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GUEST COMMENTARY: No Tears for Stalled WTO Talks

Posted by kinchendavid on July 26, 2006

By Sir Ronald Sanders

No tears should be shed by small developing countries over the collapse on Monday, July 24, 2006 of trade negotiations at the World Trade Organisation (WTO).  There was very little in it for them.

 Although trumpeted as a “development” round since November 2001 when the negotiations began, the talks have been nothing more than a tussle between the United States (US) and the European Union (EU) to get an advantage over each other for agricultural exports to the world market.

 In the Ministerial meetings that followed in Cancun in 2003 and Hong Kong in 2005, the negotiations failed to move because the US and the EU shadow-boxed with each other over who would make the least reduction in subsidies to their farming communities.

 And, while they were doing so, farming communities in desperate countries, such as those in sub-Saharan Africa, languished in ever increasing poverty unable to compete in the global market place even though their labour is dirt cheap.

 The farming lobbies in the EU, particularly France, and the US are powerful groups and elected representatives cross them at the risk of being voted out of office.

 In the US, upcoming mid-term elections in farming States would undoubtedly have influenced the stance of US representatives at the WTO talks.  Rice, corn, wheat, soyabeans and cotton account for 93% of the subsidies that go to 40% of big and powerful US farmers.

 Britain’s Prime Minister Tony Blair has pointed out the unfairness of a similar situation in the EU in which a handful of wealthy but powerful farmers benefit from subsidies, but France’s President Jacques Chirac remains a strong supporter of help to French farmers. 

 So, both the US and the EU proclaim that they want to see a reduction in subsidies to farmers, but each demand deeper cuts from the other in order to make the exports of its own farmers more competitive in the global market place.

 All that happened in Geneva on July 24th was a re-enactment of the jockeying for position between the US and the EU.

 In announcing, finally, that the five years of talks had ground to a jarring halt, Pascal Lamy, the Director-General of the WTO, declared: “There are no winners and losers in this assembly. Today, there are only losers”.  But, there would have been many losers had these talks succeeded.

 For the talks success would have depended on a deal between the US and the EU not only to agree parity on their cuts in subsidies, but also on agreement to demand radical reductions in tariffs on agricultural imports by developing countries.

 The result would have been the annihilation of farmers in many small countries, such as those in the Caribbean and Pacific, who would have been unable to compete with imports from the US and the EU. 

 Rural communities in Africa would also have been devastated since, because they can not compete globally with heavily subsidised EU and US agricultural exports, they rely heavily on sales in their domestic market, and they would have been severely undercut by US and EU products on which tariffs were reduced.

 But, while the failure by the EU and the US to agree over agricultural subsidies was the straw that broke the camel’s back in these talks, it was by no means the only failure.  

 Pascal Lamy pointed out that the discussions in Geneva between the representatives of six WTO member states – the so called G6 – “did not even move on to the third leg of the triangle – market access in non-agricultural goods”.  The G6 are: US, EU, India, Australia, Brazil and Japan.

 On market access for non-agricultural goods, industrialised nations want developing countries to cut their tariffs by 60 to 70 percent while offering to cut theirs by only 20 to 30 percent.  Their argument being that tariffs by developing countries place their products at a disadvantage.

 In other words, having developed their own industries by a raft of protectionist measures over decades, the industrialised countries now want to kick away the same ladder for businesses in developing countries in their own markets.

 It is just as well for developing countries that the G6 representatives did not get past the obstacle of agricultural subsidies to contend with the challenge of market access for non-agricultural goods.  For, even if by some miracle, Brazil, India and China had agreed to slash tariffs to the extent required by industrialised nations, it is most unlikely that other nations in Asia, Africa and Latin America would have acquiesced.

 The reality is that, thus far, these trade negotiations have offered little to developing countries – particularly small ones such as those in the Caribbean, the Pacific and Africa.

Indeed, if the trends that are painfully evident in these talks continue, the losses in tariff income for many developing countries will not only be huge; there will be little room in which to replace them except by high taxes on already impoverished local communities. 

 Pascal Lamy said that “the failure of this Round would be a blow to the development prospects of the more vulnerable Members for whom integration in international trade represents the best hope for growth and poverty alleviation”.  He would have been right if these talks were indeed a “development round” with real and concrete measures for development permeating the discussions.

 But, the talks have been anything but development oriented.

 Principally, they have been about rivalry between the farming lobbies in the EU and the US for agricultural dominance of the world market.

 To a lesser extent, they have also been about the competitive relationship between the EU and the US on the one hand and the increasingly large developing economies of China, India and Brazil on the other. 

 Neither of those two items addresses the very different concerns of poor countries and small states. 

 It is now to be hoped that, in trying to reinvigorate these talks, the US and the EU especially will acknowledge that “free” trade is not necessarily “fair” trade when the trading relationship is between hugely unequal nations, and will therefore put in place real measures for the development of poor and vulnerable countries. 

 They should start by reaffirming their commitment, given to poor countries in Hong Kong last November, to provide them with duty-free, quota free access.  And, they should volunteer to accord to small states longer periods of duty-free access to markets of developed countries, and permit them to maintain tariffs on a non-reciprocal basis.

 The idea that the full liberalisation of trade in all its aspects will benefit poor and small states should be challenged.  With the WTO grappling to find a way forward, now would be the right time to make the challenge.

Sir Ronald Sanders is a business executive and former Caribbean Ambassador to the World Trade Organisation who publishes widely on Small States in the global community. Check out  Guest Commentaries category for his complete biography.

Responses to: ronaldsanders29@hotmail.com

                  

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