Global Trends by Martin Khor

Monday 26 July 2004

Decision Week at the WTO

A crucial meeting this week at the World Trade Organisation will be a test as to whether it can accommodate the needs and demands of the developing countries, or whether the major developed countries still insist on having their way.

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This week will be “Decision Time” for the World Trade Organisation as it holds a crucial meeting to re-launch talks that  had stalled at last year’s Ministerial meeting in Cancun.

The meeting of the WTO’s General Council, starting Tuesday, is not a Ministerial conference, as the Council comprises the member states’ Ambassadors in Geneva.

But reports last week indicated that Trade Ministers from up to 30 countries, including the United StatesTrade Representative Bob Zoellick, the European Trade Commissioner Pascal Lamy, may turn up.   It could then take on the atmosphere similar to that of a Ministerial.

The decisions expected to be taken will have very significant implications not only for world trade but also the growth prospects in the developing countries’ domestic economies, particularly in agriculture and industry.

However, it is not clear, even at this late stage, whether this week’s meeting will conclude with these expected decisions.

The talks among diplomats here in Geneva, and among some Ministers elsewhere, to prepare for the meeting have not been smooth.  There have been serious disagreements on almost every part of an initial paper containing the draft decisions that was released on 16 July.

Last week, intense negotiations on the draft (known as the “July package”) did not succeed in bridging the differences.   It will be “touch and go” whether this week’s talks can bridge the gaps or end, like Cancun, without consensus or results.

There are disputes especially on what to do about liberalization of industrial goods and agriculture, and about the so-called Singapore issues.

A discredited text on industrial goods, which had been opposed in Cancun, has re-emerged unchanged as a decision to be adopted.   Last week, many developing countries asserted their opposition to this disregard of their views.

The draft calls for industrial tariffs to be drastically cut under a “non-linear formula”.  If accepted, this would destroy the viability of many local firms and industries in developing countries that cannot compete with cheap imports.  

The draft also wants to place about seven industrial sectors under a “fast track” to reduce tariffs to zero.   The developing countries oppose this and ask that any such sectoral scheme be voluntary.

A proposal by these countries that their views be included in the text or in a cover note linked to the chapter on industrial goods has not been accepted yet by the developed countries that are trying their best to keep to the original text.

“The future of our industries is at stake,” said one developing-country diplomat. “Some of our industrial firms have already closed, and if this draft goes through, the process of our losing our local industries will accelerate.”

Another area of major dispute is agriculture.  Last Wednesday, several developing countries, including the Group of 20 (led by Brazil and India), the African Group and Indonesia (for the Group of 33 that stresses the need to defend small farmers) severely criticized the text on agriculture.

They said the text favoured the rich countries by creating new mechanisms enabling them to escape their obligations to significantly cut their domestic subsidies and their high agricultural tariffs.  As a result, the agriculture-exporting developing countries would not be able to increase their exports to the rich markets.

More importantly, they said, the text has also not taken on board the demand of developing countries for special treatment to protect their small farmers from cheap imports.

The developing countries are particularly upset by the text’s double standards.  Issues of concern to the developed countries were taken care of by concepts and detailed provisions in the text, whilst the issues of concern to developing countries were inadequately treated or postponed for decision to a later stage.

“There is special and differential treatment, but it is for the developed countries,” said the Brazilian Ambassador, Luis Felipe Seixas Correa.

Multiple meetings were held last week to resolve the agriculture issue, but the gaps remained wide, and diplomats were not optimistic that they can be bridged in time.

On the so-called Singapore issues, there is wide acceptance that negotiations can be launched on one issue, trade facilitation, but not on the other three issues (investment, competition and government procurement).   

However, there is disagreement on the modalities (or terms of reference) for the trade facilitation negotiations.   A “core group” of developing countries led by Malaysia has tabled revisions to the modalities contained in the draft, but another group of countries (led by the North) are opposing the revisions.

Many countries, again led by Malaysia, want to drop the other three issues altogether from the WTO.  But the developed countries (led by Japan and the European Union) want the issues retained in the WTO even if they are not to be negotiated towards new treaties during this period.   

Finally, the developing countries also want a high profile to be kept on the “development issues” (special treatment for developing countries and resolving problems in implementation of existing WTO rules).

There has been almost no work on these issues since Cancun, and the developing countries want the meeting next week to decide on concrete measures to have them resolved.  However, the developed countries prefer that to have the issues kept on a low profile.

With so many issues unresolved and the reported absence of give-and-take from the developed countries, several developing-country diplomats I spoke to are rather pessimistic.

They hope the differences can be bridged, but think that time is running out.  Their biggest fear, however, is that strong political pressure will be put on many developing countries by some of the major developed countries, in an attempt to get them to sign on a document they don’t really agree with.

So the meeting this week will be a very tense one.  What is at stake is crucial not only for the WTO but for the development and economic prospects of developing countries.