WTO: Celebrating the crumbs
“Who will stand up for the poor?” asks Percy F. Makombe from the Southern and Eastern African Trade Information Negotiations Institute in the light of the recently concluded World Trade Organisation meeting held in Hong Kong 13-18 December. Makombe writes: “By agreeing to the Hong Kong ministerial text, developing countries are accepting short term and insignificant gains in agriculture for the serious loss of the right to develop policy space and options.”
It was the English poet John Milton who made the famous statement that "They who have put out the people's eyes, reproach them of their blindness." Milton was of course speaking of other times. Yet after monitoring six days of World Trade Organisation (WTO) trade talks in Hong Kong between December 13-18, one could be forgiven for thinking that Milton was referring to these times.
After a week of haggling, 149 WTO countries gave their thumbs up to a statement that is supposed to keep alive the prospect of a global trade deal. There seemed to be a touch of inappropriateness when Chair, John Tsang, Hong Kong's Commerce Secretary, banged his gavel and authoritatively declared "It is so decided". Perhaps the appropriate words would have been “It is so ordered!” This way any pretensions to a consultative decision making process would be done away with.
According to the declaration, rich countries are supposed to end their export subsidies by 2013 and also speed up cuts to other forms of government farm support. On cotton, rich countries must phase out export subsidies next year (2006) but there is no agreement on subsidies for US farmers. Lowest Developing Countries (LDC) have also been made to believe that the “deal” is good for them as rich countries will allow duty and quota-free access for 97% of products from LDCs from 2008. These countries will be given special allowances for meeting market-opening requirements. The WTO has set April 30 as the deadline for the completion of negotiations in agriculture and industrial goods. Despite opposition by developing countries to negotiations on liberalisation of trade in services, the text commits them to begin negotiations in 2006.
There is very little from the ministerial declaration to suggest that the world’s richest countries are committed to helping developing countries. The declaration represents nothing more than an offering of mere crumbs at the table. In the area of agriculture, developing countries are urged to open their markets ostensibly so that free trade can take place, but in reality to give a place for rich countries to dump heavily subsidised agricultural products. Nowhere is this more evident than in the cotton issue for instance. An Oxfam report reveals that the US government subsidised its 25 000 cotton farmers to the tune of US$4.2 billion in 2004. This places the US farmers at an unfair advantage and enables them to take a 40% chunk of the global market. This has serious repercussions for millions of cotton farmers in Africa especially in Benin, Burkina Faso, Chad and Mali whose countries depend on cotton for almost half their exports. It borders on obscenity for the US government to give that kind of support to agribusiness and then preach the doctrine of free and fair trade to African farmers.
The promise by the declaration to eliminate cotton export subsidies in 2006 has been touted as an example that rich nations are willing to lose something in these negotiations. Yet to argue that way is an exercise in deception for two reasons. First, the European Union does not have cotton export subsidies. Second the US cannot claim to be doing anyone a favour by eliminating them because it is required to do so anyway to comply with a WTO panel ruling.
The deal that allows Least-Developed Countries to get duty-free, quota free access for 97% of exports from 2008 is as meaningless as it is worthless. This is not least because all the LDCs account for less than one per cent of world trade. Allowing unrestricted entry of their products in developing and developed countries’ markets is therefore inconsequential. This is more so given the fact that Japan for instance will not permit the entry of sugar, rice and fishery products into its market. EU farmers strongly lobby their governments not to permit the entry of beef and sugar in their countries. US considers textiles from Bangladeshi and Cambodia to be competitive and will therefore not grant duty and quota-free access to it. So we have a farcical situation where Cambodia can be granted duty and quota free access to the US market if it is selling Boeing 707 aeroplanes but not textiles. Where does Cambodia begin to get the money to manufacture a Boeing 707?
On Non Agricultural Market Access (NAMA) the text proposes the cutting of tariffs using the so-called ‘Swiss Formula’. While it is clear that this is the ‘preferred’ formula, what is not clear is what the coefficients for developed and developing countries will be like. Whatever the coefficient, there is no doubt that the formula will radically reduce tariffs thus exposing vulnerable industries in developing countries to aggressive and unfair competition.
Developing countries have agreed on the Swiss formula but have got nothing in terms of policy flexibility in the NAMA negotiations. Since developing countries have much higher tariffs than the rich countries, this means much larger tariff cuts by developing countries in terms of percentage points. Yet an ideal situation is one where developing countries with a weak and vulnerable industrial base should have the policy freedom and flexibility to choose their own commitments regarding which sector and at what rate of reduction their commitments are to be. The argument that competition from cheaper imports will induce local firms to be more competitive flies in the face of facts. The fact of the matter is that the developed countries of today industrialized under high tariff and import protection, and those countries that liberalized too fast suffered closure of local industries and job losses.
While there has been progress on negotiations on issues like agriculture and non-agricultural market access which are on the priority list of developed nations, there has been little or no movement on issues like the Special & Differential Treatment (S&D) which are of importance to developing countries. Countries are different and the same rules should not apply to all countries because they are in different stages of development. It is not fair to require countries to make concessions and undertake commitments that are inconsistent with their development. Only a satisfactory resolution of S&D treatment will contribute to the redress of the present imbalances in the multilateral trading system.
By agreeing to the Hong Kong ministerial text, developing countries are accepting short term and insignificant gains in agriculture for the serious loss of the right to develop policy space and options. The 2013 deadline for the elimination of export subsidies is not even a deadline. Further down, the text is very clear that the deadline “will be confirmed upon completion of the modalities…” This looks more like an exit strategy for the developed nations; it gives them space to explain why they have not met their commitments. In return for this shaky commitment, developing countries will be asked to open up some more. They will be asked not to protect their infant industries. Further down, they will be asked to privatise basic services like water and health leaving their citizens exposed to the vagaries of the market. All this for what?
Who will stand up for the poor? To question those who want to auction our lives is not only our right it is our duty. To challenge those who seek to commodify our lives is not only a necessity, it is our responsibility. It’s certainly not easy to fight big business and capital, but as has often been said, “Every journey begins with a single step.”
* Percy F. Makombe is an editorial board member of the Southern and Eastern African Trade Information Negotiations Institute.
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