Will the Doha Round fail to deliver for development?
As yet another deadline approaches in the Doha Round of trade negotiations, the chances of a deal being done this year that helps developing countries are looking increasingly slim. Aggressive demands by rich countries mean that, far from being able to pursue reforms that will lift people out of poverty, poor countries are having to engage in damage limitation. Unless the substance of the offers on the table changes radically, then no deal should be signed in 2006.
Summary
As yet another deadline approaches in the Doha Round of trade negotiations, the chances of a deal being done this year that helps developing countries are looking increasingly slim. Following an inconclusive Ministerial meeting in Hong Kong in December 2005, developed countries are continuing to offer very little in agriculture, while demanding that poor countries open their industrial and services markets to foreign competition.
Having missed numerous deadlines over the years, World Trade Organisation (WTO) members and commentators are now taking the end of the US ‘Trade Promotion Authority’ in 2007 as a final date by when the WTO talks must finish. This means having at least some proposals in place by the end of this month (April 2006), and the rest by July. Yet the deal that is currently emerging would harm rather than help most developing countries.
Unless the offers change, Oxfam believes developing countries would be better off missing the current deadline and waiting longer for a new set of rules. No deadline is hard enough to justify signing a new trade deal that is going to undermine development. Although a slow round would prolong existing imbalances, it could at least prevent things from getting worse. Developing countries could hold out for the reforms that they were promised, and avoid sacrificing future economic development.
In agriculture, acknowledged by most experts as the key to unlocking poverty, offers so far have not been good enough. Oxfam analysis shows that, if their current proposals are accepted, both the EU and USA could actually increase their trade-distorting spending on agriculture, despite having announced cuts of 70 per cent and 54 per cent respectively. The offer made in Hong Kong to end export subsidies by 2013 was welcome, but these only account for 3.6 per cent of EU spending on agriculture. Current offers will not put a stop to export dumping.
The US proposal on agricultural market access has serious implications for food security and livelihoods because it denies developing countries the right to defend essential products on which poor farmers depend. The EU offer would exempt many products exported by developing countries from tariff cuts, thereby significantly diluting market-access gains.
Although the Hong Kong meeting reaffirmed the right of poor countries to protect certain products of vital importance to food security or livelihoods, research indicates that additional special measures are needed to prevent increases in rural poverty. This special treatment could be extended with only minor reductions in other countries’ gains from the Doha round.
Developing countries at the WTO are being asked to sign up to a deal on Non-Agricultural Market Access (NAMA) that defies the lessons of history. In return for minimal progress on agriculture, they are under pressure to dramatically and permanently open their industrial markets to foreign competition.
The vast weight of historical evidence suggests that countries must be able to raise and lower tariffs according to changing circumstances if they are to promote growth and industrialisation successfully. Yet the current negotiations at the WTO aim to eliminate this flexibility.
While negotiators mistakenly concentrate on the formulae, no attention is being paid to the areas where developing countries stand to gain. Discussion of how to regulate the use of non-tariff barriers, and eliminate tariff peaks and tariff escalation in developed countries, has been wrongly sidelined but is essential to ensure a pro-development outcome.
When negotiations on services were launched in 1994, it was with the promise that developing countries would be allowed the flexibility to take into account their levels of development and national policy objectives. Negotiations were to be carried out on a request-offer basis, and countries would only have to participate when they felt ready. Yet, over the last year, increasing pressure has been placed on developing countries to agree to open their markets. Before making offers, countries need to assess the potential costs and benefits of liberalisation, but so far the negotiations have not provided space for this.
Although the language used in the WTO Services texts makes some efforts to allay concerns regarding developing countries’ rights to regulate and provide universal service in significant areas like telecommunications, sanitation, or education, in practice the system can be very inflexible. The stated aim that regulation and restrictions will be ‘no more burdensome than necessary’ is one that carries grave implications for poor people in developing countries.
To make matters worse, negotiations in the area in which developing countries could gain from liberalisation, namely labour mobility, are stuck because rich countries are unwilling to contemplate opening their labour markets to foreign workers.
A minimal development package was presented to developing countries in Hong Kong. This included commitments on aid-for-trade, DFQF (duty-free and quota-free) market access for the poorest countries, and a permanent amendment to the TRIPS (trade-related aspects of intellectual property rights) agreement. Efforts to provide trade-related assistance to poor countries are welcome, but what has been agreed so far does not constitute a sufficiently attractive package to make up for the concessions and damage being done in other areas.
There is an urgent need for fairer trade rules that more evenly benefit developing countries. However, what is on offer at the moment looks very unlikely to deliver this, and could actually make things worse. Unless rich countries fundamentally alter their approach to the talks and withdraw many of the demands they are making on the poorer members, there can be no deal this year that helps to reduce poverty. An extended round that gives members a chance to reassert the primacy of development, and that saves poor countries from signing away their future, seems increasingly the best option.
Recommendations for a pro-development outcome
Agriculture
• Deeper cuts to rich countries’ trade-distorting agricultural subsidies
• Better market access offers, with no unreasonable demands for reciprocation
• Elimination of tariff peaks and tariff escalation in rich countries
• Disciplines on the use of Non-Tariff Barriers
• Adequate Special and Differential Treatment, including Special Products and a workable Special Safeguard Mechanism to food and livelihood security and rural development
• Elimination of all US cotton subsidies, as ruled by the WTO dispute settlement body
• A cap on Green Box subsidies and a full review of the current Green Box to ensure that subsidies in it do not distort trade
• Further disciplines on the Blue Box
• New rules to prevent the abusive use of food aid to dump surplus commodities
• Action to address preference erosion and the impact of higher food prices on Net Food-Importing Countries
NAMA
• At minimum, a formula with coefficients that ensure Less Than Full Reciprocity, but preferably no formula for developing countries, which should have to make average cuts instead
• Disciplines on use of Non-Tariff Barriers, including anti-dumping actions (Rules negotiations)
• Elimination of tariff peaks and tariff escalation in rich countries
• Countries that have not already bound their tariffs at the WTO must not be asked to cut and bind in this round. Binding should be considered a concession in itself
• Action to address preference erosion
Services
• Sufficient time for poor countries to carry out impact assessments and to consult with civil society
• Affirmation of the right to regulate in the public interest before further commitments are made
• Adoption of emergency safeguard measures and special and differential treatment provisions
• Response to developing-country demands for access to Northern labour markets (Mode 4)
• Exclusion of essential public services and government procurement from liberalisation commitments
Development package
• Full duty-free quota-free (DFQF) market access for the poorest countries implemented immediately, with simplified rules of origin
• Adequate aid for trade should be provided, but it should not be conditional on market opening
