APPENDIX 4
Memorandum by Christian Aid
INTRODUCTION
"If we could boost Africa's share of world
trade by just one per cent, then its income would increase by
US$70 billion dollars a year—which is more than three times
all the aid the developed world gives, and enough to lift millions
out of abject poverty. Driving this forward at the world trade
talks in December will not be easy. But we will do everything
in our power to secure an outcome that is pro-development and
pro-poor."
Alan Johnson
Secretary of State for Trade & Industry
26 September 2005
Christian Aid is committed to making international
trade work for the poor—it has the potential to help lift
millions out of poverty. But it can also undermine livelihoods
and make people even poorer.
Christian Aid's work in more than 50 countries
has brought us into contact with numerous examples of countries,
communities and industries damaged by inappropriate trade liberalisation.
Our research estimates that trade liberalisation has cost sub-Saharan
Africa US$272 billion over the last 20 years—equivalent
to the amount it has received in aid and debt relief, and more
than enough money to pay off its debt and finance vaccinations
and education for every child in the region.
The current approach to liberalisation fails
to take into account the economics of poverty in the developing
world. Most poor people live in rural areas where the main business
is agriculture, and where services, infrastructure and alternative
employment are almost non-existent. Rapid liberalisation means
a glut of cheaper imports, which push local producers out of business.
So, for instance, tomato farmers are reduced to breaking rocks
for a living and Jamaican sugar factory workers are driven to
prostitution to survive.
The modern economic success stories are countries
with a moderate level of protection. South Korea, Malaysia, China
and Mauritius have based their growth on industries that were
protected and nurtured as they grew. This is the way in which
every industrialised country has developed.
Christian Aid therefore argues that developing
countries should not be pushed to liberalise their markets but
should be able to set their own path to development. We are not
calling for blanket protectionism or isolationism and self-sufficiency,
but for the political space for developing countries to introduce
targeted policies that best contribute to poverty eradication,
whether they involve liberalisation or protectionism.
Christian Aid is joined by the 70 organisations
and over nine million supporters of the Trade Justice Movement
as well as the more than 500 organisations that make up the MAKEPOVERTYHISTORY
coalition in its opposition to pressure on developing countries
to liberalise their economies.
KEY RECOMMENDATIONS
1. The UK government should make a clear
statement about its position on WTO negotiations with regard to
not forcing developing countries to liberalise.
2. In negotiations with its EU partners
it should support:
— poor countries' ability to exempt
an unlimited number of agricultural products from liberalisation;
— an immediate end date for export
subsidies;
— further reform of rich-country agricultural
subsidies;
— lower reductions in non-agricultural
tariffs for developing countries than developed countries, and
the right of developing countries to exempt some sectors from
liberalisation;
— the right of poor countries to regulate
service providers as necessary to ensure poor communities are
not denied access to those services; and
— a flexible approach to the General
Agreement on Trade in Services (GATS).
1. THE WTO IN
2005
1.1 After the G8 in July and two high-profile
conferences in the US in September, the next date on the global
anti-poverty campaigners' agenda is December, when the World Trade
Organisation holds its sixth ministerial meeting in Hong Kong.
For many campaigners, this is the culmination of a year of intense
activity. Despite encouraging news on debt and aid at the G8,
many people felt that progress on international trade was the
real prize of 2005.
1.2 However, there is a real possibility
that trade will be the area on which there is the least progress
in 2005. A pro-poor outcome from the Hong Kong ministerial meeting
of the WTO would require rich countries to make long-overdue changes
while allowing poor countries the flexibility they need. Genuinely
putting development first will not lead to a WTO deal that pushes
developing countries into making choices between different groups
of poor people. For instance, if a country has to trade-off the
interests of poor farmers and an infant food-processing industry
this will not successfully reduce poverty.
1.3 Expectations of the ministerial meeting
are both very high and very low. High, because trade is such an
important issue, and if the world's leaders keep the promises
they have made this year to make trade work for poor people, then
millions could benefit. Low, because making deals at ministerials
is a tortuous business. Two out of the last three have ended in
failure. The G8 leaders will need a major change of approach if
they are to turn their words in Gleneagles into deeds in Hong
Kong.
2. WHAT PROGRESS
IS NEEDED
AT THE
WTO?
2.1 Success at the Hong Kong ministerial
will be defined in very different ways by the various groups of
participants. For the WTO secretariat, any deal at all will look
like a major success after the debacle at Cancun. For the EU and
the US, a deal which allows them the maximum leeway on agriculture,
while extracting concessions from the big developing countries,
such as Brazil, India and South Africa, will be a successful one.
These big developing countries, who are increasingly influential
at the WTO, are after a deal which forces real changes to the
agricultural regimes of the EU and the US. The smaller developing
countries, many of which still feel marginalised at the WTO, want
a result which will give them the maximum space to pursue the
policies that they need to develop their economies.
2.2 These very different interests mean
that negotiations are making little progress in the three key
areas of agriculture, services and non-agricultural market access
(NAMA), as the WTO enters the final months before the ministerial.
The EU and US continue to face each other down on agricultural
reform, with neither side being prepared to blink first. Their
aggressive agenda on NAMA and services is being vigorously challenged
by developing countries, but negotiations in both areas need progress
on agriculture before they can shift into a gear that might actually
lead to a deal at Hong Kong.
3. PROSPECTS
FOR PROGRESS
IN KEY
AREAS
Agriculture
3.1 The majority of the world's poor people
are dependent on agriculture for their living. They have been
hardest hit by many years of trade liberalisation. Poor farmers
have found themselves unable to sell their goods in local markets,
as they have faced competition from cheaper, often subsidised,
imports. Research has shown that imports tend to rise faster than
exports following trade liberalisation, and that imports of consumer
goods like food rise fastest of all. For farmers, this means a
loss of their domestic markets without any increase in their exports
to compensate. These farmers have no alternatives available to
them—in most developing countries there is no industry to
employ large numbers of people leaving agriculture.
3.2 Some governments are starting to take
a more nuanced approach to agricultural trade policy, protecting
farmers at certain times of year, or making imports conditional
on a certain level of domestic buying. Christian Aid's report
Taking Liberties contains examples of beneficial protection
of farmers in Mozambique, Honduras and India. However, if WTO
negotiations on agriculture lead to an agreement which demands
a high level of liberalisation, these possibilities will no longer
be open to developing countries—and it is poor farmers who
will pay the price.
3.3 In the WTO's terms, progress on agriculture
means getting a deal which promises sufficient reductions in agricultural
subsidies and market access in rich countries to keep the big
developing countries happy, while also being politically possible
in the rich countries themselves. The danger is that, in the to
and fro of negotiations on this central issue, the needs of the
smaller developing countries and of poor people in all developing
countries, in particular small farmers, might be left out. While
the Least Developed Countries (LDCs) will probably not have many
immediate obligations whatever the final agreement looks like,
they are also watching closely as the final agreement will affect
what they are required to do in the future.
3.4 In the last few months, negotiations
on agriculture have focused on how much WTO members should be
asked to reduce their tariffs, and how much they should reduce
the payments they make to their farmers. There is agreement that
developing and developed countries should reduce their tariffs
by different amounts—the questions are how much each should
reduce tariffs and what kind of exceptionsthere should be for
particular products. There is agreement that developing countries
should have some kind of exceptions, but how these might work
is not even being discussed at the moment.
The main groupings in the agricultural negotiations
are:
3.5 G20: the group of big developing countries,
including Brazil, India and South Africa, which came together
at Cancun. Many of these countries have large and competitive
agricultural sectors and are interested in increasing their exports.
Their main objective is to reduce trade barriers in agriculture
and to reduce or eliminate the support given to farmers in rich
countries. The G20 is also sympathetic to the need of the smaller
developing countries to protect their agriculture sectors, but
this is not their priority. Their political significance is considerable:
at the recent meeting of EU and US negotiators to try and iron
out some of the differences between their two positions, it was
the G20 proposals that formed the centrepiece of the discussion.
3.6 EU: The EU is trying to defend its high
tariffs on agricultural products. Proposals from the EU suggest
lower reductions in agricultural tariffs than proposals from the
US, and have provision for very low reductions for some specific
products which the EU particularly wants to continue to protect.
3.7 US: the US wants to defend the growing
subsidies it pays to its farmers, and is keen to extract the maximum
concessions on market access from other countries. Proposals from
the US focus on cutting tariff barriers in other countries, while
retaining the possibility of continuing high levels of support
for domestic farmers.
3.8 G10: the G10 is a grouping of rich countries,
such as Norway and Japan, who, for domestic reasons, want to continue
to protect their agricultural sectors. They tend to argue that
exemptions to any tariff cuts should apply to rich countries as
well as developing countries, through the promotion of the idea
of "sensitive products".
3.9 G33: this group includes many of the
poorer developing countries (many of whom are also in other coalitions
such as the Africa group). They are mainly interested in retaining
their right to protect their own farmers, by ensuring that the
final agreement includes numerous opt-outs. Current proposals
for achieving this involve defining a group of "special products"
which developing countries would be allowed to protect, and giving
them access to a "special safeguard mechanism" that
could be used to defend their products from increased imports.
Neither have been the subject of intense negotiations as yet,
but it is clear that there are big differences between the G33,
the US and the EU over how these parts of the agreement might
work, particularly over how many products could be exempted from
the agreement and how these would be defined.
3.10 Preference-receiving countries: many
of these are also in the G33 but they have a particular problem
with any agreement. Countries that have been enjoying trade preferences,
that is, special access to rich countries markets, stand to lose
out if trade barriers come down and other countries can also export
into the same markets on the same terms. In general, they favour
smaller tariff reductions phased in over long periods to protect
their preferences for as long as possible.
3.11 So far, the key discussions have been
between the rich countries and the G20. Rich countries have been
very reluctant to make even limited progress this year. The G8
leaders failed to make an announcement on ending export subsidies,
which are just a small part of the total support that goes to
farmers in rich countries. Agreeing an end date was seen as an
important political signal that rich countries are prepared to
make some concessions, but this chance was missed. There is an
expectation that an end date will be agreed at Hong Kong, but
this is by no means certain. An end to export subsidies would
not resolve the problems of agricultural support in rich countries,
nor deal with the question of market access for developing countries'
exports.
3.12 There is a danger that, with the emphasis
on subsidies and market access, the rights of poor countries to
protect their own farmers will be forgotten. Though the G20 support
smaller developing countries in this regard, and would probably
make use of such provisions themselves, it is not their priority,
and the risk is that the right to protect might be traded away
in return for a better deal on market access or reducing subsidies.
Non-agricultural market access (NAMA)
3.13 A second pillar of the WTO talks is
the NAMA negotiations. Developing countries face two dangers in
these talks. Many of their existing industries are under threat
if the eventual agreement requires that they reduce their tariffs
very steeply and quickly. Countries in Africa and Latin America
that have liberalised rapidly have lost tens of thousands of manufacturing
jobs and seen developing industries collapse. On top of that they
will be much less able to develop new industries if they are not
able to use tariffs and other protection as support. In almost
every country that has industrialised successfully, protection
was a key factor in allowing new industries the space to become
competitive and productive. For developing countries today, a
degree of protection is often key in attracting investors to a
new sector (see Taking Liberties for an example of this
in the Mozambican sugar sector).
3.14 While the WTO talks on NAMA have been,
in the words of one negotiator "held hostage to agriculture",
the key fault-lines in the negotiations are nonetheless clear.
In agriculture, the interests of rich countries are complicated
by the protection they offer their own farmers. However, in NAMA
there is no such caveat. The EU, and in particular the US, are
clear that they want to reduce tariffs as far and as fast as possible.
The US has even floated the idea—more as a tactic than a
serious negotiating stance—of zero tariffs on industrial
products in every WTO member.
3.15 As in agriculture, the discussions
have centred around how much tariffs should be reduced, and what
exceptions there should be. The main disagreement is over whether
those countries with higher tariffs (generally developing countries)
should reduce their tariffs the most, or whether it should be
richer countries who make the steepest reductions, on the basis
of their greater wealth. There is also disagreement over whether
developing countries should have the ability to not reduce tariffs
at all on some products.
3.16 Current proposals, from the US and
the EU, would mean that the highest tariffs will be subject to
the steepest reductions. This would require developing countries
to reduce their tariffs by more than richer countries. In a particularly
damaging development, developing countries are being asked to
trade off overall tariff reductions against the number of exemptions
they have. In other words, if they succeed in limiting their overall
tariff reduction they will be asked to pay by applying that reduction
to all products. The US and the EU are being particularly insistent
on this point.
3.17 Again, least developed countries are
mostly exempt from making any reductions, but whatever is agreed
will probably start to affect them in future rounds of trade negotiations.
Countries which have a low level of "binding" on their
tariffs (meaning that they have not agreed maximum tariff levels
at the WTO for the products the tariffs apply to), will be asked
to bind their tariffs at the average level for all developing
country tariffs. For some, this might mean reductions on tariffs
for particular products.
3.18 Countries which receive trade preferences
are also concerned about the effect of general reductions in tariffs
as a result of a WTO agreement, and have proposed that products
which receive preferences are liberalised more slowly. Other developing
countries do not support this idea, arguing that preferences benefit
some developing countries at the expense of others.
3.19 The EU and, in particular, the US are
negotiating very aggressively in the NAMA talks. This is partly
because they know they will have to make concessions in agriculture,
and are determined to get the best deal possible in other areas
to compensate. It is also because they see real possibilities
for their exporters in getting access to some big developing-country
markets.
Services
3.20 The third area of talks in the WTO
is services. These are being discussed under the General Agreement
on Trade in Services (GATS). Services are a key target for a number
of rich countries, including the UK, who hope that their financial
and other industries will gain from access to new markets. Liberalisation
in this sector threatens developing countries' ability to regulate
provision of services and so ensure that vital parts of the infrastructure
such as public and financial services are available to their whole
population.
3.21 For a long time the EU and the UK have
been responding to campaigners' concerns that developing countries
will be forced to liberalise key public services such as water
or healthcare, with the promise that the "bottom up"
structure of the negotiations means that this cannot happen. The
claim was that under GATS, each country could say for itself which
sectors it chose to liberalise and which to keep protected. However,
this principle has been challenged by a number of rich countries
(the EU, Japan and a few others), which have recently proposed
a new structure for the negotiations. They propose that benchmarks
be established to define whether a country was offering up a sufficient
number of sectors in the GATS negotiations. This proposal has
been rejected by a number of developing-country groupings at the
WTO, including the least developed countries, a large number of
Caribbean and African countries, Arab trade ministers and several
Latin American countries including Brazil.
3.22 As with NAMA, the rich countries are
keen to get as much as possible out of the services negotiations
to compensate for whatever they may have to give away in agriculture.
They have a very strong economic interest in getting access to
new markets. According to the OECD, the contribution of trade
in services to GDP in Europe has almost doubled in the last 15
years.
Special and differential treatment
3.23 The negotiations on "Special and
Differential Treatment" are also an area of concern. A key
aspect of this "development" round was meant to be the
consideration of developing countries' interests in a separate
set of talks on special and differential treatment. The idea was
to review existing agreements and see what changes needed to be
made for them to truly support development. Rules were also supposed
to be set to guide future agreements, ensuring that basic developmental
principles were followed.
3.24 This area of the talks was supposed
to be completed quickly, so that the development credentials of
the development round could be firmly established. However, they
have been dogged by controversy and have made almost no progress
in the four years since the Doha ministerial meeting. This slowness
has largely been due to the reluctance of rich countries to make
any concessions to the poorest, and their determination to hold
out and extract the maximum negotiating capital from whatever
agreement is made.
3.25 This is unacceptable in a round where
the focus is supposed to be development. WTO members must agree
to give developing countries what they were promised in Doha and
sort out the problems with existing agreements, while putting
in place deals which ensure that the special rights of developing
countries are respected in any future agreement.
4. THE ROLE
OF THE
UK GOVERNMENT
4.1 The UK government has put development
issues firmly on the agenda in 2005. On trade, the government
has made many encouraging statements about the need to stop forcing
liberalisation on developing countries, and the need for reform
to the agricultural support systems and high tariff barriers in
rich countries.
4.2 The government has announced changes
in two areas of trade policy: relating to the Economic Partnership
Agreements between the EU and its former colonies, and on the
practice of demanding that countries liberalise in return for
aid. Neither have been turned into changes in practice yet, but
both were welcome as statements of intent. The government has
failed to set out its policy position with the same clarity in
relation to the WTO.
4.3 As yet, the policy of not forcing countries
to liberalise, which was also a recommendation of the Africa commission,
has not been turned into reality at the WTO. There is, for example,
no record in the minutes of the EU's 133 committee of the UK arguing
for a change of stance on any of the areas where the Commission
is pushing particularly hard for liberalisation. At the recent
meeting, where the idea of `benchmarking' in the GATS negotiations
was discussed, the minutes record agreement from all members about
this new position.
5. RECOMMENDATIONS
5.1 We appreciate the changed stance of
the UK government on forced liberalisation in developing countries.
However, in order for this change to bear fruit, Christian Aid
would like to see a clear statement from the UK about its position
in relation to the WTO negotiations, and evidence, for example
from minutes from the 133 committee, that the UK is actively pushing
the EU to alter its aggressively liberalising stance.
Agriculture
5.2 It is essential that any agreement does
not undermine the rights of poor countries to protect poor farmers.
Poor countries should be allowed to designate an unlimited number
of products to exempt from any requirement to liberalise, based
on food security, livelihood security and rural development criteria.
A special safeguard mechanism to deal with temporary problems
should also be agreed. There must be no similar mechanism for
developed countries. Currently, the EU and the USA are insisting
that any exemptions for developing countries must be matched by
similar arrangements for their own producers. This is an unacceptable
attempt to latch on to legitimate developmental concerns to meet
short-term domestic political objectives.
5.3 The WTO has already agreed to set an
end date for export subsidies. This must be announced as soon
as possible. An opportunity to do this was missed at the G8—if
it is missed again in Hong Kong millions will continue to suffer.
5.4 Domestic support for agriculture in
developed countries must also be reformed, in order to ensure
that it does not distort trade and is only given where it provides
clear benefits for small farmers and the environment.
Non-agricultural market access
5.5 Whatever deal is agreed, it must allow
developing countries to reduce their tariffs much less than developed
countries, in recognition of the more fragile state of their economies.
Current EU and US proposals at the WTO would require developing
countries to reduce tariffs faster than may be in their developmental
interests.
5.6 Developing countries must have the flexibility
to exempt certain sectors from tariff reduction altogether. Some
rich countries have attempted to force developing countries to
trade off the possibility of exempting some sectors from the negotiations
against the possibility of smaller tariff reduction. This is unacceptable,
as both are potentially useful in promoting industrial development.
Services
5.7 Developing countries must retain the
right to regulate all service providers as necessary to promote
their development objectives. Current WTO rules allow the possibility
of bringing domestic regulations to WTO dispute-settlement panels,
where they could be overturned. The role of regulation in ensuring
that poor people have access to the services they need must be
clarified and confirmed in the GATS.
5.8 Although the flexibility of the GATS
agreement, which allows countries to decide which services to
include, has been much-praised by governments, there are moves
afoot that threaten this. The European Union is pushing for an
approach that sets standards for what individual countries have
to commit to under the services agreement. This would threaten
the autonomy of individual governments to decide which services
they wanted to liberalise. It is vital that the WTO resists this
pressure.
September 2005
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