Rich countries not off the hook after breakdown of WTO talks

Published: 26 July 2006

GENEVA – The European Union and the United States are making a serious miscalculation if they think suspension of the WTO talks spells a free-for-all in global trade, said international agency Oxfam.

Concern and anger over unfair world trade rules and harmful EU and US trade policies will only intensify following this week’s breakdown in negotiations. “The Doha round has opened people’s eyes to the fact that world trade could help millions of poor farmers and workers, but rich country farm policies are working directly against that,” said Celine Charveriat of Oxfam’s Make Trade Fair campaign.

The EU and US farm policies are now wholly discredited and it is widely recognized that they must be reformed. Even with talks on ice, their harmful agricultural subsidies are vulnerable to a suite of legal challenges just as significant as Brazil’s successful cases on cotton and sugar.

The two trading blocs will also face considerable opposition if they try to pry open developing country markets by negotiating harmful bilateral and regional free trade agreements. “The EU and the US must make amends by changing their mindset and begin meaningful reforms for development,” Charveriat said.

The backlash of failure

The indefinite suspension of the talks means that the chances of a deal in the immediate term is unlikely because of upcoming elections in key countries and the expiry next year of the US administration’s authority to negotiate a deal.

“This is a huge blow for millions of poor people, for instance cotton farmers who are struggling to make a living. If talks take years to complete, the entire West African cotton sector could be wiped out,” Charveriat said. Oxfam says that the Doha suspension will:

  • Continue to allow rich countries to capture the lion’s share of world trade flows;

  • Continue to allow dumping, leaving countries little choice but litigation to stop it;

  • Deny developing countries better access to rich markets;

  • See the EU and US turn to bilateral trade agreements to open other countries’ markets.

The Doha round was primarily initiated in order to correct the rigged rules that allow rich countries to capture nearly 70% of world trade flows worth $20.6 trillion, while poor and developing countries representing 81% of the world’s people – many of them living in extreme poverty – got 30%. The entire continent of Africa got just 2.6%.

“These trade talks were about fostering equitable economic growth in all countries. This is in the long-term interests of everyone, especially the US and EU. However, for the past five years, both have behaved as if the Doha development round was a sacrifice for them to make,” Charveriat said.

The suspension of the Doha round could mean that the international community has lost the only diplomatic option to influence upcoming reforms of the US Farm Bill and the EU common agricultural policy through negotiation.

But the option of litigation is still open because Oxfam says the EU and the US are violating existing WTO rules. Oxfam believes that $13bn worth of present-day EU and US subsidies are illegal. Countries such as Chile, Costa Rica, Argentina, Kenya, Peru, Ghana, Zimbabwe, Uganda, Egypt, Thailand and Nigeria among others could bring solid cases on rice, corn, sorghum, milk, butter, tobacco, fruit and tomato subsidies. “This is just the tip of the iceberg,” Charveriat said. Oxfam also sees a danger that the EU and the US will turn to bilateral trade agreements to get what developing countries refused to give them at the WTO: unfettered market access and intellectual property and investment rules that are damaging to development.

Why the talks failed

The EU and US failed to see that times had changed since the Uruguay Round and that developing countries are now key players. “Developing countries were clear about what they need from the round. They showed real strength of unity in refusing to allow development to disappear from the agenda, which would have happened had they accepted the EU and the US offers,” Charveriat said.

There is also a growing public awareness about the unfairness of current world trade rules: an Oxfam petition calling for fair trade rules has 20 million signatures of citizens around the world and many more NGOs, farmers organizations, unions, workers and social movements mobilized against the current approach to trade negotiations.

National politics poisoned the Doha talks. The US Congress refused to give its negotiators the room to make meaningful reductions in US agricultural support. The EU was similarly hostage to its member states, for example France and Ireland, who refused to let the EU make meaningful reductions to its farm tariffs. “It is academic whether one was worse than the other. In the final weeks the US would not budge, but the EU is no less to blame by its earlier intransigence.”

Poorer countries were expected to cut farm tariffs too steeply, despite the risk to millions of subsistence farmers. They were put under pressure to give up their ability to protect their food security and policies to fight rural poverty.

In negotiations to open up industrial markets, rich countries tried to push through a deal whereby developing countries would have had to slash their tariffs by more than twice as much as rich countries. “Developing countries were asked put jobs and industrialization under threat for the privilege of rich countries reforming their illegal agricultural policies – reforms that they had promised to make years before. This was trade negotiation at its most surreal.”

A roadmap out

Oxfam is looking to the EU and the US to make amends. Irrespective of when talks restart, rich countries must end dumping – not only by ending export subsidies but by ending all trade-distorting subsidies that lead to dumping, especially on cotton. “The EU and US will lose all credibility if they take this suspension of trade talks as an excuse not to reform their Farm Bill and CAP,” she said. “Developing countries will refuse to come back to the table to discuss cutting their tariffs if the EU and the US are still dumping.”

“The cost of delay is too big and the potential for development too great for these talks to be left to wither on the vine,” Charveriat said. However, restarting the talks would be difficult if rich countries continue to deny developing countries the right to use the available flexibilities as they liberalize their markets, at their own pace and scale. “The EU and the US must not try to question the development mandate of the talks and ignore the fact that there is extreme poverty in most developing countries,” she said.

“The poorest countries of the world must not be made victims of this failure that is not their fault.” The least-developed countries should be given full 100% duty-free quota-free access to rich country markets. This must also include reforming the “rules of origin” that allow rich countries to use other means, for example overly burdensome health and safety, to exclude poor country exports.

The EU and the US must agree to a meaningful aid-for-trade, made up of new money and with no strings attached. “There is no excuse for this package to suspended along with the Doha talks,” she said.

Contact Information

For more information, please contact:
Matt Grainger, Oxfam International Senior Media Officer
Phone: +44(0)1865-339128
Mobile: +44(0)7730680837