APPENDIX 12
Memorandum by Oxfam
INTRODUCTION
1. Oxfam welcomes the opportunity to feed
into this important inquiry into trade and the role of the European
Commission's negotiating strategy for the World Trade Organisation's
Ministerial meeting in Hong Kong, December 2005. 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 vehicle to reducing 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.
2. Oxfam's submission deals with the general
process of the WTO negotiations, giving an overview of the state
of the negotiations with a particular focus on NAMA (Non-Agricultural
Market Access). We will outline where we believe the UK Government
and the rest of the European Union member states must take action
to reform these practices.
THE IMPORTANCE
OF THE
NEGOTIATIONS
3. Today, developing countries account for
only 31% of world trade, despite the fact that more than 80% of
the world's population lives in the developing world. This picture
is even bleaker if the data on agriculture is disaggregated: developing
countries capture only a third of world agricultural trade, and
Africa accounts for only 4%. Because 70% of all Africans—and
nearly 90% of the poor—work primarily in agriculture, an
improvement in such grim statistics could make a real difference
to poverty reduction, on the poorest continent and elsewhere.
4. Developing countries have vital defensive
interests in agriculture as 900 million people around the world
live in rural areas and depend upon crops for their nutritional
intake and their livelihoods. However, they also have offensive
interests in industrial sectors, to create employment opportunities
and to contribute to economic growth.
5. 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. [22]
6. The Doha Development Round was launched
to reform trade rules in order to give developing countries improved
opportunities for trade, income generation, and employment. However,
four years into the Round, those who need the most actually stand
to lose the most and talks appear to have degenerated into a scenario
where rich countries compete to offer the fewest concessions,
while extracting as many concessions as possible from poorer members.
As a result, negotiations have been progressing extremely slowly
since 2001, and agreed deadlines have been consistently missed,
particularly in relation to issues of critical importance to developing
countries, such as reform of the agriculture rules, implementation
rules on special and differential treatment (SDT), and amendments
to the Trade-Related Intellectual Property (TRIPS) agreement.
TIMING
7. The Doha Round is already behind schedule.
WTO Members have set late 2006 as the target for finishing the
Doha talks, in order to complete the Round before "Fast Track"
(Trade Promotion Authority, TPA) negotiating authority expires
in the United States in the following year. TPA is the power granted
by the US Congress to the Administration to negotiate trade agreements,
which Congress can then only approve or reject, but not amend.
Without it, US negotiators warn, it would be very difficult, if
not impossible, for the USA to negotiate and ratify a Doha package.
The US Congress appears to be in an increasingly protectionist
mood, and TPA may not be renewed, so the end-2006 deadline is
real.
8. Despite this looming deadline, WTO members
are nowhere near reaching agreement on agriculture or non-agricultural
market access (NAMA), or other priorities of poor countries, including
the elimination of trade-distorting cotton subsidies, amending
the TRIPS agreement, or addressing preference erosion. A "first
approximation of modalities", or first outline text for the
December Hong Kong Ministerial meeting, was supposed to have been
produced by the end of the General Council Meeting, in late July.
However, that deadline was missed, and instead the chairs of the
agriculture and NAMA committees had to submit an assessment of
where the talks stand, rather than being in a position to propose
text. If WTO members continue to miss negotiating deadlines the
entire round may be at risk.
9. Leaving so many key and contentious issues
to be resolved until a late stage in the Round means it will be
difficult to conclude the talks by the end-2006 deadline. In addition,
it is highly problematic that developing countries will not have
time to conduct full developmental impact assessments of the proposals.
10. Delays in discussing sensitive topics
make it increasingly likely that the Hong Kong Ministerial meeting
will proceed in a similar way to the fifth Ministerial at Cancun
in 2003, with an overloaded agenda and a high risk of collapse.
Oxfam believes that this would put developing countries in an
untenable position of having to accept a bad deal, or risking
the collapse of the Round and marginalisation of the WTO, and
being blamed for that happening.
11. It is highly unlikely that the Millennium
Development Goals (MDGs) would be achieved if trade rules do not
change radically. Unfair trade rules result in significant loss
in fiscal revenue for developing countries: this is money that
could otherwise be used to contribute to reaching the MDGs. [23]
12. A breakdown in multilateral talks could
lead the USA and EU to focus on negotiating bilateral and regional
Free Trade Agreements, many of which contain provisions that threaten
development, and the overlapping nature of which means that developing
country exporters would face a bewildering range entry rules for
different markets.
POLITICAL ENGAGEMENT
13. The Doha Declaration states: "International
trade can play a major role in the promotion of economic development
and the alleviation of poverty—the majority of WTO members
are developing countries. We seek to place their needs and interests
at the heart of the Work Programme." [24]However,
it would appear that this supposed focus on development has largely
been ignored. For instance, in July 2005, the US Agriculture Secretary
stated that negotiators should "stay poker-faced" and
not agree any changes to farm programmes without seeing "what
concessions we're going to receive from our trading partners,
especially in the area of market access".[25]
Similarly, EC Trade Commissioner Peter Mandelson has[26]
said that: As Europeans, we cannot "pay" all the time
in order to exercise "leadership".
14. Developing countries are willing to
make constructive proposals to propel the negotiations, such as
the G20 proposal which was put forward at the Dalian "mini-ministerial"
conference in June, and which was explicitly welcomed by the chair
of the agriculture negotiations for being something from which
all parties could work. However, the EU and US are less so. We
recognise that the European Commission did move to end the deadlocked
technical discussions on converting non-linear tariffs into their
linear equivalent (or "ad valorem" tariffs), which had
blocked the negotiations for three months. But this kind of political
will is now urgently needed again to unblock the talks.
NEGOTIATING STRATEGIES
15. For reasons outlined above, of all the
issues on the Doha agenda, agriculture is the most important for
developing countries. However, both the EU and USA are adopting
a position that in order to "get something" in agriculture,
developing countries must open their markets in non-agricultural
products and services, even though all these areas are critical
to development, and rich countries have yet to make any real concessions
on agriculture. This is clearly not a pro-development strategy.
16. In addition, there is good reason to
believe that the sequencing of negotiations is designed to maximise
concessions from developing countries. For example, in talks on
agriculture, developing countries are being asked to make concessions
on a tariff-reduction formula, without seeing what concessions
they will get in the other two strands, or "pillars":
domestic support and export subsidies. A more balanced approach
is needed, so that the sensitivities of both developed and developing
countries are addressed at the same time as the offensive interests
of both sets of members.
OVERVIEW OF
THE STATE
OF THE
NEGOTIATIONS AGRICULTURE
17. One fundamental objective of the Doha
Development Round was to reduce trade- distorting support. However,
several analyses, including Oxfam's own, project that negotiations,
if they follow their current trajectory, will actually create
new opportunities for rich countries to expand trade-distorting
agricultural subsidies. This would severely reduce the value of
the Doha Round.
18. Rich countries are demanding the same
approach on market access for developed and developing countries
and want to limit the scope of "special and differential
treatment" (SDT) measures that would soften the impact of
agricultural tariff reductions for developing countries. For instance,
they are resisting granting developing countries exemptions from
tariff reductions for vital food crops or in the case of import
surges, despite the fact that these are flexibilities that have
already been agreed to in principle in the talks. Their defence
is that it would create a precedent for blanket protectionism.
At the same time, rich countries are exhibiting double standards,
by seeking to ensure that their own "sensitive products"
will be exempt from tariff reductions.
19. A special mandate in the talks was provided
in Cancun to negotiate an end to cotton subsidies.[27]
Even though a special committee has been set up to negotiate a
reduction in cotton subsidies, and a recent WTO panel found that
a number of US programmes are illegal under WTO rules, the USA
is maintaining a hard line on cotton. It argues that the USA should
only have to eliminate its trade-distorting cotton programmes
in the context of the overall agricultural negotiations, once
it has secured sufficient progress on market access. It would
seem clear that the motive is to reserve these subsidies to use
as a bargaining chip in the negotiations. Again, this is a clear
breech of the spirit, and, arguably, the letter of the Doha Development
Agenda.
20. The agricultural negotiations are now
effectively deadlocked, as the EU is taking a position that it
has already "moved" by agreeing to use the G20's proposal
put forward at the Dalian "mini-Ministerial" as a basis
for its negotiating stance, and that it has already moved on domestic
support by reforming the Common Agricultural Policy. Europe insists
that it will not offer concessions until the US puts a proposal
on the table to reduce its domestic support. The US, meanwhile,
says that it will not move until the EU agrees an end date for
export subsidies.
SPECIAL AND
DIFFERENTIAL TREATMENT
21. In the Doha mandate, all developing
countries were promised "special and differential treatment"
(SDT), ie additional flexibilities regarding the depth, scope,
and pace of commitments by developing countries, which would take
into account their special development needs. These very words
were included at least nine times in the Doha Declaration, and
SDT has been a fundamental principle guiding trade commitments
since the time of the GATT. Today, the USA and EU talk about "fair
reciprocity" instead, while claiming that special and differential
treatment is a barrier to development. They also insist on the
exclusion of certain developing countries from SDT under the new
Doha agreements, referring to them as "advanced developing
countries"—even though this term has been neither defined
nor linked to development indicators. The countries targeted have
at least two things in common: (a) they are facing significant
development challenges and thus must be permitted to use the flexibilities
under WTO rules; and (b) they are perceived as competitors by
the rich countries in certain sectors and are therefore targeted
for tougher treatment. In addition, it is Oxfam's belief that
this insistence on differentiation is, in part, derived from a
desire to "divide and conquer" developing countries
in the negotiations.
22. India, one of the countries that Europe
and the USA wish to exclude from SDT, is still home to more people
living in absolute poverty than the whole of sub-Saharan Africa—35%
of Indians live on less than $2 a day.
SERVICES
23. Developing countries are being pushed
to liberalise foreign direct investment in extensive swaths of
their services sectors, which would mean opening up health care,
water, banking, education, and other services to foreign providers.
Clearly, full liberalisation of key public services could have
severely negative implications for development and the welfare
of vulnerable groups, especially in very poor countries. Opening
up other areas, for example transport and telecommunications,
could have a significant impact on developing countries' production
and trade.
24. WTO talks on services were launched
on the basis of "request-offer", whereby members offer
to liberalise specific sectors, in exchange for offers by other
members to liberalise certain sectors of their economies. Under
this approach, developing countries can choose which sectors to
offer to open, and to what extent. But rich countries have not
been satisfied with developing countries' offers, and so are seeking
to change the basis of the negotiating process. They are now calling
for a negotiated minimum commitment—in terms of number of
sectors and level of ambition—from all members. This goal-post
movement is not acceptable at this late stage of the Round.
25. Under pressure from their corporate
lobbies, which are eager to gain access to emerging markets, rich
countries are clearly allowing self-interest to over-rule the
legitimate development concerns of developing countries. So far,
most progress in the services talks has been made in "mode
3", which focuses on commercial presence or FDI. However,
no progress has been made on "mode 4" negotiations—that
is of the temporary movement of personnel—which is of greatest
interest to developing countries.
TRADE RELATED
INTELLECTUAL PROPERTY
(TRIPS)
26. It was agreed in Doha that WTO members
would revise the TRIPS Agreement, to ensure that WTO rules on
intellectual property would not impede access to affordable medicines.
The end-2002 deadline for agreeing on the outline of an amendment
was missed, due to opposition by the USA alone, and in spite of
a proposal on how this could be achieved, tabled by the Africa
Group. Subsequently an interim solution was reached, but never
transformed into an amendment. WTO members that cannot produce
their own generic medicines and are too poor to buy expensive
patented medicines are still waiting for a legally certain solution
to their predicament. The promise to solve this problem was a
key factor in persuading developing countries to agree to a new
Round. Now it is just another broken promise. Other patents issues
of interest to developing countries, such as bio-diversity, are
also being ignored in the negotiations.
OTHER ISSUES
27. Although a matter of concern for many
developing countries, the relationship between WTO rules and Free
Trade Agreements, many of which contain WTO-plus provision that
threaten development, has not been addressed in these talks. As
pointed out in the report by the Sutherland Commission (2005),
there has been in recent years a proliferation of FTAs, which
has resulted in a "spaghetti bowl" of different trade
rules and undermined the multilateral system. At the WTO, developing
countries can negotiate in blocs, increasing their odds of getting
a pro-development deal. In addition to imposing a greater burden
on exporters from developing countries (note: Sutherland report
said this), "WTO plus" rules in FTAs often undermine
developing countries' hard-fought gains at the WTO.
28. A pattern of marginalising the priorities
of the poorest countries is also clear. For instance, granting
Least Developed Countries duty-free, quota-free market access
from developed countries was one of the round's objectives, but
no progress has been achieved in that area. Preference erosion,
a serious concern for many of the poorest members, has not been
seriously addressed in respect of either NAMA or agriculture;
now developed countries are floating the idea of additional trade-related
development assistance, rather than a WTO solution to the problem,
to avoid having to address it in the talks. Worse, there is still
no amount or clear process attached to this promise of trade-related
development assistance.
STATE OF
THE NON-AGRICULTURAL
MARKET ACCESS
(NAMA) NEGOTIATIONS
29. Oxfam believes that if NAMA negotiations
continue along their current trajectory, they will prevent developing
countries from pursuing effective industrial policies, jeopardising
their development strategies; increase the risk to developing
countries of de-industrialisation, unemployment, environmental
degradation, and worsening poverty; fail to address the issue
of Northern protectionism, thus missing the opportunity to contribute
towards poverty reduction through improved market access for developing
countries; and fail to uphold the principle of "differential
treatment" and the promise of "less than full reciprocity"
for developing country members.
30. The industrialised countries are pressing
in the NAMA negotiations for developing countries to liberalise,
while at the same time refusing to make a clear commitment to
dismantle their own protectionist measures. For instance, poor
countries are being asked to make concessions on tariffs in NAMA,
without knowing if or when non-tariff barriers (NTBs—will
be addressed, or if disciplines are to be put on anti-dumping,
or what is on the table in relation to agricultural trade reform.
31. Despite this being a "development
round", the proposals by rich countries on tariff reductions
are unprecedented in their level of ambition: they would seriously
curtail the capacity of developing countries to implement home-grown
industrialisation and development strategies. Not only are rich
countries insisting that developing countries make commitments
on 100% of their tariff lines, but they are pushing for the application
of a mathematical formula to reduce every single tariff. In the
past, developed countries were never able to agree to cut each
and every tariff line, preferring to preserve flexibility. In
the Uruguay Round, for example, they agreed only to target average
and minimum cuts (the "Uruguay Round approach" to cutting
tariffs), so that they could pick and choose which lines to cut,
and by how much. Now they are trying to hold developing countries
to a more ambitious standard, and are pushing an extremely aggressive
formula which would reduce developing countries' tariffs much
more severely than their own. This is contrary to the mandate
which calls for less than reciprocal commitments for developing
countries.
32. In July 2003, the G90 trade ministers
criticised the liberalisation measures proposed in the NAMA negotiating
text, stating that they contradicted "the principle of less
than full reciprocity enshrined in the Doha Ministerial Declaration"
and would "further deepen the crisis of de-industrialisation
and accentuate the unemployment and poverty crisis in our countries".
Some developing countries, including India and Brazil, have expressed
concern that rich countries are demanding excessive tariff cuts
while continuing to block imports, such as steel and clothing.
Unless the concerns of developing countries are taken into account,
NAMA could prove a major stumbling block to progress in Hong Kong.
33. Although their average tariffs are low,
rich countries maintain high tariffs and practise tariff escalation
for products in which developing countries are competitive, such
as steel and clothing. The European Union, for example, imposes
tariffs of less than 4% on Indian yarn, but if the yarn is worked
into garments, the tariff jumps to 12%. The average US tariff
for all imports is 1.6%, but this rises to 4% for India and Peru,
and to 14-15% for Least Developed Countries (LDCs) such as Bangladesh,
Nepal, and Cambodia.
34. In the talks, there is still no sign
that the rich countries are prepared to stop charging more tax
on exports from poorer countries, or honour their promise to provide
full market access to the LDCs. If even this minimal promise,
made to the very poorest countries in the world, is not being
fulfilled, then Oxfam believes there remains little doubt that
this can no longer be termed a "development round".
35. The industrialised countries are also
avoiding discussion of certain non-tariff barriers (NTBs), even
though developing countries have flagged them up as the biggest
obstacle faced by their exporters—often more significant
than tariffs. Rich countries claim, for instance, that there is
no mandate to discuss health and technical standards in the NAMA
talks, but this is not correct. Other NTBs that are abused for
protectionist purposes include anti-dumping measures, restrictive
rules of origin, and product standards and plant and animal safety
measures.
36. Rich country negotiators argue that
the main benefit of NAMA tariff reductions will be an increase
in South-South trade. While there are potential gains here, the
issue should not be used to distract attention from Northern protectionism.
In fact, South-South trade is already growing very fast and there
is nothing to prevent individual developing countries from further
liberalising their trade regimes unilaterally, regionally, or
as part of UNCTAD's global South-South trade negotiations.
37. As with other part of the Doha negotiations,
the process for the NAMA talks remains biased towards the interests
of industrialised countries. The interim negotiating text for
the NAMA talks contained in the 2004 "July Framework"
was unbalanced and opposed by many developing countries, yet it
remains the basis for ongoing talks. Until a group of developing
countries tabled a new formula proposal and explicitly rejected
the US and EU-supported Swiss formula, at the July 2005 NAMA talks,
Oxfam understands that the chair of the NAMA talks was ready declare
a consensus on the Swiss formula, for instance.
38. Oxfam is concerned that while the UK
Government has changed it trade policy to reflect the concerns
of developing countries in relation to the agriculture negotiations
(for instance the Labour Party Election 2005 Manifesto commitment
that "We do not believe poor countries should be forced to
liberalise. We will allow them to sequence their reforms, so that
they can build their capacity to compete globally"[28]),
this new developmentally-informed stance is not being reflected
in its negotiating positions in Brussels and Geneva, where the
UK supports the EC's position that larger developing countries
must open their industrial sectors.
CONCLUSIONS AND
RECOMMENDATIONS
39. Oxfam believes that with urgent political
intervention, the Doha talks can be kick started and refocused
on development.
40. Members should agree a clear road-map—in
terms of content and process—for negotiations between now
and the meeting in Hong Kong in December. Processes for negotiations
must be inclusive, transparent, and member-driven, and members
must not be presented at the last minute with texts negotiated
by small groups of members for quick ratification. In addition,
SDT must be prioritised in the talks, without developing countries
being expected to make concessions in return for it, as per the
Doha mandate.
41. Although competency for WTO trade negotiations
lies with the European Commission rather than the individual member
states, the UK can join with other like-minded countries in mandating
the Commission negotiators to recognise and respect developing-country
interests including the need to regulate imports appropriately,
while at the same time pushing to reduce European protectionism.
42. Steps should be taken to ensure that
negotiations focus on the entirety of the mandate, not solely
on issues of interest to industrialised members. The current approach,
under which issues that are sensitive for developing countries,
such as market access, are addressed before the sensitive issues
for rich countries, is not balanced and puts developing countries
in the unfair position of having to make real concessions in exchange
for vague promises in both the NAMA and agricultural negotiations.
Oxfam urges that no agreement should be made on market access
formulae, without first guaranteeing SDT and adherence to "less
than full reciprocity", and making progress on NTBs, such
as anti-dumping rules, so that developing countries can clearly
see what they stand to gain and lose by any such agreement.
43. Positive moves to allow developing countries
space to develop appropriate agricultural trade and development
policies would meet commitments set out the Doha Declaration to
take developmental and food security considerations fully into
account. The UK had said it is broadly supportive of a "special
safeguard mechanism" and "special products", provided
these are not used as tools for blanket developing country protectionism.
This is positive although the UK needs to be much more proactive
and vocal in supporting these initiatives.
44. Developed countries should stop asking
developing countries to agree commitments that they are not themselves
ready to undertake: for example, sharp reductions in domestic
agricultural subsidies.
45. The General Council should confirm that
discussion of categorisation of countries is not part of the Doha
mandate. All countries in the developing country and LDC categories
must retain access to "special and differential treatment",
a fundamental component of WTO rules.
46. The General Council should confirm that
the objective of negotiations on cotton is to eliminate all trade-distorting
subsidies on cotton and that a timeline for such elimination will
be decided by Hong Kong. This would send the signal that the WTO
talks will deliver on urgent development issues, even though progress
has been stalled. Action on cotton subsidies should be de-linked
from progress overall in the agriculture Negotiations.
IN THE
NAMA NEGOTIATIONS
47. As negotiations gear up to the Hong
Kong Ministerial in December 2005, members should ask themselves
what a pro-development outcome would look like. Thought should
be given to the right process for arriving at such an agreement,
and negotiators should bear in mind that the July 2004 agreement
specifically states that none of that text was agreed definitively.
There are currently a variety of proposals on the table. Oxfam
would urge rich country negotiators use the principle of SDT and
"less than full reciprocity" to guide the selection
of formula approach. The Swiss formula, proposed by the USA in
the NAMA negotiations, does not match these criteria, unless coefficients
are very far apart (and the USA has consistently said it will
not accept widely-spaced coefficients).
48. Oxfam believes that a new approach is
needed to a number of issues, as the current text is not an appropriate
basis for agreeing a pro-development agreement on NAMA. In keeping
with the Doha mandate, the principles of "special and differential
treatment" and "less than full reciprocity" must
be reflected in the negotiations. Developing countries must be
given sufficient flexibility to pursue industrial development,
create jobs and protect the environment.
49. Oxfam believes the final NAMA package
should contain the following elements:
— Developing countries should be allowed
to choose which tariff lines to bind along with the rates at which
they bind. No tariff that developing countries bind in this round
should be subject to cuts; binding is already a concession.
— Developing countries should have
the flexibility to choose which tariffs they reduce and by how
much. Setting targets for an average reduction would be better
than adopting a "formula approach" to market access.
— If a formula is agreed, it must allow
developing countries to exempt key sectors from tariff reductions
or even to raise tariffs on the grounds of economic development
policies, environmental concerns, rural development, employment,
or poverty reduction.
— The agreement must radically improve
developing country access to rich country markets by eliminating
tariff peaks and escalation. Imposition of a cap on tariffs set
by industrialised countries should be considered.
— Measures must be agreed to prevent
protectionist abuse of anti-dumping actions and product standards,
and excessively demanding rules of origin.
— LDCs should be exempt from all tariff
commitments, including binding. They should be granted duty- and
quota-free access to rich-country markets, bound at the WTO.
— Initiatives to eliminate or harmonise
tariffs in whole economic sectors should be rejected.
— Studies should be carried out to
assess the impact of possible future liberalisation commitments
on the environment and on the livelihoods of people living in
poverty.
— For environmentally sensitive sectors
such as fisheries and forestry, there should be no negotiations
without full impact assessments.
— Preference erosion must be dealt
with by WTO members, particularly those who created the preference
system, who should at a minimum provide bilateral assistance to
preference-dependent countries, commensurate with the impact of
preference erosion resulting from implementation of the current
round. This should be a binding commitment.
— The negotiating process must ensure
greater participation of developing countries, and the July 2004
Framework for NAMA should not be taken as an agreement. All NAMA-related
issues should be discussed at the NAMA negotiating body, even
if they are negotiated elsewhere.
22 Rigged Rules and Double Standards. Trade, globalisation
and the fight against poverty Oxfam International Make Trade
Fair report 2002. Back
23
Rigged Rules and Double Standards. Trade, globalisation and
the fight against poverty Oxfam International Make Trade Fair
report 2002. Back
24
Doha Declaration 2001. Back
25
http://westernfarmpress.com/news/7-18-05-keep-poker-face-on/ Back
26
http://europa.eu.int/comm/commission_barroso/mandelson/speeches_articles/temp_icentre.cfm?temp=sppm046_en Back
27
http://www.wto.org/english/thewto_e/minist_e/min03_e/min03_10sept_e.htm Back
28
P 91, Britain Forward Not Back The Labour Party Manifesto
2005. Back
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