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TWN Info Service on WTO Issues (Sept03/15)

28 September 2003

Third World Network

Dear friends and colleagues

Re:  B.L. DAS’S PAPER ON SALVAGING WTO FROM CANCUN COLLAPSE

As you may know, Mr Bhagirath Lal Das is one of the most respected authorities on international trade and WTO related issues.  We are pleased to attach below a paper he has written on the collapse of the Cancun Conference and what can be done in the follow up process.

We hope you find it useful.

Please check the TWN website for previous issues of TWN Info and for more information on WTO issues.

With best wishes

Martin Khor

TWN.

 

SALVAGING WTO FROM CANCUN COLLAPSE

(By Bhagirath Lal Das)

20.9.2003

All concerned with international trade should work for salvaging the WTO from the debris of Cancun collapse. Even those considering the WTO framework as anti-development would certainly see the powerful signals emitted from Cancun indicating a new identity of the developing countries.         

It will be some time before the WTO recovers from the shock of Cancun collapse. And that too only if the main actors make sincere efforts for its recovery. Cancun was qualitatively different from Seattle. In Cancun, the deep difference between the developed countries and the developing countries was at the core of the failure of the conference, whereas the chaos at Seattle was due to various other reasons. Though the developing countries, particularly those of Latin America and Africa-Caribbean-Pacific, publicly expressed frustration and disgust at the Seattle process, the final failure was because of other factors, like handling of the conference by the chairperson, public insistence of the host country on some new issues like social clause, deep difference between the two majors, viz., the US and the EU and the chaotic atmosphere outside the conference venue due to several demonstrations. There was really no intense engagement among the countries at the negotiating table. In Cancun, on the other hand, there was engagement of the countries, but there were grave differences among the developed countries and the developing countries. The problem started because the Chairman of the General Council, and later the Chairman of the Ministerial Conference too, presented texts for the Ministerial Declaration that had almost fully included the proposals of the major developed countries and totally ignored the specific and firm proposals of the developing countries. The US-EU were not ready to eliminate/substantially reduce their subsidies in agriculture, while demanding from the developing countries to cut their tariffs in agricultural products and industrial products significantly. The EC was insistent until the near end that negotiations should start on the Singapore issues.

The developing countries finally got fed up with the unreasonable and unfair demands of the major developed countries when they themselves were not prepared to make material concessions. The collapse did appear to be sudden; but there was grave simmering discontent among the developing countries right from the final phases of the preparatory process in Geneva. It all boiled over in Cancun. One may be tempted to diagnose the reason for collapse in some sudden move here and there; but the reason appears to be more deep rooted.

Over the years, the major developed countries have followed the strategy of squeezing maximum concessions from the developing countries, but it cannot continue indefinitely. The developing countries, if pushed to the wall, are bound to resist. The governments of the developing countries cannot go on explaining to their people indefinitely that they have been pressurized into accepting one-sided and harmful results. Their people will soon ask them firmly to resist pressures. Cancun gave us a glimpse of this trend. Pressures on the developing countries by the developed countries in Cancun and in preparation to Cancun were no less than at the time of Doha. But the imperatives on the developing countries gave them strength to resist these pressures. This situation also worked as a cementing factor in the cohesion of some groups of the developing countries. Moreover the developing countries are fast improving their understanding of the WTO and its processes. They have been effectively aided in it by some dedicated NGOs.

The Cancun collapse is a symptom of the instability of the GATT/WTO system as it has been emerging lately.  A multilateral system has to be based on the perception among its members of the shared benefits. Once the large membership feel that the system demands only “give” from their side without any possibility of “take”, the system is bound to be unstable. And instability in the system will hurt all the countries, big and small. The much publicised parting statement of the USTR in Cancun that they would follow different alternative tracks like bilateral and regional arrangements in the wake of Cancun collapse has certain emptiness in it. The US may have a multitude of bilateral and regional arrangements, but when it comes to enforcement of commitments in the areas of goods, services and IPR, it has to take shelter in the WTO framework. After all it has had tremendous gains in the Uruguay Round in all these areas and it continues to enjoy those gains. In that background, its threat to give up or underplay the WTO route does not appear serious.

What is needed is to understand the deep seated malady in the system and to take corrective measures quickly before it is too late. All parts of the system, viz., the developed countries, the developing countries and the institutional machinery, have to play active role in it. 

The developed countries should consider the following approach.

1.   They should lower their sights and ambitions in the WTO. They have already got a lot in their favour in the Uruguay Round. They should consolidate these gains and stop demanding new concessions from the developing countries.

2.   They should allow the system to settle down and not destabilize it by insisting on introducing new subjects in the negotiations.

3.   They should be constructive in the area of agriculture and try to understand the sensitivity and importance of this sector in the economics and politics of the developing countries. Positive action in this area is likely to result in spread of gain among the weak sections in the developing countries. Hence agriculture is generally perceived as a test case for assessing the intentions of the developed countries.

4.   They should give up their old mind set of monopolizing the management of the GATT/WTO and realize that this organization has to keep in the forefront the interests of a large number of its membership, i.e., the developing countries.

5.   More basically, they should realize that their own growth will be helped by the development of the developing countries, because it is there that the prospect of future fast growth of demand lies. They should come out of the thick shell that they have built around themselves over the last two decades or so, thinking that they can sustain their growth on their own without counting on the role of the developing countries. In this mind set, their linkage with the developing countries is limited to their targeting them for extracting more and more concessions.

The institutional machinery of the WTO, including the Chairpersons and the Secretariat, have also to change their approach and style of functioning. Some points are important for them to note.

1.   They should realize that the strategy of “clean text” is not always the best. It is not the “clumsy” and “overburdened” text that hinders agreement, as is often alleged about the text for Seattle which accommodated the diverse view points and put them in square brackets. Even the cleanest text, as for example the two texts for Cancun, can result in disaster, if the process of preparation has not been fair and objective. A “clean text” can facilitate negotiations only if the process of preparation has been open and transparent and it is a fair and objective balance between the differing positions.

The General Council Chairman’s text for Doha which was confidently taken as a model for Cancun text also suffered from similar defects as the latter. But there was a big difference in the two situations. While the GC Chairman’s text for Doha was mainly in the nature of a framework in most of its part (except Singapore issues), the texts for Cancun contained specificities of obligations which had been widely opposed by a large number of the developing countries and the alternative suggestions given by them had been totally ignored by the Chairmen of the General Council and the Conference.

There was also the difference in the environment. A large number of the developing countries got confused in Doha by the tactics of the US-EU, whereas, after having learnt their lesson in Doha and later, the developing countries could not be deviated from their determined track in Cancun. Also, during the two years passage between Doha and Cancun, the developing countries had gone through a process of introspection and consolidation. The NGOs of the world had a big role in it.

2.   The institutional machinery of the WTO has to show without a trace of doubt that it is not influenced by the major developed countries. It has to be neutral and objective and clearly appear to be so. Much damage has been done by the perception that the machinery is being used by the major developed countries for advancing their own narrow interests. The machinery should work for the system and not for individual countries, howsoever powerful.

The developing countries have found a new identity in Cancun. They showed they could not be pushed around any more. The following steps may help them in future.

1.   The various groups of the developing countries that became effective in Cancun should interact with one another to forge a broader and deeper alliance. They should try to identify their common interests and also differences, if any. It may be possible for them to build upon their commonness and smoothen their differences through the process of mutual understanding. After all, one common factor with all of them is that they have all been serious losers in the Uruguay Round and have been the target of the major developed countries for squeezing concessions out of them even later. Though it may be possible for these individual groups to stop some thing here and there and thereby reduce damage, their combination is essential for getting positive benefits.

2.   They should counter the divisive tendencies among them. For example, often the division among them is promoted by urging that they should cut their tariffs on industrial and agricultural products in the interest of expanding south-south trade. Though expansion of south-south trade is a laudable objective, undertaking obligation of tariff reduction in the WTO is not an appropriate way to go about it. A preferred path should be to use the framework of Global System of Trade Preferences (GSTP) for reduction of tariffs among the developing countries. It has two special benefits for the developing countries over reducing the tariffs in the WTO framework. Firstly, a developing country while reducing its tariffs under the GSTP does not have to extend this benefit to the developed countries; thus there is less revenue loss for the committing importing developing country. Secondly, the beneficiary exporting developing country will face less competition from the developed countries as the latter will not get the advantage of this lower tariff in the developing countries. Over a course of time, this process is likely to enhance investment in the developing countries in manufactures and agriculture, because of larger market access opportunities among the developing countries. The developing countries should give fresh impetus to the GSTP framework which is administered in the UNCTAD and is dormant at present. 

This is not to suggest that the developing countries should not engage in the tariff reduction exercise in the WTO framework at all. Of course, they may engage in this exercise there, but only with the objective of getting tariff concessions from the developed countries. And there too, their well coordinated approach in tariff negotiations the developed countries is likely to yield greater benefits to them than their individual isolated attempts.

An attempt should be made by all to usher in a reformed WTO process. International trade is important for all including the developing countries. And a multilateral framework is useful for that purpose. It is not practicable to create a totally new framework in the current international environment that is characterised by mutual suspicion, lack of goodwill and erosion of confidence. It should be a much preferred choice for all concerned to work for a reformed and improved WTO. Foundation should be laid for it even before reverting to the Doha work programme in the post-Cancun phase.

 


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