Global Trends by Martin Khor

Monday 27 October 2003

Debate on trade shifts to UN agency

BLURB:    A frank and lively debate on what’s wrong with the world trade talks, why the WTO conference in Cancun failed, and what should be done has been held in the UN agency, UNCTAD, at a period when such frankness appears to be difficult or impossible at the WTO itself.   Martin Khor reports from Geneva.


The impasse at the World Trade Organisation after the failure of its Cancun Ministerial talks has provided a little boost to its “sister organisation” a mile down the road,  the United Nations Conference on Trade and Development (UNCTAD).

At least in one way.  Many countries that have been reluctant to disclose their positions in the present sensitive atmosphere of the WTO have been voicing their frank opinions at the UNCTAD.

This UN agency in fact used to be the “senior partner” in the world trading system, as most trade negotiations took place there, mainly on commodity agreements.

But in the past 15 years its fortunes have declined, as commodity agreements phased out, and the WTO and its rules-based system phased in.

The WTO has now become the more prominent organisation, as most trade negotiations now take place there.  But with the Cancun collapse, UNCTAD became the venue where governments in the past two weeks have been discussing the trade system, including what happened in Cancun and what to do next.

UNCTAD’s Trade and Development Board (TDB) recently concluded its 50th session.

The highlight was the discussion on the WTO’s recent negotiations and its Cancun Ministerial conference, which attracted 47 delegations (both developing and developed countries) to speak in a frank and very lively debate.  This contrasted with the near-silence that characterised the WTO’s first post-Cancun meeting on 14 October, where only five delegations spoke. 

The TDB president, China’s Ambassador to the UN, Mr. Sha Zukang, presented a Chairperson’s Summary of the UNCTAD debate.

According to the Summary, it was generally agreed that there is no better alternative than the multilateral trading system (MTS).  But trade and trade negotiations must not be treated as a panacea for the global economy. Trade is not an end in itself but a means to balanced, equitable and sustained development.

The Summary noted that a fair share of benefits from the MTS has so far failed to accrue to developing countries, notwithstanding that they have undertaken significant liberalization Some countries noted that today’s developed countries practiced and benefited from policies that are now being curtailed for developing countries through the MTS. 

Regarding Cancun, the summary said disappointment was expressed with the Cancun impasse and concerns expressed that the Ministerial Conferences are becoming prone to such setbacks.

Trying to apportion blame between developed and developing countries serves little purpose and is misleading, since the priority of the hour is to listen and appreciate the concerns of all and to find multilaterally acceptable solutions.

“Concern was expressed that the Cancún setback could undermine commitment to multilateralism and play into the hands of protectionist and partisan interests. It could also speed up the vigorous pursuit of unilateralism, bilateralism and regionalism.”

In assessing Cancún, the TDB concluded its problems were due both to process and substance.

The WTO negotiating paradigm has changed, with developing countries demanding to be heard and to be taken into confidence before decisions that could have a far-reaching impact on them are taken. 

“Decision-making processes in WTO have become more complex and difficult, not only because of the enlargement of the membership and the scope of the agenda, but also because a large number of democracies participate,” said the Summary.

“Like their developed country counterparts, developing country Governments have to factor in political, social and economic interests and considerations involving their people and constituencies, as well as critical development and survival issues.

 “A view was expressed that there is need for reform of the decision-making process of the WTO to make it more efficient. It was stated that the WTO follows a rudimentary decision-making process, while it has a very effective enforcement system. This is a possible source of imbalance in the MTS when it relies more on the modern dispute settlement mechanism than on rules to address trade issues.

“Other views cautioned that an examination of reforms in the WTO would divert attention from real issues facing the MTS, particulary market access and development issues. Yet others encouraged further democratization of the decision-making process of the WTO.”

The Chairperson’s Summary said the seeds of the Cancún setback were sown through missed deadlines, lack of treatment of development issues, unfinished business and imbalances from the Uruguay Round, as well as the slow pace of agricultural reform in developed countries.

“The lack of a substantive outcome highlighted a lack of consensus on key areas of negotiations.  Many expressed the view that the proposed package at Cancún was disappointing in terms of its development content, leaving many to believe that Doha may have been only a rhetorical rather than a substantive promise.”

On the post-Cancún phase, movement towards convergence will require political will from all parties, renewed cooperation and consensus.  Added the Summary:  “Cancún should serve as a wake-up call for the international community to build mutual trust and bridge differences to restart negotiations in good faith and in a forward-looking manner. All countries agreed that efforts must be made to put the DWP back on track.

 “There is need to address the legitimate concerns of developing countries on new and complicated issues on which no consensus exists for new WTO disciplines.”

The statement also summed up discussions on specific issues, such as agriculture, industrial products and the so-called Singapore Issues.

On agriculture, several countries stressed that fundamental reform of agricultural trade could bring important gains for developing and developed countries. Said the Summary:  “The elimination of all forms of export subsidies and a substantial reduction in trade-distorting domestic support for agricultural trade would promote development in developing countries and significantly contribute to poverty alleviation.

“The convergence of positions on the reform of agricultural trade is possible through renewed cooperation and constructive engagement by all parties,. In addition, market access must be coupled with effective special and differential treatment, special products, special safeguard mechanisms, specific measures for small economies, food security, rural development and adequate measures for net food-importing developing countries and LDCs.”

On negotiations to bring down tariffs of industrial products, the Summary said that developing countries wanted their reduction commitments to be  “consistent with their capacities and development objectives, and considered that they should be accorded less than full reciprocity, as provided in the Doha Ministerial Declaration. They found that the level of ambition on NAMA (non agriculture market access) was too high compared to agriculture.”

“They stressed that sectoral proposals (i.e. to quickly eliminate tariffs in selected sectors) should be on a voluntary basis and that tariff peaks and escalation need to be addressed.”

The above is a reference to the worry that developing countries have that the rich nations have been demanding that they (the poorer countries) drastically reduce their industrial tariffs, which if accepted in the WTO talks could cause cheaper imports to wipe out the smaller local firms. 

The Summary also covered the discussions on the controversial Singapore Issues, i.e. investment, competition, transparency in government procurement and trade facilitation.

The resistance of developing countries to the demands by the rich nations to negotiate new WTO treaties on these four issues caused a stalemate that was the immediate cause of the Cancun collapse.

 The Summary said that “most developing countries indicated that they are not yet convinced of the potential gains to them from WTO disciplines on these issues. In the interest of manageability and prioritization in the DWP, it might be better to concentrate on substantive and core trade issues for the present, and some suggested that it would be timely to drop these issues from the WTO work programme.

“It was pointed out that some proponents have shown flexibility in terms of removing most of these issues from the WTO agenda and therefore any future consideration of this matter should take this into account. Meanwhile, other organizations, like UNCTAD, could be asked to continue work to build confidence, clarify their development implications and provide for substantive treatment of these issues.”

The Summary also noted UNCTAD’s important contribution to developing countries. UNCTAD can act as a facilitator for the beneficial integration of developing countries in the trading system. It should continue to play such a supportive role through research and policy analysis and provide a forum for consensus building and maturing and ripening of negotiating areas for further treatment in WTO, and in this way contribute to putting the WTO talks back on track.