Doha development agenda fades at the World Trade Organization. Developed countries continue to push a self-interested agenda for the WTO December Hong Kong meeting.

Maria Riley

(December, 2005) Negotiations in preparation for the World Trade Organization 6th Ministerial Meeting to be held in Hong Kong, December 13-18, 2005, are intense, highly political and deeply disturbing. With an overriding emphasis on opening markets, the negotiations are ignoring the development needs and realities of developing countries. The purpose of the upcoming Ministerial is to agree upon the negotiating formulas to conclude the "Doha Development Round" by the end of 2006. The stakes of the meeting are very high for all the countries involved, but most of all for the developing countries.

In a recent communiqué on trade liberalization, the Bishops of the U.S. and Latin America identified the moral success of trade agreements as how they advance human dignity and development. They called for trade agreements to be fashioned "in ways that stimulate economic growth while at the same time giving priority to integral human development that builds solidarity, improves the common good of all, and in an essential way reduces poverty, exclusion and hunger." They warned that while "the market has its own logic...it does not have its own ethic." The current negotiations in Geneva do not stand up to this moral criterion.

Background

The WTO 4th Ministerial held in Doha, Qatar, 2001, set out the so-called Doha Development Agenda (DDA), which has evolved into a full-blown Development Round. From the beginning some NGOs, developing countries and trade experts have criticized the DDA as being more about market openings and deeper trade liberalization than about development in the developing world. This assessment proved true as the stark disagreements between the developing and developed countries, particularly in agriculture, investment, and industrial tariffs, came into clear view with the collapse of the 5th Ministerial held in Cancun in 2003. Following that collapse the developed countries, rather than reassessing the development implications of the rejected proposals, blamed the developing countries for not cooperating and causing the failure in Cancun.

After Cancun, WTO work in Geneva came to a standstill for six months as all sides did an assessment and sought a way forward. In January 2005, discussions resumed with the goal of setting forth another negotiating plan. In July the WTO General Council reached an agreement, called the "July Framework," on how to move forward. Though this minimal agreement kept the talks going, it failed to bridge the fundamental disagreements between the developed and developing countries. The document reflected the dominant positions of the big trading powers, the U.S. and the EU, while making very few concessions to the developing countries' development agenda.

Sixteen months later with the Hong Kong Ministerial on the horizon, the problems remain and the political pressure mounts to reach negotiating rules to move the negotiations forward toward completion. However, grave concerns persist that the current directions of the negotiations do not carry the promise of a development round but are primarily focused on opening markets to further extend and deepen trade liberalization. This continuing aggressive approach by developed countries, including the U.S., to liberalize trade is based on the questionable premise that more open markets and the free flow of goods and services will inevitably lead to greater development and the eradication of poverty in the developing world.

There is growing evidence to the contrary. The latest UNDP Human Development Report 2005 identifies one of the failures of the current model: "The problem is that the human development potential inherent in trade is diminished by a combination of unfair rules and structural inequalities within and between countries" (p. 9). The current negotiations continue to reinforce the unfair rules and structural inequalities while they fail to address the inability of the market to respond to all the needs of human and social development.

Nor do the negotiating processes give new hope for advancing a pro-development agenda. The non-transparent and anti-democratic mini-ministerials and green room groupings continue but this time with a new cast of dominant players. The FIPs (Five Interested Parties, which include the U.S., EU, Brazil, India and Australia) is the primary negotiating group. At certain key moments the FIPs open up to a small group of other countries. This arrangement has fragmented the developing country coalitions, the Group of 20 and the Group of 33 countries, that formed around the Cancun Ministerial to create a counter weight against the traditional power blocs at the WTO.

Critical Negotiations

The three critical negotiations are agriculture, NAMA (non-agriculture market access/industrial tariffs) and services. Agriculture: A thriving small-farmer agricultural sector is essential to rural development and food security in the developing world, where 90 per cent of the people in poverty work in agriculture. Current negotiations should be focused on means to reduce the growing impoverishment of developing countries' small farmers and on rural development.

Key on the negotiating agenda is the reduction of domestic subsidies and export support that the U.S., EU and Japan provide to farmers. These subsidies foster over-production and demand ever expanding markets. The process leads to dumping food on local markets in developing countries at prices below the cost of production, creating unfair competition with local farmers.

Substantial reductions in real dollars in trade-distorting domestic support and export subsidies are necessary. The proposal the U.S. put on the table to reduce domestic support by 60% is carefully crafted to conceal the fact that the cuts would be on the highest allowed subsidies, not on the actual subsidies distributed. In real dollars, the U.S. offer would reduce its trade-distorting subsidies by about 2% over the next five years. And this offer is only good if the EU and Japan reduce their subsidies even more. Both have rejected the offer.

Such number games do not move negotiations forward, nor do they show any commitment to development.

NAMA: The Non-Agricultural Market Access negotiations cover a wide variety of products from natural resources (e.g., forest products and gems) to light manufactures (e.g., food products, footwear and leather goods) to industrial goods (e.g., machinery and electronic equipment). Current negotiations cover a wide range of tariff issues, including tariff reductions, the expansion of goods that will have limited tariffs and the elimination of tariff escalation and peaks.

The "ambitious" proposals put forward by the industrial developed countries to a tariff reduction formula leading to zero tariffs on industrial products would be the death knell for the industrial sector of many developing countries, especially those with weak or infant industries. Under a zero tariff, competition with imported goods will seriously limit the capacity of many countries to establish local industries and pursue industrial development strategies.

The range of tariff proposals would remove any remaining flexibility developing countries have to regulate the pace and scope of industrial development and to protect their natural resources while opening their markets to a flood of products. They would effectively strip the developing countries of the trade options and domestic investment policies that were used by developed countries when they were at earlier stages of development. Reduction in tariffs further exacerbates budget deficits as tariffs are an important revenue source for most developing countries.

Services: Frustrated by the number and quality of service sector offers that have been put on the negotiating table, the EU has proposed that a certain number of service sectors be "benchmarked" as mandatory for all countries to open up for trade liberalization. The proposal is problematic from several points of view. First, it runs contrary to the General Agreement on Trade in Services (GATS) which allows countries to determine the level of services liberalization they deem advisable for their level of development. Secondly, who would decide which sectors must be forced open remains in question.

Before a system of benchmarking is adopted, the Uruguay Round GATS agreement would need to be changed. The powerful countries in the WTO have consistently refused to reopen any agreements when developing countries have sought changes to repair some of the imbalances of the agreements. While the GATS agreement needs revision to clear up its legal and semantic ambiguities, it should not be reopened at this time to accommodate the desire of the developed countries to pry open the service sectors in the developing countries.

The service sector is critical for the social development of countries. Access to public services, like water and power and such critical social services as education and health care are essential to a thriving and engaged society. Governments must maintain control over their service sectors, their ability to set domestic regulations and their development agendas. All of these are at risk in the present climate of services negotiations.

Conclusion

It is difficult at this moment to see much positive prodevelopment momentum in the lead-up to the Hong Kong Ministerial. The WTO does not want to endure another ministerial failure. The power-brokers at the WTO are pushing a very ambitious agenda of opening markets andlowering tariffs with scant attention to the needs or demands of the developing nations. There is political pressure on the developing nations to conform to the agenda being pursued and they, in turn, do not want to be blamed for yet another ministerial failure.

What is clear is the short-sightedness of the developed countries in their pursuit of this model of trade liberalization. What will the developed nations gain if they manage to pry open more markets, when their people are too poor to enter the market? Moreover, the trade liberalization agenda mitigates against other policies, such as the "trade not aid" approach to development and the move of the G8 nations to eliminate debt in the most indebted countries. The fall-out of a trade policy that impoverishes developing countries rather than leading them to development will be the need for increased aid and a quick return to indebtedness. The current direction of the Geneva negotiations does not meet the moral criteria of advancing human dignity and development. ?

Maria Riley, OP, is the Coordinator of the Gender, Trade and Development Program at the Center of Concern.  This article first appeared in Center Focus Issue #169, November 2005 http://www.coc.org/resources/articles/display.html?ID=1309   and is reprinted by permission.

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