WTO Director General Pascal Lamy announced on Monday that the entire Doha Round of multilateral trade negotiations has been suspended indefinitely. The move came after key trade ministers were unable to reach agreement in talks over the weekend on trade in agriculture. The suspension is likely to have a number of significant effects.

The most direct result is that the many trade liberalization initiatives associated with the Doha Round will be put on hold for the time being. Benefits such as duty-free/quota-free treatment for least-developed countries, the elimination of agricultural export subsidies and increases in aid for trade assistance had been agreed upon but were dependent on the implementation of a final agreement. Efforts to further reduce tariffs and non-tariff barriers for consumer, industrial and farm goods, and to improve market access for services, will be delayed. And WTO talks on issues like reforming trade remedy laws and improving customs processes and other trade facilitation measures will come to a halt.

Trade policy in the United States and other countries could also be affected. In the U.S., the Bush administration may accelerate its efforts to conclude bilateral free trade agreements before trade promotion authority, which allows the White House to negotiate trade pacts that Congress may either approve or reject but not amend, expires on July 1, 2007. FTA talks are in various states of play with Thailand, Panama, Malaysia, South Korea and the United Arab Emirates, and it is possible that additional FTA negotiations will be announced. Other countries, as well as blocs such as the European Union, Mercosur and ASEAN, may turn their attention to FTAs as well if it seems apparent that the WTO process will not move forward for some time.

Regardless of specifics, the extent of any impacts will likely depend on how long the negotiations are suspended. It is possible that, after the annual summer vacations and fall election seasons, WTO members will decide that the price of failure is too high and seek to resume the round; after all, this is a consistent historical pattern in major multilateral trade talks. On the other hand, evolving circumstances or events could conspire to delay the WTO negotiations for months or years.

John S. Connor, Inc. will continue to monitor this issue and update you as more information becomes available.