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BRUSSELS -- Peter Mandelson, the European Union's top trade official, said he
wants a new round of global trade talks that will focus on energy, with the goal
of subjecting trade in oil and gas to the same "ordinary rules" as other goods.
Bringing energy trade and investment under the rules and enforcement
procedures of the World Trade Organization would, among other things, require
that producers provide free access to transit of such resources, Mr. Mandelson
said in an interview. That would include the sensitive issue of breaking
Russia's monopoly over access to its gas pipelines.
Mr. Mandelson's proposal shows how $70-a-barrel oil prices and narrow margins
of spare capacity have officials around the global scouring for ways to
rebalance the terms of energy trade in consumer nations' favor, energy analysts
say.
Any such new trade round would likely be years away, with the current Doha
talks on trade in agricultural products and other sectors still limping toward a
conclusion. Extending the WTO's reach over energy would also face enormous
hurdles. For one thing, producers are likely to see little to gain in opening up
distribution networks to competition.
However, already within the Doha talks, some countries have argued to extend
the WTO's coverage to oil-and-gas services -- the products are already covered
-- and energy officials say interest has been rising for some time in devising
better rules. A senior WTO official said he hadn't heard any proposal to launch
an energy-focused round of talks, though if made, "it would be given serious
thought."
Mr. Mandelson acknowledged that securing such a deal would be difficult. But
he said a global forum such as the WTO -- where most parties are at the table
and able to negotiate a wide range of demands in various sectors -- is the best
way to attain "structural change" in areas that states regard as fundamental to
their interests.
"The difficulty is that oil and gas are viewed by those that have them as a
national-security issue, as well as an economic good. And they are a source of
political strength," Mr. Mandelson said.
According to Fatih Birol, chief economist at the International Energy Agency,
the industrialized world's energy-market watchdog, there has been growing
discussion over how to eliminate energy-trade barriers as the traded portion of
oil and gas consumption increases. The IEA projects that the traded portion of
global oil production will rise from 50% today to 66% in 25 years, while traded
gas would rise from 18% to 33%.
The growth mainly reflects that oil and gas output in big industrialized
consumer nations is falling, requiring them to seek more energy resources from
producers in the Middle East, Russia and Venezuela. "Freer trade, as is always
the case, will empower the consumer," Mr. Birol said.
To entice producers to a deal, Mr. Mandelson suggests offering them more
security in their export markets and investment. Producers would benefit from a
freer flow of capital for investment and a reduction of protectionism in
consumer countries, which would enable them to buy assets there, Mr. Birol said.
Still, some important producers, such as Russia, aren't yet in the WTO, and
attempts to secure the same agreements in other forums have been less than
successful. In the early 1990s, negotiators worked to integrate the energy
markets of former Soviet states with Western Europe. The resulting Energy
Charter went into force in 1998, promoting cross-border energy investment and
freer access to pipelines and power grids. More than 50 countries have signed
up, but it has done little to free up Europe's tightly regulated energy markets.
Outside Europe, the biggest energy exporters don't have much incentive to
sign up amid today's super-high oil prices and outsize revenue inflows. Saudi
Arabia, the world's biggest oil exporter, joined the WTO in December as part of
its long-term strategy of diversifying its economy and attracting foreign
investment. But Riyadh has specifically ruled out any significant foreign
participation in its oil sector.
Meanwhile, trade negotiators were preparing for a critical session in the
Doha round next week. WTO chief Pascal Lamy said it was crucial that diplomats
agree to the blueprint of a deal as scheduled at the end of this month. A number
of trade diplomats, including some in the U.S. and Europe, have suggested they
may need until the end of July to agree to a new pact. "One more month...will
change nothing," he said.
Getting a quick deal looks tough. WTO diplomats yesterday released a draft
agriculture text for negotiation. The 74-page document was punctuated with 760
individual points that have yet to be agreed upon. A similar paper released
before the 1999 Seattle meeting contained 402 such entries. Some analysts said
the numerous areas of disagreement signaled that the round had come to a
standstill.
Mr. Lamy said that a large number of those issues might be easily dealt with
and that there is still hope for a deal on agriculture. He noted that political
leaders from Europe, the U.S. and major developing countries have recently
signaled their willingness to be flexible.