TWN Info Service on WTO and Trade Issues (July06/09)

21 July 2006

Developing countries on Doha talks at the G8 Summit

The G8 leaders met with leaders of 5 developing countries as part of what the G8 calls its "outreach" activity.

A large part of the discussion was on the WTO Doha talks.

Below is a report of the G8-developing countries working lunch.

With best wishes
Martin Khor


Developing countries on Doha talks at the G8 Summit

By Martin Khor (TWN), Geneva, 18 July 2006

No one who was not there seems to know what actually happened at the G8 Summit leaders' meeting with the leaders of five developing countries in the lunchtime "outreach working lunch" at St Petersburg on Monday (17 July).

But by some accounts, it was quite a strange affair. The leaders of the five "outreach countries" - China, Brazil, India, Mexico and South Africa - wanted to discuss the Doha negotiations with the G8 leaders and perhaps come to a common conclusion.

But instead they were faced with a G8 stand-alone statement on trade which the G8 leaders had adopted by themselves the day before (Sunday). Apparently the "outreach" leaders were caught by surprise.

And it would well be an unpleasant surprise. That G8 statement, in its most operative part, in paragraph one itself, said that "We urge all parties to work with utmost urgency for conclusion of the Round by the end of 2006... The Round should deliver real cuts in tariffs, effective cuts in subsidies and real new trade flows."

Another paragraph says the G8 leaders commit themselves to substantial improvement in market access in agriculture and industrial products and expanding opportunities in services, and "we look to other WTO members to contribute to this objective, commensurate with their level of development."

The terms "real cuts in tariffs" and "new trade flows" have recently been used by developed countries, and the WTO Director General Pascal Lamy, to mean that developing countries (or at least the ones with big markets) have to bind their tariffs and cut their bound tariffs to below the applied rates.

In all previous trade rounds of the GATT system, the basis for tariff reduction has been estimation of reduction in bound tariffs. The developing countries have been indignant that in this so-called Development Round, the developed countries are insisting that developing countries cut their bound tariffs to below the applied rates, and that this has become their measure of whether and how much the Round is successful.

That the G8 special statement on Trade would raise the negotiators' demands of "real tariff cuts" and "real new trade flows" to the status of endorsement by G8 political leaders would not have been a good pre-start to the G8-outreach 5 meeting.

Then, before the working lunch started, US President George Bush had a little chit-chat with UK Prime Minister Tony Blair, which unfortunately for them, was caught on microphone.

Much of the more sensational and embarrassing exchange was on the Middle East situation, with Bush making unkind references to UN Secretary General Kofi Annan and his attempts at a peaceful solution.

But some of the Bush-Blair private talk on the Doha talks also make for embarrassing reading, and show up that at least Bush was really not that focused about the issue.

A transcript of that talks has been published in some Western newspapers. The Washington Post version has the following description and transcript (on the Doha issue).

British Prime Minister Tony Blair approaches.

Bush : Blair, what are you doing? You leaving?

Blair : No, no, no, not yet.

Blair, standing over Bush as the president eats, tries to engage on the stalled global trade negotiations.

Blair : On this trade thing...

Some of the ensuing conversation is inaudible. Blair evidently wants Bush to make a statement on the talks.

Bush : If you want me to. I just want some movement. Yesterday, I didn't see much movement. The desire's to move.

Blair : No, no there's not. It may be that it's impossible.

Bush : I'll be glad to say it. Who's introducing me?

Blair : Angela. [German Chancellor Angela Merkel ]

Bush : Tell her to call on me. Tell her to put me on the spot.

Bush then changes the subject, presumably to a gift Blair must have given him for his recent 60th birthday.

Bush : Thanks for the sweater. Awfully thoughtful of you. I know you picked it out yourself.

Blair : Oh, absolutely.

At the G8-Outreach Five meeting, WTO Director General Pascal Lamy spoke for a few minutes. He said of his talks of the last two weeks (after the failed end-June WTO meetings) principally with G8 negotiators that "there were some good news but they remain marginal."

He said the chief political responsibility lies with the G8. "Clearly need to move closer on these issues which means you must be willing to revise the instructions that you have given your Ministers." Failure would be a blow to development prospects, send a strong negative signal to the world economy. He asked all the leaders present to "give your Ministers now more room for negotiation."

The five developing country leaders had prepared a joint "position paper", which was handed over at the meeting. The paper was a contrast to the G8 leaders' own statement on trade.

According to a news report by the Press Trust of India, the five leaders voiced serious concern at rising protectionism in developed countries, and made a strong pitch for eliminating subsidies, high tariffs and other trade barriers generating distortions in the world agricultural market.

Their paper said that the Doha round is the best chance to open world markets, level the playing field, share wealth and create jobs.

Describing agricultural subsidies in developed countries as not only immoral but often illegal, the outreach countries rued that rich countries, by keeping these privileges for themselves, were exporting more poverty to already poor countries. In addition to the elimination of export subsidies, it was urgent for developed countries to undertake effective commitments in both domestic support and market access.

Noting that deadlines have been set and repeatedly missed, they contended that a consensus could be reached only if development was made the kernel of the negotiating round and the principle of special and differential treatment incorporated integrally in all aspects.

They said believing that concessions made by developing countries would magically unblock negotiations was an illusion, and asked developed countries to assume their responsibility in moving the process forward.

"The key to the end of distortions lies in the hands of those who distort,'' the paper said. The outreach countries also wanted developed countries to implement duty free and quota free treatment to least developed countries as early as possible.

Observing that time was running out, the five countries said the engagement of world leaders was urgently required to break the WTO deadlock and to give a "`fresh impetus'' in all areas of the negotiations underway.

Expressing concern at the negative impact of soaring energy prices on their development efforts in recent years, the countries favoured the establishment of a global energy order that is fair, equitable, secure and stable and to the benefit of the entire international community.

They stressed the importance of more compatible and balanced regulatory frameworks both at the regional and global levels.

They also called for a "new paradigm'' for international cooperation to deal with global challenges in energy security, education and infectious diseases. The countries argued that increased participation of developing countries in the decision-making processes of the UN system and other international organisations was essential to ensure more balanced and legitimate results.

On the situation in Africa, they said the world community should continue to cooperate with African countries in their quest for peace, development and social justice.

Brazilian President Luiz Lula da Silva made a statement, in which he said that the WTO negotiations are in a crisis. It is not a technical crisis. "It is a political crisis. It is a crisis due to lack of leadership. It is therefore absolutely appropriate that we discuss this issue here. After all, this is why - and not only to produce formal declarations - the main leaders of the developed and developing world are supposed to meet."

Lula said that what is at stake in these negotiations is not merely a handful of trade concessions. At stake is the very future of economic multilateralism, with obvious social and political repercussions.

It is not by chance that almost 60 years after the creation of the GATT/WTO system the term "Development" appeared for the first time in the title of a Round. This Round is not only about trade, it is, above all, about development, which means: creating conditions that allow the world's poorest populations to enjoy progress which was often achieved at their expense.

Lula said that a simple comparison is enough to highlight the injustices in our world that the Doha Round is supposed to correct, even if partially.

"In agriculture, the means of livelihood of a great part of the world's poorest populations, subsidies - which have been banned in the industrial sector for decades - continue to export hunger and poverty to less developed nations. While developed countries provide distortive support to the tune of US$1 billion a day, 900 million people in rural areas all over the developing world live on less than US$1 a day.

"It is absolutely false the notion that such distortions can be compensated with aid policies or trade preferences, which simply perpetuate situations of dependency. A dependency on just a few products - sometimes only one and on a few markets. Poor countries do not need favours.

"They need equitable conditions to fully benefit from their comparative advantages. Hence, the priority on agriculture. With its ambitious and balanced proposals, the G-20 has contributed decisively in bringing positions closer. But obviously, we are not there yet.

"Many developing countries, including Brazil, have already given clear signals that they are ready to contribute to the Round with important moves in industrial goods and services, proportional to their levels of development. Of course, such moves will be based on bound tariffs. They will, nonetheless, have a real impact on trade flows, offering new market opportunities.

"However, it is utterly misleading - and unfair - to argue that progress in agriculture must be attained by means of concessions from poor countries. In fact, we all know that very few developing countries will effectively apply the formula for tariff cuts in industrial goods.

"The participation of these countries in the international trade is still relatively small and their contribution will never be enough to close the divide between the negotiating positions of rich countries in agriculture.

"Without firm political impetus and renewed instructions, our ministers will not manage to narrow the distance between current negotiating positions. We know that, in order to close the existing gap, we will need to take decisions that will displease some domestic constituencies. There is always a risk of losing popularity and votes.

"Critics will surely have their space in the media, but true leaders mind not only about immediate interests. They think about society as a whole, about the current and future generations. Great nations have the additional responsibility to bear in mind the impact of their decisions on less powerful countries. Also in this respect, Brazil will not shy away from its responsibilities.

"A Round that merely consolidates the status quo, particularly in agriculture, will be tantamount to condemning the vast majority of humankind to a life of hunger and extreme poverty."

Lula said that last December an important step was taken, Last December, to ban the use of export subsidies and other equivalent types of support. Now we have to deal with the other two pillars of negotiations in agriculture.

He added that it is unacceptable and simplistic to argue that "my subsidies only offset the subsidies of others".

"The current level of subsidies is excessive, illegal and inhuman. The current expenditures with agricultural subsidies must be subject to substantial and effective cuts. I emphasize the word "effective", which is present in the Hong Kong Ministerial Declaration.

"The current level of protectionism in the developed markets is also unjustified. Agricultural trade cannot remain hostage to exorbitant tariffs (some of them above 1,000%), quota restrictions, safeguards, and other trade limitations.

"Tariff cuts in agriculture must be equally significant and cannot be neutralized by exceptions and managed trade. Special treatment for the specific situation of poorer countries, which face the challenges of subsistence and food security, must be acknowledged.

"I am ready to instruct my minister responsible for the negotiations to show the necessary flexibility with a view to reach an ambitious and balanced outcome for the Development Round, with gains to all. I do not expect less from my colleagues gathered here. We must do what is necessary and what is fair. We all have our limitations, but we have to face them with a sense of historical responsibility.

"It is not in easy times that we need leaders. True leaders step up, act and are recognized in moments of crisis. The Development Round is in a crisis. Omission is not an acceptable option."