Memorandum submitted by WWF-UK
1. Summary1.1 There are a number of global challenges
facing the world today, such as poverty and inequality, biodiversity loss,
climate change, security and HIV/AIDS. Unless World Trade Organization
1.2 The range of global challenges that confront us can be met only through the concerted engagement of both developed and developing countries. This kind of engagement will emerge only when developed countries take significant practical steps to demonstrate that they can move beyond viewing international trade negotiations as just another vehicle to promote their short-term national self-interest. The current expertise of the WTO, and the organisation's decision-making processes, make it ill-equipped to fully address the global challenges. In meeting global challenges it will also be necessary to draw on the expertise of other international bodies.
1.3 A sophisticated approach to both dismantling current tariffs, in particular tariff escalation and tariff peaks, and context-specific use of alternative policy mechanisms is required to address global challenges. In particular, it is important to recognise: · that tariffs present an important component in the economic development strategies of many developing countries. · that in other respects tariffs present an inefficient instrument for addressing the challenges confronting us. · that the contribution which trade in particular goods will make to addressing global challenges will be context-specific, and must be reviewed on an ongoing basis. · that any new approach to market access must first confront the problems facing developing countries, through (i) dramatically improving market access for developing country exports, (ii) offering them technical and financial assistance to encourage shifts to more sustainable production, and (iii) allowing developing countries adequate mechanisms to protect their markets from dumped products and import surges.
1.4 The example of the reform of the EU sugar regime is an example where an opportunity to address a number of global challenges, including economic development in least developed countries and environmental sustainability, could be seriously missed. A sugar reform that helps raise environmental standards and alleviate poverty in developing countries is possible and would be the best way for Europe to demonstrate its commitment to the best outcome for the development round of the WTO. 2. Introduction2.1 WWF welcome the opportunity to submit evidence to this select committee enquiry. Trade and investment issues are global in scope, but different countries and different regions have widely different priorities and perspectives. For this reason, WWF responds to these issues by drawing on the expertise of staff based in key locations amongst the 50 country and regional offices WWF has worldwide. This network allows WWF to bring a truly international perspective to trade and in-vestment debates. It allows us to engage not only with governments and companies in centres of influence in the North, but places us to work in partnership with those governments in the South which are becoming increasingly important in shaping the international agenda.
3. WWF Approach to TradeGlobal Challenges3.1 There are a number of global challenges facing the world today, such as poverty and inequality, biodiversity loss, climate change, security and HIV/AIDS.
3.2 These challenges, though, are intimately interconnected. Consider, for example, the nexus between climate change, trade in oil, the economic fortunes of oil-rich developing countries, international conflict, and terrorism. Or the connections between demand for red meat, trade in fodder for beef-cattle, Brazil's export-led growth strategy, international debt and the deforestation of the Amazon. Or aging populations in Europe and Japan, increased pressure on pension-funds for high rates of return, foreign direct investment into China, growth in Chinese demand for raw materials, and illegal logging in Indonesia.
3.3 Such interconnections make prioritisation difficult, and point to the need to formulate our responses on a case-specific basis through deliberative processes reflecting the full range of relevant expertise.
3.4 Unless World Trade Organization (WTO) rules are shaped to contribute to meeting global challenges, they will at best divert attention from the urgency of addressing them, and at worst undermine the development of other processes intended to do so. There has been a tendency to pigeon hole global challenges as 'developmental', 'economic' or 'environmental'. However, this makes little sense, as they are all increasingly interdependent. Crucially for WWF, the environment must not be an after thought in Hong Kong, as recently implied by UK DTI and DEFRA Ministers.
WTO response to Global Challenges3.5 Sooner or later the role of trade rules in meeting these global challenges will need to be re-examined. WWF is well aware that today's WTO does not present the best forum for innovative thinking about how international trade rules can be used to help address global challenges. In some circumstances, the pursuit of trade liberalisation can lead to positive steps to meet these challenges. Equally, there are many instances where trade liberalisation undermines such progress. Either way, the economic policies promoted by the WTO have been shaped not by a coherent approach to simultaneously addressing a range of global challenges, but rather in response to short-term national self-interest.
WWF Recommendations3.6 WWF believes that there are several things, pertaining to the entire WTO agenda, that are clear: · The range of global challenges that confront us can be met only through the concerted engagement of both developed and developing countries. This kind of engagement will emerge only when developed countries take significant practical steps to demonstrate that they can move beyond viewing international trade negotiations as just another vehicle to promote their short-term national self-interest and towards seeing trade as facilitating sustainable development.
· Whilst there are clearly occasions on which several of these global challenges can be addressed simultaneously through so-called "win-win" policies, it will often be the case that balances must be struck, and trade-offs made, between different outcomes.
· These balances must be struck in an ongoing, context-dependent, transparent and participatory way, with adequate safeguards against protectionism, and privileging the urgent needs of developing countries.
· The current expertise of the WTO, and the organisation's decision-making processes, make it ill-equipped to strike these balances. In meeting global challenges it will also be necessary to draw on the expertise of other international bodies.
· Serious engagement with these challenges requires a long-term perspective.
4. Market Access in Goods4.1 There are understandable concerns amongst developing countries that current negotiations will result in further disproportionate liberalisation of their own markets. Tariff regimes can be an essential component of development strategies - for example, in the course of protecting vulnerable agricultural producers, or nascent industries, in developing countries. However, tariff regimes are largely ill-suited to addressing many of the other global challenges that we face. Indeed, developed countries maintain high tariffs and tariff escalation in particular on goods of export importance to developing countries, undermining progress on international development goals. It is therefore difficult to foresee reasons for the continued application of tariffs by developed countries. Nevertheless, dismantling these regimes in developed countries will sometimes have negative impacts - from the erosion of preferences for some developing countries, to greater incentives for unsustainable natural resource exploitation.
4.2 If such negative effects are to be minimised, this will require a sophisticated approach to both dismantling current tariffs, in particular tariff escalation and tariff peaks, and context-specific use of alternative policy mechanisms to address global challenges. For instance, alternative mechanisms are needed to support the export of goods and services which contribute to the pursuit of development strategies. These could include a range of measures from transitional assistance packages for developing countries suffering preference erosion, to public procurement policies aimed at supporting key export industries in developing countries. It is essential that such measures are objective, transparent and adopted only after international consultations.
4.3 In particular, governments should recognise: · that tariffs present an important component in the economic development strategies of many developing countries, and that new disciplines on market access provisions must not compromise the scope of developing countries to use this policy tool.
· that in other respects tariffs present an inefficient instrument for addressing the challenges confronting us, and that most developed country tariffs, in particular tariff escalation and tariff peaks, should be progressively dismantled.
· that the contribution which trade in particular goods will make to addressing global challenges will be context-specific, and must be reviewed on an ongoing basis through the oversight of a purpose-built international forum drawing on a broad range of expertise, whose recommendations should form the basis for market access negotiations.
· that any new approach to market access must first confront the problems facing developing countries, through (i) dramatically improving market access for developing country exports, (ii) offering them technical and financial assistance to encourage shifts to more sustainable production, backed by, for instance, developed countries' public procurement strategies, technology transfers or inclusive labelling schemes, and (iii) allowing developing countries adequate mechanisms to protect their markets from dumped products and import surges.
5. Agricultural Trade Liberalisation5.1 Global agricultural production and rural communities throughout the world, face a number of challenges, some of which already have immense impact today, others of which present a growing threat. These include food security and poverty reduction, urbanisation, water shortage, desertification, nutrient mining, salination, eutrophication, declining biodiversity, habitat loss and the impacts of climate change. In addition, of course, trade in agricultural produce is central to the economies of and poverty alleviation in many developing and middle-income countries.
5.2 Due to the Structural Adjustment Programmes of the World Bank and the IMF and the outcomes of the Uruguay Round, developing countries have experienced a far more extensive opening of their markets than developed countries. At the same time, the market access to developed countries for their agricultural products has not yet been significantly improved. In addition, very few developing countries can make use of the special safeguards (SSG) to protect their internal markets against sudden import surges. It must be ensured that developing countries can use appropriate instruments to protect their domestic commodity markets (which are important for their food security and agricultural development) whilst simultaneously gaining improved market access to developed countries.
5.3 However, a debate on the sophisticated measures necessary to address the different challenges will not be achieved whilst developing WTO Members see the trade policy of many developed countries as being driven primarily by protectionist interests. If political progress is to be made in addressing the challenges that confront us, significant concessions must first be made by developed countries.
5.4 In particular, developed country governments should agree: · to honour the 2004 "July package" understanding that the highest tariffs should be reduced the most. This will entail greatly reducing developed country tariffs on imports of agricultural products from developing countries.
· to provide tariff-free access to all agricultural products originating from least-developed countries (LDCs), and agree to abandon tariff escalation and tariff peaks on agricultural products originating from all developing countries.
· that it should be the prerogative of developing countries themselves to decide whether to reduce import tariffs on basic food commodities important for food security, livelihoods and agricultural development.
· to exempt LDCs from tariff reduction commitments, including binding of tariffs.
· to technical and financial assistance packages for developing countries whose preferences are being eroded as a result of tariff reductions, in order to help them adapt through diversified and sustainable production.
· to support capacity-building in developing countries, particularly in LDCs, for them to be able to comply with non-tariff measures such as health, food safety and environmental requirements in foreign markets.
6. AGRICULTURAL SUBSIDIES
6.1 The agricultural subsidy regimes employed by developed countries serve to make many global problems worse.
6.2 It does not follow, however, that there are no circumstances under which agricultural subsidies can play a positive role in meeting global challenges. It is important that, as we scrap the most egregious subsidy regimes, we also recognise that under some circumstances subsidies can play a positive role. But if such a role is to be identified, this can only be as part of a serious attempt to assess both the present and future international impacts of any subsidy use, by taking fully into account the context-dependence of the effects of any subsidy scheme. For instance, producing crops for bio-fuels can play a significant role in combating climate change and alleviating poverty. There could be circumstances under which the production of bio-fuels should be subsidised. However, there are also circumstances where the intensive growing of crops for bio-fuels will deplete and pollute soils and freshwater, where the life-cycle greenhouse gas balance does not contribute to combating climate change, or where their production does little to reduce rural poverty. It is clear that the current focus on testing the "trade distortiveness" of a subsidy regime is completely inadequate as an approach to capturing such concerns.
6.3 Subsidy disciplines that acknowledge the positive role that subsidies can play will be designed and administered only through a process which draws on a broad range of expertise - from government representatives, through to those expert in the implications of agricultural practice on the environment. This will require the establishment of a purpose-built international forum both to determine disciplines and to ensure their implementation through dispute settlement.
6.4 In particular, governments should: · call for the replacement of the current categorisation of subsidies based on trade distortion by a categorisation based on their contribution to addressing global challenges.
· recognise that this will require ongoing assessments of the impacts of specific subsidy regimes.
· highlight that the WTO is not equipped to carry out such assessments alone, and that a broader range of expertise should consequently be involved in the administration of new subsidy disciplines through a purpose-built international forum.
7. Non-Agricultural Market Access7.1 Non-agricultural market access (NAMA) negotiations include negotiations on both tariffs and so-called non-tariff measures, ranging from health, safety and environmental standards to export restrictions.
7.2 Under the tariff negotiations, the reduction of tariff escalation and peaks in developed countries carry the clearest potential for improving livelihoods of the poor. However, the impact of such reductions also depend on the broader context: For instance, the development of an industry for forestry products following an abolition of tariff escalation in main importing markets of timber may lead to depletion of the exporting country's natural resources if law enforcement is deficient and illegal logging increases.
7.3 The negotiations on non-tariff measures could provide a forum for dialogue on the development of national regulations, in order to promote "soft harmonisation" (i.e. that does not affect the substantive level of national regulatory standards but that attempts to co-ordinate technical regulations) and improve market access particularly for developing countries. It is important, however, that such negotiations do not degenerate into bargaining away legitimate regulatory standards.
7.4 In particular, governments should agree to: · extend tariff-free market access to LDCs, whilst exempting them from commitments to reduce tariffs, including binding tariffs.
· sequence the dismantling of other tariffs according to the contribution that increased market access will make to addressing global challenges.
· eliminate tariff peaks and tariff escalation in developed country markets for imports from developing countries.
· use the negotiations on non-tariff measures as a forum to eliminate complex and non-transparent non-tariff barriers that can off-set benefits obtained by tariff reductions. Outcomes may include harmonisation of standards, increased flexibilities to take into account the local conditions of the exporter, and technical and financial assistance to help developing countries improve their own standards.
7.5 If nothing else, governments should: · not agree formula-based "line-by-line" tariff reduction requirements.
· not ban export duties as a tool in development policy or revenue-raising.
· not use the negotiations on non-tariff measures to undermine legitimate health, safety and environmental standards.
8. Case Example: Impacts of European Union Sugar Regime Reforms on developing countries8.1 The EU sugar regime and its reform this year offers an insight into the double standards applied by Europe to WTO negotiations on agriculture. It is an example of how the EU fails to recognise or manage the negative impacts of trade reform on developing countries let alone seek to help those countries to benefit from liberalisation. Developed countries need to take a pro-sustainable development stance in agricultural trade negotiations within the WTO. They must recognise the importance of developing countries being able to protect their own markets from dumping and of being given better access to developed country markets. Developed countries must also acknowledge their own responsibility to end subsidised over-production and export of agricultural produce and to offer effective aid to developing countries to help build sustainable agricultural economies. Sugar offers a prime example of how all these principles are being ignored by the EU. Whilst socio-economically and environmentally sugar cane is a much more important crop for developing countries than sugar beet is to Europe the EU persists in protecting and subsidising its industry, offering unfavourable trade terms to the poorest developing countries and failing to create an effective aid for trade programme.
How the regime damages developing countries: 8.2 Europe over-produces sugar, stifles demand for imports and directly and in-directly subsidises the dumping of sugar on world markets at below the true costs of production. As a result developing countries, in particular, face depressed world prices, restrictions on their access to the EU market and unfair competition in third countries.
8.3 Alongside lower earnings, poverty and poor labour conditions in developing countries, there are also environmental consequences. Where sugar is grown irresponsibly valuable habitat is lost, water is overused, soil eroded and degraded and land, air and water are polluted by pesticides, fertilisers from sugar fields as well as by smoke and waste products from sugar mills. In some regions inefficient irrigation of sugar means that unnecessarily large amounts of water are used. In others, water becomes polluted with silt and agri-chemicals. Better management practices are widely available that address many of these impacts and sugar can be grown in ways that are good for nature. Cane can help prevent soil erosion and wildlife can co-exist in well-managed plantations. Unfortunately, due to the depressed nature of the world market and unfair competition from subsidised sugar exports, the sugar industry in many countries is unable to invest in these practices.
8.4 The EU is reforming its sugar policies. For global sustainability, changes should lead to genuine cuts in European production and an end to all support that allows the European industry to compete unfairly with developing countries. Europe also needs to import at least twice as much sugar from developing countries as it does now. Alongside reform the EU must extend meaningful help to least developed countries to ensure they can raise standards and benefit from liberalisation.
8.5 Instead the EU is proposing a reform package that offers generous terms to the European industry and little for the developing world. It creates a voluntary system for reducing EU production whilst actually increasing quotas; it guarantees to compensate for price cuts in Europe and continues to maintain a range of safety nets that shelter the industry from competition. In contrast it offers pitiful compensation to those countries that have traditionally traded with the EU at a favourable price and no help at all for the least developed countries that have been excluded from the European market by the regime.
8.6 These proposals have worrying environmental implications which depend on two factors:
8.7 The fate of land taken out of sugar production in less competitive countries, for example the small island states that currently trade with Europe. The environmental impacts depend on their response to declining sugar incomes, including whether they seek alternative land uses and livelihoods or expand and intensify sugar production in order to squeeze costs. One particular concern will be the shift from sugar to coastal and fisheries exploitation as an alternative.
8.8 How and where sugar production expands in those countries that will be able to compete. The concern is that any country seeking to export will expand rapidly and possibly unsustainably to fill a vacuum left by other countries leaving the market.
8.9 In addition there will be indirect environmental impacts that will depend on the ability of those countries gaining market share to capture the development and environmental benefits of expanding sugar exports.
8.10 These environmental concerns are not an argument to slow or minimise the pace of reform but do demonstrate the need for the EU to put a great deal more effort and resources into encouraging more sustainable and better management practices.
How can the EU ensure that developing countries benefit from reform? 8.11 If reforms result in an end to the dumping of EU sugar and a greater level of imports from developing countries to the European Union, as the European Commission predict, then they should be beneficial to a number of least developed countries. However there are doubts that the reforms are even likely to meet the requirements set by the recent WTO ruling to end export subsidies.
8.12 European farmers will be compensated for 60% of the price cut in the form of a Single Farm Payments - a total of € 1.54 billion a year. Private storage and withdrawal subsidies will still be paid in cases of low market prices. Production refunds will continue to be paid to high sugar using industries, such as confectionery and pharmaceuticals. 1.3 million tonnes of extra sugar and sweetener quota is being created and over-production is being further legitimised by continuing to 'turn a blind eye' to sugar for chemical and alcohol uses. Sugar beet will qualify for set aside payments and for a €45 per hectare payment for renewables. A restructuring aid worth over €4.2bn will be made available to encourage the industry to give up quota. All this amounts to a very generous offer to the European sugar industry which has already benefited massively from 40 years of support and market management.
8.13 Whether EU production and therefore exports drop will depend on the success of voluntary restructuring, whether the signals to withdraw from production out-weigh the signals to over-produce and if not whether the European Commission stands by its commitment to use compulsory quota cuts if needed. Many observers believe this will not happen. A mid-term review of the reforms in 2010 is needed to ensure that the sustainability impacts are managed adequately.
8.14 The greatest threat of the current proposals is the one posed by the lack of help being extended to developing countries to invest in the sustainability of their industries. Without adequate help LDCs will not be in a position to benefit from regional markets or from greater access to the EU. Help must be given to ensure that these markets can be supplied with sugar produced to high environmental standards in countries where it can significantly contribute to poverty alleviation. Without such help the threat of unsustainable expansion in LDCs or in countries like Brazil, which is already geared up to export sugar, poses environmental threats which are not acceptable.
8.15 The EU is offering some help to traditional suppliers - but only €40 million for one year. Studies show that these countries' revenue losses alone will amount to €250 million a year. To compensate for this and to then stimulate investments in the sugar sector or alternatives requires funding of at least €500 million a year. In addition the EU must offer similar help to those least developed countries who have not benefited from preferable trade in the past and will not benefit from the proposed measures. WWF advocates the use of budget savings from reform for assistance to LDCs rather than only to the European industry.
November 2005
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