Memorandum submitted by CAFOD
EXECUTIVE SUMMARY
The "Doha development agenda" is rapidly
turning into a desert mirage. The end of 2002 saw many of the
negotiations in Geneva in a state of paralysis (or at best, glacial
progress). This was especially true in the areas of keenest interest
to developing countries, such as agriculture, special and differential
treatment, and TRIPs/access to medicines.
CAFOD would therefore like to ask the International
Development Select Committee to consider setting up a joint committee
to monitor progress in the Doha Round negotiations, along the
lines of the Quadripartite committee on Arms Sales.
POLICY RECOMMENDATIONS
ON CAP REFORM
DG Agriculture and the Common Agricultural Policy
should be scrapped and replaced by DG Rural Affairs and a Common
Rural Policy, free from capture by the agribusiness and farm lobbies.
In the meantime, through the mid-term review:
— CAP reform should have as an explicit
objective that it works in the interests of poverty reduction
and food security in developing countries.
— The EU should set out a binding timetable
for the elimination of all export subsidies.
— The final proposals agreed by the
MTR should be subject to an assessment of their likely impact
on food security in developing countries.
POLICY RECOMMENDATIONS
ON MARKET
ACCESS
— The EC should continue to lobby the
OECD to open its markets to exports from the poorest countries,
and speed up the introduction of the Everything But Arms initiative.
— More research is urgently needed
to determine in what circumstances market access and developing
country export promotion are most effective in reducing poverty.
POLICY RECOMMENDATIONS
ON SPECIAL
AND DIFFERENTIAL
TREATMENT IN
THE WTO
The EU should seek to correct the inequities
of the Agreement on Agriculture through a two-stage process:
— Developing countries should be able
to rebalance the agreement through the use of countervailing measures
against subsidised imports, until the north cuts domestic support
and subsidies.
— Developing countries should be provided
the flexibility to deal with issues such as price volatility,
(through special safeguards) and the need to protect small farmers
from dumping (eg through a Development Box, allowing countries
to protect food security crops).
POLICY RECOMMENDATIONS
ON DEVELOPING
COUNTRY CAPACITY
Developing country delegates face an impossible
workload in Geneva. Moreover, CAFOD has serious concerns about
the way capacity building is being used politically in fora such
as the WTO.
— HMG should review the effectiveness
of the process of "ministerials + Rounds" and explore
other options, for example the more inclusive UN negotiation processes
of the Framework Convention on Climate Change.
POLICY RECOMMENDATIONS
FOR THE
CANCÚN
MINISTERIAL
The Cancún ministerial in September 2003
looks like resembling Seattle much more than Doha. The main emerging
flashpoints are:
— Agriculture: CAP and northern subsidies,
lack of Special and Differential Treatment for Developing Countries.
— New Issues: Whether to commence negotiations
on investment, competition, transparency in government procurement
and trade facilitation.
— Implementation: outcome of detailed
discussions of developing country problems in implementing the
Uruguay Round agreements.
In the run-up to the Cancún ministerial,
HMG should build confidence in the developed country's commitments
to change the way the WTO operates by publicly announcing its
willingness to abandon negotiations on Investment and the other
New Issues.
INTRODUCTION
In the aftermath of the Doha ministerial, NGOs
were divided between optimists and sceptics over the prospects
for the "Doha Development Agenda". CAFOD was in the
"glass half full" camp, arguing that the greater attention
to the needs of developing countries reflected in the ministerial
declaration was a step forward on previous agreements, opening
the way to pro-poor reform of the multilateral trading system.
Unfortunately, events in the 14 months since
Doha have given more comfort to the sceptics than the optimists.
The end of 2002 saw many of the negotiations in Geneva in a state
of paralysis (or at best, glacial progress). This was especially
true in the areas of keenest interest to developing countries,
such as agriculture, special and differential treatment, and TRIPs,
where one of the few "gains" of Doha in terms of access
to medicines for developing countries, was threatened by the intransigence
of the US administration and pharmaceutical lobby.
Events outside the WTO have not helped. The
increased subsidies of the US farm bill and the inability of the
EU to achieve meaningful CAP reform have caused genuine anger
among developing countries, who react strongly against what they
see as the "you liberalize, we subsidize" approach of
the powerful northern economies.
CAFOD's current assessment is that the talks
in Geneva run a significant risk of breakdown between now and
the Cancun ministerial. The blame lies with a combination of the
impossibly overloaded agenda agreed in Doha, the organisational
problems of the WTO, and the lack of political will demonstrated
by, among others, the EU and US negotiators. The "Doha development
agenda" is rapidly turning into a desert mirage.
Although officially supposed to be completed
by January 2005, history and the state of talks in Geneva suggests
that negotiations are likely to drag on for several years. Given
the central importance of the Doha round, and DFID's important
international role in the debate on trade and development, CAFOD
would like to ask the International Development Select Committee
to consider setting up a joint committee to monitor progress in
the Doha Round negotiations, along the lines of the Quadripartite
committee on Arms Sales. This would comprise representatives of
Select Committees overseeing the work of the DTI, DEFRA, DFID
and perhaps FCO.
1. AGRICULTURAL
REFORM
The CAP is hurting some of the poorest people
and communities in the world. In the words of Lord Desai it is
"a crime against humanity".
Three quarters of the world's 1.2 billion extremely
poor people live and work in rural areas. Agriculture is crucial
to their survival and the global fight against poverty. Nearly
three billion people—half the world—live on less than
$2 a day, which is less than the support received by the average
European cow.
DAMAGING IMPACT
OF EU TRADE
The CAP hurts developing countries and their rural
poor in two ways. Firstly, it undermines local producers within
developing countries by dumping subsidised goods on their local
markets. Secondly, it reduces the potential for developing country
farm exports to both European and third country markets.
CAFOD's concerns are mainly with the first impact,
since dumping affects poor farmers directly, whereas developing
country exports are often dominated by a few large farmers and
so have less immediate impact on poverty.
Research carried out for CAFOD shows that in
recent years, artificially cheap EU milk powder and sugar, which
benefit from export subsidies, have caused havoc among Third World
farmers.
Even though the EU is a high-cost producer,
subsidies have allowed it to become the world's largest exporter
of both skimmed milk powder (SMP) and white sugar. One NGO study
found that the EU exports SMP and white sugar respectively at
one-half and one quarter of production costs.
Dairy in Jamaica: In Jamaica, since 1995, annual
milk production has dropped by a third as the local market has
been flooded with subsidised EU milk powder. Jamaican dairy processors
have turned their backs on the local dairy industry, preferring
to use cheaper milk powder from Europe instead. As a result, Jamaican
farmers are forced to throw away thousands of litres of milk from
overflowing coolers. Many have lost their jobs and their livelihoods.
Sugar in South Africa: Nearly all of the 51,000
sugar cane growers in South Africa are small farmers. Another
85,000 South Africans depend on jobs in the sugar industry. It
costs between $250 and $300 to produce one ton of sugar in South
Africa. In Europe, it costs $600.
But in spite of the high costs, EU subsidies
enable European farmers to keep on growing sugar beet and dumping
their excess on the world market. Over the past decade, the South
African Sugar Association estimates that the EU has depressed
the world sugar price by 20 to 40%, forcing small farmers out
of business.
NEW, IMPROVED
CAP?
The sugar and dairy regimes represent the remnants
of the "old CAP", still based on price support and export
subsidies. EU officials at the WTO argue that the old CAP subsidies
are worse for developing countries than new forms introduced by
the Agenda 2000 reforms. Export subsidies are bad, because they
directly encourage dumping on world markets; direct payments to
farmers continue to support production, especially when they are
paid by the cow, or the bushel, but are not quite as bad as export
subsidies; "de-coupled" payments, not linked to production,
are, they argue, not "trade distorting" at all.
CAFOD agrees that export subsidies are the worst,
but its research into the wheat sector shows that the direct payments
to farmers promoted by the current CAP reform process still lead
to dumping.
CAP reform, originally starting in 1992, has
been changing payments per bushel into a system of direct payments
to farmers on the basis of the area under arable crops. However
with continuing high levels of support to production the current
subsidy regime still enables EU farmers to sell cheap wheat onto
the world market. One NGO study found that the EU's wheat export
prices are 34% below typical costs of production.
The OECD estimates that in the six years since
the Agenda 2000 wheat reform of 1999, the EU will export nearly
40% more wheat than previously. One expert has described the difference
to developing countries of the shift from export subsidies to
direct payments as being "pick-pocketed instead of mugged"!
THE MID-TERM
REVIEW
Initially the mid-term review set out what,
in terms of the European Union, was a fairly radical reform agenda.
CAFOD welcomed much of its content, including the proposals for
decoupling payments from production, the move to redirect more
money into rural development and the measures that will favour
small farmers. The language on the environment was also welcome.
Of course, much depends upon the extent to which
these proposals are watered down, as the initial paper is discussed,
amended and agreed by member states. Already the Franco-German
accord prior to the Copenhagen summit appears to have limited
the extent to which the overall CAP budget can be cut between
now and 2013—a serious setback. The revised mid-term review
proposals set out by Franz Fischler in January 2003 have also
lost many valuable elements, with a real weakening in the attempt
to shift the CAP away from its current focus on supporting agricultural
production. The danger is that politics will once again sink hopes
for a new start on the CAP.
More broadly, however, a much more radical rethink
is called for than that set out in the Mid-Term Review. After
the BSE crisis, the British Government decided to scrap the Ministry
for Agriculture, Fisheries and Food, partly because it had been
"captured" by the farm lobby and was failing consumers.
It was replaced with a Department for Environment, Food and Rural
Affairs.
CAFOD, along with many other NGOs, believes
a similar rethink is urgently required at the European level.
DG Agriculture and the Common Agricultural Policy should be scrapped
and replaced by DG Rural Affairs and a Common Rural Policy to
deal with the undoubted challenges facing Europe's rural communities,
free from capture by the agribusiness and farm lobbies.
POLICY RECOMMENDATIONS:
— CAP reform should have as an explicit
objective that it works in the interests of poverty reduction
and food security in developing countries.
— The EU should set out a binding timetable
for the elimination of all export subsidies.
— Much of the direction of current
CAP reform (the "decoupling proposals of the MTR) is moving
EU support in the direction of Green Box qualification at the
WTO—yet with little evidence that it would substantially
reduce the level of trade distortion on developing country markets.
The final proposals for decoupling agreed by the MTR should be
subject to an assessment of their likely impact on food security
in developing countries.
— Given the failure to reduce total
levels of subsidies, the EU should support proposals set out by
developing countries for greater special and differential treatment
in the Agreement of Agriculture at the WTO, through the introduction
of a Development Box.
2. MARKET ACCESS
Access for developing country exporters to EU
markets is an important aspect of trade and CAP reform. In some
circumstances it can contribute significantly to poverty reduction.
However, market access is very far from being a poverty panacea,
or even the most significant issue for poor farmers in developing
countries.
Research, such as that emerging from the DFID-funded
Globalisation and Poverty Programme,[1]
shows that, while market access can lead to poverty reduction
in some sectors and countries the impacts of northern trade liberalisation
can be both positive and negative, and that "adjustment is
probably more costly than had been anticipated":
— Benefits are distributed unevenly
across households.
— The increasing sophistication of
global markets is increasing entry barriers for both small farmers
and poor economies, favouring large exporters and producers.
Moreover, as tariffs fall around the world,
non-tariff barriers such as the EU Sanitary and Phytosanitary
Safeguards (SPS) system are acquiring a more prominent role as
an obstacle to developing country exports, arousing suspicions
among developing countries that the EU is seeking new means of
keeping out their products.
That said, CAFOD welcomes the EC Everything
But Arms initiative, and deplores the other OECD economies failure
to match it.
POLICY RECOMMENDATION:
— The EC should continue to lobby other
major importers within the OECD to open their markets to exports
from the poorest countries, and speed up the introduction of the
Everything But Arms initiative.
— More research is urgently needed
to determine in what circumstances market access and developing
country export promotion are most effective in reducing poverty.
3. SPECIAL AND
DIFFERENTIAL TREATMENT
The Development Box: CAFOD has been active in
work with a number of developing country delegations at the WTO
on the creation of a "Development Box" in the Agreement
on Agriculture (AoA).
Agriculture is seen by many observers as the
key to the Round, especially for developing countries. Not only
is agricultural production an area where developing countries
possess some comparative advantage, but anger and frustration
over the way the developed countries have implemented the AoA
is widespread among developing countries. Many of these countries
feel that the AoA sanctioned a series of trade distorting measures,
in effect establishing a form of "special and differential
treatment" for the richer countries! Developing countries
point to rising domestic support, tariff peaks and escalation,
and the failure to implement the Marrakesh decision (pledging
to assist poor food-importing countries) as factors preventing
them from reaping the promised rewards from the limited liberalization
that has taken place under the AoA. This frustration has been
heightened by the recent US farm bill, and by the snail"s
pace of CAP reform. Moreover, developing country agricultural
liberalisation has, in a number of cases, led to surges of "dumped"
northern products, causing widespread damage to small farmers"
livelihoods.
The notion of a DB first appeared as a "Bread
Box" in proposals from NGOs, and later from FAO, that go
back at least to the 1996 World Food Summit, many backed with
solid empirical work. When agricultural negotiations began in
2000 under the "built-in agenda" agreed as part of the
Uruguay Round, a number of developing countries submitted proposals
in this area, culminating in the formation of the Friends of the
Development Box (FDB) group, chaired by Pakistan, just before
Doha. The FDB organized a highly successful seminar during the
ministerial meeting. Although unsuccessful in its immediate objective
of securing mention of the DB in the ministerial declaration,
the FDB significantly raised the profile of the issues surrounding
development impact of agricultural liberalization and, in February
2002, won agreement for the first-ever discussion of the DB as
an explicit agenda item at the Committee on Agriculture special
session. A further submission by developing countries followed
at the November 2002 committee, and the Development Box is included
in the chair's overview of the state of the Agriculture negotiations,
published in December 2002.
PROPONENTS OF
THE DB CONSIDER
THAT, WITHIN
THE AOA,
FIVE AREAS
NEED TO
BE ADDRESSED:
1. To protect and enhance domestic food production,
particularly in key staple crops.
2. To sustain and enhance the employment,
food security and livelihood opportunities of the rural poor.
3. To allow developing country governments
more flexibility to support small farmers.
4. To protect poor farmers from the dumping
of subsidised imports from richer countries and from damaging
fluctuations in import prices and quantities.
5. To promote improved in-country movement
and international sales of surplus production.
Beyond the acceptance and registration of exceptions,
however, the DB should be understood as representing a fundamental
shift in the approach to designing trade rules, in that it proposes
placing food security and development needs, particularly of poor
farmers, at the heart of the negotiating process. The vehicle
for this shift is a rethinking of S&D which, in the Uruguay
Round, was watered down until it meant little more than longer
implementation times and exemptions for the poorest countries.
In the DB approach:
— S&D and graduation from it should
be determined by development benchmarks, not arbitrary timetables;
— S&D should be a permanent and
integral feature of WTO rules, not an "exception" to
the Most Favoured Nation principle;
— Trade rules should be redesigned
to distinguish between social groups, not just between countries.
Although developing countries have made numerous
submissions on the Development Box in Geneva, they have encountered
considerable resistance from developed country delegates. This
varies from outright hostility from the US and some Latin American
agro-exporting economies, to the approach taken by the EC, which
in December 2002 adopted the language of development by proposing
a "Food Security Box", but in practice largely emptied
it of content, including only a heavily watered down version of
the original proposal which would offer few benefits to developing
countries.
DFID has been an influential player in the formulation
of the EC response to the Development Box, commissioning research
and successfully lobbying in Brussels for the adoption of the
current position. While welcoming the new, but limited, flexibility
in what was previously an openly hostile UK and EC position, CAFOD
has been disappointed by DFID's reluctance to listen to developing
country arguments. In the light of the failure of CAP reform,
and the South's anger at the North's "you liberalize, we
subsidize" approach, CAFOD feels that the EC should support
compensatory measures, including the Development Box, until such
time as CAP has been reformed and dumping has ceased.
POLICY RECOMMENDATIONS:
THE EU SHOULD
SEEK TO
CORRECT THE
INEQUITIES OF
THE AOA
THROUGH A
TWO-STAGE
PROCESS:
1. A "rebalancing": the Agreement
on Agriculture has three "pillars"—market access,
domestic support and export subsidies. To date there has been
far more movement on market access than the other two. Many developing
countries argue that this is because the powerful countries use
domestic support and export subsidies to support their farmers,
whereas poor countries use tariffs—or would like to be able
to use tariffs but are prevented from doing so by the AoA. The
consequence has been the kind of widespread dumping of artificially
cheap foodstuffs described in "Dumping on the Poor"
(attached). They therefore argue that first, developing countries
should be able to rebalance the agreement, easing off on tariff
reductions and applying countervailing measures (import taxes)
until the north puts its house in order on domestic support and
subsidies.
2. Rebalancing deals with the lopsidedness
of the AoA, but does not deal with the special position of agriculture
in developing countries, where it plays a fundamentally different
social and economic role than in richer economies. Developing
countries should be provided the flexibility to deal with issues
such as price volatility, (through special safeguards allowing
them to smooth out fluctuations through tariff adjustments) and
the need to protect small farmers from dumping (eg through a Development
Box, allowing countries to protect food security crops).
4. DEVELOPING
COUNTRY CAPACITY
Developing country delegates face an impossible
workload in Geneva, running from meeting to meeting on entirely
separate and highly technical issues, with little time for briefing
and preparation. Often they are forced to choose between simultaneous
meetings. For example, when the Working Group on Trade, Debt and
Finance met on 17 December to discuss an Africa Group proposal,
there were no African delegates present because of another crucial
meeting on TRIPS and health.[2]
Much use is made of the term "capacity
building", but CAFOD has serious concerns about the way capacity
building is being used politically in fora such as the WTO.
First the concept of "capacity building",
as used by the WTO and others, is essentially top-down, and is
often used as a "sweetener" to get over objections based
on issues other than capacity. In practice there is often a fine
line between capacity building start and proselytising for the
northern position (eg seminars on how to liberalize agriculture
or conform with the WTO TRIPs regime).
Also, there is a tendency to conflate capacity
to negotiate (eg to identify national priorities and ensure they
are reflected in final texts) and capacity to implement agreements
that may in themselves be flawed.
Summarizing a number of studies of developing
country negotiating experiences in multilateral fora, Sheila Page
of the ODI came up with some interesting conclusions on capacity
building:[3]
— There is no substitute for the real
thing: best way to learn how to negotiate is to take part in negotiations.
Delegations in long drawn-out processes are much more effective
by the end than at the start. Page concludes that "the pressure
for limited duration rounds many not be in the interests of developing
countries."
— Formal capacity building by both
donors and multilateral agencies such as the World Bank or WTO
is "tainted" by their conflicts of interest: both groups
have their own view of what constitute "sound" trade
policies and therefore may not be well placed to help developing
countries arrive at their own negotiating positions.
The point about the timelines for effective
capacity building is important for DFID"s work on the WTO.
While CAFOD applauds its promotion of the Integrated Framework
to ensure that a country"s trade policies are properly rooted
in an awareness of its development needs, it is becoming ever-more
clear that such approaches are likely to bear fruit only after
the bulk of the Doha negotiations are already completed.
Policy Recommendation: HMG should urge the WTO
to review the effectiveness of the process of "ministerials
+ Rounds", and explore other forms of governance, for example
the more successful UN negotiation processes such as the Framework
Convention on Climate Change.
5. ISSUES FOR
THE CANCÚN
MINISTERIAL
Regrettably, the Cancún ministerial in
September 2003 looks like resembling Seattle much more than Doha.
The main emerging flashpoints are:
— Agriculture: CAP and northern subsidies,
lack of Special and Differential Treatment for Developing Countries.
— New Issues: Whether to commence negotiations
on investment, competition, transparency in government procurement
and trade facilitation.
— Implementation: outcome of detailed
discussions of developing country problems in implementing the
Uruguay Round agreements.
CAFOD has deep concerns about all three issues
and will be focussing its research and lobbying effort on agriculture
(covered above) and the case against including negotiations on
investment in the Doha round.
In some circumstances, Foreign Direct Investment
(FDI) can play a positive role in development and multilateral
rules are important in protecting the weaker players from abuse
at the hands of the stronger. However the WTO is the wrong place
for such an agreement because:
— The historical experience both of
the East and Southeast Asian Newly Industrialised Countries (NICs),
and of the now-developed countries suggests that the WTO's "core
principles", in particular that of national treatment (foreign
actors must receive treatment at least as favourable as that accorded
to comparable domestic actors), are particularly inappropriate
for the issue of investment. The West should preach what it practiced
(the working title of forthcoming CAFOD paper on this issue),
acknowledging that discrimination in favour of domestic investors
has been a central element of virtually every successful national
development strategy to date, and that therefore the WTO is the
wrong home for any pro-development investment agreement.
— The WTO has a narrow liberalizing
mandate which will inevitably focus on enabling foreign investors
to prise open southern markets, regardless of the development
impact.
— It does not have the mandate to introduce
concomitant obligations on investors.
— Many developing countries have repeatedly
made it clear that a WTO investment agreement is not a priority
for them, and neither do they have the capacity to address this
issue properly.
Policy Recommendations: In the run-up to the
Cancún ministerial, HMG should build confidence in the
developed country's commitments to change the way the WTO operates
by publicly announcing its willingness to abandon negotiations
on the Singapore Issues.
Attachments:
Dumping on the Poor: The Common Agricultural Policy,
the WTO and International Development, CAFOD, September 2002.
Not printed. Copy placed in the library.
CAFOD (Catholic Agency for Overseas Development
January 2003
1 Professor John Humphrey, IDS, personal correspondence,
January 2003. Back
2
Bridges Weekly Digest, 20 December 2002. Back
3
Developing Countries: Victims or Participants, Sheila Page,
ODI, January 2003. Back
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