TRADE: Rich Countries Stake Bets on Industry

By Gustavo Capdevila Reprint | | Print |

Gustavo Capdevila

GENEVA, Aug 12 2003 (IPS) - The trade leaders of the industrialised world hinted Tuesday at their strategy for the upcoming WTO ministerial conference in Mexico by requesting dramatic tariff cuts for non-agricultural imports. Developing countries are wondering what this will mean for farm trade.

The approach, which emerged during WTO preparatory sessions for next month’s official meet, implies continuity of the principle that has guided the multilateral trade system since 1947, when the World Trade Organisation’s predecessor, the GATT (General Agreement on Tariffs and Trade) entered into force.

Trade liberalisation efforts since then have tended to place priority on eliminating barriers for industry, to the detriment of the much-protected farming sector, considered the "Cinderella" of international trade.

In rich countries, the average tariff applied to imported agricultural products is approximately four times higher than for industrial products.

In contrast, this difference is just two- or three-fold for imports in developing countries, according to a study by the International Monetary Fund and World Bank.

Given this context, the joint document presented at the WTO headquarters here by the European Union, United States and Canada, with their proposals for negotiations on market access for industrial goods, was received with criticism and irony by trade negotiators from developing countries.

Mexico’s trade representative at the WTO, Eduardo Pérez Motta, commented on the "very aggressive" nature of the proposal, saying it employs a formula for reducing or eliminating tariffs to come down harder on countries that impose high tariffs on industrial goods, most of which are in the developing world.

The Pakistani delegation, meanwhile, noted that some of the areas targeted for tariff reduction would force that country to cut approximately 40 percent of its tariffs, while for a rich country it would mean only a three-percent cut.

But the main criticism of the EU-US-Canadian proposal is that it is directly related to the crucial negotiations on farm trade, the central issue up for discussion at the fifth WTO ministerial conference, to take place in the Mexican resort city of Cancun, Sep. 10-14.

The Brazilian trade representatives here said it would be impossible to consider the industrial bloc’s initiative without first achieving concrete results in the agricultural area.

Pérez Motta commented on the ambitious aims of the three parties involved in the proposal as far as market access for industrial products.

The EU’s presence as one of the initiative’s sponsors "gives us some hope", because if it is being so ambitious in non-agricultural trade, it may be a sign "that they are going to be very ambitious in agriculture as well," he said with a note of sarcasm.

The mathematical formula for tariff reductions described in the proposal does not yet have any quantifiable values because the sponsors have yet to "give numbers", acknowledged the Mexican diplomat.

Another point in the initiative suggests a sector-specific elimination of tariffs, because it mentions only the examples of textiles and apparel, and environmental goods.

Meanwhile, another project being discussed during this week’s sessions by the WTO negotiating group on market access includes other areas for tariff elimination, among them export products of particular importance to developing and less developed countries, the latter being the poorest of the poor.

The negotiating group’s document mentions electronics, fish and fish products, footwear, leather goods, automotive parts, precious metals, stones and gems, as well a textiles and clothing.

The final item in the EU-US-Canadian proposal has to do with the mandate that came out of the fourth WTO ministerial conference, held in Doha, Qatar, in 2001, which states that market access negotiations must take into account the interests of developing and less developed countries.

The Doha Declaration established that this "special and differentiated " treatment for poor countries should be an integral part of all trade negotiations, and will be reviewed at the Cancun conference next month.

In this respect, the "rich bloc’s" proposal lays out a system of credits that would ostensibly allow the developing world to reduce its tariffs proportionally less than the industrialised countries – if and when their economic situation justifies it.

But Pérez Motta said he objects to this approach because it uses special and differentiated treatment "as a reward," as a means to grant credits in exchange for trade liberalisation.

The Mexican negotiator pointed out that "developing countries have different realities and you have to give them different options" so that they can maintain tariffs in defence of certain of their industrial sectors.

EU Trade Commissioner Pascal Lamy said that with this initiative the European bloc and the United States "intend to live up to their responsibilities as the world’s largest trading entities," and said he was pleased that Canada has joined them in this effort.

Together, the EU, United States and Canada contribute nearly two-thirds of the WTO budget, which this year reached 153 million Swiss francs, or some 120 million dollars.

The chief negotiators from the 146 WTO member states are engaged in informal sessions until Aug. 22 in Geneva, discussing the agenda points for the Cancun meet.