MEMORANDUM SUBMITTED BY THE WORLD DEVELOPMENT
MOVEMENT
The World Development Movement welcomes this
International Development Committee inquiry. WDM is an independent
research and advocacy organisation with 8,000 members, 35,000
supporters and 100 local groups across the UK. WDM's aim is to
ensure that the policies of governments, international agencies
and companies towards developing countries promote fairness, opportunities
for the poor and respect for the rights of vulnerable and disadvantaged
people.
Since its establishment in 1970, WDM has undertaken
research, lobbying and campaigning on international trade and
investment issues, including campaigning for phase out of EU's
restrictions of the export of textiles and garments from the poorest
countries, opposition to the Multilateral Agreement on Investment
(MAI) and a fairer deal for developing countries at the Ministerial
Conference in Seattle.
EXECUTIVE SUMMARY
1. The EU has been quick to blame the US
for the collapse of negotiations in Seattle. WDM considers that
the EU was also to blame. Major causes of the failure to agree
an agenda for future trade negotiations resulted from:
— The EU's collaboration with the US
in marginalising developing countries, resulting in a deeply unfair
process of negotiations.
— The EU's flawed strategy in seeking
a comprehensive round, particularly in according priority to proposals
for agreements on investment and government procurement.
— The elevation of commercial objectives
and the interests of EU multinational companies above development
aims.
2. The EU has characterised the failure
of negotiations as a regular feature of past negotiations. This
is not the case. Past negotiations have sometimes failed to reach
agreement, but have always agreed a way forward. International
trade policy is in crisis and needs fundamental reform. The British
Government and EU failed to learn the lessons from the failure
of negotiations on a Multilateral Agreement on Investment (MAI).
It is vital that they learn the lessons from Seattle.
3. The failure of negotiations in Seattle
was also due to the unwillingness of governments to give priority
to aims other than liberalisation of trade as an end objective
in itself. This constitutes a serious failure of governments to
develop a coherent approach to international policy-making and
exposes the inadequacy of the theory underlying trade liberalisation.
WDM Proposals for Reform (the key recommendations
are in italics)
4. The British Government should act quickly
to restore the trust of developing countries, including:
— A process to review, repair and reform
of existing agreements that are unfair and inconsistent with the
aims of poverty reduction.
— Agreement to extend bound duty free
access to all imports from LDCs.
— Research and consultation on new
initiatives to stabilise commodity prices.
— Implementation of a massive capacity-building
programme.
5. The British Government's initiative for
reform of the WTO's negotiating process is welcome. It should
address fundamental issues such as business influence over trade
policy, outmoded tit-for-tat trade concessions and unfair negotiations
and decision-making processes. It should also ensure that all
countries agree to open up trade policy-making to scrutiny by
Parliaments and the public.
6. The WTO's core objective should be
to agree trade rules that achieve the reduction of poverty and
promote sustainable development.
7. The British Government should play a
leading role in the development of an international framework
of rules to ensure that:
— the WTO does not override other multilateral
agreements;
— there is a coherent framework of
internationally agreed standards on the rights of workers, consumers,
indigenous people and the environment;
— those standards are consistently
and fairly enforced, without the threat of abuse for protectionist
purposes.
8. The British Government should ensure
that WTO rules are not allowed to override sound national policies.
National governments must be given the rights and responsibilities
to pursue pro-poor development policies.
9. The British Government should strengthen
Parliamentary scrutiny and use the processes of consultation to
listen to NGOs and members of civil society. The Government should
institute mechanisms for improved coherence across Whitehall,
including the development of joint policy-making, rather than
giving the dominant role to the DTI as the lead government department.
Greater coherence in EU trade policy-making is an urgent priority.
THE FAILURE
OF TRADE
NEGOTIATIONS IN
SEATTLE
10. While the media coverage emphasised
the street demonstrations in Seattle, these had little impact
on the negotiators or the negotiations. There was little evidence
that government negotiators understood the concerns of the thousands
of protesters in Seattle and many other centres around the world,
including the UK. These demonstrations followed the submission
of thousands of letters to MPs and Ministers from WDM supporters
and members of the public. Perhaps the major impact of the thousands
of people on the streets was to increase the hothouse atmosphere
in the Convention Centre. In addition, the presence of the world's
media and NGOs gave credence to the demonstrators' chants that
"the whole world is watching". However, this
was not the main cause of failure of the negotiations. The major
reasons are as follows.
11. The process of negotiations was deeply
unfair to developing countries
Negotiations were dominated by the US and the
EU. This was reflected in the exclusion of most developing countries
from the informal ("Green Room") meetings where most
of the negotiations took place—those countries that did
participate were perceived to have been selected on the basis
of their support for the US and EU positions. The introduction
of discussions on labour standards, against the wishes of most
WTO members, and repeated disrespect for developing country representatives
resulted in the Africa, Caribbean and Latin American country groupings
preparing strong statements of condemnation.
12. The EU's strategy for WTO negotiations
was flawed
The EU's negotiating position was driven by
its inability to secure agreement from Member States for reform
of the EU Policy (CAP). There is evidence that massive subsidies,
high effective protection and other trade distorting measures
under CAP have caused major disruptions to the agricultural markets
in developing countries, undermining food security, the livelihood
of farmers and development in the poorest countries. There is
also evidence of massive waste of public funds and environmental
costs in the UK and other parts of the EU. The problem of CAP
(and the Common Fisheries policy) should not be loaded onto developing
countries. Reform is up to the EU.
13. The EU's strategy for a comprehensive
Round attempted to provide a range of trade-offs that would be
in the EU's interests, in return for agricultural reform (these
interests were narrowly defined—as in the case of an investment
agreement, the interests were those of a few large companies and
industry lobbyists rather than the broad grouping of civil society
that opposed an investment agreement). However, developing countries
and members of the Cairns group of agriculture exporters rightly
point out that reform of agriculture in the EU is long overdue.
As the Secretary-General of UNCTAD has stated:
"The longest transition periods in the
trading system are in agriculture and textiles . . . If there
is an early harvest, it should be on issues that the developing
countries have waited 50 years." In Seattle, developing
countries were not prepared to accept unfavourable agreements
in return for reforms that should have been undertaken long ago.
14. This failure of the EU's strategy resulted
from an unwillingness to accept that the burden of trade reform
has fallen heavily on the poorest countries. The share of the
Least Developed Countries (LDCs) in international trade has halved
over the past 20 years. Despite having 10 per cent of world population,
LDCs now account for only 0.3 per cent of world trade.
15. The strategy was also flawed because
it did not recognise that most developing countries lack the capacity
to implement new agreements. The EU's concept of a comprehensive
round ignores the repeated positions of developing countries that
they are experiencing difficulties in implementing the agreements
from the Uruguay Round, and that there are heavy costs in doing
so (the World Bank has estimated implementation costs for some
of the agreements at one year's development budget for smaller
developing countries). The World Bank also concluded that developing
countries would see little benefit, if any, from this expenditure.
16. Further, the EU's strategy chose to
ignore the abundant evidence that developing countries do not
have the capacity to participate fully in negotiations on a comprehensive
Round. It has been widely recognised, including by the British
Government, that few developing countries have the capacity to
embark on complex and wide-ranging negotiations on the range of
agreements that would be included in a new round. This is particularly
true in the case of complex new issues that the EU was proposing
to introduce. In the case of investment, the failure of negotiations
on the Multilateral Agreement on Investment (MAI) demonstrated
that OECD countries had not anticipated the likely social, environmental
and developmental impacts after two years of preparations and
five years of negotiations. Developing countries not only would
have started negotiations without that experience, but also were
expected to conclude negotiations on investment and all other
issues within three years.
17. The lack of capacity of developing countries
is also indicated by the fact that some 30 developing countries
are not able to afford a permanent representative in Geneva. At
the negotiations in Seattle, WDM's analysis showed that many developing
countries had only one or two negotiators, whereas the US had
around 200 and the EU Member States had a combined delegation
of 594 representatives.
18. The US and EU gave priority to commercial
aims in negotiations
Despite the rhetoric about wider aims, trade
negotiations are conducted on the basis of achieving advantage
for the "national champions". These objectives were
dominant in the positions of the US which gave priority to biotechnology
and eight sectors in which the US has a dominant position and
resisted reform of WTO provisions that have been used to protect
politically powerful industries (such as anti-dumping laws). The
EU gave priority to market access for its multinationals (proposals
on investment and government procurement) and protection of agribusiness
and fishing subsidies. The EU's provisions on the environment
and developing countries were weakened or dropped during informal
negotiations with the US on 29 November, the day before formal
negotiations started.
19. Liberalisation is no longer a valid objective
for trade rules
A deeper cause of failure was the inadequacy
of the underlying objectives for the WTO and trade negotiations—as
expressed by the British Government, trade liberalisation is,
per se, "a good thing" and its achievement should
be the aim of trade rules. However, the weight of evidence is
now that unregulated trade and investment is implicated in the
increasing disparities between rich and poor (within and between
countries), environmental damage and downward pressure on social
and environmental standards. This has been documented in recent
reports such as the UN Conference on Trade and Investment (UNCTAD
Trade and Development Report 1999), UN Environment Programme (GEO2000)
and UN Development Programme (Human Development Report 1999).
20. A major problem with the use of trade
liberalisation as an aim is that the underlying theory does not
accord with reality. Trade policy is still heavily based on a
simplistic application of the theory of comparative advantage,
even though the core assumptions of the theory do not reflect
the realities of the global economy. For example:
— Trade theory assumes capital remains
within each nation; the reality is that some £1 trillion
per day crosses national borders.
— Trade theory assumes that competition
takes place between small producers and consumers; the reality
is that some two-thirds of trade involves multinationals and over
half of that is represented by trade within the same company.
The result is that a few multinationals dominate trade in every
major commodity of importance to developing countries.
— Trade theory assumes that information
is freely available; in reality small producers in remote parts
of the world have little information on the relative prices and
costs that apply throughout supply chains. Information is a competitive
weapon, closely held by the largest companies.
— Trade theory assumes no economies
of scale or scope; the reality is that most industries are consolidating
as the costs of research and development, production, distribution,
marketing and advertising confer huge advantages on the largest
producers, often reinforced by patent protection, subsidies and
political influence.
21. The result is the benefits of trade
are realised by those with the market power to capture them. The
problem is not only that trade rules discriminate against small
companies and traders in the poorest developing countries, but
so do the underlying structures of international trade. As noted
by the Secretary-General of UNCTAD, Rubens Ricupero: "In
the old GATT, there was a mistaken view that competition only
requires clear rules and an impartial arbiter. But . . . no-one
imagines a lightweight should fight a heavyweight in boxing".
Others have characterised the contest as a schoolboy climbing
into the ring with Mike Tyson—the rules may be same for
both, but the fight will be short and brutal.
22. In the past, governments have helped
infant industries to establish and have used trade policy to help
domestic companies build the production base and experience to
compete internationally. Such policies have been used by every
industrialised country during their development phase, perhaps
most notably by Japan, South Korea and other Asian "tiger"
economies. Many economists criticise the way these policies have
been applied by some countries, with justification in some cases.
However, the appropriate response should be to strengthen the
capacity of governments to implement such policies fairly, rather
than to prohibit their use, as is occurring under WTO agreements
such as TRIMs, TRIPs, subsidies and the EU's proposed agreements
on investment, competition and government procurement.
23. The rich countries are, deliberately
or otherwise, "pulling up the drawbridge" on the poorest
developing countries, by prohibiting the use of policies that
would allow them to help their industries gain a foothold in international
markets. The use of such policies is particularly important for
those LDCs that are facing the challenge of diversifying their
economies away from dependence on exports of a narrow range of
commodities.
24. Therefore, reform of the WTO needs to
encompass two levels:
— Reform trade rules that are distorted
in favour of the largest countries and the largest multinationals.
It is blatantly unfair that developing countries face tariffs
10 per cent higher than industrialised countries, and LDCs face
tariffs that are 30 per cent higher.
— Ensure that developing countries,
particularly the LDCs, are allowed to use positive assistance
for domestic producers to enable them to be able to compete internationally.
25. There is no coherent system of international
rules
Conflicts at the Seattle Meeting over issues
such as the environment and labour rights were inevitable. The
problem only partially results from the failure of the WTO to
encompass social, environment and developmental issues. The problem
is also that the WTO is one of the only mechanisms that is available
to ensure that internationally agreed standards are fully implemented.
It is not surprising; therefore, that trade unions were looking
to the WTO as a means to ensure the consistent implementation
of internationally agreed labour standards. This proved to be
one of the major stumbling blocks at Seattle.
26. Developing countries were concerned
that labour standards in the WTO would be used as a pretext for
protectionism. Given the record of the industrialised countries
in twisting the WTO rules to their advantage (including through
the agreements on textiles and clothing, agriculture, subsidies
and anti-dumping), WDM considers that such concerns are fully
justified. Further, trade agreements have been heavily weighted
in favour of large multinationals. It is unlikely that labour
standards in the WTO would result in protection of the rights
of workers or improvements in working conditions.
PROPOSALS FOR
REFORM
27. Review, repair and reform existing trade
agreements
The most immediate priority is to restore trust
between the countries of the rich North and the poor South. This
will not be achieved without addressing the concerns of the South
over inequities in current trade agreements. Powerful trading
nations have dominated trade negotiations in the past and, as
in Seattle, developing countries have been excluded from the process.
The challenge is not only to reform the process for future negotiations,
but also to repair the agreements that have resulted from unfair
negotiations in the past.
28. In the run-up to Seattle, developing
countries proposed reforms to existing agreements including subsidies
and anti-dumping provisions, Trade-Related aspects of Intellectual
Property rights (TRIPs), Trade-Related Investment Property Rights
(TRIPs), Trade-Related Investment Measures (TRIMs) and the dispute
settlement mechanism. Although governments acknowledge that Seattle
and previous negotiations have been deeply unfair, the EU has
ruled out the renegotiation of existing agreements. This is an
inconsistent position. The EU should engage in a process, with
developing countries and civil society, to identify those provisions
in existing agreements that do not support their policy objectives
(including poverty reduction and promotion of sustainable development),
and agree to renegotiate them. It is likely that reform of
the EU's Common Agriculture and Fisheries Policies will be priorities.
29. Bound duty free access for all exports
from the poorest countries
The EU should fulfil its undertaking, made at
the 1996 WTO Ministerial Conference, to offer bound duty free
access to all imports from Least Developed Countries (LDCs). This
proposal was progressively weakened during negotiations in Seattle
and the definition of "essentially all" imports now
appears to exclude some of the products of greatest importance
to the LDCs. The EU should be prepared to act unilaterally
to offer bound duty free access to all products and services from
LDCs if other industrialised countries do not agree. This
should be accompanied by accelerated reduction of tariffs and
other forms of protection on exports from all developing countries
in priority sectors, notably textiles/clothing and agriculture.
30. Introduction of new trade initiatives
to address development contraints
A major reason for the marginalisation of the
poorest countries from world trade has been a two-thirds drop
in prices for primary commodities over the past 30 years. These
problems are not addressed in WTO agreements. International
trade instruments should be developed to stabilise commodity prices
and address the long-term decline in terms of trade for the weaker
producers. Other agreements within the international regulatory
system should prevent the domination of commodity supply chains
by a few multinational companies.
31. Implement a massive programme of capacity-building
WDM welcomes the initiative that DFID has taken
to provide funding to help build the capacity of developing countries
to participate in trade negotiations, access dispute settlement
and implement agreements. However, these initiatives need to be
part of a long-term multilateral capacity-building initiative
that is funded by new funding (rather than a diversion of aid)
and extends beyond the inadequate technical assistance programme.
Capacity cannot be switched on quickly. Each country will need
to embark on a multi-year effort, including processes such as
planning, consultation within government, recruiting and training
staff, surveys of industry and civil society, research into specific
trade impacts, development of policy options, consultation domestically
and internationally and preparation of specific proposals. No
new issues should be introduced into WTO negotiations until this
capacity-building programme has been undertaken.
32. Reform the negotiations process and improve
accountability
WDM welcomes the initiative by the Secretary
of State for Trade and Industry to initiate reform of the WTO
negotiating process. Fundamental reform is required before
any further negotiations should take place. Reform should
extend beyond the narrow confines of institutional reform to include:
— Banning the undue influence of business
lobbies in the formulation of trade policy at the national level
and in negotiations or standard-setting bodies at the international
level.
— Dropping the "tit-for-tat"
system of trade negotiation and accession for new countries, in
favour of fully multilateral processes.
— Abandoning the current charade of
WTO "consensus decision-making".
— Providing for adequate systems of
Parliamentary scrutiny and public debate at the national level,
as well as within the WTO.
33. Reform the core objectives of the WTO
The challenge for reform has been articulated
by the Deputy Premier of Thailand (the future Director-General
of the WTO), Supachai Panitchpakdi: "When we discuss the
multilateral trade system, we are usually asked to serve the system.
It is high time we made the system serve our development goals."
International institutions such as the World Bank and IMF
have now given priority to the aim of poverty reduction, adopting
it as an overarching objective. The WTO should adopt poverty
reduction and promotion of sustainable development as the main
aims of the international trading system. Trade policies and
agreements should be developed on the basis of their contribution
to the achievement of these aims.
34. Implement a coherent approach to rules
on the global economy
There must be a systematic approach to consistent
enforcement of all such standards internationally. The relationship
between the WTO and international agreements, whether labour,
environment or development (such as the Lome Convention) should
not be treated in an ad hoc way, depending on which political
lobby is making the most noise. There must be a systematic approach
that addresses the core issues:
— Ensuring that the WTO does not override
other multilateral agreements.
— Negotiating a coherent framework
of international standards.
— Developing a system to ensure those
standards are consistently enforced.
35. Ensure that the WTO does not override
other multilateral agreements
The first principle should be that WTO rules
should not be allowed to undermine the multilaterally-agreed standards
that are set by other international institutions and policies.
Clarification of the relationship between the WTO and other international
agreements was included in the EU's objectives, but was effectively
dropped in the pre-negotiations between the EU and US on 29 December,
the day before full negotiations started. Most notably, the deal
also included an agreement by the European Commission to the US
proposal for a WTO Working Group on Biotechnology (which would
have fatally undermined the Biosafety Protocol). After the strong
intervention of the Environment Minister, Michael Meacher, and
other EU environment ministers, the EU General Affairs Council
withdrew the deal (although this did not seem to have been communicated
to the EU trade Commissioner, Pascal Lamy, who continued to insist
that a Biotechnology Working Group was subject to negotiation).
36. Negotiate a coherent framework of international
standards
There is a framework of existing international
standards that have been agreed, primarily through UN institutions.
These standards need to be further developed, for example, to
include a ban on the use of coercive marketing of tobacco products
(through the World Health Organisation) and procedures for the
assessment of the social and environmental impacts of GMOs (under
the Biosafety Protocol). There also needs to be a system for the
fair enforcement of these standards internationally. The WTO is
not a suitable forum, since the use of trade measures for enforcement
are open to abuse for protectionism.
37. Develop a system to ensure that standards
are consistently enforced
A core problem is that business has globalised,
but regulation has not. Governments are frequently trapped between
the dilemma of aiming to implement higher standards, but not wishing
to drive away foreign companies or to deter potential investors.
WDM has submitted proposals to the British Government and European
Commission (published as "Making Investment work for People")
on a mechanism for enforcement, primarily relying on national
legal systems for enforcement, backed up by a "Core Standards
Commission". The British Government should take the lead
in developing proposals for the consistent implementation of international
standards through mechanisms other than the IMF or WTO.
38. Ensure that WTO agreements do not override
the right of national governments to adopt policies for the reduction
of poverty
WTO rules are increasingly intruding into the
sphere of economic policy-making at the national level, particularly
through agreements on non-trade issues (such as TRIPs and the
investment agreement proposed by the EU). Such agreements must
not undermine the powers of national governments to regulate effectively,
in the public interest. Further, the process of liberalisation
in the WTO should not precede regulation. The Asian financial
crisis has shown the dangers of deregulation of capital markets
before adequate financial regulation is put in place. The same
principles apply to liberalisation of trade without a system for
consistent enforcement of social and environmental legislation.
The WTO's 1999 report on Trade and the Environment acknowledged
that serious environmental damage results from trade liberalisation
without adequate regulation.
39. Nor should WTO agreements be allowed
to undermine international action in the pursuit of important
aims, including the ability of local government to specify the
use of fair trade products, sustainably produced timber, GM free
food or products that are not imported from repressive regimes.
EU Member States have shamefully launched a WTO dispute against
the State of Massachusetts that has preference for companies that
do not do business with Burma. This is likely to mean that local
authority action that was so effective in isolating apartheid
South Africa would be ruled out in future.
40. The central principle should be established
that WTO agreements will not take precedence over the right of
governments to pursue their agreed development objectives. This
principle is consistent with the emerging recognition that governments
have the responsibility to pursue such policies—the WTO
should not be allowed to undermine the powers of governments to
do so. This issue is especially important to the majority of LDCs
whose capacity to regulate has been eroded through the combination
of a heavy burden of international debt servicing and the stringent
restraints on government spending by the IMF and World Bank under
Structural Adjustment Programmes. Not only should poverty reduction
become a central aim of the WTO, but also all WTO agreements
need to include the provision that national governments have the
rights to pursue pro-poor policies.
41. Improve openness and accountability
While WDM has welcomed the opportunities to
meet with UK and EU government officials and Ministers prior to
negotiations and at Seattle, there is little sign that NGOs have
been listened to in these consultations. There needs to be far
more rigorous Parliamentary scrutiny over the development of
UK and EU proposals for trade negotiations. Consultation processes
need to be extended and policy-makers should demonstrate a
willingness to listen to the advice provided by NGOs.
42. Improve policy coherence
Greater integration of policy across Whitehall
is required if development and environment issues are to be integrated
into the core of trade policy. In particular, there seems to have
been a willingess to include social, environmental and developmental
objectives in Press Releases and public statements, but to dispense
with them quickly in the course of negotiations. Government
departments need to act as joint team in policy formulation, to
balance the dominant role of the DTI. This lack of coherence is
even more of a problem at the EU level.
World Development Movement
January 2000
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