Collapse of the WTO’s Doha Round of Trade Talks

The World Trade Organisation was set up as a replacement to the General Agreement on Trades and Tariffs in 1994 during the latter’s Uruguay round of trade talks. It was conceived as both a permanent forum for trade negotiations and as an arena within which the mediation of multilateral dispute resolutions could take place. Lori Wallach, trade lawyer for Public Citizen Watch, in her ground-breaking book “Whose Trade Organisation” is less charitable, describing it as a “neoliberal trojan horse” designed ostensibly to push through Friedmanite policies of unrestricted “free trade” but which in reality operates as a corporate-controlled vehicle for further prising open weakened economies – a “slow motion global coup de’tat“.

The attempt to launch a new trade round in Seattle in December 1999 concluded in general disarray, with rich and poor countries stalemated amidst much acrimony and scenes of often violent protest by what the media simplistically dubbed as “anti-globalisation” supporters. The breakdown in fact occurred over the hubristic top-down management of the globalisation process with key issues being the developed countries protectionist barriers to agricultural imports from the developing world, the inflated subsidies paid to rich-world farmers, particularly in the US, EU and Japan, the call by developing countries for greater protection against the “dumping” of heavily subsidised agricultural produce and the refusal of the poor countries to accept an expansion of the WTO’s remit to include certain non-tariff related trade issues; the so-called “Singapore Issues”.

In an increasingly interconnected world with rising trade volumes Western advocates of neoliberal free trade have consistently pointed to the need for a global set of trade rules and the dismantling of trade barriers, yet too often they fail to apply these standards on their own trade distorting protectionist activities. Rich countries of the industrialised North, whose politicians appear to be hopelessly aligned with farming lobbies spend over $300 billion annually supporting their domestic agricultural markets – a figure equal to the GNP of sub-Saharan Africa and six times the amount given in bilateral aid.

Before Doha even began the EU wished to include three new areas for discussion; investment and competition policy and new rules governing trade and the environment even though many developing countries don’t even have competition authorities. However, of these new issues, the environment-related provisions proved the most difficult point of contention with the EU looking for assurances that the “precautionary principle” would be written into WTO law thereby protecting their citizens from the potential dangers of uncertain science as with GM foods. Developing countries on the other hand saw the EU’s environmental concerns as a back door to further protectionism; envisaging in a low-tariff environment the blocking of their exports over “green” issues through the insistence of eco-labelling and so forth.

The reluctance to embrace this expanded agenda at the expense of a focus on developing world concerns was seen in the months leading up to the Doha Ministerial by the October 23rd 2001 statement by the G-77 and China warning that the rich countries must put helping the poor at the centre of discussions. Mike Moore, Director-General of the WTO, reiterated these sentiments the following week endorsing the call for a development-focused round of talks.

There was also some outstanding issues left over from the Uruguay round. The agreement on Trade Related Intellectual Property Rights (TRIPS) needed to be revised in light of the AIDS crisis – South Africa, Brazil and India wanted a blanket exemption so they could supply their populations with affordable generic drugs whilst patent-holding lobbyists sought guarantees against their re-export into Western markets. In addition there were also over a 100 agreements identified by developing countries which had as yet to be effectively implemented. The most important of these “implementation issues” from the point of view of the global South related to the North’s obligations to open their markets more fully for developing country exports.

For example, many African, Asian and Latin American countries still faced restrictions in areas where, in the absence off trade-distorting domestic subsidies provided by the EU, US and Japan they would otherwise have a competitive advantage due to their low-cost environment. In addition to this subsidy regime they had asked that provisions governing the practice of “tariff escalation” be revised as promised to allow for greater access of Southern products into industrial nations. Tariff escalation simply entails the successive raising of import levies indexed on the amount of processing underwent by basic commodities. Some decried the practice from the point of view that it encouraged developing countries to produce only those goods which would receive a lower tariff;and thus discouraged the development of local industries in the global South that focused on providing highly processed end-products. One need only look at the number of Fortune 500 companies in the agri-business sector that source their raw materials cheaply from producers in the South to realise the kind of lobbying power opposed to any changes which would realign the “natural” competitive advantages here.

Related to this, was the call by the poorest African states, prior to Doha, to be exempted from the Trade-Related Investment Measures (TRIMs), set for implementation by 2003. Under these measures, they were obliged to remove from their statute books legislation protecting local businesses and industry – the very agents that would be poised to take advantage of an environment more conducive to the export of highly processed goods – from open competition with those foreign companies who would avail of a more liberal FDI regime. Prior to the commencement of the Doha round the US continued to state that it supported the “full and faithful implementation” of the WTO agreements, meaning that developing countries must meet the obligations they took on in Marrakech (where the Uruguay round was completed in 1995), and within the agreed-upon time frame.

Yet, despite all these reservations and unfinished business left over from the Uruguay round on November 14th 2001 in Doha, Qatar, the WTO’s 142 members agreed, 18 hours after their talks deadline, that they were ready to begin a new round of trade talks. African countries were eventually won over by a declaration that the TRIPS agreement should not prevent them dealing with the AIDS crisis; i.e. they could produce generics and exceptions to patent controls could now be made on public health grounds. Other poorer countries were given more time to work on the “implementation” issues and promised help with “capacity-building”.

India almost pulled out of negotiations citing their wariness of embracing the EU’s insistence on including the Singapore Issues (investment and competition policy, trade and the environment) on the talks agenda along with the US reluctance to liberalize textiles and soften their anti-dumping measures, particularly with regard to steel which is protected by powerful lobby groups in Washington. Activists from the South perhaps understood something of the bind Robert Zoellick, the US Trade Representative was in, in this respect, given that Congress had yet to approve Fast-Track negotiating authority for the Bush Administration. Later called Trade Promotion Authority this had been pulled by Congress in 1994 and if approved in 2002 would grant the Bush Administration the ability to present a negotiated trade agreement as a “yes” or “no” vote to Congress. Without TPA it was considered doubtful whether a Doha Trade Agreement would survive a process of congressional nit-picking given the powerful political connections of the cotton and steel lobbyists.

The EU for their part were forced to accept a stronger commitment to phase out their export subsidies and to make cuts in their domestic supports, despite fierce opposition from the French. But as one African said at Doha, issues that “may lose elections in France are life and death in Tanzania.”

Commitments from the North were also made to reduce their peak tariffs on heavily processed or industrial goods such as textiles. This was a key concession as Lesser Developed Countries (LDC’s) were hitherto obliged to specialise in the export of primary commodities because of the lower import tariffs. This had the effect of help driving the overall price for commodities down as they were competing against other LDCs who were likewise taking advantage of the lower tariff band. It also addressed one of the main grievances that developing countries felt were largely due to the Uruguay round – in the nine years from the birth of the WTO in 1994 to 2003 nonpetroleum primary commodity prices plunged to historic lows falling on average by more than a quarter.

This was disastrous in terms of generating foreign currency since 70% of export revenues for developing countries comes from agriculture. According to the September 2002 Journal of International Trade Statistics in the period from 1995-2001 cereal prices were down 31%; coffee was down 65%, cocoa 24%, food commodity prices were down 24%, timber was down 18%, cotton 51%, wool 26% and rubber prices were down 62%. Likewise, in UNCTAD’s 2002 Trade and Development Report it was noted that extreme dollar-a-day poverty rose for people in these primary-commodity exporting countries where the percentage of people earning less than a dollar a day grew from 63% of the population in 1981-83 to 69% in the 1997-99 period.

However, the success of the Doha talks was limited to the adoption of a framework for discussion and the setting of a timeline to accomplish an agreement. Nothing as yet had been decided. As the Economist put it;

“The Doha agenda is based on a gamble: that poor countries, who felt they were given a raw deal by the previous Uruguay round of trade negotiations that ended in 1994, will now feel that rich countries are prepared to open their markets. If poor countries are not convinced of this, the Doha round will fail.”

So, given that the Doha round was now accepted as being a pro-poor “development round” with liberalization of agriculture as its central plank the first nail in its coffin was surely provided by the 2002 US Farm Bill. This election year extravaganza passed by the House and Senate in May 2002 was a remarkable boon for farmers comprising an additional 80% boost in agricultural spending for market losses amounting, roughly, to a figure of $82 bn over ten years. The bill, as the Economist remarked “extended or re-introduced subsidies for a host of farm products”. For America’s biggest crops; soybeans, wheat and corn it invented new payments related to price and production and thus were highly trade distorting; exactly the opposite of what Doha was supposed to be about. Moreover, three quarters of the cash would go to the richest 10% of farmers making US subsidies per farm three to four times that of European levels. In the Uruguay round countries had agreed to cut and set ceilings for their trade-distorting subsidies. At this time, America’s had been $19.1 bn. The 1996 Freedom to Farm Act had aimed to phase out subsidies for most agricultural products but as prices fell in the late 90’s (see above) farmers cried foul and Congress capitulated with emergency payments pushing up total support which threatened US commitments under Uruguay. As the Economist put it at the time;

“The political clout of farm states in an election year led to this gross subsidy-fest, with lawmakers falling over themselves to dole out cash to farmers The signal to the rest of the world is unambiguous. American officials in Geneva (WTO H.Q.) may be talking about freer trade in agriculture, but Washington politicians are sending American farmers exactly the opposite message.”

And all it seems to win over tight seats in the November Senate elections in states with powerful farming lobbies such as Iowa, Missouri and South Dakota. Clearly the Farm Bill sent all the wrong messages to other OECD WTO signatories who had been hard-pressed under the Doha framework of talks to relinquish their support to farmers. Europe, who were loathe to make any commitments on CAP reform could now point to the example of the US’s most recent protectionist surge and, in fact, the following October, the French president, Jacques Chirac, made a deal with the German chancellor, Gerhard Schroeder, to keep CAP spending broadly unchanged until 2013. After the Farm Bill, US support to farmers amounted to 25% of the value of agricultural produce. This, however, still lagged behind the coddled European farmers who still accounted for half the EU’s budget of $200 bn and who receive 35% of the value of agricultural produce in supports and Japan who give their farmers an outrageous 60% of its value in 2002.

In August, Congress voted 215-212 to grant Bush Fast-Track negotiating power but this authority now appeared devoted to the pursuit of bilateral trade agreements such as CAFTA, NAFTA and the FTAA rather than the multilateral “development round” of Doha. The slow motion coup detat was evidently giving itself a bilateral makeover pressing for regional negotiations in an attempt to dilute LDC bargaining power. Meanwhile, poor countries became increasingly skeptical before the Cancun ministerial. Apart from the US, EU and Japan’s seeming unwillingness to do anything to liberalize their agricultural sectors they were actively reneging on the solemn promises delivered in Doha which got the second round of talks going in the first place. The tariff reductions to allow easier access to their imports never materialized along with the promises of cheap access to medicines for TB, malaria and AIDS; America refused to endorse a formula for transfer agreed upon by all the other parties.

On August 30th , less than a month before the Cancun ministerial, a deal was cut which allowed poor countries to import generics ‘in case of emergencies’. The tepidness of this solution on such an emotive issue was lost on no-one. By April 03 James Wolfenssohn, the World Bank president was prompted to describe the talks over subsidy cuts as “a dialogue of the deaf”. For many, a litmus test of the supposed pro-poor agenda of Doha was the fate of the West African cotton exporter group – Burkina Faso, Mali, Chad and Benin. America gives 36% (organicconsumers.org) of its 25,000 cotton farmers $3bn a year in trade-distorting subsidies that produce $4bn worth of cotton that depress world prices and wreaks havoc on the livelihoods of traditional exporters. That the draft text produced half-way through Cancun could make only vague pledges “to review the textiles sector” and then suggested that perhaps the African countries may be “encouraged to diversify out of cotton”, told participants in other discussion groups all they needed to know – nothing had changed since the Uruguay manipulations; US and EU politicians were still shamelessly in hock to their pampered robber baron farmers.

The Singapore Issues were next on the agenda. The South refused to budge still reeling over the extent of the betrayal on cotton subsidies. Two days later 90 countries signed a letter saying they were not prepared to move into talks in these areas. Pascal Lamy, the EU’s chief negotiator whittled them down to three then two and finally just before the talks imploded insisted they should at least discuss “trade facilitation”. In the end the outraged African countries refused to discuss any of the four Singapore issues and South Korea said it could only accept negotiations on all four. At this point, Luis Ernesto Derbez, Mexico’s foreign minister and chairman of the Cancun meeting canceled the conference under the premises of an impasse of interests.

Clearly, the developed countries had either completely misread the South’s determination to end the scandal of subsidies or they had no intention of ever coming to an agreement; being happy with the spoils they had already received after Uruguay. Bilateral trade agreements now appear to be the order of the day and why not as from the rich country perspective this dilutes their counterparty’s bargaining power and makes it impossible for them to apply the leverage required to phase out the scandalous system of subsidies.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: