July 2008

Thursday, July 31, 2008

After 20 years the fun has gone out of this story. A year ago we discussed at IATP the idea of setting up a clock that would mark the time since the Doha round began to highlight how deep the disagreements were. It was back when every other month WTO Director General Pascal Lamy would say something like, “a final agreement is within reach.” Mercifully, they stopped the charade and called it quits for now. But the truth of the matter is that the clock stopped on the WTO in 1994.

The Uruguay Round, which transformed the General Agreement on Trade and Tariffs (GATT) into the World Trade Organization (WTO) was launched in 1986. Eight years later, there was still no agreement. Everyone points to the Agreement on Agriculture as the stumbling block, but given delegates’ inability to solve the agriculture issues, it is hard to believe that other big topics like banking, insurance and telecoms – what the WTO calls “services” – would have been much easier.

To get past the obstacle of agriculture, and declare the Uruguay Round completed, the WTO artfully created the “Built-in  Agenda” of issues not yet resolved, to be taken up at subsequent ministerials. This sleight of hand allows diplomats and negotiators to run back to their capitols saying we had a success and we gave away nothing! The Built-in Agenda is still pending.

Having attended most of the WTO ministerials, it is my impression that the closest they came to an agreement was in Seattle. Of course, this may seem hard to believe, given the tens of thousands of demonstrators, the police riot and the virtual lockdown of the WTO meeting, but for those of us who sat up those tense nights with pounding headaches from the swamp of tear gas that covered downtown, it seemed very close indeed. The United States was chairing the meeting. Many delegates were absent either because the chaos in the streets prevented them from getting to the hall, or because they chose not to enter out of solidarity with the citizens being gassed and pummeled in the street. And at the WTO, not being present is counted as a yes vote. The U.S. and its European partners were pushing through measure after measure. On top of the other forms arm twisting to get their way, an empty hall was a golden opportunity for developed countries to move an agenda that would further their goals.

NGOs from around the world met to strategize at IATP’s Media Center, located in the historic Town Hall in Seattle, with one half of the building in the police curfew area and the other half outside. Who did we know? How could we get information into delegate’s mail boxes? What hotels were friendly delegates staying at? We were scrambling. In the end, though, what stopped the railroad was the voice of a delegate from Burma, who spoke from the floor and asked the U.S. chair person why the process was so undemocratic. Bang, down came the gavel. Meeting adjourned. The U.S. wasn’t going to be accused of hosting an undemocratic WTO ministerial in its home territory of Seattle. It was a close call for opponents of corporate-led globalization.

The Doha ministerial was another story. Held within weeks of 9/11 in the small country of Qatar, the meeting was under tight security. U.S. Marines in civilian clothes, their machine pistols tucked under their sports shirts, patrolled the halls. Dogs and soldiers everywhere. Only a couple hundred NGO participants attended. Even in this moment of broad-based international sympathy for the US, the talks amounted to largely a lot of rhetoric about commitments to developing countries, and an agreement to try to launch a new round.

Cancun in 2003 and Hong Kong in 2005 – again, no agreement. Cancun went so badly that the Mexicans closed the meeting a day ahead of schedule. Now a “mini-ministerial” in the safety of the WTO’s hometown, Geneva. Pascal Lamy turned to the world food crisis as the reason to approve the Doha round and in the end the talks broke down because developing countries feared agreement would in fact worsen their food security, which for many are already at the breaking point.

After 20 years of failure, the blame game is well rehearsed, but the truth of the matter is that global capital overreached. The WTO’s failure leaves a bitter taste in countries racked by food riots and starvation and underdevelopment. There is no turning our back on the real issues of trade and development, which demand thoughtful and equitable multilateral cooperation. Too bad we had to waste all this time stopping a bad idea. And maybe now we can start talking about the kind of international trading system that can build a fair and just world economy.

Tuesday, July 29, 2008

Today, trade talks at the World Trade Organization in Geneva broke down. It has now been seven years since the Doha Round of negotiations began at the WTO.

Below is a statement from Carin Smaller, head of the Geneva office of the Institute for Agriculture and Trade Policy:

“This deal may have been hanging by a thread, but what snapped the thread was a major division between WTO members on how to achieve development. The U.S. argued that opening markets was the best way to achieve food security and to promote livelihoods. India and China, supported by the majority of developing country members, argued for a strong safeguard mechanism to protect food security and livelihoods in the event of major disruptions to agricultural markets.

This deal did not collapse over small technicalities. It was doomed to fail from the start. There is no political support for what is on the table: not from India or France or Argentina or South Africa or most of the WTO membership. Following the same WTO model is impossible now: governments are no longer willing to sacrifice other concerns strictly for the sake of trade. People are in the streets rioting over food and energy prices. The business world is in a state of shock over the financial crisis. These are the problems that governments have to focus on. And the Doha Round cannot help them.

People want global agreements to solve food insecurity, to get them out of poverty and to avoid the devastating effects of climate change. If trade can help these goals, it should be used. But the deal on the table was likely to make things worse.

Other global institutions are better equipped to solve these new challenges. Multilateralism is more important than ever, and it has to support a diversity of approaches to allow governments to realize full employment and sustainable development. 

The question is no longer whether we need an alternative path to the Doha Round, but rather how to initiate it. It is time for strong political leadership from the South and North to push for a new model of trade.”

Tuesday, July 29, 2008

So this is it… Another WTO ministerial has just collapsed and the talks are ending in acrimony, with members blaming each other for the failure. Although we do not like what Doha had become, this is a very sad play to be watching. The world is not getting any better out of this. We wish Ministers were more creative, and would have used this opportunity to outline an alternative path for the global community, since Doha does not satisfy anybody anymore.

Instead, here we are, divided between a sense of relief that a bad deal has been avoided, and serious concern that multilateralism is being severely damaged. Strong and fair multilateral trade rules are more essential than ever to help address the serious crises the world is currently facing. But Doha was not providing the right rules.

The mistake was to convene this ministerial in the first place. WTO Director-General Pascal Lamy tried to use the multiple crises (food, climate, finance) to entice governments to agree to a deal that doesn't address these issues. It failed. Now he has to face the consequences.

Tuesday, July 29, 2008

Yesterday, we wrote about the enormous pressure being put on India and China to agree to a deal at the WTO. Today, let's get into some of the details of what this fight is really about.

Exporters such as the U.S., Australia, Thailand and Uruguay want to sell their agricultural commodities abroad. But the targeted importers, countries like China and India, worry about the disruption that uncontrolled agricultural imports will bring to their millions of farmers, the overwhelming majority of whom are among the poorest people in these already poor countries. They want to open their markets, but less, and not to all products. Many have learned from experience that the damage done by agriculture dumping cannot be undone by the post-facto imposition of some kind of corrective - especially if that corrective has to wait several years for a WTO trade dispute panel to meet, deliberate and judge, and then for the country at fault to change its laws (with the strong risk the party at fault will ignore the ruling, as both the U.S. and EU have done in some cases).

At its heart, this fight is about protection: countries like India and China (but with the solid support of close to 100 other of the 150 or so WTO members) insist they need a higher level of tariff protection than countries like the U.S. and members of the European Union think they should have. In return - make no mistake about this - the U.S. and EU are fighting to protect their own interests (they spend money on protection in the form of support to industries, rather than using taxes such as tariffs, but it is all about protecting interests).

A main point of contention concerns something called the Special Safeguard Mechanism, or SSM. The idea behind the SSM is not new. The Uruguay Round Agreement on Agriculture included a so-called Special Safeguard (SSG). The mechanism was created to give further protection to countries that converted non-tariff barriers (such as restrictions on the quantity of a good that could be imported) into tariffs (which were often extremely high). About 30 developing and most developed countries had the right to use the SSG.

When the Doha negotiations were launched in 2001, a group of countries (at that time led by Pakistan) explored with a group of NGOs (including IATP) the idea of a "development box" for agriculture. The notion was to protect food security and rural livelihoods from the commercial fight over market share. In addition, the Doha negotiations were called (once upon a time) a Development Round because they were supposed to include an agenda of some 100 or more items that surfaced as the Uruguay Round (UR) was implemented and that developing countries wanted addressed before undertaking any new commitments in Doha. It never happened, and this latest text continues to ensure that it will not happen, at least not in this round.

Fast forward to today and you have the G33, a group of developing countries, fighting for two particular measures (see IATP's Agreement on Agriculture glossary for more details):

1. Special Products (SPs): a list of agricultural products that would be subject to their own, milder, tariff reductions or exempt altogether because of their importance to livelihoods and/or food security.

2. The Special Safeguard Mechanism (SSM): the right to increase tariffs sharply to curb an import surge, to protect a domestic industry from short-term swings in global markets.

On Monday, day eight of the latest attempt to agree to modalities for Doha: the whole day was taken up with fighting over the the terms for the SSM, and when governments broke for the night (at 2.30 am or so), they were still in disagreement. The disagreement is over rules proposed in text by DG Lamy on July 25 for when an SSM measure could be used. The text has been widely criticized (see for instance issue 4 of the on-going commentary from the South Centre). A lot of background is also available on this issue - a recent paper by TWN is a good place to start.

In the end, the fight is really about everyone trying to simultaneously protect and aggress (India is after new export markets like everybody else at the WTO), a process known as mercantalism. Deeply out of favour with theorists, it is nonetheless the driving force behind much of the trade policy codified in international trade agreements.

Mercantalism makes for ugly negotiations. Not much room to discuss the right-to-food, or decent work or climate change. Anyone else ready for a new way to do business?

Monday, July 28, 2008

The WTO media coverage over the past few days has been scathing for India and China. "U.S. slams China, India for putting Doha round into 'gravest jeopardy'" was the headline in the International Herald Tribune. "US: China, India threaten Doha round of WTO talks" read the Associated Press. "India blocking WTO talks - diplomatic sources" was the headline in Forbes. And "China throws up barrier to Doha agreement" was the headline in the British daily, the Guardian. So, are India and China the bad guys? Are they trying to destroy the Doha negotiations?

One of the big questions coming into this ministerial meeting was the extent to which big developing countries like China, India and Brazil, would be prepared to open their markets to imports from around the world. The Doha talks are now sticking on this. Brazil has accepted the deal on the table. China and India are unhappy at the extent to which they are being asked to expose their agricultural and manufacturing producers to outside competition. The U.S. has attacked both countries for putting the talks into the "gravest jeopardy" since the Doha Round started seven years ago. Other exporting agricultural countries like Uruguay and Paraguay also spoke out against these developing countries trying to retain policy flexibility to protect their markets.

Are India and China's positions legitimate?

Before I answer these questions, a few facts and figures. First, both India and China are still poor countries. India ranks 128 out of 177 countries and China ranks 81 out of 177 countries in the UN's Human Development Index. According to the UNDP, 16 percent of Chinese people and 34.7 percent of Indians live below the poverty line. Furthermore, there are massive income inqualities between rural and urban populations and between the rich and poor in both countries.

I think the concerns of China and India deserve attention at the WTO. Both countries have serious and legitimate food security concerns and an enormous number of livelihoods to protect. Supporting and building strong rural communities and decent employment is vital if both countries are to meet the development challenges ahead.

As importantly, it is not just China and India who are concerned about the effect of import surges on their manufacturing and agriculture sectors. They are supported by over half the WTO membership who share these concerns. It's hard to see how blasting other countries in the media is going to change that.

Saturday, July 26, 2008

All of us, journalists, NGO representatives, delegates, attending the WTO ministerial here in Geneva are spending lots of time (and money) at the WTO cafeteria. No doubt the service there is excellent. Friendly waiters make it less painful to think about how many meals you've had in the same place over the past five days!

Ministers today, congratulated the service as well... but a service of a different kind. This afternoon was the "signaling conference" on services, where ministers discussed how they could further liberalize the services industries in their countries.

Coming out of the meeting on time (at 7pm), they all highlighted that discussions had been positive, with substantial "signals" coming from some of the major players. The EU and U.S. allegedly highlighted their ability to offer more access to their markets for highly skilled professionals - this was one of the long-standing demands by India.

It sounds like this "positive" meeting will add to the momentum that the Round gained yesterday. As a result, it is likely that the conference will extend into next week... probably until Tuesday or Wednesday. Good news for the WTO cafeteria.

How developing countries' concerns will be addressed in the coming days remains very uncertain. Many of them - including India, China, South Africa, Argentina, Indonesia - still have significant concerns with the proposals on agriculture and NAMA. But the tendency here right now is to overlook these concerns and blame others for not being more positive.

Issues like banana, preference erosion and cotton, remain to be dealt with. There is huge pressure to rush these issues. This is of great concern because there will be no time to properly consider the impacts of what is agreed to in a possible deal.

Friday, July 25, 2008

Negotiations ended tonight with general agreement on a set of numbers for agriculture and industrial goods (NAMA) that had been proposed by WTO Director General Pascal Lamy earlier in the day. Not all countries agreed, but most did, and so the Green Room members have decided to put this text aside for now, and to work on the remaining issues. Tomorrow there will be a meeting on services, called a "signalling conference." On Sunday there will be another Green Room meeting on agriculture and NAMA to get agreement on the remaining issues.

So what is in the Lamy compromise?

The document may look like a set of incomprehensible figures, but there is a lot of important stuff in there. On agriculture, the U.S. is being asked to reduce its ceiling of trade-distorting support to US$14.5 billion, down from its $15 billion offer earlier in the week. Developed countries will start cutting their agricultural tariffs at 70 percent and developing countries will start cutting their tariffs at 47 percent (two-thirds of the developed countries). Developed countries are being given a flexibility of up to 6 percent of tariff lines for sensitive sectors. Developing countries are being given 12 percent of tariff lines to safeguard food and livelihood security and rural development. Developing countries will have to cut these tariff by on average 11 percent, and they will be able to shield 5 percent of these lines from any tariff cut. There are also further details for the Special Safeguard Mechanism, which is a tool available to developing countries in case of import surges.

On industrial goods or NAMA, developed countries will have to reduce their industrial tariffs to under 8 percent. Developing countries have to reduce their industrial tariffs to between 20 and 25 percent. Depending on which level they choose they will be given flexibility to exempt some tariff lines from the tariff cut. But, developing countries will not be able to exempt entire sectors from the tariff cut. So for example, they will not be allowed to exempt the entire automobile sector from a tariff cut, but they would be able to exempt some products, like the engines, the car body and the car seats. Developing countries are also strongly requested to participate in negotiations to eliminate tariffs on certain sectors. If they participate in these so-called "sectoral initiatives" they will be allowed to cut their tariffs less.

The compromises being made so far to reach this agreement are killing any chance for a successful development round. The result is a complicated mess, reflecting a narrow set of commercial interests, rather than a vision to reform the trading system. So far, this deal fails on nearly every count to reach the Doha Round's original goals.

Friday, July 25, 2008

Numbers and rumours are circulating around the WTO about a possible deal for the Doha Round. We have found the document that lays out Lamy's ideas for how to conclude the Doha Round, specifically on modalities for agriculture and industrial goods (NAMA). It outlines details, including numbers, for how to reduce American and European subsidies and to reduce tariffs on agricultural and industrial goods for both developed and developing countries.

A group of around 30 ministers are meeting with Lamy in the Green Room to discuss whether they like the compromise that he has put on the table...

Friday, July 25, 2008

Today, WTO Director General Pascal Lamy was given support by the WTO members to continue his small group meetings with seven key WTO powers. He delivered a damning speech to the WTO membership, warning them that the next 24 hours was crucial and that if they showed no further flexibility, they faced the serious consequences of failure.

The G7 meeting started around mid-day and continued for around five hours. According to one delegate, Lamy circulated ideas for numbers on tariff and subsidy cuts in order to bridge the gaps between members. According to WTO sources, there were very encouraging signs of progress and very interesting ideas circulating in the G7 meeting. Pascal Lamy and the seven members are now taking their ideas to the larger group of members in the Green Room, in the hopes of building greater convergence with the others.

The mood in the WTO has lifted considerably in the last few minutes. The number crunching has begun. It is still unclear whether this will lead to an agreement or not.

Friday, July 25, 2008

One of the longest running disputes at the WTO concerns the banana trade. And once again, the banana dispute has popped up this week in Geneva as a stumbling block for negotiators. I sat down this morning with Alistair Smith, expert at Banana Link, to get the latest.

IATP: The WTO is trying to solve a long-standing banana dispute in Geneva. Can you explain to us what's at stake here?

AS: The so-called "banana war" has been bugging trade relations between banana producers in Europe, Africa and the Carribean countries, and Latin American countries for more than 15 years. The dispute revolves around the preferential access to the EU market that some African and Carribean countries enjoy as a result of historical relations. At the WTO, Latin American countries are fighting what they see as a disadvantage for them on the world market.

IATP: What's been proposed over the past few weeks to solve this conflict? Why is it so important in the current WTO ministerial?

AS: Developing countries involved swear they will not agree to a broader deal on Doha unless a satisfactory solution is found on bananas. Pascal Lamy proposed an agreement on July 12, that was accepted by the EU, but the West African and Caribbean countries think it goes too fast and want longer to implement the proposed tariff cuts. Latin American countries put forward a proposal to cut the high EU import tariff a little faster than in Lamy's proposal on July 21; they also offered to leave some other tropical products that are also important to the ACP (African, Caribbean and Pacific countries) out of the list for cuts to be agreed in the wider agriculture talks. Despite the inevitable doubts of the small Caribbean island exporters, we think the Latin American proposal could prove to be a very significant step towards ending the long-running banana wars. We know that most ACP Ministers are taking the Lamy proposal for tariff cuts over 6 years seriously, even though they have told the Latin Americans they want to keep negotiations on bananas separate from a deal on other tropical products. Some of the biggest Latin exporters, like Colombia and Costa Rica, have publicly stated this week that they can live with the Lamy proposal.

In short, at this critical juncture in Geneva, we believe that, as so often in the past, it is behind-the-scenes corporate lobbies that are endangering the banana peace. Governments and the WTO Secretariat on their own could easily broker the peace required, especially if special measures can be agreed for the small Caribbean island producers in the three Windward Islands and Jamaica.

IATP: Banana Link has been working for years with stakeholders of banana production and trade around the world to improve the sector's sustainability. In your view, what is the way forward on this question?

AS: We are hoping there is agreement on banana tariffs into the EU, because there are other more important issues that need to be addressed within the sector. This dispute has been a significant distraction for the last 15 years. We invite all governmental and private parties to turn their energies to making a real success of the international Multi-Stakeholder Forum on Bananas, scheduled to be launched in 2009. Once parties concerned can take their eyes off the all-consuming issue of euros per tonne duty, then, together with plantation workers' and producers' representatives, we believe that substantial practical advances can be made quite quickly on the range of social, economic and environmental issues facing the sector.

Thursday, July 24, 2008

No, Freddy Mercury has not joined the show. Yes, the Doha talks have been saved for one more day. A late night Green Room meeting with around 30 ministers gave WTO Director General Pascal Lamy support to continue his small group consultations with the G7. The mood among members was slightly more positive as they left the Green Room, but there are still enormous hurdles to overcome. The G7 will start meeting again tomorrow (Friday) at noon. The Green Room of 30 countries will meet after that. Stay tuned for more...