Global Trends by Martin
Monday 1 August 2005
New battles ahead as WTO talks falter
Blurb: Last week’s meeting
at the World Trade Organisation ended on Friday without any results.
There will thus be more intense talks from September, and developing countries
should prepare to face great pressures from the developed countries determined
to pry open their markets.
The World Trade Organisation
held its end-of-July General Council meeting last week in an atmosphere
of anti-climax and general gloom as it failed to meet its well-publicised
aim of coming up with half-way agreements on key issues.
Indeed, several Trade Ministers
(from the United States, the European Union, Japan, India, Hong Kong)
turned up at a meeting which is usually attended by Ambassadors. But there
wasn’t much for them to do, as it was too late to cobble together any
kind of deal.
“The situation is disappointing
but not disastrous,” said the WTO’s outgoing Director-General, Supachai
Panitchpakdi. He was making the best of a bad situation.
Just a week ago, he had tried
to cajole the WTO members to get a last-minute deal, by saying he had
pressed the alarm button and “these talks are in trouble.”
Actually, there is not really
a crisis, or not yet at least. What the WTO is aiming at is to get agreements
done before the Ministerial Conference in Hong Kong in mid-December.
In the WTO tradition, deals
are made only at the last minute, and at the Ministerial meeting itself.
But two out of the last three Ministerial conferences (in Seattle and
Cancun) ended in disaster as the bickering among countries went on to
the last minute and the talks collapsed in front of the world media.
To avoid a repeat, the WTO
leadership wanted to pace the preparations better, so that the deals (represented
by drafts and texts) are done even before the Hong Kong meeting, which
would then be mainly ceremonial.
Last week’s meetings were to
have produced “first approximations” of the Hong Kong texts. But in the
end there were no texts on nothing was produced on agriculture, industrial
tariffs, services or special treatment for developing countries.
This just means that there
will be more work to be done in the remaining months before the Hong Kong
This time around, the blame
was at least not put on the developing countries. Indeed, the Group of
20 developing countries were praised by both the EU and US for coming
up with drafts on agriculture that is perceived as the “middle ground”
on which progress can be made.
Developing countries wanted
the developed countries to cut their farm subsidies and high tariffs,
so that their agricultural products can get into the rich countries’ markets.
But the rich countries (influenced by the lobby of their big farmers)
are still not willing to do enough, thus resulting in the impasse.
The rich countries on their
part are pressing the developing nations to drastically cut their import
duties on industrial goods and to open up their services (such as banking,
wholesale and retail trade, telecommunications, energy, legal and architectural
services) to foreign investment.
Most developing countries are
alarmed at these pressures, as they have already liberalised, and the
local firms are already struggling to compete on their home ground. Further
opening up on the scale being proposed might just knock many local enterprises
Thus, the formula used to cut
the industrial tariffs was not agreed to last week. Neither was there
agreement to use new methods (proposed by the EU) to get developing countries
to open up more services sectors using a “benchmarking approach.”
On another issue, trade facilitation,
most countries were happy that there was progress on the talks, and credit
was given to Malaysia’s Ambassador to the WTO, Muhamad Noor Yacob, who
chairs the negotiating group on this issue.
The developed countries are
pressing poorer countries to upgrade their import facilities and cut the
red-tape on trade procedures. Developing countries say they need aid
to pay for expensive technical upgrading, and that some regulations are
necessary and should not be scrapped.
On special treatment for developing
countries, 88 proposals had been put forward, but hardly any progress
was made on most since 2001. An attempt to finalise just five proposals
relating to the poorest countries failed last week as well.
With lack of any outcome in
last week’s talks, the main event as the General Council closed on Friday
were the farewell speeches to Dr Supachai, who leaves the WTO to join
the United Nations Conference on Trade and Development as its new Secretary
General on 1 September.
His successor, Pascal Lamy,
the former EU Trade Commissioner, made a brief appearance to announce
the appointment of four new deputy directors-general, who come from Chile,
India, Rwanda and the US.
The WTO takes a one-month summer
break in August. From September, there will be the usual intense pressures
building up. The developing countries can expect to be put under great
stress to agree to cut their agricultural and industrial tariffs very
significantly, and will need a lot of skill and will to negotiate properly.
As recent examples in almost
every country have shown, when duties are slashed too fast or too steeply
on imported products, this can adversely affect the market share or even
survival of local companies and farmers.
Unfortunately, the companies
in developing countries are not even aware of the WTO negotiations and
the effects these may have on their future. They are thus unable to lobby
their governments, unlike the farmers and industrial conglomerates of
the rich countries, that lobby so well that they practically drive their
governments’ trade policies.
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