Global Trends by Martin Khor

Monday 3 August 2004

WTO Talks End with Imbalanced Deal

The World Trade Organisation ended a week of intense talks last Saturday night with agreement on how to proceed with its Doha negotiations, thus avoiding another Cancun-like failure.  There were some gains for developing countries, but the negative aspects outweighed the gains.


Agreement was reached last Saturday night in Geneva on how to get stalled negotiations going again at the World Trade Organisation after a long week of intense meetings.

The WTO adopted frameworks for how to move ahead on trade in agricultural and industrial goods, on the so-called Singapore issues, services, and the “development issues”.

They will be the basis for trade diplomats for the next stage of negotiations, to agree to “modalities” (principles and figures, for example on how much to reduce tariffs).

The negotiations are under the work programme agreed to at the WTO’s Ministerial meeting at Doha in 2001.    

A first reading of the results show a few significant gains for the developing countries, but they have also lost ground heavily in some critical areas.

Also, the meeting and its outcome revived an old issue, of how the WTO’s decision-making process is controlled by the big countries and how developing countries’ positions are generally not properly reflected. 

At an early morning press conference on Sunday, the WTO’s Director General Supachai Panitchpakdi said the WTO had now achieved what it failed to do in Cancun last September (when the Ministerial conference ended without any decision).

“Multilateralism has made a minor triumph,” he said, adding that some people had predicted that the Geneva meeting would be another Cancun.  “This agreement has strengthened belief in the multilateral trading system.”

It was in fact the fear of another Cancun-like collapse that drove many developing countries to eventually accept a deal of which they had been critical.   When the first draft came out on 16 July, it was severely criticized by many countries. 

Some, but only some, of the concerns were dealt with, but the countries decided to compromise and “live with the text” for fear they would be blamed if another WTO meeting failed, and the system were to suffer another blow.

There were two major gains from the Geneva meeting for developing countries in general.  

Firstly, the developed countries agreed in principle to eliminate agricultural export subsidies and deal with export subsidy-like measures like export credits, though an end date for the elimination is still to be decided on.  This should reduce some of the most trade distorting of the rich countries’ subsidies that have unfairly kept out the developing countries’ farm products.

Secondly, three of the unpopular “Singapore issues” (investment, competition, and transparency in government procurement) have now been dropped from the WTO’s negotiating agenda, at least during the period of the Doha programme.  Developing countries had opposed these issues which they believed would interfere with their national policies and hinder their economic development.

The attempts by the rich countries to set up new agreements on these issues had generated heated controversy for years and was a major factor in derailing the Cancun meeting.

The decision left it vague as to whether discussions (as contrasted to negotiations) would continue even now at the WTO, and left open the possibility of their making a comeback after the Doha programme is finished.  However, doing away with negotiations on these issues is a relief for developing countries.

Against these two positive developments are some setbacks.  By far the worst decision was the adoption of a framework on trade in industrial goods, which could lead to the threat of cheap industrial imports overwhelming local goods and industries.

The framework on NAMA (non-agriculture market access), contained in Annex B of the Geneva agreement, advocates a formula for reducing tariffs sharply, with steeper cuts for higher tariffs. 

For example, under a variation of this formula, a 40% tariff on a product would have to be reduced to 7%.  It also calls for fast-track tariff elimination for products in several industrial sectors.

If accepted, these measures could threaten the survival of local industries. Most developing countries (especially from Africa and the Carribean) had opposed the Annex for months, and were outraged when they were told last week they had to accept it nonetheless.

At one stage, it looked as if the Geneva meeting would collapse on this issue.  In the end, the developing countries agreed to accept the unpopular Annex, on condition it be prefaced with an explanation that more negotiations are needed on many of its elements.

That has given the developing countries a space from where to continue to battle for a better framework. But since the present Annex is the basis for negotiations, it will be an uphill task.

On agriculture, the developed countries had their way when some of their issues were fast-tracked into the text, whereas the developing countries’ long-standing problems made little progress.

The rich countries pushed for a change in WTO rules to allow them to use new kinds of domestic farm subsidies under the “Blue Box” (in WTO jargon).  This issue split the meeting and also threatened to derail it. 

Developing countries felt it was a loophole that would permit domestic subsidies to rise overall, thus making a mockery of the often-stated WTO aim to reduce these subsidies. To break the impasse, it was agreed the issue would be reviewed later but the text has given an advantage to the “Blue Box” advocates.

The rich countries also succeeded to have their heavily protected farm goods categorized as “sensitive products” which would not be subjected to the standard tariff-cutting formula.  This concept of “sensitive products” made a sudden appearance in the text just a fortnight ago, without its having been extensively discussed.

In contrast, the developing countries have pushing for years for a decision that certain farm products on which so many small farmers depend be designated as “special products” and exempted from further tariff reduction. 

But although these “special products” received slightly better recognition after last week’s meeting, the exemption was not given and there will be tough talks ahead on how to define these products and what special treatment, if any, they will get.

Another blow was that the cotton issue was badly treated at the meeting.  Cotton-producing West African countries have highlighted their plight, on how billions of dollars of  cotton subsidies (mainly in the US) have hampered their own cotton exports. 

Their highly-publicised proposals for special treatment for cotton, aimed at eliminating cotton subsidies on a fast-track basis, were very much watered down, to a general pledge to address the issue ambitiously, and the setting up of a cotton subcommittee. 

There was also a decision to launch negotiations for new rules on “trade facilitation”, one of the original four Singapore issues.  Such a launch had been resisted by the developing countries, which are worried about the costs of implementing such new rules.   But they agreed after developed countries pledged to give assistance on the implementation, including for infrastructure development.

On the “development issues”, the Geneva meeting again failed to agree to concrete measures to provide special treatment for developing countries, or to resolve their many problems of implementing the WTO rules.   It merely set new deadlines (since the old deadlines have long past) for the issues to be considered and for reports on these issues to be submitted.   

In fact the Geneva meeting marked another sad step in the steady decline in status and action on these “development issues”.   There has been hardly any concrete results for years on them.

When the Doha negotiations were launched in 2001, it was with a lot of rhetoric on the need to put developing countries’ interests at the center.   Sadly, the negative aspects far outweighed the positive developments at the Geneva meeting last week.   And thus development remains rhetoric, whilst some of the new decisions (especially on industrial tariffs) are potentially threatening to development prospects.