Global Trends by Martin
Monday 5 Dec 2005
Development hopes fade at WTO
The World Trade Organisation
last week adopted a draft Declaration that will be negotiated at its Ministerial
conference in Hong Kong starting 13 December. This is supposed to be
a Development Round, but hopes for development are fading as the rich
countries insist on using it to open the markets of developing countries
At the WTO’s Ministerial conference
in Hong Kong on 13-18 December, there will be many expressions of disappointment
that the Doha round of negotiations has not lived up to its “development”
This widespread feeling is
shared by officials of developing countries and many non governmental
groups, thousands of which will be in Hong Kong.
Last Friday, the WTO agreed
on a draft Ministerial declaration that will be brought for negotiations
in Hong Kong. It will mainly contain only progress reports on how the
talks are going in various areas.
The only report finalised by
the WTO members themselves is on trade facilitation. Malaysia’s Ambassador
to the WTO, Muhamad Noor Yakub, chairs this group and has been congratulated
for managing this feat.
The WTO members could not agree
on the content of the other main reports. On agriculture and non-agriculture
market access (NAMA), the reports will only carry the name of the Chairmen
of the groups.
And on the contentious area
of services, there is disagreement on many items in the text drawn up
by the Chairman. So the draft for Hong Kong will denote (through a bracket)
that there is no agreement and the section on services will be opened
for re-negotiation in Hong Kong.
It is clear that the WTO talks
are stuck. Developing countries and NGOs alike are worried how the rich
countries have derailed the development goals.
The Round is no longer about
development but about opening up the markets of the developing world.
The fear is that the outcome will be counter to development goals, with
millions of small farmers dislocated and local industries losing their
business or disappearing.
When the Doha talks were launched
in 2001, it was 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 implementing the WTO agreements.
Over a hundred proposals were
forwarded in each item, asking for reforms in the major WTO treaties,
which were found to contain imbalances. Four years later, hardly any proposal
of significance from these two items have been resolved.
Then there was supposed to
be a strong development dimension in the talks on agriculture, NAMA and
services. This means two things: increasing export opportunities for
developing countries, and enabling them to have “special treatment” so
that their firms and farms are not required to compete with imports and
foreign firms, before they are ready.
Unfortunately, as the Indian
Commerce Kamal Nath has put it, the WTO talks are 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.
And at the same time, the rich
economies are still very reluctant to liberalise in areas that can benefit
developing countries, especially agriculture and the movement of labour
This is at the heart of the
deadlock. 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 developed countries, on the defensive,
are pushing the developing countries to quickly open up their agriculture,
industrial products and services.
Due to the impasse, expectations
that the Hong Kong Ministerial will produce full “modalities” (the formulae
and numbers for reduction of subsidies and tariffs) have been lowered.
But the NGOs – and quite a few governments – are worried that in the pressure
cooker atmosphere of WTO Ministerials, the developed countries extract
commitments from developing countries while giving very little away themselves.
Agriculture should be at the
centre of this Round, with rich countries cutting their subsidies and
tariffs. So far, their proposals have been inadequate. Experts find
there would be little if any real cuts in domestic subsidies and little
gain in market access, unless the US and EU offers are much improved.
At the same time, most of the
proposals would oblige the developing countries to cut their own agricultural
tariffs by more than during the last Round.
Thus, rich countries can continue
to “dump” their farm 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.
Further, the developed countries
have launched a campaign to have the developing countries open their markets
also in industrial goods and services.
The “Swiss formula” is to apply
on industrial tariffs. It works in a way that cuts tariffs more deeply
the higher they are. 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 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
In services, developed countries
want to introduce many new negotiating methods that would undermine the
present system allowing developing countries to liberalise in sectors
of their choice at their own pace.
One proposal is for a system
of “benchmarking”, in which developing countries must commit to liberalise
in a certain percentage (the EU has proposed 57%) of sub-sectors.
Another proposal is that countries
that are requested by others must compulsorily take part in plurilateral
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 those 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.
Several developing countries
have been fighting the proposals. But the developed countries are adamant
to see their demands are met. So a big battle looms on this front at
the Hong Kong meeting.
The Hong Kong meeting 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 really
positive has faded. Instead, the Ministerial meeting is in danger of
becoming an exercise in fending off the demands of the develop countries,
limiting the damage of unfulfilled expectations, and postponing some hard
decisions to another day.
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