Deadlock. That’s the current state of trade negotiations in the lead up to a crucial World Trade Organisation meeting in Hong Kong from 13-18 December. Expect “rude battles and fierce negotiations” during the meeting, writes Demba Moussa Dembele, as the United States and European Union try their utmost to wrangle a deal that will give them license to loot. In the face of intense pressure, African trade ministers must remember the welfare of their people, stand firm and resist the heavy-handed tactics they will be subjected to, Dembele writes.

In just a few days, Hong Kong will host one of the most important meetings of the World Trade Organisation (WTO). After the failure of the last ministerial meeting in Cancun (Mexico) two years ago, there are fears that history may repeat itself, because so far there is no consensus on some of the key issues to be discussed. The Draft Declaration issued by the Director General on November 26, 2005 and revised on December 2, 2005, has been criticized by several developing countries as being biased in favor of developed countries in many of the issues under negotiation, notably on services and industrial tariffs.

For African and other developing countries the stakes are clear: will this round be a real development round or will it be subverted by developed countries, notably the United States and the European Union (EU), to push for more liberalization and the opening up of developing countries’ economies to multinational corporations? Indeed, the current round of negotiations, called the Doha Development Round (DDR), was supposed to foster development and give more attention to issues of interest to developing countries. In particular, it was supposed to correct the egregious inequities and imbalances of the Uruguay Round Agreement on agriculture which allowed industrial countries to increase their support for their farmers, leading to a dumping of subsidized products on developing countries’ markets and to big distortions in the world prices of agricultural products.

But the Cancun fiasco and the current impasse illustrate the gap between developing and industrial countries regarding the interpretations of the Doha Round. The major sticking points of the negotiations include agricultural subsidies by developed countries, liberalization of the services sector and non-agricultural market access (NAMA).

Over the last two years, African countries have tried to harmonize their positions so as to strengthen their solidarity and defend more effectively their interests. This is especially the case for African least developed countries (LDCs) which joined other LDCs to raise their specific concerns. In their last meeting held in Arusha (Tanzania) on November 24, 2005, African trade ministers issued a statement called the Arusha Development Benchmarks for the 6th WTO Ministerial in Hong Kong, in which they exposed their views on some of the key issues to be discussed in Hong Kong.

Agricultural subsidies

They stressed the inadequacy of the proposals made so far on agricultural subsidies, which are one of the most contentious issues in the current negotiations. As is well known, cotton subsidies are the best illustration of the inequities and injustice inherent in the world trading system. The United States, which controls around 40 percent of the market, spends between $3 and $4 billion annually to support 25,000 farmers. This has had the effect of depressing cotton prices in world markets, hurting some 10 to 11 million African farmers. For African countries, the elimination of agricultural subsidies has become one of the key tests of the sincerity of developed countries to correct the imbalances that characterize the world trading system. In their statement, African trade ministers insist that agricultural subsidies be phased out by the year 2010 and call for the removal of all other structural distortions.

Given the formidable pressure from African and other developing countries on agricultural issues and the fear of another failure, the United States and Europe are maneuvering to shift the blame to developing countries. Both have made superficial concessions recently aimed at ‘meeting’ developing countries’ demands. For instance, on October 10, 2005, the United States issued a proposal indicating that it is ready to slash its agricultural subsidies by 60%. However the proposal is conditional on the EU and Japan agreeing to slash their subsidies by percentages, already rejected by both. In other words, the US proposal leads nowhere. On the other hand, the European Union, while criticizing the US proposal as ‘unrealistic’ and not feasible, has put on the table a proposal of its own, which puts the onus on the US.

Industrial tariffs

African trade ministers insist that obligations of African countries in this area should be commensurate with the continent’s development level and that they should be granted flexibilities and retain policy space. Moreover, any appropriate formula should allow Africa to pursue development objectives, such as industrial policy, employment creation and product diversification.

This position contrasts with developed countries’ push for drastic tariff reduction and rapid liberalization of industrial markets. The satisfaction of these demands would have a devastating impact on African economies. Already, crippled by structural adjustment programs, the remaining African industrial base would be eliminated and industrialization would be put on hold for an indefinite period. With little industrial prospects, Africa would attract ever fewer FDIs, except in the mining and extractive industries, which would reinforce the continent’s specialization in primary products. Industrial impasse will translate into the acceleration of the ‘brain drain’, further clouding Africa’s development prospects. Therefore, African countries should not heed the call for significant tariff concessions. They should retain these tariffs as a development tool.

Trade in services (GATS)

In this area, African trade ministers have rejected the call for rapid liberalization and the introduction of new approaches to the GATS framework. They have reiterated Africa’s right to regulate the services sector, to open up and liberalize fewer sectors in line with its development level and priorities. African resistance in this area is strongly echoed by other developing and emerging countries.

To understand the stakes in the services trade, one must keep in mind that they permeate all aspects of economic, social and cultural development. They range from education to health, from transportation to housing, from banking services to trash collection. Trade in services accounts for more than 25 percent of world trade and is growing rapidly. In several developed countries, services account for about two thirds of economic activity and over half of the world economy.

Therefore, liberalization in trade in services would represent a tremendous opportunity to boost these countries’ economies and pave the way for foreign control of key sectors in developing countries, as already is the case in many African countries. Indeed, a further liberalization in this sector would deal a major blow to African development prospects since this would lead to market delivery of many of these services, making them inaccessible to the overwhelming majority of the population. Moreover, liberalization in services would increase the role and power of foreign investors, thus hampering or severely limiting state-led development strategies. Furthermore, this would reinforce the current division of labor. In light of this, African countries are right in opposing further liberalization and the opening up of their services sector. They must have the right to use them as development tools under the control of national authorities to serve national development objectives.

The African agenda in Hong Kong

In light of the above, for African countries, a successful conclusion of the Hong Kong meeting should mean the satisfaction of the following:

- Removal of structural distortions in agricultural goods markets as a result of industrialized countries’ policies;

- The sovereign right to use industrial tariffs and other instruments to pursue their development objectives, especially to promote industrialization and full employment;

- Non-reciprocal market access and trade liberalization given the asymmetry between African and industrial countries in the world trading system;

- The right to protect their agricultural sector and use other policy tools to enhance the welfare of their citizens, in particular the right to food sovereignty;
- Set a firm deadline and a timetable for the elimination of agricultural subsidies, with transparent and verifiable monitoring mechanisms;

- Set up compensatory mechanisms for the trade losses due to those subsidies;

- Opposition to the imposition of services liberalization and the right to regulate services and liberalize them in line with their development priorities;

- Maximum flexibility in identifying special products (SP);

- Implementation of effective special and differential treatment (SDT) measures;

- Inclusiveness and transparency in the negotiation process.

Conclusion

Given the gap between African and other developing countries’ positions and those of developed countries, the Hong Kong Ministerial will give rise to rude battles and fierce negotiations. African countries will face an uphill battle. Agricultural issues will be the make or break issue in Hong Kong. As things stand now, only concessions by the US and the EU on subsidies and on other areas may break the deadlock and give a chance to the Doha Round.

The efforts of the United States and the European Union to convince world public opinion that they have made all the concessions needed have received the help of several leading multinational corporations. On November 8, 2005, CEOs and Chairmen from a number of these corporations published an editorial in the Financial Times, calling on WTO negotiators to conclude the negotiations “on time”! This elicited a swift response from several NGOs, which published a statement in the November 15, 2005 issue of the same Financial Times.

All this shows that governments of industrial countries and multinational corporations are united in pressuring developing countries into accepting to make concessions to further liberalize their economies to the detriment of their own populations. This campaign aims to intimidate developing countries’ negotiators and implicitly send the message that they would be to blame if the Hong Kong meeting were to fail. Intense pressure, heavy tactics and even physical threat may be applied by the US and the EU to get African and other developing countries’ negotiators to accept what they have refused since Cancun.

However, African trade ministers must stick with their demands and resist the pressures put on them. They must have in mind the fundamental interests of their countries and citizens. They must not fear another failure of the WTO, because Africa has nothing to lose. In reality, another failure of the WTO ministerial will further expose the hypocrisy, lies and injustices of the current trading system and illustrate its illegitimacy.

* Demba Moussa Dembele is Director, African Forum on Alternatives Dakar (Senegal)

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