Uruguayan vice president Danilo Astori. Credit: CC BY 2.5

By Marcela Valente
BUENOS AIRES, Jul 4 2012 (IPS)

By simultaneously admitting Venezuela into its fold and suspending Paraguay’s membership, Mercosur has sparked dissension within the trading bloc that threatens the future legal architecture of the Southern Common Market. 

The resolution to admit Venezuela at the Mercosur summit on Jun. 29, in the Argentine province of Mendoza, does not have the approval of Paraguay, whose parliament has not ratified full membership for the South American oil producer, as required by the bloc’s charter, the Treaty of Asunción. 

On Tuesday, Uruguay’s vice-president, Danilo Astori, called the move an instance of “institutional aggression.” He added: “It’s a major institutional blow, perhaps the most serious in 21 years (of Mercosur).”

What happened in Mendoza “struck at the heart of the Treaty of Asunción and disregarded one of its most important rules, which is that the entry of a full member must be approved by all the existing full members,” Astori told the Uruguayan newspaper ‘El Observador’. 

From now on, “anything could happen” in Mercosur because “not a single major rule remains unbroken,” he said.  

Shock waves rippled through the Uruguayan government, whose foreign minister, Luis Almagro, has expressed objections to the mode of Venezuela’s entry.  

In Brazil, Tullo Vigevani, professor of international relations at Sao Paulo State University, said “the issue is controversial and raises questions.” 

The presidents of Mercosur countries – Argentina, Brazil, Paraguay and Uruguay – accepted Venezuela as a full member at a summit meeting in 2006. But the final, formal admission of Venezuela depended on ratification by the parliaments of each country, and it was never passed by the Paraguayan Congress. 

The institutional crisis in Paraguay, triggered by the summary removal of President Fernando Lugo on Jun. 22, led the presidents of Argentina, Brazil and Uruguay to the suspension on the grounds that it violated their charter’s democracy clause. 

At virtually the same instant they formally admitted Venezuela through a resolution signed by presidents Cristina Fernández of Argentina, Dilma Rousseff of Brazil and José Mujica of Uruguay. 

Paraguay’s suspension will cease when democratic order is restored after the 2013 general elections that will allow a new government to take office. 

What will happen when Paraguay, a founding member of Mercosur, is presented with the fait accompli of Venezuelan membership? 

In Vigevani’s view, “if the Paraguayan parliament does not ratify Venezuela’s membership in future, a new problem will ensue,” and the country “could leave the bloc permanently.” 

“The most likely prospect at present is that Paraguay will not rejoin. But there may be a U-turn, since the country’s political isolation has medium- and long-term implications, and (its authorities) may wish to come to an arrangement,” he said. 

The Union of South American Nations also decided to suspend Paraguay because Lugo’s removal followed impeachment that was carried out with unseemly haste and without regard to due process. 

But, whereas there was a consensus of attitudes on Paraguay, the incorporation of Venezuela was far from unanimous. 

Three days after the Mercosur resolution, Almagro expressed doubts about the legality of the measure and described as controversial the summit’s decision-making process. 

“At the negotiating round (on Jun. 28, in a meeting of Mercosur foreign ministers prior to the presidential summit), we firmly opposed the entry of Venezuela under those circumstances,” Almagro said. 

“Everything was decided at a meeting of the presidents behind closed doors,” Almagro said on the Uruguayan radio programme, ‘ En Perspectiva’. 

In Almagro’s view, “the last word has not been spoken,” and he said he was waiting on reports from the foreign ministry’s legal department. 

Almagro also said the incorporation of Venezuela was proposed by President Rousseff. 

The responses from authorities in Brasilia and Buenos Aires were  immediate. 

Brazilian foreign policy adviser Marco Aurélio García claimed the idea of admitting Venezuela to Mercosur  “was proposed by President Mujica.”  But, this was promptly denied by Montevideo. 

“We did not exert pressure on any country because that is not President Dilma Rousseff’s style. It was an unanimous decision that reflected the political consensus,” García said. 

The Argentine foreign ministry said the presidents’ decision “was unanimous;” it was adopted “in private” after listening to the positions of the foreign ministers and legal advisers of the three countries; and their “unanimous” analysis was that the entry of Venezuela “is in strict compliance” with the bloc’s rules. 

Santiago Deluca, a lawyer and former secretary of the Mercosur Permanent Review Tribunal, said: “From the legal point of view, the effective scope of the suspension of Paraguay’s rights in relation to the entry of Venezuela is not entirely clear.” 

It was not specified whether Venezuela’s admission “is conditional on future circumstances.” However, “legislation always comes after actual events,” and “any solution” is possible in future if the parties all want it, he told IPS. 

Over and above the legality of the situation, “it is the legitimacy of this kind of interaction” that raises most doubts, Fidel Canelón, professor of international studies at the Central University of Venezuela in Caracas, told IPS. 

“This business of ‘you exit so that I can enter’ will create a furore in the region’s relations,” because “it is perceived as punishment imposed on Paraguay by Brazil and Argentina,” Canelón said. 

“Even if the issue is settled with the support of the political and economic elites in the member countries, it may nurture forces within Paraguay that act against Mercosur, increasing the instability of the group,” he warned. 

Canelón referred to Asunción’s claim that Paraguay was under attack by Argentina, Brazil and Uruguay  as in the bloody 1864-1870 War of the Triple Alliance.

“Another reading, taking into account the dissension revealed by Uruguay, is that once again the big fish are dictating to the little fish in the bloc,” he said. 

This interpretation “raises the nasty suspicion that the presidents of Argentina and Brazil may have accelerated the entry of Venezuela because of the lucrative businesses the Venezuelan government has opened up for companies” of both countries, Canelón concluded. 

* With additional reporting by Mario Osava in Rio de Janeiro and Humberto Márquez in Caracas.

François Hollande at a massive rally just prior to his election victory on May 6, 2012. Credit: Ps-soisy/CC-BY-ND-2.0

By Julio Godoy
BERLIN, May 7 2012 (IPS)

The voting out of conservative governments in France and Greece this weekend heralds the end of harsh European austerity programmes and ushers in an era of new economic, investment, and social policies aimed at restoring growth and employment across the continent.

In France, the Socialist presidential candidate François Hollande, a champion of government-led economic growth and employment strategies, accomplished a comfortable victory over the incumbent president Nicolas Sarkozy – the man often seen as the poster child of the austerity programmes in practice all over Europe.

In Greece, citizens penalised the two strongest, traditional parties, New Democracy and the Pan- Hellenic Socialist Movement (PASOK), for their recent technocratic coalition government that has imposed a severe austerity plan on the country, which deepened the five-year-long recession and ignited a steep increase of unemployment and poverty

Instead, Greek citizens cast their ballots with the Coalition of the Radical Left, which obtained 17 percent of the votes, the Communist party (8.4 percent), and yet another Leftist party (six percent). A neo-Fascist group also obtained a minor, but substantial share of the votes.

Winds of change?

Particularly Hollande’s triumph in France is seen as the turning point in the current economic paradigm in the continent. During his speech immediately after the election, Hollande said that his triumph was seen across Europe “as a relief, a hope, the confirmation that austerity is not a call of fate” for the continent.

He added that his mission would be “to give Europe a dimension of growth, of employment, of prosperity” for all.

Hollande, who for the next five years will be ruling over the second largest economy in Europe, also announced that during the next weeks, and at the next European summit scheduled for Jun. 24, he will argue before the European Union and the government in Germany that cuts in public spending, far from contributing to a solution of the sovereign debt crisis in the eurozone, have aggravated the problem of public finances in practically every European country.

For the past two years Germany and the EU, together with Sarkozy, have been pivotal in conceiving the austerity programmes imposed upon the governments in Greece, Italy, Portugal, Ireland and Spain.

Charactertised by drastic cuts in public spending, pensions, social welfare programmes and salaries, these policies have so far only sharpened the economic crisis, prolonging recessions, worsening poverty and even increasing mortality rates among the elderly.

Economic performance, as measured by gross domestic product (GDP), has shrunk in Greece by 17.3 percent since 2007; in Ireland by more than seven percent; in Italy by 6.7 percent; in Portugal by almost six percent and in Spain by four percent.

During his victory speech, Hollande insisted that his government will focus on “social justice and restoring hope for the youth.”

France suffers from a 25 percent youth unemployment rate; in Spain, youth unemployment affects almost 50 percent of the population, a predicament that affects other Mediterranean countries of the eurozone.

This data, coupled with weeks of anti-austerity rhetoric in the lead-up to French and Greek elections, have softened the hitherto stern austerity rhetoric in Germany, the EU, and even at the European Central Bank (ECB).

German chancellor Angela Merkel said last week that she now envisions “a growth amendment” for the austerity programmes that her government has consistently forced upon Europe for two years.

Simultaneously, EU commissioner for economic and financial affairs Olli Rehn called on European governments to approve a new European public investment programme to “boost growth across the region.”

In a public speech on May 5 in Brussels, Rehn actually went as far as to say that the austerity fiscal rules in practice in the EU are not a “straightjacket” and that they allow “considerable scope for judgment” by national governments to implement growth policies.

Rehn also admitted that many EU and eurozone member states are suffering from a “severe recession and rising unemployment.” He added that under certain conditions, additional public investment in surplus countries, such as Germany, “could be beneficial to reduce macroeconomic imbalances” within the EU.

Even the head of the ECB, Mario Draghi, urged on May 4 that growth be put “back at the centre of the (European) agenda.” Such a call is extraordinary, given that the ECB mandate focuses solely on an extremely low inflation target, and has routinely ignored unemployment and growth deficits in the eurozone.

Long road ahead

Leftist European parties across the board see all this as a welcome change. According to Sigmar Gabriel, leader of the German Social Democratic Party, Hollande’s triumph in France means, “Europe will take a new economic orientation, towards growth and employment. That’s excellent news.”

In a press conference on May 7, Gabriel condemned “Angela Merkel’s cuts plans, which have pushed Europe deeper into the crisis. What Europe now urgently needs is a coordinated policy, a collective plan against youth unemployment,” he said.

Gabriel added that the electoral results in Greece showed that that the austerity programmes needed to be accompanied by “social measures to cushion their impact on society.” Furthermore, he said, “Greece needs much more time to solve” its sovereign debt and economic crisis.

In Spain, Alfredo Pérez Rubalcaba, the leader of the Socialist Workers‘ Party (PSOE), called Hollande’s triumph “a great hope, the beginning of a new era.” Pèrez’s deputy, Elena Valenciano, said that Hollande embodies “a new European Union, one of solidarity and equal rights for all.”

Under Hollande, France will be a “wall of protection against the neoliberal policies that have brought us to the present crisis,” Valenciano added.

In a world where governments are increasingly subservient to global finance capital, multinationals are gaining ground in the fight against state regulations that aim to protect the environment, public health or social policies.

According to the most recent data released by the United Nations Conference on Trade and Development (UNCTAD), the number of lawsuits brought against governments by companies evoking clauses in bilateral investment treaties (BITs) was 450 at the end of 2011.

These are only the known cases; most most are kept secret.

In the many instances in which these lawsuits have been successful, governments have been made to pay fines amounting to tens, sometimes hundreds of millions of dollars or euros.

The highly controversial BITs – which establish the conditions for investment by companies of one country in another state – have handed multinational corporations an arsenal of clauses with which to fight state regulations against harmful investment.

In 2011, Argentina held the record of known cases (51), followed by Venezuela (25), Ecuador (23) and Mexico. Most of the claims against Argentina are related to the 2011 financial crisis and many to the privatisation of water. In total, Buenos Aires has been fined more than one billion dollars by multinational corporations.

Last year, Ecuador was forced to pay fines of 78 million dollars to the United States’ oil company Chevron, which claims that the country’s efforts to protect the Amazon from pollution have negatively affected business.

This year, Argentina may face a new case, after the government moved to regain state control over the country’s biggest oil firm, which had been owned by the private Spanish oil company Repsol for many years.

According to UNCTAD, the year 2011 saw 40 percent of cases decided in favour of states and 30 percent in favour of investors, while the remaining 30 percent resulted in settlements.

Ironically, BITs allow companies to sue governments but not vice versa.

In December 2011, for instance, the Stockholm-based Vattenfall threatened to sue Germany for the federal government’s decision, in the aftermath of the Fukushima catastrophe, to phase out nuclear energy by 2022.

The Swedish nuclear company was poised to rake in compensation amounting to more than a billion euros. Evoking the Energy Charter Treaty – a multilateral agreement that protects investment in the energy sector – Vattenfall first tried, unsuccessfully, to convince the federal government to accommodate its requests.

The deadline for peaceful dispute settlement expired last March and now Vattenfall could sue the government at any time.

“Germany has around 130 BITs that could potentially severely restrain its environmental policy,” Nathalie Bernasconi, of the Geneva-based International Institute for Sustainable Development (IISD), told IPS.

“Foreign investors may challenge, in an international arbitration process, any change in law and policy to protect the environment and public health, to promote social or cultural goals, or to grapple with financial or economic crises. However, it is impossible to predict the outcome with any precision because each will depend in large part on the composition of the arbitral tribunal deciding the case, which consists of three highly-paid individuals, typically specialised in commercial rather than public law.”

It is the second time that Vattenfall has attacked Germany on environmental charges. In 2009, it challenged the standards set out in an environmental permit required for the operation of its coal-fired power plant situated on the river Elbe, which runs through Hamburg.

Claiming that the regulations – aimed at limiting the increase in water temperatures caused by the plant’s operations – were too strict, the company brought the case to an arbitral tribunal at the International Centre for Settlement of Investment Disputes (ICSID).

In order to settle, Germany agreed to change the conditions under which the permit was delivered and the case was dropped.

“A legal analysis by a German law firm commissioned by Greenpeace confirms that the environmental standards in the permit were diluted in a way that was probably not required under German law. It is a typical case where a government… (has) abandon legislation or standards it originally planned to adopt out of fear of being sued or condemned in an international procedure,” Bernasconi commented.

Another emblematic example of the power corporations wield over governments is the case brought by Philip Morris International against Uruguay and Australia under BITs the countries had signed with Switzerland and Hong Kong respectively.

The U.S. tobacco giant is using these treaties to challenge new legislation concerning the health warnings and advertising on cigarette packages – even though the regulations are in compliance with and encouraged by the World Health Organisation (WHO) framework convention on tobacco control.

According to Veijo Heiskanen, a specialist in international arbitration at Lalive law firm in Geneva, “From the 1960s to the 1970, states had a direct role in economies. With the privatisation (wave) of the 1990s, this direct role was replaced by regulation.”

This led to questions about whether the implementation of these regulations was adversely affecting investors, particularly foreign ones, which is often the case.

While investor protection was initially necessary to regulate government measures like nationalisation, the trend now seems to be leaning heavily on corporations challenging these regulations.

For example, in the late 1990s, Mexico was fined 16.7 million dollars for forbidding the U.S.-based company Metalclad from dumping toxic waste in the Guadalcazar County in the northern part of the north-central state of San Luis Potosí.

“The real question is whether (BITs) regulations are appropriate and states should seek (sound) legal advice to make sure that they are in compliance with international standards,” stressed Heiskanen. “These disputes are politically sensitive because there are (millions of dollars) at stake.”

Prior to paying fines to Chevron last year, Ecuador was sentenced to the payment of 700 million dollars back in 2010. That same year the Swiss cement supplier Holcim obtained 650 million dollars from Venezuela, when the country nationalised cement production.

All experts are agreed that legislation and regulations need to find a better equilibrium so that they cannot be exploited by states or investors.

“Investment protection treaties must be modernised to strike a better balance between investors’ and states rights,” Bernasconi concluded. “The old model doesn’t work any more.”

States and citizens alike have become extremely mistrustful of the dispute settlement process. “The commercial arbitration model on which investment arbitration is built is just not adequate for resolving sensitive issues of public policy,” she added.

“A lack of transparency, unpredictability and conflicts of interest have simply become unacceptable. This discontent has led countries like Australia to disfavor investor-state dispute settlement entirely and others to terminate their investment treaties.

“Watching these developments, countries like Brazil, which never ratified any of its investment treaties, must count themselves lucky,” she added.

Taiwanese civic activists and opposition parties are persisting in efforts to block imports of high-risk American beef even though the ruling rightist Chinese Nationalist Party (Kuomintang) legislative majority narrowly defeated a push by opposition legislators Apr. 27 to suspend imports of American beef products.

Activists for Taiwan’s National Food Safety Alliance call for a ban on ractopamine-laced U.S. beef. Credit: Dennis Engbarth/IPS.

The legislative clash followed the outbreak in California of a native case of bovine spongiform encephalopathy (BSE), otherwise known as “mad cow disease” on Apr. 24.

BSE is a fatal neurodegenerative disease in cattle that causes a spongy degeneration in the brain and spinal cord.

After the first reported outbreak of BSE in the U.S. in December 2003, the DPP government then suspended U.S. beef imports, a ban that was partially lifted in June 2005 and, with the exceptions of products such as beef on bone and various offals, in January 2006.

However, without consulting consumer protection and health NGOs, the restored KMT government of President Ma Ying-jeou signed a protocol with Washington in October 2009 that mandated the lifting of Taiwan’s existing ban on imports of bone-in beef, intestines and ground beef.

In the wake of a storm of protest, lawmakers reinserted restrictions on imports of brains, intestines and ground beef from countries with BSE risk, including the U.S., in the food safety law in January 2010, but permitted the importation of T-bone steaks and other “beef on bone” produce.

In the wake of the latest BSE outbreak, the Taiwan government initially maintained that there was no need to suspend U.S. beef imports.

In response, lawmakers from the opposition Democratic Progressive Party, the Taiwan Solidarity Union and the People First Party won a 42 to 39 vote in a full session of the 113-seat national legislature to change the legislative agenda on Apr. 27 and put to a floor vote a resolution to suspend imports of all U.S. beef and beef products, and remove U.S. beef and products from display shelves and markets.

An emergency mobilisation by the ruling KMT caucus blocked the resolution by a 44-45 vote as KMT Legislative Speaker Wang Jin-pyng cast a tie-breaking vote for the first time in nearly a decade.

National Food Safety Alliance spokesman Ho Tsung-hsun told IPS that as the speaker, Wang should have maintained political neutrality, but instead “put the interests of the ruling party above those of the people.”

Moreover, Ho added that the result showed that the ruling party “should be able to muster enough votes to defend the government’s decision” to open Taiwan’s market to ractopamine – laced beef imports.

“Our alliance will have no option other than to push for recall votes against KMT legislators who support deregulation next year and let the people have a chance to display their views,” Ho added.

Nevertheless, the lack of consensus in the ruling party ranks was exposed by the failure of 19 KMT lawmakers to appear for the vote, despite the prospect of party discipline.

While most of the no-shows cited “family affairs” or “scheduling conflicts” to explain their absence, KMT at-large lawmaker Ms Yang Li-huan frankly told reporters that “if we import and give the people foodstuffs that we shouldn’t import and that are poisonous and illnesses break out in a few years, who will bear responsibility?”

While the resolution did not pass, it may have had political impact.

On Apr. 30, Department of Health Minister Chiu Hung-ta stated that the DOH will send a delegation to the United States to inspect slaughter houses and added that if the OIE raised the level of the alert over BSE in the U.S., the Taiwan government “will immediately suspend imports of U.S. beef and beef products.”

Moreover, the fate of the KMT government’s plan to liberalise imports of U.S. beef with residue of the growth drug ractopamine was thrown into doubt by the BSE outbreak, the Apr. 27 legislative vote and an Apr. 28 mayoral by-election.

On Apr. 22, the DOH had issued a surprise announcement that it had set an “acceptable daily intake” for ractopamine intake of 1 microgram per kilogram, the same level that is used presently in Japan and Australia compared to the 1.25 microgram ADI adopted by the U.S.

The announcement came one day before the Social Welfare and Health Committee of Taiwan’s national legislature was slated to review proposed changes to the food safety regulation law and was decried as a “surprise attack against the Legislature and the health of the Taiwan people” by DPP Legislator Ms Tien Chiu-chin.

The KMT government has proposed changes to the food regulatory rule book that would authorise the Cabinet itself to set a “safe standard” for residues for additive such as ractopamine, while the DPP proposes a “zero indication” standard and other lawmakers call for direct bans or for the Legislative Yuan itself to set the standard.

Despite the defeat on the BSE resolution, opposition lawmakers succeeded on Apr. 27 in blocking an attempt by the KMT to refer the ractopamine-related draft revisions directly to a second reading.

“If the revisions were sent directly into a second reading, the KMT would have been able to put the process into a black box of party-to-party negotiations and there would be no opportunities for public hearings or direct debate on the articles in committee,” said Soochow University political science professor Lo Chih- cheng.

Another variable was added Apr. 28 when the potency of the recall threat raised by food safety activists was bolstered by the stunning victory scored by the opposition DPP the day after the Legislative vote.

In a by-election for the mayoralty of the historic port city Lukang on the central west Taiwan coast, DPP candidate Huang Chen-yen trounced a KMT rival by a 71 percent to 29 percent margin even though the previous mayor was a KMT politician who is now a legislator.

“The big margin of victory for the DPP in Lukang township by-election shows that there is a real possibility that recall campaigns could succeed,” said Lo.

“This vote indicates that Ma is already a lame duck and KMT legislators will have to watch out for themselves if they want to stay in office or get elected,” said Lo. “The beef issue is far from resolved.”

Aggeliki Anagnostopoulou (30) sits in a corner of the huge room that volunteers from the new party, Independent Greeks, are using as a headquarters for their pre-election campaign in the lead up to polling day on May 6.

A New Democracy (ND) voter until the last election in 2009, she recently joined the Independent Greeks, led by former ND minister Panos Kammenos who broke away from his old party when it entered a pro-bailout coalition government at the end of last year.

“Greek voters are disappointed with the two big parties. They are trying to find a new perspective. I (used) to vote for Panos Kammenos in New Democracy but I was disenchanted with the party so I followed him to this new beginning,” said Anagnostopoulou, who used to work as an external auditor for a United States-based multinational but was made redundant in 2011.

At the two-month-old, improvised party headquarters, modern techniques like the use of social media are being fused with the traditional practice of citizens registering with the party, in the hope of attracting new supporters while keeping the old voter base happy.

With elections just around the corner, the Independent Greeks’ headquarters has become increasingly populated.

Former supporters of ND and PASOK, the two parties that dominated Greek politics from the beginning of the 1980s up until the last election in 2009, have thrown their lot in with Kammenos in what appears to be the biggest protest vote the country has experienced in the last 30 years.

Kammenos, known for his explosive speeches in parliament, has capitalised heavily on anti-bailout rhetoric with nationalist undertones, in a campaign that blames PASOK and New Democracy politicians for betraying the country and conspiring against the nation.

Recent polls show him climbing up to 10 percent support in the national election this Sunday.

Creditors hold the reigns

Greece all but handed over its public finances to its creditors – led by the Troika, an administrative structure consisting of the European Commission, the European Central Bank and the International Monetary Fund – when it became all too clear in May 2010 that the country was unable to repay its huge public debt.

Since then it has implement a severe austerity programme of raising taxes and cutting pensions and state salaries across the board, deregulating the labour market and pushing ahead with pro-market reforms in exchange for billions of ‘bailout euros’.

The programme of slashing public spending has sunk the country into three years of recession and pushed unemployment up to 21 percent.

The austerity policy has also damaged political parties associated with its implementation and sent an enormous wave of protest votes fleeing towards leftist and right-wing parties.

Pre-election polls have highlighted the fragmentation of political forces, showing ten parties from across the political spectrum climbing above the three percent support threshold.

“It is evident now that the old political system that nurtured Greece’s public finance issues is meeting the beginning of its end,” said Nick Malkoutzis, a renowned journalist and political analyst who has gained recognition covering the crisis on his popular blog ‘Inside Greece’.

Increased support for leftists or the appearance of extremist groups like the neo-Nazi Golden Dawn party are not yet proof of a change in political culture; still, “It is evident that people are looking for something different. Plenty of them think that a vote for the neo-Nazis is a way to punish traditional politicians,” said Malkoutzis.

“Real change might come not in this but the next election,” he told IPS.

Given that the Troika plans to return to Greece right after the elections, to determine an economic plan that will cut a further 11.5 billion euros in public spending, “it is unlikely that the new parliament will live long,” Stavros Lygeros, a senior Greek political analyst, commented a few days ago.

“It is in fact one of the major paradoxes of this election that ND and PASOK fight each other, when they have both signed (onto) the austerity programme to be implemented after elections.”

He added that the mainstream political establishment is hopeful that the two parties will survive the election only to form a new coalition government that will carry on under the Troika’s command.

During the announcement of elections at the beginning of April, Troika officials publicly exerted pressure on the leaders of PASOK and ND in order to prevent them from straying too far from the rhetoric of bailout commitments.

Paul Thomsen, head of the IMF mission in Greece, has specified measures the new government will have to implement, irrelevant of which party wins the election.

“It is very negative for Europe that technocrats were able to express opinions in international media that elections should not take place in Greece, or that the country must carry out its commitments irrelevant of the outcome of this election. It is obvious that the Troika would prefer a PASOK and ND government that implements further austerity measures,” says Malkoutzis.

ND and PASOK leaders have employed a pre-election rhetoric that borders on blackmail, explicitly warning the nation in their latest speeches and articles about the chaos that will surely follow if they do not survive the election.

Though “this blackmail worked for the last two years, it wont be of use for much longer,” said Zeza Zikou, an economic analyst for the biggest national political newspaper, Kathimerini.

Gradually, she said, people will understand that the bailout agreements have condemned ordinary people to work forever to repay a debt that can never be settled.

After almost a decade of major economic transformation, the Lao People’s Democratic Republic is on the brink of World Trade Organisation (WTO) membership.

But the small country’s Herculean effort to join the exclusive trade club is a reminder to the ten other least developed countries (LDCs) now seeking membership of the cumbersome process involved.

“LDCs think it is easy to accede to the WTO, like becoming a United Nations member, but it is not,” Nicolas Imboden, director of the Geneva-based Ideas Centre, told IPS. The non-governmental organisation has been counselling Lao PDR, whose accession will be completed in October, for fourteen years. It is now starting to assist Liberia and Comoros, two other least developed countries on a waiting list that also includes Afghanistan, Bhutan, Equatorial Guinea, Ethiopia, Sao Tome, Sudan, Vanuatu and Yemen.

“They have to adopt the rules of the WTO and this is a huge task for most of them,” said Imboden. “They must undertake reforms, completely revise their legal systems and establish rules that apply to all foreign investors and importers, without discrimination.”

Imboden noted that many LDCs justify clamouring for membership on the grounds that it will open up new markets, a motive he argued is “flawed”, since LDCs already have good trade relations with most countries.

Rather, the “benefits” of membership are mainly domestic: aligning national economic policies with the WTO regime sets up the basis for improved economic efficiency and attracts companies eager to invest in these countries, not because of their market size, but to export to the neighbouring region.

“Reforms related to WTO accession require a change of attitude, not only a change of law,” Khemmani Pholsena, vice-minister of industry and commerce for Lao PDR, told IPS. “Lao PDR has reviewed and enacted some 25 trade-related laws and 50 other legislations since 2000. And I believe that these reforms will strengthen the rule of law, thereby cutting down on undue privileges and possibilities of corruption.”

Laos is still a communist country and transforming its state-run economy into a free market system is a huge task, particularly when a part of the administration wants to open up the economy and some party members don’t.

For example, before the accession process began, exporters had to deposit their money in Laotian banks and convert it into the local currency, while importers had to pay for a special licence. If the government felt a particular import was undercutting state-owned enterprises, it simply did not issue the licence.

“I remember having seen a whole store of watches at the central market in Vientiane,” Imboden continued. “Importing watches was forbidden, but they were coming in illegally and the government would not acknowledge that it was unable to control the licences. Now all this (illegal licencing) is abolished.”

“From the experience of other recently acceded members, such as Cape Verde and Tonga, contentious issues (for Lao PDR) at this stage may include trading rights, customs valuation, and intellectual property,” Pholsena admitted.

Intellectual property has not hitherto been protected in Laos, so the country has had to build up a national institution and set up laws on patents and patenting rights.

“In 2003 there were few lawyers in the country and nearly half of them were working on intellectual property,” Imboden recalled. “This is not in line with Laos’ priorities. The WTO asks LDCs to adopt provisions on intellectual property that may be necessary and useful, but not needed at this stage of development and take up too many resources.”

Services liberalisation may also be a challenge, since acceding countries have to liberalise more aggressively than others. “Recently acceded countries have to pay a higher price for WTO entry,” Pholsena said.

For example, “Out of a total of 160 services sub-sectors, Cambodia committed to 110, in contrast to 24 sub-sectors made by existing LDC members. Lao PDR is facing pressure to liberalise at a similar level.”

“We are aware that there will be both winners and losers as a result of these reforms and the government has to do its utmost to help the latter overcome the negative effects and transform challenges into opportunities,” Pholsena added.

She believes sectors like tourism, agro-business and natural resource-intensive industries are in Lao PDR’s comparative advantage and will prosper.

Imboden, too, is positive. He doesn’t see many risks for Laotian industry. Competition from ASEAN (the Association of Southeast Asian Nations), with which Laos has a free trade agreement, already exists; and competition from the rest of the world is going to be limited since Lao PDR doesn’t have big industries or inefficient state-owned enterprises, like China did.

In agriculture, he argues, the accession process has already had positive effects. In flat lands, exports have increased. Lao PDR cultivates coffee that is processed locally and exported with a good value added. And the majority of people who live on small plots and produce mainly sticky rice will face little competition from abroad, he added.

A big chunk of the accession process is represented by the market access negotiations that are held bilaterally. Each WTO member asks the acceding country to reduce tariffs on certain items by a given percentage. Most of them don’t put excessive demands on LDCs, but some do.

Ukraine, for example, put a lot of pressure on Lao PDR at the end of the accession process, like it did with Montenegro, blocking the accession of this small European country for a year.

It asked Vientiane to reduce a substantial number of tariff lines below the applied rate, which had never before been demanded of an LDC.

“We told Laos not to give up and the other countries tried to convince Ukraine to be less demanding, particularly after the last WTO ministerial conference, where the decision was taken to ease the accession of LDCs.”

Lao PDR also had very difficult negotiations with the United States, but Washington has relaxed some of its requirements.

Ignoring widespread concern over the safety, efficacy and cost of pentavalent vaccines, India’s central health ministry has, this month, approved inclusion of the prophylactic cocktail in the universal immunisation programme in seven of its provinces.

Pentavalent vaccine doses, a cocktail of five antigens in a single shot, confers immunity against five paediatric diseases – diphtheria, pertussis, tetanus, hepatitis B and haemophilus influenza type b (Hib), with the last one considered particularly problematic by some experts.

Pentavalents, produced by several manufacturers and promoted by the Global Alliance on Vaccines and Immunisation (GAVI), has had a history of causing adverse reactions and deaths in India’s neighbouring countries like Bhutan, Sri Lanka and Pakistan.

In 2010, the National Technical Advisory Group on Immunisation (NTAGI), a body of experts selected by the Indian government, recommended limited introduction of pentavalents in southern Kerala and Tamil Nadu and evaluation of results over a year before extension to other states.

Pentavalents were launched in Kerala and Tamil Nadu in December 2011, but the results were not encouraging. Kerala recorded four infant deaths following vaccination, with symptoms similar to what were seen in other South Asian countries.

Public health activists in Kerala, a state with 100 percent literacy and human development indices similar to those of advanced Western countries, quickly filed a public interest litigation (PIL) in the Kerala High Court asking for intervention in having the programme called off and a return to the existing health plan.

But despite infant deaths and two pending PILs (with yet another being heard in the Delhi High Court) against pentavalents, the health ministry announced on Apr. 16 that pentavalents would be introduced in five more states – Gujarat, Haryana, Karnataka, Goa, Jammu and Kashmir and Puducherry in October.

In making the decision, the government overlooked the NTAGI, which has not even been convened since August 2010 when the body suggested limited introduction to Kerala and Tamil Nadu as the two states have good adverse event following immunisation systems.

“Going by what we have seen in the neighbouring countries and now in the state of Kerala, pentavalents can, without warning, cause children (to suffer) hypersensitivity reactions and death,” Jacob Puliyel, an eminent paediatrician at St. Stephen’s hospital in New Delhi and member of the NTAGI, told IPS.

Puliyel likened the situation to penicillin sensitivity and said it bordered on criminality to be administering pentavalents without first testing a child for hypersensitivity. “Every child that is being given a dose of pentavalent vaccine is a potential victim of the adverse reaction,” he said.

Puliyel was among the many eminent physicians and public health activists in India who wrote to World Health Organisation (WHO) director-general Margaret Chan on Apr. 3 asking the health body to “re-evaluate” its recommendation of pentavalent vaccines on the grounds of safety.

Another signatory, Dr Meera Shiva, an expert on pharmaceutical drugs attached to the voluntary Medico Friends Circle, told IPS that WHO had to delist a number of brands of ‘prequalified’ pentavalent vaccine, “but adverse reactions persist and we have surely not heard the last of them.”

The letter to Chan, written under the aegis of the All-India Drug Action Network, an umbrella of public health activist groups, suggested that the cause of the vaccination- related deaths was likely to be “hypersensitivity reaction as described in the post mortem report on one of the children (who died) in Kerala.”

“Unlike conventional drug treatments meant for the management of existing diseases, in prophylaxis with vaccines, safety is of paramount importance. Vaccines that frequently and unpredictably cause the death of healthy children cannot be recommended,” the letter to Chan said.

Policy analysts specialising in vaccines said they were dismayed at the move to approve pentavalents in as many as seven of India’s states, which account for 340 million of India’s 1.2 billion people.

“Pentavalents are a test case for India’s new policy on vaccines that is in keeping with liberalisation and openly favours pharmaceutical majors at the cost of India’s public sector vaccine units,” said Madhavi Yennapu, a scientist who specialises in vaccines at the central government’s National Institute of Science, Technology and Development Studies.

Twenty of India’s 23 public sector vaccination units, once the mainstay of the country’s immunisation programme, have been shut down one after another over the last four years on the grounds that the quality of their products was suspect.

Yennapu pointed to the draft National Vaccination Policy, released last year, for clues on why the government has not made any serious attempt to revive the vaccine- manufacturing units by enforcing quality standards, for instance.

The new policy demands that the “risk of manufacturing vaccines by private manufacturers must be cushioned by assistance from (the) government” and suggests that it be made mandatory for the government to support vaccine producers with advance market commitments (AMCs).

Madhavi explained that AMCs provide guaranteed markets for a vaccine even before trials are conducted, with the government committed to paying a supporting minimum price. “Even if the vaccine turns out to be less efficacious than the existing one the government must honour the AMC by buying the new vaccine at the agreed price.

“This means that AMC funds must be deposited with the World Bank ahead of vaccine delivery by countries that GAVI is supposed to be helping with the introduction of new vaccines,” Madhavi told IPS. “Naturally, GAVI would be looking at large countries like India, Brazil and China to provide the AMCs.”

For a country like India, what is important is to “see how many vaccines are needed to prevent how many deaths and at what cost, rather than throw out tried and tested vaccines in favour of a cocktail (pentavalent) which not only has doubtful advantages but has been shown to cause adverse reactions,” Madhavi said.

According to Madhavi, there is no hard scientific evidence to show that India needs the Hib vaccine .”It is clearly piggybacking on other vaccines and the public made to pay for it.”

The existing diphtheria, tetanus, pertussis (DPT) vaccine costs about 30 cents for all the doses needed to immunise a child, while immunisation with pentavalents will cost more than 10 dollars. “We need to ask ourselves if introducing the new vaccine is really worth all the public money being spent on it,” Madhavi said.

When Kenya’s newly announced geothermal power generation project comes online, it will turn the East African country into an economic powerhouse in the region.

About 60 percent of Kenya’s power is hydroelectric, however, the supply is unsteady. Credit: Isaiah Esipisu/IPS

In April, the government launched the Menengai Geothermal Development Project, the first initiative of its newly formed Geothermal Development Company, which has been set up to fast track the development of geothermal resources here.

According to its chief executive officer, Dr. Silas Simiyu, by 2016 the first phase will generate 400 MW, which is enough to light up 500,000 households and run 300,000 small businesses.

“It is situated 180 kilometres northwest of Nairobi, and will have a capacity to produce 1,600 MW of electricity by the time we implement all three phases in 2030,” said Simiyu.

According to Nashon Adero, a policy and economic analyst at the Kenya Institute for Public Policy Research and Analysis, the first phase of the project will have a significant impact on the country as it moves towards industrialisation.

“At the moment, the country consumes 1,600 MW,” Adero said. “Four hundred MW is therefore an additional 25 percent. And given that the country has embarked on other ambitious projects of green power generation, such as the Lake Turkana Wind Power project, which will generate an additional 300 MW, Kenya will become an economic giant within the region.”

Construction on the Lake Turkana Wind Power project will begin in June, and when completed it will be sub-Saharan Africa’s largest wind farm.

Generally, Kenya is perceived as eastern and central Africa’s financial, communication and transportation hub, with the country’s GDP increasing by four to five percent in the last 10 years.

“Kenya’s GDP is currently the largest in the (East African) region given its strong agricultural industry, particularly in tea and coffee production, and floriculture,” said Ezekiel Esipisu, Habitat for Humanity’s regional operations manager for East Africa and the Middle East. “This, coupled with investments at the Nairobi Stock Exchange and the manufacturing industry, means that the country is one of the leading economies in Africa.”

Esipisu told IPS that the country’s investment in power production would propel economic development further.

“All of Kenya’s neighbours have power deficits. The roadmap towards further power production will definitely boost development. We will see Kenya move closer to industrialisation, and it will become a real economic giant in the region.”

About 60 percent of Kenya’s power is hydroelectric, which is generated when falling water from a dam is used to drive turbines. However, the supply is unsteady, as Kenya has been subjected to perennial drought and erratic rainfall. And the power cuts have hampered the country’s growth.

From July to August 2011, the government was forced to implement power rationing after the water levels in the country’s major dams dropped. At the time Kenya was generating about 1,200 MW of power, while demand increased at an average rate of eight percent a year, according to the Ministry of Energy.

The 2011 power cuts reportedly cost the country over 96 million dollars. However, the worst period of power rationing was between 1999 and 2001, which resulted in an estimated loss of four percent of Kenya’s GDP – about 400 million dollars.

“Hydroelectric power generation is solely dependent on climatic conditions,” said John Omenge, the chief geologist at Kenya’s Ministry of Energy. “During a drought, for example, the water levels will definitely drop, reducing the amount of power generated.

“Geothermal power generation is therefore the answer. It is one of the most reliable methods of producing electric energy, because such sources are not affected by environmental calamities such as drought,” he said.

In volcanically active places like the Rift Valley region, water is pumped down an injection well, and then filtered through the cracks in the hot volcanic rocks. The resultant pressurised steam that is formed is used to drive turbines.

Kenya is the first African country to diversify into geothermal power. The country is already generating 209 MW of electricity from the Olkaria Geothermal Projects, which are located in the Rift Valley and are operated by the Kenya Power Generating Company.

And the Menengai Geothermal Development Project is just a small part of the country’s “Vision 2030”, a development blueprint that aims to transform Kenya into an industrialised and middle-income country by 2030 by generating 5,000 MW of electricity from geothermal resources at various sites across the country.

“Power supply is key to any form of development,” said Gabriel Negatu, the director of the East Africa Resource Centre at the African Development Bank. The bank is providing funding for the first phase of the Menengai Geothermal Development Project.

“This project is therefore crucial for a country like Kenya because it is becoming the economic heartbeat of the continent. It is due to such high prospects that the regional office for the African Development Bank is now based in Nairobi. Many other organisations are following suit, making the city a regional economic hub,” he said.

Though the World Trade Organisation (WTO) has long held that trade between African countries is too low, experts at the South Centre, an inter-governmental think tank of developing countries, say intra-continental trade is already significant in manufactured goods and promises a new path to industrialisation.

Valentine Rugwabiza, deputy director-general of the WTO, says Africa needs to strengthen domestic markets and integrate into the world market Credit: World Trade Organisation

“Trade among African countries is very low. Last year, it stood at 10 percent of the continent’s overall trade,” Valentine Rugwabiza, deputy director general of the WTO, which seeks to reduce barriers and promote aid for trade, told IPS.

“Though Africa’s share in world trade is also very small – less than three percent in 2011 – it is growing very rapidly, particularly with emerging economies; while trade amongst African countries is stagnant.”

With a rigid division of labour inherited from the colonial era, Africa relies on a narrow range of exports and is over-dependent on primary products: in 2010, fuel extraction and mining represented 66 percent of its total merchandise exports.

According to Rugwabiza, lack of investment in infrastructure and non-tariff barriers of all kinds make trade between the 54 countries cumbersome.

“Whereas it takes 18 days to export products from Latin America and the Caribbean, it takes almost 33 days to do so from Africa,” she added, noting that it is also more expensive to ship a container from Africa than from any other part of the developing world.

For instance, shipping a container from South-east Asia costs 900 dollars, compared to 2,000 dollars from Africa; likewise, it costs 935 dollars to import a container from South-East Asia, and almost 2,500 dollars to do so from Africa. The Geneva-based South Centre, however, has a more optimistic view.

“In absolute terms, intra-African trade is low,” Aileen Kwa, trade policy officer with the South Centre, told IPS. “In terms of non-oil exports Africa’s internal trade is almost on par with its exports to the EU. Furthermore, the trade growth rate within Africa is the second highest after China and before the United States and the EU. Therefore, it is very promising, also in terms of the quality of exports.”

She explains that, with the exclusion of South Africa, only 10 percent of sub-Saharan Africa’s exports to the EU are in manufactured goods, a figure that rises to 27 percent for intra-regional trade.

“Most of Africa’s manufactured goods go to Africa. So if the continent wants to industrialise, the market that provides the best opportunities is Africa, not China, the U.S., or the EU.”

For Rugwabiza, however, the industrialisation of Africa will require not only strengthening of the domestic market, but also integration into the world market.

“Today, components of the same piece are produced in different countries all over the world. This is a huge chance for Africa to specialise in single tasks and insert itself into global value chains,” she told IPS.

“Some countries already do so, but they are still an exception. Mauritius, for example, produces pieces for H&M, (a major global clothing store). Since it has a reliable logistics and service sector, the multinational knows that it will receive the orders on time and, thanks to a stable and predictable legal environment, that there will be no unexpected regulations coming up,” she said.

Kwa notes that the picture is uneven: in some parts of Africa, intra-regional trade is larger than in others. The total exports of the East African Community (EAC) to sub-Saharan Africa already surpassed their total exports to the EU in 2000. Other countries like Zambia and Senegal also export more to Africa than to Europe.

Still, other regions display a bleaker outlook.

Rugwabiza belives that Africa, with its high dependence on trade with the outside world, is highly vulnerable to external shocks. This is particularly true of the agricultural sector, as the food crisis has shown.

“In 2008, Africa imported cereals for 15 billion dollars, with only five percent coming from the continent. Agricultural subsidies in developed countries, insufficient investment and low productivity in (domestic) agriculture and non-trade barriers (between African countries) are still a huge obstacle,” she added.

Shoprite (Pty) Ltd, for example, a South African multinational, spends 20,000 a week on securing import permits to distribute meat, milk and plant-based goods to its stores in Zambia alone. For all the countries it operates in, about 100 ‘single entry’ import permits are required each week, but this can increase to 300 per week during busy periods.

As a result of this legal red tape, there could be up to 1,600 documents accompanying each loaded Shoprite truck that crosses a Southern African Development Community (SADC) border.

But things can change. For example, the EAC has managed to substantially reduce the number of control points, while Uganda and Rwanda have set up a common border post that is now open 24 hours a day.

Kwa says that African countries’ over-dependence on imports from world markets, particularly in food, is mainly due to their loss of productive capacities.

She believes there needs to be some balancing between short-term and long-term goals. While in the short run countries must be able to import food quickly and as cheaply as possible to meet their immediate needs, they must, in the long term, produce their own food without relying on imports from developed countries that have an extremely unfair competitive advantage due to the latter’s massive government subsidies.

Relying on imports undercuts domestic producers and undermines their future capacity to produce. Therefore, countries may need to use tariffs and other trade policy tools to stop some of the imports, even from their neighbours, at least for some time.

“First countries have to increase their productive capacities and then trade will follow. The WTO always thinks about increasing trade, but the main question for Africa is how to increase its productive capacities. Then trade will naturally follow,” Kwa told IPS.

Industrialised countries have mounted an unprecedented campaign to stop the United Nations Conference on Trade and Development from providing policy advice to the poorest countries in Africa and across the globe.

Industrialised countries have voiced their unhappiness with theUNCTAD's policy advice to developing nations. Credit: Einberger/argum/EED/IPS

As UNCTAD attempts to secure a new mandate at its ministerial meeting in Doha, Qatar, from Apr. 21 to 26, industrialised countries have voiced their unhappiness with the agency’s policy advice to developing nations.

According to trade officials from developing countries, industrialised countries believe that the agency’s advice on finance, environment, food security, intellectual property rights and development clashes with their market-driven liberal agenda.

“Developed countries do not want UNCTAD to enter into finance on the grounds that it is an area that only the International Monetary Fund and the World Bank must handle,” said Lesotho’s ambassador to the U.N. and World Trade Organization (WTO), Dr. Anthony Mothae Maruping. He is also chair of the UNCTAD negotiating committee in charge of the draft text for the upcoming meeting. Maruping said that he was working to bridge the differences between the industrialised countries, led by the European Union (EU) and the United States (U.S.), and the G77 and China – the coalition of developing countries.

The draft text on the agency’s mandate for the next four years outlines its research and policy advice on subjects including the current economic recession, exchange rate misalignments, the volatility and financialisation of commodity markets, special and differential treatment for developing countries, regional financial and monetary cooperation, and the need for the reform of the international financial and economic architecture. In his report for the Doha meeting, UNCTAD Secretary-General Dr. Supachai Panitchpakdi calls for a paradigmatic shift to development-oriented growth that would bring about sustainable and inclusive economic and social change in the world’s least-developed countries (LDCs).

“The combination of macroeconomic austerity, rapid liberalisation, privatisation, and deregulation not only failed to produce a supply-side revolution but, instead, set the region (Africa) back economically; productivity growth stalled in most sectors, and the informal economy had grown rapidly since the onset of the international debt crisis in the early 1980s,” Panitchpakdi said in the report.

He argued that the time has come for moving away from finance-driven globalisation, which has characterised the dominant pattern of international economic relations based on a one-size-fits-all policy agenda. He said this has had a destructive impact on all countries, particularly on least- developed ones.

However, the aftershocks of the global economic crisis of 2008 continue to reverberate across the world in countries like the United States, the United Kingdom, France, Germany, Greece, and Portugal.

It is little wonder that, despite this, industrialised countries led by the U.S. and the EU are stubbornly pressing ahead with their failed boom-and-bust policies, say analysts.

Against this backdrop, UNCTAD’s meeting in Doha has assumed considerable importance in setting out a new agenda.

“It comes at a time when global economic governance is under close scrutiny, with growing concerns about the health of the multilateral agenda,” said Richard Kozul-Wright, the head of UNCTAD’s Unit on Economic Cooperation and Integration among Developing Countries.

He was referring to the controversial plurilateral negotiating effort among select industralised countries for a free trade agreement on services at the Doha multilateral trade negotiations.

A plurilateral agreement allows member countries to voluntarily agree to new rules. In contrast, in a multilateral agreement all members have to be in agreement.

“The stalled Doha Round, the slow pace of climate discussions and the failure of the international community to pre-empt recurrent food crises have added to the growing concerns about multilateralism,” he told IPS.

UNCTAD was the first multilateral body, since its inception in 1964, to point out the dangers of an unsustainable housing bubble and the unsustainable public and private debt of industrialised countries. Its 1997 report cautioned against the downside risks of finance-driven globalisation.

The U.N. agency also cautioned against the demands made on developing countries during the Doha negotiations to reduce the tariffs on their industrial goods to almost zero.

“UNCTAD’s work in all areas is commendable,” said Dr. Matern Yakobo Christian Lumbanga, Tanzania’s ambassador to the U.N. and WTO. “UNCTAD’s assistance in different policy areas is vital for LDCs and it has rightly advised us not to depend on one or two areas of exports or raw materials.” He said that LDCs in Africa have come to realise the benefits of diversification, as advocated by UNCTAD.

The upcoming UNCTAD meeting is going to address the specific concerns of the LDCs, and will focus on durable economic changes such as “broadening the variety and sophistication of goods and services produced so that LDCs are less vulnerable to external shocks,” said Kozul-Wright. “This is the most pressing of the rebalancing challenges, which must include an emphasis on job creation, social protection and environmental sustainability if the opportunities provided by a more open global economy are to improve the lives of many rather than the favoured few,” he said.

European civil society organisations continue to demand that international financial institutions (IFIs) such as the World Bank and the International Monetary Fund apply the same standards of transparency and accountability to their internal affairs that they demand for governments across the world.

These demands are being made just ahead of the spring meetings the IFIs will hold later this month in Washington D.C., and refer in particular to the nomination of a new president for the World Bank.

“The election of the new president of the Bank is typical of the lack of transparency and democracy that reigns in the international financial institutions,” Peter Chowla, an economist working for the Bretton Woods project (BWP), told IPS.

The BWP, a London-based international coalition of economists and anti-globalisation activists, focuses its work on the IFIs, to challenge their power, open policy space, and promote alternative approaches.

Traditionally, the U.S. government and the European Union share the leading positions at the IFIs. While the U.S. government occupies the coveted presidency of the World Bank with a candidate of its own, the EU places one European technocrat at the helm of the IMF – no fair election process precedes either of these appointments.

Last year, the French government obtained the backing of European governments to name former French finance minister, Christine Lagarde, managing director of the IMF, despite vociferous opposition from developing countries.

This year, U.S. president Barack Obama has nominated Korean-born physician Jim Yong Kim to become the Bank’s next president.

Although there are two alternative candidates for the position, the present Nigerian minister of finance Ngozi Okonjo-Iweala and her former Colombian counterpart José Antonio Ocampo, it is taken as given that Kim’s candidacy will obtain the support of European countries, and that he will be elected during the bank’s board hearings scheduled to take place in Washington from Apr. 9-11.

It is expected that the confirmation of Kim as new president will be announced on Apr. 11.

Chowla recalled that such “opaque processes” of nomination were conceived more than 60 years ago, when the IFIs were founded, and no longer fit into “the present global economic and political structures.”

But disagreements between European civil society organisations and the IFIs go beyond nomination procedures, and include the institutions’ policy recommendations for governments about management of climate change financial facilities.

Jeroen Kwakkenbos, policy and advocacy officer at the European Network on Debt and Development, told IPS that the World Bank had “neither a mandate nor the qualifications” to participate in the management of the future Green Climate Fund, which is supposed to administrate future financial resources for adaptation and mitigation of climate change, or of REDD (reducing emissions from deforestation and forest degradation in developing countries).

“We urge the IFIs to remain outside the management of these facilities,” Kwakkenbos told IPS. “Such entities should be managed under democratic principles – that is, one country, one vote, following representation of stake holders in the boards of the organisations.”

Chowla stressed that the main problem with the IFIs is that these institutions continue to apply the neoliberal doctrine that characterised them throughout the 1980s and 1990s.

“These characteristics are deregulation, privatisation, and bilateral free trade agreements between industrialised and emerging countries,” Chowla pointed out. “Four years after the global financial crisis broke out, there are no tangible signs of new regulation of financial flows.”

Chowla specifically mentioned the financial flows to emerging countries, which have triggered important dislocations of exchange rates, leading to what some economists have dubbed “the currency war”.

“(A)symmetry in the recovery of developing countries and the recessions in Europe after the crisis have led to major and unstable short term capital flows to developing countries,” Chowla stated.

These flows have proved to be significantly destabilising, causing sharp appreciation of currencies of emergent developing countries such as Brazil.

Chowla said that the IMF analysis of this destabilising monetary phenomenon on emerging countries is flawed, because it is either based on econometric exercises relying on highly uncertain variables, or on the Fund’s own policy recommendations, which the authorities have not yet even agreed with.

Furthermore, the Bank and the Fund have helped to impose austerity programmes upon European countries already suffering deep economic downturns, regardless of the dramatic social consequences of cuts in public spending and social welfare, Chowla said.

Chowla also mentioned the support the World Bank continues to offer for privatisation programmes across the world.

“In Romania,” he said, “the Bank is the main force behind the planned highly controversial privatisation of the local health system, opposed by unions and civil society groups.”

Other groups, such as the Europe Corporate Observatory, raise similar complaints against the Bank and the IMF, for supporting free trade agreements (FTAs) with developing countries, which obviously damage local public health initiatives and food provision.

The most salient case is the European FTA with India, slated to come into force this year, which would force the Indian pharmaceutical industry to cease producing inexpensive generic medications to treat contagious diseases such as HIV/AIDS, which most of the developing world is dependent on as a cheap alternative to patented drugs.

Trade ministers of the BRICS countries – Brazil, Russia, China, India and South Africa – say that at the G20 trade ministerial summit later this month in Mexico they will try to ensure that attempts by industrialised countries to frame a new trade agenda do not drown development-led trade liberalisation and the World Trade Organization talks.

The G20 is not representative of the WTO because the poorest countries have no say in setting the trade agenda. Credit: Kim Cloete/IPS

The Doha Development Agenda (DDA) was launched by the WTO almost 11 years ago to correct the historical imbalances and asymmetries in the global trading system. It was designed to enable poorer countries to integrate into the system.

“This is a most dangerous move by the industrialised countries which are determined to undermine the independence and multilateral character of the WTO, where a large majority of countries are asking for developmental flexibilities for implementing liberal trade commitments,” said a trade envoy, referring to the agenda for the meeting.

“The G20 is not representative of the WTO because the poorest countries and countries in Africa, except for South Africa, have no say in setting the trade agenda,” the envoy said.

The G20 bloc of major and emerging economies is made up of Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom, United States, and the European Union.

Clearly, the rich countries have overwhelming influence in setting the agenda at the G20 meetings, the envoy said.

“The draft agenda for the meeting is basically asking trade ministers to agree on creating a super-body headed by the chiefs of the WTO and OECD (Organization for Economic Cooperation and Development) to oversee all the review and monitoring functions,” the envoy argued.

Therefore, the presence of the BRICS ministers is so essential and important, lest the trade agenda be radically altered for the next 10 years, said sources familiar with the BRICS ministers meeting.

During their meeting in New Delhi last week, the BRICS ministers discussed the draft G20 agenda issued by Mexico, and not yet made publicly available, the South African trade minister said.

Significantly, the draft agenda is silent on the Doha trade talks.

It aims to take decisions on core trade issues without first discussing them at the WTO, which is now grappling with new approaches to accelerate the DDA talks.

“We strongly believe that the process has to be multilateral and the central focus has to be on the Doha single undertaking,” said Davies, emphasising the importance of transparency and inclusiveness.

“Attempts to reshape the architecture without concluding the Doha talks are not correct,” Davies said, suggesting that the BRICS countries are ready to take small steps to reinvigorate the Doha trade negotiations. The minister insisted that agriculture is at the heart of the DDA and that precious little is done to address the continued trade-distorting subsidies of the industrialised countries.

It is important to accord primacy to the Doha multilateral trade negotiations by discussing issues first at the WTO, Davies argued.

The draft agenda for what is going to be the first G20 trade ministerial meeting of its kind – beginning on Apr. 19 – sets the stage for preparing a “New Trade Narrative.”

The five-page agenda obtained by IPS, which remains confidential, squarely addresses the trade interests of the rich countries, under subheadings such as “better understanding global value chains to better regulate trade” and “services, trade finance and trade facilitation are essential to oil global value chains.”

Angel Gurria, secretary-general of the OECD, known as the rich-country think tank, and Pascal Lamy, the WTO director general, will provide the justification for pursuing this new agenda to the G20 trade ministers.

The heads of the OECD and the WTO have been working in tandem for some time now to change the manner in which global trade is measured and assessed in a neoliberal framework away from a development perspective, say analysts.

But developing countries and the least-developed countries have opposed the framework advanced by the OECD and WTO Secretariats on market-led trade reforms.

In addition, the G20 ministers will discuss “trade, growth, and jobs.” The themes for discussion include “trade as a source of growth,” “trade as a source of jobs,” and “the imperative to keep markets open and to keep opening markets.”

Up until now, trade negotiations, including the very setting of the trade agenda for any negotiations, have been based on a give-and-take framework. But for the first time, Mexico is asking ministers to move away “from this setting in which many trade discussions happen” to identify “the links between trade and job creation and (to improve) trade statistics that consider global chains and value addition.”

Mexico also wants ministers to focus on “the major forces and challenges facing their economies, including protectionist pressures, and what alternative policies are there to deal with them, other than trade instruments.”

“Reading the draft agenda, one gets the feeling that there is a hidden language, which shows basically the interest of developed countries and not of developing countries,” said Isabel Mazzei, a former Oxfam International trade policy advisor.

Speaking in her private capacity to IPS, she asked: “What does it really mean ‘to change the trade narrative’- does it mean to ‘move the goal posts’?”

“The Doha Round is about development, agriculture, elimination of subsidies, policy space….and now it looks like this narrative is obsolete as there is no mention of agriculture or subsidy elimination,” she said. “Many developing countries still have a big portion of their labour force coming from the agricultural and manufacturing sectors.

“Clearly the G20 draft agenda is a concerted attempt to bring the issues and concerns of rich countries from the back door,” she concluded.

Brazil and South Africa have experienced a widespread contraction of their manufacturing industries, with the latter suffering massive unemployment as well, thanks to the rampant volatility and misalignment of dominant global currencies like the dollar, trade experts from the two countries say.

South Africa's unstable exchange rate made exports uncompetitive. Credit: Servaas van den Bosch/IPS

“Brazilian industry is at the receiving end of exchange rate appreciation and 2011 saw a negative growth in the manufacturing sector with textiles, leather, chemicals, rubber, and electrical industries, among others, having been adversely affected,” said Josue Gomes da Silva, the chief executive of the Brazilian company, Coteminas. He was speaking at a closed-door seminar at the World Trade Organization (WTO) on Mar. 27.

“Four hundred thousand small businesses closed down in South Africa over the last three years, resulting in unemployment of about 23 to 34 percent due to the unstable exchange rate that made South African exports uncompetitive,” said Stewart Robert Jennings, chief executive of South Africa’s PG Group.

“The South African Rand has strengthened during the last three to four years and is now the most volatile currency,” he said, suggesting that the Brazilian Real and Rand are at their highest appreciation values against the greenback.

Da Silva and Jennings offered a detailed account of the creeping “deindustrialisation” in their respective countries at a closed-door seminar convened by the WTO’s Working Group on Trade, Debt, and Finance.

The two-day seminar, which concluded on Mar. 28, is an outcome of a sustained campaign by Brazil over the last year to persuade members of the WTO to discuss the role played by volatile exchange rates in international trade.

However, several industrialised countries, as well as China, were reluctant to address the issue of exchange rates at the WTO, saying it is part of the International Monetary Fund’s (IMF) agenda. “The seminar is an attempt to give shape to a reality, away from abstract concepts,” Brazil’s trade envoy Ambassador Roberto Azevedo told IPS.

While representatives from the private and public sectors and academia were invited to discuss the role exchange rates played in trade, journalists were barred from the seminar at the insistence of Canada and the United States.

Though there was no consensus on the factors influencing the misalignment of currencies, which imply that there is a gap between a country’s real exchange rate and its equilibrium level, there was general recognition that a problem exists and is playing an adverse role in different countries.

While currencies in big developing countries appreciated significantly over the last few years, in other countries, currencies depreciated or were maintained at a steady peg to the dollar despite favourable macro-economic fundamentals.

The Real is overvalued by 42 percent, while South Africa’s Rand has appreciated in double-digit percentage terms against the dollar. The Indian Rupee also initially appreciated by five percent against the dollar from 2008 to 2009. However, it has recently depreciated sharply due to the country’s burgeoning current account deficit.

Consequently, Brazil and South Africa witnessed a sharp drop in their exports of manufactured goods, while imports from other countries shot up alarmingly. “Brazil has dropped to 14th place in machinery and equipment exports, while imports doubled because of exchange rate overvaluation,” said da Silva.

Meanwhile, the policy flexibility of South Africa, Brazil and India, as reflected by the Wiggle Room Index constructed by The Economist, is not high. The three countries are ranked 65th, 79th and 82nd, respectively.

Against this backdrop, WTO director general Pascal Lamy issued a nuanced statement on Mar. 27 on the exchange rate volatility and its various effects on traders. He said international trade needs exchange rate stability.

“Trade measures cannot correct policy imbalances elsewhere, and be an answer to non-trade policy concerns…. Tit-for-tat measures would be a recipe for protectionist crossfire,” Lamy cautioned.

All these issues, Lamy said, “require a mix of cooperation in the macro-financial field and proper domestic policies which lie outside the remit of the WTO.”

The director general exhorted participants to make sure that the “WTO system does not crumble under the weight of excessive expectations.”

In contrast, a senior official of the U.S. administration, which is providing credit at close to zero percent to its banks and industry since the onset of the financial crisis in 2008, complained that China had kept the Yuan nearly unchanged despite a growing current account surplus and bulging foreign exchange reserves.

“A strong consensus now exists on the importance of promoting market-determined exchange rate systems, enhancing flexibility to reflect underlying economic fundamentals, avoiding persistent exchange rate misalignments and refraining from competitive currency devaluation,” said Mark Sobel, the U.S. Treasury Department’s deputy assistant secretary for international monetary and financial policy.

China responded saying that those countries adopting unconventional monetary policy have contributed to the currency volatility and misalignment by adding liquidity to financial markets.

“Exchange rate volatility was intensified by the monetary policy of major currency issuers – the U.S.,” Ruogu Li, president of China’s Exim Bank, told the participants.

“Both developed and developing members have fallen victim to major currency issuers,” the Chinese banker said, according to sources present at the meeting. “For every iPhone sold in the U.S., Chinese workers and companies get less than two percent, while the rest of the profits go to the American companies.”

The seminar has underscored the need to acknowledge the problem.

“If countries agree that misalignments are a given in the current international economic and trade processes, it is important to discuss the trade-related aspects of the problem at the WTO,” said Azevedo.

India’s generic pharmaceutical industry meets 70 percent of domestic demand and exports 11 billion dollars worth of generic drugs annually. Credit: Kristin Palitza/IPS

By Ranjit Devraj
NEW DELHI, Mar 19 2012 (IPS)

By allowing a generic manufacturer to produce a patented cancer drug at a fraction of its current cost, India has declared that it is not about to abandon its role as the ‘pharmacy of the world’s poor’.

In a path-breaking move on Mar. 9, India’s patent office invoked compulsory licensing (CL) provisions under World Trade Organisation (WTO) rules to allow generic drug manufacturer Natco Pharma to produce and sell ‘Nexavar’ in India, a drug developed by the German pharmaceutical giant Bayer to treat liver and kidney cancer.

CL allows generic manufacturers to produce a patented drug or use a patented process when denied by the patentee. It is an important ‘flexibility’ clause in the WTO agreement on trade-related aspects of intellectual property rights (TRIPS), but one that countries capable of manufacturing generics are still putting to test.

The issue has aligned non-government organisations (NGOs) and the manufacturers of generic drugs with those governments prepared to take on powerful pharmaceutical multi-national corporations (MNCs) that sell drugs worth more than 800 billion dollars annually.

“India always had CL provisions, even in its original 1970 patent laws. In 2005, when amendments were made to make WTO laws consistent, CLs were retained and this was a major achievement (of the Doha declaration of 2001),” Sachin Chaturvedi, senior fellow at the Research and Information System for Developing Countries, a think-tank of India’s ministry of external affairs, told IPS.

“More generic drug manufacturers in India are sure to come forward now and seek licenses to cheaply manufacture drugs and make them accessible to the poor,” said Meera Shiva, chairperson of the Health Action International – Asia Pacific, an NGO dealing with public health issues.

Shiva told IPS that the cost of treatment with Nexavar – the trade name for sorafenib tosylate – is expected to drop by nearly 97 percent, from 5,500 dollars for a month’s treatment per person to about 175 dollars, once production of a generic version by Natco Pharma begins.

“This will bring relief to more than a million people suffering from liver and kidney cancer and extend their lives by several years,” said Shiva. “It brings hope in a country where government surveys have shown that 65 percent of the 1.1 billion population fall into debt as result of ‘out-of-pocket’ healthcare spending.”

India’s patent office ruled that “the mandate of the law is not to just supply the drug in the market, but to make it available in a manner such that (a) substantial portion of the public is able to reap the benefits of the invention. If the terms are unreasonable, such as high cost, availability is meaningless.”

Shiva said what is significant is the realisation that avenues exist within the WTO for governments to intervene on behalf of their people and ensure access to medicines in the face of attempts by pharmaceutical MNCs to keep profit margins high.

Indian Move a Victory for IBSA

Volunteers for the humanitarian organisation Doctors Without Borders (known by its French acronym MSF) in Brazil and South Africa – countries that have benefited from the Indian generics industry – hailed the Indian move.

“In 2007, the Brazilian government issued a CL for the drug Efavirenz, used to treat AIDS, after declaring it of public interest,” said Felipe de Carvalho, project officer with MSF’s Access Campaign in Brazil.

“Right after the issuance of the CL for Efavirenz, while local production was being developed, Brazil bought generic versions from Indian generic producers,” de Carvalho said. “In 2007 alone, the purchase of cheaper versions of Efavirenz represented savings of 30 million dollars.

“So, if the use of CL in India is expanded and allows for exportation, countries like Brazil can benefit from the resulting generic production, as happened in the case of Efavirenz,” de Carvalho told IPS.

When the Brazilian government issued the CL for Efavirenz, the country became the target of intense denouncement by pharmaceutical companies and developed country governments, de Carvalho said.

“The decision in India is important to reinforce developing countries’ right to use TRIPS flexibilities.”

India’s CL has brought on a storm of protests from pharmaceutical MNCs. In a published statement Ranjit Shahani, who heads the Switzerland-based Novartis in India, warns that the move will “work to the detriment of patients through the negative impact they (CLs) will have on future investment in innovative pharmaceuticals.”

However, Shiva debunked this claim that investments in research and development for drugs come solely from excessive profits generated by the pharmaceutical industry. “The fact is, there is publicly- funded research and often big pharma benefits from that too.”

Catherine Tomlinson, senior researcher at the Treatment Action Campaign in South Africa, said it was “heartening to see India’s ongoing resistance against pressure from developed countries to not use the TRIPS provisions to protect health and we hope it will serve as a positive example for our own government.

“For activists in South Africa, it is distressing that our government continues to bow to pressure not to use CL provisions, despite the country facing numerous health emergencies and many critical medicines remaining unavailable to the majority of the population,” Tomlinson told IPS.

Leena Menghaney, a lawyer who works for MSF’s Access Campaign in New Delhi, said India’s patent laws had many advantages. “CLs can be issued to generic producers if patented drugs are unavailable or unaffordable, or if countries that lack production capacity order drugs from India.

“In fact compulsory licensing, under Indian law, is not reserved for emergencies – this is another myth spread by the MNCs,” Menghaney said.

Between 1970 and 2005, India did not recognise patents for medicines, allowing the growth, in that period, of a large and powerful generic pharmaceutical industry that takes care of 70 percent of domestic demand and also exports 11 billion dollars worth of generic drugs annually.

Excerpt:

By Dennis Engbarth and - -
TAIPEI, Mar 18 2012 (IPS)

Taiwan civic activists and opposition parties have launched efforts to block plans by the Chinese Nationalist Party (Kuomintang or KMT) government to “conditionally deregulate” the import of United States-produced beef containing residues of ractopamine, a controversial “growth enhancing” chemical used in cattle feed.

A Taiwanese woman protests outside the national legislature against a decision to ‘conditionally deregulate’ import of ractopamine-laced U.S. beef. Credit: Dennis Engbarth/IPS.

Taiwan currently bans domestic use of ractopamine and most other “leanness enhancing” drugs in livestock production, and the import of meat products that are found to contain any residues or traces of ractopamine.

Taiwan would seem to be a minor market for U.S. beef. Only 3.7 percent of the 5.42 billion dollars worth of beef and “variety” products (such as brain, eyes, intestines and spinal cords often called ‘offals’) exported annually by the U.S. is destined for Taiwan, according to U.S. Department of Agriculture (USDA) data. Nevertheless, Washington has put intense pressure on Taipei to fully deregulate controls on imported beef and pork products.

DPP Legislator Lin Chia-lung told IPS that Washington “aims to use Taiwan as a platform to open the markets of other countries to U.S. beef, including China, Japan and South Korea and to use Taiwan as a decisive breakthrough point to push through approval of standards for ractopamine in the Codex Commission.”

After failing to secure major concessions from the previous DPP government, Washington secured a signing of a secret protocol with the Ma government in October 2009 that lifted restrictions on imports of U.S. beef-in-bone, ground beef and assorted ‘offals’, thus overturning a ban imposed by the DPP administration after the detection of bovine spongiform encephalopathy (BSE or mad cow disease) in the U.S. in December 2003.

Ultimately, civic protests and a legislative revolt forced the KMT government to accept revisions in the food health regulatory act that partially re-imposed restrictions on ground beef, brains, eyes, spinal cords and intestines and led to the resignation of Ma’s national security advisor.

Similarly, in the wake of vocal civic opposition to Ma’s commitment to Burkhardt, more than half of the 113-seat national legislature, including over 30 of 64 KMT lawmakers, co-sponsored or supported draft revisions to the Food Health Regulation Act that would effectively continue the ban by imposing a ‘zero indication’ testing standard.

Nevertheless, Economic Affairs Minister Shih Yen-hsiang told lawmakers Mar. 8 that that Washington considered Taipei’s position a “litmus test for whether Taiwan is a reliable trading partner.” Pro-KMT economists publicly warned that the deadlock was causing the suspension of bilateral trade and investment talks and could block plans to allow visa-entry into the U.S. for Taiwan citizens.

After three seminars with government officials and health experts failed to reach a consensus, the KMT cabinet issued a news release late on Mar. 5 announcing its plan for “conditional deregulation”.

The new policy would allow imports of U.S. beef with a maximum residue level of ractopamine to be determined by official agencies but would still ban import of internal organs and other beef offals, prohibit importation of pork and pork products with ractopamine residues and require U.S. beef products with ractopamine to be clearly marked “so that consumers can make their own choice.”

National Taiwan University (NTU) School of Veterinary Medicine dean Chou Chin-cheng, a member of the technical advisory commission, told IPS that there simply has not been any credible research on the direct impact of ractopamine residues in beef or pork on human consumers, and stressed that the growth enhancing drug may pose risks to certain consumers, including infants or persons with high blood pressure or diabetes.

Chou also observed that the Codex Alimentarius Commission set up by the Food and Agriculture Organisation and the World Health Organisation to set food safety standards has failed to agree on safe maximum residue levels for ractopamine.

“The entry of ractoprine-laced beef into Taiwan’s market will exacerbate overall health risks,” said the NTU professor.

Despite official assurances that ractopamine is safe, a poll conducted by the KMT-friendly TVBS satellite television network of 1,107 Taiwan adults Mar. 12-13 showed that only 31 percent supported the Ma government’s conditional deregulation policy and 59 percent said they did not approve.

The Cabinet’s furtive decision also sparked a protest by hundreds of citizens Mar. 8 outside the Cabinet complex in Taipei. The demonstration was organised by the Taiwan Anti-American Beef Alliance (TAABA), a coalition of over 60 food health, consumer protection, environmental and civic organisations.

On Mar. 9, thousands of swine farmers protested the KMT government’s deregulation outside the national legislature, and then marched to the Council of Agriculture, where farmers clashed with police and threw eggs at the COA office.

Taiwan Swine Farmers Association chairman Pan Lien-chou warned that “once the ban is lifted, domestic swine production will be unable to bear unequal foreign competition.”

On Mar. 12, the mayors of all six DPP-administered municipalities, encompassing 7.2 million of Taiwan’s 23.2 million people, declared their intention to set zero indication standards for ractopamine in their districts.

On Mar. 15, TAABA reorganised itself as the National Alliance for Food Safety with more than 100 civic groups as members, at a rally outside the Cabinet complex.

Ho Tsung-hsun, executive director of Taiwan’s Life Conservationist Association, told IPS that the new alliance will push for a total ban on ractopamine and will also campaign for full transparency and the institutionalisation of citizen participation in government food safety policy making.

Ho observed that the deregulation, which is opposed by the DPP and two other minor parties, could be blocked if only 11 of the 33 KMT lawmakers who previously opposed the move maintained their stands.

Citing the discovery of the use of illegal growth enhancing drugs in domestic pork and a recent major outbreak in H5N2 avian influenza in chickens, Ho stated that “this campaign will be a long-term struggle since the problem is not only U.S. beef imports but the prospect of the collapse of our entire food safety system and the subversion of our democratic system.”

Excerpt:

By Ravi Kanth Devarakonda and - -
GENEVA, Mar 17 2012 (IPS)

India, Brazil, and South Africa, the international grouping for promoting international cooperation among the three countries known as IBSA, along with China and several other developing countries, have denounced the ongoing attempts to craft an exclusive, plurilateral agreement to liberalise trade in services without concluding the multilateral trade negotiations of the World Trade Organization.

IBSA has denounced the ongoing attempts to craft an exclusive, plurilateral agreement to liberalise trade in services. Credit: Servaas van den Bosch/IPS

In sharp contrast, the proposed plurilateral agreement for services, which aims to seek WTO commitments for the 16 countries part of the initiative, will turn the clock back for providing the much-promised developmental gains from the poorest and developing countries.

Ahead of the current turmoil in global trade negotiations, the IBSA trade ministers warned that that “plurilateral initiatives go against the fundamental principles of transparency, inclusiveness, and multilateralism.”

The 16 countries, the United States, countries from the European Union, Japan, Canada, Norway, Switzerland, Australia, New Zealand, Singapore, South Korea, Taipei, Pakistan, Mexico, Colombia, and Chile, call themselves the real good friends (RGF) of liberalisation of trade in services.

The RGF coalition will hold their third brainstorming session on Mar. 21 to prepare the ground for a plurilateral services agreement outside the WTO. Though the contours of the form and substance of the proposed agreement are not clear yet, the coalition appears determined to achieve an outcome based on the highest common denominator, say trade envoys from the coalition.

The IBSA countries have not adopted any formal position on the ongoing plurilateral initiative of the RGF coalition. But trade envoys from the respective countries spoke against the dangers it would pose to the multilateral negotiations in general, and the Doha trade negotiations in particular.

“We don’t think that plurilateral initiatives will comply with the requirement of transparency and inclusiveness, which is the basis for any multilateral process,” Brazil’s trade envoy to the WTO, Ambassador Roberto Azevedo, told IPS. “Brazil doesn’t believe it is a building block for the resumption of multilateral negotiations and on the contrary it would make that even more difficult.”

Brazil, said Azevedo, “is perfectly willing to negotiate multilateral market access in services as long as others are willing to negotiate market access in agriculture which is at the heart of the WTO’s Doha trade negotiations.”

The plurilateral route for an agreement on services will undermine the “balance” in the Doha trade negotiations, said Ambassador Jayant Dasgupta, India’s trade envoy. South Africa’s trade envoy Ambassador Faizel Ismail expressed concern that a plurilateral agreement will undermine the much- promised “developmental” outcome in the Doha trade negotiations.

Even the EU, which is taking an active part in the current RGF plurilateral initiative remains uncomfortable. “Our line is that we should not take initiatives that undermine the WTO because the WTO is very important for trade,” the EU’s trade commissioner Karel de Gucht said on Mar. 12.

Under the WTO’s General Agreement on Trade in Services (GATS), which governs global trade in services, any group of countries can strive for economic integration by seeking higher and deeper services commitments among themselves.

Until now, there was no attempt by any group of countries to craft an exclusive plurilateral services free trade agreement among a select group of countries within the WTO since its establishment in 1995.

In the past there were open-ended plurilateral agreements such as the WTO’s Information Technology Agreement involving liberalisation of trade in various electronic goods, and the telecom services agreement.

The ongoing exploratory talks among the 16 countries are taking place at a time when the WTO members have not been able to conclude the much-promised Doha negotiations, which were started in 2001.

A continued stalemate in negotiations between a large majority of countries seeking a palatable outcome and one major industrialised country making “maximalist” demands has put paid to an early conclusion, said trade diplomats.

As opposed to multilateral negotiations in which all members have an equal say, at least on the paper, the plurilateral process involves closed-door negotiations among select-members. The U.S. and other major industrialised countries, however, reckon that it is difficult to negotiate with 153 countries as it would involve a grand bargain of compromises.

“We live in a consensus based-organisation and what that means is that 153 members have to approve on everything and what that means in practice is the least common denominator,” the U.S. trade envoy to the WTO, Ambassador Michael Punke, told a seminar organised by the European Centre for Political Economy in Brussels.

He said “we should look at the services plurilateral as a different, fundamentally different way, of approaching the agreement.” Punke argued that the RGF group would provide the ideal ground for accomplishing an outcome based on “highest common denominator” since most of them are engaged in significant liberalisation of trade in services.

However, developing countries remain opposed to the assault on the multilateral framework. “The greater the number of participants, it would be difficult to reach a common agreement but it would provide greater benefits,” said Azevedo. “In short, a modest outcome with a larger number of participants should lead to more attractive and meaningful outcome.”

Excerpt:

Venezuela and the United States claim they want to reduce their co-dependence on oil, as supplier and importer, respectively. But their mutually beneficial relationship continues with hardly a hiccup as the years go by, in spite of heated verbal confrontations.

“One reason is that it would not be easy for the United States, as a large oil consumer, to find a less awkward supplier,” Mervin Rodríguez, a professor of oil economics at the Central University of Venezuela, told IPS.

A decade ago, Venezuela exported to the United States nearly 1.5 million barrels of crude a day, while last year it sent 979,000 barrels per day (bpd), on average. Meanwhile China, which bought not a single barrel of oil from Caracas at the end of the 20th century, now imports close to 400,000 bpd.

“Then there is the issue of refineries. The U.S. has refineries designed for Venezuelan crude. Changing the fuel refining system is not terribly difficult, but it is a factor that has a bearing on maintaining prices and dependency,” said Rodríguez.

In his 2008 electoral campaign, as well as just before taking office in January 2009, and again in 2011, U.S. President Barack Obama said he intended to reduce his country’s dependence on foreign oil, as one of the pillars of its energy security.

Obama said “When I was elected to this office, America imported 11 million barrels of oil a day. By a little more than a decade from now, we will have cut that by one-third,” by increasing national production, switching to clean energy, and developing fuel-efficient and hybrid cars, which run on a mixture of gasoline and electricity.

The oil savings he announced are equivalent to what the U.S. imports from the Middle East and Venezuela combined, that is, between 3.2 and 3.5 million bpd.

But this strategy appears to be falling by the wayside because of the abundance of new discoveries of crude oil and natural gas, both within and outside the United States, Carlos Romero, a postgraduate professor of political science at Simón Bolívar University, told IPS.

“This is one of the high points in the history of the oil industry,” he said.

Venezuelan President Hugo Chávez has said “we have been cutting our exports to the United States,” a country to which “previously we sold subsidised oil” – an allusion to sales with discounts for refineries where the state oil company Petróleos de Venezuela (PDVSA) was a partner.

“We are diversifying our markets. We are sending oil to China (as payment for loans) and to countries like Argentina, Paraguay and Uruguay, where we had never exported oil before,” Chávez said.

Venezuela produces between 2.5 and three million bpd of crude and exports about two million bpd. Between 200,000 and 300,000 bpd go to its cooperation programmes with Cuba and other Caribbean countries.

The United States, on the other hand, consumes 19 million bpd, according to the U.S. Energy Information Administration (EIA), while it produces only 5.8 million bpd, according to the average for January this year. Twenty years ago, oil wells on U.S. soil were producing 7.5 million bpd.

“Washington has looked for alternative suppliers, and Caracas has tried to reduce the dependence of its cash flow on a single buyer, but so far they have not succeeded in making those wishes a reality,” said Romero.

The decline in the amount of oil supplied by Venezuela “is a reflection of the fall in its real production of crude, and the almost complete loss of its capacity to export gasoline, rather than to a political or diplomatic decision,” he said.

Political relations between Washington and Caracas have been escalating in tension over the past decade, and have been close to breaking point several times, with reciprocal expulsions of ambassadors and other officials. However, bilateral trade has continued regardless of the constant mudslinging.

For instance, the United States adopted some sanctions against PDVSA in May 2011 due to its trade ties with Iran, and the Venezuelan Foreign Ministry announced it would “study the impact” of the measure on oil supplies to the U.S., but the topic has not been addressed since.

“Because of its relations with Iran, Venezuela may find itself dealing with the consequences of a fight picked by others. It’s a question of weighing and comparing one’s losses. Selling oil to the United States is Venezuela’s main source of revenue, whereas in an emergency Washington can dispense with Venezuelan crude and justify it as the dictates of security and foreign policy,” said Rodríguez.

Both nations appeared to be buying time, “and while Venezuela searches for other buyers, the U.S. is diversifying its suppliers,” said Rodríguez. “The crude the U.S. is obtaining from Colombia, Brazil and Ecuador combined is already as much as, or more than, it gets from Venezuela, while production and supply from Iraq is increasing.”

Renewable sources of energy to generate electricity, and development of forms of transport, especially cars, that are fuel-efficient, hybrid and non-polluting, are key goals for industry and consumers in the United States.

“However, the current prospects for oil have done away with the urgency, and in Venezuela the incentive of huge revenues from crude, currently fetching 90 or 100 dollars a barrel, has confirmed its status as an economy living off its oil income,” said Romero.

As for the new energy sources and transport systems, “these are at the stage of experimental scientific and technological development, but they are still a long way from being capable of replacing fossil fuels,” he added.

Ahmadou Lamine has been forced to close his business selling fuel imported from Nigeria, known locally as “zoa-zoa”, because of the Islamic extremist group Boko Haram.

A farmer in Cameroon. The closure of Nigeria's border with northern Cameroon has had a negative economic impact on this region. Credit: Fanny Pigeaud/IRIN

Lamine, from Maroua, the capital of Cameroon’s Far North Region, ran out of stock after Nigeria temporarily closed its border with Cameroon’s northern region. The move came after the Christmas Day bombings of Nigeria’s churches by Boko Haram, which killed dozens of people.

“Motor bike riders who used to supply us with zoa-zoa from neighbouring Nigeria couldn’t do so anymore. I was forced to shut my business premises,” Lamine told IPS. “I don’t know how I am going to cope with paying the rent on my house, let alone feed my family and pay my children’s school fees,” he added.

The closure of the border has had a negative economic impact on this region. Fuel prices here have doubled, jumping from fifty cents a litre to about one dollar. And a similar trend is recorded with other imports from Nigeria like sugar, milk, flour, beverages, sweets and oranges.

“It’s difficult,” Alima Aissatou, a housewife in Maroua told IPS. She pointed to her near-empty basket that would have previously been filled with food purchased from Maroua’s main market. “How do you feed a family with this?” she asked.

The closure of the border is not only affecting businesses and households, it has also led to a reduction in customs revenue. The interim Customs Bureau Chief for Maroua, Philemon Tamfu, told IPS that the impact of the border closure was most felt “in Limani, Fotokol, Kolofata and Kouseri, all border towns in the Far North Region where all (customs) entries and exits are recorded.”

Speaking to IPS by phone, the Customs Bureau Chief for Limani, Alain Symphorien Nzie, said that the area used to receive 239,000 dollars every 10 days in customs revenue, averaging 718,000 dollars a month. But a few weeks after the border was closed, it could barely manage to generate 50,000 dollars. Limani, a border town, is home to citizens of Cameroon and Nigeria.

“I had to improvise all means possible to come up with the 50,000 dollars. This amount is likely to keep on dropping if the blockage continues,” he said of the minimum quota that customs departments need to meet.

A similar trend has been noticed in the border town of Fotokol. Instead of the 40,000 dollars that is usually collects over the first 10 days of January, only 4,000 dollars was received.

International news agency CNN quoted trade and customs officials in Maroua as saying that nearly 80 percent of its regional economy has shrunk since the closure of the borders.

Nigeria’s borders with Cameroon remain sealed as Africa’s most populous nation fears that the extremist group Boko Haram might be using the northern parts of Cameroon as a base.

This comes after the unearthing of a cache of arms, suspected to have been smuggled in from Cameroon, in Borno State, Nigeria. The arms included AK47 rifles, pistols, rocket launchers, bombs, and detonating bomb cables.

Cameroon’s government is concerned that the extremist group could be infiltrating and establishing itself in the country. Wikileaks revealed that President Paul Biya raised the concerns in a conversation with United States Ambassador to Cameroon, Janet Garvey.

“Biya was concerned about the threat of Islamic extremism …He was beginning to worry about Islamic extremists infiltrating Cameroon from Nigeria through Cameroon’s mosques,” Wikileaks stated.

The former minister for Territorial Administration and Decentralization, Marafa Hamidou Yaya, also expressed similar fears to the ambassador. He reportedly said: “there were a lot of desperate people among the Muslim communities in the North, and Douala in particular, and some of them had unexplained money.” Douala is the country’s economic capital.

Evidence on the ground suggests that Boko Haram has already infiltrated Cameroon. In Lagdo, a locality in the Far North Region, villagers have reported that people with long beads and red or black headscarves have been combing the area and spreading the group’s extremist doctrine.

“They came here and told me that all our problems are caused by western education and western ideas,” a resident of Lagdo told IPS, as he cast a furtive glance around. “They also said they will give me a lot of money if I joined their group. They looked dangerous, so I lied that I would consider their proposal. I am afraid that they may come again.”

The threat of the group’s infiltration of Cameroon has put security, political and traditional authorities on the alert.

On. Jan 19, the governor of the North Region, Gambo Haman, said: “the Boko Haram being chased from Nigeria’s northeast, as well as thousands of runaway Chadian soldiers in irregular situations here, must be closely monitored to avoid unwanted trouble throughout the national territory.”

He said surveillance has been reinforced and many Quran learning centres were shut down, and their teachers are being closely monitored by security intelligence.

The Nigerian newspaper, Sunday Tribune, reported on Jan. 29 that Cameroon security forces had recently blocked an attempt by 25 itinerant Arabic teachers to cross into Cameroon. “We stone-walled them,” the source reportedly said.

Meanwhile, government authorities are liaising with religious groups to guard against the group. The senior Divisional Officer for Wouri in Douala, Bernard Okalia Bilai, convened a meeting of Imams and Muslim community leaders to jointly come up with strategies to stop the group’s infiltration of Cameroon.

“Their doctrine is anti-social,” Bilai said. “It is a doctrine that persuades young graduates to rip up their degrees…It is a doctrine that condemns what today constitutes the values of our society. Top authorities of the country don’t accept that such hateful dogma is established in our communities…we must be vigilant.”

But these efforts may be too little, too late. In an exclusive interview with the UK-newspaper The Guardian on Jan. 27, a senior member of Boko Haram disclosed that recruits from Cameroon, Chad and Niger have already joined the group.

The black market for foreign exchange and fuel is booming in the midst of an acute scarcity in Malawi. The shortage is so severe that even the Consumer Association of Malawi, an influential consumer rights body, has come out in support of the black market.

The queue outside a petrol station. Because of the fuel shortage people have to wait in long queues and endure sleepless nights at petrol stations. Credit: Claire Ngozo/IPS

Since September 2010, there has been an erratic availability of both fuel and forex here. But the shortages grew worse in 2011 when people started spending nights at service stations, queuing to buy fuel. Those seeking to purchase foreign exchange have had to wait for up to two months after applying to banks for the money.

The shortages lead to violent nationwide protests last July. At the time, President Bingu wa Mutharika blamed the shortage partly on International Monetary Fund (IMF) policies, while IMF and local economic experts repeatedly called on the government to devalue the Malawi kwacha to generate forex. The government has refused to do so.

John Kapito, the consumer association’s executive director, told IPS that that in light of the situation consumers still have a right to fuel and forex and that an alternative has to be allowed if the normal market cannot keep up with people’s needs.

“Actually what has been created is a parallel market. It’s not a black market because it is not bad; it is doing consumers a lot of good and we should accept it as such,” said Kapito.

He, however, bemoaned the exorbitant prices being charged on the parallel market.

Illegal foreign exchange dealer Goodson Kamowa is becoming a wealthy man selling dollars at double the exchange rate on the flourishing black market.

“I am really making a killing,” said Kamowa. He charges up to 325 Malawian kwacha for a dollar, when the official rate is 167 kwacha to the dollar. It is indeed a rip-off, but Malawians have no option but to pay the exorbitant rates if they want the foreign currency.

Malawi continues to reel under severe economic problems after the country’s major donors cut aid to the country last year. Up to 40 percent of Malawi’s national budget has been dependent on donors and donors funded 80 percent of the country’s development budget.

While the situation has progressed from bad to worse, there are many who have seen a business opportunity in the crisis. Kamowa plies his trade in Old Town, one of the country’s busiest trading areas in the capital, Lilongwe. He told IPS that his business is thriving by the day.

Since he started selling foreign exchange on the black market he has bought a new car and a plot of land to build a house on. “It’s really becoming lucrative,” said Kamowa.

Consumers, Kamowa said, do not have a choice and have to buy from the black market because banks cannot easily provide them with foreign currency.

“Demand is very high and people are ending up paying a lot of money to access foreign exchange,” Kamowa said.

While the banks are having a difficult time obtaining the currency, Kamuzu is a little more innovative in his methods of buying dollars.

He explained that he hangs about at Malawi’s main airport, Kamuzu International, and at international bus depots where he buys dollars from people coming into the country. He offers a higher rate than what the banks and foreign exchange bureaus, so people sell him their dollars.

“I also buy forex from people who work in international organisations. They always have foreign currency,” Kamowa said. As the country’s administrative capital, Lilongwe has a high population of expatriates.

The black market for diesel and petrol is also booming. Many small-scale vendors have abandoned their usual trade in clothing, electronics and food items and have begun selling fuel.

The fuel traders brave long queues and sleepless nights long after many other consumers have given up. Then they sell it for 4.5 dollars a litre, almost twice the regular price of 2.3 dollars a litre.

“Diesel and petrol are selling like hot cakes on the black market because people still want to be able to go about their business without being disrupted by the fuel shortages at the pumps,” said Chimwemwe Kasupe, a vendor in the populous Biwi Township, in Lilongwe. He has stopped selling electronics and now trades in fuel.

“I have spent so many nights on fuel queues. I fill up my two cars with diesel and petrol and siphon it into jerry cans, which I sell off to customers,” Kasupe told IPS.

But the government needs to resolve the problems soon, Kapito said. “Our government is failing us. It must resolve these economic problems so that people do not spend so much on such basic needs such as fuel,” said Kapito.

While the government is working on a solution, they are also attempting to shut down the black market.

Malawi’s Minister of Information Patricia Kaliati told IPS that the government will not tolerate the mushrooming of parallel markets and will ensure that they are closed down.

“We are working very hard to see that fuel and forex are available. We are really getting frustrated by the traders on the black market as they are stocking up on fuel and forex while the majority is failing to access the same,” said Kaliati.

Last week, 21 people were arrested for selling fuel illegally and 10,000 litres of fuel was confiscated from vendors, according to national police spokesperson Dave Chingwalu.

On Jan. 15, the police arrested two Asian nationals who operate businesses in Lilongwe at the airport as they attempted to externalise 185,000 dollars to Dubai.

“The two businessmen were charged with attempting to transfer foreign currency illegally,” said Chingwalu.

Meanwhile, Mutharika continues to blame the business community for the shortage, especially foreign investors, who he accused of externalising foreign currency.

The most recent accusation was at a news conference on Jan. 31. Mutharika said he would eventually catch up with the culprits. “I know where the forex is going. You will not beat the system forever, no matter how smart you are,” he threatened.

Meanwhile, the country continues to face the effects of the economic problems hitting the country.

Prices for basic necessities such as the staple maize flour, bread and sugar have doubled due to the fuel and forex shortages.

A report by the Employers Consultative Association of Malawi (ECAM), a body of employers, indicated that up to 12,000 people would lose their jobs by June if the current economic crisis were not checked.

ECAM said that production in many organisations and companies has declined by at least 50 percent due to the scarcity of fuel and foreign currency.

Ayman Siam, 41, is not growing carnations as usual this year. It’s limonium and statice flowers instead because they are hardier. Given the risks of an Israeli blockade, it’s a political decision.

Ayman Siam is looking beyond barriers to the global market. Credit: Mohammed Omer/IPS.

“The business loss I suffered from growing carnations comes close to a million dollars, including the cost of the plants and fertilisers,” Siam tells IPS. Service suppliers have taken legal action against him for an inability to settle payments due since 2006.

All this is besides the loss of income for his workers.

Siam, like others growing flowers in Palestinian areas, is hoping for better relations ahead with the government in the Netherlands and the European Flower Exchange Market there that he supplies to, for further export into European countries. The Netherlands has begun to provide some financial support to Gaza’s farmers.

Siam produces far less than his capacity. “I had to reduce from eight dunums (a dunum is 1,000 square metres) of flowers, to only three dunums for the mid-November to mid-May 2012 season. The supply was good. The demand was good. But Israel’s blockade stood in between.”

Now Siam hopes his new flowers will “tolerate longer delays at the Israeli crossing points.” He is cultivating about 15,000 flowers, so a lot is at stake.

Siam is also happy that this year his flowers are not being labeled an Israeli product. In the past, the Israeli company Agrexco used to buy the flowers and sell them to European markets as its own.

Now, with more international groups boycotting Israeli products, the boxes and plastic bags he uses for packing are marked ‘Palestine Crops’. “I am thrilled to see my product is being sold as our own. So far, it is a good start as we have received more demands for the red and white carnations.”

There seems hope of support. “Gaza growers have a lot of potential and I hope they can expand the business in the future,” Ada Cohen, area manager of the company Floral Holland tells IPS.

It’s looking brighter for some workers too. Mohammed Dahlez, 32, has got his old job back. He is one of the few lucky ones; Siam has had to lay off most of his workers.

“Our lives are so dependent on the Israeli crossings, we hope we get our own independent sea port to export our goods straight from Rafah to the Netherlands,” he says, carrying a collection of white carnations to be packed.

Mahmoud Khalil, head of the Flower and Berry Growers’ Association in Gaza, hopes that Gaza growers are gradually able to transport flowers outside of Gaza. “Before 2005, Gaza Strip used to export 50-60 million flowers to the Netherlands…this year; we were down only to 15-16 million.”

Many have not recovered from the loss. At the peak of the blockade in 2008, millions of Majed Hadaeid’s blossoms were served as food for goats, donkeys, camels and sheep. The “loss was too big to compensate,” he says. He laid off 200 workers. “I am broke, all I have is this house for my children.”

Hadaeid does not benefit from the Netherlands grant, since that two million dollar fund aims to support smaller farmers.

Most business that survives is down. Khalil says the flower business in the Gaza Strip used to feed 4,000 workers before 2005. The number has fallen to about 500.

“The challenge facing the farmers is the small quantity of flowers produced when the cost of transportation is fixed,” says Khalil. For the past two months his organisation has been encouraging farmers to plant more flowers. “One hopes that we succeed in selling all our products abroad, this will give an optimistic start for farmers in the coming seasons.”

Siam is keen to expand his business, and “get back to the old days when we were present in the market not only as flower farmers, but as Gaza’s ambassadors of love to the global market of flowers.”

But, he adds, “this all depends on how much pressure The Netherlands can exert on the Israeli government to allow us to continue exporting our flowers.”

The Cameroon government is increasingly turning to China as a privileged partner in its development efforts. But there are many discordant voices who say the long-term effects of China’s economic relations with Cameroon could be disastrous for domestic industry.

“We are inviting Chinese firms to come in numbers and invest in Cameroon in all sectors, especially hydrocarbons, mineral exploitation, and wood extraction.” That invitation was extended by President Paul Biya in January 2007 when Chinese President Hu Jintao paid the first-ever visit by a Chinese president to Cameroon.

The Chinese president said on that occasion that Chinese relations with Cameroon and Africa were built on “sincere friendship, equality, reciprocal benefit and “win-win cooperation.”

Trade between the two countries leaped to more than 170 million U.S. dollars in 2000, up from only 85 million dollars in 1999. And according to the Chinese leader, by 2006 bilateral trade had climbed to 340 million dollars.

Figures from the National Institute of Statistics indicate that prior to 1999, Cameroon’s exports to China were almost negligible, but jumped by more than 170 percent to 123 million dollars in 2000. This represented seven percent of Cameroon’s total exports, up from barely 2.5 percent in 1999.

By the same token, Cameroon’s total imports from China increased by 110 percent between 1999 and 2005. In 2005, imported goods from China – basically cereals, manufactured goods, machinery, transport and equipment – cost Cameroon 144 million dollars, up from just 39 million dollars in 1999.

The government says China is a good partner for cooperation, not only because of the much vaunted “win-win” approach, but also because China, unlike the West, does not impose conditionalities.

Secondly, the Chinese ask very little for contracts, compared to Western companies. For instance, the China Road and Bridge Corporation won a bid to construct a 13 km road in Cameroon’s economic capital Douala for 18 million dollars, beating out rival bidders who were asking for 30 million dollars. And the project was successfully completed one month ahead of schedule.

Mixed reactions

Meanwhile, many ordinary Cameroonians see cheap Chinese goods as a valid alternative. “With just 2,000 CFA (about four dollars), I can afford a pair of shoes…the Chinese are helping people like us,” says Christian Njah, a security guard in Yaoundé who draws a monthly salary of about 50,000 CFA (100 dollars).

Official figures indicate that 40 percent of Cameroonians live below the poverty line.

But not everyone in this West African nation is happy about the Chinese presence. In Cameroon’s North West region, small-scale traders have expressed anger.

“We are not against the Chinese investing in Cameroon, but when they come to compete with us in roasting and selling simple items like corn, plantains and barbecue on the road-side, then there is a big, big problem,” complains Elizabeth Neh, a roast-corn vendor in Bamenda.

It is a feeling that sweeps across the community of smaller businesspeople in Cameroon, some of whom have wound up selling the same cheap, Chinese products.

Fondo Sikod, a professor of economics at the University of Yaoundé II at Soa, says “Chinese goods provide poorer Cameroonians with cheaper access to more goods and services. This is good for the well-being of the people.

“But this is bad in the long term because it destroys local manufacturing capabilities and competitiveness…Besides, there is little or no technological transfer because the Chinese frequently bring along their own labour, with Cameroonians confined to peripheral positions as drivers and sweepers.

“This is not good at all, and that is why the Chinese are still doing maintenance work at the Yaoundé Conference Centre, constructed way back by the Chinese in 1982,” he said.

The competitive threat is best illustrated in a report submitted to the African Economic Research Consortium in 2008 by Sunday Aninpah Khan and Francis Menjo Baye, both of them lecturers at the University of Yaoundé II.

“A comparison of the prices of made-in-Cameroon and made-in-China batteries can better illustrate this competitive threat. In Cameroon, a pack of four size AA batteries made in Cameroon (Hellesens) costs 67 cents of a dollar, while those imported from China (Royal) sell at just 22 cents – almost 67 percent less, despite incurring additional costs like customs duty, insurance, transport, etc.”

The low cost of Chinese products is having a significant impact on Cameroon’s exports to the Central African sub-region, with sales of industrial products falling by 42 percent between 2003 and 2005, and earnings dropping from four million dollars to just 1.3 million dollars.

“Cameroon firms are not only losing market at home, but also in their backyard,” the report states.

In addition, Cameroon suffers a significant trade imbalance in its relations with China. According to Professor Fondo Sikod at the University of Yaounde II, China was responsible for 23.5 percent of Cameroon’s total trade deficit of 48 million dollars in 2004. And the situation worsened in 2005, with China accounting for 75 million dollars of Cameroon’s 91 million dollar deficit.

President Biya recognised this when he told his Chinese counterpart in February 2007 that “we wish to benefit from export quotas for some of our products like coffee, cotton, cocoa, banana, just to name a few; so as to re-equilibrate as much as possible the trade balance between our two countries.”

So China’s interest in Africa may not be based so much on “sincere friendship, equality, and reciprocal benefit.” China’s economy is growing at a perky 10 percent.

And Sikod says China’s push in Cameroon and Africa is fuelled “by a desperate need to find oil and raw material to fuel its fast-growing industry” – a situation that has created serious trade imbalances, and has had the effect of strangling domestic industries.

Cameroonian political economist Emmanuel Tatah Mentan, now a lecturer at the College of Saint Benedict in the U.S. state of Minnesota, has described Sino-African relations as “a wedding with uncertain prospects.”

An increasing number of African countries are beginning to step away from aid dependency, as the domestic private sector becomes the engine of growth across much of Africa.

Currently, at least a third of African countries receive aid that is equivalent to less than 10 percent of their tax revenue. They include Algeria, Angola, Equatorial Guinea, Gabon and Libya. This is a significant change from years of high dependency on aid.

These are countries that have made the most progress towards replacing aid with domestically mobilised resources. On average, Africa has managed to raise an estimated 441 dollars in taxes per person per year while receiving 41 dollars per person per year in aid, according to a comprehensive look at African resource mobilisation by the African Economic Outlook 2011.

“What this means is that Africa as a whole receives aid that is less than 10 percent of collected taxes,” says Ken Mwai, a financial analyst and real estate investor in Kenya. “Although aid exceeds 10 percent of tax revenue in 34 countries, these countries have shown a progressively higher expansion of their tax base.

“They include countries such as Mozambique that have almost doubled their tax revenue, as well as Liberia which in the last decade has increased tax revenue from six percent to about 20 percent.”

Botswana is another strong economy whose development is largely driven by domestically raised revenues. Although countries such as Rwanda raise more resources from donors, that east-central African nation also has a strong focus on foreign direct investment.

Mwai further explains that “development in Kenya is donor-driven, but aid has been useful in building sustainable infrastructure. As a result, Kenya has been able to build state of the art roads. For instance, the Thika Road super highway has made the real estate business in that region exponentially profitable.

“This has attracted private investors and will have a positive direct and indirect impact on taxes, as people establish and expand already existing businesses.”

The road was funded by the African Development Bank (ADB), a regional multilateral bank focused on promoting economic and social progress in Africa.

Uganda depends substantially on donor funding for development. But like Kenya, aid has gone into building strong infrastructure, which has created an enabling environment for private investment.

“In the last two years, Uganda’s economy has been driven by the growth in telecommunications, the construction industry, as well as the expansion of financial institutions – sectors dominated by private investors accounting for about 54 percent of the GDP, as compared to the agricultural sector that accounts for about 24 percent of the GDP,” says Ken Ogwang, a property developer affiliated with the Kenya Private Sector Alliance (KEPSA), which has a membership of about 60 businesses.

Of Africa’s 54 countries, aid exceeds taxes in only 12 extremely poor countries such as Niger. But under that West African nation’s Accelerated Development and Poverty Reduction Strategy (ADPRS), which supports the growth of the private sector, additional revenue from this growth is projected to double the current real GDP growth rate to 11.5 percent.

Politically stable and democratic countries in Africa such as Tanzania and Madagascar are now raising alternative resources primarily through increased taxation, trade and domestic borrowing.

Aid has been the main source of income in countries such as Tanzania, which received 2.9 billion dollars in aid, making it the leading recipient of ODA in the region. However, economic analysts predict that the ongoing private-public partnerships in Tanzania will make the country more self-reliant.

These partnerships include the Southern Agricultural Growth Corridor of Tanzania (SAGCOT), a private- public agribusiness partnership meant to support small farmers.

In Kenya, leading private companies such as Safaricom, East African Breweries Limited and private banks have widened the country’s tax base by expanding their branches and scope of distribution, consequently increasing the number of people who are employed and, thus, taxed.

Safaricom is a leading mobile network operator in Kenya. In 2011, the company brought in an estimated 58 million dollars in taxes.

According to the United Nations Development Programme (UNDP), for African countries to achieve the Millennium Development Goals and continue to sustain that achievement, they will need to invest at least 25 percent of GDP, which calls for higher domestic savings to meet development needs. The MDGs are a series of development and anti-poverty targets adopted by U.N. members in 2000, with a 2015 deadline.

Property developer Ogwang says “The private sector has proved useful in boosting GDP. Years of depending on agriculture has been Africa’s undoing. Consequently, more African countries are now diversifying their economies by creating an enabling environment for the private sector to thrive. Already, telecommunications is one of the main sectors driving Uganda’s economy.” The involvement of the private sector in establishing profit-driven educational institutions has become another source of revenue. According to the United Nations Educational, Scientific and Cultural Organisation (UNESCO), South Africa, Senegal and Nigeria have the highest number of such institutions. Michael Sudarkasa, CEO of the African Business Group, a South Africa-based continentally active economic development and business consulting advisory services group, says that “While much more remains to be done by government to stimulate domestically-funded development in Africa, the African private sector is increasingly giving greater focus to corporate social investment and core business alignment, to help African governments to implement their national development agenda initiatives.”

Sudarkasa observes “The end result of both domestic resource mobilisation and private-public partnership acceleration has been greater African autonomy in regard to the continental development agenda – and this has been universally regarded as a very positive trend.”

Sierra Leone’s Gola Rainforest remains a centre of contention as the local community here plan to take their chief to court next week over a controversial 50-year land lease to a mining company.

The Gola Forest is bisected by several of Sierra Leone's major rivers. Credit: Courtesy of David Zeller/Gola Programme

Mining companies have long coveted the land here for its iron ore potential as deposits in Bagla Hills are estimated to be worth 150 billion dollars.

The International Monetary Fund estimates that because of this natural resource, Sierra Leone’s small economy will have one of the biggest growth rates in the world at a staggering 51.4 percent in 2012, on the back of legal iron ore activity and exports.

But the community of Tonika remains furious about the deal.

“The chief is guardian of the land – he can’t sell it,” Alfred Williams, a member of the Tonkia Descendants Association, told IPS. Williams says the local community knew nothing of the sale until it appeared in the local media following Sable Mining’s statement to the London Stock Exchange.

Sable Mining issued a statement in May announcing its purchase of an 80 percent interest in Red Rock Mining, which had apparently bought the lease for 206 square kilometres of Bagla Hills from the local Tonkia Paramount Chief.

But the lease has become even more controversial as the country’s President Ernest Bai Koroma declared the 75,000-hectare rainforest a protected area and a national park in December. The forest type is one of the world’s 25 global bio-diversity hotspots.

The government has also launched an investigation into what they describe as an illegal land sale.

Kate Garnett, from the government’s Forestry Conservation and Wildlife Management Unit, says Bagla Hills “is a case of Sable Mining having been deceived by a local man.” The government issued a statement saying that any sale of Bagla Hills, as well as mining in the rainforest, is illegal.

The government’s Director of Mines Jonathan Sharkar said that the Ministry of Mineral Resources has never dealt with Sable Mining Africa.

“Sable Mining have never applied for a mining concession in this country – we have no dealings with them,” Sharkar says. He also points out that any land rights are also only surface rights – any minerals are owned by the government.

A Sable Mining spokesperson, who did not want to be named, confirmed that they do not hold a current mining licence for Bagla Hills.

Sable Mining would not comment on the land rights and referred IPS to their statements from earlier this year. These claim land registration documents proving ownership of Bagla Hills by Sable Mining have been filed at the land registry. The government, however, denies this.

But the case still dominates talk shows in this West African country. It led to a local demonstration, and in September the country’s Resident Minister William Juana Smith requested journalists refrain from reporting stories that had “the potential of creating conflict.” He had threatened that serious action would be taken against anyone doing so.

But the issue remains volatile as it concerns the livelihoods of the community. The Tonika community once made a good living mining gold in the forest, selling timber, farming and hunting. This will now stop because of the lease, says Williams.

“While the chief gets rich, people in Tonkia are left poor and aggrieved, without schools, hospitals and jobs. Young people need work – some of us say through mining, some say through the Gola reserve,” says Williams.

Augustine Sannoh, from the civil society movement, East Kenema, says that the chief has mobilised a small band of pro-mining individuals.

“He continues to galvanise support – even though there’s a court case to answer. The problem is that local people struggle to see the financial benefits of Gola Rainforest National Park. You can now only take firewood and fish for personal consumption. You can make honey or rattan products to sell, but these have a lower economic value than hunting and mining. It’s a big local dispute still.”

Williams also says the Gola Forest Programme (GFP) that manages the national park is yet to help people find alternative livelihoods as promised.

GFP’s Guy Marris denies this.

“We’ve supported with roads, bridges, culverts, and medical centres,” he says. Marris says the GFP recognises that providing alternative livelihoods to the community is a key strategy to forest preservation.

Plans are underway for various projects including carbon trading “which could earn tens of millions dollars,” as well as small enterprise development, and eco-tourism.

“It’s a process, it’ll take time, but in the meantime, we are mandated to represent government – no mining is permitted by individuals or by companies,” says Marris.

However, Garnett says communities still believe that mining will transform their lives.

“There are many examples where only environmental destruction has been left behind,” Garnett says.

She says the Forestry division was planning to take communities on visits to mined sites, “to show how mining can leave little positive community impact.”

“The law says no mining and we agree with conservation for now, but I have to say people want mining here because it is a quick way of getting money. No one wants to be poor, everyone wants to be rich,” Musa Taimeh, chairperson of the Tonkia Descendants Association, says.

Natalie Ashworth, from watchdog group Global Witness, says that people have an unrealistic expectation of what mining can offer them.

“People think it is going to change everything and provide thousands of jobs, which of course it is not. I doubt Sable Mining would have acquired Red Rock if they did not think they would be able to apply for a mining license at some point. As long as Sierra Leone is poor and has so few options, Gola Rainforest will always be threatened,” she says.  

Excerpt:

By Marcela Valente
BUENOS AIRES, Dec 19 2011 (IPS)

As Mercosur foreign ministers gather this Monday ahead of Tuesday’s summit of heads of state, political harmony is growing between the governments of member countries, although free trade not only remains a pending challenge but is increasingly facing pitfalls.

Presidents José Mujica and Fernando Lugo already expressed their concern over protectionist measures at the last summit, in June. Credit: Paraguayan president's office

Argentina and Brazil are on one side of the dispute over protectionism, and are increasingly imposing the biggest restrictions on trade, while the much smaller Paraguay and Uruguay continue to push for better access to the markets of their giant neighbours.

In contrast to this division, there is a climate of political unity over Venezuela’s admission as the fifth full member of South America’s biggest bloc. The admission process began in 2006, and now only the Paraguayan Senate is opposing ratification of the Paraguayan government’s pledge in favour.

Uruguayan President José Mujica, who is hosting the summit being held in Montevideo on Tuesday Dec. 20, has proposed changing the 1991 treaty that created Mercosur, in order to remove the hurdle to Venezuela’s entry.

His fellow presidents, Cristina Fernández of Argentina, Dilma Rousseff of Brazil and Fernando Lugo of Paraguay, would agree to a new legal clause that would obviate the Paraguayan Senate’s veto.

Ecuador is also applying for full membership in the bloc.

However, in spite of their political will to accept new Mercosur partners, Argentina and Brazil appear to look the other way on the issue of removing trade barriers, even if the trade goods in question come from member countries with disadvantages in terms of size and economic development.

Argentine economist Gabriel Molteni, a co-author of “20 años después: Logros y desafíos pendientes del Mercosur” (20 Years On: The Achievements and Pending Challenges of Mercosur), told IPS that “beyond the advances in the convergence among the partners, there are restrictions on intra-bloc trade.”

In addition to protection measures agreed in advance for sensitive goods like sugar or automobiles, Molteni pointed to the increasingly frequent use of “non-automatic permits”, where prior government approval is needed for imports, which are invoked to “manage” trade.

The study by Molteni and colleagues, published in the December issue of the Integration and Trade Journal of the Institute for the Integration of Latin America and the Caribbean, shows that while intra-zone trade in the European Union is above 60 percent of its total trade, in Mercosur intra-bloc trade stood at 15 percent in 2009.

“In relative terms, intra-regional trade grew very slowly compared to the bloc’s foreign trade, which grew a great deal, particularly because of the boom in demand for commodities, the main export category of Mercosur partners,” he said.

In Molteni’s view, “government positions have changed, and now free trade is not the only value, but also the ‘mix’ with the internal market, which is given a different degree of importance than it had in the 1990s,” he said.

The vice president of the Brazilian foreign trade association (AEB), José Augusto de Castro, told IPS that “officious, not official” restrictive measures are being applied in Mercosur – but more by Argentina than by his country, he maintained.

The most frequently used measures are non-automatic permits, which “are legal and not protectionist” if imported merchandise is not delayed for more than 60 days, but become a different matter if it is delayed for 90 or 180 days, because that causes the transaction to be broken off, he said.

Perhaps as a strategy to get transnational or Brazilian companies to set up shop in Argentina, that country frequently uses this instrument to hamper imports of household appliances, footwear, agricultural machinery and other goods.

The Brazilian footwear industry association complained last week that nearly two million pairs of shoes are awaiting non-automatic import permits to enter Argentina.

According to the Brazilian association, in some cases permits have been delayed since April – much longer than the two months’ maximum period.

But Brazil also adopts protectionist measures; for instance, it added 30 percentage points to the tax on imported vehicles that do not have at least 65 percent domestic content.

In the view of AEB’s Castro, the fall in international prices for agricultural products and commodities, which are Mercosur’s strong suits for exports, may bring on a large trade deficit that could lead the partners into “protectionist temptations.”

But today, with Brazil’s huge trade surplus with respect to its partners, there is no justification for trade restrictions, he said.

“Relaxing import regulations for its Mercosur partners would not significantly affect Brazil’s trade balance,” said Castro, who added that the obstructions were “the initiatives of particular companies,” rather than of the Rousseff administration.

He recognised that Mercosur could provide an answer to the global crisis currently battering Europe, with the fall in demand from the industrialised world. “It would be possible to grow within the bloc, and so create a small escape valve,” he said.

However, at the moment what is needed is to “give up the requirement of unanimity” in order to gain “freedom of action,” he said.

As an example, Castro mentioned the case of Uruguay, which wants unilaterally to enter into a free trade treaty with the United States and other countries, and of Brazil, which would like to make an individual alliance with the EU.

Nearly 30 percent of Uruguayan exports go to the bloc, mainly Brazil and Argentina, and this has caused it headaches recently because of delays in approvals of import permits by its larger neighbours.

Pressured by exporters anxious about these problems in Mercosur, Mujica will ask on Tuesday for the freedom for Uruguay to negotiate its own accords outside the bloc, according to the local press.

This is consistent with Uruguayan Vice President Danilo Astori’s opposition to protectionism, when he said a few days ago that “the worst thing a country like Uruguay can do in times of crisis, like this one, is to close in on itself.”

Paraguay will also make complaints at the summit. It will ask Argentina to allow passage of electricity from Paraguayan or shared power plants to Uruguay, which could thus purchase energy more cheaply than from the larger partners.

* With additional reporting from Mario Osava in Rio de Janeiro and Darío Montero in Montevideo.

Excerpt:

By Isolda Agazzi and - -
GENEVA, Dec 15 2011 (IPS)

As the Eighth Ministerial meeting of the World Trade Organisation (WTO) kicked off in Geneva this week, a group of NGOs exposed the devastating potential of a free trade agreement currently being negotiated between the European Union and India. If passed, they say the deal would make a mockery of all WTO rules and regulations.

A recent impact assessment on the right to food of the EU-India FTA, researched and compiled by leading advocacy groups including the Delhi-based Third World Network (TWN), the Indian NGO Anthra and Germany charities Misereor, Glopolis and the Heinrich Böll Foundation, concluded that the proposed deal would violate the right to food of a vast segment of the Indian population, particularly those who rely on the poultry and dairy sectors.

Additionally, the zero-tariffs clause of the free trade agreement (FTA) could lacerate the retail sector by stripping small retailers of any protection against corporate giants.

Having sat on the table since 2007, the agreement could be sealed as early as next year, an outcome that many experts see as “disastrous” for the local economy.

“The EU is asking India to cut its tariffs to zero on at least 92 percent of all imports, including industrial and agricultural goods,” Ranja Sengupta, senior researcher at TWN told IPS. “Considering that trade with EU represents 60 percent of India’s total international trade, this would be a disaster, particularly in hitherto protected sectors, like agriculture.”

“Our (impact statement) focuses on the dairy and poultry sectors because they employ a large number of very small farmers, many of them operating in their backyards in order to subsist,” Sengupta explained.

Given that the dairy sector currently provides 90 millions jobs, slashing tariffs will likely result in a repeat performance of the 1999 milk crisis in India, when EU imports of skimmed milk powder rose from 600 to 25,000 tonnes, effectively destroying the country’s “white revolution” for milk self-sufficiency.

Similarly, the pending FTA will flood the market with imports, depress producer prices, reduce incomes and eventually increase debt.

The poultry sector, which consists of 96 million small, landless agricultural households that manage 85 percent of the poultry stock, is currently guarded by a robust ‘100 percent tariff’ that actually prohibits imports.

But the FTA could kill these protections. According to Sengupta, Indians consume more poultry legs than breasts and vice versa in Europe. If the EU dumped its poultry legs on the local market, India would not be able to retaliate by exporting poultry breasts to European markets because of the latter’s strict health and safety standards.

Currently, the WTO advocates lowering tariffs, not removing them altogether. Additionally, the agenda for the ministerial meeting this week includes the question of industrialised countries eliminating government subsidies.

“In sharp contrast, FTAs like the one being negotiated between India and the EU insist on the complete elimination of tariffs but contain no binding clauses about eliminating subsidies,” Sengupta lamented.

Experts are also concerned about the FTA’s impact on the retail sector, the second largest employer in India after agriculture.

In the WTO, services trade liberalisation is a relatively flexible mechanism because it allows countries themselves to decide which sectors to open up to foreign competition.

“But FTAs make very strong demands to liberalise services in high-employment areas like retail,” effectively backing the government into a corner, Sengupta stressed.

Small vendors have already suffered major losses as a result of burgeoning domestic retail chains: 15 percent have seen a decline of their profits against Indian retail stores and 4.2 percent face annual closure if located near bigger retailers.

Additionally, larger retailers exercise a stranglehold over the market and then discreetly increase the prices they had originally kept low to attract consumers.

Still, Indian domestic retailers, which have already lacerated the market for small retailers, do not even hold a candle to multinational behemoths like Tesco or Carrefour, against whom small retailers in India do not stand a fighting chance.

Though India invests 51 percent of the country’s capital in single-brand retail – one company selling a single, branded product – it has not yet allowed foreign direct investment, which would be “suicide” for smaller stores.

Carrefour has promised to create 1.8 millions jobs but the five NGOs who authored the study on the FTA’s impact consider this figure to be unrealistic. Furthermore, 1.8 million new jobs hardly compensates for the estimated loss of 2.9 million to a potentially staggering 6.7 million informal jobs as a direct result of the zero tariffs clause.

“This is a very sensitive issue in the country but unfortunately the public is unaware of the serious impact of the FTA because negotiations are often conducted in secret. Contrary to the WTO, the FTA does not need to be ratified by the national parliament and state governments are not even consulted,” Sengupta told IPS.

The EU-India FTA will also go much further than the WTO in the protection of intellectual property.

The EU is now pressuring India to accede to UPOV 1991 that grants seed breeding companies very strong rights at the expense of farmers, who will no longer be able to exchange, resell and use commercial seeds freely. This is a violation of their right to practise traditional forms of agriculture.

Many advocates are also concerned about the issue of “geographical indications (GIs)”, a scheme that assigns certain products special status – based on their production location – and therefore a market advantage. The EU has established 190 GIs for agricultural products, which it wants India to recognise.

“But India is lagging behind in registering its own GIs, which means that EU products will get additional access to markets in India,” Sengupta told IPS.

Experts believe that if substantial evidence finds the FTA to have potentially adverse consequences for the Indian people, it should be reviewed and renegotiated.

“There is no point in negotiating at the WTO if these FTAs are signed simultaneously,” Sengupta stressed.

Excerpt:

The island of Jersey figures as one of the largest exporters of bananas to Europe, due to multinational tax dodging practices. Credit: Busani Bafana/IPS

By Daan Bauwens and - -
BRUSSELS, Nov 28 2011 (IPS)

Not corruption but multinational tax dodging is the main reason why developing nations stay aid-dependent, says a new report. And while new proposals by the European Commission try to tackle the problem, they turn a blind eye towards tax havens.

The island of Jersey figures as one of the largest exporters of bananas to Europe, due to multinational tax dodging practices. Credit: Busani Bafana/IPS

“It is estimated that more than a trillion dollars per year is flying out of developing countries,” Marta Ruiz, senior policy and advocacy officer at Eurodad and co-writer of the report, tells IPS. And “more than half of this amount is related to activities conducted by international companies.”

According to Eurodad, multinationals shift profits away to other countries by making use of trade mispricing. “Trade is manipulated between subsidiaries of the same international company operating in different countries,” Ruiz explains. “Goods are sold to the subsidiary abroad at a much lower price than the market price, just to minimise the profits made in the country of origin.”

The report launched Nov. 21 gives two examples of trade mispricing: one U.S. company operating in a developing nation appeared to import plastic buckets from its subsidiary in the Czech republic at a price of 972.98 dollars each, while another U.S. company exported car seats to Belgium for 1.66 dollars each.

“The Organisation for Economic Cooperation and Development (OECD) has calculated that more than half of world trade is intra-group,” says Ruiz. “The clear implication is that taxes on profits are not paid to the country where the economic activity is taking place.”

As Eurodad’s detailed overview demonstrates, profits are made in countries which have a close to zero tax rate. These are the so-called tax haven islands such as Jersey, the Isle of Man or the Cayman Islands. But European countries like Belgium, Switzerland or Luxembourg are also named on the list of tax havens.

Eurodad’s report cites an investigation done in 2007 by the British newspaper The Guardian. According to this investigation, channel island Jersey is one of the largest exporters of bananas to Europe, even though every banana boat from Africa or the Caribbean travels directly to the consumer country.

But on paper, these banana boats follow a complex journey on which they stop at a half a dozen offshore financial centres where they are sold to subsidiaries before they reach the European mainland. The data show that for every euro that is spent on bananas in Europe, only one cent of taxable profit is reported to the producer countries.

Another cited study from 2010 shows how Google, a U.S. company, is shifting profits away. Google located its European head office in Dublin, where corporate income taxes are low. But Google Ireland is also owned by Google Bermuda, a country without corporate taxes. Last year, Bloomberg revealed that Google cut its taxes by 3.1 billion dollars during the last three years thanks to the use of tax havens.

“This is a global problem,” says Ruiz. “These practices are taking place all over the world, they are related to the current critical situation in Europe. Lots of these companies are European but they are not even paying the taxes they should at home.

“But from a development perspective, we stress that it these practices that are endangering each developing country’s ability to eradicate poverty and to work out a sustainable development strategy.”

Eurodad’s report was launched only three weeks after the European Commission proposed new legislation on corporate accountability. Under the new rules, EU companies in the extractive and forestry sectors would have to disclose all payments to the governments in countries where they operate. The proposal is aimed at tackling the corruption which prevents those living in poverty from benefiting from the raw materials in their countries.

But experts regard the proposed directive to be highly problematic. Richard Murphy, an international tax expert who was present at the launch of the Eurodad report, tells IPS “The proposal will be of benefit, but not nearly as much benefit as we want.

“It will help to hold developing country governments to account because we know how much money they receive. But we will not know if the amount they get is the right amount because we won’t know how much profit is made in those countries. It is only a tiny step forward.”

According to the Eurodad report, only five percent of the illicit financial outflows from developing countries is related to corruption, while criminal-related flows represent 30 percent. The remaining 65 percent is related to trade mispricing.

Ruiz says “the EC’s proposal is a welcome step, but it only tackles corruption, while tax dodging is the greatest source of illicit capital flight. Reporting rules must reveal this picture and apply to all sectors, not just extractives and forestry.”

In its report, Eurodad proposes a country-by-country reporting scheme. The system, originally conceived of by tax expert Murphy and applauded by European leaders and the European Parliament, requires transparency on the part of all multinational companies with respect to their operations around the world.

“When they are present in one hundred countries, we would like to know which countries, what activity they conduct in each of them and under which name,” says Ruiz

“At the moment this data is not available. The country-by-country standard would provide indications to tax authorities which are weak in developing countries. It could help shed light on suspicious cases of abusive practices and therefore help identify cases that need further investigation.”

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Kenyan tea and coffee farmers remain disgruntled about the minimal profits they make selling their cash crops. Credit: Nalisha Kalideen/IPS

By Miriam Gathigah and - -
NAIROBI, Nov 24 2011 (IPS)

Kenyan tea and coffee farmers remain disgruntled about the minimal profits they make selling their cash crops, the country’s leading foreign currency earners, as the government receives millions in funding for training and subsidies that most of these farmers are yet to see materialise.

Kenyan tea and coffee farmers remain disgruntled about the minimal profits they make selling their cash crops. Credit: Nalisha Kalideen/IPS

But funding from the World Bank to support the agricultural sector by “subsidising inputs and empowering farmers to embrace modern technologies in farming,” has not reached them according to coffee farmer Manasseh Mugo.

Due to a lack of aid effectiveness and processes that monitor and evaluate how this money is spent, Mugo and other tea and coffee farmers are unable to make significant profits selling their crops and live from hand to mouth.

“I buy all the inputs and labour needed to grow coffee. Once the coffee ripens, we harvest and sell it to the coffee factory in our region. One kilogram is now being sold at less than a dollar in Nyeri, while other regions are giving farmers slightly above a dollar for the same amount,” Stacy Njui, a coffee farmer in Nyeri, Central Kenya, told IPS. The country’s revised Coffee Act prohibits coffee farmers from selling their produce outside of the region of origin.

But another reason why these tea and coffee farmers in Kenya are unable to make huge profits is because of a lack of cohesion between policies and development at the European Union (EU). The effect is trickling down to the local level with serious implications on the ability of people in developing countries to improve their livelihood, according to a CONCORD report titled “Spotlight on EU Policy Coherence for Development“, released in November.

According to CONCORD, the European NGO confederation for relief and development, the EU should “ensure the effective implementation of human rights and greater progress towards eradicating poverty in developing countries. Poor people in developing countries are already in (a) vulnerable situation that must not be worsened by the negative impact of EU policies.”

The EU remains the world’s largest donor giving away about 71 billion dollars a year. However, there are glaring disparities between EU policies on funding and the development objectives that developing countries have purposed to achieve.

Only seven out of 164 impact assessments done by the European Commission have looked into how the EU policies impact on developing countries, according the CONCORD report.

In Kenya the impact of these policies is obvious in the tea and coffee industry. The number of farmers who have decided to turn from cash to food crops is on the rise as multination co-operations buy their coffee at throwaway prices, only to sell it at much higher rates.

Consequently, the Kenyan government continues to plead with farmers to continue growing these cash crops because, aside from horticulture, they remain this East African nation’s leading foreign exchange earners.

But coffee farmers are frustrated. The country’s revised Coffee Act restriction of where farmers can sell their produce, and the stipulation that all coffee sold in Kenya must pass through a central auction has made it difficult for these farmers to obtain the best prices for their crops.

“Coffee farmers were selling their coffee to factories outside their region who are buying the coffee at a dollar or more per kilogram.

“But since the Coffee Act criminalises selling coffee to factories outside a famer’s region, the frustrated farmers are now threatening to pour their coffee beans on the road where it will be crushed by vehicles and go to waste. It is an attempt to punish the government for not regulating the market so that farmers can receive their fair share,” Mugo said, explaining the current situation among coffee farmers in Nyeri, Central Kenya.

The CONCORD report comes days ahead of the Fourth High Level Forum on Aid Effectiveness to be held in Busan, South Korea from Nov 29 to Dec 1.

Equally significant is the fact that the 17th Conference of the Parties (COP17) to the United Nations Framework Convention on Climate Change kicks off in Durban, South Africa from Nov. 29 to Dec. 9.

“Both conferences (Busan and COP17) will ignite serious discussions around donor funding, donor relations and even more importantly, donor policies. Developing countries are living through a phase of great donor generosity despite the global economic crisis, yet, most developing countries continue to experience extreme levels of poverty,” said Dr. Peter Muga, a development research consultant in Nairobi.

Although the EU’s policies say it is committed to eradicating poverty in developing countries, the CONCORD report shows that the EU is more committed to safeguarding its own prosperity.

“The disparities are there because many EU polices are not taking into account their external impacts, such as in Africa. Even when we present evidence (such as these disparities) to European authorities they don’t act to make the change. Ultimately this is down to a lack of political will. They don’t realise that tackling global poverty is also in the EU’s interest,” CONCORD co-coordinator on Policy Coherence for Development, Blandine Bouniol, told IPS.

EU polices in areas such as agriculture affect the competiveness of local farmers in Africa. For example, EU-subsidised farm products are sold in Africa at a very low price, making local farmers unable to compete and sometimes pushing them out of business.

“Some EU policies are doing more harm than good. For example, we’re seeing massive rights violations in the developing world as European companies, fuelled by EU targets and financial incentives on offer, are grabbing land in poor countries to produce biofuels – which themselves have questionable green credentials,” said Laura Sullivan, ActionAid’s European Policy and Campaigns manager.

“This undoes the good work being done with EU aid. The EU must provide a means through which these complaints can be heard and address the unintended consequences of EU policies. Current provisions aren’t putting people’s rights ahead of European commercial interests,” Sullivan told IPS.

She said ActionAid was looking “very closely at the EU’s renewable energies policies.”

“EU countries have committed to tripling their use of biofuels by 2020 but don’t have the land needed to grow the fuel domestically – what we’re seeing is an increase in land grabbing in Africa and increased demand for biofuels is also pushing up global food prices, which hits poor communities the hardest.”

Excerpt:

Environmental damage in the Niger Delta. Credit: Dulue Mbachu/IRIN

By Meena Bhandari and - -
FREETOWN, Nov 17 2011 (IPS)

There is a new oil rush off the coast of West Africa. But there are fears that the sector is not sufficiently regulated, and watchdog groups are raising concerns about transparency and governance in the region.

Anticipation is building in Sierra Leone after African Petroleum, an oil and gas exploration company focused on offshore West Africa, said they would begin drilling in the Sierra Leone-Liberia Basin next year after oil was discovered here in 2009. Civil society groups in Sierra Leone say they are just catching up with the oil discovery. “It’s very new – we’re still learning,” says Mohamed Toray of the National Movement for Justice and Development..

He says the country’s Petroleum Act, which was guided by agreements with oil companies, was rushed through as an emergency bill by the president’s office in July, and few people were consulted.

“Government agreements with oil companies guided the wording of the law. But, the law should have guided agreements with oil companies,” he says.

He also says Sierra Leone has a lot to learn from Ghana’s government, which engaged with civil society and the public when oil was found off its shores in 2007.

He says lessons can also be learned from Nigeria’s troubled history with oil. A recent report by the European Union Parliament says varying figures of 93 to 716 barrels a day were lost in Nigeria due to conflict, based on best and worst case scenarios.

Now Liberia is garnering attention – with expectations high that oil will be found soon. Major U.S. oil giants Chevron and Anadarko Petroleum Corp (one of the world’s largest independent oil and gas exploration and production companies) are all searching hard in Liberia’s waters. The relatively unknown African Petroleum is also conducting explorations.

According to the U.S. Geological Survey, the West African Coastal Province – which includes Liberia, Sierra Leone and Guinea – has an estimated 3,200 million barrels of oil and 23,629 billion cubic feet of gas.

Translated into hard cash, that is hundreds of billions of dollars. “But, nobody knows for sure what it’s worth,” says Natalie Ashworth from Global Witness, the campaigning organisation that uncovered links to how the wars in Sierra Leone and Liberia were fuelled by natural resources.

“Anadarko, the company that found reserves in Sierra Leone’s waters, is apparently keeping its data close to its chest,” she says.

Oil discoveries should be a boon to this region – boosting gains made from the war recovery efforts with millions of donor dollars, and increasing foreign investor confidence.

Liberia’s current GDP per capita is a minute 247 dollars, and Sierra Leone’s is 325 dollars – so any oil find would make a serious impact in two of the poorest countries in the world. Both Liberia and Sierra Leone rank amongst the worst places in the world for mothers to give birth, for example, despite both burgeoning with natural resources.

The implication is that a lack of transparency means a loss of potential revenue, and possibly depriving these economies of desperately needed social spending.

Liberia’s oil could turn out to be a blessing for some, and a curse for most, unless the government commits to an open reform process, says Global Witness. Oil exploration began in August off the coast of the West African country. However, the international organisation says that unless the country cleans up its oil sector, they will not be ready for oil.

In a September report by Global Witness, the watchdog organisation says it has already uncovered discrepancies, bad practice and even corruption in Liberia.

“Our investigations have shown that, even before a discovery is made, there are deep-seated problems in Liberia’s oil sector: government officials and at least one company have paid bribes, contracts have been awarded illegally, and companies with little experience in the oil sector have received concessions,” says Ashworth.

The group claims that a government agency paid bribes to the legislature so that oil contracts would be ratified. It also found the sector was not independently regulated.

Global Witness says that reforms in Liberia, like passing the groundbreaking Extractive Industries Transparency Initiative law that publishes extractive industry contracts and revenue data to improve resource governance, have not gone far enough in practice.

Global Witness goes as far as to say that Liberia is “not ready for oil” with its current governance and lack of transparency and needs wider reforms in its resource sector before people can actually benefit from any new finds.

Indeed, the history of oil in Africa has so far been a tumultuous one. A recent EU report found that the negative impacts of the oil industry in sub-Saharan Africa were a major concern, for the health and livelihoods of local communities.

It also stressed the need for better accountability, transparency and governance, and came hot on the heels of the United Nations findings highlighting the impact of oil spills in the Niger Delta.

The Niger Delta is said to be one of the most polluted sites in the world with oil spills over the last 50 years, having a devastating impact on human and wild life. A clean up is estimated to take 30 years at a cost of around one billion dollars, according to the U.N.

Meanwhile, Ian Gary of Oxfam International says the oil transparency and governance situation in Ghana at least is stronger than in the case of its neighbours, citing the fact that petroleum agreements are posted on the Ministry of Energy’s website.

“There were months of debate with heavy input from the public and civil society to develop the Petroleum Revenue Management Act,” he says. Ghana also recently inaugurated the Public Interest and Accountability Committee, a civil society watchdog required by the new law.

Despite this progress, Oxfam International says constant vigilance from civil society will be needed to ensure laws are upheld in practice.  

Excerpt:

By Ravi Kanth Devarakonda and - -
GENEVA, Nov 17 2011 (IPS)

The convergence of leading countries from the global South – China, India, Brazil and South Africa, among others – to assist the poorest countries in sub-Saharan Africa and elsewhere constitutes a new “dynamic” in the emerging global economic partnerships, says the United Nations Conference on Trade and Development.

In a report released on Thursday on the poorest countries – often referred to as the least-developed countries (LDCs) – UNCTAD calls for “a new path of development” to break from the “structural maladjustment” policies that led to “boom and bust cycles and growth collapses.”

There are currently 48 poorest countries with low per capita income of less than a dollar a day. About two-thirds of LDCs are located in Africa, and all indicators suggest that they are the worst affected by the International Monetary Fund (IMF) and World Bank’s market-oriented policies.

“The neo-liberal policies (fostered by the IMF and World Bank) devastated these countries,” says Dr. Supachai Panitchpakdi, UNCTAD’s secretary general. “These policies turned most sub-Saharan African countries from net food producing countries into net food importing countries.”

Team leader for the report, Zeljka Kozul-Wright, said that the LDCs are the victims of “structural maladjustment” policies followed over the last 40 years, which resulted in “boom-bust cycles and growth collapses.”

“LDCs suffered unstoppable marginalisation, and what we are saying is that if the current trends persist, the LDCs would become major loci for extreme poverty in the global economy sooner rather than later,” cautions Charles Gore, UNCTAD’s chief for the African division, LDCs and special programmes.

“The only way to reverse this trend is to create a new type of catalytic developmental state in the poorest countries with an adequate policy framework that would strive for structural transformation,” Gore told IPS.

“South-South cooperation opens up more opportunities and policy space needed to build such a catalytic developmental state,” he argued, suggesting that the economic and technical assistance offered by China, Brazil, and India comes without any conditionalities.

He dismissed suggestions that LDCs are merely exporting oil and other vital raw materials to China. Though the report cautions about “commodity-dependence”, it also says that there are positive examples where manufactured exports from LDCs to other developing countries increased by 18 percent per annum during the last decade.

Faced with worsening international trading conditions and haemorrhaging economic crisis in the centres of leading industrialised countries, LDCs face major challenges. The only plausible path to stay afloat in these difficult times and sustain their economic growth in the short and medium term is by enhancing their partnership with the Southern champions of economic development, the report says.

The report says that overall, the LDCs’ real GDP increased by 5.7 percent last year, “which is a slight improvement – one percentage point – in comparison with the result in 2009, but is far below the 7.1 percent average annual growth rate attained during the boom period between 2001 and 2008.”

Latest estimates suggest that LDCs are expected to grow by about 4.9 percent this year. The breakdown of the growth projection suggests that while Asian and island LDCs are expected to grow by 5.2 percent and 5.4 percent, the African LDCs and Haiti are likely to grow by 4.9 percent.

In terms of real GDP per capita income growth, African LDCs are expected to grow by 2.1 percent, which is barely sufficient given the high population growth. The Asian LDCs performed better than their African counterparts, the report says.

The report forecasts an average growth of around 5.8 percent for the LDCs during the medium term. “Clearly, it is an Asian LDC story,” says Gore, suggesting that the poorest countries in Africa are not there yet to realise their potential.

“The reason for the better performance of Asian LDCs has much to do with the flying geese model involving the catching-up process of industrialisation of latecomer economies from the international division of labour in East Asia based on dynamic comparative advantage,” he told IPS.

The performance of Asian LDCs – Bangladesh, Cambodia, and even Nepal – is impressive because of textile and other exports of manufactured goods. The African LDCs exports of manufacturing products comprise processing raw material, which have some initial value-addition.

Against this backdrop, the African LDCs must adopt the model followed in East Asia where the state played a dominant role in creating new, productive capacities and structural transformation. The state must be able to provide industrial subsidies, and credit for the development of industry and pursue robust policies in the social sector – health and education, Panitchpakdi told IPS.

South-South cooperation can become a “game changer” in the emerging economic partnerships of countries outside the industrialised North.

“The benefits of South-South cooperation support the building of developmental state capacities and the objectives of developmental states in LDCs, while the developmental state in LDCs in turn generates and augments the development impact of South-South cooperation,” Panitchpakdi says.

At a time when there is a complete drought in the much-promised official development assistance by rich countries, a mere one percent contribution by the leading developing countries from their 3.5 trillion dollars in foreign exchange reserves held by developing country sovereign funds can result in a significant development finance for the poorest countries.

This is where “developmental regionalism” can play an important role “that accepts globalisation as a historical trend, but rejects the market-led approach to it,” Panitchpakdi says.

Excerpt:

By Cléo Fatoorehchi
CANNES, Nov 4 2011 (IPS)

While the Greek bailout and stimulus package dominated discussion among the Group of 20 (G20) major industrialised and emerging market economies at the high-level summit in Cannes, France, this week, the proposed financial transactions tax (FTT) received meagre attention.

Heads of the Group of 20 (G20) major economies meet at this year's summit in Cannes, France. Credit: UN Photo/Evan Schneider

Back in February, French President Nicolas Sarkozy nudged Microsoft co-founder Bill Gates to prepare a report on the enourmous potential of such a tax to jump-start development in poor countries, particularly after the 2008-9 crash pushed many donor nations to slash their official development assistance (ODA) to the global south.

A ‘technical note’ from the report, released at the World Bank and International Monetary Fund spring meetings in Washington D.C. in September, claimed that the adoption of an FTT by the G20 or even the European Union could generate “substantial resources.”

According to the note, “Some modeling suggests that even a small tax of 10 bp (basis points) on equities and two bp on bonds would yield about 48 billion (dollars) on a G20-wide basis, or 9 billion (dollars) if confined to larger European economies. Some FTT proposals offer substantially larger estimates, in the 100-250 billion (dollar) range, especially if derivatives are included.”

Eyes on Europe

However, fears about potential ripple effects of massive instability in the Eurozone pushed the FTT further and further down the G20 agenda over the last few days.

Many experts were fearful that if the EU crumbled further, the global impacts, especially in developing countries, would be severe.

Alan S. Alexandroff, director of the Digital20 Project at the Munk School of Global Affairs at the University of Toronto, told IPS that the current global economic architecture meant that any regional crisis posed grave threats to other, interdependent parts of the world.

“Since China’s major export market is Europe, it is going to be a very difficult problem for China if they cannot export because the economy in Europe is under stress,” he said, adding that India and Brazil were also vulnerable to shock waves emanating from the Eurozone.

Samuel A. Worthington, President and CEO of the U.S. umbrella organisation InterAction, told IPS, “The Greek crisis, the broader euro crisis, as well as the fiscal crisis in the U.S. have a direct negative effect on the developing world.”

“It decreases remittances; it decreases bank investments around the world, particularly with European banks in Africa; and it makes the overall prospects of global growth lower,” he added.

Strong push for financial transactions tax

Luckily, the release Thursday of Gates’ long-awaited report, entitled ‘Innovation with Impact: Financing 21st Century Development,’ shed light on alternative methods of boosting ODA, even under economic pressure, through innovative development financing schemes.

Touching on a broad range of issues, the report stressed, “well designed aid reduces poverty right now, and accelerates poor countries’ progress toward the moment when they will no longer need it.”

It outlined the proposal of a tobacco tax, an idea promoted by the World Health Organisation (WHO) and also suggested taxes on aviation and bunker fuels, which would serve the dual purpose of addressing environmental concerns about pollution and over-exploitation of natural resources, as well as generating substantial revenue.

Finally, the report called outright on the G20 governments to commit to the FTT. According to the report, even taxing financial transactions at the minimal scale of 0.001 percent would mobilise billions of dollars towards developing countries.

Various international and development NGOs warmly welcomed Gates’ support on these issues.

Luc Lamprière, Oxfam’s spokesperson at the G20, said in a statement on Thursday, “Gates’ enthusiasm for an FTT and a carbon charge on shipping and aviation should encourage champions like France, Germany, and Brazil and convince sceptics like Canada, UK and the U.S.”

But as Worthington pointed out, “unfortunately, the trend seems to be going in the opposite direction.”

While some G20 countries have already implemented their own versions of an FTT at the national level – namely South Korea, South Africa and Brazil – influential countries like France are looking for a coalition, or collective agreement on the issue. Worthington believes that “France is afraid to act in isolation” for fear of putting Paris’ markets at risk.

Sarkozy eventually closed the G20 meeting in Cannes on Friday with the announcement that ten out of the twenty countries support the implementation of the tax, though no concrete action plan was put in place.

The U.S. and the UK refused to agree to the FTT, but were convinced to mention it in the final communiqué – a significant step forward, according to Khalil Elouardighi, a relentless advocate of the tax through Coalition Plus.

With a strong coalition of countries throwing their weight behind the FTT, NGOs expect that nothing will keep it from being implemented.

Last Friday, the Leading Group on Innovative Financing and Development published a draft treaty on the FTT, complete with a blueprint for action beginning in September. The group plans to meet in Madrid on Dec. 29, at which point many hope that the leaders will be true to their word, and sign a concrete treaty on the tax.

Excerpt:

By Kristin Palitza and - -
CAPE TOWN, Nov 4 2011 (IPS)

African heads of state have ambitious plans to create a free trade zone, encompassing 26 countries and more than 600 million people on the continent. But economic experts warn the project is a bold step that comes with a plethora of legal, administrative and political hurdles. Others suggest the plan might be a pie in the sky.

A cornerstone of Africa's planned Free Trade Area will be improved production capacity. Credit: Kristin Palitza/IPS

She was in conversation with South African Minister of Trade and Industry Rob Davies – one of the key advocates of the scheme – at a public debate held at the Centre for the Book in Cape Town, South Africa, on Nov. 3.

Earlier this year, African heads of state had announced plans for a one trillion dollar free trade area (FTA) across three existing regional economic communities, namely the Common Market for East and Southern Africa (Comesa), the East African Community (EAC) and the Southern African Development Community (SADC).

The FTA, which currently has a GDP of 650 billion dollars, will enable the duty- and quota-free movement of goods by 2014, of services and business people by 2016 and an Africa-wide economic and monetary area by 2025.

Supporters of the scheme, like Davies, hope the agreement will dramatically increase inter-regional trade and reach a GDP of 1.5 trillion dollars within the zone by 2015.

“The FTA will lead us on a new growth path that is significant in terms of job creation and industrial development,” believes Davies. He expects economic output within the zone to expand by 50 percent over the next five years, with an average annual economic growth of 5.5 percent. “Africa’s GDP per capita will expand by 30 percent,” the minister further predicted.

But trade experts like Pheko are less optimistic about the proposed economic agreement. A major concern is how countries will handle the huge amount of paperwork associated with inter-regional trade, she explained, as the FTA does not have an institutional location to handle administration.

Pheko also warned of potential legal issues, given that a number of regional trade blocs already exist in Africa, all with different rules and regulations and at different stages of integration. “Not only could those blocs slow down the building of a free trade area. All of them have struggled to take advantage of free trade agreements even on a smaller scale,” she cautioned.

Another big question will be how to integrate geo-political hotspots like Zimbabwe, Sudan, Somalia and Libya in such a trade agreement. “It remains to be seen if we will be able to negotiate the economic asymmetries on the continent,” added Pheko.

There are some obvious advantages to an African free trade area. Many African economies are so tiny they are unviable on their own. The revenues of countries like Malawi, Mozambique and Lesotho, make up less than four percent of the total SADC revenue, for example. Pooling regional markets may help take advantage of new growth opportunities. “On a regional scale, we would have sizable thrust,” argued Davies.

But will regional powerhouses like South Africa, Kenya and the Democratic Republic of Congo (DRC) be willing to prioritise regional interests over national ones?

“The elephants in the room all have hegemonic tendencies,” explained Pheko, noting that if they try to dominate trade negotiations to benefit their own national interests, while refusing to pay the adjustment costs, economic inequalities will be aggravated.

Not being able to bridge those inequalities might lead to “great tensions or even economic and social upheaval,” warned Pheko. “The FTA is not a building bloc to regional integration per se. It can pit countries against each other, such as middle-income and least developed countries.”

Davies admitted there is still a long way to go to integrate regional economies: “We need a sensible agreement that doesn’t force countries to make unrealistic choices,” he noted, acknowledging that “there will be tough negotiations when it comes to industrial development.”

He also recognised a number of challenges the free trade zone will have to face, including undiversified und underdeveloped production structures, inadequate infrastructure, prevalence of non-tariff barriers and lack of trade governance structures. Foreign investors have long noted that unsatisfactory infrastructure on the continent has been a key reason holding back investments.

“One of the greatest impediments to regional trade is transport linkages. It is often cheaper to buy products from China or Brazil than to transport them within the continent,” also warned Joanmariae Fubbs, chairperson of the portfolio committee on trade and industry at South Africa’s ruling African National Congress.

Davies said the FTA plans to address those concerns. It will boost trade by expanding the North-South corridor, which links Central Africa via Zambia with South Africa’s biggest trade port, Durban. There are also plans to further develop the Trans-Cunene-Corridor between the DRC, Angola, Namibia and South Africa. But building roads, bridges, expanding harbours, railroad networks and electricity plants are expensive, long-term projects.

For now, it remains to be seen if the 26 African nations have sufficient political will to pull this off.

Excerpt:

When the G20 leaders meet for their fifth summit in Cannes, France, on Thursday, they will be confronted with several worsening global economic and trade issues. Among them is how to strengthen the international trading system and how to overcome the developmental deficit that continues to create an uneven playing field for poor countries.

A police car burns at last year's G20 summit in Toronto, Canada. Credit: Marty Olauson/IPS

So far there is no consensus among the members of the WTO on what the blueprint to addressing the endemic ills plaguing the organisation is, particularly on how to deliver on the developmental promises made in the Doha Development Agenda (DDA), say trade diplomats.

The DDA was launched over 10 years ago to correct the historical imbalances and asymmetries in the global trading system and was designed to enable poorer countries to integrate into the system.

The EU and its allies, including Switzerland, want the G20 leaders to instruct their trade ministers to agree to an “ambitious” agenda that would make the WTO an active and lively body.

“The EU’s stand is also subtly supported by the WTO’s Director General Pascal Lamy, who wants an expanded agenda,” says a trade diplomat familiar with the discussions.

“A number of delegations want new approaches to be consistent with the Doha mandate, suggesting that the WTO could play its role in responding to global challenges, including its role in keeping protectionism at bay,” Lamy told members at the WTO’s General Council meeting last week.

Though Lamy did not mention the exact number of delegations or their composition, he was primarily alluding to a small group of countries led by the EU, says a trade diplomat from the IBSA countries.

Lamy, who will attend the G20 meeting, is expected to lobby leaders for his expanded agenda to revitalise the WTO.

But China and IBSA members do not share the need for an expanded agenda. At a time when the WTO is yet to deliver on the promised developmental goals set out in the Doha agenda, they are asking why members should abandon the single undertaking of the DDA negotiations and embark on a new programme. The single undertaking principle stipulates that nothing is agreed upon until everything is agreed upon in the entire Doha package.

Clearly, there are differing perspectives at play, particularly between the EU, IBSA and China. “We are not telling the public the truth about where we are and how members must make a collective effort to recover the credibility of the organisation,” says Ambassador Roberto Azevedo, Brazil’s trade envoy to the WTO.

He disagreed with the EU’s specific demands, which include an early realisation of select issues, including trade facilitation and improvements in the Dispute Settlement Understanding (the WTO’s procedure for resolving trade quarrels).

“Characterising extremely difficult issues as areas of potential outcome for early harvest would not reflect the truth and would set us up for additional failures to deliver on a realistic promise,” Azevedo told IPS.

IBSA and China have adopted common positions on the DDA and other issues at the WTO. China supports the recent IBSA declaration that reiterated the trading bloc’s commitment to the DDA in addressing the core inequities and uneven playing field that poses problems for the poorest countries trying to integrate into the global trading system. China wants to ensure that there is a strong outcome on the development package.

The emergence of BRICS (Brazil, Russia, India, China, and South Africa) countries on the global stage brought tectonic shifts, even at the WTO. While Russia is yet to join the WTO, China and IBSA present common strategies on developmental issues in the Doha mandate.

In their statement issued on Oct. 19, the IBSA leaders said “the demands of the current negotiations in the Doha Development Round reflect an imbalance in the sense that there is too much accommodation of the sensitivities of developed countries in agriculture, alongside unjust demands on developing countries to open their markets in the services and industrial sectors.”

Over the last three years, the industrialised countries have changed the terms of the Doha negotiations without addressing the central issues. They seem determined to extract a high price involving steep cuts on industrial goods and sweeping market access for services from the four developing countries – China, India, Brazil, and South Africa – for meagre concessions to reduce their subsidies and market access for agriculture products.

In sharp contrast, the EU issued a “non-paper” for the G20 Summit in Cannes, on the same day when the IBSA declaration was made public. Brussels’ “non-paper”, obtained by IPS, is totally silent on the issue of addressing “the high levels of protection and subsidies in agriculture in the developed countries” as demanded by the IBSA leaders.

Incidentally, high levels of protection and tens of billions of dollars in farm subsidies are still prevalent in the EU and several farm defensive countries – Japan, Switzerland, and Norway among others – have more to do.

The EU, however, defended its proposal saying it is “our initiative” and others can discuss their proposals. “We are open to the proposals from other members,” said the EU’s trade envoy Ambassador Angelos Pangratis. “We certainly look forward to other initiatives,” he told IPS, suggesting that Brussels would like members to discuss the elements it had proposed.

Lesotho’s textile sector – the country’s largest employer – is regarded by many as the only way out of the poverty trap in a tiny kingdom where more than half of the population lives on less than 1.25 dollars a day. But what many do not know is that the government and the World Bank have unofficially turned their backs on the sector and will soon cut important subsidies.

Workers at Shinning Century Ltd in Maseru fear for their jobs. Credit: Kristin Palitza/IPS

Makhoase Lethibelane, 30, works 10 long hours each day as a label printer at the Shinning Century Limited textile factory in Lesotho’s capital Maseru. Her work is repetitive, draining and badly paid. At the end of each month, Lethibelane takes home a meagre salary of 122 dollars.

Her income not only has to support herself and her eight-year-old daughter, but also her unemployed parents. Still, Lethibelane says she feels “lucky to have a job, since many others have lost theirs.”

Lesotho is one of Africa’s largest textile manufacturers, with the majority of its exports destined for the United States. The country boasts some 40 textile and apparel plants. But since the global economic crisis caused textile exports to dwindle, many of this country’s 60,000 textile workers lost their jobs.

At Shinning Century, half of the factory’s machines stand idle. Managing director Jennifer Chen says she had to lay off two-thirds of her staff over the past couple of years. She only employs 500 to 600 workers at the moment.

“We lost many orders due to the financial crisis,” explains Chen. Some of her main customers, well- known U.S. brands GAP and Banana Republic, moved their business to China or Vietnam when the economic meltdown hit in order to save money on lower salaries in Asia, she says.

For the past few years, Lesotho had been a favourite textile-manufacturing destination due to the African Growth and Opportunities Act (AGOA), a tariff-preference programme designed by the U.S. government in 2004 to attract business to Africa.

The impact was immediate: numerous Asian investors took advantage of AGOA benefits and set up their factories in Lesotho. The number of textile jobs tripled in a country where nearly half the population is unemployed and one in four is HIV-positive.

“AGOA secures us business because it offers duty-free supply without quota limitations,” says Chen, who hails from Taiwan. In addition, textile manufacturers have been receiving heavy subsidies from Lesotho’s government to keep the country attractive compared to Asian countries, where minimum salaries and worker’s rights are seldom observed.

Even though who benefits most from AGOA remains questionable – almost all of Lesotho’s clothing factories are owned by Asian immigrants who reap the main profits while Basotho workers scrape by on survival wages – both factory owners and the Basotho people have firmly placed their hopes on the revival of the local textile industry, eager to emulate Mauritius’ success in creating a competitive, high- end export market for textiles.

Poverty levels in this small Southern African constitutional monarchy have reached dramatic levels after the economic crisis caused a 60 percent decline of Lesotho’s share of Southern African Customs Union revenue and a drop in global diamond prices. Alternating floods and droughts have ruined subsistence agriculture, leaving tens of thousands food insecure.

According to the World Bank, Lesotho’s Gini coefficient – which measures inequality and ranges from 0, or perfect equality, to 1, or perfect inequality – is at 0.63 among the highest in the world. It has by far surpassed the threshold of 0.4 at which serious inequality could lead to social unrest.

With AGOA poised to expire in 2015, and Lesotho’s preferential status with the U.S. thereby under threat, textile manufacturers as well as textile unions have been trying to come up with alternatives to rescue an industry on which the livelihoods of 40,000 workers and their families depend. “We have to find ways to develop a regional supply chain in the Southern African Development Community (SADC),” reckons Chen.

Union representatives demand diversification and expansion of the industry to stay competitive. “We need to start manufacturing production materials locally, like fabric, zips, hangers, buttons,” says United Textile Employees general-secretary Bahlakoana Lebakae. “At the moment all our raw materials come from the East.”

But unbeknown to unions and manufacturers, Lesotho’s government has made different plans.

“The textile sector lacks profitability. It’s no longer competitive internationally. Government has given up on it and clearly indicated to us it can’t subsidise the textile (industry) any longer,” World Bank Lesotho senior operations officer Macmillan Anyanwu told IPS.

After consultation with the World Bank, Lesotho’s government decided to ditch the textile sector, to eventually cut the subsidies and instead invest in agriculture, horticulture, water management and tourism. “We need to diversify away from textiles into other areas,” hinted Prime Minister Pakalitha Mosisili in February.

With the help of the World Bank, the government has been piloting new sector development since 2009.

“We are trying to find markets for (agricultural) products and water supply in and outside the (SADC) region. We also focus on increasing the capacity of small to medium-sized businesses and improving border services to boost economic growth,” says Anyanwu, explaining some of the steps government has taken with the support of the World Bank.

By 2013, when the pilot phase comes to an end, government will officially adjust its economic policy to invest in the most promising sectors. What will become of the thousands of textile workers and their families remains unclear.

By IPS Correspondents
GENEVA, Oct 14 2011 (IPS)

Developing countries, particularly from Africa, are concerned about attempts by industrialised nations to change the negotiating dynamic of the World Trade Organization.

Will the World Trade Organization remain multilateral? Credit:

The Doha Development Agenda (DDA) trade negotiations, launched in 2001, were meant to correct the historical imbalances and asymmetries in the global trading system and were designed to enable poorer countries to integrate into the system.

Industrialised countries are insisting on negotiating new controversial issues like investment, competition policy, energy security and climate change, often referred to as 21st century issues, without concluding the old issues of duty-free and quota-free market access. The WTO eighth ministerial meeting will take place from Dec. 15 to 17 in Geneva, Switzerland.

Over the last few weeks, developed countries from North America and Europe launched a campaign to alter the WTO’s negotiating framework from a multilateral format, where all members have a say in an agreement, to a plurilateral one, which would restrict participation to select countries.

The developed countries argue that “the business as usual approach” involving every member at the WTO will not work.

“The African friends seem to have a problem with regards to new issues and the plurilateral approach,” said Ambassador Luzius Wasescha, Switzerland’s trade envoy to the WTO.

“If these new issues are not discussed at the WTO, members will discuss them outside and they (the African countries) will regret (such a move),” he told IPS.

The discontent comes at a time when WTO Director General Pascal Lamy wants the theme of the upcoming ministerial meeting to be “WTO: the institution that delivers.” However, trade officials from developing countries question whether the organisation and its powerful drivers have actually delivered on the promises made in the DDA.

“It’s a joke to consider such a theme when the credibility of the global trade body is at its nadir when it comes to addressing the concerns of poor countries,” said an African trade diplomat who preferred anonymity.

Developed countries want their issues on the Doha agenda to be addressed first and let the remaining issues, which concern poor countries, die a slow death, said the diplomat.

Effectively, industrialised countries want to close the window on addressing the “developmental” dimension of the DDA in which African countries invested considerable political capital.

“Instead of addressing the duty-free and quota-free market access, removing trade-distorting farm subsidies on cotton and other products, and enabling the poorest countries to enjoy the benefits from global trade, some countries are now insisting on 21st century issues,” said Ambassador Faizel Ismail, South African’s trade envoy to the WTO.

“What is the point in embarking on 21st century issues without first concluding the negotiations of the 20th century issues that are relevant to the poorest countries in Africa and elsewhere?” the Mauritian trade envoy to the WTO, Ambassador Shree Baboo Chekitan Servansing, is understood to have asked the chair for the WTO’s General Council, Ambassador Yonov Frederick Agah of Nigeria, during an informal consultation. Agah is overseeing the preparations for the eighth ministerial meeting.

Servansing, who is the coordinator for the Africa, Caribbean, and Pacific countries at the WTO, wants implementation, trade and development issues concerning enhanced flexibilities for developing and poor countries, which arose from the previous Uruguay Round, resolved.

Developed countries, however, are not convinced. In a confidential letter written to many trade ministers, and obtained by IPS, Australia’s Minister of Trade Craig Emerson fired the first salvo by calling for a “new pathway to global trade liberalisation” prior to next month’s G20 meeting in Cannes, France. The G20 is a group of the world’s most powerful countries.

Emerson’s approach insists on an early realisation of select issues in the DDA negotiations based on a plurilateral framework and parallel negotiations on new issues.

While the letter speaks of some concessions for the poorest countries, the thrust of the document is on bringing new issues and new approaches that are “antithetical” to the multilateral negotiating principles underlying the 153-member WTO.

Emerson said in his letter “the Doha agenda is large and complex, with many entanglements between issues, making it impractical to achieve progress.” But “some parts of the Doha (agreement) may be more easily resolved and we should be permitted to advance those issues.”

“The Geneva meeting could therefore agree to continuing negotiations with the idea of early implementation where achievable,” Emerson continued. “This approach would also need to consider finding alternative negotiating approaches to those issues which have become the most intractable, and in particular market access.”

Referring to new issues such as competition policy, investment, climate change and energy security, the Australian trade minister urged his colleagues “to contemplate agreement on the negotiation of identified issues, but beyond the existing Doha mandate.”

“This would offer a mechanism to modernise the WTO’s work and to ensure it keeps pace with the demands of the modern global economy,” Emerson suggested.

Though African and other countries oppose the Australian approach, developed countries have solidly supported the move.

“Why should African countries agree to new approaches?” asked Martin Khor, the executive director of the Geneva-based South Centre, which represents the interests of the poor countries.

“The WTO is a multilateral organisation and it should not have plurilateral agreements within it, as this damages the multilateral nature of the organisation,” he told IPS.

“Under the pretext of bringing new issues as well as selectively picking up issues of interest to them from the Doha agenda, industrialised countries want to say good bye to the DDA once and for all,” said the African trade diplomat.

He said the theme for the ministerial meeting should be “WTO: the more it changes, the more it remains the same,” implying that industrialised countries continue to have their way at the trade body.

Excerpt:

South Korea’s opposition party has said it will resist any bid to force a sweeping free-trade agreement with the U.S. through parliament, following ratification of the deal by the U.S. congress.

The ruling Grand National Party (GNP) urged opposition legislators on Thursday to swiftly approve the long-delayed deal but the Democratic Party (DP) says the pact is one-sided.

The GNP was negotiating with the opposition to try to pass the deal along with 14 related bills this month.

The GNP has an overwhelming majority in the legislature. But with a general election next April, it has been reluctant to pass the legislation through the house and ignite a televised repetition of past scuffles.

“We should open a new chapter in the Korea-U.S. alliance through the FTA, which will add an economic alliance to the existing military alliance,” Hong Joon-Pyo, the GNP chairman, said on Wednesday.

But the DP and five other splinter groups held a joint rally on Wednesday with activists at parliament and pledged to stop the ruling party forcing the bills through.

“The FTA, which the ruling party and the government are seeking to pus through, is feared to deepen the rifts within our society and worsen polarisation,” Sohn Hak-Kyu, the DP leader, said, calling for greater protection for farmers.

Kim Jin-Pyo, the DP floor leader, said the party would use tough tactics – filibustering and occupation of parliament – if there is an attempt to railroad the bills.

U.S. ratification of the long-delayed pact came as South Korea’s President Lee Myung-Bak paid a state visit to the country’s oldest political and military ally.

Seoul’s foreign ministry said the agreement, especially welcomed at a time of global economic uncertainty, would bolster that alliance.

In a statement it called for swift approval of the deal so it could go into force next year on January 1.

‘Watershed deal’

In Washington on Wednesday, Lee said the trade deal would be a watershed since the two countries signed a military alliance in the wake of the 1950-53 Korean War, in which U.S. forces fought for the South.

He said it would create jobs in both countries and was expected to increase two-way trade by more than 50 per cent by 2015.

The U.S. is South Korea’s third biggest trade partner after China and the European Union, with trade worth 88 billion dollars last year. Seoul enjoyed a 10 billion dollar advantage.

Resource-poor South Korea, whose economy is powered by exports ranging from ships to semiconductors, has aggressively pursued free trade accords. Seven are in effect, including deals with the European Union, India and Southeast Asia.

The U.S.-South Korea deal was signed in June 2007, but was partially renegotiated last year to give U.S. car manufacturers greater access.

The DP, which was in office in 2007, says the revision tilted the agreement in favour of Washington and wants renegotiation.

Analysts said that among South Korean companies, the agreement would most benefit auto, technology and textile companies.

“The biggest beneficiaries will be the auto makers and auto parts vendors. Imposed tariffs on auto parts will be immediately removed,” WS Lee, an analyst at Taurus Investment & Securities, told Dow Jones Newswires.

On the U.S. side, the U.S. International Trade Commission estimated in 2007 that a deal would increase exports to South Korea by 10-11 billion dollars annually.

The American Chamber of Commerce in Korea (ACCK) urged Korean legislators swiftly to ratify the pact.

“This is an historic moment that will strengthen the U.S.-Korea alliance by adding a third economic pillar to the already strong relationship,” Pat Gaines, ACCK’s chairman, in a statement.

* Published under an agreement with Al Jazeera.