WTO NEGOTIATIONS COLLAPSE

By Walden Bello

[This article published in: SoZ Sozialistische Zeitung, September 2006 is translated from the German on the World Wide Web,  http://www.vsp-vernetzt.de/sozkoeln/index2.htm ]


The collapse of the so-called Doha round of the WTO on July 24, 2006 is the best thing that happened to the developing world for a long time. Enormous efforts were made to save the world trade round in the two weeks before the meeting of the WTO general council in Geneva. At the G8-summit in St. Petersburg, the leaders of the greatest economic powers of the world urged a successful conclusion to the round and described it as an “historical chance for economic growth, development potential and higher living standards in the world.” This was pure wishful thinking. From the beginning of the Doha round in November 2001, the governments of developed industrialized countries rejected the demand of the majority of WTO member states. The negotiations concentrated on meeting past obligations. A new round of negotiations should be avoided. A greater market opening was demanded from the developing countries while the developed countries made only minimal concessions themselves.

AGRICULTURAL TRADE

This was very clear in the agriculture negotiation. In the compromise proposed by Pascal Lamy, the general director of the WTO, the US could still subsidize its agriculture with $20 billion (the US rejected this compromise). If the European Union had ended its export subsidies for agricultural goods (which they refused), 55 billion euros would have been paid in another form. In a countermove to these minimal concessions, the developing countries would have radically lowered tariffs on agricultural imports from developed countries.

The US even tries to remove all protection for the farmers of the South. Its trade representative Susan Schwab wanted to cancel the exceptions negotiated for “special products” and “special protective measures” in Hong Kong in December 2005. These measures are inadequate but allow the governments to slow down to erosion of local agriculture by exempting some imports from lower tariffs and raising tariffs on subsidized imports.

If the WTO negotiations had started from this compromise, the agricultural tariffs of poor countries would have been lowered. These countries would not have had more food security. Hunger would have massively increased again and hundreds of millions of people would have been threatened by poverty. The leading negotiator of the Philippine government underlined these consequences to the WTO agricultural committee. “This agricultural sector is strategically important for food security and employment. This sector has already been destabilized since our small producers must largely submit to unjust international trade.”

However the developed countries demanded a radical reduction of the agricultural tariffs of developing countries. They also urged maximum market access for their industrial and non-agricultural products. In this negotiation phase, they insisted that countries of the South lower their tariffs on non-agricultural goods 60-70% while only offering a tariff reduction of 20-30% themselves. This violated the basic WTO principle of reciprocity. Representatives of South Africa’s government summarized the frustration of the majority of the lands of the South over the Doha process: “The developing countries will not agree to the destruction of their local industry when the developed countries make unacceptable and irrational demands.”

Destruction of their agriculture and extensive de-industrialization are not the only prices demanded by the developed countries for a successful conclusion of the Doha round. Under the chapter “Trade with Services” (GATS), they claim the right for foreign corporations to take over and control services in developing countries – to the detriment of the basic provisions of the poor.

COSTS AND BENEFITS

The lands of the South and civil society worldwide are not the only ones warning that liberalization in the style of the WTO damages the interests of the developing world. Even institutions that long appeared as sharp advocates of liberalization admit the advantages that the Doha round would bring the poor were greatly inflated. If the “Doha scenario” were implemented, a study of the World Bank from the fall of 2005 calculated additional revenue of $16 billion in ten years for developing countries. This is 0.16% of their gross domestic product or less than a penny each per year. The one billion poorest of the world would have an increased income of 2 dollars per year.

In this World Bank study, many costs burdening the developing countries in this scenario were not considered – for example, the negative consequences of a monopoly on patents falling to conglomerates under the TRIPS-agreement and forcing the poor to pay much higher prices for life-saving medicines.

Some studies estimate that these costs would burden developing countries much more and that trade liberalization would add costs. For example, UNCTAD (UN Conference for trade and Development) concludes that developing countries would lose between $32 and $62 billion annually in the dollar scenario. That is two- to four times as much as the World Bank calculated in additional revenues. These revenues would be lacking governments for spending on health care, water supply, education and so forth.

Africa would have been the greatest victim of a successful Doha round. Both liberalization of agriculture and trade with industrial goods would be disadvantageous to this continent. African farmers who are mostly subsistence farmers would not be competitive with unhindered access to export markets. In addition, they would lose their native markets.

Free trade is such a blatant obstacle for development that a study of the UN Development Program (UNDP) advised poor Asian countries to do what Japan and South Korea did successfully protect their key industries with tariffs before exposing them to foreign competition. The governments of these countries should be encouraged to invest in health care, education, water supply and other basic services so development will occur and poverty pushed back. They should not be forced to sell these services to foreign conglomerates for the sake of private profit.

Trade can be a means for development. However the mechanism of the WTO subordinated development to free trade in the interest of corporations and further marginalizes developing countries. It is time to end the illusion that the Doha round could benefit the poor. Its collapse benefits them. Attention must now be directed to creating alternative systems and institutions that replace the WTO and really help the poor.