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Africa: Trade Talks Analysis, 1
AfricaFocus Bulletin
Dec 16, 2005 (051216)
(Reposted from sources cited below)
Editor's Note
"Any expectations that developing countries or the public might
have of Hongkong marking progress to achieving 'development' in the
Doha negotiations have been very much dashed. The 'Doha Development
Agenda' (DDA) got its nickname when the developed countries
pressurised the developing countries to accept a new Work Programme
at the Doha Ministerial in November 2001. 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 DDA." - Third World Network
This AfricaFocus Bulletin contains a summary analysis of the issues
being discussed four years after Doha, at the Hongkong WTO
Ministerial conference. The analysis is from Third World Network
(TWN), an independent group monitoring trade and related issues
that is based in Malaysia, with offices in Delhi, Montevideo,
Accra, and Geneva.
Another Bulletin sent out today has two additional short articles
from TWN, one the summary of a workshop with Tetteh Hormeku,
coordinator of the Africa Trade Network, focusing on the latest
"development package," and the other an account of the December 13
statement on agriculture by the G20 group of developing countries,
which includes, among others, Brazil, Egypt, India, Nigeria, South
Africa, and Tanzania.
TWN has much additional information and analysis on its website at
http://www.twnside.org.sg
For a full list of earlier AfricaFocus Bulletins on trade issues,
see http://www.africafocus.org/tradexp.php
++++++++++++++++++++++end editor's note+++++++++++++++++++++++
Some Critical Issues in the Hongkong Ministerial
TWN Briefings for Hongkong, 1
Third World Network
Visit http://www.twnside.org.sg.
When the WTO's Sixth Ministerial conference opens in Hongkong on 13
December, there will be lowered expectations of two types. First,
it is now a foregone conclusion that the well-publicised ambition
that the Ministerial will agree to "full modalities" in agriculture
and non-agricultural market access (NAMA) will not be met. The
Hongkong meeting will at best move some distance towards that, in
the small group discussions of a few major players, or in the
bigger Green Room of 30 members or so. The modalities will have to
wait for a new deadline, now placed as March or April 2006.
But second, and more importantly, any expectations that developing
countries or the public might have of Hongkong marking progress to
achieving "development" in the Doha negotiations have also been
very much dashed. The "Doha Development Agenda" (DDA) got its
nickname when the developed countries pressurised the developing
countries to accept a new Work Programme at the Doha Ministerial in
November 2001. 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 DDA.
Even then, trade experts and development analysts had understood
that this was WTO "double speak" and that there was very little of
development content in the Doha programme. Today, four years later,
it has become very clear that the developed countries, in their
negotiating positions and stance, have dropped the pretence of
having any development goals or even any pro-development sympathy
at all in the main negotiations on agriculture, NAMA and services.
They have also all but pushed aside the possibility of progress in
the developing countries' attempt to re-balance the unbalanced WTO
rules through the direct "development issues" of special and
differential treatment and implementation issues.
As the development content disappears and the brutal face of greed
for market access into the developing world shows itself ever more
clearly, the double-speak is coming back to haunt the spin-masters
of the WTO. Officials of developing countries and NGOs alike are
asking: Where is the development in 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 Development" in the Doha Round.
There will be attempts at Hongkong to put a "development spin" to
an otherwise lacklustre event, by announcing a "development
package" comprising 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
cynical "face saving" exercise 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
its "development" name 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.
Development Issues: All but Disappeared
When the Doha talks were launched in 2001, the Trade Ministers in
their Declaration proclaimed that the needs and interests of
developing countries would be at the centre of the work
programme.At the top of the agenda were two items directly
involving development concerns - strengthening special and
differential treatment for developing countries, and resolving the
problems from implementation of the WTO agreements.
The proposals covered a wide range of issues relating to all the
major WTO treaties. They were meant to begin the process of
re-balancing the unbalanced rules arising from the Uruguay Round.
Among the rules perceived to be unfair were those in agriculture,
which allowed developed countries to maintain or increase their
huge subsidies, whilst developing countries were obliged to reduce
their tariffs, thus subjecting their farmers to unfair competition
from artificially cheapened subsidised imports. There were more
than a hundred proposals for each item, and the deadline for
dealing with them was to precede the deadline for achieving
negotiating modalities for liberalising agriculture and
non-agricultural market access (NAMA) or industrial tariffs. Four
years later, hardly any development-related proposal of
significance from these two items have been resolved. Several
deadlines have passed without success, and Hongkong is expected
merely to set yet another deadline in 2006, which nobody believes
will be met.
Then there was supposed to be a strong development dimension in the
market access areas of agriculture, NAMA and services. Respect for
this dimension would cover two things: increasing export
opportunities for developing countries in markets of developed
countries; and enabling developing countries to maintain policy
space (through special and differential treatment) so that their
firms and farms do not come under undue pressure to compete with
cheaper imports and large foreign firms, when they are not yet
ready to do so.
Unfortunately, as the Indian Commerce Minister Kamal Nath has
recently implied, the WTO negotiations are now in danger of
becoming not a Development Round but a Market Access Round.
Developing countries are being pressed to open up all sectors of
their economy.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 Hongkong. 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.
Due to the impasse, expectations that the Hongkong Ministerial will
produce full "modalities" (the formulae and numbers for reduction
of subsidies and tariffs) have been lowered. But many developing
country trade officials are worried that in the pressure cooker
atmosphere of WTO Ministerials, the developed countries' Ministers
and officials (and possibly aided by the WTO Secretariat
leadership, if past record is any guide) will try to extract
commitments from developing countries by putting pressure on their
Ministers (or asking them to accept deals which sound nice but have
negative content), while giving very little away themselves.
Agriculture
Agriculture should be at the centre of this Round, for it remains
the sector containing most trade distortions, and the Uruguay
Round's promise of liberalisation in the rich countries has yet to
be fulfilled. The proposals by the US, EU and other developed
countries have so far been inadequate. Independent experts in NGOs
and many developing countries have found that there would be little
if any real cuts in domestic support and little gain in market
access, unless these offers are much improved.
At the same time, most of the proposals on the table would oblige
the developing countries to cut their own agricultural tariffs at
higher rates than during the last Round, especially since the
tariff-reduction formula is likely to apply to all products,
instead of the more flexible Uruguay Round approach of cutting by
an overall average rate (so that there can be different reduction
rates for different products).
The NGOs and farmers' organisations (and quite a few governments'
officials) are furious that instead of being eliminated, the
existing injustices of the WTO agriculture regime would actually
worsen under this Round, since the rich countries can continue to
"dump" their products below cost in developing countries, which are
even less able to defend themselves from the artificially cheapened
farm imports because they have to cut their tariffs even more
sharply.
The European Union, picked on by most for not doing enough in
agriculture, has led the charge of developed countries to have the
developing countries open their markets also to industrial goods
and services. Its expressed rationale is that there must be
"balance", and the EU must get something in return to make it
worthwhile for it to make "sacrifices" in agriculture.
Non Agricultural Market Access (NAMA)
And so the push is on to have the "Swiss formula" accepted without
reservation in NAMA, and have it apply on industrial tariffs. It
works in a way that cuts tariffs more deeply the higher they are,
which suits the developed countries since their industrial tariffs
are generally low. But developing countries, which have relatively
high bound tariffs to protect their emerging industries, will be
caught.
There is a coefficient in this formula, which determines how steep
the tariff cuts will be. The lower the coefficient, the larger the
cuts. The EU has proposed a coefficient of 10 to apply to all
countries. The implications are very dramatic. All tariffs will
have to go below 10 per cent. For example, an existing 50% tariff
on a product will drop to 8.3% and an existing 20% tariff will fall
to 6.7%. Even if a coefficient of 30 is selected (and this is
rejected by the developed countries), the cuts will still be
severe. An existing 50% tariff would have to be cut by 63% to 19%.
Many domestic industrial firms in developing countries will not be
able to survive the brutal competition from imports resulting from
kind of drastic tariff cut.
In previous Rounds, neither developed nor developing countries were
subjected to such a formula cut. The flexibility for developing
countries to choose at which rates to liberalise their imports of
industrial goods will be lost in this Round. Many government
officials, as well as trade unions and NGOs are very concerned that
should the proposals go through, industrial development will be
foreclosed in most developing countries, with the loss of local
firms and industrial jobs.
Services
In services, there are already modalities for the negotiations,
agreed to in 2001, known as the services guidelines and procedures.
These preserve and extend the flexibilities in the WTO's services
agreement that allow developing countries to commit to liberalise
in only the sectors they choose, and to the extent they consider
appropriate.Though other members may make requests to a country to
open up, it is up to the country whether to make an offer to open
up in the requested sectors, or not, or to what extent. The
negotiations take place under the bilateral offer-request system.
In the past few months, several developed countries, led by the EU,
have proposed to introduce many new negotiating methods that would
undermine and potentially displace the bilateral system, the
services guidelines and the structure and flexibilities in the
services agreement itself.
The proposal is that a multilateral system of "benchmarking"be
introduced, in which developing countries would have to commit to
liberalise in a certain number of sectors (in the EU proposal, it
is 57% of the services sub-sectors). Another proposal is that
countries that are requested by others compulsorily take part in
plurilateral and sectoral negotiations. For example, a group of
countries that want others to open up their financial services can
request countries whose markets they are targeting to join in
negotiations for a plurilateral deal, and these requested countries
have to participate.
These new methods are designed to make it easier to pry open the
services markets of developing countries, by removing their present
freedom to decide for themselves what commitments to make at the
WTO. If these proposals go through, the developing countries will
lose control of their services sectors, which include finance,
distribution, telecommunications, energy, business and professional
services, as well as social services.
Several developing countries have been fighting against the
proposals which they see as an encroachment of their rights in the
present WTO services regime, and a threat to their domestic
services firms. But the developed countries are adamant to see
their demands are met. So a big battle looms on this front at the
Hongkong meeting.
Although the worst of the proposals - multilateral quantitative
benchmarking, also known as quantitative targets - has been removed
from the draft Ministerial text, the EU and other proponents are
expected to re-introduce it in Hongkong, perhaps using yet another
term to describe the same thing. And the rest of the proposed new
methods - qualitative benchmarking of commitments in the services
modes of delivery; the sectoral initiatives through "Friends" (in
reality the main demandeurs) of the various sectors; and the
plurilateral approach (where participation by the targetteed
countries is made mandatory in the text) - all remain in the
contested and controversial Annex C on services in the draft
Ministerial text.
Conclusion
To sum up, many developing countries and social movements are
frustrated that the WTO rules have perpetuated an unfair trading
system which is in favour of the rich countries and their
corporations, while laying developing countries open to ever more
pressures to liberalise when their farmers and firms are not in a
position to compete in the global economy, whether because the
rules are unfair (thus allowing the rich to have high subsidies),
or whether because the firms are too weak to face the onslaught of
giant foreign firms.
The results of the unfair trading system include the loss of
livelihoods and incomes of small farmers, loss of jobs due to
de-industrialisation in many countries, continued obstacles to
access to markets in rich countries and continuous decline in
commodity prices and the poverty that is linked to that.
The Hongkong Ministerial meeting, coming at a strategically
important moment in the Doha negotiations, might have had the
potential to correct some of the imbalances and turn the corner
towards development. But it looks as if the potential for doing
something positive has faded or disappeared.
Instead, the Ministerial will most likely become a battle between
the developed countries who want to use Hongkong 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.
Hongkong will also see an attempt by the WTO establishment to
offset the embarrassment of not achieving progress in modalities,
by putting on a "spin" that the developing countries, or at least
the LDCs, are getting some benefits in advance through a
"development package."
The Ministerial will thus be a mixed brew of unfulfilled
expectations arising from slow progress in the negotiations, an
attempt to offset this through a spin on development, a hard push
by developed countries to "lock in" market opening commitments by
the developing countries; and a lot of frustration from developing
countries that fear they will be made the sacrificial lambs that
have to open up their markets so that the major developed countries
have a bargaining chip to get themselves off the hook. Not at all
a bright prospect for a WTO Ministerial conference.
AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with
a particular focus on U.S. and international policies. AfricaFocus
Bulletin is edited by William Minter.
AfricaFocus Bulletin can be reached at africafocus@igc.org. Please
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or to suggest material for inclusion. For more information about
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