as a result of proposals
under discussion in Doha talks, see Charles E. Hanrahan and Randy Schnepf,
WTO Doha Round: The Agricultural Negotiations, CRS (Sept. 12, 2006),
26-28.

66USDA FAS Fact Sheet, The Importance of Agricultural Trade (February
2006).

67According to CRS, although Congress passed legislation authorizing
elimination of the Step 2 program, which was found to be a prohibited
export subsidy, Brazil has pressed for further reductions in U.S. cotton
support in response to the panel ruling. As a result, according to CRS,
additional permanent modifications to U.S. farm programs may still be
needed to fully comply with the "actionable subsidies" portion of the WTO
ruling, most likely in the context of the 2007 farm bill. See Ralph M.
Chite, Agricultural Issues in the 109th Congress, CRS (Oct. 6, 2006).

68Randy Schnepf and Jasper Womach, Potential Challenges to U.S. Farm
Subsidies in the WTO, CRS (Oct. 25, 2006).

69American Farmland Trust, Agenda 2007: A New Framework and Direction for
U.S. Farm Policy (Washington, D.C.: May 8, 2006).

70The Chicago Council on Global Affairs, Modernizing America's Food and
Farm Policy: Vision for a New Direction, Report of the Agricultural Task
Force, Catherine Bertini, August Schumacher Jr., and Robert L. Thompson,
Co-chairs (2006).

71"Whole-farm revenue" programs have been proposed as a new form of income
stabilization that would not be linked to production of particular
commodities and, thus, less production and trade distorting. One such
example of a whole-farm revenue program, revenue insurance, is an
insurance program offered to farmers that pays indemnities on the basis of
revenue shortfalls.

72David Orden, "Feasibility of Farm Program Buyouts: Is It a Possibility
for U.S. Sugar?" Presented at the third annual North American Agrifood
Market Integration Workshop, "Achieving NAFTA Plus," Calgary, Canada (May
31-June 2, 2006).

73GAO, 21st Century Challenges: Re-examining the Base of the Federal
Government, [136]GAO-05-325SP (Washington, D.C.: February 2005).

74As previously noted, agriculture is one of the most heavily protected
and distorted economic sectors across the globe, and the United States is
by no means the only country facing challenges in designing and managing
efficient and fair programs. Indeed, earlier GAO work on trade topics,
such as export credits and the role of foreign state-trading enterprises
in undermining U.S. exports, highlighted such issues.

           We are sending copies of this report to interested congressional
           committees; the U.S. Trade Representative; and the Secretaries of
           Agriculture, Commerce, and State. We will also make copies
           available to others upon request. In addition, this report will be
           available at no charge on the GAO Web site at
           http://www.gao.gov .

           If you or your staffs have any questions about this report, please
           contact me at (202) 512-4347 or [email protected] . Contact
           points for our Offices of Congressional Relations and Public
           Affairs may be found on the last page of this report. GAO staff
           who made major contributions to this report are listed in appendix
           II.

           Loren Yager
			  Director, International Affairs and Trade
			  
			  Appendix I: Objectives, Scope, and Methodology

           In this report, we assess (1) the overall status of the Doha
           Development Round now and the progress that had been made prior to
           and since the breakdown of the talks, (2) the factors and
           substantive divisions among key World Trade Organization (WTO)
           members that led to an environment of deadlock and the eventual
           suspension of the negotiations, and (3) the possible economic and
           other ramifications if the round is not concluded satisfactorily.
           We conducted this work upon specific request by Congress. GAO is
           not a policymaking agency of the U.S. government and thus is not
           authorized to take a position on the Doha Round overall or on
           specific issues related to the round.

           We followed the same overall methodology to complete all three of
           our objectives. We obtained, reviewed, and analyzed documents from
           a variety of sources. From the WTO, we analyzed the 2001 Doha
           ministerial declaration; the Doha work program decision adopted by
           the General Council on August 1, 2004, known as the "July
           framework agreement"; the Hong Kong ministerial conference
           declaration from December 2005; statements by the WTO
           Director-General and negotiating group chairs; and negotiating
           proposals and other documents from WTO member countries. From U.S.
           government agencies and foreign country officials, we obtained
           background information regarding negotiating proposals and
           positions. A variety of international organizations, experts,
           former officials, private sector interests, and other actors have
           commented on Doha's difficulties, and we have monitored scholarly
           journals and other sources for these perspectives. We also
           obtained information on day-to-day developments from reputable
           trade publications.

           To assess the status of the Doha negotiations, we met with
           officials from various U.S. government agencies, including the
           Office of the U.S. Trade Representative and the Departments of
           Agriculture, Commerce, and State, to obtain information on
           progress in the negotiations and on specific issues and factors
           affecting the negotiations. Furthermore, we attended conferences
           and seminars that discussed these issues, such as those sponsored
           by the Carnegie Endowment for International Peace, the German
           Marshall Fund of the United States, the Global Business Dialogue,
           and the Washington International Trade Association.

           To assess what led to the environment of deadlock and the eventual
           suspension of the negotiations, we talked with more than 35
           officials from the major negotiating parties in Geneva,
           Switzerland, and Washington, D.C., including officials from the
           United States; the European Union; and the developing countries of
           Bangladesh, Benin, Brazil, China, India, Indonesia, Kenya, South
           Africa, and Zambia, about their respective proposals and views
           regarding why the negotiations collapsed. Second, since the
           negotiations broke down over agriculture, we interviewed
           agricultural economists who are experts in international trade and
           domestic farm policy, and who are familiar with the issues of
           market access and domestic support. In addition, we met with
           officials from U.S. industry groups such as the National Corn
           Growers Association, the American Farm Bureau Federation, the
           National Cattlemen's Beef Association, and the National
           Association of Manufacturers. Third, we surveyed current research
           on major proposals in the negotiations, including analyses
           contained in academic journal articles, government reports,
           nongovernmental organization reports, and press releases. Finally,
           we attended several conferences that pertained to the economic
           analyses of agriculture and development aspects of the
           negotiations.

           To assess the possible economic and other ramifications if the
           round was not resumed in a short period of time or if the talks
           could not be successfully concluded, we discussed these potential
           effects with the range of officials and experts previously
           mentioned. For the economic effects, specifically, we reviewed the
           economics literature and identified specific studies that
           calculated the estimated effects of potential Doha agreements.
           Building on our analysis from prior reports, we identified
           specific recent studies that included both (1) likely
           liberalization scenarios based on the status of the negotiations
           at the time (rather than studies that just examined the potential
           effects from complete liberalization of all trade barriers) and
           (2) the most recent tariff and other trade regime data that take
           into account the range of preferential trade programs that
           currently exist. We then compared these studies and the range of
           potential economic effects from various Doha scenarios. To examine
           the other ramifications, including the potential effects on the
           stature of the world trading system and the implications for
           domestic legislation, including the Trade Promotion Authority and
           the 2007 Farm Bill, we discussed the relationship of Doha and the
           implications of its failure with country representatives, WTO
           officials, and other trade experts (previously mentioned). We also
           reviewed documents and studies that discuss these implications.
           However, because the actual effects of a Doha failure are unknown
           and determined by a wide range of factors, we do not predict or
           measure the full ramifications of a collapse in the negotiations.
           Rather, we identify those areas indicated by our analysis that
           could potentially be affected.

           With the assistance of the Office of the United States Trade
           Representative and the State Department, we traveled in September
           2006 to WTO headquarters in Geneva. We met with WTO member country
           officials, including those from Australia, Bangladesh, Benin,
           Brazil, China, the European Union, India, Indonesia, Japan, Kenya,
           South Africa, and Zambia. We also met with WTO officials,
           including a Deputy Director-General and the Director of
           Agriculture. At the U.S. mission, we met with officials overseeing
           the agriculture, industrial (nonagricultural) market access, and
           service negotiations, as well as with the Deputy Chief of Mission.
           We also met with organizations and groups following the
           negotiations, such as the International Centre for Trade and
           Sustainable Development and Oxfam. During our trip, we also
           attended the WTO Public Forum. Upon returning from our trip, in
           October 2006, we briefed House Ways and Means Committee staff on
           the status of the Doha negotiations.

           We performed our work from June 2006 through February 2007 in
           accordance with generally accepted government auditing standards.
			  
			  Appendix II: GAO Contact and Staff Acknowledgments
			  
			  GAO Contact
			  
			  Staff Acknowledgments

           Loren Yager, (202) 512-4347 or [email protected]

           In addition to the individual named above, the following persons
           made major contributions to this report: Kim Frankena, Assistant
           Director, and Venecia Rojas Kenah, Analyst-in-Charge, as well as
           Ann Baker, Karen Deans, Barbara El Osta, Marisela Perez, and
           Timothy Wedding. The team benefited from the expert advice and
           assistance of Ron Maxon, Paige Gilbreath, and Carol Bray as well
           as Martin de Alteriis and Ernie Jackson.
			  
			  Related GAO Products
			  
			  Commodities

           Dairy Industry: Information on Milk Prices, Factors Affecting
           Prices, and Dairy Policy Options. [58]GAO-05-50 . Washington,
           D.C.: December 29, 2004.

           Peanut Program: Potential Effects of Proposed Farm Bill on
           Producers, Consumers, Government, and Peanut Imports and Exports.
           [59]GAO-01-1135R . Washington, D.C.: September 26, 2001.

           Dairy Industry: Estimated Economic Impacts of Dairy Compacts.
           [60]GAO-01-866 . Washington, D.C.: September 14, 2001.

           Dairy Industry: Information on Milk Prices and Changing Market
           Structure. [61]GAO-01-561 . Washington, D.C.: June 15, 2001.

           Fluid Milk: Farm and Retail Prices and the Factors That Influence
           Them. [62]GAO-01-730T . Washington, D.C.: May 14, 2001.

           Dairy Products: Imports, Domestic Production, and Regulation of
           Ultra-Filtered Milk. [63]GAO-01-326 . Washington, D.C.: March 5,
           2001.

           Sugar Program: Supporting Sugar Prices Has Increased Users' Costs
           While Benefiting Producers. [64]GAO/RCED-00-126 . Washington,
           D.C.: June 9, 2000.

           Sugar Program: Changing the Method for Setting Import Quotas Could
           Reduce Cost to Users. [65]GAO/RCED-99-209 . Washington, D.C.: July
           26, 1999.

           Commodity Programs: Impact of Support Provisions on Selected
           Commodity Prices. [66]GAO/RCED-97-45 . Washington, D.C.: February
           21, 1997.

           Agricultural Marketing: U.S. Cotton Market Before and After Import
           Assessments. [67]GAO/RCED-96-49 . Washington, D.C.: January 22,
           1996.

           Cotton Program: Costly and Complex Government Program Needs to Be
           Reassessed. [68]GAO/RCED-95-107 . Washington, D.C.: June 20, 1995.

           Sugar Program: Impact on Sweetener Users and Producers.
           [69]GAO/T-RCED-95-204 . Washington, D.C.: May 24, 1995.

           Rice Program: Government Support Needs to Be Reassessed.
           [70]GAO/RCED-94-88 . Washington, D.C.: May 26, 1994.

           Sugar Program: Changing Domestic and International Conditions
           Require Program Changes. [71]GAO/RCED-93-84 . Washington, D.C.:
           April 16, 1993.

           Cotton Program: The Marketing Loan Has Not Worked.
           [72]GAO/RCED-90-170 . Washington, D.C.: July 31, 1990.
			  
			  Farm Program Payments and Payment Limitations

           Farm Program Payments: USDA Should Correct Weaknesses in
           Regulations and Oversight to Better Ensure Recipients Do Not
           Circumvent Payment Limitations. [73]GAO-04-861T . Washington,
           D.C.: June 16, 2004.

           Farm Program Payments: USDA Needs to Strengthen Regulations and
           Oversight to Better Ensure Recipients Do Not Circumvent Payment
           Limitations. [74]GAO-04-407 . Washington, D.C.: April 30, 2004.

           Farm Programs: Information on Recipients of Federal Payments.
           [75]GAO-01-606 . Washington, D.C.: June 15, 2001.

           Farm Programs: Observations on Market Loss Assistance Payments.
           [76]GAO/RCED-00-177R . Washington, D.C.: June 30, 2000.

           U.S. Department of Agriculture: Marketing Assistance Loan Program
           Should Better Reflect Market Conditions. [77]GAO/RCED-00-9 .
           Washington, D.C.: November 23, 1999.
			  
			  Conservation

           Agricultural Conservation: USDA Should Improve Its Management of
           Key Conservation Programs to Ensure Payments Promote Environmental
           Goals. [78]GAO-07-370T . Washington, D.C.: January 17, 2007.

           USDA Conservation Programs: Stakeholder Views on Participation and
           Coordination to Benefit Threatened and Endangered Species and
           Their Habitats. [79]GAO-07-35 . Washington, D.C.: November 15,
           2006.

           Agricultural Conservation: USDA Should Improve Its Process for
           Allocating Funds to States for the Environmental Quality
           Incentives Program. [80]GAO-06-969 . Washington, D.C.: September
           22, 2006.

           Conservation Security Program: Despite Cost Controls, Improved
           USDA Management Is Needed to Ensure Proper Payments and Reduce
           Duplication with Other Programs. [81]GAO-06-312 . Washington,
           D.C.: April 28, 2006.

           Environmental Information: Status of Federal Data Programs That
           Support Ecological Indicators. [82]GAO-05-376 . Washington, D.C.:
           September 2, 2005.

           Agricultural Conservation: USDA Should Improve Its Methods for
           Estimating Technical Assistance Costs. [83]GAO-05-58 . Washington,
           D.C.: November 30, 2004.

           Columbia River Basin: A Multilayered Collection of Directives and
           Plans Guides Federal Fish and Wildlife Activities. [84]GAO-04-602
           . Washington, D.C.: June 4, 2004.

           Agricultural Conservation: USDA Needs to Better Ensure Protection
           of Highly Erodible Cropland and Wetlands. [85]GAO-03-418 .
           Washington, D.C.: April 21, 2003.

           Agricultural Conservation: Survey Results on USDA's Implementation
           of Food Security Act Compliance Provisions. [86]GAO-03-492SP .
           Washington, D.C.: April 21, 2003.

           Livestock Agriculture: Increased EPA Oversight Will Improve
           Environmental Program for Concentrated Animal Feeding Operations.
           [87]GAO-03-285 . Washington, D.C.: January 16, 2003.

           Agricultural Conservation: Survey of USDA State Technical
           Committee Members. [88]GAO-02-371SP . Washington, D.C.: March 1,
           2002.

           Agricultural Conservation: State Advisory Committees' Views on How
           USDA Programs Could Better Address Environmental Concerns.
           [89]GAO-02-295 . Washington, D.C.: February 22, 2002.

           Natural Resources Conservation Service: Additional Actions Needed
           to Strengthen Program and Financial Accountability.
           [90]GAO/RCED-00-83 . Washington, D.C.: April 7, 2000.
			  
			  Crop and Revenue Insurance

           Crop Insurance: More Needs to Be Done to Reduce Program's
           Vulnerability to Fraud, Waste, and Abuse. [91]GAO-06-878T .
           Washington, D.C.: June 15, 2006.

           Crop Insurance: Actions Needed to Reduce Program's Vulnerability
           to Fraud, Waste, and Abuse. [92]GAO-05-528 . Washington, D.C.:
           September 30, 2005.

           Crop Insurance: USDA Needs to Improve Oversight of Insurance
           Companies and Develop a Policy to Address Any Future Insolvencies.
           [93]GAO-04-517 . Washington, D.C.: June 1, 2004.

           Crop Insurance: USDA's Progress in Expanding Insurance for
           Specialty Crops. [94]GAO/RCED-99-67 . Washington, D.C.: April 16,
           1999.

           Crop Revenue Insurance: Problems With New Plans Need to Be
           Addressed. [95]GAO/RCED-98-111 . Washington, D.C.: April 29, 1998.

           Crop Insurance: Opportunities Exist to Reduce Government Costs for
           Private-Sector Delivery. [96]GAO/RCED-97-70 . Washington, D.C.:
           April 17, 1997.
			  
			  Food Aid

           Foreign Assistance: USAID Completed Many Caribbean Disaster
           Recovery Activities, but Several Challenges Hampered Efforts.
           [97]GAO-06-645 . Washington, D.C.: May 26, 2006.

           Maritime Security Fleet: Many Factors Determine Impact of
           Potential Limits on Food Aid Shipments. [98]GAO-04-1065 .
           Washington, D.C.: September 13, 2004.

           Foreign Assistance: Observations on USAID's Commodity Import
           Program in Egypt. [99]GAO-04-846T . Washington, D.C.: June 17,
           2004.

           Foreign Assistance: Lack of Strategic Focus and Obstacles to
           Agricultural Recovery Threaten Afghanistan's Stability.
           [100]GAO-03-607 . Washington, D.C.: June 30, 2003.

           Foreign Assistance: Sustained Efforts Needed to Help Southern
           Africa Recover from Food Crisis. [101]GAO-03-644 . Washington,
           D.C.: June 25, 2003.

           Food Aid: Experience of U.S. Programs Suggests Opportunities for
           Improvement. [102]GAO-02-801T . Washington, D.C.: June 4, 2002.

           Foreign Assistance: Global Food for Education Initiative Faces
           Challenges for Successful Implementation. [103]GAO-02-328 .
           Washington, D.C.: February 28, 2002.

           Foreign Assistance: U.S. Food Aid Program to Russia Had Weak
           Internal Controls. [104]GAO/NSIAD/AIMD-00-329 . Washington, D.C.:
           September 29, 2000.

           Foreign Assistance: Donation of U.S. Planting Seed to Russia in
           1999 Had Weaknesses. [105]GAO/NSIAD-00-91 . Washington, D.C.:
           March 9, 2000.

           Foreign Assistance: North Korean Constraints Limit Food Aid
           Monitoring. [106]GAO/T-NSIAD-00-47 . Washington, D.C.: October 27,
           1999.

           Foreign Assistance: North Korea Restricts Food Aid Monitoring.
           [107]GAO/NSIAD-00-35 . Washington, D.C.: October 8, 1999.
			  
			  Agricultural Trade

           Trade Adjustment Assistance: New Program for Farmers Provides Some
           Assistance, but Has Had Limited Participation and Low Program
           Expenditures. [108]GAO-07-201 . Washington, D.C.: December 18,
           2006.

           Analysis of Data for Exports Regulated by the Department of
           Commerce. [109]GAO-07-197R . Washington, D.C.: November 13, 2006.

           International Trade: Customs' Revised Bonding Policy Reduces Risk
           of Uncollected Duties, but Concerns about Uneven Implementation
           and Effects Remain. [110]GAO-07-50 . Washington, D.C.: October 18,
           2006.

           Export Promotion: Trade Promotion Coordinating Committee's Role
           Remains Limited. [111]GAO-06-660T . Washington, D.C.: April 26,
           2006.

           International Trade: Further Improvements Needed to Handle Growing
           Workload for Monitoring and Enforcing Trade Agreements.
           [112]GAO-05-537 . Washington, D.C.: June 30, 2005.

           International Trade: U.S. Agencies Need Greater Focus to Support
           Mexico's Successful Transition to Liberalized Agricultural Trade
           under NAFTA. [113]GAO-05-272 . Washington, D.C.: March 25, 2005.

           Free Trade Area of the Americas: Missed Deadline Prompts Efforts
           to Restart Stalled Hemispheric Trade Negotiations. [114]GAO-05-166
           . Washington, D.C.: March 18, 2005.

           Tobacco Exports: USDA's Foreign Agriculture Service Lacks Specific
           Guidance for Congressional Restrictions on Promoting Tobacco.
           [115]GAO-03-618 . Washington, D.C.: May 30, 2003.

           World Trade Organization: First-Year U.S. Efforts to Monitor
           China's Compliance. [116]GAO-03-461 . Washington, D.C.: March 31,
           2003.

           Free Trade Area of the Americas: Negotiators Move Toward Agreement
           That Will Have Benefits, Costs to U.S. Economy. [117]GAO-01-1027 .
           Washington, D.C.: September 7, 2001.

           International Trade: Concerns Over Biotechnology Challenge U.S.
           Agricultural Exports. [118]GAO-01-727 . Washington, D.C.: June 15,
           2001.

           Agricultural Trade: Impacts of the Andean Trade Preference Act on
           Asparagus Producers and Consumers. [119]GAO-01-315 . Washington,
           D.C.: March 15, 2001.

           World Trade Organization: U.S. Experience in Dispute Settlement
           System: The First Five Years. [120]GAO/T-NSIAD/OGC-00-202 .
           Washington, D.C.: June 20, 2000.

           World Trade Organization: Progress in Agricultural Trade
           Negotiations May Be Slow. [121]GAO/ T-NSIAD-00-122 . Washington,
           D.C.: March 7, 2000.

           U.S.-Mexico Border: Better Planning, Coordination Needed to Handle
           Growing Commercial Traffic. [122]GAO/NSIAD-00-25 . Washington,
           D.C.: March 3, 2000.

           Pork Industry: Trade Barriers and Other Factors Limit Federal
           Programs' Potential to Increase Exports. [123]GAO/RCED-00-41 .
           Washington, D.C.: February 1, 2000.
			  
			  Doha Round Negotiations

           World Trade Organization: Limited Progress at Hong Kong
           Ministerial Clouds Prospects for Doha Agreement. [124]GAO-06-596 .
           Washington, D.C.: April 26, 2006.

           World Trade Organization: Global Trade Talks Back on Track, but
           Considerable Work Needed to Fulfill Ambitious Objectives.
           [125]GAO-05-538 . Washington, D.C.: May 31, 2005.

           World Trade Organization: Cancun Ministerial Fails to Move Global
           Trade Negotiations Forward; Next Steps Uncertain. [126]GAO-04-250
           . Washington, D.C.: January 15, 2004.

           World Trade Organization: Early Decisions Are Vital to Progress in
           Ongoing Negotiations. [127]GAO-02-879 . Washington, D.C.:
           September 4, 2002.
			  
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(320422)

www.gao.gov/cgi-bin/getrpt?GAO-07-379 .

To view the full product, including the scope
and methodology, click on the link above.

For more information, contact Loren Yager at (202) 512-4347 or
[email protected].

Highlights of [138]GAO-07-379 , a report to congressional requesters

March 2007

WORLD TRADE ORGANIZATION

Congress Faces Key Decisions as Efforts to Reach Doha Agreement Intensify

President Bush has identified the success of global trade talks launched
in Doha, Qatar, in November 2001 as one of the United States' top trade
policy priorities. Known as the Doha Development Agenda, the talks are an
important means of spurring global growth and development. Completing the
talks in 2006 was considered essential for an agreement to qualify for
streamlined congressional consideration under the U.S. Trade Promotion
Authority. However, the talks collapsed in late July 2006 in the face of
wide differences over the extent of agricultural reform and how best to
promote economic development in poor countries. Efforts to break the
deadlock continue.

Given the tenuous state of this central plank of U.S. trade policy, GAO
updated its series of prior reports. In this report, we assess (1) the
overall status of the Doha Round negotiations now and the progress that
had been made prior to and since the breakdown of the talks, (2) the
substantive divisions among key World Trade Organization (WTO) members
that led to an environment of deadlock and the eventual suspension of the
negotiations, and (3) the possible economic and other ramifications if the
round is not concluded satisfactorily.

The Doha talks remain deadlocked, and their ultimate success is uncertain.
However, the recent resumption in negotiations and renewal decisions
facing Congress in 2007 create a window for breaking the deadlock.

           o Regarding agriculture, WTO members differ sharply over how much
           to reduce barriers that distort production and trade, namely
           import restrictions such as tariffs (import taxes) and government
           payments and other "domestic support" to farmers. As the world's
           largest agricultural exporter, the United States is seeking to
           sharply reduce foreign barriers to U.S. exports and has insisted
           on attaining greater promise of commensurate market access gains
           before agreeing to further cut its trade-distorting payments to
           U.S. farmers. The European Union (EU) is among the major
           agricultural players that have resisted this, and it has joined
           forces with developing countries in demanding U.S. subsidy cuts
           far beyond those already offered. In particular, the EU and
           developing countries have pressed the United States to cut
           subsidies below current spending and to disavow certain programs
           that could lead to future increases.

           o Regardingdevelopment, members remain divided over how the WTO
           can best promote economic growth and reduce poverty in the
           developing countries. Despite their diverse interests, developing
           countries maintain solidarity in pressing myriad demands for
           special treatment that would shield them from liberalizing their
           own imports. The United States believes such liberalization is not
           only critical to fostering development, but needed for WTO members
           to maximize the likely economic gains to both developed and
           developing countries, and to offset anticipated losses for some
           countries.

Participants and observers offer mixed views on the implications if Doha
is not successfully concluded. Some warn of forgone economic gains, a
weakened global trading system, and a more difficult U.S. trade policy
environment. Others suggest that the ramifications are much more limited.
Congress faces renewal decisions in 2007 on two key pieces of
legislation-- Trade Promotion Authority and the Farm Bill--that could spur
a breakthrough and be pivotal to the trading system and the future U.S.
role in it.

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