LESSONS FROM THE WTO 6TH MINISTERIAL MEETING:
AN APPRAISAL AND CALL TO ACTION
II. Why the MC6 is a bad deal for developing countries?
- The WTO 6th Ministerial meeting salvaged the stalled trade talks and provided the needed impetus for the recovery of the Doha Round. It came though at a high price for developing countries. What they got are merely crumbs in agriculture, in exchange for their agreement to the controversial issues of NAMA and services, which they had painstakingly resisted in the run-up to the MC6.
- The HK WTO MC6 results further expose the hypocrisy and shallowness of the Doha Round. Far from promoting development for poorer countries, the Round in reality seeks merely more aggressive liberalization in trade in goods and services and in investments for the benefit of developed countries and their transnational corporations.
- The HK MC6 thus triumphantly advances the march of globalization, at the expense of poorer countries and their people.
- Hidden in the din of praises showered by both developed and developing country governments on the outcome of the MC6, are the stories of manipulation, connivance and even sell-out of leaders of developing country coalitions.
- The results also expose the power relations in the WTO, the vulnerability of developing countries and the reality of developing countries cooperation. National interests dictated more by their exporting elite rather than their small farmers and workers dominated the week-long negotiations.
As a whole, the HK agreement is clearly a bad deal for developing countries and LDCs. It clearly demolishes their remaining flexibility to protect sectors crucial to their economic development. In effect, it pushes back the development agenda of poorer countries.
- In agriculture, developing countries which pinned their hopes that the negotiations would address substantially their development concerns gained little. There was no deal to effectively curtail huge trade-distorting domestic support of developed countries that has contributed to agriculture dumping and the devastation of small-scale farming in developing countries. The Ministerial declaration merely adopted a three-band approach to subsidy reduction but failed to present a subsidy cutting formula that would effectively reduce total trade-distorting agriculture subsidies to levels below their current levels. Even if there are proposals by developed countries like the US to cut over-all trade-distorting support substantially and increase cuts in their de minimis and blue box payments, developed countries’ current levels of subsidies will remain untouched, given their practice of late notification of subsidies which has given them much leeway to protect their present subsidy structure. For instance, the US proposal to cut by 53% their total trade-distorting support from a base level of $48.2 billion would allow them a new ceiling of $25.6 billion, but their actual spending in 2001 was $21.5 billion. Hence, despite the proposed subsidy cuts, the actual high levels of trade-distorting subsidies would remain. Moreover, the declaration was silent again on the urgent proposals made by developing countries to review and discipline the Green Box subsidies, where much of developed countries’ trade-distorting subsidies have been shifted, along the line of reducing them. Thus, unless all these supports that are mainly funneled to agribusiness are substantially reduced, agriculture dumping will continue to bring havoc on agriculture and farmers’ livelihoods in poorer countries.
- In the Market Access pillar, the flexibilities demanded by developing countries have not been sufficiently addressed. Many of them have resisted the ambitious tariff reduction proposal of developed countries led by the US, citing the imbalances of the existing agreement which forced most developing countries to rapidly open up their markets without reciprocal action from developed countries. In the run up to and during the MC6, while the Group of 33 put in substantial efforts to flesh out the Special Products and Special Safeguard Measures (SSM proposal, the MC 6 declaration still failed to define how the SPs will be treated, whether such products will be exempted from tariff reduction or will undergo smaller tariff cuts, etc. What was acknowledged though was that SPs are to be self-designated but covering an “appropriate number of tariff lines” guided by indicators based on the criteria of food security, livelihood security and rural development. But again this statement effectively puts limit to the coverage of SPs. The negotiations on indicators could even bog down agreement on the whole concept. Considering the US strong aversion to the principle of proportionality or giving tariff flexibility to developing countries in light of their implementation experience and current tariff structure, the negotiations for defining rules and formulas for the operationalization of SP would surely be an uphill battle. In a similar vein, while the SSM proposal made some headway with the adoption of the price-trigger mechanism, along side the volume trigger, it remains to be seen how such can be made more operational and relevant to developing countries’ context during the formulation of modalities.
- The so-called victory gained by developing countries with the MC6’s adoption of an end-date for export subsidy elimination by 2013 is a shallow one. The elimination of export subsidies has long been overdue and thus should take place immediately and not seven years hence. The year 2013 conveniently coincides with the final phasing out of EU’s export subsidies, thus guaranteeing that such a commitment will not create undue havoc on its own support structures. Even then, the elimination of export subsidies is conditional to a parallel elimination of other forms of export subsidies such as export credits and discipline on other export measures such as food aid, which are also targeted to be completed by 2013. Interestingly, however, there seems to be not any commitment at all, as the end-date has yet to be confirmed upon the completion of modalities. Moreover, export subsidies constitute only a miniscule portion of the total trade-distorting support of developed countries, thus eliminating them would not guarantee that the practice of dumping will end. EU’s export subsidies by 2013 would total only Euro 1 billion , as compared to their domestic support payments amounting to Euro 55 billion annually. The US does not use anymore export subsidies. Dumping or the selling of agriculture goods in the world market at below the cost of production is made possible not only by direct export subsidies, but also by huge domestic supports that serve as indirect export subsidies.
Worse than the above however, is that this so-called gain came at the price of developing countries’ acquiescence to agreements in NAMA and SERVICES.
What little gain, developing countries may have gotten in agriculture, on the balance were practically demolished in the industrial, non-agriculture and services sector. The agreements reached in NAMA and services bind developing countries to a disastrous path of unbridled liberalization and de-industrialization, which has serious consequences on their long-term development. Most developing countries have already suffered severe economic blows during period of indiscriminate liberalization under SAP. Most of their domestic industries have already collapsed. Whatever remaining protection and support they have on their domestic industries are now even poised to be removed under the recent agreement on NAMA.
Despite the resistance of developing countries to developed countries’ proposals on NAMA, the Swiss formula for cutting industrial tariffs with coefficients was adopted by the Ministers in HK. This means deeper tariff cuts for industrial goods that have remaining high tariff protection precisely because of their strategic significance to national employment and other development concerns. The stage is also set for the binding of industrial tariffs following their adoption of “non-linear mark-up approach to establish base rates for commencing tariff reductions.” Again this means raising current levels of tariffs on industrial goods to a base rate upon which the tariff reduction formula will be applied and subsequent tariff reduction made. This effectively robs developing countries of an important policy tool to steer the course of their industrial and economic development. Tariff binding would limit their flexibility to raise their tariffs at an appropriate level of protection to defend domestic jobs and pursue national development interests.
Many view that the MC6 was a resounding victory for developed countries and their transnational service companies, who have long been demanding to open up service markets of developing countries. The concessions they made in agriculture were so miniscule compared to what they are aiming to get in services. Developed countries have high stakes in the services sector, like energy, water, telecommunications, banking and finance, transport, etc. Hence there was no let up in the pressures they exerted in the run up to and during the MC6 to deliver changes in the services negotiations. Thus, despite opposition from most of developing and least developing countries, Annex C of the July 2004 framework was adopted in the Ministerial declaration without major alterations. Annex C allows the conduct of plurilateral negotiations on top of the existing bilateral request and offer process under the GATS. This exerts enormous pressure on developing countries to completely or fully liberalize their services sector. Under plurilateral negotiations, a group of countries can present their request in a certain sector to individual members. Based on the Ministerial Declaration, the deadline for these negotiations would be February 2006. This new method of negotiation would have serious implication on the ability of developing countries to reject requests on sectors they would like to protect.
D. Development Package
A lot of talks on duty-and quota-free access for LDC products to developed countries’ markets were spent during the conference, but there were no substantial agreements giving LDCs more export opportunities. There was no binding commitment on the part of developed countries to provide market access to LDCs. Developed countries even got a escape clause, as the text allowed them to exempt from market access 3% of tariff lines, which could conveniently allow them to continue protecting their sensitive products.
In sum, the MC6 advanced the Doha round of negotiations by securing substantial agreements in the key areas of NAMA and Services, towards the direction of more ambitious liberalization in these sectors even as nothing much was gained by developing countries in the agriculture, in terms of securing wider flexibilities and policy space to protect rural livelihoods and promote rural development. The outcome as well as the processes that transpired in the ministerial meeting unmasked the real intent of the Doha Round, which is to further expand developed countries’ market access not only in agriculture but in industrial goods and the services market in developing countries in favor of their transnational corporations. The MC6 clearly showed that the Doha Development Round is a complete sham and is merely a ploy to get the support of developing and least developed countries in a new round of negotiations, amidst their rising frustration over the inequities and imbalances of the existing WTO agreements. The failure of the MC6 to incorporate a real development agenda for the poorer countries merely reflects the true nature of the WTO, as the main instrument promoting corporate-led globalization. The WTO whose main paradigm is to promote the neo-liberal orthodoxy that free trade is the end goal, cannot and will never accommodate developing countries’ development concerns, even if increasing empirical evidence has shown that trade liberalization and forced world market integration have exacerbated global poverty and hunger. Hence, whatever reference to development would remain peripheral in any WTO negotiations.
III. But why did the developing countries agree to a highly imbalanced declaration that would have calamitous impact on their development?
We need to understand the WTO as a reflection of the balance of forces in the world. The rich countries led by the US and EU continue to wield enormous power over poorer countries through economic and trade ties as well as their military might. Inevitably, the trade agenda of the WTO is continuously shaped by this dynamics. In the Ministerial meeting, developed countries exerted enormous pressure and resorted to manipulation and deal making to force an agreement that was obviously skewed in favor of expanding profits of their own giant corporations. For instance, EU campaigned hard during the MC6 to get a favorable deal on NAMA and Services and linked its offer on agriculture to what developing countries can concede in these two sectors. EU got what it wanted, but developing countries got a paltry deal. In consequence, the corporations particularly the services transnational companies who were also very much active in lobbying during the MC6 reaped enormous benefits from the ministerial. They are now launching their first round of plurilateral negotiations.
The undemocratic processes in the WTO which included all the green room meetings, lack of substantial negotiations on key issues like NAMA and Services and even the set up of the last day plenary, which made any discussions or debates on contested issues impossible led to the approval of the Ministerial Declaration which included highly contested provisions such as the Annex C. The dominant role of the WTO Secretariat and the rich countries in directing these processes reveals that the WTO is an instrument of economic domination of the rich countries and not of mutually beneficial trade cooperation among equals.
The outcome of the MC6 would also show that the unity of developing countries remains fragile. While the developing country groupings like the G20 showed remarkable solidarity in Cancun to thwart the proposals of the US and EU on agriculture, in the HK MC6 they were revealed to be narrow groupings limited to single issues that in the end compromised their position on the entire negotiations. Hence, when the developed countries gave in to some of their specific demands, such as the case of the end date for export subsidy elimination or when the WTO provided sufficient processes to discuss their proposals, even if much of them were not carried through in the final text such as the case of the G-33 proposal on SP and SSM, or when the rich countries used trade preferences as leverage, developing countries’ acquiescence to the declaration became inevitable. The alliance of developing countries along specific issues may therefore not be enough to bring forth substantial reforms in the WTO. As such it could even be disastrous as it could divide countries along specific positions and therefore allow the developed countries to continue to dictate the entire agenda.
Developing countries’ vulnerability in their negotiating position stems from a confluence of factors. First, developing country governments’ trade and economic policy are steeped in the neo-liberal orthodoxy, which clearly is a product of the IMF-WB sponsored structural reforms of the 80’s and 90’s. Economic and trade liberalization are pillars of their economic policies. Second, most of developing country governments represent the interests of their economic elite who largely benefited from economic liberalization. This is exemplified by Brazil’s agri-business sector which continues to demand for more market access for Brazil’s major export crops, even if expanded trade has displaced poor landless peasants from their land. While there maybe some sections of the elite who might have been negatively affected by liberalization and have demanded for more protection, in the end it is the more powerful and politically entrenched interests who can and will be able to dictate the government’s negotiating agenda. Within this context, many developing countries may find it very difficult to reject and break out of the dominant trade paradigm. While they see the inequities in the agreement, they agree that globalization and trade liberalization still offer the best solution. Hence, the most that they can do is to demand for specific reforms in the trade rules. Consequently, this limits their position to compromises and creates disunities among their ranks.
National interests as defined by those who control developing country governments are the main driving force in the shifting of positions of previously staunch critics of the US and EU position. The sell out of Brazil and India of the G20 position was largely determined by the concessions they got from the rich countries. Even before the MC6, Brazil and India had already coalesced with the US and EU in a new power bloc called the QUAD. Brazil and India were instrumental in getting the nod of developing countries in the adoption of the services text in the last day of the ministerial meeting. Clearly then, the US and EU had succeeded to dismantle the unity of the G20.
While some developing country governments have shown consistency in resisting the developed countries agenda for more aggressive trade liberalization, and have used their position in certain issues to demand for more sweeping reforms, such as SDT and the SP and SSM, their influence in the negotiations is minimal. Many opted not to risk their political capital, by agreeing to the text even if they had strong opposition to it, in particular Annex C. But even then two countries, Venezuela and Cuba have to be cited for taking the risk to put into record that there indeed was opposition and resistance to the services text, even if the WTO had glossed them over.
IV. IMPLICATIONS OF THE MC6 AND THE DOHA ROUND ON FOOD SOVEREIGNTYN AND DEVELOPMENT
By reviving the momentum of the Doha Round and advancing the permanent trade liberalization of the WTO, the MC6 has serious implications on food sovereignty, food security and rural development of poorer countries. Aggressive trade liberalization in the face of declining government support in agriculture, and the prevailing structural weaknesses ailing developing countries’ economies, has significantly undermined food security, and food sovereignty of developing countries. Trade liberalization in agriculture has been accompanied by significant decline in domestic food production, collapse of traditional farming livelihoods, displacement of farmers and rising rural unemployment.
Developing countries will be forced to swallow more of the same formula of trade liberalization, not only in agriculture and industrial goods, but in services and investments as well, if the Doha Round is completed. This would have more devastating impact on poor farmers, smallholders, independent producers and entrepreneurs as well as workers whose livelihoods have been already been devastated and threatened by liberalization.
The substantial deals already reached in NAMA and services would likely push the negotiations towards more expanded and deeper liberalization. Such would further exacerbate the problem of lack of access to land, water fishery and other productive resources of poor farmers, fishers and other marginal rural sectors. On the other hand, TNCs’ monopoly control on agriculture production and trade would intensify leading to more market concentration, dumping and declining farm prices and incomes.
In the services sector, for instance developed countries have already made several requests to open up developing countries’ retail and distribution sector. If developing countries were to commit to this sector, this would mean the expansion of supermarket supply chains that would have implication on small retailers as well as poor farmers’ capacity and bargaining power in the supply chain. A more insidious scenario would be displacement of farmers from their lands in favor of foreign investors/service corporations purchasing land and other assets in poorer countries.
The full liberalization of the manufacturing and natural resources envisioned under NAMA will surely lead the developing countries to severe de-industrialization and undermine their capacity to create more domestic jobs for their own people. This will further cement the import-dependent and export-oriented model of their economy, which has for decades failed to lift their people from poverty.
In sum, if the deals struck in the MC 6 are to be completed, developing countries and the least developed countries would never see an era of prosperity for their people and the next generation to come.
V. POST-HK CHALLENGES AND THE WAY FORWARD
Unless a decisive halt to current trade negotiations in the WTO are made, the march towards more aggressive and expanded trade would be very devastating to peoples around the world, particularly the landless peasants, small farmers, fishers, small entrepreneurs and workers. The next three months would be decisive as the deadline for the modalities in agriculture and NAMA is set by the end of April 2006 and the schedule of government commitments based on these modalities is by the end of July 2006. February 2006 is also the deadline for the launching of the plurilateral negotiations on services. Social movements and campaigners would have to target that no deals on these deadlines nor on those that would conclude the Doha Round by 2006 would be made. The Doha Round should be effectively stopped if development that meets the real and urgent needs of the peoples of the world is to be achieved.
As already seen in the MC6, the WTO and its processes favor largely the developed countries and their transnational corporations’ agenda for corporate globalization. Hence, securing food and livelihood security and promoting development for the people of the developing countries and the least developing countries will only find fruition outside of the framework of the WTO. It is time to look at a different model of development away from the infamous Washington Consensus– where trade is not seen as the end in itself, but merely a tool to promote broader development goals.
Towards this, the following elements of strategies are proposed for the next wave of campaign against the WTO:
- There is a need to emphasize a comprehensive critique of the WTO. While the single issue campaigns have their own contribution, the focus on singular issues has also deflected criticisms on the fundamental character and nature of the WTO and to the other important aspects of its trade agenda. It also created complacency that WTO can indeed be reformed by strengthening developing country proposals in agriculture, SDT, etc. Therefore, the calls to get WTO out of agriculture and fisheries must be linked to other calls on services and NAMA. This means that the campaign should be comprehensively packaged as well so that important aspects of our criticism are not left out.
- Build alliances along this comprehensive critique both at the national and international level. Among developing country governments, there maybe a need to support the building of alliances that are forged along a more comprehensive critique of the WTO and its agenda of permanent trade liberalization. The model of the anti-FTA alliances in Latin America would be an example. Among social movements, there maybe a need for single issue campaign networks to go beyond their sectoral issues and forge alliances with other networks to present a comprehensive appraisal and critique of the WTO and to organize sustained coordinated campaigns that will increase pressure on governments.
- At the national level, networks and campaigners should be able to build strong pressure on governments to stop them from forging a deal in the coming months that will only speed up the liberalization process being envisioned under the Doha Round. Governments must be increasingly held accountable for their position in the negotiations. This can be made possible if national movements generate wider public consciousness on the issues and sustained pressure on governments.
- Critical to above would be the building of linkages between the anti-WTO movements at the international and national level to movements for social change. In this regard, our network must be able to maximize various fora at the national and international level where our issues on food sovereignty and agriculture trade can be popularized and where we can establish concrete links with other movements. At the national level, it is essential that issues on the WTO must be linked to national as well as local issues to generate broad support from farmers, workers, small business, etc. At the international level, we should be able to maximize various forums including the WSF in order to make more organizations aware of the issues we’re campaigning and generate wider support for our demands.
- Final Hongkong Ministerial Declaration, 18 December 2005.
- Draft Ministerial Declaration for Agriculture Negotiations, 16 December 2005.
- Breaking out of the Mold: Reflections on the WTO Ministerial Conference in Hongkong, IATP, 17 January 2006.
- Murphy, Sophia. “The United States WTO Agricultural Proposal of October 10, 2005,” in Sailing Close to the Wind: Navigating the HongKong WTO Ministerial, IATP, 2005.
Khor, Martin. WTO Ministerial Outcome Imbalanced against DevelopingCountries, Hongkong, December 2006.
Murphy, Sophia. “The United States WTO Agricultural Proposal of October 10, 2005,” in Sailing Close to the Wind: Navigating the HongKong WTO Ministerial, IATP, 2005.
Khor, Martin. WTO Ministerial Outcome Imbalanced against Developing Countries, Hongkong, December 2006.