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Giving away more policy space under NAMA?

Geneva, 4 Aug (Chakravarthi Raghavan) - When the Doha negotiations resume, perhaps after six months (and the US elections and the change of guard in Brussels), developing countries may be trying to advance from their limited gains in agriculture talks, but in Non-Agriculture Market Access (NAMA), they may find themselves starting from having given away more policy space.

At Cancun, developing country negotiators refused, and very rightly, to agree to the Derbez text on NAMA, but may have now ended up with something worse in the current Annex B.

True, thanks to the last minute political solidarity support in the Green Room by Indian Trade Minister Kamal Nath to Africa and its opposition - brushed aside till then by the WTO officials, the US and EC negotiators at technical levels, and Robert Zoellick, Pascal Lamy, Supachai Panitchpakdi and others at the higher levels of WTO decision-making process - some ground for fight back has been saved. Till then, the opposition of Kenya and Nigeria (for the African Group) could be ignored and brushed aside. But after the intervention by the Indian Minister, a solution had to be found.

A chapeau to the revised Annex B (of the Oshima-Supachai draft text) which would have had no effect in the further stages of talks, has been slightly redrafted and made into a first operative paragraph 1 of Annex B (framework for establishing modalities in market access for non-agricultural products). This could lead to endless arguments still, which may be lost unless the major developing country negotiators intervene and keep up their support which would be in their own self-interest too, but at least for solidarity with Africa.

Otherwise, even the fragile unity forged on the agriculture front may splinter.

Paragraph 1 inserted into the Annex B (which otherwise maintains without change the Derbez text) perhaps provides some scope for “additional negotiations ... on the specifics of some of these elements”. More likely there may be endless arguments ahead on what “specifics” mean or don’t mean, and what the secretariat officials who masterminded putting the Derbez text as Annex B in the drafts, to satisfy the US-EC, would do if they continue to service these ‘additional negotiations’.

However, in the words of one of the expert advisors helping developing countries in this area, the developing countries including the G20 leadership have agreed to give away more domestic policy space, and embrace the push back of their economies into the late 19th and early 20th century colonial liberal order about which there are now many irrefutable empirical studies showing how the developing world was deindustrialized.

And in some key Third World capitals, the neo-liberal order theologians in policy positions, are trying to stage a comeback and lock in their countries on to this path - where border tariffs will be no more than 5-10 percent across all imports to allow for ‘efficiency’ and committed at the WTO.

=46rom Chennai in India, the Hindu an English language daily which is not a revolutionary paper, has warned in its Editorial on 4 August, welcoming the General Council decision that not only are some very hard negotiations ahead on agriculture, but that NAMA could become a deal-breaker.

Columnist Larry Elliot, in a comment in the Guardian daily of the UK on Tuesday, has said that everyone at the WTO pays lip service to free trade, but act like good old mercantilists - grabbing as much as they can from others but giving away little. The negotiations at Geneva had as little to do with Adam Smith as the Vatican had with true Christianity in medieval times. The rich and the powerful steamroller their way if they could over the opposition.

[The rich and powerful almost did it with the African Group, thanks to some Trojan horses, like modern computer hackers and virus program writers.]

The reality gap has to be closed between the way the world trading system operates in theory and operates in practice. Developing countries know that the US, Germany and Japan relied on protection rather than free trade in the early stages of industrialization, and they look with a mixture of envy and contempt at the way the west now behaves, and point to the Reformation that came in the early 16th century, when the Catholic Church behaved like the WTO now.

On one reading of Annex B of NAMA, even with its first paragraph, alternative proposals on the table at Cancun and immediately thereafter too, seem to be off the table now.

During the last stages of the Uruguay Round Negotiations on trade in services, and its financial services annex, the US suddenly changed course and went back on its positions. A raft of developing countries across the board, in retaliation took back their own offers on the table. The US power was brought to bear in some capitals and finance ministries, with some of them trying to order negotiators in Geneva to put back their offers on the table. The negotiators in Geneva refused to act except on specific written orders of government, which no one in capitals wanted to send and in the negotiations key developing countries forced the US to retreat.

A similar power ploy may be at work in several capitals of Asian and Latin American countries over NAMA etc now.

But civil societies, business groups and parliamentarians are aware now - even if they take a while to catch up with information and not manipulated ones from Geneva, Brussels and Washington.

The new second para (previously first) of the Annex B, merely restates the Doha objectives and the lip service it provides for S&D Treatment.

The hard line position of the US and EC on NAMA, in the Girard text (the pre-Cancun Swiss Chairman of the NAMA negotiations) is now maintained by being treated as a reference point, while the objections to it and a simpler and more transparent linear formula that a number of developing countries including India had advocated before Cancun figure nowhere.

The African objections including on other grounds too have not figured at all.  And the post-Cancun efforts of some of the African countries to have their concerns reflected as alternatives or in some legal way into the Derbez text had been sought to be dismissed as moves by some corrupt governments and how NAMA would improve their governance. The coordination of the African group after Cancun and till recently has only resulted in marginalising them from the other developing countries who could have provided some support.

The no a priori exceptions could mean like the 40-year history of the textile arrangements where some negotiated exceptions for particular sectors may be possible - perhaps the US and EC may make use of it for their relatively high tariffs on textiles and clothing which, with new anti-dumping initiatives could stop textiles and clothing imports by 30-50 percent duties and countervailing levies.

Once provisionally set, it could take 3-5 years even to complain and win a case, with no implementation but new measures and initiatives.

Apart from the tariff reductions on bound rates, for ‘unbound tariff lines’ (it is not products that may have several tariff lines, as in agriculture) but the basis for tariff reductions is to be twice the MFN applied rate in the base year.

This will amount to disarmament of developing countries before industrial development.

Even as it is, despite the somewhat rosy interpretations, for example, of the recent Indian elections as a revolt of the rural farmers against their marginalisation, the vote against the previous ruling coalition in major urban centres was due to the unemployment and closures of the small and medium scale enterprises in the consumer industries section, which have been overwhelmed by the industrial imports of consumer products for upper income groups.

Credit for autonomous liberalisation is only to be for what was undertaken after the Uruguay Round, and if it is bound. Much of Africa and other developing regions were forced into autonomous liberalization through what even the World Bank and IMF studies have now concluded as misguided policies of structural adjustment programmes before 1995.

There is to be no credit for any of these, even if the duties are now bound.

It is difficult to come across a great inequity: ‘what we have we keep, and we will take all of what you have’ is the US-EC-WTO backed approach in NAMA on this issue at least.

The non-ad-valorem duties are to be converted into ad valorem duties in NAMA.

But why not in agriculture products of the North?

All the demands like zero for zero options, sectoral harmonisation etc are all kept open - to be sprung towards the end for everyone to participate and contribute.

There is an exhortation that everyone may follow the EC’s “Everything but Arms” initiative which with its exclusion of sectors like sugar etc, does not even provide any benefits to the LDCs.

All in all the NAMA annex is a negative, not only for the Africans, but most developing countries, even though some policy-makers in major developing countries, may be trying to lock themselves and their successors into the liberal order.

Like the straw that broke the camel’s back, they may even succeed in breaking the system as such. - SUNS5630

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