Global IssuesWTO Meeting in Hong Kong, 2005
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13–18 December, 2005 saw hundreds of delegates and ministers descend upon Hong Kong for the 4th World Trade Organization (WTO) Ministerial meeting, one of the most important meetings in the world. Continuing from the earlier Doha round
(which was supposed to start off a round of talks on issues to help developing countries in world trade as it was recognized that the global trading system was unequal and unfair for most of the world), this meeting was billed as a Development Round.
However, the concerns from previous years remained, including the lack of transparency and democracy in the decision-making processes, and the power that the rich nations have over the poor to distort trade in their favor. The previous Ministerial meeting in 2003 collapsed when developing countries managed to stand up against unfair demands from rich nations. Yet, since then, the same issues have resurfaced as rich nations appear to have hardly moved on their countless promises, pledges and obligations.
Unlike last time however, poor countries were not as unified as before. A weak and unbalanced trade agreement resulted, allowing rich countries to gain many concessions from the poor, with very little in return, which the rest of this article looks at.
On this page:
- Meeting’s outcome
- Success or failure? Depends if you are rich or poor
- Concessions for developing countries are very weak and few in number
- Agricultural Subsidies and Spin
- Non Agricultural Market Access (NAMA) and Services
- Cotton
- Duty- and quota-free access for least developed countries
- Why Did Developing Countries Cave In This Time?
- Negotiations Back on Track, Transparent and Democratic?
- Build up to meeting has the same problems as previous years
- World Trade: Important for the Poor
- Trade
Development
Rounds Appear To Have Little To Do With Development - How bad would it have been for developing countries if these talks failed?
- More Information
Meeting’s outcome
In general, many rich country ministers felt the meetings were a success. Many others did not.
Success or failure? Depends if you are rich or poor
As with all the previous meetings, depending on your view point, the meeting was a success or a failure. Typically, if you were from the rich bloc of countries, the meeting outcome was a success, as European Union Trade Commissioner Peter Mandelson noted:
Today Europe has gone further in its existing commitment to eliminate its export subsidies by setting a clear end date in 2013. I said we came to Hong Kong to do business and this shows we meant it.
We have demanded, and received, equivalent commitments from others for similar subsidy reform. This is a genuine advance for the agriculture negotiation and for the development goals of the Doha Round. Europe made it happen and we are pleased to have done so.
… We will continue to demand that others move with us, every step, and every cut until all forms of export subsidy are ended.
But contrast this with a summary from the Third World Network:
[The] Ministerial Declaration … was imbalanced against the developing countries.
The developing countries gave in on the key market access issues of services and non-agricultural market access. In return they did not receive any significant gain in cotton, market access for LDCs, or
aid for trade, the three main components of a so-calleddevelopment package.As for the 2013 end-date for elimination of agricultural export subsidies, the most publicized claim of benefit from Hong Kong, it was no victory. This greatest-distorting subsidy of all should have been eliminated many years ago, and no price should have been asked for it.
Why such diverging views? As has happened in the past, these views have often been so divergent because of the audience to whom such statements are made, and for whom the deal is beneficial. For the European Union, and other rich countries, it is in their interest to minimize any concessions as they clearly benefit from the current international economic system. Small gains for poor countries will thus be spun in as much of a positive light as possible, even if, as in this WTO round, the concession for a 2013 target date to eliminate agricultural export subsidies is a scandal given it should have been eliminated years ago. Thus a defeat can be presented as a victory.
Concessions for developing countries are very weak and few in number
Martin Khor, quoted above, also went on to note: That the EU should have held back till the last minute before agreeing to this inferior alternative, so that it could extract even more from developing countries, showed to what a low level the Ministerial, and the Doha negotiations overall, have fallen in terms of development content.
A senior Ambassador from a developing country was also quoted by Khor: If it is so hard to get so little from the developed countries, the negotiations will be very tough when they resume in Geneva
giving a glimpse of the feeling of how little the developing countries gained from this meeting. Furthermore,
The real prize that the major developed countries wanted out of Hong Kong was a change in the negotiating modalities in services, so that they would have new instruments to pressurize developing countries to open up their key services sub-sectors. Despite massive opposition from a very large number of developing countries, including the G90, for five days, the developed countries eventually got what they wanted
Agricultural Subsidies and Spin
As has been highlighted for many years—and recently, even gaining attention in the mainstream media of various rich countries—the vast agricultural subsidies that rich blocs such as the EU and US give to their large farmers far outweighs foreign aid and leads to an artificially low price for agricultural products. Poor countries, not allowed such subsidizing, face price slumps and imports (dumping) of excesses (sometimes called food aid
) from richer countries. As explained on this site, food dumping has severely contributed to hunger and poverty.
Since the G8 Summit earlier in 2005 and the accompanying Make Poverty History Campaign and Live8 concerts, issues such as agricultural subsidies and their harmful impacts, and also the high barriers rich countries put up to prevent market access for the poorer countries, have all led to increasing pressure on Europe, the US and others to open up their markets and practice what they preach.
As a development round
these WTO talks were to move closer to elimination of those unfair subsidies. Instead, the poorer countries lost out again.
Rich countries, Europe in particular, hailed the agreeing of the 2013 end date for the elimination of export subsidies as a great moment for poor countries, and an act to help them. However, not only are export subsidies just one small part of the overall subsidies, but rich countries will only eliminate them if poor countries agree to further concessions.
The … elimination of export subsidies loses in significance when compared to the damages to African farmers caused by domestic support measures in the rich countries. The domestic support in the EU amounts to 55 billion euros, while export subsidies amount to 3 billion euros. The rich countries have also given themselves an escape route through a formulation that the end date will be confirmed only upon the completion of the modalities.
Having these additional concessions or escape route
is even more unfair given that the EU had promised to eliminate these subsidies years ago as Khor noted (further above). In addition, a large part of domestic subsidies enter into exported products and are thus export subsidies in disguise
:
According to [French economist Jacques] Berthelot:
For example, formal export subsidies to EU cereals were reduced from Ecus 2.2 billion in 1992 to 121 million euros in 2002. But domestic support in the form of direct payments that benefited exported cereals rose from 117 million euros in 1992 to 1.3 billion euros in 2002.Unless domestic subsidies are cut, export subsidization will continue even after the
elimination of export subsidiesin 2013 or their phasing out before that. The Hong Kong conference would have been more meaningful if there had been a decision leading to substantial cuts in total trade-distorting domestic subsidies … so that overall domestic support is really decreased. This did not happen.
The EU had domestic issues to consider too:
EU Agriculture Commissioner Marianne Fischer Boel said that their main interest was to defend European interests, but because this was a development round, they also considered the interests of the poorest countries in the world as well.
She said that the date of 2013 was important as it was linked to the final year of CAP reform and phasing out and so to stay within the mandate was essential.
Boel admits that the main interest was to defend European interest.
At the same time because it was a development round they considered the interest of the poorest countries. But given the outcome it seems they may not have considered the poorest too much.
Non Agricultural Market Access (NAMA) and Services
NAMA covers practically all traded goods outside of agriculture. It was agreed at the WTO meeting in Doha in 2001 that all these products would come under WTO rules without exception.
Martin Khor, quoted earlier, also noted that As a bonus, the developed countries also extracted important concessions from developing countries on the last day and in the last hours of Hong Kong on NAMA [Non-Agricultural Market Access].
The fears that many developing countries and NGOs have regarding NAMA is that poorer countries will be opened up to foreign takeover of their industries, or that their fledgling industries would not be on the same level playing-field to compete with established industries and companies (typically from rich countries). They feel they have a right to help nurture their industries just as the rich countries have long done, to help them develop.
The African Trade Network, an organization which coordinates the activities of African NGOs also feared the biggest loss was in services and NAMA:
[African countries’] right to choose which service sectors to open and to what extent, according to their own national needs, has been undermined. Annex C [of the WTO Hong Kong declaration] on services opens up for plurilateral and sectoral negotiations as well as increased foreign ownership in investment in service sectors—putting enormous pressures on African countries to open up sensitive service sectors to powerful corporations from the North.
Through the adoption of a Swiss formula on Non Agricultural Market Access (NAMA), African countries will be forced to undertake drastic cuts in their industrial tariffs. This will lead to further collapse of local industries, de-industrialization and massive job losses.
With services in general, a similar outcome was seen, whereby developed countries have been given additional leverage to subject the developing countries to negotiate with the
as Khor also added.Friends of Services
… in a plurilateral setting
A plurilateral
approach sounds inclusive and democratic. The fear that is being shown here however, is not of more democracy, but lack of it: that powerful, richer countries, will be able to dictate the terms of trade again, and the smaller, poorer countries will thus have less say, and therefore have less ability to control their own destiny. Ultimately the poorer countries will therefore be less accountable to their own people. (And we in the rich countries will blame them for failing their own people and for being corrupt even when in cases that may not be the case.)
Cotton
Cotton is a major form of export for a number of African countries, so they were especially keen to see enormous cotton subsidies, especially by the US, reduced or eliminated. However, as Khor summarized:
On the cotton issue, … the cotton producers of Africa … criticized the decision as having achieved nothing. The Declaration offers the elimination of export subsidies in 2006. But export subsidies constitute only a small portion of the nearly $4 billion subsidies the US gives to its cotton producers every year.
In contrast, there is no concrete action agreed for trade-distorting domestic subsidies which amount to about $3.8 billion or 80-90% of total US support for cotton. Domestic subsidies also make up almost all of the European cotton subsidies.
The African Ministers had demanded that 80% of domestic subsidies for cotton be eliminated by the end of 2006, and the rest within a few years. The Hong Kong decision is miserly; it only endorsed the objective that,
as an outcome of negotiations, trade distorting domestic subsidies for cotton production should be reduced.The African Cotton Producers Association’s response is thatthere has not been any concrete proposal on the most essential request.
Long-time writer on agricultural and trade issues, Devinder Sharma also comments on the wordage about cotton subsidies. He says that in trade terms, the vague suggestion that rich countries reduce trade-distorting domestic subsidies means practically nothing.
Duty- and quota-free access for least developed countries
A major part of the meeting was taken up by discussing duty- and quota-free access to western markets for the least developed countries (LDCs). However, while it sounded like a generous concession was made by the rich countries, they in fact found a way to hide behind numbers to that they did not have to risk many of their sensitive products
being affected by competition:
On product coverage, there is also an escape clause that countries having difficulties providing such market access shall provide access for 97% of products. This allows developed countries to continue to protect
sensitive productsthat are of export advantage to LDCs, such as textiles and clothing, rice, sugar, leather products and fishery products.Japan at its press briefing indicated that products sensitive to LDC imports cover 2% of the total, and thus the 3% exemption allows it comfortably not to include those LDC products that could effectively enter its market. The US has also indicated it cannot include textiles and clothing from Bangladesh or Cambodia.
In other words, the LDCs can have market access for products they don’t produce at all or don’t produce competitively, but access can be blocked for those products in which they are competitive. They are only given rights in areas where they cannot realize these rights.
Sangeeta Shashikant, also reporting for the Third World Network, adds that For the US, the products would include sugar and textiles and for Japan they would include rice, fisheries and dairy products and leather products.
For Devinder Sharma, special safeguards for the poorer countries does not mean much as the rich countries have these as well and this has a larger impact on the poor:
It is now abundantly clear that while the developing countries have got Special Products and SSM, the developed countries have almost an equal and parallel provision of Sensitive Products and SSM. If the developed countries had felt satisfied with the two provisions—Sensitive Products and SSM—to protect their agriculture, there would have been no need to provide the monumental farm subsidy support. The fact that developed countries, adequately armed with the safeguard provisions (besides non-tariff barriers and phytosanitary measures), are still not willing to eliminate agricultural subsidies, clearly shows where the key to a fair trade in agriculture lies.
Unless agricultural subsidies are removed there is no way developing countries can escape the harmful impacts of cheaper and subsidized food surges. Highly subsidies imports from the developed countries have already done irreparable damage to the agricultural production potential of the developing countries.
Consider also the following quote on what the US Trade Representative, Rob Portman said:
Asked to specify products which the US intended to protect from the duty- and quota-free market access for LDCs, Portman replied that for sugar the US has a program in place and the duty-free access could create a problem; hence flexibility was needed. The US also has a domestic textiles industry and it has serious concerns about globally competitive LDCs and their products. He added that there was enough space to be able to deal with sensitive products and with any concerns in the US Congress.
In effect, Portman is admitting that free trade doesn’t always work! And this comes from the United States, the foremost promoter of global free trade. There are also fair-sounding words like flexibility
that Portman asks for, and yet for years the developing countries do not get such treatment.
Why Did Developing Countries Cave In This Time?
Given their united stand in the previous WTO meeting, how was it that this time they agreed to what seems like a lot of concessions, in return for extremely little from the rich countries?
It seems there was a combination of more divide and conquer tactics from the rich countries, plus a few developing countries trying to secure their own interests.
As the BBC admitted, the outcome of such a meeting was naturally going to favor those who had political and economic muscle.
As described above the agreement on Non Agricultural Market Access has been a major loss for developing countries. A partial reason this may have happened is revealed by the US Trade Representative, Rob Portman. According to Sangeeta Shashikant, reporting for the Third World Network, Portman revealed that he had assured Ministers from developing countries that with regard to the services text, it would not be a mandatory requirement that they participate in plurilateral negotiations, and thus they could accept the text.
Hira Jhamtani, quoted earlier, reported on the reaction of another developing country NGO, Focus on the Global South who also gave some insights into why developing countries were not so unified this time: The G20 has sold the developing countries out. They know well, that there are no real cuts in domestic supports and export subsidies by the EU or US with this text. India and Brazil have led the developing countries down the garden path in exchange for some market access in agriculture for Brazil, and services outsourcing for India.
Jhamtani reported that for the UK-based international development organization, Oxfam, the flawed text reflected the interests of rich countries. The text was a betrayal of development promises
and developing countries were put in an impossible position: either accept a text which is seriously flawed or be blamed for the failure of the round.
Lori Wallach from Public Citizen in the US was also mentioned by Jhamtani as noting that Much time here has been spent by rich nations trying to come up with a divide and conquer
development
package aimed at seducing the poorest nations to split with the merely poor. The real goal of this cynical development
package proposal is to change the topic from the negotiating agenda which many developing nations view as damaging to their interests.
And in another report by Khor:
These NAMA commitments extracted from developing countries are unprecedented in the history of the multilateral trading system. When implemented, they will have severe de-industrialization effects.
How did the developing countries get to make such commitments, and in return for what, if any?
From the start, the EU’s Peter Mandelson went on an aggressive campaign to get developing countries to agree to its services and NAMA proposals, threatening that he would not offer anything in agriculture otherwise. This in itself would not have worked, however, if the developing countries felt they had nothing to gain from the Declaration.
Recognizing this, the major developed countries, aided by the Secretariat, sought to offer (or seem to offer) something for each group of developing countries, early on in the Conference. Each group was embroiled in negotiations to get its bit of benefit. By the last day, each group—the G20, G33, LDCs, cotton countries, the ACP—was convinced that what it got was valuable enough to give up its fight on services or NAMA, and thus all the groups were persuaded (or persuaded themselves) that they could accept the whole package.
The persuasion aspect was important in the final hours. When finally on the last day the EU agreed to the 2013 end-date for export subsidies, the G20 leaders (India, Brazil, China) went on a persuasion drive to get other developing countries and their groupings to agree to the services text.
And so, the developing countries allowed themselves to be divided and conquered.
Negotiations Back on Track, Transparent and Democratic?
At a heads of delegations meeting on December 17, 2005, Martin Khor noted that many developing countries expressed many concerns and pointed out many shortcomings in the text. They felt that there was too little development in the text and too little real SDT elements. Some felt that development only appeared as a token, as an attempt to disguise the offensive demands of the rich countries, and disarm them so that they could accept the parts of the text that were problematic to them.
Contrast that with the view of Pascal Lamy, the WTO Director General on the outcome and process of negotiations that took place:
Lamy claimed that the negotiations were back on track after a period of hibernation. Handing out marks, as he put it to assist those assessing the negotiations, Lamy gave the organizers of the conference a perfect score.
He gave the
processof the negotiations a score of 18/20, and insisted that it was a bottom-up approach, and inclusive and transparent. He further gave thepoliticsaspect of the conference 17/20 as the conference placed the interests of developing countries more at the heart of the negotiations. Lamy also believed there was enough fuel in the tank to cruise at the right negotiating altitude.
Inclusive and transparent? Perhaps many in developing countries will wonder if Lamy (and the other rich country delegates that expressed similar positive views) attended the same meeting? As Martin Khor details, the negotiations were incredibly opaque and suffered from all the lack of democracy and openness that has been the history of WTO meetings and is quoted at length:
The … conference … ended … with the adoption of a Ministerial Declaration in a carefully choreographed closing session designed in a way to prevent delegations from speaking or taking an active role in decision-making.
Indeed, the choreography had gone on the whole week, and remarkable as it may seem, the closing session was the only official meeting of the whole Conference, except for the opening ceremony on 13 December.
The [WTO] Director-General Pascal Lamy was later to brief journalists that over the week, 450 meetings were organized, six major gatherings and over 200 consultations by facilitators.
Some were heads of delegation meetings, others consultations and plenary sessions on the various issues, yet others were
Green Roomexclusive meetings to which a select few were invited.Yet, there will be no records or minutes of these meetings or of the negotiations. Who said what, indeed which countries were invited or were present, will not be known or at least will not be made public. For all intents and purposes these were
non meetings.The WTO spokesman referred to the Green Room meetings in terms of:If the Green Room does exist, and if there was a meeting…Yet, the leaders of the conference kept congratulating themselves for the
transparent, inclusive and bottom-upprocess.… Chairs were arranged theatre-style, with no tables in front of delegates or microphones or the name card of the countries. There were no standing microphones either in the aisles. A more participation-unfriendly arrangement would be hard to imagine.
… At the Hong Kong closing session, any delegation wanting to speak would find it very difficult, if not near impossible, to make an intervention, especially since the Chair, John Tsang, Hong Kong’s Commerce Secretary, was often not even looking at delegates before proclaiming
It is so decidedand banging the gavel after reading out decisions on various items.
Khor also noted that Venezuela and Cuba actually had to go onto the stage, interrupting the char, to let their reservations be heard, something that has never happened before at the WTO meetings.
Why would rich countries see this as a success when so many do not? It is clear that the loss for the developing countries is indeed the victory that the rich countries needed so as to maintain and benefit from the unequal global trading system they have helped create. From their view point it is understandable that this is the position they would go for. Jhamtani’s report is revealing noting that the president of the Coalition of Service Industries, representing the transnational services companies that lobbied for the opening up of services, Robert Vastine, said that the agreement on plurilateral negotiations, and on dates for submitting additional requests and offers, fulfill US stated objectives at the outset of the Ministerial.
(More details about the green room, lack of transparency, etc are discussed further below.)
The outcome for the poor countries was perhaps unfortunately somewhat predictable as discussed in more detail below:
Build up to meeting has the same problems as previous years
This section looks at the sadly predictable issues that came up during the build up to the Hong Kong meeting, and the obstacles the poorest countries would face.
Blame The Poor Again?
It seems that year after year, we see the same process whereby the negotiations lead to rich countries blaming the poor for not accepting their generous offers.
As a recap from the July 2004 WTO meeting where talks collapsed, I wrote how the rich countries continually blame the poor, even though the majority of the world’s countries and NGOs see it the other way. As was written on that previous page, the NGO Oxfam, for example, summarizes such a global view, that the refusal of the EU and US to cede any ground to developing countries on agriculture—and Europe’s attempt to force a global investment and competition treaty on to the table—had forced poor countries to walk out.
Many years ago, the rich countries had agreed to sort out the unfairness in their agricultural policies (vast subsidies and denying market access for the poor countries, for example), and the impact that had on the rest of the world. But what happens at these meetings is predictable:
- Year after year, rich countries have stalled on their obligations and want the poor to agree to discuss other issues (such as opening up poor countries for
foreign investment
and domination by transnational corporations originating from the rich countries); - Rich nation negotiators say that if they will offer a great deal: concede to reduce subsidies and market barriers, thus improving access for the poor countries, but only if the poor countries to provide some concessions in return (as if the many destroyed livelihoods in the developing world due to rich nations failing in their promises have not been enough);
- The mainstream media typically reports the current happenings, e.g. the EU or US agreeing to do something but only in return for some concessions from developing nations;
- When the historical context is missing from the headlines, it makes it look like a fair offer;
- When the poor likely reject the agreement in some way, which they are in their full right to do, it is presented as though the poor were unreasonable;
- For good measure, some politicians from rich countries will exclaim their astonishment as to why the poor might refuse their offer;
- And unfortunately the majority of the people in the rich countries will continue to believe their leaders have been accountable and been good global citizens...
- On the other hand, if developing countries agree (typically under a lot of pressure) to the unequal trade concessions, the rich will claim success and say that this is a good deal for the poor countries.
I wrote practically the same thing after the July 2004 Framework meetings where I suggested this was a recipie for continued poverty.
Unfortunately much of this turned out to be the case for the Hong Kong meeting build up, and the subsequent outcome.
Undemocratic Processes at WTO Once Again
It seems that the preliminary meetings leading up to the December meeting also followed this same pattern discussed above, as Martin Khor from the Third World Network reports.
Furthermore, as various non-government organizations (NGOs) have criticized, the draft texts once again revealed the undemocratic nature of the WTO process whereby some items were included into the draft text without consensus and could only be removed by consensus of all 148 nations. Hence, special interests from rich nations were easily added in, while time and energy would be required to to attempt (typically unsuccessfully) to get it back out. This gave the big players an unfair advantage. They set the barriers or the level of discourse so high that any concessions that they would have had to make would still result in a reasonably good outcome for them.
The much-criticized green room
meeting process, whereby the rich nations only invite a few developing countries to set the basic agenda of the meeting did not really change. As reported by the Third World Network,
Outside [a preliminary] meeting, an Ambassador of a developing country, on hearing that there are plans for more Ministerial involvement in the negotiating process and in text drafting before Hong Kong, remarked that in reality this would put the developing countries at a severe disadvantage.
Very few Ministers from developing countries will be able to be in Geneva to be on call for meetings or to do drafting, so it is not a feasible idea as far as developing countries are concerned.
On the other hand, the developed countries have the resources for their Ministers to be present, or they can come over at short notice as Geneva is close by for them. Thus the idea that Ministers should now be called on to take part in negotiations and undertake drafting of texts is very worrying as this will bias the process against developing countries.Another senior diplomat questioned the basis on which the super Green Room of Ministers was planned.
He said it was not clear to the members on what basis the choice was made to invite certain delegations, and their Ministers, to the Green Room, and not others. The decision to have this meeting was not put before the membership for prior approval, and many delegations did not even know who had been invited, let alone what happened at the meeting.
… The organizing of such a
Mini Ministerial Green Roomhas major systemic implications for the decision-making process and structure in the WTO.… These include the mandate to hold such a meeting, the basis for selecting delegations and Ministers, the choice of chairperson for such a meeting, the selection of topics, and the longstanding complaints of lack of transparency and of the inability of the majority of developing countries to participate.These concerns can be expected to increase if more mini-Ministerials and super Green Rooms are organized in the run up to Hong Kong and if selected Ministers are invited to draft texts.
RecalibratingHong Kong and Rescheduling WTO Negotiations, South-North Development Monitor (SUNS), November 10, 2005
And as Martin Khor reported separately on one of those mini Green Room Ministerial Meetings, there was a lot of concern during the meeting build-up that the EU and US would attempt to introduce discussions of new issues without resolving the existing ones first, which they are supposed to do:
By the look of things, the EU and US will not accept lowering of their demands on the developing countries,said another developing-country diplomat in the corridor, as the Green Room meeting was going on.
They seem intent to turn the spotlight away from agriculture, where they have defensive interests and cannot offer much, and to focus attention on areas where they have offensive interests, and make un-reasonable demands that the developing countries would be wise to reject.Most developing country delegates seem to share this view, that the EU (now supported by the US) hope that through this tactic the blame can be shifted to (or at least shared by) the developing countries, should the Hong Kong Ministerial meeting fail to deliver the full modalities it was supposed to.
Perhaps this explains the very brief statement issued by Mandelson on Tuesday, following the London meeting.
I am not in the business of scaling down ambition. If we do not deliver ambitiously on the Doha Round as a whole we risk losing or compromising Doha’s key development component. That is not acceptable to Europe. I have been warning for months of the dangers of restricting our negotiations to agriculture. We have now broadened the discussions and we should concentrate on making up lost time.It should not be difficult to point out the contradictions in this statement. Many development and trade experts, and many developing country policy makers and delegates believe that the so-called high ambition set by the EU for developing countries to open up their economies would in fact damage if not destroy
Doha’s key development component.And that the low ambition shown by the EU for itself in agriculture would also endanger the possible development benefits of the Doha agenda.
Ministerial Green Roomconvenes, Third World Network, November 8, 2005
Rich countries complained of lack of symmetry
ignoring their own hypocrisy
The BBC’s Newsnight program reported in early November 2005 (15th or the 9th), that Peter Mandelson (the European Union’s Commissioner for Trade) was frustrated that the developing countries were not reciprocating on the concessions the rich were appearing to give. There is a lack of symmetry
on the offers on the table, he felt. US President George Bush has also said indicated that the US is willing to cut subsidies to its agricultural industry, but only if poorer countries do the same cutting, to the same extent.
On the surface, such suggestions of reciprocation sound fair. Yet, without the historical context and the unequal playing field that all the countries start on, these suggestions are grossly outrageous. Furthermore, rich countries have long agreed to do these things, without the need for any nation to reciprocate, because it has been recognized that these practices are unfair.
Furthermore, while rich countries argue that cutting their subsidies may harm some poor countries that have preferential access to their markets, it has long been agreed at the WTO that poorer countries on the whole will need special treatment so they can benefit from a global rules-based trading system. Oxfam once again provides a useful summary:
For years, developing countries have drawn attention to the numerous difficulties that they face in engaging in the multilateral trading system. All GATT [the forerunner to the WTO] members agreed that developing countries would need special and differential treatment (SDT), in consideration of their different economic circumstances and needs, in order to participate effectively in international trade.
The incorporation of special pro-development provisions in multilateral trade agreements has been considered a fundamental and necessary component of the General Agreement on Trade and Services (GATS), and then of WTO systems. In fact, the preamble and objectives of the WTO specifically call for positive efforts to ensure that developing countries and LDCs
secure a share in the growth of international trade commensurate with their economic development, and the stated goal of the Uruguay Round was to create a fair and equitable multilateral trading system which would lead to development and prosperity.Many African countries signed up to the Uruguay Round rules in the belief that because they permitted SDT, they would encourage development. The African countries were assured that flexibilities would provide them with space to liberalize at a pace appropriate to their development, i.e. slower than rich countries They also believed that the SDT provisions would require rich-country WTO members to provide positive support to them as they sought to integrate in the world trading system, through enhanced financial and technical assistance and technology transfer.
And as Oxfam goes on to note, not much has happened in this area, apart from meaningful words and gestures from rich countries.
There is genuine concern that some poor countries that currently do benefit from preferential trade access with the rich, Europe in particular, do risk losing out to competition from other poor countries if rich country subsidies and barriers are removed/reduced. However, as stated above, these types of concerns are supposed to be at the core of WTO rules to ensure trade leads to positive, sustainable development. These are the things that need priority in discussions. Rich countries instead, year after year, are pushing to discuss other areas such as opening up the services sectors in poorer countries. The developing countries are rightly attempting to delay that.
The kind of statement Mandelson makes is interesting. In the 2003 WTO meeting in Cancun, Mexico, UK’s then trade representative, Patricia Hewitt, exclaimed similar concerns: that there was a deal on the table which was fair and the poor countries did not take it (which Hewitt said surprised her; she couldn’t understand it.) That previous link has more details, but Mandelson and other rich country representatives appear to continue to have the same types of attitudes. Are they simply playing spin to the media, or are they really that ignorant of concerns from the developing countries?
World Trade: Important for the Poor
Consider Africa. It is the poorest continent. Yet, it has constantly faced an uphill struggle at the WTO and other international forums. Repeatedly, Africa has provided information on the types of concerns it has, the changes it suggests that rich countries need to make to make global trading fairer, etc. Repeatedly the richer countries have said they will listen, but actually have done very little.
Earlier, in July 2005 at the G8 Summit, the issue of Africa and poverty came to the fore, as Live 8 and the Make Poverty History campaign came into full view. G8 leaders were pressured to deliver meaningful improvements in their policies. They promised what sounded like enormous debt relief ($40 billion written off) which the mainstream applauded. What was less reported however, was that such a promised debt write-off for Africa by G8 leaders was spin:
- Being spread over some 40 years, the debt relief actually only amounted to $1 billion per year for just 18 of the poorest countries (some 60 or more are said to need similar debt relief);
- The net present value of the deal is actually about $17 billion.
- As if that was not enough, even more conditions were associated with the aid. But those conditions, as well as the important things like sticking to democratic principles and dealing with corruption, included the less reported but more damaging economic ones that have helped maintain so much poverty for Africa in the first place.
(See the previous link for more details.)
If aid, and debt relief are subject to so much spin, trade, therefore, becomes an even more important aspect for Africa to help alleviate poverty. In fact, while a lot is often made of aid, small changes to trade can dwarf the aid amounts, as Oxfam, the prominent development organization, has noted:
With more than 10 per cent of the world’s population, sub-Saharan Africa captures only 1 per cent of global export market share. … [T]he devastating impact of unilateral liberalization under structural adjustment programs, … is compounded by a significant debt burden, the HIV/AIDS pandemic, and domestic challenges including corruption and inequality, [making] it difficult if not impossible to overcome the additional development obstacles presented by unfair trade rules.
Trade, in combination with appropriate domestic policies, could be used to reduce poverty and foster development. An increase of just 1 per cent in world export market share could translate into a one-fifth increase in average income in sub-Saharan Africa, which would increase annual exchange earnings by $70 billion. This sum is not only twenty times more than the sum that the region received in aid in 2003, but it is more than one and a half times more money than the World Bank estimates is needed each year to enable Africa to reach the MDGs by 2015.
As Indian scientist and activist Vandana Shiva adds, the WTO’s agricultural rules have contributed to the thousands of suicide deaths of Indian farmers. Ultimately, Shiva feels the way trade is carried out and negotiated must change and become more democratic:
WTO reduced agriculture to a commodity. The Agreement on Agriculture was drafted by Cargill, not by farmers. 40,000 Indian farmers have committed suicide in the decade of WTO. Suicides are the result of debt, debt is the result of rising costs of inputs as agriculture is industrialized and corporatised, and falling prices resulting from trade liberalization and removal of import controls. Hong Kong brought no relief to the farmers of the world who were protesting on the streets. No commitments were made on bringing back quantitative restrictions and import controls—a call of farming communities everywhere. The removal of export subsidies by 2013 is meaningless in the context of the rapid destruction of small farms and decimation of small farmers. It is both meaningless because export subsidies are a merely $3 billion, while total subsidies for industrial agriculture in OECD countries is $400 billion.
… Agriculture also needs to return to the ground because WTO cannot make democratic decisions about this vital sphere. Clayton Yrutter who went from Cargill to become the U.S trade representative during the Uruguay Round wrote in an article in the Financial Times on December 15 titled
A Doha trade deal can be struck beyond Hong Kong—As always, the critical negotiations will eventually take place in Washington and Brussels—gathering 148 trade ministers together is not conducive to agreement.Multilateralism was WTO’s pretense. But multilateralism is not acceptable to the powerful. That is why they want political shrinkage in terms of participation but an economic expansion over our lives. We will continue to fight for democratic expansion and economic shrinkage in corporate control and WTO’s jurisdiction.
Oxfam also provides a useful summary of the problems that have resulted. Rich countries, under unfair WTO rules (which they have helped formulate) have created numerous problems for Africa and other poor countries, such as the following:
- Industrialized countries continue to export crops at subsidized prices far below the cost of production, depressing markets and putting at risk the livelihoods of millions of small farmers and their families.
- At the same time, they exclude agricultural goods and value-added products made by African countries, through the imposition of peak tariffs and the use of non-tariff barriers (NTBs) that include excessive regulations on allowable levels of pesticide residues.
- Tariff and non-tariff barriers undermine diversification and industrialization that would help poor countries out of poverty.
- Many provisions in WTO rules restrict African governments’
policy space
or room for maneuver in domestic policy making (i.e. WTO rules sometimes conflict with sovereign decision-making rights, potentially undermining democratic accountability.) For example,- Under the Agreement on Agriculture (AOA), TRIPS, Trade-Related Investment Measures (TRIMs), and other WTO agreements, officials are constrained in terms of the types of pro-development policies that they can enact in the areas of agriculture, tariffs, investment, and intellectual-property rights.
- Worse, in order to implement these agreements and fund compliance with hostile trade rules, poor countries are required to shift large sums of money away from investments in health care, education, or essential infrastructure.
- Moreover, WTO agreements, once agreed, are nearly impossible to revise, even when negative implications for development become evident, as happened with the TRIPS Agreement.
Needless to say, poor countries are disadvantaged by the WTO rules which the more powerful, richer countries are of course able to influence for their own interests. Free market principles, which the rich countries promote, are thus distorted at the very core, creating inequality structured into law
as J.W. Smith of the Institute for Economic Democracy describes this.
Compound this with the distorting effects of vast subsidies that rich countries give for their own agriculture and other industries, the free market principles they they so forcefully demands from the poor are only used by themselves when it suits.
For years, rich country governments have been accused by poor countries of using such tactics to pry open markets of the developing world for their corporations and interests, creating unequal trade and an uneven playing field. This, as J.W. Smith also notes, is mercantilist, which is what characterized the old days of colonialism and imperialism. It is therefore not without serious concern that some from the developing world regularly cry foul of the rich countries for practicing neo-colonialism.
Trade Development
Rounds Appear To Have Little To Do With Development
In 2001, at the Doha round of trade negotiations, rich countries promised to listen to the repeated concerns of poor countries that they all needed to finish off discussion about issues critical to poor countries, which were still unresolved from previous negotiations (and which rich countries had actually agreed to finish discussion of before starting talks on new issues). The rich countries therefore promised Doha would be a Development Round.
Rich countries promised to remain committed to trade rules reform to make them fairer and heed various concerns poor countries raised. Rich countries, for example, agreed to
- Prioritize amendments to the controversial TRIPS agreement so that medicines would be more affordable for poor countries;
- Reform regulations to end the dumping of subsidized agricultural exports;
- Curb their use of non-trade barriers that made it harder for poor countries to gain market access to rich countries.
Yet, as Oxfam notes,
Negotiations proceed apace, on terms dictated by rich countries … a host of issues … were included [by Africa, to be discussed] in the Doha mandate but have not been effectively addressed, despite four years of negotiations.… Immediately [after the 2001 meeting,] rich countries sought to pack the agenda with the
Singapore issuesand other issues of importance to their domestic industry lobbies. Over the next three years, developing countries were forced to expend significant amounts of energy and negotiating capital to keep critical development issues on the table and to ward off attempts by rich countries to overload the agenda.
But Oxfam does not stop there. They criticize the tactics of the rich nations further:
The case for improving Africa’s integration in world trade has never been stronger, but the prospects for fairer rules fade with every missed deadline. The Doha Round has become
business as usual, with rich countries trying to extract as many concessions as they can from developing countries, including those in Africa. Every time a negotiating deadline is missed—often due to failure by rich countries to muster the political will to make the tough concessions that are necessary for agreement—millions of poor people in Africa and elsewhere are consigned to further exclusion from the benefits of international trade.… Each small step forward taken by the European Union or the US has been followed by months of evasion and obstruction, amid claims that they have already given enough and should not be required to make further concessions.
African industries that survived structural adjustment are facing a new threat, as rich countries push for significant market opening by means of an aggressive tariff-cutting formula which could expose industries to competition before they are ready. There has been little effort by developed countries to finalize a TRIPS amendment which would facilitate access to affordable medicines for millions of Africans, including in response to epidemics such as HIV/AIDS, malaria, and tuberculosis. Many are asking whether the
development roundlabel was a ruse to persuade reluctant African countries to support a new round of talks.… Unfortunately, [all the] proposals [from African countries] have so far fallen on deaf ears. Rich countries refuse to discuss the commodities crisis in the Doha talks, claiming that it is not part of the mandate even as they crowd the agenda with their own issues. The WTO Secretariat has also indicated its lack of support for the African submissions. For many countries, the fact that WTO negotiations seem incapable of addressing perhaps their most pressing trade and development issue is indicative of the Doha round’s wider failure to take Africa’s development crisis seriously.
And so, as the Third World Network has noted, the developed countries have used the term development
as spin:
To cover the fact that the programme was really aimed at opening the markets of the South, the WTO secretariat leadership and the major developed countries dubbed it the Doha Development Agenda.…
Last month, the Africa Ministers in their Arusha conference prefaced their Declaration with a section on Reaffirming Development. A few days later, a group of developing countries that included Brazil, India, Argentina and South Africa held a press conference and issued a paper criticising the developed countries for threatening the developing countries’ development interests by making excessive market-access demands on them. They also called for the
reaffirming of Developmentin the Doha Round.There will be attempts at Hong Kong to put a
development spinto an otherwise lacklustre event, by announcing adevelopment packagecomprising aid for trade, non-binding duty-free market access for LDCs, and a few other items. This may fool some people unfamiliar with the WTO negotiations. But it will be seen as a cynicalface savingexercise by others. It will not prevent officials of many developing countries or the NGOs from expressing their frustration that the Doha negotiations have not lived up to itsdevelopmentname but have instead taken an anti-development turn.Not only is there a disappointment that the promised benefits (especially in agriculture) of the Doha negotiations have not emerged. There is a deep-seated resentment mixed with fear that the Round is now mainly about the aggressive opening up of the markets of the developing countries, which will damage them economically and socially, and perhaps disastrously. The fear is that if negotiations proceed the way the developed countries are strongly pushing, the outcome will be counter to development goals, with millions of small farmers dislocated and thousands of local industries losing their business or disappearing. The resentment is that this will be done, cynically, in the name of a Development Agenda and now of a Development Round.
(For more about the devastating onslaught of structural adjustment, see this site’s section on Structural Adjustment Policies.)
And then there are the procedural problems that for years the poorer countries have complained about. For example, the infamous green room
whereby major rich countries and blocs will meet typically with just a couple of poor countries, such as Brazil and India, and present the main thrusts of the negotiating agenda. The poor countries which form the majority of the world will only be represented by two nations and start on the defensive.
As has happened in past years, the poor, or least developed countries (LDC) often find they lack resources and staff to attend all the meetings, thus putting them in a disadvantaged position. The rich appear to care little, as Oxfam is worth quoting once again:
LDCs are in a particularly difficult position. Under-resourced and under-staffed, they often have only one or two overworked staff members trying to follow all areas of WTO talks, if not those of all international organizations in Geneva. For obvious reasons, LDC officials report great difficulty in following the talks. In addition, LDCs often lack leverage in the talks: rich countries tend to dismiss their concerns on the grounds that because they are not expected to make any concessions, they should not expect much in return. Despite their pro-development rhetoric, rich-country negotiators clearly believe that if they want something, WTO members should give something in return—even LDCs.
And so, this meeting started with developing countries once again on the back foot. As Martin Khor also adds, the Indian Commerce Minister Kamal Nath has recently implied [that] the WTO negotiations are now in danger of becoming not a Development Round but a Market Access Round.
At the same time, the rich economies are still very reluctant to liberalise in the areas that the developing countries are able to benefit from, especially agriculture and the movement of labour (Mode 4 of the services agreement).
This then is the tension at the heart of the deadlock in the talks that will be taken over to Hong Kong. The developing countries want the rich countries to give up their subsidies and open up in agriculture, as they promised to do in the last Round, but in practice did not. But the developed countries, caught on the defensive, are instead aggressively pushing the developing countries to drastically open up their agriculture, industrial products and services.
…
The Hong Kong Ministerial meeting … might have had the potential to correct some of the imbalances and turn the corner towards development.
…Instead, the Ministerial will most likely become a battle between the developed countries who want to use Hong Kong to push their market-opening agenda further versus the efforts of developing countries to limit the damage to their economies from making such market-opening commitments.
It will also be a battle between the major developed countries that are on the defensive in agriculture trying to preserve their high protectionism of the sector versus the push by agricultural exporting countries to get the former to make some real market access offers.
Hong Kong will also see an attempt by the WTO establishment to offset the embarrassment of not achieving progress … by putting on a
spinthat the developing countries, or at least the LDCs, are getting some benefits in advance through adevelopment package.
This site’s pages on the previous meetings detail these aspects as well (links to those pages are at the bottom of this page).
How bad would it have been for developing countries if these talks failed?
Listening to ministers and political leaders from the industrialized world, the impression was that it would be an absolute disaster if these talks were to fail. But a disaster for whom? For developing countries, or for rich countries unable to get the poor to open their markets even more, for what seems to be little in return?
When interviewed on television, a number of experts from a developing country perspective made an interesting point: that no deal will be better than a half-deal. Chakravati Raghavan, long time writer on development issues, is worth quoting:
Unless developing countries stand firm against pressures … they may be setting themselves up for another highly imbalanced outcome and a more oppressive multilateral trading system.
… These policy choices (which developing countries need and rich countries are denying them) will be no more than what today’s industrialized countries used during their period of industrialization and development, but which they now want to deny to the developing world. Market access for exports of developing countries in the developed world is important, but without policy-space and ability to produce and export value added goods, market access will not become Development. (Emphasis added)
… From this point of view, the Doha Round of negotiations … has a built-in agenda to enable the industrialized world and the majors to invoke instruments that would further restrict developing country policy space.
And for many from the developing world, the parallels with colonialism is something hard to forget, as for them it was a recent event and has impacted those countries even today:
Moreover, for doing nothing or almost nothing in agriculture, the US, EC and Japan (and Mr. Lamy [head of the WTO] and his officials more subtly) are demanding that developing countries, and the majors among them, make large market access concessions by drastically reducing their industrial tariffs, and by opening up their service sectors to enable the major TNCs to establish themselves in these countries, through commercial presence (an euphemism for investment) and take over the service sectors of the developing world.
If the developing countries yield, this will put their economies back to the colonial era—excepting that unlike in the nineteenth and early twentieth century, developing country governments will be policing and safeguarding the interests of the foreign corporations.
And as noted further above, there was concern that the Hong Kong meeting would likely see a lot of spin, perhaps blaming the poor for any failure in the talks. Furthermore, it is realized increasingly that industrialization is key for economic development, not just solely relying on exports of raw materials and commodities:
Even the former Brazilian negotiator during the Uruguay Round, and former UNCTAD Secretary-General, Mr. Rubens Ricupero, now a professor at the Armando Alvares Penteado Foundation, Sao Paulo (Brazil), in an interview to Agencia Brasil, advocated that Brazil should reject the offers made in the context of negotiations in the WTO, lest the country’s development be compromised.
At this moment it is better to have no agreement than a bad agreement… The Brazilian government should remain firm.… Even though the proposals (for accord at Hong Kong?) are insignificant, he adds in the interview,they will be rolled up in such propaganda that it will give the impression that whoever refuses is assuming the onus of wrecking the global trade system.And … no less a person than the Vice President of Brazil was highly critical of current economic policies and what he saw as dominance of finance capital at the cost of industrial capital.
… Several subsequent studies have cast serious doubts over the general policy advice to developing countries to remove trade barriers and liberalize for growth.
… An econometric analysis by Halit Yanikkaya (2003)—Journal of Development Economics No 72 (I)—found that trade barriers, while negatively associated with openness, are more positively associated with growth, particularly in developing countries.
As for services, and liberalization of financial sectors, an IMF staff study (IMF occasional paper 220, 2003), concluded that it was difficult to make
a convincing connection between financial integration and economic growth, once trade flows and political stability are taken into account… (developing countries) that made the effort to be financially integrated (into global capital markets) faced more instability.
More Information
This web site will attempt to provide information on the outcome of the meeting, but the following may be able to provide far more detailed and frequent coverage, and/or further background information:
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