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CAFOD Analysis of WTO Doha Declarations

This is an initial analysis of the Doha declarations. We would welcome feedback. Please send all comments and corrections to dgreen@cafod.org.uk. For more information and analysis on the WTO, visit www.cafod.org.uk/policy

Background

There were three main texts agreed at the end of the 4th WTO Ministerial in Doha: The Ministerial Declaration, the Decision on Implementation Related Issues and Concerns, and the Declaration On The Trips Agreement And Public Health. This paper provides an initial analysis of the potential impact on developing countries of the decisions taken at Doha. It does not discuss process or institutional issues at the WTO or in Doha, or the two other major events in Doha - the accession of China and ‘Chinese Taipei’ (Taiwan) and the agreement of a WTO waiver for the EU-ACP Kotonou agreement - the successor to the Lome agreement, thereby exempting the agreement from legal challenge under WTO rules.

Summary

The Doha declaration has no clear winners and losers - it is a classic case of ‘is this glass half full or half empty?’ The full implications for developing countries will only become clear in the course of negotiations, but here are some of the high and low points of the text, in terms of development.

The Good News

The biggest victories for developing countries in Doha were mainly defensive. In particular, they defended the original broader interpretation of the TRIPs agreement, allowing them to override patents in the interests of public health, and they fended off a determined effort by the EU and (to a lesser extent) the US to begin negotiations on the four ‘Singapore Issues’ of competition, investment, transparency in government procurement and trade facilitation. These will now come back to the next ministerial in late 2003 for a decision on whether to go forward to a negotiating phase.

There were some positive victories as well. Developing countries were relatively pleased with the text on agriculture, in that it opens the way to reducing the excessive levels of domestic support in both the EU and North America, which lead to structural dumping of food on world markets. Although they failed to get an explicit reference to the Development Box, the language on Special and Differential Treatment is sufficiently strong, and the momentum built up in Doha sufficiently great, that they are confident that the Development Box will form part of the agriculture negotiations from now on. Elsewhere, they now have a mandate to discuss the use of tariff peaks and tariff escalation, practices commonly used to keep out their exports.

Other gains are less clear cut. The Working Groups on Trade, Debt and Finance, and on Trade and Technology Transfer and the discussion on small economies could either prove  mere talking shops, or be the first step to resolving some of the most pressing issues facing developing countries. The declaration is dripping with language on ‘Special and Differential Treatment’ (S&D) for developing countries, and in particular LDCs. Critics say this is just talk, but so-called ‘best endeavours’ language at the outset of negotiations is not the same as best endeavours language in the final agreements. The latter can be ignored by individual countries as they implement the agreements; the former should strengthen the hands of developing countries as they go into negotiations. In many ways, developing countries came of age as a political force in Doha. What matters now is whether they can maintain that energy, unity and clarity as they go into a complex web of negotiations.

The Bad News

Developing Countries now face a colossal, almost overwhelming challenge in Geneva. Doha set up nine parallel sets of full negotiations, mandated discussions on nine other Geneva-based bodies and established a new Trade Negotiations Committee. Realistically, all but the largest developing countries will have to concentrate their energies on the issues of immediate relevance to them, such as agriculture and implementation. In doing so, they run the risk of repeating the Uruguay Round experience, where they were arm-twisted into signing up to agreements whose implications for developing countries were poorly understood, only to regret it when it was too late.

Many Developing Countries are also disappointed with other aspects of the agreement. They resent the glacial pace of implementation discussions and the inclusion of most of the significant implementation issues as part of the wider negotiations, arguing that this means they will have to ‘pay twice’ by having to make concessions in other areas in order  to correct the inequities of the Uruguay Round.

On TRIPS, although the public health issue was clarified, there was little progress on issues relating to the patenting of life forms, especially seeds, and the problem of biopiracy, although this received a mention in more diplomatic language as a topic to be examined (para 19).

Detailed Analysis

1.   Preamble (paras 1-11)

Among the positive aspects are several references to the need for special attention to issues concerning developing countries, e.g. WTO members ‘recognize the particular vulnerability of the least-developed countries and the special structural difficulties they face in the global economy.  We are committed to addressing the marginalization of least-developed countries in international trade and to improving their effective participation in the multilateral trading system.’ (para 3)

However,  some developing countries took exception to the unqualified pro-liberalisation tone of the preamble, which failed to acknowledge some of the negative impacts of liberalisation in recent years. Moreover, while the preamble makes reference to poverty reduction (para 2) there is no explicit reference to making the 2015 millennium development targets an overarching objective of the WTO’s work, as had been proposed by the G77 + China in the run up to Doha. At the WTO, trade liberalisation remains an end in itself, rather than a means to an end.

On other issues, the EU managed to insert a large paragraph (para 6) of text establishing that countries should not be prevented by the WTO in pursuing a range of ‘non-trade concerns’, such as animal welfare and environmental protection. On Labour Standards, the preamble merely reaffirms the 1996 ministerial declaration , offering little comfort to those wishing to introduce labour rights issues into the WTO. However the dropping of the final sentence from the 27 October draft, which read ‘The ILO provides the appropriate forum for a substantive dialogue on various aspects of this issue’ was hailed as a victory by labour rights activists, who argued that the final text at least does not exclude the WTO from taking part in such a ‘substantive dialogue’ in the future.

2.   Implementation-related Issues and Concerns (para 12)

The separate decision on Implementation-Related Issues and Concerns divides up implementation issues into a set of issues agreed in Doha, and a set of ‘outstanding issues’ (including many of the more important ones for developing countries), which will be negotiated as part of the single undertaking.

Chief among the issues to be settled in Doha was the section on Textiles and Clothing (Decision on implementation, Paragraph 4). Ever since the Uruguay Round established a phasing out of textile quotas by the year 2005, developing countries have been complaining that the importing countries have been dragging their feet and twisting the rules to delay implementation until the last possible minute. After fierce US resistance to any speeding up of liberalisation, Paragraph 4 merely ‘Requests the Council for Trade in Goods to examine’ a range of proposals suggested by developing countries and report back by July 2002.

The Doha declaration also agreed to extend the timeframe for developing countries to comply with new sanitary measures, and to consider requests for other extensions in the areas of Trade Related Investment Measures and Customs Valuation agreements. However, most of the significant implementation issues were not settled in Doha, but were included as further negotiations as part of the Single Undertaking. This means that the outstanding implementation concerns will have to be addressed by developed countries, if they are to get a successful conclusion to the round. However, Developing Countries have argued consistently that implementation issues should be settled before Doha, and many are unhappy that they are being ‘made to pay twice’ - first they sign a bad agreement in the form of the Uruguay Round, then they are only able to rectify some of the inequities in that round by negotiating further concessions in other areas through a single undertaking.

3.   Agriculture (paras 13 and 14)

After a prolonged battle between the EU and the Cairns group of agroexporters, the text finally settled on  ‘without prejudging the outcome of the negotiations we commit ourselves to comprehensive negotiations aimed at: substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support’ (para 13)

While this does not commit the EU to phasing subsidies out altogether, as demanded by many other countries, it will increase pressure for their reduction. Export subsidies have the effect of leading to artificially cheap prices for food exports, which can trigger import surges which undercut and destroy the livelihoods of third world farmers. Encouragingly, the EU is adamant that the phrase ‘all forms of export subsidies; and substantial trade reductions in trade-distorting domestic support’, also applies to two of the US’ favourite instruments - export credits and food aid. This could further reduce the level of dumping on Third World markets.

Despite a strong campaign in Doha by a large number of developing countries, there is no specific mention of the need to create a ‘development box’ in the Agreement on Agriculture. However, there is strong text on Special and Differential Treatment for developing countries, which reads ‘We agree that special and differential treatment for developing countries shall be an integral part of all elements of the negotiations and shall be embodied in the Schedules of concessions and commitments and as appropriate in the rules and disciplines to be negotiated, so as to be operationally effective and to enable developing countries to effectively take account of their development needs, including food security and rural development.’ The Committee on Agriculture is required to report on provisions for S&D by 31.3.03. Developing countries are optimistic that this will allow them to have a proper discussion on the development box in Geneva.

4.   Services (para 15)

The Services paragraph proved one of the more uncontroversial issues in Doha. The main complaint from a group of developing countries was that it failed to include their proposals for negotiations to be linked to progress on an assessment of the developmental impact of services liberalisation (as specified in the GATS agreement).

5.   Industrial Tariffs (para 16)

This paragraph agrees negotiations ‘to reduce, or as appropriate eliminate tariffs, including the reduction or elimination of tariff peaks, high tariffs, and tariff escalation’. It also allows for ‘less than full reciprocity’ in tariff reductions between rich and poor countries.

Developing countries have long argued for reductions in tariff peaks and escalation, and see this text as an important victory. However, developed countries managed to slip in the phrase ‘high tariffs’, since industrial tariffs are typically higher in developing countries. This may divert attention away from the impact of Northern tariffs on developing country producers.

Developing countries, notably in a written submission by seven African countries, had also argued that negotiations should only be begun after a full impact assessment, since their experience to date suggests that this form of liberalisation has led to de-industrialisation and job losses. These concerns were ignored.

6.   Trips (paras 17, 18 and 19)

This section was accompanied by a separate declaration on Trips and public health. Together, they confirm the existing agreement that the TRIPS agreement ‘does not and should not prevent Members from taking measures to protect public health’. This merely reaffirms the existing text of the TRIPS agreement, but was important because of a number of recent incidents in which pharmaceutical companies and the US government have challenged countries availing themselves of this option. Although developing countries wanted an imperative ‘shall’ rather than the exhortatory ‘should’ which finally appeared in the text, they clearly scored a significant victory over the US and several EU countries, which wanted to be much more restrictive on the circumstances in which countries can override patent laws in the interests of public health.

The other change that weakened this crucial paragraph was the stipulation that the TRIPs agreement should be interpreted in such a way as to ‘promote’ rather than ‘ensure’ (text in earlier draft) access to medicines for all (TRIPs declaration para 4).

Delegates also pointed out that the TRIPs declaration is a political declaration, rather than an authoritative TRIPs agreement. In other words, it addresses the spirit, rather than the letter, of the agreement and does not provide legal clarification.

While the focus on public health is important, it was disappointing to see that other important developmental aspects of Trips received far less attention. In particular, there is no acknowledgement of developing country requests that life forms and genetic codes should be excluded from TRIPS disciplines, little on biopiracy (the patenting of traditional community knowledge by big companies), and no clear statement that the Biosafety Protocol (which allows countries to refuse the release of GM seeds) takes precedence over WTO rules.

7.   Competition, Investment and other Singapore Issues (paras 20-27) The four ‘Singapore Issues’ (named after the location of the 1996 ministerial conference), proved one of the main North-South battlegrounds of the conference. The EU wanted to begin negotiations on competition and investment, while the US pushed talks on transparency in government procurement and trade facilitation (e.g. making sure trade flows smoothly through customs at the borders).

Most developing countries did not want any of them, arguing that they imposed a massive negotiating burden, that they were not priority issues, and that they had yet to be convinced that it is in their interests to seek agreements in these areas. For example, governments have traditionally used their purchasing power to develop national industries, something which might be threatened if, as expected, an agreement on transparency in government procurement leads to increased pressure for an agreement on government procurement per se.

In the end, a last minute compromise was reached. The text for each of the four issues reads: ‘we agree that negotiations will take place after the Fifth Session of the Ministerial Conference on the basis of a decision to be taken, by explicit consensus, at that Session on modalities of negotiations’.

However, in order for this to be acceptable to India and 12 other developing countries, the chair of the final Doha plenary read out the following statement.

‘I would like to note that some delegations have requested clarification concerning paragraphs 20,23,26 and 27 of the Draft Declaration. Let me say that with respect to the reference to an ‘explicit consensus’ being needed, in these paragraphs, for a decision to be taken at the Fifth Session of the Ministerial Conference, my understanding is that, at that Session, a decision would indeed need to be taken, by explicit consensus before negotiations on Trade and Investment and Trade and Competition Policy, Transparency in Government Procurement, and Trade Facilitation could proceed.

In my view, this would give each Member the right to take a position on modalities that would prevent negotiations from proceeding after the Fifth Session of the Ministerial Conference until that Member is prepared to join in an explicit consensus.’

This in effect removes any commitment to negotiate after the 5th ministerial, which will take place in 2003. Until then the work programme agreed in Doha confines itself to clarifying a range of issues around trade and the Singapore Issues, without going into direct negotiations.

Despite fending off the immediate threat of negotiations, the issues have not gone away. Between now and the next ministerial, the pressure is likely to increase on developing country to accept negotiations. As in Doha, the battle in 2003 over a Northern-driven agenda risks diverting attention from more pressing development concerns.

There was some progress in other areas. Paras 21 & 24 acknowledge the need for further evaluation of the developmental implications of competition and investment agreements, and specifically mention UNCTAD as a body which can help with this. There is also language specifying that any competition framework must ‘take due account of the development policies and objectives of host governments as well as their right to regulate in the public interest. The special development, trade and financial needs of developing and least-developed countries should be taken into account as an integral part of any framework, which should enable Members to undertake obligations and commitments commensurate with their individual needs and circumstances.’ (para 23)

8.   WTO Rules (paras 28 &29)

This subject was mainly a response to widespread unhappiness with the abuse of anti-dumping rules by richer WTO members. The US in particular fought hard to water down the draft text and restrict the remit of any review of anti-dumping rules. Only time will tell how successful they were.

9.   Trade and Environment (paras 31, 32 and 33)

The EU fought hard to introduce text on the environment into the draft, and was fiercely opposed by many developing countries that fear it will be used to justify ‘ecoprotectionism’ against their exports. The EU managed to win a commitment to negotiations on the relationship between WTO rules and Multilateral Environmental Agreements such as the Kyoto Protocol on Climate Change, and the reduction or elimination of tariff barriers on environmental goods and services. Other hot topics, notably eco-labelling, were kicked into the sluggish backwaters of the Committee on Trade and Environment, which will be asked to report to the 5th ministerial on future action, ‘including the desirability of negotiations.’

The ‘precautionary principle’ was also kept out of the negotiations, to the satisfaction of the developing countries, which fear that it could impose crippling certification costs on their exports, and be used for eco-protectionist purposes. The US and Cairns Group countries also opposed its inclusion as a potential threat to their exports.

10. Small Economies (para 35)

The WTO agreed to a work programme to look at the particular issues facing small, vulnerable economies, such as the islands of the Caribbean, but stopped short of creating a special category of such members within the WTO. The small economies have long argued that they are unable to compete on equal terms with large economies, because they cannot generate the same economies of scale (e.g. it is impossible to produce bananas in the broken hillsides of the Caribbean as cheaply as on the flat plains of Central America).

11. Debt, Finance and Technology Transfer (paras 36 & 37)

At the request of a large number of developing countries, the WTO set up two new working groups to examine these issues. They have long argued that the kind of trade system currently enshrined in WTO rules has failed to contribute to a resolution of the debt crisis, or to deliver the improved technology transfer promised during the Uruguay Round. While working groups can merely be talking shops, sucking up scarce resources from overstretched delegations, they can also be the first step on the road to reform. Much will depend on the seriousness with which developing countries in Geneva pursue the work in these groups, and whether the rich countries approach discussions with an open mind.

12. Technical Cooperation and Capacity Building (paras 38, 39, 40, & 41)

The developing countries have long argued that they need far more help if they are to participate actively in highly complex negotiations, and implement the agreements that they sign. These paragraphs stress the importance of such work, and calls on the WTO’s Director General to report on progress in December 2002. However, the language used is of the ‘best endeavours’ kind, urging countries to provide support, but not, for example, making the provision of adequate capacity building a condition for implementation by developing countries of their WTO commitments.

13. Least-Developed Countries (paras 42 & 43)

These paragraphs acknowledge many of the concerns of the WTO’s poorest members, but only in ‘best endeavours’ language. Thus WTO members ‘recognize that the integration of the LDCs into the multilateral trading system requires meaningful market access, support for the diversification of their production and export base, and trade-related technical assistance and capacity building’ and ‘urge development partners to significantly increase contributions to the IF Trust Fund  and WTO extra-budgetary trust funds in favour of LDCs.’ It remains to see if these exhortations result in greater help for LDCs.

There was particular disappointment that the EU’s pre-Doha decision to open its markets to all non-military exports from LDCs was not taken up by the other developed countries. Instead the text merely read that members ‘commit ourselves to the objective of duty-free, quota-free market access for products originating from LDCs’. Without a deadline, or any negotiating framework, this objective is unlikely to be achieved.

14. Special and Differential Treatment (para 44)

WTO members  ‘agree that all special and differential treatment provisions shall be reviewed with a view to strengthening them and making them more precise, effective and operational’. The decision on implementation instructs the Committee on Trade and Development to review S&D, consider how best endeavours language can be turned into binding commitments and to report on this to the General Council by July 2002. While the CTD has not been particularly dynamic in the past, the work programme as outlined could offer significant gains on S&D, if pursued forcefully by developing countries, and not blocked by the developed world.

15. Organization and Management of Work Programme (paras 45-52)

This sets out the machinery for running negotiations, leading to a conclusion ‘not later than 1 January 2005’. A new Trade Negotiations Committee will be set up in Geneva, open to all countries with Geneva-based representatives. With the exception of the review of the Disputes Settlement Understanding, all negotiations will be treated as parts of a single undertaking, meaning that all WTO members sign up to all of them, and they only come into force when all have been agreed. Again there is a commitment to ‘take fully into account the principle of special and differential treatment for developing and least-developed countries.’ (para 50). The Committee on Trade and Development is also instructed to ‘identify and debate developmental and environmental aspects of the negotiations, in order to help achieve the objective of having sustainable development appropriately reflected.’ (para 51)

There greatest problem with the single undertaking is that developing country delegations in Geneva will be faced with an enormous task in participating in a well-informed, proactive manner on nine simultaneous and highly complex areas of negotiations, plus substantive discussions on a range of other issues. Between now and 2005, there will be Negotiations on:

·        Implementation

·        Agriculture

·        Services

·        Industrial Tariffs

·        Trips

·        Anti Dumping

·        Relationship between Regional Trade Agreements and the WTO

·        Dispute Settlement Understanding

·        Trade and Environment

Between now and the 5th ministerial (late 2003) the declaration also calls for substantive discussions in the following bodies:

·        Working Group on the Relationship between Trade and Investment

·        Working Group on the Interaction between Trade and Competition Policy

·        Working Group on Transparency in Government Procurement

·        Council for Trade in Goods (on trade facilitation)

·        Work Programme on Electronic Commerce

·        General Council (on small economies)

·        Working Group on the Trade, Debt and Finance (New Group)

·        Working Group on Trade and Transfer of Technology (New Group)

·        Committee on Trade and Development (review of Special and Differential Treatment)

Lastly, the Trade Negotiations Committee will add another tier of meetings alongside those of the General Council. This is clearly a huge, if not impossible, workload for developing country delegations in Geneva, many of which have only one or two WTO specialists, and no budget to fly in experts for particular subjects, as is the practice of the developed country governments.

 


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