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EU biz worries about lost WTO shot

European businesses fear they could miss a rare chance to lower barriers to their fastest-growing markets.

india Updated: Apr 13, 2006 11:33 IST

European businesses fear they could miss a rare chance to lower barriers to their fastest-growing markets as the World Trade Organisation struggles to conclude its Doha round.

From carmakers to insurers, Europe's blue chips welcomed the round's 2001 launch in the Qatari capital as their best shot at the booming economies of India, Brazil, China and beyond.

But as the talks enter probably their last few months, hopes that they will provide a big boost to earnings have faded.

"Doha could end without any result," said Hanns Glatz, a delegate to the management board of DaimlerChrysler.

"For us, that would not worsen the situation immediately but it would have an enormous impact on the credibility of the WTO, which up to now has been one of the few worldwide systems to work effectively," he said.

A Doha flop would deprive the German carmaker of a chance to simplify the way it makes cars in assembly plants in countries such as Thailand, Indonesia and Malaysia which are fenced off by high import tariffs and other trade barriers.

"Obviously, if we could have just one product assembled in each of those countries it would make sense," Glatz said.

European service providers say they too stand to get little or no new access to developing countries.

Instead, progress is likely to be limited to giving legal force to tariff cuts and other measures already in place, said Pascal Kerneis, head of the European Services Forum (ESF) grouping banks, insurers, telecoms firms and other companies.

"We are not happy with that. But we face the reality that it is all we are likely to get," Kerneis said.

The American Chamber of Commerce to the European Union expressed "extreme concern" on Wednesday the round could fail.

But European employers' group UNICE was less pessimistic.

"We came here thinking ... there was a real prospect of failure," UNICE head Ernest-Antoine Seilliere said after meeting WTO officials in Geneva. "What we heard is generally speaking that there were still some weighty chances for success, that things were moving under the surface more than one thought."

"Game not lost"

Some European firms have begun to pin hopes on bilateral and regional trade negotiations between the EU and Asian countries to make up for lost time once the Doha round is over.

ESF's Kerneis said governments seemed to be "keeping their ammunition off the table" pending bilateral talks after Doha.

As well as moving more quickly than the unwieldy WTO, with its 149 members, such talks would not be hindered by concerns of developing countries that opening up their markets to the EU would leave them exposed to a flood of imports from China.

For now, the Doha round, with its potential to cut trade barriers worldwide in one swoop, remains the EU's priority.

Brussels has faced criticism from some European business leaders for making too timid an offer on agricultural trade to unlock the kind of concessions it wants from others.

But some business representatives say they understand the strategy of EU trade chief Peter Mandelson not to sweeten the farm offer until more is on the table for Europe.

They say last-minute haggling could yet produce a suitable deal before July, the deadline for the WTO's main thrust.

"The game is not lost. We want to keep ambition high," said Hubert Mandery, a senior vice president at German chemicals group BASF, adding he was "slightly optimistic".

With tariffs for importing chemicals into developed countries at 2-3 per cent, reducing the 15-40 per cent tariffs in emerging markets represents the potential big gain, along with an easing of many non-tariffs barriers (NTBs) such as export taxes, import licences and inspections, he said.

Some European sectors hope Doha can help them make progress on the "nitty-gritty" of doing business in the US market.

Reinsurance firms face a barrier in the form of collateral requirements in the United States. Telecoms operators are unhappy with ownership restrictions for non-US investors.

But Asia and South America remain Europe's big goals.

"Exporters despair of being able to get products into some of those countries," said William Lakin, secretary-general of European textile producers association Euratex, citing the combination of high tariffs and other barriers.

The sector exports about 40 billion euros a year from the EU but that is only about 20 per cent of its turnover.

Some European business representatives fear the Doha round could actually damage their prospects.

Car executives fret that China and India may negotiate continued protection for their local automakers which are on course to become global exporters soon.

"It would be totally unfair if, once they become competitive and have complete access to our market, we cannot export cars or components to their markets," said Michel Bricout, trade director at the European Automobile Manufacturers Association, noting the Doha round was likely to last for a decade.