MEMORANDUM SUBMITTED BY OXFAM
1. SUMMARY AND
RECOMMENDATIONS
A rules-based system
1.1 Oxfam works with small businesses, workers'
organisations, and farmers' groups in more than 60 countries throughout
the world. Many of the communities with whom we collaborate are
engaged in international trade, either as producers or wage earners,
and almost all have seen their livelihoods affected to some extent
by international trade policies.
1.2 Trade has become an increasingly powerful
engine of growth and can play an important role in promoting poverty
reduction and sustainable development. However, its benefits have
been distributed unequally. The world's poorest nations, the 48
least-developed countries, home to 10 per cent of the world's
citizens, have seen their share of world exports decline by almost
half over the past two decades to a negligible 0.4 per cent.
1.3 Oxfam is in favour of a rules-based
multilateral trade system. However, following the collapse of
talks in Seattle, it is clearer than ever that WTO agreements,
and the processes by which they are reached and enforced, must
be changed if the world trade regime is to strengthen international
efforts to eradicate poverty.
Summary of conclusions
1.4 Oxfam believes that poverty reduction
should be front and centre of everything the WTO does. For this
to become reality, our two main conclusions are as follows:
— issues of WTO internal and external
process urgently need to be addressed. Radical institutional reform
is required to transform the WTO into an accountable and transparent
organisation which takes decisions with the full participation
of all member countries. National mechanisms for achieving WTO
accountability must also be strengthened through consultations
with civil society and increased parliamentary scrutiny. The position
of the WTO within the wider framework of global governance must
be clarified; and
— a range of substantive issues relating
to WTO agreements must also be addressed. Rich countries must
allow vastly improved market access for poor country exports.
Unfair trade practices such as the dumping of agricultural exports
must be eliminated. The TRIPs agreement should be re-balanced.
Poor countries' concerns around implementation issues must be
addressed.
OXFAM'S
RECOMMENDATIONS
WTO and Institutional Reform
R.1 Institutional objectives and indicators
for success must make it explicit that trade is a means to an
end, and not an end in itself. The WTO should follow the IMF in
adopting poverty reduction as a central objective. Systematic
mechanisms must be established to assess the impact of WTO rules
on progress towards international development targets.
R.2 Seattle highlighted the undemocratic
nature of WTO negotiating processes. The voice of poor countries
must be strengthened through capacity building, and the WTO transformed
into a transparent organisation which takes decisions with the
full participation of poor countries.
R.3 All countries should improve national
mechanisms for achieving accountability of WTO processes such
as consultations with civil society and increased parliamentary
scrutiny.
R.4 The position of the WTO within the wider
framework of global governance must be clarified. The WTO's remit
should not extend to non-trade issues where it lacks institutional
competency. In order to ensure that multilateral agreements on
human rights, development, the environment and health take precedence
over WTO rules, WTO members should consider establishing mechanisms
to involve specialist agencies, such as UN bodies, in WTO trade
disputes involving these concerns. A wider spread of policy-makers
from government should be directly involved in trade policy-making
and WTO negotiations, not just the trade specialists who have
traditionally led on these issues.
Implementation of the Uruguay Round
R.5 Developed countries must address the
implementation concerns of developing countries. For example,
rich countries must implement their commitments to open their
markets to developing country exports of textiles and clothing.
R.6 The impact of existing agreements should
be reviewed, and agreements must be revised to correct inequities,
for example by requiring further liberalisation in sectors of
particular export interest to developing countries, or by increasing
flexibility where necessary to bring agreements in line with development
strategies in poorer countries.
Agreements under review: TRIPs and TRIMs
R.7 At the WTO General Council Meeting in
early February 2000, the UK Government and the EC should support
developing country government calls for an extension to the deadline
for compliance with the TRIPs agreement, or for a peace clause.
Rich countries must refrain from demanding more restrictive laws
than those laid out in the TRIPs agreement.
R.8 Developed countries should meet commitments
to provide technical support to help poorer countries comply with
the TRIPs agreement. The cost of World Bank projects supporting
Intellectual Property Rights reform in developing countries varies
from $4 million in Brazil to $32 million in Mexico. Developed
countries should also support the WHO to provide technical advice
to developing countries to interpret the agreement in the interest
of public health.
R.9 The forthcoming TRIPs review should
establish mechanisms to monitor the impact of TRIPs on poor people's
access to essential drugs, on technology transfer, and local manufacturing
capacity. Such reviews should draw on the expertise of specialist
UN agencies such as the WHO and UNCTAD.
R.10 The UK Government should support calls
for the TRIPs review to assess options to allow automatic licensing,
shorter patent periods, or exemption for an extended WHO list
of essential drugs.
R.11 Governments must be allowed to retain
regulatory mechanisms such as requirements for technology transfer
or the hiring of nationals, as part of their national development
strategies. The TRIMs agreement must not evolve into a mechanism
for prohibiting an extended list of such policies.
The in-built agenda: agriculture and services
R.12 The British Government should vigorously
lobby its EU and other partners to eliminate subsidies on agricultural
exports. Domestic subsidies should be re-designed so that they
promote social and environmental objectives, without damaging
developing country producers.
R.13 Developed countries should improve
market access for agricultural products from poor countries by
substantially reducing general tariffs, eliminating tariffs that
escalate according to the level of processing, and reducing non-tariff
barriers, such as seasonal import restrictions.
R.14 Developing countries must be allowed
to protect and support their agricultural sectors up to the point
of self-sufficiency, in order to meet the challenges of food security
and preserve the viability of rural employment.
R.15 Major agricultural exporting countries
should establish a fund to assist import-dependent countries to
meet their food import bills at times of high world prices. This
would effectively operationalise the Marrakesh Decision on
Least Developed and Net Food-Importing Developing Countries,
which developed countries have so far failed to implement.[33]
R.16 The Agreement on Trade and Services
must not be extended to cover the health and education sectors.
Issues of particular importance for developing
countries
R.17 The EU should urgently take unilateral
action to fulfil its commitment to provide tariff- and quota-
free access for all exports from the world's poorest 48
countries, and press for other industrial countries to follow
suit
R.18 The legitimacy of the Special and Differential
Treatment principle must be restored at the WTO and maintained
for as long as some economies remain weaker than others. Existing
S&D provisions should be reviewed on the basis of their contribution
to poverty reduction objectives, and operational measures should
be strengthened. In addition, a vulnerability index should be
introduced, which defines eligibility of countries at different
levels of development for various categories of S&D treatment.
2. INTRODUCTION
2.1 Oxfam welcomes the International Development
Committee's inquiry into the WTO and developing countries.
2.2 This submission summarises Oxfam's analysis
of the outcome of the Seattle Ministerial Conference, and proposes
some ways forward for establishing the necessary conditions for
developing countries to maximise the benefits of WTO membership
in the future.
Seattle breakdown
2.3 The Seattle WTO Ministerial Conference,
that was intended to launch a new round of international trade
talks, was suspended late in the evening of Friday 3 December
1999. A number of factors contributed to the failure of the Seattle
negotiations, both issues of substance and process, including:
— outstanding differences over contentious
issues (eg agriculture, labour and the environment);
— developing countries' concerns that
their priorities (eg implementation of existing WTO agreements)
were not adequately addressed; and
— lack of transparency in the negotiating
process.
2.4 It is unlikely that any new Round will
be launched until after the US presidential elections in late
2000, and there is now some breathing space for reflection and
review of WTO processes and agreements.
Rebuilding trust
2.5 The Seattle talks ended in frustration
and recrimination. There is now an urgent need for member countries
to invest in building trust in the ability of the WTO to meet
the needs and objectives of all member countries. A clear outcome
from Seattle is that it is no longer acceptable for rich countries
to stitch up WTO deals and expect the rest of the world to accept
them without having participated in the negotiations.
2.6 Oxfam welcomes the UK Government's support
for a programme of radical reform of the WTO. Stephen Byers, Secretary
of State for Trade and Industry, has stated that "there has
to be fundamental and radical change in order for [the WTO] to
meet the needs and aspirations of all 134 of its members."[34]
A programme of reform must be complemented, however, by concrete
moves to change unfair trade rules and measures to address the
substantive concerns of developing countries relating to their
experience of implementing WTO agreements.
Addressing substantive concerns
2.7 More than ever before, the major trading
powers need to demonstrate political commitment to ensuring that
developing countries derive a fair share of the benefits of any
further multilateral trade liberalisation. Improving market access
for developing country exports, and ending unfair practices like
agricultural dumping are essential for poor countries to benefit
more equally from international trade. Developing country concerns
in relation to implementation issues must also be addressed. Progress
is possible in these areas within the context of the WTO in-built
agenda if the EU is willing to play a leadership role.
2.8 A relatively easy place to start,
is for developed countries to grant tariff and quota free market
access for all exports from the world's poorest countries[35].
This will both generate economic benefits and provide an important
signal of goodwill. Even if other industrialised countries fail
to support this initiative, the EU should act unilaterally, without
resorting to loopholes to exclude products on the grounds of "sensitivity".
Reforming the WTO
2.9 The following sections contain Oxfam's
analysis and policy proposals for WTO reform. The underlying principle
for all the recommendations is that they would help to re-direct
the world trade regime in support of poverty reduction and sustainable
development, and that these objectives should become guiding principles
for the WTO.
3. WTO INSTITUTIONAL
REFORM
3.1 There is an urgent need for the WTO
to increase trust in its ability to reflect the interests of all
its member countries and to take account of non-trade public concerns
in formulating and enforcing international trade rules.
Negotiating power
3.2 In Oxfam's analysis, a key factor behind
unbalanced WTO agreements has been the unequal negotiating power
of members. Many developing countries are under-represented, or
even totally unrepresented, in the day-to-day activities of the
WTO. Relatively few developing countries participated effectively
in the Uruguay Round, and this was reflected in the outcomes.
Many poor countries had little understanding of the financial
implications of some of their commitments. A recent World Bank
study estimates that implementing only three of the Uruguay Round
agreements can cost more than a year's development budget for
the poorest countries[36].
3.3 In contrast, developing countries worked
hard to participate fully in the preparations for Seattle. They
submitted papers during the preparatory period of analysis and
information exchange and proposed text for the draft Ministerial
Declaration. Despite these efforts, developing countries felt
that many of their key concerns, such as the failure of developed
countries to fulfil their Uruguay Round commitments, were not
taken seriously by the major trading powers. Several developing
countries still lack the resources and capacity to participate
fully in the process, and 30 were not represented in Seattle due
to a lack of resources.
The negotiating process
3.4 In Seattle, and in Geneva before that,
many negotiations were conducted in closed meetings involving
around 25 countries—the so-called "Green Room".
The countries included in these exclusive meetings in Seattle
were selected by the chair of the Ministerial Conference, Charlene
Barshefsky (US Trade Representative) and the WTO Director-General.
3.5 The untransparent and undemocratic nature
of this process left developing countries feeling excluded and
frustrated. Some developing countries (notably the Organisation
of African Unity and the Caribbean Community) made unprecedented
public statements threatening to walk away from a "consensus"
if they felt that their interests had not been fully taken into
account.
3.6 A major challenge for the WTO is to
find a way to reconcile the reality of different members having
highly unequal levels of economic and political power, with the
objective of achieving a more transparent and democratic negotiating
process that allows for more equal levels of participation by
all members.
The WTO's remit
3.7 The preamble establishing the WTO includes
a number of non-trade objectives, such as raising living standards
and achieving full employment. However, the WTO's efforts are
judged on the basis of reductions in trade barriers and growth
in international trade flows, rather than in terms of their contribution
towards the achievement of the International Development Targets.
3.8 The Seattle talks re-emphasised tensions
between WTO rules and international conventions and treaties on
human rights and the environment. The position of the WTO within
the wider global governance framework should be clarified and
limited to areas where it has institutional competency to rule
on disputes.
RECOMMENDATIONS
3.9 Institutional objectives and indicators
for success must make it explicit that trade is a means to an
end, not an end in itself. The WTO should follow the IMF in adopting
poverty reduction as a central objective. Systematic mechanisms
must be established to assess the impact of WTO rules on progress
towards international development targets. For example, the
impact of trade liberalisation on poverty could be examined as
part of the WTO Trade Policy Review Mechanism (TPRM), on the basis
of evidence presented by specialised UN agencies and civil society
organisations. The findings could then be used to inform the direction
of future WTO negotiations.
3.10 Seattle highlighted the undemocratic
nature of WTO negotiating processes. The WTO must be transformed
into a transparent organisation which takes decisions with the
full participation of poor countries. The voice of poor countries
must be strengthened through capacity building. For example,
by providing funds to enable developing countries to represent
themselves in Geneva, and training in negotiating skills and trade
policy analysis. The efforts of the UK Government in supporting
capacity-building work, including the Legal Advisory Centre for
developing countries, are very welcome, but more is required,
including increased support from other developed countries.
3.11 Action is also needed to address
wider civil society concerns about the lack of transparency and
accountability of the WTO, for example by improving national consultations
with civil society and increasing parliamentary scrutiny of WTO
processes.
3.12 The position of the WTO within the
wider framework of global governance must be clarified. The WTO's
remit should not extend to non-trade issues where it lacks institutional
competency. In order to ensure that multilateral agreements on
human rights, development, the environment and health take precedence
over WTO rules, WTO members should consider establishing mechanisms
to involve specialist agencies, such as UN bodies, in WTO trade
disputes involving these concerns. A wider spread of policy-makers
from government should be directly involved in trade policy-making
and WTO negotiations, not just the trade specialists who have
traditionally led on these issues.
3.13 Oxfam has commissioned some research
into how the WTO machinery should be reformed in favour of increased
transparency and democracy. We are organising a joint seminar
with the South Centre in Geneva in early February to debate this
issue with developing country WTO delegates and southern NGOs.
Oxfam will send a supplementary submission to the Committee with
more detailed proposals on this issue in February, based on the
outcome of these activities.
4. IMPLEMENTATION
ISSUES
An unequal bargain
4.1 A key concern of developing countries
is that their experience of implementing trade liberalisation
under the WTO agreements has been an unequal bargain. The greatest
gains from tariff reductions under the Uruguay Round agreements
have accrued to developed countries. Meanwhile, many developing
countries have undertaken substantial unilateral trade liberalisation
under structural adjustment programmes, which has not been reciprocated
by developed countries. This is why developing countries' proposals
for Seattle concentrated on the need for reform of existing agreements
in order to secure a more equal share of the benefits.
4.2 Following the implementation of the
Uruguay Round, the average tariff on imports from the least-developed
countries into the developed countries will be 30 per cent higher
than the average tariff on imports from other developed countries.
This reflects the lower reductions applied to products of interest
to the world's poorest countries.
4.3 Developing countries are also concerned
that industrialised countries have not implemented their Uruguay
Round commitments, with the result that poorer countries have
not derived the anticipated benefits. For example, the EU and
USA have delayed implementation of their agreement to reduce quotas
on imports of textiles and clothing to the last minute. So far
they have honoured only one-sixth of their promise in this area.
Difficulties of implementation
4.4 Developing countries face difficulties
in implementing existing WTO agreements, such as those covering
customs valuation and intellectual property, which involve quickly
implementing systems that developed countries have established
over much longer periods of time, and which entail substantial
implementation costs. On top of this, some developed countries
are placing bilateral pressure on poor countries to implement
more restrictive rules than those required under WTO agreements.[37]
Seattle
4.5 In Seattle, the US adopted the approach
that "a deal is a deal", and refused in principle to
consider re-visiting past agreements. The EU indicated that it
was open to developing country proposals but only if they do not
re-open existing agreements, and subject to developing countries'
support for the EU's proposed comprehensive Round.
4.6 Developing countries' insistence on
their rights to participate in shaping the WTO agenda in Seattle
means that developed countries will now have to address their
implementation concerns if any progress is to be made towards
agreeing a WTO agenda for further liberalisation.
RECOMMENDATIONS
4.7 Developed countries must address
the implementation concerns of developing countries. For example,
rich countries must implement their commitments to open their
markets to developing country exports of textiles and clothing.
4.8 The impact of existing agreements
should be reviewed, and agreements must be revised to correct
inequities, for example by requiring further liberalisation in
sectors of particular export interest to developing countries,
or by increasing flexibility where necessary to bring them in
line with development strategies in poorer countries. These steps
must be taken prior to any attempt to launch a new round of WTO
talks.
5. AGREEMENTS
UNDER REVIEW:
TRADE-RELATED
ASPECTS OF
INTELLECTUAL PROPERTY
RIGHTS (TRIPS)
AND TRADE-RELATED
INVESTMENT MEASURES
(TRIMS)
TRIPS
5.1 The TRIPs agreement establishes a set
of "minimum" standards for intellectual property rights,
based on developed country systems, which are binding for all
WTO members. Countries are required to grant patent protection
for all inventions, in any branch of technology, which fulfill
the criteria of novelty, inventiveness and usefulness. Under the
WTO agreement, patent protection must be extended to 20 years
and cover both products and processes
5.2 Prior to Seattle the EU and US refused
to consider any changes to the basic provisions of the TRIPs agreement,
stating that they will only discuss implementation issues. One
of the reasons sometimes given is that reviewing the rules may
result in negative outcomes due to commercial pressures. This
is an important consideration; nevertheless, recent public campaigns
may help ensure a more positive outcome.
Implementation concerns
5.3 By the end of this month (30 January
2000) developing and transition countries must comply with the
WTO TRIPs agreement.[38]
Oxfam is very concerned that many of these countries have not
had sufficient time or resources to comply with the TRIPs agreement
and may therefore be vulnerable to costly and damaging disputes.
Development concerns
5.4 The case for TRIPs is that it helps
ensure commercial incentives for research and development. In
Oxfam's view however, the TRIPs agreement is unduly tipped in
favour of commercial interests and is likely to damage the economic
opportunities of poor people and countries, as well as public
health. It does so by threatening to raise the prices of knowledge
intensive products such as drugs and seeds, to exclude local firms
from adapting or imitating inventions more cheaply, to increase
reliance on imports, and to restrict technology transfer.
5.5 However, there is little concrete understanding
about the likely developmental impact of the TRIPs agreement,
and further research and impact monitoring is necessary.
Health
5.6 While the TRIPs agreement is only one
factor influencing poor people's access to essential treatments,
it is likely to become increasingly significant. This is because
of the growing importance of some new patented drugs for treating
new public health priorities such as HIV/AIDs, and the need to
develop new drugs and vaccines for old diseases such as tuberculosis.
Also, evidence suggests that the price of patented drugs has risen,
and that non-availability of drugs is also a problem with some
patented drugs.
5.7 Even without WTO patent rules, current
prices put many drugs beyond the reach of poor people in developing
countries. HIV/AIDs is a case in point. It is a major killer in
sub-Saharan Africa, yet even the basic medicines necessary for
treating resulting infections are not affordable for the majority
of people. Oxfam research shows that if drug prices are too high,
poor people, particularly women, buy inappropriate, cheaper drugs,
or take less than the correct dosage, or wait days or even weeks
to save enough money for the purchase. Others just go without.
This has obvious implications for individuals' health, but also
for the spread of disease, and drug resistance caused by incomplete
courses of treatment.
Making TRIPs work for poor countries
5.8 The TRIPs agreement contains various
safety clauses, which in theory allow developing countries some
flexibility in adapting their patent regimes in favour of key
human development objectives. For example there is an exemption
which allows governments to use certain safety provisions in order
"protect the public health interests of their people".
These provisions include the possibility of compulsory licensing
or parallel imports for example. However, in practice it may be
difficult for developing countries to make effective use of these
provisions.
5.9 Firstly, developing countries attempting
to use the safety provisions may come under intense pressure from
powerful northern countries. Even before the deadline for developing
countries to comply with TRIPs, the US Government, in support
of its pharmaceutical companies, attempted to stop the South African
government from allowing local firms to manufacture US-patented
AIDS medicines—a measure that South Africa considered essential
in order to make treatment available at affordable prices for
the country's many sufferers.
5.10 Also many developing countries lack
the legal expertise necessary to judge whether such measures are
consistent with the provisions of the TRIPs agreement. The burden
of proof in disputes falls on countries rather than companies.
The risk of incurring a costly dispute is probably sufficient
to make most err in favour of caution. Also, the tendency of WTO
dispute panels has been to give the benefit of doubt to established
standards: in the case of TRIPs this is likely to mean giving
weight to the more restrictive interpretations of TRIPs found
in many industrialised countries.
5.11 Both the US and EC have recently made
statements indicating that they will accept a more flexible interpretation
of the TRIPs agreement in the case of public health objectives.[39]
However, continual pressure will be needed to ensure that these
commitments are translated into practice.
RECOMMENDATIONS
5.12 At the WTO General Council Meeting
in early February 2000, the UK Government and the EC should support
developing country government calls for an extension to the deadline
for compliance with the TRIPs agreement, or for a peace clause.
Rich countries must refrain from demanding more restrictive laws
than those laid out in the TRIPs agreement.
5.13 Developed countries should meet
commitments to provide technical support to help poorer countries
comply with the TRIPs agreement. The budgeted cost of World Bank
projects supporting Intellectual Property Rights reform in developing
countries varies from $4 million in Brazil to $32 million in Mexico.
Developed countries should also support the WHO to provide technical
advice to developing countries to interpret the agreement in the
interest of public health.
5.14 The forthcoming TRIPs review should
establish mechanisms to monitor the impact of TRIPs on poor people's
access to essential drugs, on technology transfer, and local manufacturing
capacity. Such reviews should draw on the expertise of specialist
UN agencies such as the WHO and UNCTAD.
5.15 The UK Government should support
calls for the TRIPs review to assess options to allow automatic
licensing, shorter patent periods, or exemption for an extended
WHO list of essential drugs.[40]
TRIMS
5.16 Investment, like trade, can play an
important role in the development process through employment creation
and the transfer of skills and technology necessary for competition
in global markets. What is important for poverty reduction, are
the conditions under which it is received and regulated. The WTO's
Trade-Related Investment Measures (TRIMs) Agreement limits developing
country governments' ability to define these terms, and is another
example of how WTO rules favour TNC interests.
5.17 The kinds of investment rules that
the TRIMs Agreement requires governments to phase out include
requirements that foreign companies, as a condition of market
access, use a certain proportion of locally produced inputs, or
balance imported inputs with equivalent or higher volumes of exports.
These measures can help to ensure that foreign investment contributes
to national development goals.
5.18 The review of the TRIMs Agreement may
generate proposals to extend the list of prohibited policies.
These could include measures from the failed Multilateral Agreement
on Investment (MAI), such as those outlawing requirements on firms
to transfer technology or hire a given level of nationals.
5.19 There is certainly a case for requiring
countries to be much more transparent about the Trade-Related
Investment Measures that they are applying. However the review
of TRIMs must not be used as a mechanism for developed countries
to push broader investment discussions onto the immediate WTO
agenda.
RECOMMENDATIONS
5.20 Governments must be allowed to retain
regulatory mechanisms such as requirements for technology transfer
or the hiring of nationals, as part of their national development
strategies. The TRIMs agreement must not evolve into a mechanism
for prohibiting an extended list of such policies.
6. THE "IN
-BUILT AGENDA":
AGRICULTURE AND
SERVICES
6.1 WTO members are mandated to conduct
further negotiations on agriculture and services starting in 2000.
Oxfam believes that these negotiations should be informed by a
review of the impact of existing agreements on poverty and progress
towards international development targets. Furthermore, any commitments
to further liberalisation should first address imbalances in the
existing agreements, in particular, by removing northern barriers
that restrict developing countries' exports and by relaxing rules
that restrict the ability of developing countries to pursue national
development strategies.
AGRICULTURE
6.2 According to the Uruguay Round Agreement
on Agriculture, these negotiations must take into account: the
experience of implementing the reduction commitments, the effects
of the reduction commitments on world trade in agriculture, non-trade
concerns (which include food security), and special and differential
treatment to developing country members.
International agricultural trade
6.3 Agriculture is one of the most distorted
sectors in international trade. Developing countries face both
restricted market access and the problem of northern dumping and
subsidised exports. Developing countries' trade interests are
not homogeneous in this sector: some are big exporters and support
further liberalisation, while others wish to maintain their domestic
production in the interests of food security and maintaining livelihoods
for vulnerable communities. All developing countries would like
to see greater fairness in world trade through a reduction in
northern subsidies and greater access to northern markets.
6.4 Agriculture plays a crucial role in
supporting the livelihoods of millions of people in developing
countries, particularly women who play a crucial role in staple
food production. For many developing countries, agriculture accounts
for the bulk of export earnings and, despite growing urbanisation,
rural areas contain most of the poorest people. The outcome of
further agriculture negotiations will have significant direct
and indirect effects on the ability of small-scale and vulnerable
producers to sustain or improve their livelihoods.
Northern subsidies, protection and dumping
6.5 The Uruguay Round Agreement on Agriculture
required developing countries to liberalise their markets, while
endorsing the continuation of high levels of protection and support
in industrialised countries. Under the agreement, WTO member countries
have to reduce levels of domestic income support, to reduce the
volume and value of subsidised exports, and to convert all import
barriers into tariffs.[41]
Despite these reduction commitments, the agreement allows for
the continuation of high levels of subsidy, continued protection,
and export dumping by developed countries.
6.6 In 1998, total agricultural support
in the OECD amounted to US$353 billion, more than triple the value
of official development assistance and twice the foreign direct
investment flows to developing countries. In the same year, farmers
in the EU, Japan and the USA received around $20,000 each. This
compares with average per capita incomes of $228 p.a. in 1996
in the least developed countries.
6.7 Northern subsidies create production
that exceeds domestic demand. Countries then use export subsidies
to dispose of surpluses on world markets. This depresses prices
and reduces the earnings of developing country exporters, as well
as their world market share. In 1950, the developing world accounted
for around one half of world agricultural trade. Today it accounts
for only one quarter, despite its dependence on this sector for
foreign exchange earnings, income, and employment. The dumping
of subsidised northern exports in developing countries distorts
markets, undermines the competitiveness of often highly efficient
local producers, and threatens rural livelihoods and food security.
6.8 EU subsidised exports of tomato concentrate
to West Africa in the 1990s have damaged the livelihoods of local
tomato producers and destroyed local processing industries. Following
liberalisation in 1994, cheap imports from the EU was a key factor
behind a 70 per cent fall in tomato concentrate production in
Senegal, which had negative consequences for jobs and incomes.
Gambia imports even more EU tomato concentrate than Senegal, and
its consumption is increasingly replacing fresh tomatoes, which
damages the livelihoods of local tomato producers, many of whom
are women.
Cheap food imports
6.9 An argument in favour of developing
countries opening up to cheap food imports, often promoted by
agricultural transnational corporations, is that it brings benefits
for poor urban consumers. This is no solution for countries with
foreign exchange shortages, particularly in view of the volatility
of world grain markets. Long-term national food security requires
increasing local food production and the purchasing power of the
poor, not just allowing cheap imports.
6.10 Food price rises caused by the elimination
of export subsidies will threaten the ability of import-dependent
developing countries to pay their bills. In these cases, the main
agricultural exporting countries should provide funds to pay for
the supply of staple foods at concessionary prices for a transitional
period.
Protectionism
6.11 Northern protectionism in the agricultural
sector is one of the key barriers preventing developing countries
from increasing their share of world trade. Tariffs are not the
only problem. EU imports of fresh fruit and vegetables are subject
to a complex system of quotas and seasonal restrictions, designed
to protect European producers. In addition, tariff escalation
(tariffs that increase according to the level of processing) deters
the progression of developing countries into the production and
export of higher-value processed goods. For example, high tariffs
on cocoa powder and chocolate bars make it unviable for some developing
countries to diversify away from the production and export of
raw cocoa beans into processed chocolate products.
Seattle
6.12 In Seattle, agriculture was predictably
a contentious issue, and a lot of time was devoted to negotiations
on this part of the draft Ministerial Declaration. Key issues
included: the strength of the language on special and differential
treatment for developing countries; whether or not the wording
on export competition should indicate an intention to eliminate,
or merely continue to reduce, export subsidies and credits; and
whether the "multifunctionality of agriculture" should
be referred to in the section on "non-trade concerns"
which must be taken into account in further negotiations[42].
6.13 The EU was not prepared to make major
concessions on agriculture in Seattle, without achieving substantive
gains in other areas within an expanded comprehensive round (which
would include investment and competition measures). This does
not bode well for the prospects of substantial progress being
made in negotiations under the limited "in-built agenda".
6.14 There are, however, external pressures
for reform of the EU's Common Agricultural Policy (CAP), which
could expedite progress in the agricultural negotiations regardless
of progress in agreeing a new Round of negotiations. These include:
the expiry of the "Peace Clause" in 2003[43],
and EU enlargement, which has huge implications for the sustainability
of the EU's budget for the CAP.
RECOMMENDATIONS
6.15 The British Government should vigorously
lobby its EU partners to eliminate subsidies on agricultural exports.
Domestic subsidies should be re-designed so that they promote
social and environmental objectives, without damaging developing-country
producers.
6.16 Developed countries should also
improve market access for agricultural products from poor countries
by substantially reducing general tariffs, eliminating tariffs
that escalate according to the level of processing[44],
and reducing non-tariff barriers, such as seasonal import restrictions.
6.17 As the Government of India proposed
in the preparations for Seattle, developing countries must be
allowed to protect and support their agricultural sectors up to
the point of self-sufficiency, in order to meet the challenges
of food security and preserve the viability of rural employment[45].
6.18 Major agricultural exporting countries
should establish a fund to assist import-dependent countries to
meet their food import bills at times of high world prices. This
would effectively operationalise the Marrakesh decision on least
developed and net food-importing developing countries, which developed
countries have so far failed to implement.
SERVICES
6.19 Oxfam's WTO-related work has not focused
on the General Agreement on Trade in Services (GATS). We are concerned,
however, that some developed countries are pushing for further
liberalisation commitments from developing countries in this area,
and in particular that some countries have suggested that GATS
should be extended to cover the health and education sectors.
The latter proposal could have substantial implications for public
provision of, and affordable access to, these services by the
poor.
6.20 The existing GATS Agreement is unbalanced
in that although it commits a country to allow the cross-border
movement of capital, developed countries retain restrictions on
the movement of labour, an areas of "services" of great
interest to some developing counties. Employment mobility can
make a contribution to economic growth and welfare in poorer countries,
mainly through remittances, though emigration can also deprive
a country of its well-qualified personnel. This complex issue
should be addressed under GATS as part of a broader international
discussion on the subject.
RECOMMENDATIONS
6.21 The Agreement on Trade in Services
must not be extended to cover the health and education sectors.
7. SPECIAL AND
DIFFERENTIAL TREATMENT
FOR DEVELOPING
COUNTRIES
7.1 The convention that developing countries
do not have to take on the same responsibilities as developed
countries, in recognition of their lower level of economic development,
has been institutionalised in the WTO's special and differential
(S&D) provisions. The maintenance of S&D treatment is
vital, given that forcing "equal" trade relations between
unequals will only reinforce inequality. And yet, some developed
countries, particularly the US, are seeking to erode this principle
and make all WTO member countries subject to the same WTO commitments.
7.2 The Uruguay Round already weakened the
S&D provisions compared to those that applied under previous
GATT agreements.[46]
This has left the existing S&D provisions inadequate to meet
the development needs of poor countries in certain sectors, given
the weakness of their economies, inequalities in the international
trade regime, and continuing high levels of poverty.
7.3 The classification of countries deserving
S&D treatment under WTO rules is based on the UN definition
of "developing" and "least-developed" countries.
This fails to address the situation of small economies that are
heavily dependent on a few export commodities and are thus highly
vulnerable, despite their somewhat higher GDP per capita, for
example the Windward Islands, which are heavily dependent on banana
exports to the EU.
7.4 Oxfam believes that two factors should
be central to determining appropriate S&D provisions at the
WTO: the likely developmental impact of WTO rules, and the capacity
of a country to adjust to the rules.
RECOMMENDATIONS
7.5 The legitimacy of the Special and
Differential treatment principle must be restored at the WTO and
maintained for as long as some economies remain weaker than others.
Existing S&D provisions should be reviewed on the basis of
their contribution to poverty reduction objectives, and operational
measures should be strengthened. In addition, a vulnerability
index should be introduced, which defines eligibility of countries
at different levels of development for various categories of S&D
treatment.
Oxfam
January 2000
33 This decision was agreed at the close of the Uruguay
Round agriculture negotiations to reassure least-developed and
import-dependent countries that they would be assisted in facing
the potential negative effects resulting from growing fluctuations
in world market prices for food, which were expected to increase
as a result of the implementation of the Agreement on Agriculture. Back
34
"Byers' ultimatum for WTO", The Guardian, Saturday
8 January 2000. Back
35
The 48 least-developed nations, as defined by the United Nations. Back
36
Customs valuation, Sanitary and Phyto-Sanitary regulations, and
Trade-Related Aspects of Intellectual Property (TRIPs). Back
37
See section on TRIPs below. Back
38
Least developed countries have until 2006 to comply with the TRIPs-extendable
on request. Developing countries that currently provide patent
protection to processes and not to products, for example in the
food and pharmaceuticals sector, can delay applying product patents
until 1 January 2005. Even here, governments must ensure that
inventions made between 1995-2004 will be able to gain patent
protection after 1 January 2005. Back
39
The EC, together with Hungary, Japan, Korea, Switzerland and Turkey,
issued a statement at Seattle in support of the use of compulsory
licensing for essential drugs appearing on the WHO list. Although
probably well intended the restriction of the statement to the
WHO essential drugs list could in fact limit the scope of compulsory
licensing. A better wording would be for an extended list of WHO
essential drugs, or for life saving drugs including those appearing
on the list of essential drugs of the WHO. President Clinton also
recently announced a more flexible interpretation of the TRIPs
agreement, which would ensure that public health crises are taken
into account when applying US trade policy. Back
40
Only 15 per cent of the WHO's model list of essential drugs are
patented. Back
41
Developing countries were given some concessions in terms of lower
reduction commitments and longer implementation periods. However,
they have to reduce restrictions on agricultural imports by 13
per cent over the lifetime of the Agreement, which could exacerbate
the food security problems they already face. Back
42
"Multifunctionality" is the term used by the EU to justify
the need for its Common Agricultural Policy on the grounds that
agriculture provides not only food and employment, but also a
social and cultural structure for rural communities and, therefore,
requires domestic support. Back
43
The Peace Clause limits challenges to agricultural subsidies that
are allowed under the Uruguay Round Agreement on Agriculture,
and its expiry in 2003 will make some EU subsidies vulnerable
to challenge under the dispute settlement process. Back
44
Tariff escalation deters poor countries from diversifying from
the export of primary commodities, for which international prices
have experienced a historic decline, into higher value-added processed
or refined products for export. Back
45
This idea is sometimes referred to as a "food security box".
The aim would be to establish either a separate article or series
of amendments in the Agreement on Agriculture that increase the
flexibility for poor countries that want to take positive steps
to promote food security. Back
46
They now take the form of longer implementation timeframes or
lower targets for reduction of trader barriers, rather than providing
greater latitude for developing countries within agreements, for
example in terms of tariff preferences. Back
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