TRADE: Developing Countries Resist New Pressures

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Ravi Kanth Devarakonda

GENEVA, Jul 18 2007 (IPS) - Several developing countries said Wednesday they will oppose a steep down payment being demanded from them in market access commitments for industrial goods as proposed in a compromise draft text to revive the troubled Doha trade negotiations.

“We are being asked to pay a heavy price by forgoing our future industrialisation to revive the Doha trade negotiations,” Namibia’s trade envoy to the World Trade Organisation Benjamin Rinaune Katjipuka told IPS. “It is unfortunate that developing countries are now being are being asked to revive Doha trade negotiations by accepting proposals that are advantageous to industrialised countries, which took almost 60 years to bring down their industrial tariffs.”

In an attempt to bring the faltering Doha trade negotiations back on rails, the chairs for Doha agriculture and market-opening for industrials presented what they called compromise texts on draft “modalities (benchmarks)” which indicate the level of reduction commitments in farm subsidies and the tariff cuts for imported farm and industrial products for industrialised and developing countries.

The benchmarks stipulate the commitments members will have to undertake as part of the delayed-Doha trade negotiations which were launched in 2001 on the ground that developing countries will be provided a “developmental” dimension to integrate into the global trading system.

During the previous Uruguay Round of trade negotiations which were concluded in 1994, the developing countries secured a raw deal as areas of prime importance to the business, industry and services lobbies in the Northern world secured the maximum share through new commitments to open markets for services and intellectual property rights.

Barring textiles and clothing, which was freed from the derogatory multi-fibre agreement, the Uruguay Round contributed very little to increasing the share of developing countries in global trade, especially in agriculture which continued to be plagued by a range of trade-distorting subsidies and complex border tariff measures.

The Doha Round mandated members to bring developmental changes, especially in the arena of agriculture through effective reductions in subsidies and substantial cuts in tariffs. It also required providing gains for developing countries in market-opening for industrial products of their interest and setting rules on the basis of less than full reciprocity that implies developed countries will take higher commitments than their developing country counterparts.

Against this backdrop, the much-delayed benchmarks, which were scheduled to be agreed in April last year, call for reducing overall trade-distorting domestic farm subsidies in the United States to a level between 13 billion and 16.4 billion dollars as against their current subsidies of about 11 billion dollars.

Up until now, the U.S. said it cannot reduce its farm subsidies below a level of 17 billion dollars, a stand that led to repeated failure in the Doha negotiations over the last one year. A major trade ministerial summit between the United States, the European Union, Brazil and India failed in Potsdam last month because of the intransigent positions adopted by the U.S. and the EU, who were not prepared to undertake ambitious commitments in agriculture, an area which witnessed little reform during the last 50 years.

Further, the new benchmarks require the so-called farm protectionist bloc of countries like the European Union, Japan, Switzerland and Norway among others to cut their farm tariffs by about 50 percent and provide vastly improved access for farm products through what are called expanded tariff rate quotas.

As part of the compromise proposals, developing countries are required to provide for two-third cuts of what is proposed for developing countries in farm products. To help the C4 (Cotton Four countries – Benin, Burkina Faso, Mali and Chad) which suffered a great deal because of the rising U.S. cotton subsidies and market access barriers, the benchmarks stipulated elimination of all market access barriers and cotton subsidies in the rich countries.

“Almost all rich countries got wealthy by protecting infant industries and limiting foreign investment,” noted Korean economist Ha-Joon Chang said in his book titled ‘Bad Samaritans – Rich Nations, Poor Policies and the Threat to the Developing World’. He said rich countries protected each industry until they were sure that they could compete in the international market place “but these countries are now denying poor ones the same chance to grow by forcing free-trade rules on them before they are strong enough.”

“Members will not be fully satisfied with the texts,” said World Trade Organisation (WTO) Chief Pascal Lamy, arguing that “what separates members today is smaller than what unites them.” He added that “in the weeks to come it is essential that members focus efforts into overcoming those differences and reach agreement in the two sectors that hold the key to success in the Doha Round.”

In the strongest criticism yet on the proposals to cut down industrial tariffs in developing countries, South Africa’s trade envoy Faizel Ismail said “there is an imbalance between the two texts as the compromise text on NAMA strives for higher level of ambition while the agriculture text proposes lower level ambition.

“It is clear that the NAMA chair is seeking to lead the negotiations by forcing developing countries to pay more,” he told IPS, adding “this is unacceptable due to the inverted emphasis on NAMA in comparison to agriculture.” He said South Africa will reject attempts to short-circuit the developmental mandate in Doha negotiations and shift the pain on to developing countries.