TWN Info Service on WTO Issues (June03/11)

Third World Network

22 June 2003

Dear friends and colleagues


At a session on development issues at the WTO public symposium on 18 June, several speakers and participants from the floor criticised how the Doha Ministerial commitments to make development the heart of the Doha work programme had not been met.

Below is a report by TWN on that session.

Please check our website for previous issues of TWN Info Service.

with best wishes

Martin Khor

Third World Network




A Third World Network Report

Geneva, 19 June 2003


WTO Members were told at the WTO Public Symposium on 18 June that the Doha Ministerial Declaration’s promise of putting development at the heart of the Doha work programme had so far turned out to be empty rhetoric since the WTO talks after Doha had in fact ignored and are working against the interests of developing countries.

A number of panelists and speakers from the floor made this point of the “development status” of the Doha agenda gone sour at the three-hour session on  “Fulfilling the Doha Development Agenda: Key issues for developing countries” at the public symposium on Challenges on the Road to Cancun organized by the WTO Secretariat.

The panel members comprised Prof. Jagdish Bhagwati of Columbia University, Mrs. Diana Melrose, head of the international trade division at the Department for International Development (DFID), UK,  Mr. Faizel Ismail, head of the South Africa delegation to the WTO, and Mr. Martin Khor, director of the Third World Network.  The session was chaired by Dr. Carlos Fortin, deputy secretary general of UNCTAD.

Martin Khor, said that the commitment at Doha to meet the demands from developing countries on implementation issues and on strengthening special and differential treatment (SDT) in WTO rules had not been fulfilled.

Nor had their interests been reflected in the negotiations on agriculture and non-agriculture market access (NAMA). “Instead, the developed countries are pushing hard to get a Cancun decision to negotiate new issues, against the wishes of a majority of developing countries, and they may again use unfair procedures and tactics to achieve their goal,” he warned.

Prof. Bhagwati criticised the way intellectual property rights, which he said was a non-trade issue, had been smuggled into the WTO by the American drug industry, and warned of the dangers of lobby groups and their governments trying to put more non-trade issues inside the WTO.  “If the multilateral trading system is captured by the developed countries and gets totally distorted, with a dagger aimed at developing countries, then where are we going?”, he said, adding that: “New issues are coming into the WTO in the name of trade due to the lobbies of the North.”

Diana Melrose said it was disturbing that after Doha there had been “least progress made on issues that matter to the developing countries,” citing the missed deadlines on agriculture, TRIPS and health and SDT.

Faizel Ismail said the WTO rules reflect the developed countries’ priorities, often at the expense of developing countries’ priorities.  He warned that the failed deadlines in the WTO negotiations had undone all the balances in the Doha programme, and “all the issues will go to Cancun and threaten to block one another like logs in the river.”

Opening the session, Dr. Fortin said that in UNCTAD’s view, the key development issues were market access for developing countries, developing development-friendly rules, transition issues such as helping developing countries to export, support to developing countries to face their commitments and take advantage of opportunities.

Bhagwati said he was suspicious when people sought to bring so-called “trade-related” issues into the WTO.  Citing the case of intellectual property, he said it was actually a royalty-collection device.The pharmaceutical drug lobby called it “trade-related” as that sounded good, like taking a holiday in the Bahamas.

“But really it has nothing to do with trade,” he said. “It got into WTO because of muscle power.  They captured the USTR.  It’s a rip off.  Now the USTR is accused of holding up the Doha agenda, so they try to shift attention to the Europeans on the agriculture issue.”

Bhagwati said that now the US was being blamed for the intellectual property problem in WTO but they need not have been if intellectual property had been left as a self-standing issue outside the WTO.  “Now the USTR is suffering, it is good as it is sweet revenge, as you started it, you suffer for it,” he remarked.   “They have had to reopen the issue due to AIDS and anthrax.”

Bhagwati added it was the corporate lobby that got intellectual property into the WTO and now the WTO is being blamed, but the NGOs should instead go after the USTR instead of the WTO.

He also criticized the USTR for putting restrictions on countries’ ability to use capital controls, through bilateral agreements like the ones it had concluded with Singapore and Chile.

“If the trading system is captured by the North and gets totally distorted and becomes a dagger aimed at the developing countries, then where are we going,” he asked.  “New issues are coming into the WTO in the name of trade due to the lobbies of the North.”

Khor said that the Doha declaration had stated that developing countries’ needs and interests would be at the heart of its programme.   But this had turned out to be empty rhetoric.

He said that a distinction should be made between trade, trade policy and trade rules. Trade could benefit or harm countries, depending on whether it is done properly, and whether internal and external conditions as well as the terms of trade were right.  Countries could suffer if their export prices fell, or if their local firms and farms were not ready to compete with cheap imports.

Sometimes less trade rather than more trade could be better.  For example, if coffee prices fall because of an over-supply, a reduction in export volume would benefit producing countries, as this would raise prices and revenues.

Trade policy should be tailored to fit the realities of trade, and the pace, sequencing and sectors for opening up to imports was crucial.  Trade rules should be made to allow for the options developing countries should have to make appropriate trade policies, which in turn should be tailored to meet trade realities and conditions.  In general, stronger countries can afford and can benefit from liberalization whilst weaker countries need more time and allowance to protect their weak enterprises and farms.

Unfortunately, said Khor, the WTO rules seem designed to help the rich countries to practise protectionism (as textiles, agriculture and TRIPS showed) whilst the developing countries were pressurized by WTO rules and negotiations, and by the World Bank and IMF conditionalities, to liberalise rapidly.  In many developing countries, deindustrialisation and displacement of farmers had taken place.

Khor said the WTO’s priority should be in re-balancing the rules, but the developed countries did not even accept that the rules were imbalanced, and wanted to further exact a price from developing countries in exchange for cooperating on implementation issues.

“But developing countries already paid a price in the Uruguay Round with TRIPS, services and TRIMS, and they did not reap the supposed benefits of agriculture or textiles they were supposed to get,” he said.  “Now they are asked to pay again in the form of new agreements on investment, competition and government procurement transparency, in exchange for the agriculture benefits they were supposed to have already got.”

Khor said in fact the EU and the US could not give real concessions in agriculture as their subsidy programme was already fixed through internal processes.  But they may again pretend to make “progress” by shifting the domestic support from one box or category to another.  In reality, the subsidies, of whatever colour box, would remain trade distorting, whatever the claims to the contrary.  Therefore they were offering nothing for something really big.

Commenting on the post-Doha talks, Khor said there had been no progress on the even limited reform programme contained in implementation and SDT.  In TRIPS, there was no progress on para 6 of the TRIPS and health declaration, nor in the review of Article 27.3(b).    In agriculture, there was no attempt in the draft modality to really curb domestic support as the “green box” subsidies escaped discipline, and there were very limited  measures to help developing countries’ farmers;  as such the serious imbalances and injustices in the agriculture agreement would continue.

He also criticized the proposals and draft modality in non-agriculture market access for imposing much steeper tariff cuts on developing countries, which went against the Doha mandate of “less than full reciprocity” for developing countries.  Moreover, developing countries were being called upon to bind most of their tariff lines, subjecting most of their industrial products to tariff reduction.  The result of the present approaches would be that for most developing countries their imports would increase more than their exports, and for many the deindustrialisation process would continue.

Khor said the developed countries had not shown any real interest in development. Instead, through their actions, they showed that their main priority was gaining more market access to developing countries through existing and new rules. He warned that if negotiations were to start on the Singapore issues, the WTO would become even much more imbalanced as the new agreements would overwhelmingly benefit the developed countries, and developing countries would take on additional obligations that would prevent and restrict them from implementing development policies.

“We would then have new discussions on a second generation of problems of implementation, and more lamenting about the lack of special and differential treatment,” he said, adding that the Singapore issues should be dropped at Cancun, or at the least that the discussions continue instead of starting negotiations.

Khor added that the WTO’s overloaded programme and its untransparent decision-making procedures were unfair to developing countries, and this lay at the heart of the WTO’s problems.  He called for the establishment of proper procedures, particularly at Ministerial Conferences.  Only if the process is fair can there be hope that the WTO can become more oriented to development, he concluded.

Melrose said that the developing countries’ key issues in the Doha agenda were market access in agriculture and special safeguards for their farmers, resolving the remaining problem in TRIPS and health, SDT, market access for textiles, and Mode 4 (labour movement) in services.

However, in the talks so far, there had been “least progress on the issues that matter most to developing countries,” she remarked, citing the missed deadlines on agriculture, TRIPS and health, SDT and non-agriculture market access.

Melrose said the obstacles to progress included lack of political will in the North to take on powerful domestic interest groups, the polarized positions on the extent of liberalization, the breadth of the round and its ambitious timetable and the serious capacity constraints of poorer countries to negotiate meaningfully.

Acccording to Melrose, before Cancun, the following actions need to happen:

political leadership to take difficult decisions, EU states have to agree to CAP reform, the US has to support the TRIPS and health text of December 18, developed countries have to agree to a substantial package on SDT, and NGOs have to voice more support for developing countries’ issues.

Faizel presented a critical view of globalisation, stating that developed countries continue to be the main beneficiaries and they had claimed special and differential treatment since 1947 and continue to enjoy these privileges at the developing countries’ expense.

He said most developing countries’ growth potential had been stifled by trade distortions caused by developed countries’ trade policies.  “The WTO rules asserted by developed countries seek to deny developing countries the right to use policy choices that these countries themselves used successfully to develop their economies.”

He added that the demandeurs of the proposed investment agreement “propose to use a concept of non-discrimination and national treatment that will prevent developing countries to guide investment to less developed regions and empower local communities.  This conception would prevent the black communities in South Africa to use the influence of the state to empower previously disadvantaged people.  Thus the notion of the right to establishment would need to be balanced by the performance obligations of investors.”

Faizel said the Doha agenda was constructed in a balanced way, with a deliberate staging of interim deadlines, that would resolve upfront the developing countries’ issues of implementation, SDT and TRIPS.  The agriculture modalities deadline was also set deliberately to unlock the political will for Members to engage in preparations for a decision in Cancun on launching negotiations on Singapore issues, he added.

“In failing to meet these deadlines, the balance in the process has been disrupted with possible negative repercussions on the substance of the negotiations. This raises questions on our ability to conclude the round within the agreed timeframe,” he said.

Because of the failed deadlines, all the balances are undone and all the issues will go to Cancun and threaten to block one another like logs in the river, he added.

At question time, John Hillary of Actionaid commented on Melrose’s observation that the breadth of the Round is a key obstacle to progress.  With regard to this, “the EU’s agenda on the Singapore issues is the predominant threat to the development outcome of this Round,” he said.  “The EC has told NGOs that their key agenda is a pro-business agenda which has nothing to do with development. We find it obscene that poor countries have to give such concessions to the rich.”

A Member of the Kenya Parliament thanked civil society for “coming to the rescue” of developing countries as the WTO deals with the executive arms of government which usually do not consult Parliaments.  He asked by what process the WTO could restore the state’s right to intervene in the market.  “When they promote competition between Kenya and the US, it is like asking Mike Tyson to fight with an 8 year old boy.”

A participant from the Kuwait oil company commented that developed countries were benefiting from being members of their own regional agreements.  Alluding to the discussions on competition in the WTO, he remarked:  “OPEC is not a hard-core cartel, it is the OECD that is a hard core cartel.”

In response, Faizel said the developing countries were not demandeurs for Singapore issues.  They were made to pay the price for genuine liberalization in agriculture. The EU said if these issues are not put in, they could not convince their constituencies to reform on agriculture.  “For developing countries, there is a link between progress on other issues and the Singapore issues.  If they do not move on agriculture, it is not likely they will get the Singapore issues.”

In relationship to competition policy, Bhagwati said that the GATT principle says that there must be total parity.  Remarking that “hard core cartels” is the minimum that EC Commissioner Pascal Lamy wanted to have in a WTO competition agreement, Bhagwati said:  “But what about OPEC?  Will you rule that out?  If some developing countries want to develop some monopoly power to extract some trade gains, is that allowed?

“Generally I recognize the virtue of competition, but there is a problem that very large companies can become a de facto monopoly as they happen to be ahead of the curve.”

Answering a question about erosion of preferences, Bhagwati said he feared that if developing countries went in for S and D, the big players would play one developing against the other.  “If you get preferences from them, they will collect something from you,” he said, adding that S and D is good only for helping in the pace of adjustment. Thus S and D should not be in the form of preferences but in having a longer time frame.

In response, Khor said that the experience of developing countries showed that a longer grace period for implementing obligations was very inadequate as a form of S and D. There should be other meaningful forms of S and D such as developing countries being exempted from obligations;  or being able to choose their own rate of implementing the obligations, or having a lower level of obligation.  Moreover, developed countries should also make binding commitments to help developing countries, including in building their supply capacity.