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TWN Info Service on WTO and Trade Issues (May06/03)

3 May 2006
 

UK parliament report attacks EC's WTO positions


The UK Parliament's International Development Committee has issued a report containing devastating criticisms of the European Union's positions in the WTO negotiations.

It attacks the EU's insistence that developing countries pay the price of high commitment in cutting their industrial tariffs and opening their service markets, in return for the EU making offers in agriculture which it had anyway committed to do to redress imbalances of previous Rounds.

It says a successful agreement for the Round is one that does not hurt developing countries or provide disproportionate benefits for developed countries, and at present sufficient progress is not being made on this.

It calls on the EC to change its position, saying: "The EU must improve its offer. It should not make its offers on agriculture or wider market access to the EU conditional on reciprocal non-agricultural market access, services or anything else. A true development round gives developing countries unconditional access to developed countries' markets for the widest range of products."

Below are highlights of the Committee's report.


With best wishes
Martin Khor
TWN

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UK parliament report attacks EC's WTO positions

By Martin Khor (TWN), 28 April 2006


The all-party International Development Committee of the United Kingdom Parliament has issued a report on 27 April containing devastating criticisms of the European Union's positions in the current WTO negotiations.

In particular, the report attacks the EU's insistence that developing countries pay the price of high commitment in cutting their industrial tariffs and opening their service markets, in return for the EU making offers in agriculture which it had anyway committed to do to redress imbalances of previous Rounds.

It concludes that a successful agreement for the Round is one that does not hurt developing countries or provide disproportionate benefits for developed countries, and at present sufficient progress is not being made on this.

It calls on the European Commission to change its position, warning that the EU "must not become the cause of failure."

The House of Commons Committee is headed by Liberal Democrat MP Malcolm Bruce and comprises six Labour MPs, three Conservative MPs and two Liberal Democrat MPs. Among those who were witnesses or who sent statements to the Committee were WTO Director- General Pascal Lamy, EU Trade Commissioner Peter Mandelson and senior EC staff, and several European NGOs.

"This round is supposed to shape trade for development, yet what we see is endless wrangling on the margins on issues that will not benefit the poorest," said Bruce, when the report was launched. "The EU must improve its offer. It should not make its offers on agriculture or wider market access to the EU conditional on reciprocal non-agricultural market access, services or anything else. A true development round gives developing countries unconditional access to developed countries' markets for the widest range of products."

The report attacks the double standards in UK government policy which on one hand stated publicly that developing countries should have policy space and flexibility, but did not distance itself from the EU's position that countries like India and Brazil must reduce industrial tariffs significantly.

"We consider that the Government is on the one hand defending the right of developing countries to choose their own policies, while at the same time arguing that movement in EU agriculture, which is crucial for the developing countries, is dependent on certain developing countries providing greater access to their non agricultural markets and making offers in services," says the report.

"Neither the Commission nor the UK should be pressing developing countries in this way, nor should they be making EU policies dependent on actions of the developing countries. This is contrary to the idea of a development round in general and to the idea of policy space more specifically."

On the same point, the report criticizes the European Commission for being inconsistent in its advice to the developing countries. It says: "The Commission's refusal to practice what it preaches in respect of liberalisation threatens the EU negotiating position. The Commission would have much greater credibility in the eyes of developing countries if it were more consistent. The attempt to argue that further liberalisation of European agriculture would be harmful to the interests of the G90 is disingenuous.

"The EU made a commitment to a development round which would redress the imbalances of previous rounds by opening its agricultural markets for developing countries. It should not attempt to renege on this commitment . The Commission's offer was insufficient to move the negotiations forward.

"The grand bargain which the EU sought - with progress in agriculture being dependent on access to developing country and US markets - was a 'Northern agenda' and not a development one. The Government's support for it was a negation of its commitment not to force liberalisation on developing countries."

The report also, in blunt terms, criticized many of the EU's moves and positions at the WTO, including:

* The EC's attempt to create "differentiation" among developing countries by using a new category "advanced developing countries" that had not been adopted by the WTO.

* The EC's push for "bench-marking" in the services negotiations, which the report said was an attempt to "change the rules of the game at half-time" with targets that were "arbitrary" and should have been rejected in principle by all EU member states.

* On the NAMA negotiations, the report recognizes the developing countries' concerns that market opening will threaten or wipe out their industries. Developing countries should have space to decide on suitable policies and the Committee expressed concern that policy space is already limited by the Uruguay Round and should not be limited further, as developing countries should not be forced to remain commodity exporters by policies that damage their emerging industrial sectors.

* On services, the talks are proceeding without studies on the implications of these for developing countries.

* On agriculture, the EU and US offers before Hong Kong did not go far enough to close the gaps and their lack of urgency raises questions about their commitment to a development round. In particular, the report says that EU Trade Commissioner Peter Mandelson indicated to the Committee that he could reduce the number of sensitive products if new commitments come from other players. It says that the EU should cut sensitive products but this offer "should not under any circumstances in the Round be conditional on actions by developing countries."

* Mini-Ministerials are unrepresentative and goes against accountability and transparency, and the government should not condone such a practice.

The report's main conclusions and recommendations include the following:

* It emphasises the importance of improved participation by, and policy space for, developing countries in the WTO. A development round should also produce development-friendly agreements to contribute the most to poverty reduction.

* The EU and the US offers before Hong Kong did not go far enough to close the gaps in member states' positions. The apparent lack of urgency in the EU and US approach to the negotiations raises questions about their commitment to a development round.

* The Government and the EU should not seek to divide the developing countries into categories which the WTO does not recognise and which the countries themselves have not agreed to. "We accept that countries such as India and Brazil are competitive in some sectors, and that trade liberalisation in these sectors would be beneficial to them, however, 'advanced developing country' is not a recognised category of states in the WTO."

* "We consider that the Government is on the one hand defending the right of developing countries to choose their own policies, while at the same time arguing that movement in EU agriculture, which is crucial for the developing countries, is dependent on certain developing countries providing greater access to their non agricultural markets and making offers in services." Neither the Commission nor the UK should be pressing developing countries in this way, nor should they be making EU policies dependent on actions of the developing countries. This is contrary to the idea of a development round in general and to the idea of policy space more specifically.

* The proposal by the Commission on bench-marking in services was an attempt to change the rules of the game at half-time. It should not have gone forward as the basis for negotiations in Hong Kong. The UK, in its Presidency, did nothing to prevent this from happening. The bench-marking proposal was an attempt to set targets for offers in services in order to move the negotiations forward, but the targets were arbitrary and imposed by the Commission. This should have been rejected in principle by all the EU member states and by the UK in particular.

* "We consider that the Commission has been inconsistent in its advice to the developing countries. The Commission's refusal to practice what it preaches in respect of liberalisation threatens the EU negotiating position. The Commission would have much greater credibility in the eyes of developing countries if it were more consistent. The attempt to argue that further liberalisation of European agriculture would be harmful to the interests of the G90 is disingenuous."

* The EU made a commitment to a development round which would redress the imbalances of previous rounds by opening its agricultural markets for developing countries. It should not attempt to renege on this commitment . The Commission's offer was insufficient to move the negotiations forward. The grand bargain which the EU sought - with progress in agriculture being dependent on access to developing country and US markets - was a 'Northern agenda' and not a development one. The Government's support for it was a negation of its commitment not to force liberalisation on developing countries.

* At the WTO meeting in Hong Kong the US did not respond to concerns raised by cotton exporting states creating a significant amount of ill will which again, as in Cancun, soured the entire negotiations. The US stance was unnecessary given that the WTO had already ruled against the US system. It was also contrary to the spirit of a development round. The subsequent repeal of domestic support for cotton is welcome and long overdue.

* Given the limited range of products which LDCs export, and given their negligible share in world trade, the minimum criteria for success in a development round would be Duty Free, Quota Free access for all LDCs' products to all developed country markets.

* "We consider the lack of discussion about the content of EU member states' sensitive products to be unsatisfactory. If such products are indeed sensitive we would like to know the reasons for this. We do question the EU's commitment to a development round if it sticks by anything like 8 percent of its agricultural products."

* The debate about infant industry protection appears inconclusive. "We have heard evidence to support both sides of the argument and evidence which tends toward a middle ground - some protection is useful, for limited periods of time, and for the right reasons. We believe that these are issues which must be decided on a case-by-case basis and that it is important for any WTO agreement to provide the space for developing countries to make decisions about which policies are most suitable."

* "We are concerned that this type of policy space may already be limited by agreements made in the Uruguay Round and would not like to see it limited further. Development is a process of diversification and developing countries must not be forced to remain exporters of primary commodities by policies which damage emerging industrial sectors."

* "We consider the rejection of the EU's bench-marking proposal to be a positive outcome for developing countries. Our main concern is that the services negotiations are proceeding apace with few, if any, feasibility studies about the implications of these for developing countries and with decisions being made by people who know about tariffs rather than people who know about particular services. It is important that decisions on services are carefully taken. We are unconvinced that the current timetable provides sufficient time for this."

* As Ian Pearson (UK Trade Minister) said, "What we have to do at the very minimum is kick open the door of the developed world so that the poorest countries can actually trade with us. We are pleased by this approach, but what is crucially needed is an agreement which prioritises the needs of developing countries. The Hong Kong declaration falls short of this requirement. The Government must now invest time and political effort to ensure that a development agenda can be agreed in December 2006."

* "Peter Mandelson has indicated to us that there may be some room for a reduction in the number of sensitive products within the limits of CAP reform, provided new commitments are forthcoming from other players. We would welcome an offer to reduce the number of products which the EU designates as sensitive, otherwise market access for developing countries will be severely limited and Doha will not be a development Round. In making this offer conditional upon the actions of other states, the EU is going against the spirit of the Round. This improved offer should not, under any circumstances in this Round, be conditional on actions by developing countries."

* "We agree with Stiglitz's recommendation that the WTO needs to promote a culture of robust, impartial and publicly available economic analysis of the effect of different initiatives on different countries, and groups within countries, if it is to effectively identify pro-development proposals and promote them to the top of the agenda. Mechanisms must be found to facilitate industrial diversification. We urge the Government to ensure that the formula for tariff reductions in NAMA does not discriminate against this."

* There has been limited discussion of Special and Differential Treatment (SDT) in the negotiations, despite a commitment to ensure that SDT would be part of all areas of negotiation. The UK Government should work to ensure that once numerical formulas are agreed for agriculture and NAMA, effective SDT is possible according to the needs of developing countries. Particular attention should be paid to the needs of smaller, low income developing countries, especially those which will lose because of preference erosion.

* The WTO should turn its attention to how the aid for trade mechanism will work. There is need to clarify the relationship between aid for trade assistance and general development assistance. Aid for trade should be additional to and not simply a diversion of aid monies already pledged. "We do not believe that the Government should consider aid for trade as part of its general aid budget."

* The formation of the G110 should not be seen as just a trade union, as was suggested by Pascal Lamy, rather as a response to an attempt by the developed countries to exert pressure on developing countries to agree to things which they did not feel were in their interest. The Commission should step back and ensure that it is not abusing its position in the WTO.

* "We accept that the use of smaller ministerial meetings make for easier decision-making but consider this an unrepresentative approach in an organisation which has facilitated greater participation and ownership by developing countries than its predecessor the GATT. It is not good from the point of view of either transparency or accountability. The Government should not condone such a practice, especially if a development agenda is still the goal of the Doha Round."

* Much remains to be done in order to bring the Round to a successful conclusion. The minimum criteria for a successful agreement would be one which does not differentially hurt developing countries or provide disproportionate benefits for developed countries. "At present we have concerns that sufficient progress is not being made."

* The Commission position must change, and there is good reason for the Commission to act pre-emptively and make known what it is prepared to offer in terms of improved agricultural market access on this since, in the WTO, nothing is agreed until everything is agreed. Such action would demonstrate leadership and political commitment to a development round. The developing countries have much to gain from an ambitious outcome. The EU must not become the cause of failure.

The report can be found at www.parliament.uk/indcom

 


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