Memorandum submitted by Oxfam
INTRODUCTION
1. Oxfam welcomes the opportunity to feed
into this important inquiry into trade and development. Trade
is one of the most powerful forces linking our lives, and a source
of unprecedented wealth. Yet millions of the world's poorest people
are being left behind. Increased prosperity has gone hand in hand
with mass poverty. Already obscene inequalities between rich and
poor are widening. Oxfam believes that world trade could be a
powerful motor to reduce poverty, and support economic growth,
but that potential is being lost. The problem is not that international
trade is inherently opposed to the needs and interests of the
poor, but that the rules that govern it are rigged in favour of
the rich. In our submission to the committee we will be addressing
the impact of some of these rigged rules and double standards
on developing countries and where we believe the UK government
and the rest of international community must take action to reform
these practices.
2. If Africa, East Asia, South Asia, and
Latin America were each to increase their share of world exports
by 1%, the resulting gains in income could lift 128 million people
out of poverty. In Africa alone, this would generate $70 billion—approximately
five times what the continent receives in aid.
AGRICULTURAL REFORM
IN THE
CONTEXT OF
THE DOHA
COMMITMENTS
3. To echo the Secretary of States' own
words to the Committee, we must have Common Agricultural Policy
(CAP) reform if Europe is to adhere to its Doha commitments, if
not, "Europe will have thrown away Doha"[6]Under
the World Trade Organisation's (WTO) Agreement on Agriculture
(AoA), developed countries made a commitment to reduce their agricultural
subsidies, "we commit ourselves to, comprehensive negotiations
aimed at . . reductions of, with a view to phasing out, all forms
of export subsidies"[7]In
practice, they have done the opposite. EU agricultural subsidies
were approximately $5 billion higher at the end of the 1990s than
a decade earlier.
4. Thousands of agricultural producers across
the world sell their goods on local, regional, and world markets.
Yet many smallholder producers in developing countries suffer
low prices, lost market share, and unfair competition. In Oxfam's
experience, the CAP depresses and destabilises markets for farmers
who receive no subsidy, including those in the developing world.
The continued practice of dumping—exporting at prices far
below the costs of production—is destroying domestic markets
in developing countries.
5. Within the EU dairy and sugar regimes
the practice of dumping is particularly pernicious. The OECD estimates
that the EU supported its dairy sector to the tune of
16 billion (40% of the value of EU dairy production)
in 2001. This is equivalent to over $2 a day per cow, which is
more than the income of half the world's population. The regime
directly costs EU taxpayers around
2.5 billion a year. At least half of this amount
is spent on export subsidies to dump surplus production on world
markets. The direct winners from EU dairy subsidies are the major
European processing and trading companies, such as Nestle and
Arla Foods, though it is impossible to obtain a breakdown showing
which companies receive what subsidies. The losers include small-scale
dairy farmers in Jamaica, India, Kenya, the Dominican Republic
and across Europe. The Indian dairy industry, the largest dairy
producer in the world, is currently seeking to expand into new
net dairy-importing markets in countries in South-East Asia, the
Gulf, and the southern Mediterranean. However, its efforts are
being hampered by unfair competition from subsidised European
dairy exports.
6. Under the EU's sugar regime, quotas and
high tariffs set Europe's sugar prices at almost three times world
market levels. High guaranteed prices to European farmers result
in huge surpluses that are dumped overseas. As a result, the EU,
one of the world's highest cost producers of sugar, is the world's
biggest exporter of white sugar, exporting almost 7 million tonnes
in 2000-01, accounting for 40% of the world market. These exports
are subsidised in two ways: first, 3.1 million tonnes of quota
exports (from A and B quota production) receive massive export
refunds (around
500 per tonne) enabling EU sugar to match the world
price. Second, exports of 3-4 million tonnes of non-quota, excess
production (known as C sugar, which must either be stored or exported)
are cross-subsidised by the very high prices farmers receive for
their quota sugar beet. These C sugar exports are often ignored
by the EU in debate because they fall outside its official regime—but
they are even bigger than quota exports (3.8 million tonnes in
2000-01 compared to 3.1 million tonnes of quota exports), they
fluctuate from year to year, so exacerbating the instability of
the world market, and they are equally damaging as quota exports
in their price-depressing impacts. Britain and France are the
worst offenders in exporting this excess production: almost one
quarter of each of their production is C surplus dumped overseas.
While Europe's major sugar processors reap high profits (British
Sugar enjoyed an astounding 21% profit margin in 2001), European
consumers and taxpayers pay
6 billion a year to fund these exports that are undercutting
export opportunities for developing countries. In 2001, for example,
Europe exported 770,000 tonnes of white sugar to Algeria and 150,000
to Nigeria—these are lost export opportunities for the far
more efficient producers of southern Africa.
7. The mid-term review of the CAP is an
historic opportunity for the European Union to address this devastating
aspect of its agricultural policies and meet its Doha commitments
under the AoA. In recognition of the fact that high prices to
EU producers, new technologies, and higher yields have led to
chronic overproduction and increased exports of some agricultural
products, the European Commission has proposed a further de-linking
of subsidies to production in favour of a shift to investment
in rural development. While welcome, this will not be enough to
prevent the export of products at prices below the cost of production,
or to stop the use of export subsidies. Moreover, serious reform
of the sugar and dairy sectors—the sectors in which dumping
is most prominent—is currently excluded from the Mid-Term
Review reform proposals.
8. On 16 December 2002, the EC presented
a proposal for WTO negotiations on agriculture, detailing how
it will comply with commitments made on agriculture in the Doha
Declaration. The EC presented the proposal as progressive and
pro-development. However, Oxfam is concerned that it fails to
address dumping effectively and has, despite development-friendly
language, relatively weak proposals on special and differential
treatment. The proposals included cutting export subsidies by
45% and domestic farm support by 55%. The proposals may seem significant
at first glance, however, they would leave untouched the great
majority of subsidies that ruin the lives of poor people in developing
countries. The reforms would not apply to several products, including
dairy and sugar, as these products are also excluded from the
MTR of the CAP, even though subsidies in these areas inflict enormous
damage on developing countries. Furthermore, the suggested reforms
may not come online until 2013. Oxfam believes that the timetable
for rolling out the elimination of export subsidies must begin
immediately.
9. Reforming a system that reaps big rewards
for a minority in Europe, while undermining the markets and opportunities
for farmers and agricultural labourers in the developing world,
is an essential step towards making trade fair and making globalisation
work for the poor.
MARKET ACCESS
10. Under the right conditions, access to
Northern markets can provide producers in developing countries
with important opportunities for poverty reduction. At a household
level, production for exports can support the diversification
of livelihoods and create incentives for investment. At a national
level, improved market access can help to diversify foreign exchange
earnings and reduce the risk of dependence on a narrow range of
commodities.
11. The problem facing developing countries
is that tariff and non-tariff barriers in agriculture are exceptionally
high. Average tariffs range from 16-20%, with peaks in excess
of 100% a common feature. These tariffs are some five to six times
the average tariff applied by rich countries when they trade with
each other in the manufacturing sector, suggesting that the rural
poor enter world markets carrying a weighty handicap.
12. Industrialised countries have repeatedly
committed themselves to provide free access for all exports from
the world's poorest countries. Yet the vast majority of their
initiatives to date have excluded key products of export interest
to the Least Developed Countries (LDCs). Only New Zealand has
fully opened its markets to all products exported by the LDCs.
The EU's 2001 "Everything But Arms" (EBA) initiative
was originally intended to provide immediate free market access
for all non-military exports from LDCs. However, following a concerted
campaign by European producers and traditional Caribbean exporters,
who feared that they would lose market share to LDC exporters,
the proposal was modified so that free LDC market access for three
important products (rice, sugar, and bananas) will be delayed
for up to eight years. With the introduction of the EBA, some
LDCs have gained export opportunities in these products, but they
are still very limited. The total EBA quota for sugar was just
74,000 tonnes in 2001—just 1% of the sugar that the EU annually
dumps on world markets. Having been excluded from the EU market
for sugar, Mozambique, for example, was granted an export quota
of just 8,000 tonnes in 2001, to be increased by 15% annually
until 2009 when duty and quota free access will be granted. If
Mozambique can successfully rehabilitate its sugar industry, it
is expected to create up to 20,000 new jobs in the sugar mills
and plantations, with jobs benefiting poor people living in rural
areas where there are few alternative employment opportunities,
and helping to stimulate the wider economy. By 2004, Mozambique
will be ready to export around 200,000 tonnes of sugar. But in
that year, its quota to export to the EU will be a mere 12,000
tonnes. Oxfam estimates that, at current EU prices, the country
has, as a result, lost the chance to earn an estimated
108 million ($106 million) in 2004 because of the
very limited quota. That's almost three quarters of the EU's annual
development aid to Mozambique of
150 million ($136 million).
13. Sugar is one of the commodities for
which a number of African, Caribbean and Pacific (ACP) countries
are granted preferential access into European markets. As a part
of the sugar regime, raw cane sugar is imported from 17 of the
77 ACP countries[8]
(plus India) restricted by quotas but purchased at the high EU
price. It is refined into white sugar primarily in the UK (by
Tate & Lyle), Portugal and France. Although it accounts for
just 8% of total EU production, it has provided these countries
with stable export earnings and, in recent years of depressed
world market prices, it has annually been worth around
500 million over what could be earned on the world
market.
14. The EU justifies its sugar regime by
claiming that ACP preferential access is a form of development
aid—but its current policies undermine this claim. ACP imports
are only 1.6 million tonnes per year—less than one quarter
of what the EU dumps on world markets. Only 17 ACP countries are
part of the preferential sugar arrangements and many other sugar
producers—including some least developed countries—have
been excluded. Of the 17 countries with preferential access, only
four are among the least developed countries—Madagascar,
Malawi, Tanzania and Zambia—and their combined share of
the ACP quota is just 4% of the total. Until 2001 other sugar
producing LDCs, such as Sudan, Ethiopia, Mozambique and Senegal,
had no access to EU sugar markets at all. Among the lucky 17,
almost 80% of the benefits accrue to just five of them—Mauritius,
Fiji, Guyana, Swaziland and Jamaica—none of which are least
developed countries. Although preferential access has provided
secure sources of foreign exchange, it has also led several countries
that are no longer competitive producers to have a high degree
of dependence on these exports of raw sugar cane.
15. Furthermore, although preferential access
for sugar has been extended to the least developed countries through
the EBA, it has been done at the expense of the ACP countries.
The EU claims that it is a leader in opening up access to developing
countries—but it is actually making the poor pay for the
poorest. Instead of cutting back on domestic quota production,
the EU has made room for the EBA sugar by cutting back the import
quotas from the ACP states.
16. In regard to the recent challenge to
EU sugar exports made by Brazil and Australia, Pascal Lamy was
reported as saying that the challenge was "very bad news"
for the ACP group—implying that these countries would be
the first to lose out from any adjustments to the regime. Oxfam
is calling on the EU to show leadership in its agricultural reform
by not pushing the costs of adjustment onto developing countries.
17. The impact of reform of the sugar regime
upon developing countries will depend very much on how that reform
is carried out. If the regime is reformed in a way that continues
to guarantee high internal prices, while reducing total production,
then the interests of the ACP and EBA countries must be safeguarded
within that adjustment, by ensuring that quota cuts come from
the excessive EU production and not from developing country import
quotas. In contrast, if the reform process reduces the internal
price to a level below that which is remunerative for the less
competitive of the ACP producers, then their interests must be
taken into account and they must be given compensation to assist
them in adjustment and diversification. For any process of reform,
the ACP countries must be included in discussions of the timing
and nature of reform since they have such significant interests
in the outcome.
18. EU Member States and other industrialised
countries must do more within the WTO to reduce tariff peaks,
eliminate all tariff escalation and provide comprehensive duty-free
and quota-free access for all low-income countries. Trade can
realise its potential only if industrialised countries reshape
the global trading system to spread opportunity more equitably.
TRADE LIBERALISATION
19. Oxfam believes that developing countries
should not liberalise trade and investment rapidly, or completely.
Rich countries are pressing developing countries to open up domestic
markets (including finance, services and government purchasing),
and to deregulate foreign investment. This is a glaring example
of double standards, since the rich countries themselves did not
liberalise in order to develop, they liberalised once they had
developed and had become internationally competitive. They stand
accused of the sermon, "do what I say, not what I did".
20. The evidence on the impact of trade
liberalisation on poverty reduction is mixed at best, so Oxfam
takes a cautionary approach. Oxfam is convinced that countries
at lower levels of economic development need to be able to decide
for themselves if, when, and how liberalisation should take place,
so that it promotes national development. Policies, such as favouring
national industry, regulating foreign investment, and offering
a measure of protection to their key sectors were critical in
creating the success of the Asian "tigers" and rich
countries in global markets.
21. Open markets are neither inherently
good nor bad for poverty reduction. What happens to poverty when
a country opens its markets depends on many factors. Amongst the
most important are the initial distribution of income and assets,
what people living in poverty produce, buy and sell, and whether
the national producers are internationally competitive. Where
trade restrictions have benefited poor people by raising the price
of the goods they produce, this group will lose out with import
liberalisation.
22. The removal of trade barriers in rich
countries would produce clear benefits for poor countries. Carefully
designed and properly sequenced import liberalisation in developing
countries can also benefit the poor, especially when the lowering
of trade barriers is part of a coherent poverty-reduction strategy.
However, rapid import liberalisation in developing countries has
often intensified poverty and inequality.
23. Loan conditions attached to IMF and
World Bank programmes are a major part of the problem. Partly
as a result of these loan conditions, poor countries have been
opening up their economies much more rapidly than rich countries.
Average import tariffs have been halved in sub-Saharan Africa
and South Asia, and cut by two-thirds in Latin America and East
Asia.
24. Oxfam's Trade Report compares the experience
of opening markets in a sample of developing countries. In contrast
with the claims of the World Bank that open markets lead to poverty
reduction, Oxfam's analysis shows a diverse array of outcomes
and no simple relationship between openness and poverty reduction.
Some of the countries that opened their markets most rapidly and
deeply have poor records on economic growth and poverty reduction
(eg Haiti, Nepal, Mali and Peru). Case studies from Peru show
smallholder farmers in highland areas operating at a disadvantage,
compared with commercial farms. In Mexico, the "poverty belt"
states in the south are becoming poorer, in comparison with states
in the north. In India, import liberalisation is intensifying
inequalities within rural areas, and between urban and rural areas.
These inequalities matter, because they slow the rate at which
economic growth is converted into poverty reduction. Meanwhile,
some countries that have been cautious about opening their markets
to imports have sustained far higher economic growth rates and
achieved a strong record on poverty reduction (eg China and Vietnam).
25. Poverty Reduction Strategy Papers (PRSPs)
provide the IMF and the World Bank with an opportunity to place
trade at the centre of their dialogue with governments on poverty.
That opportunity is being lost. In a review of 12 PRSPs we found
that only four mentioned the possible impact of trade reform on
poor people, of which two considered measures to protect the losers.
In Cambodia, the IMF and the World Bank are supporting a strategy
which will sharply reduce import tariffs on agricultural goods,
exposing millions of rice farmers to competition from Thailand.
Yet no poverty assessment has been carried out.
26. The World Bank and the IMF have spoken
out strongly against trade protectionism in the EU and the US,
to quote Mr Kohler giving evidence to the Treasury Committee last
year, "There is too much of hypocrisy, double standards,
in the international community. I am, indeed, advocating more
trade integration. Then, I think, it is only clear that I also
have to speak up against subsidies, trade distorting subsidies
in Europe, in the US, in other advanced countries, and I am doing
that"[9]Yet
IMF/WB loan conditions for developing countries that place a premium
on rapid liberalisation, without proper consideration of the consequences
for short-term poverty and long-term development, are among the
factors that prevent trade from working for the poor.
THE CRISIS
IN COMMODITY
MARKETS
27. Commodities are the most fundamental
trade and poverty issue. Most poor countries are highly dependent
on a narrow range of commodities, and commodity markets are characterised
by a rapid price decline and high price volatility. While globalisation
may be transforming international trade, many countries—and
many millions of producers—remain heavily dependent on the
export of commodities. More than 50 developing countries depend
on three or fewer commodities for more than half of their export
earnings. Dependency is most pronounced in sub-Saharan Africa;
there are 17 countries for which non-oil exports account for three
quarters or more of export earnings. Yet over the past 30 years,
the share of non-fuel commodities in world trade has been declining
almost without interruption. National economies have suffered
in terms of reduced prospects for economic growth and pressure
on their balance of payments. For households, global market pressures
have damaged people's livelihoods and reduced their sense of security.
The collapse of the global coffee price provides one example.
28. The price of coffee has fallen by almost
50% in the past three years to a 30-year low. Long-term prospects
are grim. Developing-country coffee farmers, mostly poor smallholders,
now sell their coffee beans for much less than they cost to produce—only
60% of production costs in Viet Nam's Dak Lak Province, for example.
Farmers sell at a heavy loss while branded coffee sells at a hefty
profit. Ten years ago, producer countries earned $10 billion from
a coffee market worth around $30 billion. A decade later, they
receive less than $6 billion in export earnings from a market
that has more than doubled in size. The coffee crisis has become
a development disaster whose impacts will be felt for a long time.
29. The economies of some of the poorest
countries in the world are highly dependent on trade in coffee.
Dependency is particularly high in some African countries. In
Uganda, the livelihoods of roughly one-quarter of the population
are in some way dependent on coffee sales. In Ethiopia, coffee
accounts for over 50% of export revenues, while in Burundi the
figure is almost 80%.
30. Families dependent on the money generated
by coffee are pulling their children, especially girls, out of
school. They can no longer afford basic medicines, and are cutting
back on food. Their obvious move out of coffee and into something
else is fraught with problems. It requires money that they don't
have and alternative crops that offer better prospects. For a
farmer to turn her back on the four years spent waiting for coffee
trees to start bearing fruit is a highly risky strategy. Furthermore,
many of the possible alternatives including: sugar, bananas, cotton
and dairy products, are all heavily protected industries in the
EU and the US. Beyond farming families, coffee traders are going
out of business. National economies are suffering and some banks
are collapsing. Government funds are being squeezed dry, putting
pressure on health and education and forcing governments further
into debt.
31. The central problem is one of over-supply.
Since the coffee market was liberalised in 1989 supply has risen
well above demand. The current growth rate of 1-1.5% per year
in demand is easily outstripped by a more than 2% increase in
supply which leads to lower and lower prices. Even if demand were
to meet supply over the next few years, there would still be a
glut of unsold coffee stocks on the market—estimated at
40 million bags—depressing the world price.
32. Despite the stagnant consumer market,
the coffee companies are making handsome profits. The big four
coffee roasters, Kraft, Nestlé, Procter & Gamble, and
Sara Lee, each have coffee brands worth US$1 billion or more in
annual sales. Together with German giant Tchibo, they buy almost
half the world's coffee beans each year. Profit margins are high—The
Economist estimates that Nestlé has made an estimated
40% profit margin on instant coffee but no one knows the exact
figure. Today coffee farmers receive 1% or less of the price of
a cup of coffee sold in a coffee bar. They receive roughly 6%
of the value of a pack of coffee sold in supermarkets and grocery
stores.
33. The challenge is to make the coffee
market work for all. The failures of previous efforts at intervention
in the market must be understood and lessons learned. But so too
must the lessons of the moment. The low coffee price creates a
buyers' market, leaving some of the poorest and most powerless
people in the world to negotiate in an open market with some of
the richest and most powerful. The result, unsurprisingly, is
that the rich get richer and the poor get poorer. Active participation
by all players in the coffee trade is needed to reverse this situation.
This year is critical. Coffee-producing governments have agreed
a plan that aims to reduce supply by improving the quality of
coffee traded. Future action on diversification, market intervention
and coffee promotion will be discussed at the ICO/World Bank International
Coffee Conference from May 19-20. These actions will only work
if they are backed by the companies and by the rich countries,
including the UK government, and are complemented by measures
to address long-term rural underdevelopment and open up markets
for alternative products.
SPECIAL AND
DIFFERENTIAL TREATMENT
34. One of the strengths of the WTO system
is that it applies universal rules which restrict, however inadequately,
the scope for bilateral power politics. Unfortunately, universality
is also a weakness in one crucial respect: not all WTO members
are of equal economic strength—and they face different problems.
In particular, developing countries need multilateral trade rules
that enable them, within a broad-based system of accepted ground
rules, to implement the policies needed to generate growth and
poverty reduction. Under the GATT, industrialised countries did
acknowledge that trade liberalisation had different implications
in developing countries from those that applied to their own markets
yet whilst these principles of special and differential treatment
(S&DT) were endorsed this had relatively little impact in
negotiations over market access or in the design of WTO rules.
35. Under most WTO agreements under the
Uruguay Round, the only concession granted to developing countries
is a slightly longer time-frame for implementation. Given the
scope of these agreements and associated administrative demands,
this is a very limited provision. Oxfam believes that even these
extended implementation periods are too restrictive to be classed
as adequate S&DT measures. Under the Trade Related Aspects
of Intellectual Property Rights (TRIPS) Agreement there are procedures
for extending implementation deadlines for developing countries.
The general implementation deadline is 2000 for developing countries,
and 2005 for developing countries which had not previously implemented
product patenting for pharmaceuticals and chemicals. An extension
to 2016 was agreed for pharmaceutical products at the WTO Ministerial
Conference in Doha. Whilst this is welcome, this will be a relatively
meaningless measure unless steps are taken to ensure that developing
countries can continue to produce and export affordable generics
to those developing countries without manufacturing capacity.
Oxfam believes that all developing countries need greater flexibility
to determine the length and scope of patenting in order to ensure
access to affordable medicines. The most simple and direct solution
would be to grant all developing and least developed countries
much longer transition periods to comply with TRIPS, based on
their achievement of agreed development milestones, rather than
arbitrary dates as at present. The UK government goes some way
towards supporting this position, in an answer to a parliamentary
question on the subject, the Secretary of State for Trade and
Industry said, "The UK government support the development
of objective criteria to form the basis upon which extensions
on TRIPS transition periods should be agreed. The Government therefore
support the introduction into TRIPS of a mechanism for extending
transition periods for individual developing countries."[10]
36. The idea of introducing a package of
enhanced special and differential treatment measures for developing
countries in the WTO Agreement on Agriculture has been termed
a "Development Box". Unlike the existing Blue and Green
Boxes, whose provisions institutionalise the agricultural support
policies of industrialised countries, a Development Box would
provide greater flexibility for developing countries to implement
tariff and non-tariff protection to strengthen their domestic
production, promote food security, and maintain and improve rural
livelihoods.
37. The Development Box provisions would
aim to protect poor farmers from surges of cheap or unfairly subsidised
imports and provide and sustain existing employment and livelihoods
opportunities for the rural poor. Specific instruments would include
exempting food-security crops from trade-liberalisation commitments,
allowing developing countries the flexibility to raise tariffs
or use quotas against cheap agricultural imports that are damaging
domestic production, and exempting government subsidies from liberalisation
commitments.
38. In the Doha Declaration the S&DT
issue was marked as a priority, placed in the same category for
negotiation as the implementation of various aspects of the Uruguay
Round. The Declaration states that, "We therefore agree that
that all special and differential treatment provisions shall be
reviewed with a view to strengthening them and making them more
precise, effective and operational"[11]These
reviews of S&DT provisions apply to the TRIPS Agreement, the
AoA and the General Agreement on Trade in Services (GATS), among
others. Yet the practice is out of step with the principle. At
the end of 2002 the WTO was struggling to make some S&DT measures
operational as mandated by the Doha Ministerial Declaration. Delegations
had been meeting throughout the year to develop S&DT provisions
through a series of formal and informal sessions under the Special
Session of the Committee on Trade and Development (CTD). Unfortunately,
while developing countries have tabled over 85 issues for consideration,
the bulk of which are proposed by the Africa group, the WTO could
barely arrive at agreement on four of them by the end of last
year.
39. The principles underpinning special
and differential treatment have been eroded since the end of the
Uruguay Round. Developing countries are now assuming obligations
that are inconsistent with policies for poverty reduction. There
is an urgent need to return to some first principles on special
and differential treatment, in particular to ensure that there
is no WTO prohibition on policies that promote growth and poverty
reduction.
THE CAPACITIES
OF DEVELOPING
COUNTRIES
40. Since the end of the Uruguay Round,
the authority of the WTO has been extended, with crucial consequences
for the poor. Multilateral trade rules now constrain the development
of national policies in a wide range of areas that are vital to
poverty reduction. Developing countries are already over-stretched
in dealing with the issues already on the negotiating table a)
in terms of their negotiating capacity under the Doha Round and
b) regarding the administrative burden that comes with implementing
these requirements at a national level. Developing countries are
becoming more skilled at trade negotiation, and the worst excesses
of the Green Room process have been curbed, but they are still
at a huge disadvantage because they do not have the staff and
know-how to accompany such a vast and complex range of issues,
compared with EU Member States and the US who have a huge wealth
of resources and specialists at their disposal. The WTO has 70
committees, councils and working groups and there are a total
of 1,000 official committee meetings every year. On the implementation
side, according to the findings of World Bank surveys, the up-front
average cost of implementing the TRIPS agreement alone in a low-income
country is approximately $1.5 million, with annual recurrent costs
of $2 million (World Bank 2002). An expense that the poorer developing
countries can ill-afford.
NEW ISSUES
41. There are four new issues which many
developed countries would like to see included under WTO auspices:
investment, competition, government procurement and trade facilitation.
Oxfam's view is that WTO multilateral negotiations on new issues
will, at best, bring no benefit to poor countries and at worst
bring considerable harm. Moreover, they would contribute to a
hugely overloaded agenda, making it even more difficult for poor
countries with limited negotiation capacities to participate.
This is why Oxfam strongly supports developing countries exercising
their right under the Doha declaration not to launch negotiations
on new issues at the next Ministerial meeting in Cancun in September.
42. The inclusion of investment in WTO negotiations,
despite strong reservations in many developing countries, is cause
for great alarm. Although the EC has promised that a WTO investment
agreement would not repeat the mistakes of the defeated OECD Multilateral
Agreement on Investment and would put development at its heart,
there is no development rationale for an agreement at the WTO
and every reason to believe it is about opening markets for international
corporations and reducing developing countries power to regulate.
43. In line with the principles that underpin
Chapter 11 of the North American Free Trade Agreement (NAFTA),
current discussions on investment in Geneva continue to focus
disproportionately on investors' rights. Worryingly, the growing
privileges of foreign investors are impinging on the right of
developing countries to regulate foreign investment adequately
in the interest of national development. Existing bilateral agreements
on investment are already weakening governments' control over
profit remittances and export performance requirements, for example,
which, in turn, will have negative effects on their balance of
payments. WTO rules, such as the agreement on Trade Related Investment
Measures (TRIMs), potentially preclude government policies aimed
at establishing dynamic linkages between foreign investors and
local industry, and at increasing the share of export value retained
locally. Oxfam fears a new multilateral agreement on investment,
without fundamental changes to the WTO, could also restrict the
ability of developing countries to target foreign direct investment
to deprived regions. The danger is that developing countries will
be prevented from using precisely those measures that enabled
the East Asian "tigers" to make foreign direct investment
work for development.
44. Oxfam strongly believes that all countries
stand to benefit from the stability that a rules-based system
can provide. Lacking the economic power and the retaliatory capacity
to pursue their demands outside such a system, developing countries
need multilateralism to work. For multilateralism to work, however,
it has to be fair and balanced. It has to protect weak countries
from the abuse of economic power, rather than concentrate advantage
in the hands of rich countries and corporations. Until the WTO
can pass this test, there is little reason to believe that a multilateral
agreement on investment would contribute to making trade fair.
INTELLECTUAL PROPERTY
45. Some of the multilateral rules already
under discussion within the Doha Round threaten to widen inequalities
associated with trade, and to weaken the links between trade and
poverty reduction. The rules governing intellectual property rights
provide such an example.
46. By obliging all governments to grant
a minimum of 20-year patents, the TRIPS Agreement shields pharmaceutical
companies from generic competition globally. This results in higher
prices for vital new medicines in rich and poor countries alike
. This will seriously restrict poor people's access to new medicines
to treat diseases such as HIV/AIDS, and to newly improved medicines
for drug resistant versions of old killers such as malaria and
tuberculosis. However, the Doha Declaration on TRIPS and public
health states that "the TRIPS Agreement does not and should
not prevent governments from taking measures to protect public
health" and as such it should give developing countries greater
confidence in using the existing public health safeguards in TRIPS
in order to improve access to affordable medicines.
47. Under TRIPS, the US or UK government
can override a patent on a medicine using a "compulsory license"
and commission a domestic company to produce a generic equivalent.
This tool greatly enhances the government's ability to negotiate
reasonable prices with the patent-holding manufacturer. But developing
countries are caught in a Catch-22 situation. Most countries don't
have the technology or size of market to manufacture affordable
generic versions of new medicines so they would need to import
them. But they cannot do so because TRIPS prohibits the export
of generic versions of patented medicines. The bottom line is
that they have to either pay the high price of the patented product—which
their population can ill-afford—or to leave patients without
any treatment.
48. Trade Ministers at Doha recognised this
problem and agreed in paragraph 6 of the Ministerial Declaration
on TRIPS and Public Health to "instruct the Council for TRIPS
to find an expeditious solution to this problem and to report
to the General Council before the end of 2002" . Yet in the
last 12 months, no change has been achieved as rich countries,
led by the US, are blocking meaningful solutions to this problem.
The solution currently promoted by the United States, the European
Union, Switzerland and Canada would include only a limited number
of epidemics and be swathed in red tape. Developing countries
would not have access to cheaper generic drugs for major killer-diseases
such as pneumonia, diarrhoea, heart disease or cancer. The US
proposal also places restrictions on eligible countries and includes
a whole raft of safeguards and conditions which would make it
hard for countries to implement. Furthermore, the proposed legal
mechanism would leave the importing country unacceptably dependent
on the political will of the exporting country to meet its health
needs. Oxfam, along with most developing-country governments and
NGOs, believes there is a straightforward way to honour the pledges
made to poor people at Doha and grant developing countries the
same rights to affordable medicines as those enjoyed by rich countries.
The legal mechanism which would best achieve this would be for
the WTO to issue an authoritative interpretation of Article 30
of the TRIPS Agreement which would allow the export of affordable
generic medicines to countries with unmet health needs.
CONCLUSIONS AND
RECOMMENDATIONS
Agricultural reform in the context of the Doha
commitments
49. Oxfam is calling on the EU to use the
mid-term review of the CAP to agree a plan which will stop the
dumping of EU agricultural produce on world markets. As a member
of the EU we hope that the UK Government will use its position
to encourage other member states to reach a common EU position
to:
— Agree a plan for rapid phasing out
all agricultural subsidies that facilitate export dumping—the
sale on world markets of goods at prices below their costs of
production. As an immediate step, the EU should agree a binding
timetable to eliminate all forms of export subsidies before the
5th WTO Ministerial Conference in Mexico (September 2003).
— Reform the EU's sugar and dairy regimes,
in order to avoid the damaging effects on developing country interests.
This will include:
— Eliminating the need for dairy export
subsidies by cutting milk production quotas to levels that bring
domestic EU production in line with internal consumption, and;
— An end to EU sugar dumping. This
would mean cutting EU domestic quota production by 25% so as to
make possible an end to all quota exports and an end to all non-quota
(C sugar) exports by storing all C sugar for use in the following
year's quota.
— Assess the impact of proposed CAP
reforms on poverty reduction and food security in developing countries.
— Include a specific objective that
CAP reform should foster poverty reduction and food security in
developing countries.
— Support the introduction of a "Development
Box" in the WTO Agreement on Agriculture, giving developing-country
governments the flexibility to protect their small farmers from
dumping.
— Restructure domestic support towards
less industrial agriculture and measures aimed at enhancing the
welfare of small farmers and the environment, rather than large-scale
corporate agriculture.
MARKET ACCESS
50. Oxfam believes that the EU and other
industrialised countries must begin to dismantle protectionist
barriers which are squeezing developing countries out of their
world market share by:
— Providing full and immediate access
for imports from LDCs through the "Everything But Arms"
initiative and extending it to low-income countries.
— Implementing an immediate across-the-board
reduction of all tariff peaks in excess of 15% to less than 10%,
with further reduction to less than 5% by 2005.
— Immediately eliminating all tariff
escalation on products exported from developing countries.
51. Oxfam is calling for the EU to show
leadership in its agricultural reform, while protecting the interests
of the ACP and EBA producers, by cutting EU domestic quota production
by 25% so as to make reform of the sugar regime possible, including:
— Restoring quotas for ACP preferential
sugar imports (that have been cut to make way for EBA imports)
and standing by the EU's commitment to support the economies of
these countries.
TRADE LIBERALISATION
52. Through their influence over the design
and implementation of IMF-World Bank policies, industrialised
countries have been able to maintain a highly unbalanced process
of liberalisation. The following measures should be implemented
to redress the balance, ensuring that the consequences of liberalisation
for short-term poverty and long-term development are taken full
account of:
— IMF/World Bank programmes should
not impose further loan conditions requiring trade liberalisation.
— Rich countries should reciprocate
previous liberalisation undertaken by developing countries under
IMF/World Bank conditions by making equivalent reductions in their
own import barriers.
— All PRSPs should include a detailed
analysis of the potential impact of trade liberalisation on income
distribution and poverty reduction.
THE CRISIS
IN COMMODITY
MARKETS
53. Oxfam is calling for a Coffee Rescue
Plan to make the coffee market work for the poor as well as the
rich. The plan needs to bring together the major players in coffee
to overcome the current crisis and create a more stable market.
54. Within one year the Rescue Plan, under
the auspices of the International Coffee Organisation, should
result in:
1. Coffee companies paying farmers a decent
price (above their costs of production) so that they can send
their children to school, afford medicines, and have enough food.
2. Increasing the price to farmers by reducing
supply and stocks of coffee on the market through:
— Coffee companies trading only in
coffee that meets basic quality standards as proposed by the International
Coffee Organisation (ICO).
— The destruction of at least five
million bags of coffee stocks, funded by rich-country governments,
including the UK Government, and the coffee companies.
3. The creation of a fund to help poor farmers
shift to alternative livelihoods, making them less reliant on
coffee.
4. Coffee companies committing to increase
the amount of coffee they buy under Fair Trade conditions to 2%
of their volumes.
SPECIAL AND
DIFFERENTIAL TREATMENT
55. Developing countries should retain the
right to develop industrial and agricultural policies that facilitate
successful integration into global markets through the strengthening
of special and differential treatment provisions.
56. Specifically, the EU and other industrialised
countries should support:
— The extension of the time-frame for
developing countries' liberalisation commitments.
— Developing countries' proposals to
incorporate a Development Box in the Agreement on Agriculture
to promote food security and rural livelihoods.
— Granting all developing and least
developed countries much longer transition periods to comply with
TRIPS, based on their achievement of agreed development milestones,
rather than arbitrary dates as at present.
THE CAPACITIES
OF DEVELOPING
COUNTRIES
57. Developing countries are already coping
with an overloaded work programme which stretches their negotiating
capacity and administrative capability beyond breaking point.
The EU and other industrialised countries should agree to:
— Reject a launch of negotiations on
new issues at the next Ministerial meeting in Cancún in
September.
— Support the negotiating capacity
of developing countries on issues currently under negotiation.
58. On the TRIPS agreement specifically,
WTO Member States should:
— Call for a review of the development
and health impact of TRIPS with a view to granting greater flexibility
to developing countries to determine the length and scope of patenting.
— Agree an interpretation that Article
30 can be used by countries to allow exports of generic equivalents
of patented medicines to developing countries that cannot manufacture
these products themselves. This revision should be permanent and
legally secure, cover all diseases and all pharmaceutical products,
benefit all developing countries, permit economically viable production
of generic drugs and be quick and simple to operate.
Oxfam
January 2003
6 The Rt Hon Clare Short MP, November 5 2002, evidence
to the International Development Committee on the outcome of the
IMF/WB Annual Meetings. Back
7
From the text of the Doha Declaration, November 2001. Back
8
Barbados, Belize, DCR, Fiji, Guyana, Ivory Coast, Jamaica, Madagascar,
Malawi, Mauritius, St Kitts and Nevis, Surinam, Swaziland, Tanzania,
Trinidad and Tobago, Zambia and Zimbabwe. Back
9
Mr Horst Kohler, July 10, 2002, in an evidence session with the
Treasury Select Committee. Back
10
The Rt Hon Patricia Hewitt MP, November 14, 2002, written answer
to a parliamentary question. Back
11
From the text of the Doha Declaration, November 2001. Back
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