House of Commons - International Development

Select Committee on International Development Minutes of Evidence

MEMORANDUM SUBMITTED BY ACTIONAID

SUMMARY OF MAIN RECOMMENDATIONS:

There should be fundamental institutional reform of the WTO, together with capacity building, technical assistance and financial assistance to developing countries.

The UK Government should not support a new Round and instead focus on the existing agreements by addressing:

Marrakesh Ministerial Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least Developed Countries (LDCs) and Net Food-Importing Developing Countries;

— turning all Special and Differential treatment provisions into legally binding concrete commitments; and

— rebalancing the rules to be more equitable, especially regarding agriculture and TRIPs.

The UK Government should press for a comprehensive impact assessment of the Uruguay Round.

The UK Government should undertake a proper analysis of the negative and positive effects of trade liberalisation on poverty.

The UK Government should support an amendment to Article 27.3(b) of the TRIPs Agreement to exclude all genetic resources for food and agriculture.

The focus of the built-in agenda should be on more substantial reform of the agricultural trade policies of developed countries and addressing existing loopholes.

On the tariff/quota free initiative for LDCs, the UK Government should put pressure on the EU to continue to push for wider WTO support, apply the initiative in an unconditional manner, covering all products and implement it as a matter of urgency.

1. INTRODUCTION

1.1 ActionAid welcomes this opportunity to submit evidence to the International Development Committee in the context of the inquiry into The World Trade Organisation (WTO) and developing countries. The collapse of the WTO talks in Seattle has provided an impetus to rethink the fundamental workings of the international trading system and for the UK Government to demonstrate political will in reforming the system to one which better represents the needs of developing countries. Therefore we see this Committee's enquiry as a significant one which has had the potential to influence the post-Seattle WTO agenda. We hope the Committee will invest considerable time and effort into examining the issues.

1.2 ActionAid is an international development agency that works with poor and marginalised people in over 30 countries—covering Africa, Asia, Latin America and the Caribbean, to eradicate poverty and to overcome the injustice and inequity that cause it. Founded in 1972, ActionAid has grown to become the third largest non-governmental organisation (NGO) in the UK.

1.3 ActionAid's International Food Rights Campaign (IFRC), involving India, Nepal, Bangladesh, Pakistan, Kenya, Uganda, The Gambia, Ethiopia, Malawi, Brazil and the UK, is aimed at safeguarding poor people's fundamental right to food in developing countries. Although the world produces more than enough food to feed its population, an estimated 790 million[1] are chronically malnourished. Our analysis shows that basic access to, and control over, food production and thus livelihoods are being seriously undermined as a result of the existing international trade regime.

1.4 The campaign is concerned with ensuring fair international trade rules and promoting rules which enable developing countries to achieve sufficient food security, benefit the poor and support poor farmers' rights to seed and plant resources. The focus of the IFRC is on agricultural trade and crop patenting issues with the aim of improving trade policies and reform of the WTO, especially in relation to the Agreement on Agriculture (AoA) and Trade-Related aspects of Intellectual Property rights (TRIPs) Agreement.

1.5 ActionAid is also concerned with other issues such as rules on government procurement and wider issues such as institutional reform of the WTO covering capacity building for developing and least developed countries and increased transparency and civil society participation.

1.6 ActionAid is well placed to provide evidence on the issues outlined in the scope of the Committee's inquiry. ActionAid sent a WTO-accredited six member team from the International Food Rights Campaign (IRFC) from a range of developing and developed countries to the WTO Third Ministerial Conference in Seattle. An additional three members of the IFRC were NGO representatives on the government delegations from Kenya, Uganda and the UK. At Seattle, ActionAid played an active role in strengthening, supporting and promoting the positions of developing countries.

1.7 In the lead up to Seattle, at the country level, the IFRC engaged in lobbying national governments; building the capacity of southern governments to effectively participate in negotiations; undertook local level research on the impact of trade liberalisation on food security; and undertook awareness raising and alliance building activities with local farming communities and other grassroots organisations.

1.8 Within the UK, ActionAid submitted a detailed response to the UK Ministry of Agriculture, Fisheries and Food (MAFF) consultation paper on The WTO and agriculture and actively participated in the Government's wider consultation process co-ordinated by the DTI with civil society organisations on the WTO. More recently we have been providing briefings to various MPs on the implications of the collapse of the talks post-Seattle.

1.9 Following some general comments, this memorandum will address the five main issues on which the Committee requested evidence:

— WTO institutional reform issues;

— implementation of existing commitments under the Uruguay Round;

— the impact of TRIPs;

— opportunities and threats arising from the built-in agenda (agriculture); and

— tariff/quota free access initiative for least developed countries (LDCs).

2. GENERAL COMMENTS

2.1 ActionAid believes that the WTO has the potential to play a constructive role in regulating the actions of governments and companies in international trade if it is reformed to be a fair rules-based system.

2.2 However, the existing WTO system is grossly unbalanced and blinded by the sole objective of trade liberalisation as an end in itself. Trade liberalisation is not always the appropriate policy response, especially in meeting fundamental development objectives such as the right to food. The UK Government has been a major supporter of having a comprehensive Round (which the Department for International Development has called a "development Round") saying that it would provide growth-enhancing benefits.

2.3 However, developing countries have been reluctant to overload the agenda with new issues. They point out that there are a number of outstanding implementation issues, capacity building and technical/financial assistance issues, from the Uruguay Round which need to be addressed. (See, for example the analysis of the Africa Group, G77, etc.) Moreover, many developing countries are disappointed that the expected benefits from the Uruguay Round have not yet materialised. For example, developing countries' share of world agriculture exports has stagnated since 1990[2].

2.4 A recent World Bank report has concluded that the implementation of agreements has been "imposed on (many developing countries) in an imperial way with little concern for what it will cost, how it will be done, or if it will support their development efforts"[3].

2.5 It is disappointing that DFID have not undertaken a thorough analysis backed by empirical research that could demonstrate a positive relationship between the current trade regime and poverty reduction. Similarly it would be helpful to have thorough research into the impact of past liberalisation efforts on poverty; and how any benefits are being distributed. ActionAid's work on government procurement indicates that there would be no clear benefits for developing countries as a result of liberalisation[4].

2.6 In this context, ActionAid welcomes the EU's Sustainability Impact Assessment (SIA) which relates to the impact of the EU's proposed new round agenda from environmental, economic and social perspectives. Whilst this is necessary, it is not useful unless there is first a proper assessment of the impact of the existing trade regime based on empirical evidence. An assessment of the existing trade regime should be the basis to understanding the likely impacts of future negotiations and help inform the scope and content of future negotiations.

2.7 ActionAid's field experience and research demonstrates that rapid opening of markets in developing countries without the necessary adjustment measures is putting enormous pressure on governments to intensify their agriculture, producing a bias against small scale farmers in favour of large producers, agribusiness and export crop production. We are witnessing a growing number of hungry people[5], erosion of agricultural diversity and marginalisation of the rights of the poor over land, seed and traditional knowledge. At the same time, a few transnational corporations have reaped the gains from trade liberalisation and have come to control the bulk of trade in world food. Despite liberalisation, the number of people living in absolute poverty has stayed constant at around 1.2 billion. Our experience shows that trade liberalisation is not a panacea for reducing poverty. Rather, rapid liberalisation can intensify the structural causes of poverty.

2.8 ActionAid agrees that the WTO should remain a trade policy body but it should also be acknowledged that:

"More than ever before trade—and the rules of the trading system—intersect with a broad array of issues and concerns which have a powerful impact on people's day-to-day lives . . ." Renato Ruggiero, previous WTO Director-General.

2.9 Trade policy continues to be viewed in a vacuum separate from other important policy areas. There needs to be more policy coherence and consistency within the UK Government as well as within the EU. In the UK's case, its objectives for Seattle were laid out in terms of pushing for a new Round and that the interests of developing countries would also be taken into account. Issues of equity, depression in commodity prices, debt and declining terms of trade are not mentioned, yet are directly affected by trade and investment policies. Development continues to be seen as an add-on rather than as an integral policy objective. Special and differential treatment for developing countries in the WTO is treated in the same way. The EU's track record on policy incoherence is well documented, especially with the Common Agricultural Policy (CAP) directly undermining the EU's development objectives in developing countries. Improved coherence is also needed at the level of global governance, for example between the WTO and commitments made at the 1996 World Food Summit or the Convention on Biological Diversity (CBD).

2.10 ActionAid strongly believes that international trade policy and the management of the international economy should be a means to an end and be based on promoting sustainable development and meeting poverty reduction objectives.

The collapse of the talks in Seattle: lessons to be learnt

2.11 The fundamental reason why the Seattle talks broke down can be traced to the unbalanced nature of the system in terms of process and rules. While excluding developing countries from their discussions, the big trading powers including the EU (and thus UK), US, Canada and Japan were inflexible and unwilling to address their priorities (such as textiles and antidumping) or incorporate the position of developing countries on eg TRIPs and agriculture.

2.12 Lessons must be learnt from Seattle and there should be a serious reconsideration of the UK Government's continued support for a new Round (given the lack of support from developing countries at Seattle) until the fundamental issues are addressed. For areas like LDC tariff free access; anti-dumping limits; bans on export subsidies and credits; and tariffs on textiles, a new Round is not needed to achieve increased benefits for DCs and LDCs. All that is required is a more energetic approach by the North to implementation of existing agreements.

2.13 Whilst we welcome the Secretary of State for Trade and Industry, Stephen Byers', initiative to take forward the reform agenda of the WTO in terms of transparency and participation of developing countries, this should not take away from the issues of substance:

"If you don't tackle these problems, no amount of process reform will do."

3. WTO INSTITUTIONAL REFORM ISSUES

3.1 The collapse of the WTO talks in Seattle reflects the fact that there are fundamental problems with the institution. NGOs and other civil groups have been calling for a variety of institutional reforms of the WTO since it was founded in 1995. To date, very little progress has been made.

3.2 Reforms could help to diffuse tensions and build trust between the WTO, its members and civil society; avoid negative publicity and ensure pro-poor perspectives are included in debates.

3.3 Theoretically, an international rules-based system should be able to protect weak countries from unilateral acts by the big trading powers: this is not what is happening currently. The balance of power that guides most international relations is repeated in the WTO, with developing and least developed countries being excluded both from discussion and decisions.

3.4 Developing countries must be able to see the net economic benefits of trade liberalisation (that is, after the costs of implementation are taken into account).

3.5 The need for reform is widely acknowledged. Speaking at the WTO Anniversary Ministerial in Geneva in 1998, President Clinton said: "We must modernise the WTO by opening its doors to the scrutiny and participation of the public . . . the WTO should take every feasible step to bring openness and accountability to its operations". In Seattle, US Trade Representative Charlene Barshefsky commented that "the WTO has outgrown the processes appropriate to an earlier time" and in Parliament as well as at the January 2000 Commonwealth Trade Ministers meeting in New Delhi, the Secretary of State for Trade and Industry, Rt Hon Stephen Byers MP, said that "the WTO will not be able to continue in its present form. There has to be fundamental and radical change in order for it to meet the needs and aspirations of all 134 of its members".

3.6 ActionAid is encouraged by the commitment to reform demonstrated by the Secretary of State for Trade and Industry and supports his call for fundamental and radical change at the WTO. The WTO must become a modern, democratic body that is transparent in, and accountable for its actions.

3.7 The reforms required will be complex and difficult because they entail a re-balancing of power within the WTO. [6]Whether the political will exists amongst the big trading powers to support a radical reform remains to be seen.

3.8 A voting system alone would not solve all the problems of democracy. Some Developing and Least Developed Countries (DCs and LDCs) cannot afford to maintain WTO missions in Geneva and, where there are appropriate staffing levels in missions, these staff rarely receive the same level of analytical and technical support from domestic capitals that is available from the richer nations.

3.9 Despite all the problems, if fundamental reform does not take place then the long term future of the WTO looks bleak. African and Caribbean governments made formal complaints in Seattle about their exclusion from the decision-making processes and cannot be expected to tolerate a similar situation in the future. Civil groups have been requesting democratic reforms and increased access and transparency since 1995. These calls are receiving increased support from civil society at large. Without reform, protest will grow both inside and outside the WTO.

3.10 For ActionAid, institutional reform of the WTO is seen as a necessary but not sufficient part of the agenda that will move the world towards trade agreements that are fair and that promote development. Without reforms of substance, Developing Countries (DCs) and Least Developed Countries (LDCs) will continue to be suspicious of the motivations of the industrialised north in pursuing trade agreements.

3.11 The process for deciding reforms is likely to be a significant factor in determining how successful these are. It is important that smaller, poorer Member States of the WTO are involved in the process, alongside their more powerful neighbours; and that national parliaments and civil groups from south and north are consulted.

3.12 Institutional reform can be dealt with under four headings: democracy; capacity building; transparency and accountability; and access.

3.13 Democracy

The rules regarding decision making at the WTO in Geneva and at its Ministerial Meetings are difficult to research. Frequently both the Secretariat and Member State governments appear to be hazy about exactly how things work. The low level of publicity regarding decision-making is not surprising because when WTO processes are explained to outsiders they usually are shocked. The practices of the WTO mirror those of the GATT. As US economist Fred Bergsten said of the WTO's predecessor it "does not work by voting. It works by a consensus arrangement which, to tell the truth is managed by four—the Quads: the United States, Japan, European Union and Canada . . . Those countries have to agree if any major steps are going to be made, that is true, But no votes." [7]

Not only are there no votes, but there are no rules that insist on there being a representative selection of Member States present at discussions, even though it is from these discussions that "consensus" decisions are reached. In Geneva and at Ministerial Meetings, formal committee work plays a small role compared to the numerous bilateral meetings, informal caucusing in corridors, and "Green Room" processes in which selected WTO Member States are invited to reach a consensus on behalf of the entire membership. [8]Theoretically then, even countries who are not present at any discussions are deemed to be consenting to the rules and agreements that emerge. [9]

Although it never happens, voting is a theoretical possibility within WTO rules and structures. Poorer, smaller countries are pressured to "conform" to the consensus of the more powerful. They can refuse to "conform" or to "join" the consensus but until recently they were too trusting, too poorly organised or too intimidated to do so. The Seattle Ministerial and the preparations leading up to it saw the first rebellions of the DCs and LDCs. It is unlikely that these will be the last.

However, instituting a one country, one vote system will not solve all problems. Clearly real democracy depends on WTO Member States having proper representation in Geneva and at Ministerial meetings. But the costs of this far exceed the budgets of the poorest countries. Famously, The Gambia has no representative in Geneva. Their person who covers the WTO is based in Brussels and covers the EU, all UN agencies as well as the WTO. Other poor nations support one person in Geneva who deals with all Geneva-based institutions plus the WTO. The resulting problems are obvious. Although minimum representation without capacity building (see below) will be inadequate; for reform to be meaningful there must be a support system that guarantees minimum representation for all WTO member states.

In future, negotiation processes must be transparent, inclusive and universally agreed. Ensuring active participation of all 135+ members of the WTO in negotiations will not be easy. One option that could be explored is representation through regional trade blocs.

One reason why parliamentarians and the general public have been as suspicious of the institution is that democratic oversight has been poor. The reform agenda must pay attention to national democratic oversight, both in regard to parliaments and civil groups. This may imply a lag-time between the proposals for changes in rules/agreements and arriving at "consensus" so that domestic democratic debates can occur. To facilitate the involvement of civil society, information and consultation processes should be put in place at national level.

3.14 Capacity Building

"Effective technical assistance is not easy. What the new trade agenda demands is not a few consultancy visits, but a concerted effort to apply our knowledge of development to the process of trade negotiation. This means the active engagement of development institutions—including UNCTAD and the World Bank—in trade policy and capacity building."

ActionAid welcomes the call by the Secretary of State for International Development, in March 1999, for increased funding by developed nations to support capacity building work with Developing and Least Developed Countries (DCs and LDCs). DFID's practical financial support for this work is also appreciated, but needs to be matched by other developed country members.

Many DC and LDC governments are still trying to acquire the analytical and technical skills to deal with the complexities of trade law. But meaningful capacity building has to go beyond providing technical assistance to implement agreements and the provision of, often highly paid, Northern consultants to advise governments. There is a need for capacity building from the local level up, including analytical capacity and inter-departmental assessment of the potential impact of trade rules, to enable effective engagement in the multilateral trading system.

In this respect ActionAid recommends that developed country governments should be required to replenish the WTO trust funds for technical co-operation (all funds had been used up as of July 1999). In addition, developed countries should ensure support for DC and LDC capacity building as laid out in the Integrated Framework for trade-related technical assistance to LDCs developed during the WTO High Level Meeting on Least Developed Countries. The lack of action under the Integrated Framework has been extremely disappointing. (Twenty-one LDCs have expressed an interest in having roundtables under the Integrated Framework by only two or three country meetings have taken place.)

If informed participation is desired then clearly capacity building should precede negotiations.

3.15 Transparency and Accountability

ActionAid and its sister NGOs in the south and north have been pressing for greater transparency and accountability in WTO processes since the institution was established. At minimum we believe that timetables for meetings and agendas should be published sufficiently far in advance to enable meaningful public debate. In addition, the publication of minutes of meetings and the rapid de-restriction of official documents are both crucial, not only in regard to the general business of the WTO but also in relation to the Dispute Settlement Process.

So that parliaments and civil society can develop a better understanding of how their interests have been represented in the WTO it would be helpful to have records similar to those produced for the UK Parliament that indicate which countries were present at meetings, who spoke, what positions they took, and which countries were involved in reaching "consensus", or, in the future, how countries voted. Closed negotiations mean that there is no accountability for those directly engaged in determining trade rules and little opportunity for parliaments or civil groups to question the actions of governments.

Because of concerns regarding the influence of transnational corporations at the WTO, it would be helpful to develop systems that prevent the "revolving door" syndrome whereby TNC staff move between corporate employment and being members of national negotiating teams. In addition, it might be useful to develop a record of "interests" that would detail any remuneration or perks received by WTO Secretariat staff and members of official delegations beyond their institutional or governmental salaries.

To enhance public scrutiny, the WTO Secretariat should make public a full annual report detailing their activities that includes income and expenditure accounts, and the sources of all income. WTO accounts should be subject to independent audit.

To ensure that the WTO is achieving the objectives it has set itself, including developmental and environmental objectives, the Secretariat should ensure that research and analysis is undertaken that addresses the impact of trade liberalisation of development and the environment. This should either be done by the Secretariat itself, or by another reputable body such as UNCTAD. All research findings should be disaggregated by gender and, ideally, focus on different sections of society (consumers and producers, rural and urban populations, etc) to identify the differential impact on poverty of trade rules.

3.16 Access

Increased civil society participation in the WTO process is needed to quell suspicions and to ensure greater involvement of civil groups. Amongst other measures, member governments should mandate the WTO Secretariat to establish an accreditation process for NGOs to the WTO in line with that of other UN and international institutions.[11] However, consideration needs to be given to ensure that this does not simply increase Northern NGO influence in comparison with Southern NGOs and specific proposals should be developed that would ensure equal and broad participation.

Access should be at national as well as international levels. One way of achieving this could be to establish national information and contact points within relevant ministries.

4. IMPLEMENTATION OF EXISTING COMMITMENTS UNDER THE URUGUAY ROUND

4.1 There are various outstanding commitments of direct interest to developing countries that are yet to be actioned under the Uruguay Round. Particular areas of concern include agriculture, textiles and clothing (ATC), anti-dumping, rules of origin, subsidies, technical barriers (TBT), customs valuation, sanitary and phytosanitary (SPS) measures, TRIPs, Trade-related Investment Measures (TRIMs) and services. Lack of implementation is one of the main reasons why many developing countries have been reluctant to broaden the scope of negotiations beyond the built-in agenda.

4.2 The importance of full and faithful implementation of the Uruguay Round commitments for developing countries is reflected in their successful push to have "implementation issues" covered in the WTO General Council process. However, lack of political will on the part of developed countries, including the UK Government, has stopped progress in this area. The future credibility of the WTO with the DCs and LDCs, who make up two thirds of the WTO membership, will depend upon immediate action on the issues mentioned in this section.

4.3 ActionAid's main concerns around implementation lie with:

4.3.1 Inadequate implementation by developed countries of specific commitments.

Case Study 1: Kenya[13]

Over 74 per cent of Kenya's population depend on agriculture for their livelihood. Its agriculture sector contributes up to 30 per cent of Kenya's GDP directly and another 30 per cent indirectly. The liberalisation of trade in commodities has led to an increase in imports of foodstuffs: mainly sugar, maize, rice, wheat and dairy products. This has resulted in Kenya becoming a net food importer. In 1990, Kenya produced 2.7 million tonnes of cereals and consumed 2.9 million tonnes. By 1996, Kenya was producing 2.8 million tonnes and consuming 3.8 million tonnes—meeting only 82 per cent of its needs. Once a traditional exporter of maize, Kenya has become an importer. Kenya's reliance on the international food market to meet its food deficit is not working. As its demand for food imports is rising, its ability to pay for them is diminishing. It is experiencing increasing external debt, while development/food aid and value of its exports decline.

4.3.2 Inadequate implementation of commitments relating to special and differential (S&D) treatment.

The 1998 Geneva Ministerial Declaration agreed there was need for effective implementation of special and differential (S&D) treatment provisions within agreements. However, implementation of S&D has been ineffective because it has continued to be used as an add-on in preambles, with no accompanying text to operationalise it. WTO members must focus on turning all S&D provisions into legally binding concrete commitments. In addition, S&D provisions must have regard for the specifics of each agreement and how they relate to levels of development in developing countries rather than just providing longer transition periods and reduced commitments.

4.3.3 Abuse of provisions by developed countries.

A. Despite the reduction commitments made under the Uruguay Round, the Agreement on Agriculture has done little to address the distortions in agricultural policies of developed countries. This has been a major factor in constraining the agricultural development of developing countries. For example, tariff peaks (comparatively high tariffs) and escalation (where tariffs rise as a product undergoes processing) continue to be major market access barriers on products such as dairy, meat, fruit and vegetables, coffee, cocoa, and oilseeds. This limits export earnings and the development of value-added industries in developing countries.

B. Given the lack of participation and capacity in developing countries, it is not surprising that the rules have been fixed so as to ensure loopholes which can be used by developed countries which enables them to water down their commitments.

C. The list of abuses is long. To summarise, by selecting unrepresentative reference periods, overestimating reference period support, aggregating commitments, using complex tariff regimes (such as the EU's entry price system and use of seasonal tariffs for fruits and vegetables) and creating exemptions which only they can use, the EU in particular has been able to maintain high tariffs on sensitive products, continue to use high levels of export subsidies and increase spending on domestic support (refer to section 6.1A/B).

4.3.4 The need for re-balancing of commitments/rules

A. The rules and above abuses mean that developing countries face market access barriers to their products, whilst they have to open up their markets to imports, have to compete with the use of export subsidies and high domestic support by developed countries, whilst they cannot ever introduce any such support to their own agriculture sectors.

Case Study 2: South Africa[14]

South Africa's fruit and vegetable canning industry has been a world player for decades. While South African canned fruit is charged customs duty of up to 21 per cent when it enters the EU, the EU spends 384 million ECU subsidising tomato producers in Greece, Italy and Spain. This places South African canned tomatoes at an unfair disadvantage within the EU market. Until mid 1997, the South African Government operated a General Export Incentive Scheme (GEIS) that compensated for the competitive disadvantages forced on exporters by the EU. However, the Agreement on Agriculture obliged the Government to end GEIS and abolish quotas limiting the import of tomato products into South Africa. The products of South African canners, landed and duty paid in the EU are now at a 35 per cent disadvantage to domestic EU producers. European canners, backed by subsidies, are now displacing South African products in USA, Japan and in South Africa itself.

The result is that one major South African processor, Langerberg Foods Ltd, has cut production of canned fruit for export to Europe by one third. 2,000 seasonal jobs and 400 permanent jobs, most of who were women, were lost. The factories' intake of peaches and pears will decrease by 40,000 tonnes translating into a substantial loss of income for farmers.

B. Although LDCs may be exempt from many of the commitments in agriculture, they are still affected by the actions of other countries, such as the use of export subsidies.

C. Given that most developing countries were not well prepared for participating in the Uruguay Round, their commitments were made on an arbitrary basis which does not necessarily reflect their interests or situations. For example some developing countries set very low tariff levels on basic food items of interest to domestic production, but very high tariffs on other products.

Example 3: India[15]

Prior to the Uruguay Round, India maintained import quotas for thousands of products justified under the balance of payments exceptions. In the Uruguay Round, India tariffied all agricultural lines, often at very low rates. Now without the balance of payments exceptions, India is facing problems for some basic foods, eg zero bound (maximum) rate on rice, maize and skim milk powder. The bound rate is 300 per cent for some edible oils but only 45 per cent for others; given the high degree of substitution in consumption, the 300 per cent binding probably has no significance.

D. The following amendments, based on ActionAid's analysis and proposals by developing countries, would better re-balance the rights and obligations under the Agreement on Agriculture for developing countries:

— Introduce a food security/development box for developing countries whose own agricultural production is not meeting basic food security needs.

— Allow developing countries to recalculate the basis of their commitments and revise tariffs.

— Exempt developing countries from all reduction commitments in domestic support.

— Extend the existing (special) safeguard provision for a number of basic foodstuffs integral to domestic food security needs of developing countries to enable them to raise tariffs during import surges (this provision expires at the end of the implementation period of the Uruguay Round and has been primarily used by developed countries, including the EU to add additional duties on imports during surges in volume).

Example 4: Sri Lanka

Sri Lanka is classified as a net food importing developing country (NFIDC). Its agriculture sector contributes 22 per cent of GDP and 21 per cent of merchandise exports, supporting 48 per cent of its population. Around 30 per cent of its population are currently undernourished. Sri Lanka experienced a significant increase in its food imports since 1996. This can be partly attributed to the low tariff levels it set for the imported products during the Uruguay Round. The surge in imports was followed by a decline in production of potatoes and onions and 300,000 related jobs were lost. The loss could have been substantially less if it had access to the special safeguard under the Agreement on Agriculture.

— Reform of developed country agricultural policies in developed countries is also critical in any process of re-balancing, as discussed in section 6.

E. The TRIPs agreement is unbalanced because it focuses on rights of individuals and companies claiming patents, without regard for the rights of communities over their use of resources. Various developing countries have very strong and common positions on TRIPs, such as the African Group, which need to be acknowledged and incorporated in a substantive review of the provisions of Article 27.3(b) (requires countries to provide intellectual property rights over plants and animal varieties).

Example 5: Turmeric in India

US patent (US, 5,401,504) was granted to two staff members of the University of Mississippi Medical Centre in 1995 for turmeric to be used to heal wounds. The Indian Council for Scientific and Industrial Research (CSIR) filed a case with the US Patent Office challenging the patent on the grounds of "prior art", ie existing public knowledge. CSIR said turmeric had been used for thousands of years for healing wounds and rashes and therefore its use as a medicine was not a new invention. After CSIR provided extensive written evidence claiming traditional wisdom, the US Patent Office upheld the objection and also cancelled other patent applications pending for turmeric.

F. Article 27.3(b) must be amended in light of the provisions of the Convention on Biodiversity (CBD), to make it clear that all living organisms and their parts cannot be patented and those natural processes that produce living organisms should not be patentable. Further amendments should ensure the continuation of indigenous farming practices including the right to save and exchange seeds and prevent anti-competitive practices which will threaten the ability of developing countries to have control over their own food production.

G. Finally, the transitional period for implementing TRIPs ended at the end of 1999 for developing countries. But most developing countries are not in a position to assume their full obligations due to a number of reasons including lack of human, technical and financial resources needed to work out the full implications, draft and approve necessary legislation, establish administrative and judicial mechanisms and educate and train people. Therefore, the period given for implementation of the provisions of Article 27.3(b) must be extended to at least five years from when the review is completed.

5. THE IMPACT OF TRIPS

5.1 Developing countries are the source of 90 per cent of the world's biological resources. Yet developed countries hold 97 per cent of all patents worldwide.

5.2 Communities across Asia, Africa and Latin America support food security through their farming, indigenous knowledge and cultural systems. At the centre of these practices is that of saving, exchanging and selling seeds, which has been the right over centuries for millions of subsistence farmers throughout the developing world.

5.3 ActionAid's analysis shows that the impact of TRIPs could be detrimental on the livelihoods and food security of farmers. It could decrease farmers' access to seed, reduce efforts in public plant breeding, increase loss of genetic resources, prevent seed/plant sharing and can put poor farmers out of business.

Example 6: Quinoa in Latin America

US patent (5,304,718) for quinoa, a staple food crop in the Andes, especially for the Quechua and Aymara people in Chile, Bolivia, Peru and Ecuador, was granted to two scientists from Colorado State University in 1994. The patent covered any quinoa hybrid derived from "Apelawa". Bolivia exports quinoa worth an estimated $1 million each year. The patent was abandoned after pressure from indigenous groups. However, if the patent had gone through, it could have prevented Bolivian exports of quinoa and put many Bolivian smallholders, who grow quinoa for export, out of business.

5.4 TRIPs is controversial because it recognises patents on plants that have been developed through biotechnology using plant varieties that themselves are the result of cross breeding by farmers. As mentioned in section 4.3.4D, this implies that TRIPs does not recognise community or user rights but those of individuals or companies claiming the patents as their own inventions.

Example 7: Basmati rice in India

India grows 650,000 tonnes of which 488,700 tonnes is exported. Indian Basmati exports to the EU, India's second biggest customer, amounted to nearly 100,000 tonnes in 1996-97 and it is one of the fastest growing exports from India in recent years. However, India's export potential is threatened under a patenting regime. The Texan-based RiceTec Inc was granted US patent 5,663,484 on basmati rice lines and grains in 1997. RiceTec gained the patent whilst it was already trading under its brand names such as Kasmati, Texmati and Jasmati. This patent allows RiceTec to sell a "new" variety of basmati, which it claims to have developed under the name of "basmati", in the US and abroad.

5.5 Only 10 per cent of seed are bought commercially and many poor farmers buy seed only once in five years. Many argue that farmers have a choice between using local or proprietary seed. However, ActionAid believes that without education or awareness programmes to balance the incentive packages and marketing propaganda of the agrochemical companies, choices may be poorly informed.

5.6 Once a plant is patented and farmers buy the seeds, companies can insist that farmers purchase new seed every year. Seeds are often sold in a package with fertiliser, herbicides and pesticides. Poor farmers using the new patented varieties thereby increase their dependence on the market and lose their traditional rights to save and exchange seed and to innovate by cross breeding these seeds with other varieties.

5.7 New patented varieties generally require high cost fertiliser and chemical inputs, which can lead to increased indebtedness. The use of high-tech seeds is closely associated with mono-cropping which restricts and reduces agro-biodiversity while exposing farmers to high levels of risk, therefore compromising food security.

"The TRIPs agreement creates potential for disastrous conflict between the technologically advanced and less technologically-advanced countries". Cameroon Ambassador on behalf of the African Group at the UN Convention on Biodiversity (CBD), July 1999

5.8 Although Article 27.3(b) provides an exclusion from patentability of plants and animals, and essentially biological processes for the production of plants or animals the provision requires countries to provide protection through patents or an effective sui generis—or unique system.

5.9 However there is no agreement on what an "effective sui generis system" means. Industrialised nations are interpreting it as the model provided by the Union for the Protection of New Varieties of Plants (UPOV). This agreement provides limited rights to farmers and accepts the concept of patenting plant varieties.

A recipe for Change: food security—the key issues for the 3rd WTO Ministerial Conference, Seattle,

5.10 A World Bank Report[16] also admits that "tighter IPRs (intellectual property rights) can disadvantage developing countries by increasing the knowledge gap and shifting bargaining power towards the producers of knowledge, most of who reside in industrial countries".

5.11 Patent offices are already granting patents to multinational companies on staple crops in the developing world. As mentioned above, patenting is closely linked with genetic engineering and the trend for large transnational agrochemical industries to control industrialisation and intensification of agriculture. Almost half of all patent applications on Genetically Modified (GM) crops are held by fourteen TNCs. The consolidation of the global seed and agri-chemical business now sees the top five agro-biotech companies holding 60 per cent of the world's pesticide market, a quarter of the seed market and virtually 100 per cent of the GM crop market. Without patents, the GM industry would not see return on their investment into developing GM crops.

5.12 Although Monsanto has rejected the concept of sterile "Terminator seed", alternative techniques such as Gene Use Restriction Technologies (GURTS) can engineer seeds in various ways which can enable chemicals to "switch" on GM characteristics such as herbicide resistance. Again such high tech seeds require chemicals and have the effect of tying a farmer into chemical and financial dependence on a company.

5.13 The GM industry is not designed for the types of biodiversity found on the average rural holding in a developing country where a smallholder farmer will grow a number of different crops, thereby preserving the biodiversity of a crop species. GM crops are designed for monocultural, intensive farming methods. Yet for poor farmers, the diversity of their crops is their safety net—to ensuring some kind of harvest.

5.14 The recent ActionAid Report "Crops and Robbers"[17] shows that as a result of genetic engineering and a change in the world's patent regime, "biopiracy" has already taken place on 62 patents on staple food crops important to developing countries, such as cassava, cocoa, jojoba, millet, nutmeg, rice, rubber, sweet potato and sorghum. The private sector is patenting the world's best DNA and mapping entire sequences of crops with a view to patenting the most useful elements. Plant genetic material is moving into private ownership.

Example 8: Jojoba, nutmeg, camphor and cuphea

Calgene (a subsidiary of Monsanto), has seven patent applications for naturally occurring genes in jojoba, nutmeg, camphor and cuphea (a plant from Mexico). All these involve genes which result in characteristic oils being produced by the plants which could be used in other oilseed rape crops to alter their fatty acid profiles and reduce the need for specialist oils. The three jojoba patents cover a gene for an enzyme which gives jojoba oil its special qualities. Calgene's jojoba patents seek to allow the production of wax esterase to be made in oilseed crops grown in developed countries. This could undermine the Southern market for jojoba. The group of four patents covering nutmeg, camphor and cuphea involve a gene found in these plants which means that the oil they produce contains high levels of compounds favoured by the cosmetic industry. The market for tropical oils could also be undermined by improving the ability of crops grown in developed countries to produce laurate and myristate—much in demand in the soap and cosmetics industry.

5.15 Almost half of 601 patents on plant DNA were filed by 14 transnational companies. The study concludes that the higher prices of patented seeds and accompanying royalties are likely to outweigh any possible benefit of GM plants to poor farmers.

5.16 There is also evidence to suggest that biotechnology patents on genes from cocoa and rubber could be used to substitute the crop so that it does not need to be grown in the developing countries.

Example 9: Cocoa, West Africa and Mars

The British based company, Mars UK, has two US patents (US 5,770,433 and 5,668,007) on genes from a West African cocoa plant (amelonado subspecies) which are responsible for the distinctive flavour associated with cocoa from this region. The patents could allow Mars to produce the flavour artificially by transferring the genes into a micro-organism (such as yeast) and then extracting the flavours after fermentation. The repercussions for West Africa could be serious as amelonado cocoa is the main variety grown in Ghana and Nigeria, each producing 370 and 175 million tonnes respectively in 1998. The crop contributes 35-40 per cent of Ghana's foreign exchange earnings and employs 45 per cent of the agriculture sector.

5.17 Again, ActionAid is disappointed with the UK Government's lack of analysis and support to developing countries on the TRIPs issue which is clearly of vital importance to their future.

6. OPPORTUNITIES AND THREATS ARISING FROM THE BUILT-IN AGENDA (AGRICULTURE)

6.1 The built-in agenda should be seen as a welcome opportunity to achieve several things:

— Eliminate export subsidies.

Case Study 10: Jamaica

Brussels provides 1.75 billion Euros in export subsidies (allowed under the Agreement on Agriculture) to European diary exporters, helping them to maintain 50 per cent share of the world market. As a result of import liberalisation, Jamaica's well-established dairy sector is being undermined by having to compete with cheap imports from the EU. Jamaican farmers are pouring away the fresh milk from their coolers while EU products, subsidised at one Euro per kilo of whole milk powder, are taking over their market.

— Priority must be give to substantially reducing tariff peaks, escalations and dismantling complex tariff regimes on products of interest to developing countries by developed countries such as meat, sugar, butter, cheese, cereal, cotton, coffee, cocoa, oilseeds, vegetables, fruits, nuts, hides and skins.

— Make further reductions in domestic support.

Eliminate existing loopholes open to abuse by developed countries.

— Exemptions under domestic support must be reviewed with a view to tighter definitions (Green Box) and in some cases be subject to substantial reduction (Blue Box).

— Special safeguard must not be extended for developed countries.

— No extension of the peace clause.

Address other relevant issues.

— Therefore consideration needs to be given to having rules on regulating monopoly/oligopoly power specifically in agricultural trade.

— Other export competition policies must be included in the definition of export subsidies otherwise it will still enable rich countries to maintain an unfair advantage with devastating effects on developing countries. Clearer disciplines on export restraints are also required to improve the reliability of imported foodstuffs for developing countries.

6.2 On the other hand, there are also potential threats with the built-in agenda:

Further liberalisation will be imposed on developing countries.

— Food imports have been rising rapidly, especially in the net food importing developing countries. Food import surges have become a common feature of the post-Uruguay Round period. Import surges in especially dairy and meat products mean small island regions such as the Caribbean and South Pacific in particular are facing difficulties in coping with the impact on their competing domestic sectors. Whilst trade liberalisation has led to a surge in food imports, this has not been matched by the ability to increase exports.

. . . "in the virtual absence of social safety-nets, the (liberalisation) process also marginalised small producers and added to unemployment and poverty". FAO, 1999

— Further liberalisation on the part of developing countries is premature.

B. A proper review does not take place, Article 20 of the Agreement on Agriculture specifically states that any further programme of liberalisation must take into account the implementation experience, effects on world agriculture and non-trade concerns such as food security. The Analysis and Information Exchange (AIE) process which took place within the WTO Committee on Agriculture in Geneva in the lead up to Seattle was supposed to address the intent of Article 20. However the process was dominated by developed countries jockeying to see their issues of interest on the future agenda, rather than support a proper assessment of the effects of liberalisation.

— The UK Government should therefore support an impact assessment of the Agreement on Agriculture, which could be undertaken jointly by UNCTAD, WTO, FAO and others. Civil society groups should also be involved as many have the field experience of have been collecting empirical evidence on the effects of agricultural trade liberalisation.

— Any review must also take into account the impact on rural women who are responsible for half of the world's food production and produce 60-80 per cent of the food in most developing countries.

Developed countries will dominate the agenda again.

— The US may continue to push for trade in GM products again, since it failed to do so in Seattle under the auspices of a working group on biotechnology. Disappointingly, the EU had (controversially) agreed to it, yet developing countries have put their faith in the Convention on Biodiversity (CBD), which will be undermined if this issue is picked up within the WTO as a pure trade issue. The potential impact of GM products means there are wider environmental and social issues which should be addressed within the context of the CBD.

— Agriculture is a technical subject and the agenda in discussions at the WTO Committee on Agriculture have been dominated by technical discussions on issues such as the workings of tariff rate quotas (TRQs)—better transparency and the allocation/expansion of quotas being of interest to developing countries. However, such issues are also of interest to developing countries and it must be ensured that they are able to participate.

Agriculture will be viewed the same as other sectors.

— The EU must be willing to rid the CAP of all its damaging effects on the agricultural development of developing countries and the environment by, for example, dismantling export subsidies and transferring European farmer subsidies towards meeting specific environmental objectives.

— Finally, if the agenda is kept narrow, focusing on market access, domestic support and export subsidies, it is unlikely that other important issues such as monopoly power in agriculture will be discussed.

7. TARIFF/QUOTA FREE INITIATIVE FOR LEAST DEVELOPED COUNTRIES (LDCS)

7.1 The idea of providing zero tariff access for products from LDCs was spearheaded by Renato Ruggiero, the previous Director-General of the WTO, following on from the Geneva Ministerial Confrence in 1998, which made a commitment to "continue to improve market access conditions for products exported by LDCs on as broad and liberal a basis as possible".

7.2 The EU supported the initiative and made it a part of its position going into Seattle and tried to gain support from other developed countries in Seattle. Although the EU was not able to secure the support of the other Quad countries (Japan, Canada and US) at Seattle, it has said it will still continue to extend the initiative unilaterally.

7.3 We welcome the EU's initiative and commitment in this area, which becomes more important if further across-the-board tariff reductions are made, to ensure continued effective preferences. Currently around two-thirds of exports from LDCs go to developed country markets with 60 per cent going to the EU, Japan and US[25].

7.4 However, we are disappointed with the initiative's limited application as it refers to "essentially all products". This means that sensitive agricultural products, such as sugar and dairy, and textiles—both of most importance to least developed countries can be readily excluded, therefore substantially limiting the potential benefits of such an initiative. Around 70 per cent of LDC exports are unprocessed and semi-processed primary products and minerals, with textiles and clothing making up 20 per cent.

7.5 Many LDCs have preferential market access under the Generalised System of Preferences (GSP). Eighty to 90 per cent of LDC exports enter their major markets duty free, however tariff preferences remain under-utilised in many instances[26]. It should be noted that LDCs face significant problems other than tariffs for their exports in the form of non-tariff barriers (NTBs). These include quantitative restrictions on textiles and clothing and sanitary and phytosanitary (SPS) restrictions on fish and meat products which also need to be addressed if this market access initiative is to bring benefits to LDCs.

7.6 Another disappointing aspect of the initiative is that according to the EU, the initiative will not be implemented until around 2003. ActionAid is concerned that this is not an immediate action for implementation which would assist in better integrating and spreading the benefits of the global trading system to least developed countries. Rather, it appears as a carrot-on-a-stick tactic, forming a part of the EU's negotiating strategy in getting support from least developed countries for a new Round.

7.7 Therefore, we would like to see the UK Government put pressure on the EU to continue to push for wider WTO support, apply the initiative in an unconditional manner, covering all products and implement it as a matter of urgency.

ActionAid

January 2000

1 This is the most recent estimate by the FAO for period 1995-97 (see footnote 5). Back

2 Agricultural Trade Performance by developing countries, WTO Secretariat (1998). Back

3 Implementation of Uruguay Round Commitments: the development challenge (1999), World Bank. Back

4 Government procurement currently accounts for 20 per cent of global GDP (some $6 trillion)-more than the total value of global exports. This represents a potentially highly lucrative market for powerful companies who could be treated on the same basis as local firms. ActionAid is concerned that liberalising government procurement would concentrate gains for powerful commercial interests at the expense of building up the economic base in developing countries. This could have a devastating impact on poor countries' ability to reduce poverty and promote development. The current agenda on improving transparency in government procurement should not be expanded to include liberalisation. Government Procurement: ActionAid's concerns and recommendations, ActionAid (1999). Back

5 Although the recent FAO report on the State of food insecurity in the world (1999) shows that there has been a decline in the number of people who do not have enough food to eat, the report also found that this does not indicate an overall pattern throughout the world. In fact, only 37 countries achieved a reduction in the number of undernourished in the first half of the 1990s, whilst across the rest of the developing world, the number of hungry people increased by almost 60 million. Back

6 If a one country, one vote, system is put in place, it will be possible for the USA, EU and other OECD countries to be out-voted on a regular basis. Developing and Least Developed Countries (DCs and LDCs) might immediately flex their muscles and, for example, push for the removal of the range of agricultural subsidies offered by the EU and US to its farmers. Back

7 C Fred Bergsten, Director, Institute for International Economics, Testimony before US Senate, Washington DC, 13 October 1994. Back

8 The plenary sessions at Ministerial Meetings are reserved for each trade minister to make a formal speech, a process which lasts throughout the meeting and at which fewer and fewer delegation members can be seen in the audience. Back

9 This, at least, is ActionAid's best understanding of the situation. Certainty is difficult when there is no public information available. Back

10 Rt Hon Clare Short, Secretary of State for International Development, at UNCTAD, Geneva, 2 March 1999. Back