TWN Info Service on WTO and Trade Issues (Dec18/06)
12 December 2018
Third World Network

Current WTO reform proposals must be rejected, says Minister Davies
Published in SUNS #8814 dated 11 December 2018

Geneva, 10 Dec (D. Ravi Kanth) - The current set of reform proposals for "modernizing" the World Trade Organization must be rejected by developing countries, South Africa's trade minister Rob Davies told SUNS on Friday. These proposals would "make an unbalanced multilateral trading system even worse" by curtailing the "policy space" for industrial and economic development, Davies said.

"This is the time for the developing countries to come together and reaffirm what we want" at the World Trade Organization, he said, expressing alarm over a set of reform proposals advanced by major industrialized countries and their allies.

Developing countries face "a very one-sided debate" if they do not articulate a common position, "as others [several industrialized countries and their allies] have made their position very clear and their positions are to the disadvantage of the developing countries," Davies added.

Davies said the so-called reform proposals which were advanced by several industrialized countries as well as some developing countries "would make an unbalanced multilateral trading system even worse."

"And that is the issue we [the developing countries] have to confront," he said.

"The proposals on the table are not acceptable to the developing countries, we are not willing to agree to steps that would bring about differentiation between us developing countries and we are not going to accept tightening of some rules that are of interest to some members, while at the same time big issues like agriculture trade remain on the back burner," he repeatedly emphasized.

"It is time for developing countries to speak out [against the reform proposals]," the South African Trade Minister said.

"I think the proposals, simultaneously put out on the table, are clear that developing countries should not have access to policy tools which every country that is industrializing should have access to, and their [policy] access should be severely curtailed."

Elaborating on the reform proposals, he said "what they [the proponents] are talking about is not only same obligations [must apply] but can have more time on a case by case you can ask for in the process leading up to the Doha Round."

South Africa, he said, "made a strong case that historically we are subjected to injustice as we were classified as a developed country but we were asked to take a low Swiss coefficient that would make things more disadvantageous."

Subsequently, "we were asked to justify our case as a developing country, and we were told that we will have a carve out that is not sufficient to correct the historical injustice," Davies explained.

"So this formula exposed us to power relations and it was not acceptable," he said, suggesting that the WTO reform proposals on the table will impose new power relations on developing countries unless they reject them in full.

The United States, the European Union, and Japan have also targeted against industrial subsidies, mandatory transfer-of-technology policies and intellectual property rights as part of the reform proposals.

Commenting on industrial subsidies, Davies said for many countries, "industrial subsidies are policy tools that are necessary to support industrial development and countries have deployed them for industrial development."

He said even smaller countries need industrial subsidies for further development.

Worse still, "the proponents want rules on industrial subsidies but they are not prepared to address significantly the huge distorting subsidies in agricultural products," he said.

"So what will happen is that the rules on industrial subsidies will be made further disadvantageous for developing countries like South Africa to move up the value chain," he maintained.

Davies said trade ministers of Africa will "discuss these issues in the African Group trade ministers' meeting in Cairo next week [beginning from 10 December] and our view is that, particularly South Africa, strong message should go out that these reform proposals are not acceptable."

About reform proposals that intend to strengthen the role of the WTO secretariat, and the monitoring and notification requirements, Davies said "clearly, what is being attempted in monitoring and notification requirements is to limit the policy space in the developing world and prevent the lessons of few developing countries that have succeeded (from being followed by others). The latest one is of course China and that is what it is all about."

"That is the problem and that is what Ha-Joon Chang argued in his book Kicking the Ladder and that is what exactly it is - kicking the ladder," he said, emphasizing that attempts are being made to ensure that developing countries should not have recourse to policies that have enabled the developed countries to grow over the past 200 years.

The US had built its industry starting with the Hamilton plan - "Report on the Subject of Manufactures" in 1791.

"The core of his [Hamilton's] idea [is] that a backward country like the US should protect its "industries in their infancy" from foreign competition and nurture them to the point where they could stand on their own feet," wrote the Cambridge economist Ha-Joon Chang in his book "Bad Samaritans - The Guilty Secrets of Rich Nations and the Threat to Global Prosperity."

Even Adam Smith, the Scottish father of free trade, "had solemnly advised the Americans not to develop manufacturing," says Chang.

"He [Adam Smith] argued that any attempt to stop the importation of European manufactures" would "obstruct instead of promoting the process of their country [Britain] towards real wealth and greatness," writes Chang.

Indeed, Britain and the US, the two most successful economies, had been protectionist for long periods of time with high tariff walls, according to Chang.

"While Britain and the US were protectionist, they were economically more successful than other countries because they were less protectionist than others," Chang has argued.

Asked to comment on the developing countries failing to come together in the face of such disadvantageous and harmful proposals to their interests, Davies said "if you are talking about groups and their positions, we went into the [WTO's eleventh ministerial conference in] Buenos Aires meeting with a set of proposals to improve special and differential flexibilities and 120 countries had agreed on this."

But the developed countries said that the S&DT proposals "are not acceptable as they would have serious consequences."

"But what about the reform proposals?" he asked. Surely, "they will have much more serious implications," Davies said.

If the reform proposals make their way (into the WTO rules) then we will have "power politics and even more unbalanced multilateralism than now," he said. "And that is the choice between a rock and a hard place," Davies emphasized.