Select Committee on International Development Minutes of Evidence



MEMORANDUM SUBMITTED BY THE CATHOLIC AGENCY FOR OVERSEAS DEVELOPMENT (CAFOD)

INTRODUCTION

  CAFOD welcomes the timeliness of the Development Committee's inquiry, and the inclusion of issues related to the implementation of the Uruguay Round agreements which, while of urgent interest to many developing countries, were largely ignored in Seattle. Three CAFOD delegates attended the Seattle Ministerial. This submission is based on their visit, discussions with other delegates, and background research.

  The breakdown of the talks was not a disaster for the developing world. In the aftermath, Sir Shridath Ramphal, who represented the Caribbean countries in Seattle, commented that "The Caribbean and other nations of the Third World have good reason to be happy with the failure to arrive at a consensus". Seattle's true impact on the developing world will depend on what happens next, both within the WTO and in bilateral trade relations between industrial and developing countries. The WTO itself stands at a crossroads. The path it now takes will profoundly influence the economic prospects for the developing world.

  The EU and US Governments should now acknowledge that the atmosphere of recrimination and distrust so evident in Seattle shows the need for a thorough overhaul of the WTO, not least to ensure that developing countries are no longer sidelined within the organisation. In Seattle their trade ministers were kept in the dark, their demands ignored, and their arms twisted when the powerful nations wanted their support. Several southern delegates, including Ramphal, described the process as "neocolonial", and by the end of the meeting, US Trade Representative Charlene Barshefsky, was being greeted with boos and catcalls by delegates. WTO reform is needed to create a new, fairer, more development-oriented framework of rules for multilateral trade.

  The danger, however, is that the powerful nations will give up on the WTO and retreat further into protectionism. This is especially true of the US as it enters an election year. That could be enormously detrimental to developing countries, which have spent the last decade liberalising their economies on the promise of improved access to northern markets.

THE BRITISH GOVERNMENT'S ROLE IN SEATTLE

  CAFOD applauds several aspects of the British Government's policies in the run up to and during Seattle. Clare Short first coined the term "development Round", drawing attention to the need to give priority to development issues in the planned Round of trade negotiations. She was also one of the few development ministers to attend the talks, along with environment minister Michael Meacher, making the British delegation particularly representative of non-trade concerns.

  In Seattle, the official British delegation, led by Stephen Byers, also established a welcome precedent by including representatives from NGOs, the TUC and the CBI in the official UK delegation and briefing British NGOs and business representatives for an hour every evening, listening carefully to their feedback.

  CAFOD, however, believes that events in Seattle demonstrated the difficulties in the Government's stated position that any "development Round" should include a range of new issues such as competition policy and investment (known as a "comprehensive Round"). It was clear, both in Seattle and beforehand, that many developing country governments did not share this view, arguing instead that their interests and limited capacity would be best served by addressing a limited number of issues, beginning with the negative impacts of the Uruguay Round agreements. The EU, and particularly the British Government, was therefore placed in the uncomfortable position of claiming to know what the South needed better than developing countries themselves.

  There was widespread scepticism over the EU's position among developing countries, who interpreted its insistence on a broad agenda as a way to maximise the trade-offs it could demand in return for any action on the Common Agricultural Policy. In the aftermath of Seattle, EU negotiators confirmed this interpretation of its position. Many developing countries, along with the US, see the CAP as one of the greatest obstacles to ensuring developing nations benefit fully from globalised trade, since it both limits access to European markets, and dumps artificially cheap food on other countries.

  The EU's insistence on a broad agenda was one of the reasons why the South, especially the smaller nations, came to feel so alienated by the Seattle process. What is now needed is a change of approach. If the EU does indeed support a development-based round of talks, it should begin by listening to and acting on the many concerns of developing countries (see sections on implementation and agriculture).

  Seattle also demonstrated several problems with the nature of Britain's representation at the WTO. Britain negotiated via the EU delegation, led by the EC directorate for trade and its Trade Commissioner Pascal Lamy. That meant that issues like development and environment, which belong with other directorates, got short shrift in the heat of negotiations. The most notorious example of this was when Commissioner Lamy accepted a US proposal for a biotechnology working group, leading to a debilitating row within the EU delegation, as Michael Meacher and other environment ministers from EU Member States publicly expressed their opposition to the concession. There is a clear case for looking at how non-trade interests and individual member states are represented in the EU negotiating team.

  Outside Britain's formal role at the WTO, its leadership role within the Commonwealth could enable it to lead the way in rebuilding some of the trust lost due to the Seattle experience. It could provide an important channel through which developing country concerns can be taken forward at the WTO.

INSTITUTIONAL REFORM

  All sides agree that the WTO is in serious need of institutional reform, and CAFOD supports the British Government's proposal for an extraordinary meeting of members at ministerial level to discuss this issue. However, the WTO's problems go much deeper than questions of organisational mechanics. They also include the organisation's assumptions, aims and governance.

  The WTO has hitherto been seen a staking precedence among international bodies on trade-related issues. This has led to decisions which clearly affect other areas, such as environment or development (notoriously the ruling on the EU banana regime), being taken by the WTO on the basis of trade concerns alone. Other organisations and regimes (for example the new Lome agreement) are then expected to become "WTO compatible".

  Instead, the WTO should be made "development compatible" by subordinating it to the UN system to which it theoretically belongs. When disputes arise which involve the environment, development, or other non-trade concerns, the WTO should defer to the relevant specialist agencies of the UN. Mechanisms should be put in place to enable these bodies to arbitrate fairly and quickly in disputes.

  The WTO should also follow the lead offered by the World Bank and IMF in recent years, and publicly commit itself to the International Development Targets, making the reduction and elimination of poverty its overriding goal. Too often, trade liberalisation is seen as an end in itself, rather than as a means to the end of sustainable development. This means that, in cases where trade liberalisation can actually damage development, trade liberalisation comes first. One useful reform would be to overhaul the WTO's Trade Policy Review Mechanism, which reports on individual members' trade policies. This currently only reports on steps to liberalise trade, and ignores issues such as the social and environmental impact of such policies.

  At the national and EU level, parliamentary oversight of the WTO should be stepped up, in particular to ensure that non-trade concerns are adequately taken into account. CAFOD believes the introduction of an annual reporting procedure to both European and British Parliaments would contribute towards this aim.

  Within the UK, the Secretary of State for Trade and Industry's decision to include environmental criteria in the mandate of the ECGD is a welcome integration of trade and non-trade concerns. The Development Committee has recommended that the Government's developmental objectives also be included in the ECGD's revised Mission Statement and drawn particular attention to the use of the ECGD to underwrite arms sales. These steps constitute welcome recognition of the need to integrate trade and wider non-trade concerns. The same logic should apply to the WTO.

  There is clearly a need for reform to the WTO's decision-making structures. Its insistence on taking all decisions by consensus appears superficially democratic since it gives the smallest countries the same weight as the largest. In practice, however, it has created a byzantine and opaque process of decision-making which favours bilateral horse-trading between powerful nations and blocs. The real decisions are taken behind closed doors and the less powerful nations are cajoled or coerced into agreement. In Seattle these practices alienated southern members to such a degree that African, Caribbean and Latin American nations issued separate statements (attached)[69] condemning the way in which the talks had been conducted.

  This process inevitably squeezes out global concerns such a poverty reduction and environmental protection.

  There is a need for discussion about alternatives to this way of working, such as a constituency system modelled on the IMF. Or one which provides for much more detailed scrutiny of texts, as in the UN system. It may be that the era of big trade rounds, with their emphasis on striking deals and gaining unilateral advantage, should come to an end and be replaced by a more truly multilateral system. CAFOD's principal concern, however, is that any new structure should enhance rather than reduce the level of involvement of developing country governments in the running of the WTO.

  One of the key problems of the WTO as an institution is that, while democratic on paper, developing countries are in practice unable adequately to argue their case in Geneva or during negotiations. Thirty members were unable even to afford to send delegates to Seattle. This is clearly unacceptable. CAFOD welcomes the UK government's support for a legal aid centre for developing countries, based in Geneva, to enable them to cope with the WTO's dispute procedures, but far more needs to be done. For example, a funding mechanism should be set up to allow poorer countries to maintain a permanent presence in Geneva.

  Developing countries are also disadvantaged within the disputes settlement system since, even if they win a case, their only means of redress is by imposing trade sanctions on the wrongdoer. While the US is able to impose a range of fairly effective sanctions on smaller economies (and even on the EU), it is hard to envisage a country like Ghana or Mali imposing sanctions on the US or EU!

  The general call for increased transparency at the WTO should include the role of transnational corporations, which maintain an effective lobby in Geneva and drafted many of the agreements in the Uruguay Round process. CAFOD does not oppose the involvement of business in the WTO, but believes that their participation should be properly regulated, with disclosure of their finances, staff and activities in Geneva and within the WTO in general, and rules to avoid conflicts of interest arising.

IMPLEMENTATION

  "Implementation" in Seattle became one of the main faultlines that divided North from South. It was effectively shorthand for a number of areas in which developing countries felt let down by the Uruguay Round agreements. The US and EU's refusal to revisit these agreements was a major contributor to the rising tide of anger from many Third World delegates as the week wore on.

  Underlying this argument there is a key methodological issue at stake. To what extent should the WTO proceed on the basis of empirical evidence, carried out by independent bodies such as UNCTAD or the FAO, and to what extent on the basis of simulation and theory? So far there has been almost no attempt to establish what the impact of the Uruguay Round has been in practice—an exercise which might help bridge the gap between the WTO and Northern governments who maintain that the round has brought enormous benefits to all except sub-Saharan Africa, and the Third World governments who claim that their actual experience has been the opposite.

  CAFOD believes that any credible pro-development trade policy must be based on empirical evidence and impact assessment. The British Government does not seem to share this view—senior officials at the Department for International Development have told CAFOD that the search for empirical evidence is a "wild-goose chase" and that "simulation models are the only valid approach".

  CAFOD believes that a new consensus can only be forged if the WTO stands back and adopts the "review, repair, revise" approach advocated by many NGOs prior to Seattle. The first step has to be an attempt (allowedly fraught with technical difficulties) to analyse the impact of the Uruguay Round and, where results have not lived up to predictions, to consider amending the implementation of the round to further development goals.

  Whatever the outcome of this wider debate, there are a number of areas where developing countries are already up in arms over the implementation of the Uruguay Round. These include:

    —  The 1994 Marrakech decision to compensate net food importing developing countries for the higher food import bills expected from the Uruguay Round. This has never been implemented, even during periods of sharp food price rises.

    —  The widespread abuse of anti-dumping legislation by northern governments, as a means to impose protectionist barriers against southern imports.

    —  WTO trust funds for technical assistance urgently need to be replenished. Only two countries (Uganda and Tanzania) have so far benefited from the WTO and World Bank's "Integrated Framework" for trade-related assistance to the least developed countries, a programme which has been running for three years.

    —  The North should consider providing financial support to enable countries to meet the costs of implementing the Uruguay Round, which often impose a heavy burden on poorer governments. For example, the costs of introducing the agreed customs procedures has been estimated at $10 million per country.

  Rich countries often respond to claimants from the South by offering to delay the deadlines for implementing various agreements signed in the Uruguay Round. However what is needed is a much greater level of recognition for the use of special and differential treatment of developing countries, enabling them to pursue development goals without fear of being prosecuted for breaking WTO rules.

  In Seattle, the US and other northern governments offered to put these issues on the table in a new round of negotiations, but this is both illogical and unfair. The WTO should right the wrongs and mistakes of the Uruguay Round before proceeding with any new negotiations. Making progress on righting imbalances in the last agreement conditional on further concessions in a new round will only compound the problems.

IMPACT OF TRIPS

  The TRIPs agreement signed under the Uruguay Round has raised serious concerns among developing country governments and NGOs. CAFOD has been involved in two particular areas of special relevance to developing countries: the patenting of plant varieties (Article 27) and compulsory licensing (Article 31).

  Article 27, setting out the exceptions to patentable subject matter and obliging member states "to provide for protection of plant varieties either by patents or by an effective sui generis system", is regarded by many developing countries as threatening because the industrialised countries, where most commercial plant breeding takes place, favour a rigorous system based on the International Union for the Protection of New Varieties of Plants (UPOV). Developing countries argue that many of the plant varieties now in use have been developed and conserved by small farmers and that this development has depended on the free exchange of seeds and genetic material. A uniform system of plant breeders rights—as proposed by UPOV—would not recognise the historic contribution of farmers and would inhibit the conservation of seed and exchanges by farmers and lead to further genetic erosion.

  Article 31 of the TRIPs agreement deals with the use of a patented process or product without the authorisation of the owner of the patent. The requirement to obtain authorisation from the right holder on "reasonable commercial terms" may be waived in cases of "national emergency or other circumstances for extreme urgency or in cases of public non-commercial use". CAFOD believes that this article thus allows developing countries to manufacture drugs to combat life-threatening diseases. We know, however, the United States has exerted bilateral pressure on South Africa to prevent it going down the compulsory licensing route for the manufacture of anti-AIDS drugs. South Africa can make the drugs available for a sixth of the cost of importing the drugs from the US patent holder. There needs to be explicit recognition and political support for this legitimate use of compulsory licensing in any revised TRIPs Agreement.

  CAFOD believes that countries should also be free to decide their own intellectual property regime, including the option not to patent life forms and to secure farmers' rights to save seeds from one harvest for the next. This could be agreed as part of the TRIPs review within the built-in agenda.

  The Review of Article 27.3(b) on biopatenting, however, is likely to be limited in scope owing to pressure from the United States to limit the review only to implementation and to exclude the provisions themselves. Most developing countries want a review of the provisions because this could open the way for revision of the text.

  There is concern that, in the absence of any agreement in Seattle, the 1 January 2000 deadline for the implementation of the Uruguay Round TRIPs agreement still stands, opening the way for a potential avalanche of dispute settlement cases by northern governments against southern governments which have not had the time or resources to comply by the deadline.

IN -BUILT AGENDA ON AGRICULTURE AND SERVICES

  In Seattle, developing countries showed almost unanimous suspicion of the EU's position on agriculture, claiming that its emphasis on the "multifunctional" (non-trade) aspects of agriculture was merely a smokescreen to enable the EU to maintain high levels of agricultural subsidies. These encourage food dumping on world markets, undermining domestic agriculture in numerous developing countries.

  The EU could go a long way toward putting these doubts to rest, and rebuilding trust within the WTO, if it were seriously to address developing country criticisms of the Common Agricultural Policy. This would mean analysing its impact on development, rather than merely treating the talks as an exercise in trade negotiations whereby any "concession" requires a reciprocal concession from the developing nations, from the Cairns group of agroexporters or from the US.

  The potential outline of a future agriculture agreement can be seen in the successive drafts circulated in Seattle. These were largely aimed at bridging the gap between the US and Cairns Group of agroexporters, who wanted the elimination of agricultural subsidies, and the EU which wanted a form of words which encouraged reduction but not elimination. However, many developing country concerns were not addressed in the drafts, notably anti-dumping practices, the US' use of export credits and the absence of any reference to tariff peaks which discriminate against southern agricultural exports.

  The greatest disappointment was perhaps the failure of the text to make the objective of meeting food security central to global agricultural trade. This could happen through the creation of a "food security box", enabling developing countries to introduce measures to defend food security, for example of peasant farmers, without fear of breaking WTO rules.

ZERO-TARIFF ACCESS TO NORTHERN MARKETS

  This issue was widely discussed in Seattle. CAFOD supports the British government's call for zero tariff access on all (not "essentially all" as suggested by the EC, which could exclude bananas, beef, sugar and rice) imports from the 48 least developed countries. In the absence of a generalised round of trade talks, following the collapse in Seattle, such a step, preferably taken by all the major industrialised nations, would be an important symbol of a change of approach form Seattle, and a good way to begin rebuilding the mutual trust and respect that was lost there.

Duncan Green,
Catholic Agency for Overseas Development (CAFOD)

January 2000


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