Memorandum submitted by War On
Want (WTO-HK -01)
"Forcing
poor countries to liberalise through trade agreements is the wrong approach
to achieving growth and poverty reduction in Africa, and elsewhere."
Commission
for Africa report, March 2005
INTRODUCTION
1. War on Want is
gravely concerned that the WTO's forthcoming Hong Kong Ministerial threatens to
destroy any possibility of a pro-development outcome to the Doha Round. It is
now common understanding in Geneva that the much-vaunted 'Development Agenda' has
been replaced by a mercantilist market access agenda, and that the interests of
developing countries - in particular, the poorest amongst them - have been
wholly marginalised. The finger of blame is being pointed squarely at the EU
and USA for their aggressive attempts to achieve market opening in other
economies and their studied refusal to engineer any genuine reduction in their
own agricultural subsidies. The present submission focuses on the role of the
EU and UK government, given the context of the International Development
Committee's inquiry.
2. The EU's priorities
for the conclusion of the Doha Round of WTO negotiations were agreed by the
Council of Ministers in its October 2004 General Affairs and External Relations
Council. The Council identified the industrial and services negotiations as the
two key areas in which it wished to take forward the EU's 'offensive agenda',
and instructed the European Commission to pay close attention to furthering
this agenda on behalf of EU business interests. At the same time, the Council
instructed the Commission to continue its defensive battle on agriculture and
to increase the focus on new protectionist measures such as 'sensitive
products' and geographical indications.[1]
3. The European
Commission has taken these priorities forward in Geneva under the framework of
the 'July package' agreed by the WTO General Council in August 2004. Indeed,
the Commission has intensified its efforts over the past year to promote the
EU's offensive agenda within the negotiations on non-agricultural market access
(NAMA) and the General Agreement on Trade in Services (GATS), while stressing
that it is unable to offer any further reform of the Common Agricultural
Policy, including the domestic subsidies which lead to dumping of EU produce on
developing country markets. This message has been reiterated over the past few
weeks by EU Trade Commissioner Peter Mandelson and Agriculture Commissioner
Mariann Fischer Boel.
4. As before Cancún in
2003, the EU's strategy threatens to unbalance and ultimately to derail the
Hong Kong Ministerial. While precluding any movement in relation to its own
agricultural regime, the EU has launched a new offensive targeting the
industrial and services sectors of developing country economies. The only hope
is that the EU has again over-reached itself to such an extent that it will
prevent agreement on a deal. Only by rejecting the deal which has taken shape
at the WTO will the Hong Kong Ministerial lead towards a pro-development
outcome.
NON-AGRICULTURAL
MARKET ACCESS (NAMA)
5. The WTO's
non-agricultural market access (NAMA) negotiations were left out of the
limelight during the first three years of the Doha work programme. Stalemate in
NAMA allowed more immediate debates to occupy the attentions of WTO delegates
and civil society alike, while the collapse of the Cancún Ministerial over
agriculture and the Singapore issues obviated the need for a showdown on NAMA
at that time. Since the WTO's adoption of the 'July package' at the beginning
of August 2004, however, the NAMA negotiations have shot to the fore, and
differences over NAMA now pose a real threat to any pro-development outcome of
the Doha Round.
6. The EU identified
the NAMA negotiations as a high priority in its joint submission with the USA
and Canada just prior to the Cancún Ministerial, where the three members stated
their intention to use the negotiations in order "to achieve commercially
significant market access improvements" for the multinational corporations
whose interests they represent.[2]
It is now generally accepted that such gains will come at the expense of small
producers and fledgling industries in developing countries, in sharp contrast
to the benefits which these countries had been promised in the 'Development
Round'. Opening up developing country markets along the lines proposed by the
EU will expose infant industries to overwhelming competition from cheap imports
from the world's most powerful multinational corporations, with disastrous
consequences. Contrary to suggestions that domestic enterprises benefit in
efficiency gains from the stimulation of foreign imports, the empirical record
shows that huge numbers simply collapse under the weight of such unequal
competition, leading to bankruptcies, mass unemployment and increases in
poverty levels.[3]
7. The risks of
premature liberalisation are now widely acknowledged, and the UK government has
repeatedly affirmed that it will no longer use trade negotiations to force poor
countries to liberalise their import regimes. As stated most recently by the Secretary
of State for Trade and Industry, Alan Johnson, in his 26 September 2005 speech
to the Labour Party conference: "In the past, global institutions have forced
the poorest countries to open their markets to Western business before local
producers had the capacity to compete. The poor bore the brunt. So we must
reject the path of forcing liberalisation on developing countries."
8. In reality, however,
the UK and its EU partners are indeed using the WTO's NAMA negotiations to
force open the industrial and manufacturing markets of developing countries.
The EU has pressed for the most 'ambitious' market opening in the current
round, rejecting developing country pleas for the flexibility and policy space
which would allow them to protect local producers and develop their own
industrial base. European Commission representatives have repeatedly castigated
developing country delegates in public for resisting EU attempts to open up
their markets, and have threatened to block progress on other issues in the
round if their ambitions on NAMA are not satisfied.
9. The EU's most recent
submissions on NAMA demonstrate how little the EU has been willing to
accommodate developing country concerns. Pressing for the most extreme variant
of formula for the reduction of industrial tariffs (the 'simple Swiss'
formula), the EU has attempted to restrict developing country flexibilities
still further by requiring them to trade away the special and differential
treatment (SDT) provisions granted them under paragraph 8 of the current NAMA
framework. Developing countries have drawn attention to the guarantees in the
Doha Ministerial Declaration that they should be granted both SDT and 'less than full reciprocity' in
application of the formula. By contrast, EU Trade Commissioner Peter Mandelson
has stated that EU ambitions extend to achieving real cuts in the applied
tariffs of developing countries, not just the bound tariffs which are
negotiated at the WTO.[4]
10. The EU has claimed
that its market access ambitions on NAMA extend to the more advanced developing
countries only, and has tried to suggest that poorer countries will not be
affected by the NAMA negotiations. Least developed countries and a dozen others
with low levels of binding coverage (the 'paragraph 6 countries') are exempted
from applying the NAMA tariff reduction formula across their non-agricultural
tariff lines, being required instead to increase levels of binding and, in the
case of the paragraph 6 countries, to reduce their overall non-agricultural
tariff average to that of developing countries as a whole.[5]
In addition to the concessions which these countries will be required to make,
all other developing countries face dramatic liberalisation of their import
regimes. And it will be the most vulnerable populations of those countries who
will be worst affected - irrespective of whether they live in large economies
such as China and India or smaller nations such as Bolivia, Jamaica and Peru.
11. Developing countries
have put forward their own proposals for a pro-development outcome to the NAMA
negotiations. The proposal submitted jointly by Argentina, Brazil and India in
April 2005 (the 'ABI proposal') substituted a Swiss-type formula for the
'simple Swiss' formula advocated by the EU and other developed countries,
endeavouring to factor countries' existing tariff profiles into the equation
used to determine how great each country's tariff reductions should be. The
proposal submitted by Caribbean countries, and subsequently supported by
several other developing countries, built on the ABI proposal by incorporating
a range of other factors into the equation, whereby the level of tariff
reductions would be determined according to each country's existing
circumstances and development needs. This pro-development approach contrasts
sharply with the market access ambitions of the EU, USA and other developed
countries, which have attempted to relegate development concerns to the margins
of the negotiations. Indeed, the EU - despite having been first among developed
countries to dub the current round of negotiations the 'Doha Development
Agenda' - has rejected the ABI and Caribbean proposals as being inimical to the
ambitious market access outcomes which it wishes to obtain for its own business
interests.
GENERAL
AGREEMENT ON TRADE IN SERVICES (GATS)
12. Peter Mandelson, in
his speech to the European Parliament's market access symposium on 19 September
2005, stated that obtaining market access for European service providers is
"even more crucial" than the Commission's ambitions on NAMA. The EU has used
the current round of services negotiations to present 109 other WTO members
with a wide-ranging set of liberalisation requests, first seen in full in the
leaked copies posted on the internet in February 2003 (see www.gatswatch.org).
These have demanded extensive liberalisation commitments from developing and
least developed countries as well as from other developed countries, including
the now infamous request that 72 countries commit their water services under
GATS.[6]
As reaffirmed in the EU's 2005 summary of its revised requests, "the principal aim of the services negotiations is to
improve market access for European services exporters in foreign markets"
- a far cry from the supposed 'Development Agenda'.[7]
13. In order to create
more pressure on other WTO members to deliver on the EU agenda, EU negotiators
have regularly talked of a 'crisis' in the services negotiations due to a
supposed lack of new market access opportunities for EU service suppliers in
the offers submitted by other WTO members - although in private many officials
concede that this is more a strategy for the deliberate manufacturing of
urgency than a true reflection of the state of play. Developing countries have
long complained of the intense pressure brought to bear on them by EU negotiators
in the context of the GATS request-offer process, which dictates that all such
negotiations be held on a bilateral basis and in secret. European Commission
negotiators have been reported for bullying developing countries in these
secret meetings, and have earned a reputation in Geneva as the most aggressive
and persistent demandeurs.
14. The European
Commission is now attempting to press forward its GATS agenda by introducing a
dramatic new proposal on 'benchmarking' to the negotiations. First circulated
in a non-paper to selected WTO members in June 2005 and since revised for
broader circulation, the proposal aims to overturn the very architecture of the
GATS agreement, whereby countries are supposed to determine in line with their
own development priorities which sectors they wish to commit to binding
liberalisation at the WTO, and on what terms. Instead of this 'positive list'
approach - which was the only basis on which developing countries agreed to the
inclusion of services in the WTO's work programme - the European Commission is
proposing a 'common baseline' approach whereby all countries would be required
to commit a predetermined number of sectors to GATS. This 'benchmarking' would
apply not only to developed countries but also to developing and least
developed countries as well, and would include horizontal disciplines to
intensify the liberalisation of sectors committed at the WTO.[8]
15. Several member states
of the EU have expressed disquiet with the Commission's aggressive approach to
benchmarking - not least because they were neither consulted nor informed of
the initiative before the Commission presented it to other WTO members. The UK
government has stated that it does not support the Commission's initiative,
although it is unclear how far this opposition goes. Interestingly, the EU
services industry has also expressed concern at the Commission's new proposal.
Representatives of the European Services Forum, the business lobby created at
the instigation of Sir Leon Brittan in order to direct Commission policy on
services trade, have also expressed disquiet at the proposal - not so much out
of concern at the consequences of the liberalisation commitments themselves,
but in apprehension that introducing such a controversial initiative at this
late stage in the negotiations threatens to hold up and even derail the entire
process.
16. The vast majority of
developing countries have rejected the Commission proposal on benchmarking,
pointing out that it infringes the provisions of GATS Article XIX (reaffirmed in
the modalities for the GATS negotiations agreed in March 2001) that all
countries are entitled to make their own decisions as to which sectors to
commit to binding liberalisation under GATS, and on what terms. There is
negligible support from other developed countries, several of which have
suggested their own ways in which to complement the request-offer negotiating
process. Yet despite the widespread opposition to its new level of aggression
from developing countries and civil society organisations alike, the EU's 133
Committee agreed at its 6 September 2005 services meeting that the Commission
should take forward the proposal at the WTO.[9]
AGRICULTURE AND THE HONG
KONG 'DEAL'
17. According to the EU,
the 'deal' on the table for the Hong Kong Ministerial is that developing
countries should open up their industrial and services markets in return for
action from rich countries on their agricultural regimes. As stated by Peter
Mandelson at the National Press Club in Washington DC on 13 September 2005, "An
ambitious deal on agriculture in the so-called 'North' is inextricably linked
to meaningful market access elsewhere in emerging markets." Elimination of all
EU and US farm subsidies which lead to the dumping of agricultural produce on
developing country markets would be a clear gain from the WTO negotiations, if
such an outcome were conceivable. Yet European Commission officials have
repeatedly stressed that they are unable to offer further movement on domestic
subsidies beyond that already achieved through the 2003 reforms of the Common
Agricultural Policy.[10]
While WTO members are already committed to setting a "credible end date" for
direct export subsidies by virtue of the 'July package', it is now well
established that the EU and USA will actually be able to increase the total
level of subsidies they pay their farmers if their current proposals on
agriculture are carried at the WTO.
18. Absence of progress
on domestic subsidies would leave the prospect of increased market access as
the only 'gain' to developing countries in agriculture. Yet such an outcome is
increasingly being seen as of dubious benefit in terms of poverty reduction and
development. While greater access to EU and US markets may be a positive
prospect at the macroeconomic level for those more powerful developing
countries able to benefit from the new opportunities, the reduction of tariffs
threatens the interests of African and other poorer nations which have
traditionally relied on trade preferences to sustain their own export sectors.
This prospect was well expressed in the EU's own internal assessment following
the collapse of the Cancún Ministerial, which stated: "In general terms the
African countries have more to fear than to gain from the Doha Round. They have
almost no offensive interests and, on the contrary, a lot of defensive
interests (fear of losing their preferences on the EU markets, wish to protect
their infant industries, general problem of supply side constraints)."[11]
19. Even within those
developing countries with the supply side capacity to take advantage of new
market access opportunities, it will again be the most powerful producers that
benefit most. Nor is this a neutral outcome for the poor. The most vulnerable
communities risk being driven further into poverty as a result of competition
for land, water and other essential resources from the intensified export
orientation of their agricultural sectors - as in Brazil, where local War on
Want partners reliant on the non-wood products of the Amazonian forest for
their own subsistence have seen their livelihoods threatened by the expansion
of soy and cattle farming.
20. Yet even if
developing countries could be assured a genuinely positive outcome on
agriculture, including an end to all subsidies which lead to dumping on their
local markets, this is no justification for their having to give up their own
chances for development by reciprocating through concessions on NAMA and GATS.
As stated in the UK government's 2004 Trade and Investment White Paper:
"Clearly, we should not expect poorer countries to pay a 'price' for any
'concession' on subsidies, tariffs or market opening by a developed country -
as trade negotiators too often imply. Instead we should make these reforms
willingly, both because they are the right things to do for the developing
world, and because they are in our own interests."[12]
21. In this respect,
Peter Mandelson's statement to the WTO's General Council in July 2005 that he
wishes to see "equality of pain" from developing and developed countries alike
is unacceptable.[13] Such an
approach fails to recognise the structural damage which liberalisation of
industrial and services sectors could inflict on developing country economies,
and the long-term poverty this will bring to the most vulnerable communities in
the world - a 'pain' quite out of proportion to any suffered as a result of
reducing agricultural subsidies already targeted disproportionately at the
richest farmers in the EU.
CONCLUSION
22. It is widely accepted
that the Cancún Ministerial collapsed as a result of EU and US intransigence on
agriculture and EU attempts to expand the WTO's agenda into the Singapore
issues of investment, competition policy, government procurement and trade
facilitation.[14] There is
now a significant prospect that the Hong Kong Ministerial will face the same
impasse as a result of the EU's offensive agenda on NAMA and GATS - an agenda
again shared with the USA and other countries. Yet the collapse of the Hong
Kong Ministerial is already looking like the least bad option for developing
countries, given the damaging nature of the 'deal' on the table. More
critically, perhaps, the absence of any genuinely pro-development options in
Hong Kong may confirm that the WTO as an institution is unable to answer the
development needs of the poor.
23. The UK government has
a special responsibility to ensure that the EU's aggressive strategy does not
lead to another negative outcome for developing countries. Not only does the UK
hold the EU presidency at this crucial time, thus chairing all meetings of the
EU's 133 Committee and Council, but it also occupies a particularly influential
position within the EU bloc as a longstanding champion of trade liberalisation.
This hawkish reputation would make UK action to change the EU's offensive
agenda far more effective than would be similar calls from the French
government, for instance, whose motives would attract obvious suspicion.
24. Yet the UK government
has made no secret of its continuing drive to use the WTO negotiations on NAMA
and GATS to press for maximum trade liberalisation from developing countries
and thereby to open up new business opportunities for British companies in the
emerging markets of the developing world. Despite its pro-development rhetoric
on trade, the UK has by its own admission been at the forefront of the EU's
'ambitious' market access strategy, rejecting developing country pleas for
flexibility in the NAMA and GATS negotiations and demanding instead the maximum
possible market opening - especially from those major economies which offer
most promise to British business interests. This double game of professing a
pro-development creed and yet demanding extensive liberalisation from
developing countries at the WTO is a direct breach of Labour's 2005 manifesto
affirmation: "We do not believe poor countries should be forced to liberalise."
25. For this reason, War
on Want and the other members of the Trade Justice Movement and Make Poverty
History coalition are intensifying the pressure on the UK government to abandon
its aggressive agenda and change that of the EU. MPs faced another indication
of the strength of public feeling on this issue via the mass lobby for trade
justice on 2 November 2005, just as the government is even now receiving
thousands of written appeals from War on Want activists and others up and down
the country. The International Development Committee can fulfil an important
role in holding the government to account for breaking its manifesto promise on
forced liberalisation. It should also demand an indication from government as
to the plans it has in place to ensure that the EU's negotiating strategy for
Hong Kong does not destroy any chance of a pro-development outcome to the Doha
Round.
November
2005
[1] Council of the European Union, press release of the 2608th Council
Meeting, General Affairs and External Relations, Luxembourg, 11 October 2004.
Document no 12767/04 (Presse 275).
[2] Joint Canada-EU-US proposal 'Non-Agricultural Market Access:
Modalities'. 20 August 2003. JOB(03)/163
[3] Hilary, J. (2005) The Doha
Deindustrialisation Agenda: Non-agricultural market access negotiations at the
WTO. War on Want, London.
[4] 'Challenges for Europe', City Europe Lecture by Peter Mandelson,
London, 21 July 2005
[5] For full details, see Hilary, J. (2005) The Doha Deindustrialisation Agenda: Non-agricultural market access
negotiations at the WTO. War on Want, London.
[6] Hilary, J. (2003) GATS and
Water: The threat of services negotiations at the WTO. Save the Children,
London.
[7] Summary of the EC's Revised Requests to Third Countries in the
Services Negotiations under the DDA. Brussels, 24 January 2005.
[8] European Communities, 'Non Paper on Complementary Methods for the
Services Negotiations'. Room document submitted to WTO Council for Trade in
Services, Special Session, 13 September 2005.
[9] Council of the European Union, 'Outcome of Proceedings, Ad Hoc
Article 133 Committee (Services) on 6
September 2005'.
[10] See, for example, Mariann Fischer Boel's speech to the 18 October
2005 EU General Affairs Council in Luxembourg (SPEECH/05/619) 'DDA Negotiations
in Agriculture'.
[11] Council of the European Union, General Secretariat, Liaison Office
in Geneva. 'Principal results of the regular meeting of Heads of Mission
(Geneva, 23 September 2003)'.
[12] Department of Trade and Investment, Trade and Investment White
Paper 2004: Making globalisation a force for good, p79
[13] Peter Mandelson, Statement to the WTO General Council, Geneva, 28
July 2005.
[14] This was the shared verdict of international media such as the BBC,
Financial Times, International Herald Tribune and Economist - see
quotes collected in Hilary, J. (2003) The Singapore Issues at Cancún: A
record of the WTO's Fifth Ministerial Conference. ActionAid, London.