Accords save trade talks from collapse

August - November 2019

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Accords save trade talks from collapse

WTO hears pledges to remove agricultural subsidies
From Africa Renewal: 
Kenya farmers, demonstrating in Nairobi, protest European cattle subsidies, which are twice what the average Kenyan farmer earns per day. Photo: Getty Images/AFP/Simon Maina

A year-long impasse that threatened to derail the current Doha round of negotiations at the World Trade Organization in Geneva finally ended in July when member countries reached a compromise. The round, launched in Qatar in 2001, ground to a halt in Cancún, Mexico, in September 2003 over a series of disagreements. In particular, developing countries demanded the elimination of subsidies on cotton and other key agricultural exports from the North, while industrial nations insisted on introducing into the round a set of four completely new areas.

The July agreements foster "new hope" that the Doha Development Agenda (as the round is known) will be given priority and bring tangible results, UN Conference on Trade and Development Secretary-General Rubens Ricupero said. Upon its conclusion, the World Trade Organization (WTO) expects the round to enable developing countries to use trade to boost economic growth.

However, argues Mr. Moussa Faye of the non-governmental group Action Aid Senegal, "only if there is immediate reform of the WTO will there be a fair deal that will improve the lives of the millions of people living in poverty. The [July] compromise maintains the status quo and does not change the fundamental imbalance in the multilateral trading system."

A number of African countries were particularly disappointed that the agreements provide no immediate relief from the harmful cotton subsidies, amounting to more than $3 bn annually paid out to US cotton farmers. Benin, Burkina Faso, Chad and Mali had been demanding that cotton subsidies be dealt with as a priority and separately from all other areas under negotiation in the Doha Round, to allow immediate resolution. The US opposed this. A compromise was reached to set up a special sub-committee to "ensure appropriate prioritization of the cotton issue," even though no time frames have been set.

"Failure to address the cotton issue is a serious betrayal of developing countries and will have massive implications for the 10 million West African cotton farmers whose livelihoods are currently undermined by US export dumping," said Ms. Celine Charveriat of Oxfam, a UK-based non-governmental organization.

Agricultural subsidies

The July agreements, concluded over an intense two-week period, mark the conclusion of "talks about talks," during which WTO members had to agree on the broad guidelines of subsequent negotiations. The "frameworks," as they are known in WTO terms, include what appear on paper to be significant commitments. One obliges the European Union to eliminate agricultural subsidies that have long been blamed for distorting international farm trade -- but at a date to be determined in the final phase of negotiations beginning in September. According to French Agriculture Minister Hervé Gaymard, it could be 2015 or 2017 before European export subsidies are finally eliminated.

In turn, the US agreed to curb elements of its export credit and food aid programmes, which developing countries deem unfair and trade-distorting. The US also agreed that in the first year of the implementation of the agreements of the Doha Round, it would reduce by 20 per cent its trade-distorting agricultural supports.

"This is the beginning of the end of subsidies," Brazilian Foreign Minister Celso Amorim told the media. "It is a rare combination of social justice and trade coming together," said Mr. Amorim, who is one of the leading spokespersons of the developing world on the issue.

During the last few years there has been a rise in international pressure against subsidies paid out to farmers in rich nations, which total more than $300 bn annually, for all crops. Such subsidies are seen as unjust towards the world's poorest farmers, who do not receive similar handouts. The farm supports also depress world prices, costing developing countries millions of dollars in lost revenue.

'A map for the road ahead'

Another potentially beneficial outcome of the July accords for developing countries was a compromise from industrial nations to drop all but one of a set of completely new issues they have been trying to include in the current round, known as the Singapore issues. Since the WTO's ministerial meeting in Singapore in 1996, industrial countries have been pushing for binding agreements on trade and investment, competition policy, government procurement and trade facilitation.

Countries of the South have succeeded in placing agricultural issues at the heart of the negotiations, even though agriculture represents only 8 per cent of world trade.

The issues that were dropped include trade and investment, which seeks to expand the rights of foreign investors, as well as competition policy, which would regulate cartels and lead to open competition between foreign and local firms, to the detriment of the latter. Negotiations on an agreement on government procurement, to permit foreign firms to compete for government tenders, were also shelved. Many developing countries were wary of the possible damage such agreements would have had on their development policies.

However, talks on an agreement on trade facilitation, to lower the costs and simplify customs procedures, will go on.

The deadline for concluding the round, which had been set for January 2005, was extended to at least December 2005, when WTO members meet for the organization's highest decision-making forum, the ministerial meeting. Having missed a number of crucial deadlines, there were fears that if no agreement emerged from Geneva in July, the round would completely break down. "The Doha round is back on track," said EU Trade Commissioner Pascal Lamy at the conclusion of the agreements. "We have laid out a map for the road ahead," noted US Trade Representative Robert Zoellick. Now it is time to negotiate "the speed limits for how far and how fast we will lower trade barriers."

Maintaining the status quo

However, it remains to be seen if there will be any substantial change in the way international trade is conducted and whether developing countries will benefit. Scepticism was reinforced when a US trade negotiator, seeking to calm the fears of American farmers, told the US media that in order to meet some of its July commitments without actual reducing farm supports, the US would simply shift assistance into different categories permitted by the WTO.

Even at the conclusion of the current round, it may take a long time before the benefits of lowering farm subsidies are realized. In July, the US pledged to lower the cap on its agricultural supports by 20 per cent in the first year of implementation of the final agreement. The US spent about $23 bn in subsidies annually over the last three years -- well below the maximum of $49 bn permitted under the current agreement. So lowering the cap by 20 per cent could have no impact at all on actual payments. In addition, some observers warn, the language in the framework is vague.

"In agriculture, the framework is a legal instrument for the US and EU to maintain their subsidies," argues Ms. Aileen Kwa, policy analyst with the non-governmental group Focus on the Global South. "It is nothing but a box-shuffling exercise, even as developing countries' markets are forced open."

Lack of transparency

Organizations that monitored the negotiations in Geneva charge that the final agreements largely represent the interests of a few powerful countries. In agriculture, the main negotiations to decide the final text were carried out by a so-called group of five interested parties -- the US, European Union, Australia, Brazil and India. "For developing countries, the main decisions were left to Brazil and India," reports Ms. Kwa.

African delegates complained that the most outspoken countries were left out of the "green rooms" -- meetings in which only a small group of nations engage in negotiations. Others noted that the poorer countries had very little leeway to oppose the final text presented to them, given that it had already been endorsed by their more powerful counterparts in the Group of 21 and by industrial nations.

According to Mr. Zaki Laïdi of the Centre for International Research in France, countries of the South have succeeded in placing agricultural issues at the heart of the negotiations, even though agriculture represents only 8 per cent of world trade.

However, poorer nations, especially the least developed, may not gain as much from agricultural exports. They have continually stressed the importance of not conceding too much ground on trade in industrial goods. They opposed the draft agreement, which lays the framework for significant tariff cuts. African and Caribbean countries argued in particular that this would open their domestic markets to imports of low-cost industrial products, killing their efforts to build their own industries.

"All in all, the text is a raw deal for the South," maintains Ms. Kwa. "It is the makings of a round that will be catastrophic for the poor."

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