Ngozi Okonjo-Iweala took over as new WTO Director-General, 1 March 2021. Credit: Africa Renewal, United Nations

By Lansana Gberie
GENEVA, Mar 9 2021 (IPS)

When on 15 February the chair of the World Trade Organization’s (WTO’s) General Council, Ambassador David Walker of New Zealand, announced that Dr. Ngozi Okonjo-Iweala would be the new Director-General, the mood among delegates was of relief.

Dr. Okonjo-Iweala commanded overwhelming support from the start of the selection process in July 2020, but her historic elevation—as the first African and the first woman to become Director-General of the 26-year-old trade organisation—was by no means certain only a few weeks prior.

“Without the recent swift action by the Biden-Harris administration to join the consensus of the membership on my candidacy,” the new Director-General said in her acceptance statement, delivered via video link, “we would not be here today.”

This plain statement of fact underlines the challenges she will likely face. It is also indicative of the paralyzing difficulties experienced by the world’s main trade arbiter in recent years, where key decisions are made by consensus among over 160 members.

So, what can Africa gain from an African Director-General of the world’s premier trade organization?

This question was never openly asked during the selection process, in part because as well as being an African and a woman, Dr. Okonjo-Iweala’s qualifications—Harvard-educated economist, top World Bank official, longest-serving Finance Minister of Nigeria (Africa’s largest economy), and Foreign Minister—towered above her rivals.

But the question will likely become a point of conversation during her tenure.

Lansana Gberie

Some will try to use it as a benchmark for evaluating her performance in office. That will make no sense. For the past 20 years, no round of trade negotiations at the WTO has been successful.

The WTO’s dispute resolution mechanism—the Appellate Body—has been stymied, including through the blocking of all its new appointees by the previous US administration, a decision that should be rescinded.

But there are important areas where the Director-General, with her political clout and proven leadership skills as a reformer, can lead “from behind… to achieve results,” as Dr. Okonjo-Iweala herself noted in her acceptance statement.

In that statement, she highlighted as a top priority an inclusive and effective approach to COVID-19 vaccine distribution, which surely must include an agreement to suspend intellectual-property protection for vaccines and other vital drugs to enable their mass production and distribution in poor countries.

This is known as the TRIPS Waiver proposal, an initiative of India and South Africa that now has more than 50 co-sponsors.

Dr. Okonjo-Iweala, as chair of the vaccine alliance Gavi and one of the African Union special envoys for the continent’s response to the COVID-19 pandemic, has been consistently passionate about this issue and has called for the rejection of “vaccine nationalism and protectionism.”

In post-pandemic recovery, Africa will focus on operationalizing the African Continental Free Trade Area (AfCFTA), which is expected to connect some 1.2 billion people across 55 countries with a combined GDP of $3.4 trillion.

The trade pact will unify and amplify Africa’s voice in urging the WTO to create a vision that reflects the continent’s economic aspirations.

The AfCFTA itself signals a preference for a rules-based multilateralism, which aligns with the WTO’s ideals. Therefore, Dr. Okonjo-Iweala should actively cheerlead for the AfCFTA and canvass for necessary technical support for its successful implementation.

Perhaps more difficult but vital to African and other developing economies is improving market access for their agricultural products. This access is severely limited in part because of the huge distorting subsidies that wealthy nations provide their farmers.

There have been encouraging overtures from European countries and Australia to African diplomats to help mitigate this problem, but it will need the leadership of the WTO to give the initiative the momentum it needs.

Dr. Okonjo-Iweala, who has stressed that trade must be centred around people and focused on economic development and reducing global inequities, is singularly positioned to lead this effort.

Negotiations around fisheries, which have persisted for years at the WTO, are an equally urgent concern for Africa. To date, some members even refuse to agree on what constitutes ‘fish.’

Wealthier nations lavish subsidies on their fisheries sectors, leading to over-enhanced capacity, which enables their fishing boats to infringe upon the sovereign rights of poorer countries in Africa. African-caught fish, already limited as a result of such encroachment, stand little chance of gaining market access in wealthy countries.

During her rounds of meetings in Geneva before her selection, Dr. Okonjo-Iweala advanced an important concept that was widely praised by African diplomats – trade finance.

As someone who followed her during those weeks of intense consultations, I was struck by the fact that no other candidate spoke about this issue. Providing financial and technical support particularly to least developed economies to export agricultural and fisheries products to richer countries can advance both trade and development.

Negotiations on such support for the cotton sector within WTO have, like those relating to fisheries, generated positive statements of support but no real action yet. African members have recently raised the issue of a WTO Joint Action Plan to provide support for the development of cotton by-products in poor countries.

This should be uncontroversial; it is certainly less contentious than intellectual property rights, for example. It merits urgent support.

Its realization, in addition to actions on agriculture and fisheries, will be the kind of incremental progress that will help reduce poverty and boost global trade.

For many African countries, it will constitute the kind of reform that would make multilateral cooperation – and the great honour to the continent represented by the elevation of a highly distinguished African trailblazer – truly meaningful.

Source: Africa Renewal, United Nations

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Excerpt:

Mozambique is open for business. A new suspension bridge rises on Maputo Bay. Credit: Busani Bafana/IPS

By Busani Bafana
MAPUTO, Aug 17 2017 (IPS)

The rising Maputo-Catembe Bridge is a hard-to-miss addition to Mozambique’s shoreline.

The 725-million-dollar bridge – billed to be the largest suspension bridge in Africa on its completion in 2018 – represents Mozambique’s new investment portfolio and a show of its policy commitment to boosting international trade.“African governments have identified policy incoherence as the elephant in the room." --Wadzanai Katsande of FAO

But the country can improve on its trade and investment if it can effectively align its national trade and agricultural policies to ensure sufficient coordination between trade and agricultural policymakers, experts say.

Initiatives to improve agricultural productivity, value chain development, employment creation, and food security are often constrained by market and trade-related bottlenecks which are a result of the misalignment between agricultural and trade policies.

This was part of findings discussed at a meeting convened by the United Nations’ Food and Agriculture Organisation (FAO) in the Mozambican capital earlier this month. The high-level meeting attracted decision makers from the ministries of agriculture, finance, trade, industry and commerce, private sector representatives and donor groups.

To help address this challenge, FAO, in collaboration with Enhanced Integrated Framework (EIF) at the World Trade Organisation and the European Centre for Development Policy Management (ECDPM), has piloted a regional project to help countries coordinate policy making processing, starting with agriculture and trade.

Mozambique is one of four countries in East and Southern Africa targeted in the pilot project aimed at developing a model for best practices in policy development and harmonization in enhancing economic development.

An assessment of the agriculture and trade policy framework and policymaking processes in Mozambique has been done to understand decision making in setting objectives and priorities for the country’s agriculture and trade sector.

The assessment also sought to contribute to the development of a coherent national policy framework on agricultural trade in Mozambique, said Wadzanai Katsande, Outcome Coordinator for the Food Systems Programme of the FAO.

Though listed as one of the Least Developed Countries (LDC) in the world, Mozambique is rich in natural and mineral resources including gas. The country is a bright investment destination in Africa.

Policy alignment is the key

“On paper, policies sound well and good, but in practice the story is different. There are still coordination and consistency issues in the policy formulation and implementation processes within and between agriculture and trade and these need to be addressed,” says Samuel Zita, an International Trade and Development Consultant, who recently led on an analytical study commissioned by the FAO on “Coordination between agriculture and trade policy making in Mozambique.”

“When agriculture and trade policies speak the same language that creates some predictability to investors, any disconnect between the two can have a negative effect on foreign direct investment,” Zita told IPS.

The study which focused on the country’s Comprehensive Africa Agriculture Development Programme (CAADP) and Enhanced Integrated Framework (EIF) processes also looked at the policy documents from these processes such as the CAADP National Agricultural Investment Plan (PNISA)] and the Diagnostic Trade Integration Strategy (DTIS). It recommended that Mozambique should improve the dissemination of policies, plans and strategies to stakeholders through various media. In addition, there should be an improvement in the description and publication of agricultural production and trade data.

Agriculture – defined by the national constitution as the basis of the country’s economic development – contributes 25 percent to Mozambique’s GDP of nearly 14 billion dollars. Raw aluminium, electricity, prawns, cotton, cashew nuts, sugar, citrus, coconuts and timber are major exports.

Policy cohesion can help facilitate trade development by simplifying the regulatory and policy environment for small businesses, so countries can attract private sector investment at local and international levels, says Jonathan Werner, Country Coordinator, Executive Secretariat of the Enhanced Integrated Framework at the WTO.

“We are facing many challenges for regional trade integration in Africa,” Werner Told IPS. “Our findings have shown that aligned policy processes can help create an enabling environment for trade and development.”

Policy cementing the SDGs

African governments have committed themselves to a multitude of agreements, protocols and declarations meant to promote greater agriculture productivity and trade which are major drivers of economic growth, but something is still missing in getting it all together: effective policies both at national and regional levels. Until the well-meaning policies trade and agriculture are aligned, Africa will continue to miss out on attracting the level of investment it should.

Mozambique has taken the first steps towards aligning its national agriculture and trade sector policies to boost economic development.

“African governments have identified policy incoherence as the elephant in the room and getting the policies in trade and agriculture to speak to each other is key to turning policies into action,” Katsande said noting that agriculture and trade development form the basis of key initiatives such as the Comprehensive Africa Agriculture Development Programme (CAADP), the Malabo Declaration and African Union’s Agenda 2063.

A boost for Inter-Africa trade

Africa has no less than 14 regional trading blocs but inter-Africa trade is low at 12 percent of the continent’s trade, according to statistics from the Common Market for Eastern and Southern Africa (COMESA). However, Africa’s trade with Europe and Asia is at nearly 60 percent. Some of the bottlenecks to Africa trading with Africa include trade policy harmonization, reducing export/import duties low production capacity, differing production quality standards and poor infrastructure.

The United Nations Conference on Trade and Development (UNCTAD) estimates that the Continental Free Trade Area (CFTA) set to be signed into operation by December 2017 will help double inter African trade. In 2012 African head of state endorsed the establishment of the free trade area by 2017. Trade is one of the pathways to unlocking economic growth in Africa to boost employment and foster innovation in a continent replete with opportunities.

Gerhard Erasmus, an associate at the Trade Law Centre, a trade law capacity building institution based in Cape Town, South Africa, said low inter-Africa trade was a real issue which has been blamed by some economists on the fact that African nations often produce the same goods (mostly agriculture and basic commodities) for which the intra-African export opportunities are limited.

“Unless we move up the ladder of value addition, industrialization and services we will remain stuck,” Erasmus said. “Thus domestic development plans need adjustment and targeted investments are necessary. There are many trade facilitation challenges, from long queues at border posts, corruption, uncoordinated technical standards and requirements, to red tape and inadequate infrastructure.”

Eramus said regional economic communities and even the African Union had policies and plans to address the many trade challenges, but implementation often encountered problems at national levels regarding political buy-in, lack of resources, technical capacity problems, and plain bad governance.

Credit: Bigstock

By Martin Khor
PENANG, Feb 27 2017 (IPS)

Recently a very interesting article on why there are inequalities in access to health care and how  medicine prices are beyond the reach of many people was published in The Lancet, one of the most prestigious medical journals in the world.

The authors, who are eminent experts in development and public health, pinpointed trade and investment agreements for being one of the greatest health threats.

Reading their powerful commentary leads one to think:  What’s the point of having wonderful medicines if most people on Earth cannot get to use them?   And isn’t it immoral that medicines that can save your life can’t be given to you because the cost is so high?

The article picks on the Trans-Pacific Partnership (TPP), together with the Transatlantic Trade and Investment Partnership (TTIP) as the worst culprits.  It says the TPP’s chapter on intellectual property is “particularly intrusive to health and restricts access to the latest advances in medicines, diagnostic tools and other life-saving medical technologies.”

Martin Khor

This agreement, say the authors, contains many provisions that “strengthen patent protection that provides monopolies and inevitably leads to high prices.”   They mention provisions that extend the patent terms beyond 20 years required by the WTO; lower the criteria of what can be granted  patents; and “data exclusivity” provisions that put up barriers to generic manufacturers entering markets after the expiry of patents.

This viewpoint article was co-authored by Prof Desmond McNeill (University of Oslo), Dr Carolyn Deere (Oxford University); Prof Sakiko Fukuda-Parr (The New School, New York, and formerly the main author of the UNDP’s Human Development Report for many years), Anand Grover (Lawyers Collective India and formerly the Human Rights Council’s Special Rapporteur for the Right to Health); Prof Ted Schrecker (Durham University, UK) and Prof David Stuckler (Oxford University).

They said that growing evidence suggests that the agreements “will have major and largely negative consequences for health that go far beyond earlier trade agreements.  This situation is particularly disturbing since the agreements have created blueprints for future trade agreements.”

The Nobel Peace Prize winning medical group, Medecins Sands Frontieres (MSF), is even more scathing in its criticism.  “The TPP represents the most far-reaching attempt to date to impose aggressive intellectual property standards that further tip the balance towards commercial interests and away from public health….  In developing countries, high prices keep lifesaving medicines out of reach and are often a matter of life and death.”

This condemnation is just as relevant despite President Donald Trump withdrawing the United States from the TPP. There are efforts underway for the remaining 11 countries to put the TPP into effect without the US.

Moreover, these countries have prepared changes to their laws and policies to comply with the TPP’s provisions, and may implement these even if the TPP actually never comes into effect.

This would be an immense tragedy for public health, because most of these countries did understand that the chapter on intellectual property would have negative effects, but they accepted it as part of a bargain for getting better market access, especially to the US.

Since the TPP is now in suspension, it does not make any sense for the countries to change their patent laws when the benefit of market access is no longer available.

During the TPP negotiations, the other countries managed to dilute some of the very extreme demands of the US, but only to a small extent.  The final intellectual rights chapter still reflects the extreme proposals of the US.

With the TPP in limbo and perhaps in perpetual suspension, there is really no reason why the provisions that have adverse effects should be implemented in the countries that had negotiated the TPP, when there are no benefits to be obtained to offset them.
Moreover, the major developed countries can be expected to make use of the TPP’s intellectual property chapter to inject into negotiations for new trade agreements, for example the RCEP, the Asian regional agreement.

Negotiators, especially from developing countries, and civil society groups should thus be vigilant that the TPP’s provisions that have adverse effects on health are not reproduced in other trade agreements.

Members of the World Trade Organisation are required to implement its intellectual property agreement, known as TRIPS, but they are not obliged to take on any additional obligations.

There are many provisions in TRIPS that allow a country to choose policies that are pro-health.  The TPP has clauses that prevent a country from making use of many of these options because they are “TRIPS-plus”, going beyond what the TRIPS obligations.

First, there is a TPP provision that lowers the standards a country can adopt to grant a patent.  Some patent applications are not for genuine inventions but are only made to “evergreen” a patent, to enable its term to continue after it expires.  Under TRIPS, a country can choose not to grant secondary patents for modifications of existing medicines.

The TPP (Article 18.3) requires countries to grant patents for at least one of the following modifications:  new uses of a known product, new methods for using a known product or new processes for using a known product.  Examples include a drug used for treating AIDS is now granted a new patent for treating hepatitis, or a drug in injection form is given a new patent in capsule form.

Second, a provision that enables extending the patent term beyond the 20 years required by TRIPS.   Most countries now count this 20 years from the date of filing the patent application.

The TPP requires the patent term to be extended beyond that if there are “unreasonable” delays in issuing the patents (Article 18.46) or if a delay is caused by the marketing approval process.”  (Article 18.48).     Extending the patent term means delaying affordable treatment for patients for so many more years.

Third, a provision (Article 18.50)  to create “data exclusivity” or “market exclusivity”, that prevents drug safety regulators from using existing clinical trial data to give market approval to generic drugs or biosimilar drugs and vaccines.   Under TRIPS, the clinical test data of a company can be used by a country’s drug regulatory authority as a basis to give safety or efficacy approval for generic drugs with similar characteristics, thus facilitating the growth and use of generic drugs.

Under the TPP, the data of the original company is “protected” and approval of similar drugs on the basis of such data is not allowed.  The period of “exclusivity” is at least 5 years for products containing a new chemical entity, or 3 years for modifications (a new indication, new formulation or new method of administration) of existing medicines.

Fourth, a provision on Biologics (Article 18.51).  For the first time in a trade agreement, the TPP  obliges its members to undertake data protection obligations for “biologics”, a category of products for treating and preventing cancer, diabetes and other conditions.  They are very expensive, some priced above $100,000 for a treatment course, and the clause will enable the prices to remain high for longer periods.   The exclusivity for biologics is for at least 8 years, or 5 years if other measures are also taken.

These provisions on exclusivity give drug companies extra protection, even if the product is not patented or if the patent has expired.  The drugs will be out of reach except for the very wealthy for longer periods.

Fifth, a provision (Article 18.76) that requires TRIPS-plus extra enforcement of intellectual property.  Countries are obliged to provide that the right holder can apply to detain any imported product that is suspected to be  counterfeit or having “confusingly similar trademark”.

This can block legitimate generic medicines from entering the country.   There have already been many cases of drugs being detained and later released when no infringement was found, thus needlessly delaying treatment to patients. The provision will increase the incidence.

All in all, these TRIPS-Plus TPP obligations would make it more difficult for patients to obtain cheaper generics. If these clauses are widely adopted in other trade agreements and made into national laws, this would shorten the lives of millions of people who would be denied treatment.

For example, many millions of people worldwide are afflicted with Hepatitis C, which can lead to liver failure and death. They need the new medicines that have nearly 100% cure rates close but the prices are over $80,000  for a 12-week treatment course.  Even with discounts, very few can afford this.

Some developing countries, making use of TRIPS flexibilities, are able to provide treatment with generic drugs at around $500 per patient, a very small fraction of the original drug’s price. But if the TPP clauses are translated into domestic law, this access could be blocked.

People in the developing countries are the most affected by patent over-protection, but patients in developed countries are not spared. The mainstream Time magazine in October 2016 listed the need to “Reform the Patent Process” as one of the issues the US Presidential election should address.

The Time article commented that many people believe drug companies are “gaming” the system.  “Instead of focusing on developing new cures, they are spending millions tweaking the way existing drugs are administered or changing their inactive ingredients.  Those moves have the effect of extending a drug’s patent and upping the amount of time it can be sold at monopoly prices, but they don’t necessarily help consumers.”

It is high time for a re-think to the system of drug patents.  At the least the situation should not be allowed to worsen further, which would happen if TRIPS-Plus measures are adopted.

The lives and health of millions are at stake.  Sometimes this is forgotten or put as a low priority when pitted against the promise of getting more exports in a free trade agreement.

But with the TPP in limbo and perhaps in perpetual suspension, there is really no reason why the provisions that have adverse effects should be implemented in the countries that had negotiated the TPP, when there are no benefits to be obtained to offset them.

More generally, in all countries, policy makers and people should be on guard not to agree to TRIPS-plus clauses in the trade agreements that they negotiate or sign.

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The tax on US imports, without the same being applied to US-made products, discriminates against foreign products, and US exports being exempted from taxes is tantamount to being an export subsidy. How will this be taken at the WTO, the guardian of the multilateral trading system? Credit: Amantha Perera/IPS

By Martin Khor
PENANG, Feb 17 2017 (IPS)

As American lawmakers and the Trump administration prepare the ground for introducing a border adjustment tax, many controversial issues have emerged, including whether they go against the rules of the World Trade Organisation (WTO).

The border tax is part of the overhaul of the US corporate tax system proposed by Republican Congress leaders and appears to have the support of President Donald Trump.

If adopted, the tax measure is sure to attract the opposition of the United States’ trading partners, as their exports to the US will have the equivalent of a 20% tax imposed on them, whereas the exports from the US will be exempted from a 20% corporate tax.

The tax on US imports, without the same being applied to US-made products, discriminates against foreign products, and US exports being exempted from taxes is tantamount to being an export subsidy.

How will this be taken at the WTO, the guardian of the multilateral trading system?

US Congressman Kevin Brady, chairman of the House Ways and Means Committee, and the plan’s main advocate, is convinced the plan is WTO-consistent, but has yet to explain why.

On the other hand, many trade and legal experts think the plan violates the principles and rules of the WTO, although they caution that a final opinion is possible only when the language of the law is known.

Their general view is as follows: Firstly, the inability to deduct import expenses from a company’s tax (while allowing deductions for locally sourced products and services and wages) discriminates against imports vis-à-vis domestic products, and violates the national treatment principle of the WTO and the rules of the General Agreement on Tariffs and Trade (GATT) which specify that imports must be treated no less favourably than similar locally produced goods.

Secondly, the exemption of export revenues from the taxable income would be most likely assessed as a prohibited export subsidy under the WTO’s subsidies agreement.

The renowned international trade expert, Bhagirath Lal Das, says that there are two separate issues to be considered:  the differential treatment of domestic and imported materials, and the differential tax treatment of income based on whether the product is domestically consumed or exported.

Martin Khor

Says Das:   “It appears that the proposal is to deduct the cost of domestic input (product) from a company’s income while computing the tax, whereas there is no such deduction if a like imported input is used in the production.

“If this be the case, such a provision will clearly violate the principle of national treatment contained in Article III of the GATT 1994.”     Under that article, imported products must be accorded treatment no less favourable than that given to similar domestic products in respect of laws and regulations.

Added Das:  “If the use of the domestic product results in tax reduction whereas the use of the like imported product does not get similar treatment, clearly the imported product will get “less favourable” treatment. And that will violate the principle of national treatment, and it can be successfully challenged in the WTO on this ground.”

On the second issue, the proposal is to differentiate between the earning from domestic sale and that from export in the matter of taxation in respect of a product.

Commented Das:  “Here it would appear that the exemption of the tax is conditional on export. This practice will clearly qualify for being categorised as export subsidy which is prohibited under Article 3 of the WTO’s Subsidy Agreement.”

Das cites a case of an American company, the Domestic International Sales Corporation (DISC).  A portion of its profit which was engaged in export was tax free.  The EEC, the predecessor of EC, raised a dispute in the GATT in 1973. The matter was delayed for a long time until in 1999 a panel at the WTO ruled that the US practice was in fact an export subsidy and was prohibited.

“This case may not be exactly the same as the currently anticipated proposal, but it does point to the fallibility of providing government benefit contingent on export,” says Das.

Das was formerly Chairman of the General Council of GATT,  Indian Ambassador to GATT, and subsequently Director of Trade in the UN Conference on Trade and Development, and has written many books on the WTO and its agreements.

According to another eminent expert on the WTO, Chakravarthi Raghavan, whether the US law is considered “legal” depends on the language of the law and its actual effects.

“There is little doubt that the “pith and substance” of the Republican border tax proposal or ideas will be in violation of Articles II and III of GATT and Article 3.1 of the Subsidies Agreement.”

Raghavan, Chief Editor Emeritus of the South-North Development Monitor, followed and analysed the negotiations of the Uruguay Round and of the WTO on a daily basis ever since.

There are many shortcomings with the WTO dispute system. Few countries have the courage or financial resources to take up cases against the US.
Countries can challenge the US at the WTO and if they succeed the US has to change its law or face retaliatory action.  The winning party can block US exports to it equivalent in value to the loss of its exports to the US.

However, there are many shortcomings with the WTO dispute system.  Few countries have the courage or financial resources to take up cases against the US.

If some countries do take up cases, it takes as long as three to four years for a case in the WTO to wind its way through panel hearings and to a final verdict at the Appellate Body, and for the winning Party to get the go-ahead to take retaliatory action.  During that period, the US can continue with its laws and practices.

If the US loses, it need not pay any compensation to the successful Party for having suffered losses.   Moreover, in the past, when it loses cases at the WTO, the US has typically not complied with the orders made on it.  Even if it does comply, it needs to do so only in respect of the Parties that brought the action against it; it need not do so for other Parties.

If it does not comply, the complainant countries are allowed to take retaliatory action by blocking US goods and services from entering their markets up to an amount equivalent to the losses they have suffered.  This retaliatory action can only be taken by those countries that successfully took up the cases.

Thus, the US may decide to implement the border adjustment taxes and wait two to four years before a final judgment is made at the WTO, and for retaliatory action to be allowed by the WTO.   It can meanwhile reap the benefits of its border tax measures.

Another possibility is that Trump may make good his threat to leave the WTO, if important cases go against it.  That would cause a major crisis for the WTO and for international trade.

With regard to the WTO process, Raghavan said:   “Apart from the difficulties of taking up cases in the WTO, including costs, the lengthy process and no retrospective damages when any WTO member, raises a dispute, the onus of proving the violation is on them.

“To the best of my knowledge, in none of the rulings against US, requiring changes in law or regulations, has the US implemented them, and even major trading partners have been chary of taking retaliation action.

“Countries that are affected, could act to unilaterally deny the US some rights; but they cannot justify that this is retaliation, until there is a ruling in their favour.”

American advocates of the border adjustment tax plan have claimed that it is similar to a value added tax (VAT) which is considered by the WTO to be a legitimate measure;  and thus that the border adjustment tax would also be compatible with the WTO.

Almost all major developed countries have instituted the VAT system, with the notable exception of the US.  The Republican Congress leaders and Trump have argued  that this places the US at a disadvantage in its trade relations because the VAT system imposes a tax on imports, whilst allowing companies to obtain a refund for taxes paid on their exports.

They claim the border tax would correct this disadvantage that the WTO should similarly recognise the border tax as legitimate.

However, several well-known economists and lawyers are of the opinion that there are important differences between the VAT and the border tax.

There are two parts of their arguments.  Firstly, the VAT imposes taxes on both imports and locally produced goods and services and therefore does not discriminate against imports;  whereas the border tax system imposes a tax on imports whilst excluding domestic inputs and wages from tax, which therefore discriminates against imports.  Secondly, the VAT system does not subsidise exports, whereas the border tax system does.

In a 1990 paper, Martin Feldstein and Paul Krugman found that the VAT does not improved the trade competitiveness of countries using it.  They said:  “The point that VATs do not inherently affect international trade flows has been well recognised in the international tax literature…A VAT Is not a protectionist measure.”

Krugman, in a recent blog, reiterated that “a VAT does not give a nation any kind of competitive advantage, period.”  But a destination-based cash flow tax like the border adjustment tax has a subsidy element that “would lead to expanded domestic production.”

In another paper, Reeven Avi-Yonah and Kimberly Clausing  from Michigan Law School and Reed College respectively analyse the difference between the VAT and the proposed border adjustment tax and why the former is WTO-consistent whereas the latter would violate WTO rules.

They said:   “U.S. trading partners are likely to be hurt in several ways. The effects of the wage deduction render the corporate cashflow tax different from a VAT, and these differences have the net effect of increasing the incentive to operate in the United States

“In addition, such a tax system would exacerbate the profit shifting problems of our trading partners, since the United States will appear like a tax haven from their perspective.”

Economists also agree that the border tax will raise the value of the US dollar but there is a debate as to how long this will take and by how much it will rise. If the dollar appreciation is significant, this may have an adverse effect on countries that hold debt in US dollars, as they would have to pay out more in their domestic currency to service their loans. This would include many developing countries with substantial dollar-denominated debts of the public or private sectors, and some of them may tip into new debt and financial crises.    According to former US Treasury Secretary Lawrence Summers:  “Proponents of the plan anticipate a rise in the dollar by an amount equal to the 15 to 20 per cent tax rate.  This would do huge damage to dollar debtors all over the world and provoke financial crises in some emerging markets.”           

This article is the second in a two-part series on the border adjustment tax, which would have the effect of taxing imports of goods and services that enter the United States, while also providing a subsidy for US exports which would be exempted from the tax. You can find Part 1 here

Excerpt:

For the time being the much anticipated US-China trade war is off the radar. But it is by no means off altogether. Credit: Bigstock

By Martin Khor
PENANG, Feb 17 2017 (IPS)

A new and deadly form of protectionism is being considered by Congress leaders and the President of the United States that could have devastating effect on the exports and investments of American trading partners, especially the developing countries.

The plan, known as a border adjustment tax, would have the effect of taxing imports of goods and services that enter the United States, while also providing a subsidy for US exports which would be exempted from the tax.

The aim is to improve the competitiveness of US products, drastically reduce the country’s imports while promoting its exports, and thus reduce the huge US trade deficit.

On the other hand, if adopted, it would significantly reduce the competitiveness or viability of goods and services of countries presently exporting to the US.  The prices of these exports will have to rise due to the tax effect, depressing their demand and in some cases make them unsalable.

And companies from the US or other countries that have invested in developing countries because of cheaper costs and then export their products to the US will be adversely affected because of the new US import tax.

Some firms will relocate to the US.   Potential investors will be discouraged from opening new factories in the developing countries.  In fact this is one of the main aims of the plan – to get companies return to the US.

The plan is a key part of the America First strategy of US President Donald Trump, with his subsidiary policies of “Buy American” and “Hire Americans.”

The border adjustment tax is part of a tax reform blueprint “A Better Way” whose chief advocates are Republican leaders Paul Ryan, speaker of the House of Representatives and Kevin Brady, Chairman of the House Ways and Means Committee.

President Trump originally called the plan “too complicated” but is now considering it seriously.  In a recent address to congressional Republicans, Trump said:  “We’re working on a tax reform bill that will reduce our trade deficits, increase American exports and will generate revenue from Mexico that will pay for the (border) wall.”

Martin Khor

The proposal has however generated a tremendous controversy in the US, with opposition coming from some Congress members (including Republicans), many economists and American companies whose business is import-intensive.

It however has the strong support of Republican Congress leaders and some version of it could be tabled as a bill.

Trump had earlier threatened to impose high tariffs on imports from countries having a trade surplus with the US, especially China and Mexico.

This might be a more simple measure, but is so blatantly protectionist that it would be sure to trigger swift retaliation, and would also almost certainly be found to violate the rules of the World Trade Organisation (WTO).

The tax adjustment plan may have a similar effect in discouraging imports and moreover would promote exports, but it is more complex and thus difficult to understand.

The advocates hope that because of the complexity and confusion, the measure may not attract such a strong response from US trading partners.  Moreover they claim it is permitted by the WTO are presumably willing to put it to the test.

In the tax reform plan, the corporate tax rate would be reduced from the present 35% to 20%.   The border adjustment aspect of the plan has two main components. Firstly, the expenses of a company on imported goods and services can no longer be deducted from a company’s taxable income.  Wages and domestically produced inputs purchased by the company can be deducted.

The effect is that a 20% tax would be applied to the companies’ imports.

This would especially hit companies that rely on imports such as automobiles, electronic products, clothing, toys and the retail and oil refining sectors.

The Wall Street Journal gives the example of a firm with a revenue of $10,000 and with $5,000 imports, $2 000 wage costs and $3,000 profit.  Under the present system, where the $5,000 imports plus the $2,000 wages can be deducted, and with a 35% tax rate, the company’s taxable total would be $3,000, tax would be $1,050 and after-tax profit would be $1,950.

Under the new plan, the $5,000 imports cannot be deducted and would form part of the new taxable total of $8,000.  With a 20% tax rate, the tax would be $1,600 and the after-tax profit $1,400.

Given this scenario, if the company wants to retain his profit margin, it would have to raise its price and revenue significantly, but this in turn would reduce the volume of demand for the imported goods.

For firms that are more import-dependent, or with lower profit margin, the situation may be even more dire, as some may not be financially viable anymore.

Take the example of a company with $10,000 revenue, $7,000 imports, $2,000 wages and $1,000 profit.   With the new plan, the taxable total is $8,000 and the tax is $1,600, so after tax it has a loss of $600 instead of a profit of $1,000.

The company, to stay alive, would have to raise its prices very significantly, but that might make its imported product much less competitive.  In the worst case, it would close, and the imports would cease.

The economist Larry Summers, a former Treasury Secretary, gives a similar example of a retailer who imports goods for 60 cents, incurs 30 cents in labour and interest costs and then earns a 5 cent margin.  With 20% tax, and no ability to deduct import or interest costs, the taxes will substantially exceed 100% of profits even if there is some offset from a stronger dollar.

On the other hand, the new plan allows a firm to deduct revenue from its exports from its taxable income.  This would allow the firm to increase its after-tax profit.

The Wall Street Journal article gives the example of a firm which presently has export sales of $10,000, cost of inputs $5,000, wages $2,000 and profit $3,000.  With the 35% corporate tax rate, the tax is $1,050 and after-tax profit is $1,950.

Perhaps the most vulnerable country is Mexico, where many factories were established to take advantage of tariff-free entry to the US market under the North American Free Trade Agreement. President Trump has warned American as well as German and Japanese auto companies that if they make new investments in Mexico, their products would face high taxes or tariffs on entry, and called on them to invest in the US instead.
Under the new plan, the export sales of $10,000 is exempt from tax, so the company has zero tax.  Its profit after tax is thus $3,000.   The company can cut its export prices, demand for its product increases and the company can expand its sales and export revenues.

At the macro level, with imports reduced and exports increased, the US can cut its trade deficit, which is a major aim of the plan.

On the other hand, the US is a major export market for many developing countries, so the tax plan if implemented will have serious adverse effects on them.

The countries range from China and Mexico, which sell hundreds of billions of dollars of manufactured products to the US; to Brazil and Argentina which are major agricultural exporters; to Malaysia, Indonesia and Vietnam which sell commodities like palm oil and timber and also manufactured goods such as electronic products and components and textiles, Arab countries that export oil, and African countries that export oil, minerals and other commodities, and countries like India which provide services such as call services and accountancy services to US companies.

American industrial companies are also investors in many developing countries. The tax plan if implemented would reduce the incentives for some of these companies to be located abroad as the low-cost advantage of the foreign countries would be offset by the inability of the parent company to claim tax deductions for the goods imported from their subsidiary companies abroad.

Perhaps the most vulnerable country is Mexico, where many factories were established to take advantage of tariff-free entry to the US market under the North American Free Trade Agreement.  President Trump has warned American as well as German and Japanese auto companies that if they make new investments in Mexico, their products would face high taxes or tariffs on entry, and called on them to invest in the US instead.

After the implications of the border adjustment plan are understood, it is bound to generate concern and outrage from the United States’ trading partners, in both South and North, if implemented.  They can be expected to consider immediate retaliatory measures.

A former undersecretary for international business negotiations of Mexico (2000-2006), Luis de la Calle, said  in a media interview:  “If the US wants to move to this new border tax approach, Mexico and Canada would have to do the same….We have to prepare for that scenario.”

In any case, it can be expected that countries will take up complaints against the US at the WTO.   The proponents claim the tax plan will be designed in a way that is compatible with the WTO rules.

But many international trade law experts believe the tax plan’s measures will violate several of the WTO’s principles and agreements, and that the US will lose if other countries take up cases against it in the WTO dispute settlement system.

This prospect may however not decisively deter Trump from championing the Republicans’ tax blueprint and signing it into law, should Congress decide to adopt it.

The President and some of his trade advisors have criticised the WTO’s rules and have mentioned the option of leaving the organisation if it prevents or impedes the new America First strategy from being implemented.  If the US leaves the WTO, it would of course cause a major crisis for international trade and trade relations.

There are many critics of the plan.  Lawrence Summers, a former US Treasury Secretary, warns that the tax change will worsen inequality, place punitive burdens on import-intensive sectors and companies, and harm the global economy.

The tax plan is expected to cause a 15-20% rise in the US dollar.  “This would do huge damage to dollar debtors all over the world and provoke financial crises in some emerging markets,” according to Summers.

While export-oriented US companies are supporters, other US companies including giants Walmart and Apple are strongly against the border tax plan, and an influential Republican, Steven Forbes, owner of Forbes magazine, has called the plan “insane.”

It is not yet clear what Trump’s final position will be. If he finds it too difficult to use the proposed border tax, because of the effect on some American companies and sectors, he might opt for the simpler use of tariffs.

In any case, whether tariffs or border taxes, policy makers and companies and employees especially in developing countries should pay attention to the trade policies being cooked up in Washington, and to voice their opinions.

Otherwise they may wake up to a world where their products are blocked from the US, the world’s largest market, and where the companies that were once so happy to make money in their countries suddenly pack up and return home.

This article is the first in a two-part series on the border adjustment tax, which would have the effect of taxing imports of goods and services that enter the United States, while also providing a subsidy for US exports which would be exempted from the tax. You can find Part 2 here

Excerpt:

By Roberto Azevêdo
GENEVA, Jun 29 2015 (IPS)

The latest report by the World Trade Organisation (WTO) on G20 trade measures shows a slight deceleration in the application of new trade-restrictive measures by G20 economies, with the average number of such measures applied per month lower than at any time since 2013.

According to the thirteenth such WTO report, issued on Jun. 15, G20 economies had applied 119 new trade-restrictive measures since mid-October 2014, an average of 17 new measures per month over the period.

Roberto Azevêdo

A slight decrease in the number of trade remedy investigations by G20 economies has also contributed to this overall figure.

But it is not yet clear that this deceleration will continue and the WTO calls on G20 leaders to show continued vigilance and reinforced determination towards eliminating existing trade restrictions.

The longer term trend remains one of concern, with the overall stock of trade-restrictive measures introduced by G20 economies since 2008 continuing to rise.

Of the 1,360 restrictions recorded by this exercise since 2008, less than one-quarter have been eliminated, leaving the total number of restrictive measures still in place at 1,031. Therefore, despite the G20 pledge to roll back any new protectionist measures, the stock of these measures has risen by over seven percent since the last report.

The broader international economic context also supports the need for continuing vigilance and action. According to the WTO’s most recent forecast (14 April 2015), growth in the volume of world merchandise trade should increase from 2.8 percent in 2014 to 3.3% percent 2015 and further to four percent in 2016, but remaining below historical averages.“The longer term trend [vis-à-vis protectionism] remains one of concern, with the overall stock of trade-restrictive measures introduced by G20 economies since 2008 continuing to rise”

The overall response to the 2008 financial crisis has been more muted than expected when compared with previous crises. The multilateral trading system has proved an effective backstop against protectionism.

During this period, G20 economies also continued to adopt measures aimed at facilitating trade, both temporary and permanent in nature.

These developments confirm that G20 economies overall have shown a degree of restraint in introducing new trade restrictions. However, it is not yet clear that the deceleration in the number of measures introduced will continue in future reporting periods. It is also relevant that the slow pace of removal of previous restrictions means that the overall stock of restrictive measures is continuing to increase.

The broader international economic context also supports the need for continuing vigilance and action.

Trends in world trade and output have remained mixed since the last monitoring report, as merchandise trade volumes and GDP growth picked up in the second half of 2014 but appear to have slowed in the first quarter of 2015.

Economic activity remained uneven across countries as the United States and China slowed in the first quarter, while growth in the Euro area and Japan picked up.

Plunging oil prices and strong exchange rate fluctuations, including an appreciation of the U.S. dollar and a depreciation of the Euro contributed uncertainty to the economic outlook.

Lower prices for oil and other primary commodities were expected to provide a boost to importing economies, but reduced export revenues weighed heavily on commodity exporters.

In light of these developments, our most recent forecast (14 April 2015) predicted a continued moderate expansion of trade in 2015 and 2016, although the pace of recovery was expected to remain below historical averages.

In the area of government procurement, work from the Organisation for Economic Cooperation and Development (OECD), identifying 65 measures implemented since the financial crisis, suggests that discriminatory government procurement policies have become increasingly popular and potentially affect 423 billion dollars of government procurement in the implementing economies.

This report shows that G20 economies implemented 48 new general economic support measures during the period under review, with the majority targeting the manufacturing and agricultural sectors through various incentive schemes, often, but not exclusively, in the context of exports.

The overall assessment of this thirteenth report on G20 trade measures is that the continuing
increase in the stock of new trade-restrictive measures recorded since 2008 remains of concern in the context of an uncertain global economic outlook.

Individually and collectively, the G20 must show leadership and deliver on the pledge to refrain from implementing new measures taken for protectionist purposes and to remove existing ones. (END/COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

ACP Secretary-General Patrick I. Gomes, who sees the group’s role as “a global player defending, protecting and promoting an inclusive struggle against poverty and for sustainable development in a world enmeshed in inequality”. Photo credit: ACP Press

By Patrick I. Gomes
BRUSSELS, Jun 28 2015 (IPS)

In his memoirs, Glimpses of a Global Life, Sir Shridath Ramphal, then-Foreign Minister of the Republic of Guyana, who played a leading role in the evolution of the Lomé negotiations that lead to the birth of the African, Caribbean and Pacific (ACP) Group of States, pointed to the significant lessons of that engagement of developed and developing countries some 40 years ago and had this to say:

“As regards the Lomé negotiations, the process of unification – for such it was – added a new dimension to the Third World’s quest for economic justice through international action. Its significance, however, derives not merely from the terms of the negotiated relationship between the 46 ACP states and the EEC, but from the methodology of unified bargaining which the negotiations pioneered.

“Never before had so large a segment of the developing world negotiated with so powerful a grouping of developed countries so comprehensive and so innovative a regime of economic relations. It was a new, and salutary, experience for Europe; it was a new, and reassuring, experience for the ACP States.

“Forty years later, that lesson remains retains its validity. Unity of purpose and action remains the touchstone of ACP’s meaning and success.”

With a conscious appreciation of that founding unity of purpose and action, the ACP Group convened a high-level symposium at its headquarters in Brussels on Jun. 6. The event marked the milestone of four decades of trade and economic cooperation, vigorous and contentious political engagements and a range of development finance programmes – all aimed at the eradication of poverty from the lives of the millions of people in its 79 member states.“The ACP will craft its future path to continue the struggle against power, inequality and injustice, the core purpose for which it was established in 1975”

In 1975, it was 46 developing countries that met in the capital city of Guyana, to sign the Georgetown Agreement and give birth to the ACP Group. They had recently embarked on their post-colonial path of independence following successful negotiations of non-reciprocal trade arrangements with the then nine-member European Economic Community (EEC) in February.

Known as the Lomé Agreement, after the capital of Togo where it was signed, this legally-binding, international agreement had a life-span of 25 years to 2000. Essentially, it comprised three pillars of trade and economic cooperation, development assistance – mainly through grants from the European Development Fund (EDF) – and political dialogue on issues such as human rights and democratic governance.

During that period, the preferential trade and aid pact undoubtedly gave an impetus to various aspects of economic and social development in the ACP Group. Substantial revenue was received from preferential access to the European market for exports of clothing, banana, sugar, cocoa, beef, fruit and vegetables, for example, and with the accompanying aid programmes.

The benefits were seen in the economies of Mauritius, Kenya, Cote d’Ivoire, Namibia, Guyana and Fiji, to name a few. Member states of the ACP Group, less-developed countries (LDCs), landlocked states and small island developing states (SIDS), had access to returns from trade for improved social services and in this sense, the first decades of Lomé were certainly gains for development in sub-Saharan Africa, the Caribbean and Pacific.

But these gains entrenched an aid-dependency of commodity export economies with minimal structural transformation through value-added manufacturing and related service sectors in ACP countries.

The fierce trade-liberalising world of the late 1990s, rising indebtedness due to enormous increase in the cost of energy and pressure from the challenge of the World Trade Organisation (WTO) to the European Union’s discriminatory practice of preferential trade and aid to this exclusive set of developing countries meant that post-Lomé ACP-EU trade relations had to be WTO-compatible.

Finding compatibility for “substantially all trade” between the economies of the ACP’s 79 members – grouped in six regions of Africa, the Caribbean and Pacific – and Europe, and ensuring that development criteria take precedence over tariff reductions and WTO rules have proven contentious in this long-standing partnership.

With this overhang of tensions in its troubled access to its principal market, the ACP faces the conclusion of the 20-year Agreement signed in Cotonou, the Republic of Benin, in 2020.

A soul-searching and vigorous process to be repositioned as a global player defending, protecting and promoting an inclusive struggle against poverty and for sustainable development in a world enmeshed in inequality is the singular task on which the ACP now concentrates.

Such a task has entailed a series of actions that are informed by the report of the Ambassadorial Working Group on Future Perspectives for the ACP Group of States that was approved by the Council of Ministers in December 2014.

The main thrust of the transformation and repositioning of the ACP is captured in the strategic policy domains identified in the report.

These are in five thematic areas that address:

a) Rule of Law & Good Governance;

b) Global Justice & Human Security;

c) Building Sustainable, Resilient & Creative Economies; and

d) Intra-ACP Trade, Industrialisation and Regional Integration;

e) Financing for Development.

In each of these, and in ways that are mutually reinforcing, very specific programmed activities of an annual action plan are being prepared and will be executed.

For example, the annual plan will address the thematic area of “sustainable, resilient and creative economies” through the mechanism of an ACP Forum on SIDS with financial resources, mainly from the intra-ACP allocation of the EDF and the UN’s Food & Agriculture Organisation (FAO), one of the partner agencies of the UN system with which the ACP Group works very closely.

Conceptualised so as to address systemic and structural factors affecting sustainable development, the ACP emphasises South-South and triangular cooperation as a major modality for implementation of its role as catalyst and advocate.

The current stage of rethinking and refocusing provides an opportunity for 40 years of development through trade by which the ACP Group and the European Union could recast the world’s most unique and enduring North-South treaty of developed and developing countries to effectively participate in a global partnership where no one is left behind.

The ACP has social and organisational capital accumulated from a rich experience on trade negotiations with the world’s largest bloc of Europe and its 500 million inhabitants.

Undoubtedly marked by contentious issues on trade provisions to satisfy the WTO’s non-discriminatory behaviour among its member States, ACP-EU relations reveal the persistent battle of poor versus rich with a view to finding common ground on issues of mutual interest.

The 40^th anniversary celebration by the ACP Group at a High-Level Inter-regional Symposium on Jun. 4 and 5 witnessed reflections on achievements and failures, as well as limitations in the performance of the ACP Group, in itself as a group and among its member states, as well as in its partnership with the European Union and the wider global arena.

The theme of the symposium covered the initial Georgetown Agreement and the ambitious objectives that were set in 1975. The high point was the keynote address by H.E. Sam Kutesa, President of the UN General Assembly.

Interestingly, discussions revealed how relevant and timely they remain and of special note was the “promotion of a fairer and more equitable new world order”.

This retrospective conversation has been recognised as fundamental for how, and in what direction, the ACP will craft its future path to continue the struggle against power, inequality and injustice, the core purpose for which it was established in 1975.

Edited by Phil Harris    

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

Excerpt:

Haitian-Italian designer Stella Jean (right) has been working with the Ethical Fashion Initiative (EFI), using Haitian craftsmanship in areas such as embroidery and beadwork in her collections. Credit: ITC Ethical Fashion Initiative 5

By A. D. McKenzie
PARIS, Jun 4 2015 (IPS)

“Work is dignity,” says Simone Cipriani. “People want employment, not charity.”

With that in mind, Italian-born Cipriani founded a programme in 2009 called the Ethical Fashion Initiative (EFI) that links some of the world’s top fashion talents to marginalised artisans – mostly women – in East and West Africa, Haiti and the West Bank.

Now a flagship programme of the International Trade Centre, a joint agency of the United Nations and the World Trade Organization (WTO), the Geneva-based EFI works with leading designers such as Stella McCartney and Vivienne Westwood to facilitate the development and production of “high-quality, ethical fashion items” from artisans living in low-income rural and urban areas.

The EFI says its aim is also to “enable Africa’s rising generation of fashion talent to forge environmentally sound, sustainable and fulfilling creative collaborations with local artisans.” Under its slogan “not charity, just work”, the Initiative advocates for a fairer global fashion industry.“We work with women who sometimes face discrimination in their communities, but by having a job, their position in society improves. They gain independence and respect, and in many situations they become the only breadwinner in their families” – Simone Cipriani, Ethical Fashion Initiative

This year, for the first time, the EFI is collaborating with the most important international trade fair for men’s fashion, Pitti Immagine Uomo, to host designers who represent four African countries.

Taking place June 16 to 19 in Florence, Italy, the fair will present a special edition of its Guest Nation Project, in which a particular area is designated for the “rising stars” of fashion from various countries, according to Raffaello Napoleone, CEO of Pitti.

Napoleone said that the African designers in this year’s Guest Nation give priority to manufacturing in their home countries, helping to reduce poverty, and that they are already known on the international market.

The stylists will put on a runway show, highlighting their men’s collections, in a special event titled ‘Constellation Africa’. The brands – Dent de Man, MaXhosa by Laduma, Orange Culture and Projecto Mental – have designers who represent Cote d’Ivoire, South Africa, Nigeria and Angola, and were selected as part of the African Fashion Designer competition launched by the EFI last December.

“This is where our global society is going: interconnectedness. Global and local dimensions brought together through fashion,” said Cipriani.

Market analysts expect the global value of the apparel retail industry to rise about 20 percent from 2014 levels to reach some 1,500 billion dollars in 2017. With such high volumes, the various sectors of the industry could be an increasing source of employment in many regions, from design to garment-making to sales.

But over the past several years, there has been controversy about the apparent exclusion of fashion designers and models of African descent in high-profile ‘Fashion Weeks’ and other international events

Tansy E. Hoskins, author of a polemical book published last year titled Stitched Up: The Anti-Capitalist Book of Fashion, has a whole chapter devoted to the question “Is Fashion Racist?”

She says that several decades after a renowned fashion magazine had its first black model on the cover, “all-white catwalks, all-white advertising campaigns and all-white fashion shoots are still the norm”.

Simone Cipriani, founder of the Ethical Fashion Initiative (EFI). Credit: A.D. McKenzie/IPS

The Ethical Fashion Initiative is primarily concerned with poverty reduction and ethical treatment of artisans, but Cipriani acknowledges that racism is an issue and that poverty can be linked to ethnicity as well as gender.

Still, the fashion industry does have companies that try to adhere to ethical standards, including diversity, working conditions and environmental sustainability; and 30 international brands have signed on to the EFI project. But not every company is a good fit.

“We try to work almost exclusively with brands that have a clear scheme on responsible business and social engagement, otherwise there’s always the risk of being used and having to clean up after somebody else,” Cipriani told IPS in an interview, during a trip to Paris to meet with designers.

“We’ve had our troubles and have had to work through a long learning curve”, he added. “We also tried to work with big distributors and realised it wasn’t possible for what we do, so here we are.”

Groups such as the EFI and activists like Hoskins say that their major concern is how to make the fashion industry fairer, particularly with decent labour conditions for workers everywhere.

Two years ago in Bangladesh, for instance, more than 1,100 workers died and 2,500 were injured when a factory building collapsed after safety warnings were ignored. The workers made clothing for brands including Benetton, which only this year announced that it would contribute to a compensation fund for the victims.

That agreement followed a campaign in which one million people signed an online petition calling for the company to take proper action.

“What happened in Bangladesh was a horror, and there are many situations in which exactly the same horror can occur,” Cipriani said. “The first thing about responsibility should always be people. Dignified working conditions for people.”

He said that many artisans working in the fashion industry’s supply chain also do not earn enough to live on. “They don’t get the remuneration for their work that allows them to have a dignified life,” he told IPS. “Many of them are paid in such a way that they have to live at the margin.”

In Haiti, which is known for its artistry as well as its poverty, activists say that linking local artisans with international designers can and have made some impact. The Haitian-Italian designer Stella Jean has been working with EFI, using Haitian craftsmanship in areas such as embroidery and beadwork in her collections, for example. She also employs textiles made in Africa.

Jean has been an EFI “partner” since 2013 and she sources several elements of her designs through its projects, Cipriani said. The collaboration started with a visit to Burkina Faso – one of the largest producers of cotton in Africa with an important tradition of hand-weaving – where the designer saw the possibilities of “working with these ethically produced textiles”. She incorporated them as a key feature of her women’s and men’s ready-to-wear collections.

Last year, she also launched a new range of bags, produced in Kenya with fabric from Burkina Faso and Mali and vegetable-tanned leather from Kenya, “making each bag a pan-African product,” says the EFI.

In Kenya, British designers McCartney (who declined to be interviewed) and Westwood have placed several orders for fashion items, and the EFI has carried out “Impact Assessment” studies to evaluate compliance with fair labour standards “and the impact the orders had on people and the communities they live in.”

“We work with women who sometimes face discrimination in their communities, but by having a job, their position in society improves,” Cipriani told IPS. “They gain independence and respect, and in many situations they become the only breadwinner in their families.”

The Ethical Fashion Initiative has testimonials from artisans about the improvement in their lives from the income they received through the orders, with several workers detailing their new ability to pay rent and school fees, among other developments.

Hoskins says that these steps are important, but that the fashion industry cannot be fully transformed without massive, collective action. “Ethical fashion has become a catch-all phrase encompassing issues such as environmental toxicity, labour rights, air miles, animal cruelty and product sustainability,” she argues.

“After 20 or so years and despite some innovative initiatives, it holds an ‘exceptionally low market share’ at just over 1 percent of the overall apparel market.”

In an interview, she said that asking whether fashion can ever be ethical is like asking “can capitalism ever be ethical?”

“For me the answer is ‘no’ because it’s based on exploitation, it’s based on competition, and above all it’s based on profit, and that’s what in the fashion industry drives wages down, drives environmental standards down and down and down,” she told IPS.

“There are small companies doing things differently but they’re producing maybe a few thousand units every year. The fashion industry produces billions and billions of units every single year.”

Hoskins also asked the question: “Why is it not the case that all products are ethically made?”

But reform evidently takes time. With the Pitti trade fair in Italy now collaborating with EFI, the “ethical fashion” movement may get a boost. It is also up to consumers to make the right choices, activists say.

“Consumers must demand change. Consumers can’t be too docile,” says Cipriani.

Edited by Phil Harris    

Patient and leading health organisations in South Africa have now joined a Fix the Patent Laws campaign launched in 2011 by Treatment Action Campaign (TAC) and Doctors Without Borders (MSF) to push for reform of the country’s current patent laws.

The campaign’s promoters say that these laws severely restrict access to affordable medicines for all people living in South Africa.

The organisations which have adhered to the campaign are: People Living With Cancer (PLWC), South African Depression and Anxiety Group (SADAG), DiabetesSA, CanSurvive, SA Federation for Mental Health (SAFMH), Stop Stock Outs, Cancer Association of Southern Africa (CANSA), Schizophrenia and Bipolar Disorder Alliance (SABDA), South African Non-Communicable Diseases Alliance (SANCD Alliance), Marie Stopes, Epilepsy South Africa and Cape Mental Health.

Together, they are calling on the South African government to finalise a National Policy on Intellectual Property that champions measures to reduce prices and increase access to a wide range of medicines for people in need across the country.

TAC and MSF reported Jun. 1 that the expanded coalition of organisations represents public and private sector patients in South Africa seeking treatment and care for a range of cancers, mental illnesses, diabetes and other non-communicable diseases – as well as tuberculosis, HIV and sexual and reproductive health diseases.

South Africa currently grants patents on almost every patent application it receives, allowing companies to maintain lengthy monopoly periods on medicines, argues the campaign. This keeps prices of many medicines higher in South Africa than in many other countries.

According to TAC and MSF, it is estimated that 80 percent of patents granted in South Africa do not meet the country’s patentability criteria. This is largely due to the fact that patents are granted without substantive examination of applications to ensure that patentability criteria are met.

“Some cancer patients would rather go to other countries, like India, for treatment – the combined cost of the flight, medical services and drugs is cheaper than buying the drugs alone in South Africa,” said Bernice Lass of cancer group, CanSurvive.

Linda Greeff of PLWC said that her organisation was supporting the campaign because “we want to ensure that there is proper scrutiny of patent applications before patents are granted. We want a patent granting process that is ethical and transparent, so that more people can access the medicines that they need.”

According to Cassey Chambers of SADAG, the group deals with “patients every day who cannot afford medication or treatment, and as a result become more depressed, helpless, hopeless and even suicidal in some cases.”

DiabetesSA’s Keegan Hall stressed that as health organisations, “we have an obligation to take steps to improve affordability and access to medicines. The cost of insulin and other diabetes management tools are far too expensive for many patients,” Hall added.

Health organisations joining the Fix the Patent Laws campaign say that they recognise the opportunity South Africa has to improve access to medicines for all diseases through reforming problematic patent laws.

South Africa’s Department of Trade and Industry (DTI) has already embarked on the process of legislative reform, releasing a Draft National Policy on Intellectual Property for public comment in 2013. The draft policy contained important commitments to reform the laws in order to restore the balance between public and private interest, in favour of people’s health.

The Fix the Patent Laws campaign coalition is calling for urgent approval of a finalised National Policy on Intellectual Property, as a critical first step toward reform of problematic patent laws and practices that deprive people living in South Africa of more affordable treatments for all conditions.

It notes that as a member of the World Trade Organisation (WTO), South Africa is required to uphold minimum standards of intellectual property protection as defined by the international Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). This includes granting 20-year patents on medicines.

However, South Africa also has significant flexibility under TRIPS to amend national legislation in order to improve access to medicines. According to the health organisations, reforms could include the government taking measures to limit abusive patents being granted on medicines.

At the same time, it says, government could establish easier procedures for overcoming legitimate patent barriers when medicines are unaffordable, unavailable or not adapted for patient needs.

Edited by Phil Harris   

Opening Ceremony of the 101st Session of the ACP Council of Ministers, May 2015, with Secretary-General Dr Patrick I. Gomes (third from left) and President of the Council of Ministers Meltek Sato Kilman Livtuvanu (third from right). Credit: Valentina Gasbarri/IPS

By Valentina Gasbarri
BRUSSELS, May 27 2015 (IPS)

“Four decades of existence is a milestone for the ACP as an international alliance of developing countries,” Dr Patrick I. Gomes of Guyana, newly appointed Secretary-General of the African, Caribbean and Pacific group of countries, said at the opening of the 101st Session of the group’s Council of Ministers.

“With the organisation currently repositioning itself for more strategic engagements with regards to its future, this is an opportunity not only to review the past, but also to project to the decades ahead, especially in terms of how to be effective and better respond to the development needs of our member countries in the 21st century,” he added.“From the viewpoint of the poor and vulnerable, we are the moral majority. Not only do we count, but we must continue to make our voice count in the global arena if we are to transform the ACP Group of States into a truly effective global player” – Meltek Sato Kilman Livtuvanu, President of the ACP’s Council of Ministers

The meeting, which opened May 26, brought together more than 300 officials from the ACP group who are determined to put an emphasis on re-positioning the ACP group as an effective player in a challenging global landscape.

At the group’s 7^th Summit of Heads of State and Government held in Equatorial Guinea in December 2012, the group issued the Sipopo Declaration which noted that “at this historic juncture in the existence of our unique intergovernmental and tri-continental organisation, the demands for fundamental renewal and transformation are no longer mere options but unavoidable imperatives for strategic change”.

Meltek Sato Kilman Livtuvanu, Minister of Foreign Affairs of Vanuatu and President of the ACP’s Council of Ministers, told the opening session of this week’s Council meeting that “from the viewpoint of the poor and vulnerable, we are the moral majority. Not only do we count, but we must continue to make our voice count in the global arena if we are to transform the ACP Group of States into a truly effective global player.”

A key focus of the 40th anniversary is how to enhance regional and intra-ACP relations in order to better position the ACP group to deliver on development goals in the post-2015 era, starting with playing a decisive role at the Third International Conference on Financing for Development to be held in July in Addis Ababa, Ethiopia, as well as at the U.N. Summit on the Post-2015 Development Agenda to be held in New York in September.

ACP Secretary-General Dr Patrick I. Gomes (left) and President of the Council of Ministers Meltek Sato Kilman Livtuvanu at the opening ceremony of the 101st Session of the ACP Council of Ministers, May 2015. Credit: Valentina Gasbarri/IPS

For ACP Secretary-General Gomes, the most critical meeting for the group will be the 8th ACP Summit, which had originally been scheduled to be held in November in Suriname before that country had to withdraw due to multiple commitments.

Inviting member countries to step forward and offer to host the event, Gomes said that the 8^th Summit “must be a beacon that refines our strategic policy domains for the next decade and project a powerful political vision to serve the ACP in our engagement with the European Union.”

More importantly, that summit would provide the strategic direction and financial commitment necessary to build the capacity of the ACP group to address the development needs of its populations.

Viwanou Gnassounou of Togo, ACP Assistant Secretary-General for Sustainable Economic Development and Trade, told IPS that the group “will be fully engaged in 2015 in high-level negotiations not only calling for a strategic approach but also trying to raise our common voice in a more holistic manner.”

He said that the ACP is finalising a position paper to be presented in December at the U.N. Climate Change Conference in Paris, as well as at the 10th Ministerial Conference of the World Trade Organisation (WTO) in Nairobi in December.

Participants at the Council of Ministers meeting agreed that the plethora of priorities facing the ACP today calls for widening its partnership with the European Union and beyond, embracing the global South as well as emerging economies with greater determination, and promoting South-South and triangular cooperation.

The Cotonou Partnership Agreement which currently governs relations between the ACP and the European Union expires in 2020 and the ACP Secretariat has commissioned a consultancy exercise to formulate the ACP Group’s position future relations with the European Union.

The ACP-EU Joint Council of Ministers, which meets May 28, is expected to place a special focus on migration and discuss recommendations from an ACP-EU experts’ meeting on trafficking in human beings and smuggling of migrants following the unacceptable loss of thousands of lives in the Mediterranean Sea as people try to reach Europe.

The two sides are also expected to exchange views on the broad range of issues affecting the ACP-EU trade relations at multilateral and bilateral levels, as well as financing for development as a follow up to the ACP-EU Declaration on the Post-Development Agenda approved in June 2014, which called for “an ambitious financing framework to adequately tackle sustainable development issues and challenges.”

In this context, the declaration said that a “coherent response based on a global comprehensive and integrated approach, fuelled by traditional and innovative financing solutions and governed by principles for efficient resource use seems the most appropriate way to finance sustainable development.”

Edited by Phil Harris  

A dhoni in the Maldives. Credit: Nevit Dilmen/cc by 3.0

By Ahmed Sareer
NEW YORK, Jan 10 2015 (IPS)

Since 1971, Maldives is one of only three countries that have graduated from the ranks of the world’s “least developed countries” (LDCs) – the other two being Botswana and Cape Verde.

The Maldives graduated on Jan. 1, 2011. The review of LDCs conducted in 1997 concluded that the Maldives was ready for immediate graduation.

Ambassador Sareer. UN Photo/Eskinder Debebe

The Maldives government argued that the U.N. criteria for graduation should include a “smooth transition period” in order to bring into place adequate adjustments necessary for full transition into middle-income country status.

The U.N. Resolution adopted on Dec. 20, 2004 endorsed and adopted these arguments. Under that resolution, the Maldives was set to graduate from the list of LDCs on Jan. 1, 2008.

Just six days after adoption of the resolution, the Indian Ocean tsunami struck the Maldives.

The Maldives economy, which had grown at an average of eight percent per annum for two consecutive years, was devastated by the tsunami: 62 percent of the GDP was destroyed; over seven percent of the population was internally displaced; social and economic infrastructure damaged or destroyed in over one quarter of the inhabited islands; 12 inhabited islands were turned into complete rubble.

Following the disaster, and on the request of the Maldives, the General Assembly decided to defer the graduation until 2011, with a smooth transition period until 2014.Donors often assess a country’s need by its developmental status at the U.N., which traps countries such as the Maldives in a vicious cycle being now termed as the “Middle Income Paradox”.

Graduation from LDC does not help a country to overcome the development challenges it faces. Graduation does not make a country less vulnerable to the consequences of its geography.

It is no secret that small island states being assessed for graduation, do not meet the threshold for economic vulnerability.

Small island states often achieve their high development status because of high and consistent investment in human resources, and the social sector as well as government administration.

This leaves limited financial resources for the country to prepare for natural disasters or to carry out mitigation and adaptation measures.

Countries often have to rely on multilateral and bilateral donors for assistance for environmental projects: donors that often assess a country’s need by its developmental status at the U.N., which traps countries such as the Maldives in a vicious cycle being now termed as the “Middle Income Paradox”.

However, all this is conveniently ignored or overlooked.

Graduation from LDC status need not be feared, nor does it need to be an obstacle in a country’s development path. We only fear what we don’t know.

The Maldives’ experience showed that due to the infancy of the graduation programme, the relatively low number of countries that have graduated, and the lack of coordinated commitment from bilateral partners, the graduation process has been far from smooth.

The General Assembly Resolution, which the Maldives helped to coordinate, adopted in December 2012 provided a smooth transition for countries graduated from the LDC list.

The resolution has put into place greater oversight ability for the U.N. and articulated the need for a strengthened consultative mechanism for the coordination of bilateral aid.

The Maldives has tried to make the path for subsequent graduates smoother. Yet, it is a fact that the graduation process still relies on flawed criteria.

While no country wants to be termed the “Least” on any group, it cannot be denied that inherent vulnerabilities and geo-physical realities of some of the countries that often extend beyond their national jurisdiction, need help that are specific and targeted, in order to improve the resilience of those countries.

It is for that reason that the Maldives lobbied extensively with the World Trade Organisation (WTO) to extend the application of TRIPS for all LDCs.

Following graduation, the Maldives also applied to join the EU’s Generalised System of Preferences but new regulations prevented Maldives from the scheme. This posed a significant loss to our fishing industry, which is the export sector in the economy.

The Maldives has been continually exploring the viability of a “small and vulnerable economy” category at the U.N., similar to that which exists in the World Trade Organisation.

Such a category will acknowledge the particular needs of countries arising from the smallness of their economies and inherent geographical realities.

Small island states have continually argued that special consideration needs to be given to SIDS that are slated for graduation. Yet, these voices of concern have fallen largely on deaf years.

But the needs of our people, the development we desire cannot wait to be recognised.

That is why the Maldives decided to take our development path into our own hands. This can be done by consistently employing good policies.

Development is the result of a combination of bold decisions and an ability to seize the opportunities. SIDS have shown to the world that we are not short of smart ideas. Rather than relying on others, we have to develop our own economies our way!

Edited by Kitty Stapp

Excerpt:

These Haitian schoolchildren are being supported by a WFP school feeding programme designed to end malnutrition which, for many countries, can be a double burden where overweight and obesity exist side by side with under-nutrition. Credit: UN Photo/Albert González Farran

By Gloria Schiavi
ROME, Nov 23 2014 (IPS)

Not only do 805 million people go to bed hungry every day, with one-third of global food production (1.3 billion tons each year) being wasted, there is another scenario that reflects the nutrition paradox even more starkly: two billion people are affected by micronutrients deficiencies while 500 million individuals suffer from obesity.

The first-ever Global Nutrition Report, a peer-reviewed publication released this month, and figures from the Rome-based U.N. Food and Agriculture Organisation (FAO) highlight a multifaceted and complex phenomenon behind malnutrition.

“The double burden of malnutrition [is] a situation where overweight and obesity exist side by side with under-nutrition in the same country”, according to Anna Lartey, FAO’s Nutrition Director. “And we are seeing it in lots of the countries that are developing economically. These are the countries that are going through the nutrition transition”."The double burden of malnutrition [is] a situation where overweight and obesity exist side by side with under-nutrition in the same country. And we are seeing it in lots of the countries that are developing economically. These are the countries that are going through the nutrition transition” – Anna Lartey, FAO’s Nutrition Director

Beside hunger then, governments and development organisations have also been forced to start tackling over-nutrition.

“While under-nutrition still kills almost 1.5 million women and children every year, growing rates of overweight and obesity worldwide are driving rising diseases like cancer, heart disease, stroke and diabetes”, Francesco Branca, Director of Nutrition for Health and Development at the World Health Organisation (WHO), explained in a statement.

The solution does not lie in the realm of science, health or agriculture alone. It requires a cross sectorial and multi dimensional approach that includes education, women’s empowerment, market regulation, technological research and, above all, political commitment.

For this reason, representatives of governments, multilateral institutions, civil society and the private sector met in Rome for the Second International Conference on Nutrition (ICN2) that took place at FAO headquarters on Nov. 19-21. Jointly organised by FAO and WHO, the conference came 22 years after its first edition and, unfortunately, addressed the same unsolved problem.

Malnutrition, in all its forms, has repercussions on the capability of people to live a full life, work, care for their children, be productive, generate a positive cycle and improve their living conditions. Figures from the Global Nutrition Report estimate that the cost of malnutrition is around four to five percent of national GDP, suggesting that prevention would be more cost-effective.

With the goal of improving nutrition through the implementation of evidence-based policies and effective international cooperation, ICN2 produced two documents to help governments and stakeholders head in the right direction: the Rome Declaration on Nutrition and a Framework for Action.

The conference also heard a strong call for accountability and for the strengthening of nutrition in the post-2015 development agenda.

Flavio Valente, who represented civil society organisations at ICN2, remarked that “the current hegemonic food system and agro-industrial production model are not only unable to respond to the existing malnutrition problems but have contributed to the creation of different forms of malnutrition and the decrease of the diversity and quality of our diets.”

This position was shared by many speakers, who stressed the negative impact that advertising of unhealthy food has, mainly on children.

According to a participant from Chile, calling obesity a non-communicable disease is misleading, because it spreads through the media system very effectively. He added that Chile currently risks being brought before the World Trade Organisation (WTO) by multinational food companies for its commitment to protect public health by regulating the advertising of certain food.

This happens in a country where 60 percent of people suffer from over-nutrition and one obese person dies every hour, according to the permanent representative of Chile at FAO, Luis Fernando Ayala Gonzalez.

In an address to the conference, Queen Letizia of Spain also acknowledged the responsibility of the private sector: “It is necessary to help the economic interests converging towards public health. It is worth remembering that no country in the world has been able to reverse the epidemic of obesity in all age groups. None.”

The outcome of ICN2 brought consensus around a plan of action and some key targets.

Educating children about healthy habits and women who are in charge of feeding the family was recognised as crucial, as was breastfeeding, which should be encouraged (through paid maternity leave and breastfeeding facilities in the workplace), and the need to empower women working in agriculture.

Supporting small and family farming would also give people better opportunities to eat local, fresh and seasonal produce as well as fruit and vegetables, reducing the consumption of packaged, processed food that is often low in nutrients, vitamins and fibres and high in calories, sugar, salt and fats.

However, teaching people how to eat is not enough, if they cannot easily access quality food – hence the need for relevant policies targeting the food chain and distribution.

Initiatives like the Fruit in Schools programme proposed by New Zealand go in the right direction, especially when implemented within a coordinated policy that promotes physical activity and a healthy lifestyle that fights consumption of alcohol and tobacco.

(Edited by Phil Harris)

By Roberto Azevêdo
GENEVA, Oct 15 2014 (IPS)

Regional trade agreements have grown very rapidly in recent years, and today the World Trade Organisation (WTO) has been notified that 253 are in force.

Clearly RTAs are not a new phenomenon.

In fact they pre-date the multilateral system because, in a sense, they were the seeds which grew into the General Agreement on Tariffs and Trade. Created in 1947, GATT was replaced in 1994 by the WTO.

WTO Director-General Roberto Azevêdo. Credit: WTO/CC BY SA-2.0

GATT was effectively a multilateralisation of the network of reciprocal trade agreements that countries had been pursuing for some years previously, so the system as we know it today has its roots in these agreements.

But of course things have changed in recent years. These agreements are not only more numerous, they are becoming increasingly complex.

While over 80 percent of RTAs notified are bilateral agreements, we are seeing more and more large regional agreements.

And we are seeing more agreements between countries in different regions, rather than between neighbours. This is very different from the pattern we saw during the GATT years.

In addition we see many more developing countries negotiating RTAs today.

This proliferation of agreements, each with their own sets of rules, has been dubbed a “spaghetti bowl” ­and I would certainly agree that we are seeing a significant increase in the level of complexity inside the agreements and in their relations with each other.

Most RTAs today make deeper and more extensive commitments, and have moved beyond commitments only in the sphere of market access for goods.“Although these initiatives [regional trade agreements] show that WTO members continue to liberalise trade, fragmentation of the trading system cannot be a substitute for the benefits of negotiating one set of rules for all”

A question which requires further consideration is how RTA provisions can be complementary to the multilateral trading system.

For some issues such as market access for goods and services, most RTAs grant their partners a higher level of market access than that available through the WTO.

For other issues, the picture is less straightforward.

Take, for example, RTA provisions on anti-dumping rules. In general, RTAs do not appear to have gone much further beyond where we are in the WTO today. Meanwhile, for issues such as investment, which is touched on by some RTAs, there are no WTO rules.

Another trend that has been noted in the past few years is negotiations that could potentially bring together a number of existing RTAs in so-called “mega-regional” negotiations.

While the trend to negotiate new RTAs continues, liberalising trade bilaterally or regionally is only a part of the picture.

As I have said many times,­ these initiatives are important for the multilateral trading system ­ but they cannot substitute it.

To start with, there are many big issues which can only be tackled in an efficient manner in the multilateral context through the WTO.

Trade facilitation was negotiated successfully in the WTO because it makes no economic sense to cut red tape or simplify trade procedures at the border for one or two countries. If you do it for
one country, in practical terms you do it for everyone.

Financial or telecommunication regulations cannot be efficiently liberalised for just one trade partner ­ so it is best to negotiate services trade-offs globally in the WTO. Nor can farming or fisheries subsides be tackled in bilateral deals.

Disciplines on trade remedies, such as the application of anti-dumping or countervailing duties, cannot significantly go beyond WTO rules.

The simple fact is that very few of the big challenges facing world trade today can be solved outside the global system. They are global problems demanding global solutions.

Another important aspect, leaving aside the content of the agreements, is their geographical scope. RTAs tend to exclude the smallest and most vulnerable countries. That is a major source of concern.

And, as our economies become more interconnected across borders and regions, RTAs do not – and probably cannot ­– fully address the gains from trade that can be obtained through global value chains.

Indeed, the strict, product-specific rules of origin that often accompany RTAs may actually be detrimental to value chains and therefore exclusionary for some. The smaller the country, the smaller the company, the smaller the trader, the bigger the likelihood that it will be excluded.

There is also concern that by creating different sets of rules and regulations, RTAs may be burdensome for traders and business. This is the point of complexity that is a concern for many.

Finally, although these initiatives show that WTO members continue to liberalise trade, fragmentation of the trading system cannot be a substitute for the benefits of negotiating one set of rules for all.

Ideally, this is where we should be putting our focus.

But in order to ensure this, one thing we clearly need to do is to deliver on what we agreed during the WTO word trade negotiations in Bali in December last year.

We are now halfway through an intensive consultation period to resolve the current impasse on this ­but, as things stand today, at this point in time we do not have a solution.

While this situation persists, I think the risk of disengagement increases exponentially. And this point is underlined by the proliferation of these other approaches.

For the sake of the multilateral system, and all those who stand to benefit from it, I think we have to find a solution to our current problems and put our work here at the WTO back on track. And we have to do it quickly. Time is not on our side. (END/IPS COLUMNIST SERVICE)

(Edited by Phil Harris)

Excerpt:

By Carlos M. Correa
GENEVA, Sep 29 2014 (IPS)

The steady increase in patent applications and grants that is taking place in developed and some developing countries (notably in China) is sometimes hailed as evidence of the strength of global innovation and of the role of the patent system in encouraging it. 

Carlos M. Correa

However, such an increase does not correspond to a genuine rise in innovation. It points instead to a major deviation of the patent system away from its intended objective: to reward those who contribute to technological progress by creating new and inventive products and processes.

The increase in the number of patents reflects, to a large extent, the low requirements of patentability applied by patent offices and courts. Patents granted despite the absence of a genuine invention detract knowledge from the public domain and can unduly restrain legitimate competition.

Low standards of patentability encourage a large number of applications that would not otherwise be made, leading to a world backlog estimated at over 10 million unexaminedpatents.

This problem affects various sectors. For instance, Nokia is reported to hold around 30,000 patents relating to mobile phones, a large part of which are likely to be invalid, while Samsung holds more than 31,000 patent families. A study covering various fields of clean energy technologies, including solar photovoltaic, geothermal, wind and carbon capture, found nearly 400,000 patent documents.“The steady increase in patent applications and grants … does not correspond to a genuine rise in innovation. It points instead to a major deviation of the patent system away from its intended objective: to reward those who contribute to technological progress by creating new and inventive products and processes”

The proliferation of patents is particularly high and problematic in the pharmaceutical sector, where large companies actively seek to acquire broad portfolios of patents in order to extend patent protection beyond the expiry of the original patents on new compounds. These ever-greening strategies allow them to keep generic producers out of the market and charge prices higher than those that would otherwise exist in a competitive scenario.

For example, the basic patent for paroxetine, an antidepressant, expired in the late 1990s, whereas ‘secondary’ patents will extend up to 2018.

Ever-greening strategies by one company often force others to follow the same pattern as a defensive approach.  The proliferation of ‘secondary’ or ‘spurious’ patents can impose significant costs on patients and public health systems.

Several measures can be applied at the national level to avoid the proliferation of patents on trivial developments in full consistency with the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS), because they fall within the policy space that World Trade Organisation (WTO) members have retained to design and apply their patent laws.

The most important policy that governments may implement is the rigorous application of the requirements of patentability, based on a thorough examination of patent applications. The TRIPS agreement neither defines the concept of ‘invention’ nor how such requirements need to be interpreted.

Thus, national laws may differentiate inventions and discoveries, and require that the former result from an inventive activity, thereby excluding pre-existing subject matter that is merely found, such as natural substances.

While some patent offices grant patents on the basis of legal fictions on novelty, there is no reason to follow such practices in other jurisdictions.

An example of this practice by some patent offices is to admit what are known as ‘selection patents’, whereby one of more items that were previously disclosed are independently claimed. This type of patents provide an effective means of ever-greening, because protection can be extended for the full length of a new patent, i.e. normally twenty additional years, despite the fact that novelty was actually lost when such items were first disclosed.

While some large patent offices, such as the U.S. Patent and Trademark Office, the European Patent Office and the Chinese Patent Office, seem to apply a lax inventive step standard thereby allowing for the granting of a large number of ‘low quality’ patents, there are strong public interest arguments to follow a different approach, particularly in developing countries.

A strict application of the industrial applicability/usefulness requirement, when provided for by the national law, may also contribute to prevent the grant of unwarranted patent rights.

This is the case, in particular, for claims on new medical uses, which are equivalent to claims over methods of treatment that have no industrial application or technical effect. The lack of industrial applicability may be a sufficient ground to reject such claims.

Given the policy space left by the TRIPS agreement to adopt their own definitions of the patentability standards, and to do so consistently with their legal systems and practices, governments can follow different methods to ensure that patents are granted only when there are sufficient merits under the applicable law.

Governments may introduce specific standards in the patent laws themselves. A notable case is the Indian Patent Act, as amended in 2005, which incorporated in section 3(d) specific standards to assess patent applications in the field of chemicals and pharmaceuticals.

In a case brought by Novartis (a Swiss pharmaceutical company) against the rejection of its patent application relating to a beta crystalline form of imatinib mesylate, the Indian Supreme Court held that the claimed invention failed in both the tests of invention and patentability.

The definition of the standards of patentability can also be made through regulations, including patent offices’ guidelines. A good example is provided by the guidelines on the patentability of pharmaceutical products and processes adopted by the Argentine government in 2012 to limit the ever-greening of pharmaceutical patents.

Finally, it is worth noting that in applying patentability standards, patent offices can differentiate, in line with the TRIPS agreement, among fields of technology in order to take into account particular features of specific sectors and public policies objectives, for instance in relation to the promotion of generic drugs.

Measures to accommodate these differences constitute a necessary response to the diversity of technologies and, consequently, a condition sine qua non for an intrinsically balanced system of protection that remains neutral in its effects on competition. (END/IPS COLUMNIST SERVICE)

(Edited by Phil Harris)

This column is taken from the author’s research paper on ‘Tackling the Proliferation of Patents: How to Avoid Undue Limitations to Competition and the Public Domain’, published by the South Centre (http://www.southcentre.int/research-paper-52-august-2014/).

Excerpt:

The Trans-Pacific Partnership (TPP) negotiations have been hitting headlines recently, but not for all the right reasons.

The media provides an incomplete picture of its implications, focusing mainly on its process and pre-occupations of the main parties to the negotiations. These negotiations, including the most recent meetings that took place in Ottawa, Canada, in July 2014, have been criticised by Canadian and international media for being veiled in secrecy.It is important that these negotiations do not create systems which are exclusionary, fragmenting and adversely affecting overall economic opportunities.

There have been, however, leaks and statements which show the broad contours of the ongoing talks covering the large number of subject areas which aim to develop a “21st century” trade and investment regime.

There is little attention, if any, to the adverse market conditions that the TPP will generate, for countries not part of these negotiations; countries which are significantly contributing to the prosperity of those who are negotiating TPP.

The TPP is a proposed regional free trade agreement (FTA) being negotiated by 12 countries in the Asia-Pacific region, namely Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam (contrast this with 160 members of World Trade Organisation).

The TPP nations together account for about one-third of world trade and foreign direct investment. Thus, there is a larger interconnected world outside the coverage of TPP which is economically crucial for all concerned. It is important that these negotiations do not create systems which are exclusionary, fragmenting and adversely affecting overall economic opportunities.

Today’s trade negotiations focus significantly on issues commonly referred to as non-tariff barriers. These include standards which specify requirements for products to be sold in specific markets.

These standards could have a larger general impact, such as environment or social standards, or have product-specific effects such as specifications for cars, electric gadgets, textiles and clothing, fruits, etc. The focus of TPP negotiations suggests that there is a strong possibility for markets and economic opportunities to get fragmented.

That would create major difficulties for all. This can be prevented through specific steps to create inclusive systems, which are essential in our increasingly inter-dependent world.

In the next five to seven years, the rapid growth of middle class in regions outside the TPP and global links between trade and sustainable development could create significant potential conflicts without inclusive systems.

Photo by Jamie Levine

Just recently, I was in Beijing, China for a workshop that discussed the Implications of TPP for China and India in detail. At the event, co-organised by the International Institute for Sustainable Development (IISD), the International Centre for Trade and Sustainable Development (ICTSD) and the China Society for WTO Studies (CWTO), I made two strong recommendations for India, China and even other developing nations: (i) that these countries should upgrade their capacities for policies and meeting evolving standards, so that their access to major markets could continue without significant problems, and (ii) that non-TPP countries should combine forces to push for the development of more inclusive trade systems, and suggest ways of doing so.

However, the main action to develop inclusive systems within TPP has to be from those negotiating the agreement, so as to maintain substantive and effective linkages with the rest of the world.

While some additional countries may join the TPP, whenever concluded, others which may find it more difficult to do so would nonetheless be important parts of a trading system providing opportunities for sustained prosperity for all economies. Restraining their effective participation would mean restraining the positive potential of the system as a whole.

Various countries are in different stages of preparedness with respect to higher standards likely to arise from TPP. In late 2013, South Korea announced its interest in joining in TPP. There is a strong debate in China on whether or not to join TPP.

In Brazil, parts of the private sector seem open to joining this new mega-FTA, while the government appears to be reticent about it. In India, the policy makers have begun a process of upgrading domestic capacities, but it is very unlikely that India would be able to join an agreement such as TPP, for several years.

All African economies are outside the process of any of the mega-FTAs such as TPP. Their state of preparation is in general much less than the larger economies of other continents. In some instances, there is a view that TPP may not be concluded, so why worry about it!

However, progress in TPP negotiations is continuing, though at less than the desired pace of participants. It is expected to pick up in the months ahead.

Recognising the advent of the contours of a new trade regime in large parts of the global markets, China is already moving ahead with policy reform to better equip itself for a world of new trade and investment regulations.

This will help consolidate its existing position as an important hub of global value chains and its desire to move forward in the value chain to produce higher value items with state-of-art technologies. Interestingly, this preparation for a post-TPP world enmeshes well with its next stage of domestic reform.

However, even a relatively advanced developing nation such as China would find it difficult to have market access post-TPP unless the agreement incorporates an inclusive system. This task would be much more difficult for lesser developed nations. The content of standards under TPP is likely to be high, and lead to considerable cost escalation for exports of several developing nations.

In TPP, these would likely reflect standards prevailing in the U.S.; simultaneously with TPP we have the Trans-Atlantic Trade and investment Partnership (TTIP) negotiations between EU and the US which have an important focus on standards. The results of TPP cannot be too different from that of TTIP in this regard.

Studies have shown that impediments to market access by standards are recognised by even exporters from the U.S. and the EU to each other’s market. Similarly, in a recent discussion of Korean emission standards for automobiles, U.S. Ford Motor Company argued that Korea’s standards and related system would raise cost by 7,000 dollars for each Ford Explorer vehicle.

Given that trade and investment play an important role in their growth performance, losing access to TPP and TTIP countries, which together account for about half of world trade, would be highly damaging for India, China or other non-member countries.

Ultimately, the most suitable action that the emerging developing economies (China, India, Brazil and others) can take at this point, would be to pool their collective energies together to press for conditions which ensure that the emerging international trade system works better for all countries, including those not part of the large free trade agreements such as TPP and TTIP.

Such synergies would be useful even for up-gradation of domestic capacities, working together with co-ordinated and cooperative programmes.

Common efforts are crucial for developing inclusive systems because each of these countries on its own will make little impact for changing the evolving regulatory regimes. A more formalised collective response would empower them to press the negotiating nations to develop more inclusive, rather than exclusionary, systems.

Dr. Singh has been with IISD as a senior fellow since October 1, 2013 and provides advice and support to the Institute’s work in China, and on multilateral trading systems.Before joining IISD, Singh served as deputy director-general at the World Trade Organisation from October 2005 to September 2013.

Edited by: Kitty Stapp

India’s decisive stand last week not to adopt the protocol of amendment of the trade facilitation agreement (TFA) unless credible rules were in place for the development issues of the South was met with  “astonishment” and “dismay” by trade diplomats from the North, who described New Delhi’s as “hostage-taking” and “suicidal”. 

It obviously came as something of a shock for representatives of Northern interests that any party should have the brass neck to place the interests of its constituents on the negotiating table.

After all, why should such banal issues as food security and poverty get in the way of a trade agenda heavily weighted in favour of the industrialised countries?New Delhi was demanding nothing more than credible global trade rules to ensure that “development,” including the challenges of poverty, in the countries of the South take precedence over the cut-throat mercantile business interests of the transnational corporations in the North

In fact, it was India’s firm stand for permanent guarantees for public stockholding programmes for food security that turned this trade agenda upside down at the World Trade Organization (WTO) last week, putting paid to the adoption of the protocol of amendment for implementation of the contested TFA for the time being.

India and the United States failed Thursday at the WTO to reach agreement on construction of a legally binding decision on a “permanent peace clause” that would further strengthen what was decided for public distribution programmes for food security in developing countries at the ninth ministerial meeting in Bali, Indonesia, last year.

The Bali decision on food security was one of the nine non-binding best endeavour outcomes agreed by trade ministers on agriculture and development.

For industrialised and leading economic tigers in the developing world, the TFA – which would harmonise customs procedures in the developing world on a par with the industrialised countries – is a major mechanism for market access into the developing and poorest countries.

The failure to reach agreement came during a closed-door meeting between India and the United States organised by WTO Director-General Roberto Azevedo in an attempt to break the impasse between the world’s two largest democracies.

New Delhi was demanding nothing more than credible global trade rules to ensure that “development,” including the challenges of poverty, in the countries of the South take precedence over the cut-throat mercantile business interests of the transnational corporations in the North.

Trade diplomats from several developing and poorest countries in Africa, South America, and Asia say India’s “uncompromising” stance will force countries of the North to return to the negotiating table to address the neglected issues in the Bali package concerning agriculture and development.

These issues are at the heart of unfinished business in the Doha Development Agenda (DDA) negotiations, the current round of trade negotiations aimed at further liberalising trade.

“It is important to keep the battle alive and India has ensured that the big boys cannot simply walk away with the trade facilitation agreement (TFA) without addressing the concerns on food security and other major issues,” one African official said.

The industrialised countries and some rising economic tigers in the developing world are unhappy that they cannot now take home the TFA without addressing the problem raised by India and other developmental issues in the Doha Development Agenda negotiations.

Many developing and poor countries in Africa and elsewhere were opposed to the TFA but they were “arm-twisted” and “muzzled” by the leading super powers over the last three months. African countries, for example, were forced to change their stand after pressure from the United States, the European Union and other countries.

The TFA was sold on false promises that it would add anywhere up 1 trillion dollars to the world economy. During the Bali meeting last year, the Economist of London, for example, gave two different estimates – 64 billion dollars and 400 billion dollars – as gains from the TFA, while the International Chamber of Commerce gave an astronomical figure of 1 trillion dollars without any rational basis.

“Those predicted gains [from TFA] evaporate when one looks at the assumptions behind them, such as the assumption that all countries in the world would gain the same amount of income from a given increase in exports,” said Timothy A. Wise and Jeronim Capaldo, two academics from the Global Environment and Development Institute at the U.S. Tufts University.

At one go, the TFA will provide market access for companies such as Apple, General Electric, Caterpillar, UPS, Pfizer, Samsung, Sony, Ericsson, e-Bay, Hyundai, Huawei and Lenova to multiply their exports to the poorest countries.

It would drive away scarce resources for addressing bread-and-butter issues in the poor countries and direct them towards creating costly trade-related infrastructure for the sake of exporters in the industrialised world.

Here are ten reasons why trade diplomats from the developing and poorest countries say India’s stand will bolster their development agenda:

1.  India’s stand on food security brings agriculture, particularly unfinished business in the DDA negotiations, back to centre-stage.

2.  The Doha trade negotiations were to have been concluded by 2005 but remain stalled because a major industrialised country put too many spanners in the negotiating wheel.

3.  Major industrialised countries have been cherry-picking issues from the DDA which are of interest to them while giving short shrift to core “developmental” issues.

4.  Issues agreed in the Doha negotiations, such as the ”July package” agreed on August 1, 2004, the Hong Kong  Ministerial Declaration of December 2005 and the un-bracketed understandings of the December 2008 Fourth Revised Draft Modalities for Agriculture, have all been pushed to the back burner because one major country does not want to live up to them.

5.  The Fourth Revised Draft Modalities for Agriculture provided an explicit footnote to enable the developing countries to continue with their public stockholding programmes for food security. That footnote was the result of sustained negotiations and a compromise solution among key WTO members such as the United States, the European Union, India, Brazil, Australia and China, but the United States refused to accept the footnote because of opposition from its powerful farm lobbies.

6.  Trade-distorting practices in cotton which are harming producers in Benin, Burkina Faso, Mali and Chad are supposed to be addressed “ambitiously”, “expeditiously” and “specifically” by the distorting countries in the North. But cotton is now being swept under carpet because a major industrialised country does not want to address the issue because of its farm programme.

7.  Trade facilitation was one of the Doha issues but not the main item of the agenda at all.  It was actually dropped from the Doha agenda in Cancun, Mexico, in 2003 and was brought back in 2004 due to pressure from the United States and the European Union. The core issues of the Doha agenda were agriculture, services and developmental flexibilities.

8.  A major industrialised country which pocketed several gains during the negotiations refuses to engage in “give-and-take” negotiations based on the above mandates and has turned the Doha Round upside down.

9.  Industrialised countries along with some developing countries have formed a coalition of countries willing to pursue what are called “plurilateral” negotiations, only to undermine the DDA negotiations which are multilateral and based on what is called a “single undertaking” (that is, nothing is agreed until everything is agreed). Currently, these countries are negotiating among themselves on services, expansion of information technology products and environmental goods even though these issues are being negotiated in the Doha Round.

10.  Delay in the adoption of protocol will pave way for a healthy debate to reinvigorate the multilateral trading system which is being undermined by those who created it in 1948. The developing and poor countries want credible and balanced multilateral trading rules to replace what was agreed over 25 years ago in order to continue their “developmental” programmes with a human face.

Herein lies the crux of the issue – are the major powers of the North prepared to go along with a global trading system that puts the interests of the majority of the world’s people before their own interests?

(Edited by Phil Harris)

The failure of the two major players in global trade negotiations to bridge their differences has put paid to the adoption of the protocol of amendment for implementation of the contested Trade Facilitation Agreement (TFA) for the time being. 

India and the United States failed Thursday at the World Trade Organization (WTO) to reach agreement on construction of a legally binding decision on a “permanent peace clause” that would further strengthen what was decided for public distribution programmes for food security in developing countries at the ninth ministerial meeting in Bali, Indonesia, last year.New Delhi made its choice clear to Azevedo: either members [of the WTO] agree to a permanent solution for food security or postpone adoption of the TFA protocol until there are credible outcomes on all issues, by the end of the year.

The Bali decision on food security was one of the nine non-binding best endeavour outcomes agreed by trade ministers on agriculture and development.

For industrialised and leading economic tigers in the developing world, the TFA – which would harmonise customs procedures in the developing world on a par with the industrialised countries – is a major mechanism for market access into the developing and poorest countries.

WTO Director-General Roberto Azevedo, who had put all his energies over the last seven months into ensuring the timely adoption of the TFA protocol by July 31 as set out in the Bali ministerial declaration, was clearly upset with the failure to adopt the protocol.

“The fact we do not have a conclusion means that we are entering a new phase in our work – a phase which strikes me as being full of uncertainties,” Azevedo told the delegates at the concluding session of the General Council, which is the highest WTO decision-taking body between ministerial meetings.

The Bail ministerial declaration was adopted at the WTO’s ninth ministerial meeting in December last year. It resulted in a binding multilateral agreement on trade facilitation along with non-binding outcomes on nine other decisions raised by developing and poorest countries, including an interim solution on public distribution programmes for food security.

The developing and poorest countries remained unhappy with the Bali package even though their trade ministers endorsed the deal. The countries of the South resented what they saw as the “foster parent treatment” accorded to their concerns in agriculture and development.

While work on clearing the way for the speedy implementation of the TFA has preceded at brisk pace at the WTO over the last seven months, other issues were somewhat neglected. Several African and South American countries, as well as India, remained unhappy with the lack of progress in issues concerning agriculture and development, particularly in public distribution programmes for food security.

Last week, India fired the first salvo at the WTO by declaring that unless there are “credible” outcomes in the development dossier of the Bali package, including a permanent solution for food security, it would not join the consensus to adopt the TFA. Bolivia, Venezuela and Cuba shared India’s concerns.

Despite concerted political lobbying by leading U.S. administration officials and envoys from Western countries in New Delhi to change its stand, the Indian government informed the WTO director-general Wednesday that it wanted a substantive outcome on food security, without which it would oppose the TFA protocol.

Without bringing India and the United States into a face-to-face dialogue at the WTO, Azevedo held talks with the representatives from the world’s two largest democracies in a one-on-one format.

According to sources familiar with the WTO’s closed-door consultations, Azevedo informed India that its demand for a substantive outcome on food security would not be acceptable to members because they would not approve “re-writing” the Bali ministerial declaration.

New Delhi made its choice clear to Azevedo: either members agree to a permanent solution for food security or postpone adoption of the TFA protocol until there are credible outcomes on all issues, by the end of the year.

“India’s position remains the same,” New Delhi trade minister Nirmala Sitharaman told reporters after a meeting with the U.S. Commerce Secretary Penny Pritzker Thursday.

Given the importance of TFA for U.S. business interests, Washington yielded some ground by agreeing to a compromise, but the two sides were stuck on legal aspects, particularly on how this should be adopted at the General Council.

The result Thursday was that the differences between the two led to an adjournment of the General Council without the TFA protocol.

“We have not been able to find a solution that would allow us to bridge that gap,” the WTO director-general told members.  “We tried everything we could … but it has not proved possible,” Azevedo said.

“We are absolutely sad and disappointed that a very small handful of countries were unwilling to keep their commitments from the December conference in Bali and we agree with the director-general that the failure has put this institution on very uncertain ground,” U.S. deputy trade representative Ambassador Michael Punke told reporters.

Brazil’s trade envoy Marcos Galvao suggested that it would be possible to reinvigorate the talks despite the failure Thursday. “When we come back in September, we can come forward with the Bali package and the whole work programme,” Galvao told IPS.

In New Delhi, U.S. Secretary of State John Kerry said “our feeling is obviously that the agreement that was reached in Bali is an agreement that importantly can provide for food security for India.”

“We do not dismiss the concerns India has about large numbers of poor people who require some sort of food assurance and subsistence level, but we believe there’s a way to provide for that that keeps faith with the WTO Bali agreement,” Kerry maintained.

Credible and permanent rules for food security are vital for developing countries to continue with their public distribution programmes to address livelihood security.

“The programme enables governments in the developing countries to put more money in the hands of the poor farmers by buying their crops at stable and higher price, and use those government purchases to feed the hungry – many of those same farm families – with free or subsidised food distributions,” said Timothy A. Wise, an academic with the Global Development and Environment Institute at the U.S. Tufts University.

Several developing and poorest countries – Zambia, Ghana, Malawi, Senegal, Kenya, Nigeria, Egypt, Morocco, Tunisia, Botswana, Sri Lanka, Bangladesh, Nepal, Jordan, India, and Saudi Arabia – are currently implementing food security programmes for different food articles.

The Bali package involves nine issues in addition to the TFA and they need to be addressed “on an equal footing,” Nelson Ndirangu, Kenya’s senior trade official told IPS. “I’m sympathetic to India’s stand and I agree that all issues, including a permanent solution for food security, must be addressed along with the TFA,” said Ndirangu.

(Edited by Phil Harris)

By Chakravarthi Raghavan
GENEVA, Jul 22 2014 (IPS)

The world of today is considerably different from the one at the end of the Second World War; there are no more any colonies, though there are still some ‘dependent’ territories.

In the 1950s and 1960s, as the decolonisation process unfolded, in most of the newly independent countries leaders emerged who had simply fought against foreign rule, without much thought on their post-independence economic and social objectives and policies.

Some naively thought that with political independence and power, economic well-being would be automatic.

Chakravarthi Raghavan

By the late 1950s, the former colonies, and those early leaders within them who yearned for better conditions for their peoples, realised that something more than political independence was needed, and began looking at the international economic environment, organisations and institutions.

In the immediate post-war years, the focus of efforts to fashion new international economic institutions (arising out of U.S.-U.K. wartime commercial policy agreements) was on international moves for reconstruction and development in war-ravaged Europe.

As a result, in the sectors of money and finance, the Bretton Woods institutions [the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD) or World Bank], were established – even ahead of agreeing on the United Nations Charter and its principle of sovereign equality of states (one nation, one vote in U.N. bodies) – on the basis of the ‘one-dollar one-vote’ principle.“Within the Bretton Woods institutions, there was no direct focus on promoting ‘development’ of the former colonies; what little happened was at best a side-effect of the lending policies of these institutions and the few crumbs that fell off the table here and there, often to further Cold War interests”

In pursuing their wartime commercial policy agreements, the United Kingdom and the United States submitted proposals in 1946 to the U.N. Economic and Social Council (ECOSOC) for the establishment of an international trade body, an International Trade Organization (ITO).

ECOSOC convened the U.N. Conference on Trade and Employment to consider the proposals; the Preparatory Committee for the Conference drafted a Charter for the trade body, and it was discussed and approved in 1948 at a U.N. conference in Havana.

Pending ratification of the Havana Charter, the commercial policy chapter of the planned international trade body was fashioned into the General Agreement on Tariffs and Trade (GATT) and brought into being through the protocol of provisional application, as a multilateral executive agreement to govern trade relations, i.e., governments agreeing to implement their commitments to reduce trade barriers and resume pre-war trading relations through executive actions subject to their domestic laws.

At Havana, during the negotiations on the Charter, Brazil and India had expressed their dissatisfaction, but had reluctantly agreed to the outcome and the provisional GATT.

The U.S. Senate, as a result of corporate lobbying, was however unwilling to allow the United States to be subject to the disciplines of the Havana Charter and did not consent to an ITO Charter; the result was that the provisional GATT remained provisional for 47 years, until the Marrakesh Treaty which brought the World Trade Organization (WTO) into being in 1995.

Within the Bretton Woods institutions, there was no direct focus on promoting “development” of the former colonies; what little happened was at best a side-effect of the lending policies of these institutions and the few crumbs that fell off the table here and there, often to further Cold War interests.

From about the early 1950s, to the extent that it provided any reconstruction and development loans to the developing world, the IBRD acted in the interests of the United States, its largest single shareholder, and favoured the private sector.

For example, early Indian efforts to obtain IBRD loans for the public sector to set up core industries like steel, which needed large infusions of equity capital that the Indian private sector was in no position to provide, were turned down, based purely on the ideological dogma of private-vs-public-enterprise.

It was only much later that a separate window, the International Development Association (IDA), was created at the World Bank to provide soft loans (with low interest and long repayment periods) to low-income countries.

But the IDA did not function as professed and did not provide loans to set up industries or promote development in poorer countries; in actual practice it acted to advance the interests of the developed countries in the Third World.

IDA loans came with conditionalities to promote structural adjustment programmes, such as unilateral trade liberalisation, resulting in deindustrialisation of the poorer African countries. Even worse, IDA loans came with additional conditionalities to cater to the fads and fashions of the day and the concerns of Northern, in particular Washington-based, civil society.

The IDA “donor countries” dominated its governance and used their clout there to sway IDA lending – initially, the IDA obtained funds from the United States and other developed countries, and there were two or three substantial replenishments thereafter.

Subsequently, the funds from loan repayments and the profits of the World Bank (earned by lending at market rates to developing countries) were used to fund IDA, with small new contributions from the “donors” at every replenishment.

Though developing countries borrowing from the IBRD at market rates thus turned out to be the funders of the IDA, they had no voice in IDA governance, and the developed countries, with very little new money, have maintained control over the IDA and IBRD policies, to promote their own policies and the interests of their corporations in developing countries.

On the trade front, in successive rounds of negotiations at the GATT, the group of major developed countries (the United States, Canada, Europe, and later Japan) negotiated among themselves the exchange of tariff concessions, but paid little attention to the developing countries and their requests for tariff reduction in areas of export interest to them.

The only crumbs that fell their way were the result of the multilateralisation of the bilateral concessions exchanged in the rounds, through the application of the “Most Favoured Nation” (MFN) principle. From the Dillon Round on (through the Kennedy and Tokyo Rounds), each saw new discriminatory arrangements against the Third World and its exports.

In the Uruguay Round (1986-94), culminating in the Marrakesh Treaty, the developing countries undertook onerous advance commitments in goods trade, and in new areas such as ‘services’ trade and in intellectual property protection, on the promise of commitment of developed countries to undertake a major reform of their subsidised trade in agriculture and other areas of export interest to developing countries.

These remain in the area of promises while, after the 2013 December  Bali Ministerial Conference, the United States, Europe and the WTO leadership are attempting to put aside as ‘out of date’, all past commitments, while pursuing the ‘trade facilitation’ agreement, involving no concessions from them, but resulting in the equivalent of a 10 percent tariff cut by developing countries.

In much of Africa, this will complete the “deindustrialisation process” and ensure that the Third World will remain “hewers of wood and drawers of water”.  (END/IPS COLUMNIST SERVICE)

* This text is based on Chakravarthi Raghavan’s recently published book, ‘The THIRD WORLD in the Third Millennium CE’.

Excerpt:

The “fragility” of the World Trade Organization’s ‘Bali package’ was brought into the open at the weekend meeting in Sydney, Australia, of trade ministers from the world’s 20 major economies (G20).

The Bali package is a trade agreement resulting from the 9th Ministerial Conference of the WTO in Bali, Indonesia, in December last year, and forms part of the Doha Development Round, which started in 2001.

The G20 group of countries includes Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, United Kingdom, the United States, and the European Union.“… the Bali package is not just about trade facilitation and it also includes other issues ... That was the premise on which the developing countries agreed to trade facilitation and it has to be self-balancing” – South African trade minister Rob Davies

During the Sydney meeting, India and South Africa challenged the industrialised countries present to come clean on implementation of the issues concerning the poor countries in agriculture and development, according to participants present at the two-day meeting.

Ahead of the G20 leaders meeting in Brisbane, Australia, in mid-November, Sydney hosted the trade ministerial meeting to discuss implementation of the Bali package, particularly the trade facilitation agreement (TFA). The TFA has been at the heart of the industrialised countries’ trade agenda since 1996.

More importantly, Australia, as host of the November meeting, has decided to prepare the ground for pursuing the new trade agenda based on global value chains in which trade facilitation and services related to finance, information, telecommunications, and logistics play a main role.

“I said the Bali package is not just about trade facilitation and it also includes other issues,” South Africa’s trade minister Rob Davies told IPS Monday. “That was the premise on which the developing countries agreed to trade facilitation and it has to be self-balancing.”

Davies said that “the issue is that while South Africa doesn’t need any assistance, many developing and poor countries have to make investments and implement new procedures [because of the TFA]. What was there in the [TF] agreement is a series of best endeavour provisions in terms of technical and financial support together with best endeavour undertakings in terms of issues pertaining to least developed countries in agriculture and so on.”

Over the last few months, several industrialised countries, including the United States, have said that they can address issues in the Bali package concerning the poor countries as part of the Doha Single Undertaking, which implies that nothing is agreed until everything is agreed.

The specific issues that concern the interests of the least-developed countries include elimination of cotton subsidies and unimpeded market access for cotton exported by the African countries, preferential rules of origin for the poorest countries to export industrial products to the rich countries, and preferential treatment to services and services suppliers of least developed countries, among others.

“Even if there is an early harvest there has to be an outcome on other issues in the Bali package,” the South African minister argued.

There is lot of concern at the G20 meeting that if the trade facilitation protocol is not implemented by the end of this month, the WTO would be undermined.

“What we said from South Africa is to commit on the delivery of the outcomes in the Bali package,” Davies told IPS. “And a number of developing countries present at the meeting agreed with our formulation that there has to be substantial delivery of the outcomes in the Bali package.”

At the Sydney meeting, the industrialised countries pushed hard for a common stand on the protocol for implementing the Trade Facilitation Agreement by July 31. The TF protocol is a prerequisite for implementing the trade facilitation agreement by the end of July 2015.

The United States also cautioned that if there is no outcome by the end of this month, the post-Bali package would face problems. “Talking about post-Bali agenda while failing to implement the TFA isn’t just putting the cart before the horse, it’s slaughtering the horse,” U.S. Trade Representative Ambassador Michael Froman tweeted from Sydney.

The industrialised countries offered assurances that they would address the other issues in the Bali package, including public distribution programmes for food security, raised by developing countries. But they were not prepared to wait for any delay in the implementation of the TF agreement.

Over the last four months, the developing and poorest countries have realised that their issues in the Bali package are being given short shrift while all the energies are singularly focused on implementing the trade facilitation agreement.

The African countries are the first to point out the glaring mismatch between implementation of the TFA on the one hand and lack of any concerted effort to address other issues in the Bali package on the other. The African Union has suggested implementing the TFA on a provisional basis until all other issues in the Doha Development Agenda are implemented.

The industrialised countries mounted unprecedented pressure and issued dire threats to the African countries to back off from their stand on the provisional agreement. At the AU leaders meeting in Malibu, Equatorial Guinea, last month, African countries were forces to retract from their position on the provisional agreement.

However, South Africa, Tanzania, Zimbabwe and Uganda insisted on a clear linkage between the TFA and the Doha agenda.

India is fighting hard, along with other developing countries in the G33 coalition of developing countries on trade and economic issues, for a permanent solution to exempt public distribution programmes for food security from WTO rules in agriculture.

New Delhi has found out over the last six months that the industrialised countries are not only creating hurdles for finding a simple and effective solution for public distribution programmes but continue to raise extraneous issues that are well outside the purview of the mandate to arrive at an agreement on food security.

India announced on July 2 that it will not join consensus unless all issues concerning agriculture and development are addressed along with the TF protocol.

India’s new trade minister Nirmala Sitaraman, along with South Africa, made it clear in Sydney that they could only join consensus on the protocol once they have complete confidence that the remaining issues in the Bali package are fully addressed.

Against this backdrop, the G20 trade ministers on Saturday failed to bridge their differences arising from their colliding trade agendas.

The developing countries, particularly India, want firm commitment that there is a permanent solution on public distribution programmes for food security along with all other issues concerning development, an Indian official told IPS.

Framing rules at the World Trade Organization for maintaining public stockholding programmes for food security in developing countries is not an easy task, and for Ambassador Jayant Dasgupta, former Indian trade envoy to the WTO, “this is even more so when countries refuse to acknowledge the real problem and hide behind legal texts and interpretations in a slanted way to suit their interests.”

“The major problem is that the WTO’s Agreement on Agriculture (AOA) was negotiated in early 1990s and there are many issues which were not taken into account then,” says Ambassador Dasgupta, who played a prominent role in articulating the developing countries’ position on food security in the run-up to the WTO’s ninth ministerial meeting in Bali, Indonesia, last year.

“If the WTO has to carry on as an institution catering for international trade and its member states, especially the developing and least-developed countries, the rules have to be modified to ensure food security and livelihood security for hundreds of millions of poor farmers,” Ambassador Dasgupta told IPS Thursday.

Ironically, the rich countries – which continue to provide tens of billions of dollars for subsidies to their farmers – are insisting on inflexible disciplines for public stockholding programmes in the developing world.“Credible disciplines for food security are vital for the survival of poor farmers in the developing countries who cannot be left to the vagaries of market forces and extortion by middlemen” – Ambassador Jayant Dasgupta, former Indian trade envoy to the WTO

The United States, a major subsidiser of farm programmes in the world and charged for distorting global cotton trade by the WTO’s Appellate Body, has called for a thorough review of farm policies of  developing countries seeking a permanent solution for public stockholding programmes to address food security.

“Food security is an enormously complex topic affected by a number of policies, including trade distorting domestic support, export subsidies, export restrictions, and high tariffs,” says a United States proposal circulated at the WTO on July 14.

“These policies [in the developing countries],” continues the proposal, “can impede the food security of food insecure peoples throughout the world.” The United States insists that food security policies must be consistent with the rules framed in the Uruguay Round of trade negotiations that came into effect in 1995.

“Public stockholding is only one tool used to address food security, and disciplines regarding its application are already addressed in the Agreement on Agriculture,” the United States maintains.

The agriculture agreement of the trade body was largely based on the understandings reached between the two largest subsidisers – the European Union and the United States – which culminated in what is called the Blair House Agreement in 1992. The major subsidisers were provided a “peace clause” for ten years (1995-2005) from facing any challenges to their farm subsidy programmes at the WTO.

The AOA also includes complex rules regarding how its members, especially industrialised countries, must reduce their most-distorting farm subsidies.

In the face of increased legal challenges at the WTO and also demands raised for steep cuts in subsidies during the current Doha trade negotiations, several industrialised countries shifted their subsidies from what are called most trade-distorting “amber box” measures to “green box” payments which are exempted from disputes. Jacques Berthelot, a French civil society activist, says that the United States has placed some of its illegal subsidies into the green box.

When it comes to disciplines on food security, however, the United States says it is important to ensure that “[food security] programmes do not distort trade or adversely affect the food security of other members.”  The United States has suggested several “elements” for a Work Programme on food security, including the issue of public stockholding programmes, for arriving at a permanent solution. Washington wants a thorough review of how countries have implemented food security in developing countries.

The U.S. proposal, says a South American farm trade official, is aimed at “frustrating” the developing countries from arriving at a simple and effective solution that would enable them to continue their public stockholding programmes without many hurdles. “The United States is interested in preserving the Uruguay Round rules but not address the issues raised by the developing countries in the Doha Round of trade negotiations that seek to address concerns raised by developing countries,” the official adds.

The G-33 group – with over 45 developing and least-developed countries – has brought the food security issue to the centre-stage at the WTO. Over the last two years, the G-33, led by Indonesia with China, India, Pakistan, the Philippines, Kenya, Nigeria, Zimbabwe, Bolivia, Cuba and Peru among others, has called for updating the external reference price based on 1986-88 prices to ensure that they can continue with their public stockholding programmes under what is called de minimis support for developing countries.

Following the G-33’s insistence on a solution for public stockholding programmes for food security, which became a make-or-break issue at the WTO’s Bali ministerial meeting, trade ministers had agreed on a decision “with the aim of making recommendations for a permanent solution.” The ministers directed their negotiators to arrive at a solution in four years.

Over the last six months, there has been little progress in addressing the core issues in the Bali package raised by developing countries, including food security. “We are deeply concerned that the Ministerial Decision on Public Stockholding for Food Security Purposes is getting side-lined,“ India told members at the WTO on July 2.

“In this and other areas, instead of engaging in meaningful discussion, certain members have been attempting to divert attention to the policies and programmes of selected developing country members,” says New Delhi, emphasising that “the issues raised are in no way relevant to the core mandate that we have been provided in the Bali Decisions.”

At a time when the industrialised countries want rapid implementation of the complex agreement on trade facilitation, their continued stonewalling tactics on the issues raised by developing countries has created serious doubts whether food security issue will be addressed in a meaningful manner at all.

“Credible disciplines for food security are vital for the survival of poor farmers in the developing countries who cannot be left to the vagaries of market forces and extortion by middlemen,” says Ambassador Dasgupta. “The delay in addressing food security will pose problems for millions of people below poverty who are dependent on public distribution programmes.”

LM Glasfiber workers hoist a wind turbine blade in Grand Forks, North Dakota. Credit: Tu/cc by 2.0

By Carey L. Biron
WASHINGTON, Jul 11 2014 (IPS)

Formal negotiations began this week around the increasingly significant global trade in “environmental goods”, those technologies seen as environmentally beneficial, including in combating climate change.

Attempts have been made to liberalise this market for years. But on Tuesday, 13 countries, constituting nearly 90 percent of the current trade in green goods such as solar panels, wind turbines and wastewater treatment filters, came together in Geneva to try again to reach agreement."There is no definition yet of what actually constitutes an ‘environmental good’, and many of the goods being considered are actually harmful to the environment.” -- Ilana Solomon

Yet there remains significant confusion around the actual potential – or even broader aim – of the talks, towards what’s being called the Environmental Goods Agreement. Green groups are expressing open scepticism of the process, taking place under the World Trade Organisation (WTO).

“From our perspective, we think increasing trade in and use of environmentally beneficial products is incredibly important. But we have really serious concerns about the approach the WTO is taking,” Ilana Solomon, the director of the Responsible Trade Program at the Sierra Club, a conservation and advocacy group, told IPS.

“This approach is about removing tariffs on a list of products that are supposedly beneficial to the environment. But there is no definition yet of what actually constitutes an ‘environmental good’, and many of the goods being considered are actually harmful to the environment.”

The WTO talks are taking place between the United States, the European Union, China, Australia, Japan and others. Representatives are starting from a list of 54 product categories, agreed upon in 2012 among the Asia-Pacific Economic Cooperation (APEC) grouping.

The APEC countries are now working to reduce tariffs on these products to below five percent by 2015.

Yet the list includes many items that can be used in ways that could be either environmentally positive or negative. This includes, for instance, waste incinerators, centrifuges, gas turbines, sludge compactors and a variety of technical machinery.

The list would also seem to largely exclude poor countries. Currently, only Costa Rica has joined what are otherwise industrialised and middle-income economies in the talks.

“Poor countries are probably not producing these items,” Kim Elliott, a senior researcher on trade at the Center for Global Development, a think tank here, told IPS. “If they don’t participate in these talks they’ll likely lose out around high tariffs, but they’re probably not going to be doing much exporting.”

While proponents tend to characterise the negotiations in terms of lowering overall prices for green goods, little is said of the potential impact on nascent domestic industries.

“There might well be reasons a developing country would want to develop its own industry in, say, solar panels or wind turbines,” the Sierra Club’s Solomon says. “But having low or no tariffs could impede the ability of these countries to develop their own domestic renewable energy industries.”

Knock-on effects?

The World Trade Organisation does not include climate change in its purview. Yet since the mid-1990s the multilateral organisation says it has worked to establish “a clear link between sustainable development and disciplined trade liberalization – in order to ensure that market opening goes hand in hand with environmental and social objectives.”

Momentum behind the new talks is in part due to a push from President Barack Obama. Last year, as part of a major new focus on climate, the president announced that U.S. officials would engage in the negotiations in order “to help more countries skip past the dirty phase of development and join a global low-carbon economy.”

The administration’s interest in the issue will also be shared by other proponents of expanded free trade. Multilateral trade talks have seen little to no progress over the past two decades, after all, so proponents hope that linking these issues could give a fillip to the multilateral system.

“Everybody, at least on paper, wants to do something on climate change, so this is seen as an issue that might be able to move,” the Center for Global Development’s Elliott says. “The idea is regarded as something of a win-win, as useful for the trading system and also for the planet.”

Of course, the U.S. government’s interest is also around strengthening U.S. exports, and as political pressures have risen around the world around climate change, the trade in green goods has quickly become a major force. According to official estimates, this market’s value doubled between 2011 and 2007, and stood at around a trillion dollars last year.

The U.S. share has been growing by eight percent per year since 2009, amounting to some 106 billion dollars last year.

Certainly business interests, in the United States and industrialised countries around the world, are showing significant interest in the new talks. On Tuesday, nearly 50 major business groups and trade associations wrote to the WTO negotiators to “strongly endorse” their efforts.

The industry groups also expressed hope that an accord around environmental goods could act as a catalyst for broader liberalisation.

“An ambitious [agreement] will further increase global trade in environmental goods, lowering the cost of addressing environmental and climate challenges by removing tariffs that can be as high as 35 percent,” the groups stated.

“In addition to its intrinsic commercial importance and desirability, a well-designed [agreement] can act as a stepping stone to lowering tariffs and other trade barriers in other sectors and associated value chains.”

Backdoor liberalisation

The U.S. administration may share this view. The Sierra Club’s Solomon points to a recent letter from Michael Froman, the United States’ top trade official, requesting the U.S. International Trade Commission to research the potential impact of trade liberalisation around environmental goods.

“In the absence of a universally accepted definition of an ‘environmental good,’” Froman wrote, “I request that, for the purpose of its analysis, the Commission refer to the items contained in the list attached to this letter.”

That list, which extends to 34 pages, contains hundreds of items not currently on the APEC list. These range from natural products (honey, palm oil, urea, coconut fibres, bamboo) to the technical (pipes and casings “of a kind used in drilling for oil and gas”) to the seemingly random (vacuum cleaners, cameras).

“This appears to suggest that this exercise isn’t about protecting the environment but rather about expanding the current model of free trade – a backdoor attempt to achieve liberalisation on a broad range of goods,” Solomon says.

“As this process moves forward, we’ll need a full environmental impact assessment of everything on the list under consideration. And it can’t just be the end uses that are examined, but rather the whole lifecycle of a product’s impact that is taken into account.”

African countries are coming under strong pressure from the United States and the European Union to reverse the decision adopted by their trade ministers to implement the World Trade Organization’s trade facilitation agreement on a “provisional” basis.

At last week’s summit of African Union leaders in Malabo, Equatorial Guinea, “there was unprecedented [U.S. and European Union] pressure and bulldozing to change the decision reached by the African trade ministers on April 27 in Addis Ababa, Ethiopia, to implement the trade facilitation (TF) agreement on a provisional basis under paragraph 47 of the Doha Declaration,” Ambassador Nelson Ndirangu, director for economics and external trade in the Kenyan Foreign Ministry, told IPS.

“This pressure comes only when the issues and interests of rich countries are involved but not when the concerns of the poorest countries are to be addressed,” Ambassador Ndirangu said.“This pressure [on African countries] comes only when the issues and interests of rich countries are involved but not when the concerns of the poorest countries are to be addressed … Clearly, there are double-standards” – Ambassador Nelson Ndirangu, director for economics and external trade in the Kenyan Foreign Ministry

“Clearly, there are double-standards,” the senior Kenyan trade official added, lamenting the pressure and arm-twisting that was applied on African countries for definitive implementation of the agreement.

The TF agreement was concluded at the WTO’s ninth ministerial conference in Bali, Indonesia, last year.  It was taken out of the Doha Development Agenda as a low-hanging fruit ready for consummation.  More importantly, the agreement was a payment to the United States and the European Union to return to the Doha negotiating table.

The ambitious TF agreement is aimed at harmonising customs rules and regulations as followed in the industrialised countries. It ensures unimpeded market access for companies such as Apple, General Electric, Caterpillar, Pfizer, Samsung, Sony, Ericsson, Nokia, Hyundai, Toyota and Lenovo in developing and poor countries.

Former WTO Director-General Pascal Lamy has suggested that the TF agreement would reduce tariffs by 10 percent in the poorest countries.

In return for the agreement, developing and least-developed countries were promised several best endeavour outcomes in the Bali package on agriculture and development. They include general services (such as land rehabilitation, soil conservation and resource management, drought management and flood control), public stockholding for food security, an understanding on tariff rate quota administration, export subsidies, and phasing out of trade-distorting cotton subsidies (provided largely by the United States) in agriculture.

The non-binding developmental outcomes include preferential rules of origin for the export of industrial goods by the poorest countries, a special waiver to help services suppliers in the poorest countries, duty-free and quota-free market access for least developed countries (LDCs), and a monitoring mechanism for special and differential treatment flexibilities.

African countries were unhappy with the Bali package because they said it lacked balance and was tilted heavily in favour of the TF agreement forced by the industrialised countries on the poor nations.

The Bali outcomes, said African Union Trade Commissioner Fatima Acyl, “were not the most optimal decisions in terms of African interests … We have to reflect and learn from the lessons of Bali on how we can ensure that our interests and priorities are adequately addressed in the post-Bali negotiations.”

The African ministers in Malabo directed their negotiators to propose language on the Protocol of Amendment – the legal instrument that will bring the TF agreement into force at the WTO – that the TF agreement will be provisionally implemented and in completion of the entire Doha Round of negotiation.

African countries justify their proposal on the basis of paragraph 47 of the Doha Declaration which enables WTO members to implement agreement either on a provisional or definitive basis.

The African position on the TF agreement was not acceptable to the rich countries. In a furious response, the industrialised countries adopted a belligerent approach involving threats to terminate preferential access. The United States, for example, threatened African countries that it would terminate the preferential access provided under the Africa Growth Opportunities Act (AGOA) programme if they did not reverse their decision on the TF, said a senior African trade official from Southern Africa.

The WTO has also joined the wave of protests launched by the industrialised countries against the African decision for deciding to implement the TF on a provisional basis. “I am aware that there are concerns about actions on the part of some delegations [African countries] which could compromise what was negotiated in Bali last December,” WTO Director-General Roberto Azevedo said, at a meeting of the informal trade negotiations committee on June 25.

The African decision, according to Azevedo, “would not only compromise the Trade Facilitation Agreement – including the technical assistance element. All of the Bali decisions – every single one of them – would be compromised,” he said.

The United States agreed with Azevedo’s assessment of the potential danger of unravelling the TF agreement, and the European Union’s trade envoy to the WTO, Ambassador Angelos Pangratis, said that “the credibility of the negotiating function of this organisation is once again at stake” because of the African decision.

The United States and the European Union stepped up their pressure by sending security officials to Malabo to oversee the debate, said another African official.  He called it an “unprecedented power game rarely witnessed at an African heads of nations meeting.”

In the face of the strong-arm tactics, several African countries such as Nigeria and Mauritius refused to join the ministerial consensus to implement the TF agreement on a provisional basis.  Several other African countries subsequently retracted their support for the declaration agreed to in April.

In a nutshell, African Union leaders were forced to change their course by adopting a new decision which “reaffirms commitment to the Doha Development Agenda and to its rapid completion in accordance with its development objectives.”

The African Union “also reaffirms its commitment to all the decisions the Ministers took in Bali which are an important stepping stone towards the conclusion of the Doha Round …  To this end, leaders acknowledge that the Trade Facilitation Agreement is an integral part of the process.”

Regarding capacity-building assistance to developing countries to help them implement the binding TF commitments, African Union countries still want to see up-front delivery of assistance.  The new decision states that African Union leaders “reiterate in this regard that assistance and support for capacity-building should be provided as envisaged in the Trade Facilitation Agreement in a predictable manner so as to enable African economies to acquire the necessary capacity for the implementation of the agreement.”

The decision taken by the African leaders is clearly aimed at implementing the TF decision, but there is no clarity yet on how to implement the decision, said Ndirangu. “We never said we will not implement the TF agreement but we don’t know how to implement this agreement,” he added.

In an attempt to ensure that the rich countries do not walk away with their prized jewel in the Doha crown by not addressing the remaining developmental issues,  several countries – South Africa, India, Uganda, Tanzania, Solomon Islands and Zimbabwe – demanded Wednesday that there has to be a clear linkage between the implementation of the TF agreement and the rest of the Doha Development Agenda on the basis of the Single Undertaking, which stipulates that nothing is agreed until everything is agreed!

More than 180 days after the Bali meeting, there is no measurable progress on the issues raised by the poor countries. But the TF agreement is on course for final implementation by the end of 2015.

Women in Cambodia’s garments sector work 10-12 hours a day. Credit: Michelle Tolson/IPS

By Michelle Tolson
PHNOM PENH, May 31 2014 (IPS)

The movement for reproductive justice sees women’s decision to have – or not have – children as a fundamental right. Should they choose to bear a child, women should have the right to care and provide for them; if they opt not to give birth, family planning services should be made available to enable women to space or prevent pregnancies.

In Cambodia, where women make up 60 percent of the population of 14 million people, this fundamental right is being trampled by insecure labour contracts, toxic working conditions and a near-total absence of maternity benefits for working mothers.

Take Cambodia’s garments industry, a massive sector that accounts for 80 percent of the country’s exports. A full 90 percent of the workforce is female, but labour rights have not accompanied employment opportunities.

"[The] lack of labour rights for women [is] a worrying trend that is completely changing the culture of Cambodia.” -- Tola Moeun, head of the labour programme at the Community Legal Education Centre
Ever since the country entered into a liberalising agreement with the World Trade Organisation (WTO) in 2005, long-term contracts have been edged out in favour of short term or fixed duration contracts (FDCs), the latter being far more popular among East Asian factory owners and western clothing brands like Gap, Walmart and H&M.

These informal arrangements “abuse garment workers’ reproductive rights,” Sophea Chrek, a former garment worker and technical assistant to the Workers Information Center (WIC) – which recently staged a fashion show to highlight the issue – told IPS.

“Women employed under FDCs for three to six months, or sometimes even one month, will not risk their job by having a baby. Usually, they choose to have an abortion…before the contract ends to ensure that the line leaders or supervisors are not aware of their pregnancy,” Chrek added.

According to Cambodian labour law, factories are supposed to provide maternity leave, but most get around this requirement with short contracts, which leave the estimated 600,000 workers vulnerable to employers’ whims.

Melissa Cockroft, a technical advisor on sexual and reproductive health, tells IPS that women without access to family planning services resort to unsafe and unregulated measures, such as using over-the-counter Chinese products to induce abortions.

These methods can be fatal, but women seem hesitant to avail themselves of NGO-provided free or discounted service at on-site infirmaries, which are less confidential.

Sometimes their grueling schedules, which include 10 to 12-hour workdays with only a short lunch break in between, keep them from making appointments. Many of these women, Cockroft says, are just too busy to even think of starting families.

Garment workers’ reticence to use reproductive services can be cultural too, as talking about sexual health is considered ‘shameful’ in traditional Cambodian society.

Cambodian law also stipulates that factories provide working mothers with childcare, but Cockroft says she has only seen one operational childcare facility during all her years as an advocate in the field.

For some women, the decision to leave their children at home emerges from a desire to spare them the grueling commute – many factory workers travel shoulder-to-shoulder in trucks or on compact wagons pulled by tuk tuks, ubiquitous motorcycle taxis, down Cambodia’s notoriously unsafe roads.

Very often, babies remain at home with their grandmothers in the countryside while their mothers go off to work in the city, where they earn roughly 100 dollars per month. Union leaders are trying to raise this minimum wage to 160 dollars.

In general, though, both Cockroft and Chrek say garment workers consider themselves “too poor” to have children.

Entertainers and street workers

Meanwhile, in Cambodia’s popular entertainment sector, women face a unique set of challenges, their access to reproductive health services hindered by the informal and unpredictable nature of their work.

Independent researcher Dr. Ian Lubek tells IPS that entertainment workers are likely to experience a much higher risk of foetal alcoholic syndrome due to the number of beverages they are forced to consume every night in order to get tips from their customers. Research from the International Labour Organisation (ILO) suggests that a female beer seller or hostess consumes up to 11 drinks a night.

Years of advocacy efforts have at least enabled entertainers working for international beer companies to secure better wages, with women employed by the Cambrew brewery now drawing a salary of close to 160 dollars a month.

Higher wages, according to Phal Sophea, former beer seller and representative for the Siem Reap division of the Cambodia Food and Service Workers Federation (CFSWF), amounts to less economic pressure to have transactional sex.

“I think better pay will reduce sex work because the [women] generally go out with customers when the pay is too low,” she told IPS.

Of all the groups of working women struggling to raise children, street-based sex workers are among the most marginalised and are often subject to police violence, arrests and forced detention in anti-trafficking ‘reeducation centres’.

While unions for entertainment workers can negotiate contracts, sex workers are left completely vulnerable to the laws of the streets.

Labour research indicates that Cambodians living in urban areas require, at the very least, 150 dollars a month in order to survive; most salaries are set below 100 a month, making it very difficult for the average working Cambodian to make ends meet, and feed their families. As it is, 40 percent of Cambodian children are chronically malnourished.

WNU Board Member Socheata Sim explained that sex work might be the only option for the many women without a formal education; according to a report on education levels among women in Cambodia, only one-third of school-aged girls are enrolled at the lower secondary school level, and one in ten at the upper secondary school level.

Many sex workers want a better life for their children, but few can afford the high fees, bribes and related costs of formal schooling.

Furthermore, sex workers living in slum dwellings face a constant threat of eviction. Tola Moeun, head of the labour programme at the Community Legal Education Centre, told IPS that high rates of evictions are now forcing many women to migrate abroad in search of employment.

“Yet once abroad, if undocumented, migrant workers find they do not have the rights citizens have,” he lamented.

In Thailand, for instance, where tens of thousands of Cambodian women now live and work, undocumented workers are fired from their jobs if they become pregnant, are denied maternity leave and earn half the 300-baht (nine-dollar) daily minimum wage.

Tola sees the “lack of labour rights for women as a worrying trend that is completely changing the culture of Cambodia.”

(END)

Korean rice farmers protesting in Seoul against any new imports under an agreement with the World Trade Organisation. Credit: Ahn Mi Young/IPS.

By Ahn Mi Young
SEOUL, Apr 24 2014 (IPS)

Rice, a staple of the South Korean diet, is stirring up a bowlful of worry for Seoul. Under a promise to the World Trade Organisation (WTO), the government has to make a tough choice on rice imports by June this year.

It can either allow foreign suppliers to sell rice in its market – that is, open up its rice sector to the world – or it can continue to import a fixed quota of rice annually from countries like the U.S., China and Thailand.To open up its rice market or to stick to an import quota – the decision will not be easy for Seoul.

While opening up the rice market would bring competition for local varieties of the grain – and in turn invite the wrath of Korean farmers – the second option would mean allowing a huge quantity of foreign rice despite little domestic demand for it.

The government’s dilemma comes at a time when rice consumption is falling in the country. South Koreans no longer have the “peasant diet” – a full rice bowl, a bean fermented soup and the spicy vegetable dish kimchi. They often dine out and opt for other menus. Often, women on a diet cut down their rice intake.

An average South Korean who used to eat 130 kg of rice a year in 1982 and 112.9 kg in 1992 ate only 67.2 kg rice in 2013, according to agriculture ministry data.

Despite such a trend, the government has to take a decision soon.

In 1993, when the Korean government tried to open up the rice sector, tens of thousands of angry farmers gathered across the nation to protest. “Opening up the rice market is like giving away the country’s food sovereignty”, their slogan said.

The government then promised farmers it would not liberalise the rice sector.

WTO instead allowed South Korea a concession in the form of minimum market access (MMA) norms. This system meant Seoul would have to permit a specified quantity of rice to be imported under an annual quota.

Thus, in 1994, South Korea began to import four percent of its annual rice consumption. In 2004, this agreement was extended for another 10 years, with the condition that the annual quota of imported rice be increased by 20,000 tonnes each year.

As a result, rice import under the quota jumped from about 225,000 tonnes in 2005 to 408,000 tonnes in 2014. The current quantity imported under the quota amounts to about 10 percent of the country’s total rice production, which was 4.23 million tonnes last year.

The major sources of its rice imports are China, the U.S. and Thailand, and it also buys from India, Vietnam and Cambodia.

But few South Koreans buy foreign rice, because of their strong preference for the “delicious” homegrown variety. Most of the imported quota rice is sold to food, liquor or confectionery companies but these too increasingly use more of Korean rice because of consumer preferences.

Seoul’s agreement with the WTO on the current import quota expires at the end of 2014. It must decide by June so that it can notify the WTO of its decision by September. Seoul has said the WTO is unlikely to allow any further delay in opening the rice market.

A senior official at the agriculture ministry told IPS: “If we open up, we will try to impose a 300 or 500 percent tariff on imported rice. Then the price gap between imported and domestic rice would be big enough to keep our farmers unaffected.”

Such a proposal from Seoul would have to be ratified by the WTO. “The key issue would be how high the tariff on imported foreign rice can be,” agriculture minister Lee Dong-Pil said at a press meeting in March.

Currently domestic rice sells for 162 dollars per gamani (80 kg). If South Korea imports the cereal at 60,000-70,000 won (56-65 dollars) per gamani and imposes 400 percent tariff, imported rice will cost about 280 dollars per gamani.

“Then even fewer companies would buy imported rice,” said a senior agriculture ministry official on condition of anonymity. “This may explain why major rice exporters like China or the U.S. may secretly want Seoul to maintain the current import quota system.”

The government also believes that settling for an import quota yet again – and thereby buying greater quantities of foreign rice – will not help the country. “Another delay will not benefit South Korea,” minister Lee said, referring to a growing stock of imported rice.

Talk of opening up the rice market has already spurred farmer protests.

Hundreds of them gathered in Seoul on Mar. 13 to oppose free import of foreign rice. “As we plant rice saplings in our fields, we also sow the seeds of worry in our heart,”, said a placard at the demonstration. “We will never accept an opening up of the rice market” read another.

There are 1.15 million farmers in the country and 494,352 of them are engaged in rice cultivation, according to 2012 data from the Korean Statistical Information Service.

Last month about 10,000 farmers gathered near a Seoul building where trade officials from South Korea and China were meeting for a bilateral free trade deal that would allow these two countries to increase trade between them by reducing or removing tariff on imports.

“Once a free trade deal is made between Beijing and Seoul, how can Seoul impose 300 percent tariff on Chinese rice?” asked Lee Byong-Gyu, who was leading the farmer group.

To open up its rice market or to stick to an import quota – the decision will not be easy for Seoul.

By Roberto Azevêdo
GENEVA, Apr 22 2014 (IPS)

Although some people don’t see the connection, the global trading system is aimed at creating some of the essential conditions needed to improve children’s lives and their prospects in the future.

We can identify three flash points where trade and children’s interests intersect, and where perhaps we can do a bit more to maximise our impact. One relates to developed countries, and two to developing nations.

The first point is this: the crisis in recent years has hit many western economies hard — and one of the most worrying effects has been very high levels of youth unemployment.

WTO Director General Roberto Azevêdo. Credit: WTO/CC BY SA-2.0

Levels have topped 50 percent in some countries. The effects of this are very significant – and are much more damaging than simply the loss of productive capacity in the economy.

Surveys of young people highlight the corrosive effect that unemployment can have on their confidence, motivation, and view of the future – raising the spectre of a “lost generation”.

Trade can be part of the solution, because one of the key differences that trade makes is through job creation.

The World Trade Organisation (WTO) reached a major multilateral trade deal in Bali last December which could make a big difference here, as economists predict that it could create 21 million jobs.

Of course the relationship of cause and effect is complex. The WTO conducted a major study on this issue with the Organisation for Economic Cooperation and Development (OECD) and others in 2012. The evidence shows that trade can play a powerful role – but to be effective, trade reforms have to be embedded in supportive policies.

Countries where trade openness has failed to stimulate growth commonly have unstable macroeconomic policies, inadequate property rights, insufficient public investment in overcoming supply-side constraints, or other socio-political limitations.

So for the positive effects of trade to be realised in tackling youth unemployment, we need to recognise the inter-linkages to other areas of policy.

Export-orientated jobs typically pay higher wages to their workers. In Western Europe those working in export-focused companies collect a 10-20 percent premium over the average wage. And in sub-Saharan Africa that figure is even higher, at 34 percent.

Of course there are challenges here too in ensuring that low-skilled workers are not left behind.

My second point is about the persistent tragedy of child poverty.

By supporting economic growth and poverty alleviation, trade can be an important engine for change, and therefore can make a significant difference to children’s prospects.

The leaders of the Young Lives survey conducted by Oxford University over 15 years in India, Ethiopia, Peru and Vietnam found that growth provides financial space for governments and families to invest in children and create improved infrastructure and opportunity.

The fact that the Millennium Development Goal to halve the rate of extreme poverty by 2015 was met well ahead of time was illustrative of this.

Take China, where the pursuit of an export-led growth model has led it to become the world’s second largest economy and now the world’s biggest trading nation. At the same time it has reduced the poverty level from 60 to 12 percent between 1990 and 2010.

Other economies have followed a similar trajectory, using the trading system to rapidly expand economic growth and slash rates of extreme poverty.

Look at Vietnam or the recent graduates from least developed country status: Samoa, Cape Verde and the Maldives. They show again the difference that trade and increased investment can make in achieving more inclusive socio-economic development.

However the rate of poverty reduction as a whole is not always matched in the area of child poverty. Again, the Young Lives survey argues that while economic growth is important, what matters more for children is the nature or quality of that growth.

We have to harness growth more effectively and convert it into social change that benefits poor children and their families. This is an urgent challenge for policy-makers at the international level to provide the right frameworks and mechanisms to support quality growth, and at the domestic level to ensure that no-one falls behind, particularly children.

So the debate that is currently underway to design the successors to the Millennium Development Goals will be crucial here, not least as it will dictate the agenda until 2030.

My final point is that lifting children out of poverty is essential, but it is not enough.

We need to look at children’s lives in a more holistic way.

Robert F. Kennedy warned of the narrowness of economic measurements. He said: “The gross national product does not allow for the health of our children, the quality of their education or the joy of their play… It measures everything, in short, except that which makes life worthwhile.”

Of course this is what the Human Development Index is all about – the need to place people at the centre of policy-making.

Trade is not just about dollars and cents. We need to look at the wider environment.

I believe that trade can help to create the conditions in which children can lead better lives. And at the most fundamental level, we can do this through supporting the family – by reducing the potential for conflict, helping to create a stable environment and predictable conditions, and supporting higher income levels.

This, in turn, can support better education and healthcare, while improved connections through trade also support wider access to medicine.

Amartya Sen, one of the creators of the Human Development Index, argues that true development comes through freedom.

And I believe that by encouraging openness, cooperation and democracy, trade supports this as well.
(END/COPYRIGHT IPS)

Excerpt:

By Roberto Azevêdo
GENEVA, Mar 20 2014 (IPS)

The Bali Package, approved on Dec. 7 by the World Trade Organisation (WTO) members, was a historic achievement, representing a significant boost for trade, growth and development around the world. But its true significance lies in what it allows us to do next to conclude the Doha Development Agenda.

As we prepare to seize this opportunity in 2014, it is timely to look back on the challenges which emerged in the international trading environment in 2013 and to consider how members might respond.

The WTO report on developments in the international trading environment which was circulated on Jan. 31 aims to provide an assessment of a range of trade and trade-related issues and trends during the period from mid-October 2012 to mid-November 2013.We must acknowledge that the stock of current trade restrictions and distortions continues to accumulate.

Put simply, it is a health-check on global trade and I think the diagnosis is cautiously positive although there are still reasons to be concerned about restrictive measures. We were not in great shape last year and we have picked up a few bad habits which we need to shake off. But overall trade growth is beginning to recover and we have a healthier outlook for 2014.

Let me mention some of the substantive findings of the report.

First, in terms of trade in goods, its volume expanded by less than 2.5 percent in 2013.

Growth projections for 2014 are much improved, hovering somewhere between 4 and 4.5 percent but this is still below the historical average since 1990 of 5.5 percent.

We are, of course, keeping a close eye on recent developments in the global economy and their impact on these projections.

Regarding developments in trade measures, there are two specific categories: trade remedy actions; and other trade measures.

Counting both categories together the report shows that overall 407 new restrictive measures were reported during the review period. This is compared to 308 in the same period a year earlier.

These new restrictive measures affect about 1.3 percent of world merchandise imports valued at 240 billion dollars.

Moreover, they add to the existing stock of restrictions and other impediments to the flow of international trade.

Looking specifically at trade remedy actions which were mostly anti-dumping and safeguard measures we saw 217 initiations of new trade remedy investigations. This covers around 0.2 percent of world imports, and compares to 138 terminations of either investigations or existing duties.

As was the case in 2012, therefore, more trade remedy actions were initiated than were terminated in 2013.Trade remedy activity is therefore clearly on the rise.

The number of new other trade measures also increased from 164 in the previous year to 190 during the review period.

The majority of such new measures were applied to imports mostly in the form of import tariff increases and customs procedures, covering around 1.1 percent of world goods imports.

Compared to the trend in new restrictive measures, the number of new trade-facilitating measures fell to 107 in 2013, well down from 162 a year earlier. These measures cover the equivalent of 1.4 percent of world merchandise imports which is approximately 258 billion dollars.

These measures, plus the number of terminations of trade remedy actions, represent little more than one-third of the total measures covered in the report.

This paints a rather unflattering picture of the ratio of trade restrictive measures to facilitation measures. We must acknowledge that the stock of current trade restrictions and distortions continues to accumulate.

I strongly believe we have a collective responsibility to attend to the risk posed by the cumulative effect of new and existing trade restrictions.

During the period covered by this report, members notified 23 new Regional Trade Agreements (RTAs) to the WTO, bringing the total number in force today to 250.

Negotiations on new RTAs are also continuing, in some cases between parties that collectively account for very substantial shares of world trade and GDP.

My view is that these initiatives are positive and are to be welcomed but they can only ever be one part of the wider picture. Agreements such as these cannot be sufficient on their own to ensure gains which can be realised on a global scale. In fact, the proliferation of regulations and standards could multiply costs rather than reduce them.

The multilateral trading system was never the only option for international trade negotiations. It has always co-existed with, and benefitted from, other initiatives. They are not mutually exclusive alternatives.

We must think about how the two processes – global and regional – can move forward together to reduce costs effectively and to curb protectionism.

As I have said before, 2014 is a pivotal year for the WTO. It is the year that we will implement our first negotiated outcomes and the year that the Doha Round is put back on track.

Excerpt:

By Roberto Azevêdo
GENEVA, Jan 20 2014 (IPS)

At the Ninth Ministerial Conference of the World Trade Organisation (WTO), held in Bali Dec. 3-7, a series of decisions was adopted aimed at streamlining trade, allowing developing countries more options for providing food security, boosting least developed countries’ trade, and bolstering development in general.

The first pillar of the “Bali Package” is agriculture. This is the cornerstone of the Doha Development Agenda, which the WTO has been working on since 2001. Agricultural issues are very dear to developing countries, and the Bali Package delivered some important outcomes.Agreements such as this cannot be sufficient on their own to ensure globalisable gains.

For example, it sets us on track for a reform of export subsidies and measures of similar effect, and it makes practical progress towards better implementation of the tariff quota commitments assumed in the Uruguay Round (1986-1994).

There is also a reaffirmation and a deepening of the political commitments assumed in Hong Kong in 2005 on trade liberalisation and the reduction of distorting support to cotton – a very important issue for the African countries that grow that crop.

The Package also provides temporary protection for food security programmes in developing countries, which allow for the stockpiling of grain for subsequent distribution to the poor. As we know, some of those countries could be exposed to legal challenges in the WTO for exceeding the limits stipulated in the Agriculture Agreement for certain types of domestic support.

So, in addition to the temporary protection against legal challenges, the Bali Agreement states that a permanent solution will be negotiated and concluded before the 11th Ministerial Conference in four years’ time.

The second pillar of the package is development. Here, a monitoring mechanism will provide for the review and strengthening of special and differential treatment provisions for developing countries, which are contained in all WTO multilateral texts. This achievement is vital for the equilibrium and efficacy of the multilateral system.

There are also a number of specific measures to support the least developed countries (LDCs). They include reforms that would enable services providers in LDCs to enjoy new export opportunities in developed country markets.

They also include steps to simplify rules of origin, which again will open up new export opportunities for those countries specifically.

Under this pillar we will also see improvements in trade preference arrangements which extend exemption from tariffs and quotas to LDC exports.

The third and final pillar is trade facilitation, which sets out to simplify and modernise customs procedures, and make them more transparent, thereby reducing transaction costs.

The Agreement on Trade Facilitation will be able to provide a significant – and today much needed – boost to the global economy, delivering growth and jobs. This could be worth as much as one trillion dollars per year to the global economy, generating up to 21 million jobs.

Significantly the Agreement also ensures the provision of technical assistance to support developing and least developed economies to implement these modernising reforms, and therefore help them integrate better into global trade flows.

Clearly estimates can vary, but once the Agreement is implemented, there could be an expansion in developing country exports of up to 10 percent – compared to a 4.5 percent expansion in developed countries.

It is true that the deal represents only part of the Doha Development Agenda. But there can be no doubt that this is a significant package that will provide a considerable economic boost and improve the lives of millions of people around the world  – particularly among the poorest and in countries whose economies have stalled and are suffering high levels of unemployment.

In the specific case of the European Union and its member States, the conclusion of the Bali Package reflects that grouping’s chief negotiating objectives. With the Agreement on Trade Facilitation, opportunities for expanding trade will clearly increase.

The Agreement also offers potential to facilitate the internationalisation of small and medium sized enterprises, which are important drivers of job creation and income distribution in many European countries.

But of course these outcomes do not fully reflect achievement in Bali. There was a great deal more at stake. I said at the start of the Bali Conference that the very future of multilateral trading system hung in the balance.

In recent months there has been a lot of talk about regional and bilateral agreements. The Transatlantic Trade and Investment Partnership between the United States and the European Union is one such potential agreement. My view of this is the same as of other potential agreements of this kind: it is a positive initiative to be welcomed – but it can only ever be one part of the wider picture.

Agreements such as this cannot be sufficient on their own to ensure globalisable gains. The proliferation of regulations and standards tends to multiply rather than reduce costs.

The multilateral trading system was never the only option for international trade negotiations. It has always coexisted with, and benefited from, other initiatives, whether regional or bilateral. They are therefore not mutually exclusive alternatives.

The WTO disciplines also need to evolve to reduce the gap that will exist between multilateral regulations and the new generation regulations negotiated outside Geneva.

The two processes, multilateral and bilateral, must move forward together to reduce costs effectively and to curb protectionism. Otherwise, we could see results that are exactly the opposite of what we are seeking.

Excerpt:

As industrialised countries celebrate the World Trade Organisation’s Bali accord, the developing and the least-developed countries are forced to carry their battle to another day after securing only half-baked results and grandiose promises, said several trade ministers.

“While the agreements reached at Bali are important, it is important to ensure balance in the agreements,” said Rob Davies, South Africa’s trade minister. “We are of the view that there is structural imbalance in which the least-developed countries secured only best endeavor solutions while there is a binding agreement on trade facilitation,” Davies told IPS.

“The developing and least-developing countries secured only promises and best endeavor outcomes while agreeing to a comprehensive trade facilitation agreement,” said Kenya’s foreign minister Amina Mohamed.
In sharp contrast, the United States, the European Union, and other industrialised countries praised the Dec. 3-7 Bali Ministerial Conference for delivering the trade facilitation agreement.

“For the first time in its almost 20-year history, the WTO reached a fully multilateral agreement,” said U.S. Trade Representative Ambassador Michael Froman. “WTO Members have demonstrated that we can come together as one to set new rules that create economic opportunity and prosperity for our nations and our peoples.”

EU Trade Commissioner Karel De Gucht said the breakthrough at Bali in wrapping up the agreement on trade facilitation, and some deliverables in agriculture, were truly significant for the trade body.

“They take the WTO from the darkness of the multilateral era to [shine] light on multilateral action,” commissioner Gucht told reporters. The EU commissioner, however, admitted that there was a lack of balance in the overall Bali agreement.

For over 15 years, the industrialised countries and some advanced developing countries such as Hong Kong, Singapore, South Korea, Chile and Mexico have pushed hard for rapid liberalisation of customs procedures as part of the trade facilitation agreement so as to enable their exports to rapidly penetrate the developing and least developed countries without many hassles.

Proponents say the TF accord is a “good governance agreement” for customs procedures that industrialised countries want the developing and the poorest countries to implement in the coming days and years on a binding basis – failing which the latter can be hauled up at the WTO’s dispute settlement body.

In return, the developing countries managed to secure only best endeavor agreements on some issues of their concern in agriculture, such as an interim mechanism for public stockholding for food security, transparency-related improvements in what are called tariff rate quota administration provisions, and most trade-distorting farm export subsidies and export credits.

The poorest countries as part of the “development” dossier secured another set of best endeavor improvement concerning preferential rules of origin for exporting to industrialised countries, preferential treatment to services and services suppliers of least developed countries, duty-free and quota-free market access for least-developed countries, and final monitoring mechanism for special and differential treatment flexibilities.

Ironically, the Bali accord has weakened the language on issues raised by the developing and the poorest countries as compared to what was agreed in the WTO Hong Kong Ministerial Declaration in 2005.

The Kenyan foreign minister – who was the chair of the WTO General Council at the Hong Kong meeting – spoke about this puzzling change.

“What is the guarantee that the industrialised countries will implement the promises now made in the Bali agreement, particularly the provision of financial and technical assistance to implement the trade facilitation commitments, when they did not implement the commitments that were made eight years ago?” she remarked to IPS.

The Bali package included ten agreements. They comprise a binding agreement on trade facilitation and four descriptive items in agriculture such as general services, public stockholding for food security purposes, understanding the tariff rate quota administration provisions of agriculture products, and export competition.

In the development dossier, the Bali package offered non-binding best endeavor outcomes on preferential rules of origin for least developed countries, organisation for the waiver concerning preferential treatment to services, duty-free and quota-free market access, and a monitoring mechanism on special and differential treatment.

“We have only partly accommodated the concerns of the poorest countries,” said Davies. “The priority out to be on development and implementation issues in the coming days,” the South African minister emphasised.

India steadfastly pushed hard for strong language to ensure that the public stockholding programmes for food security continued without interruption until a permanent solution was arrived at.

Despite opposition from some major industrialised countries, including the United States, and also opposition from some developing countries, India managed to secure an interim mechanism that would last for four years during which there is a commitment to find a permanent solution. If there is no outcome within four years, the interim solution will be extended till members agree to a permanent outcome.

However, there are many notification and safeguard conditions that India and other developing countries will have to implement in order to avail themselves of the interim mechanism for food security. The U.S. said these conditions are essential to ensure that public stockholding programmes for food security in one country do not cause food insecurity in other countries.

The post-Bali work programme has admitted that there are glaring asymmetrical outcomes in the “Bali Package.” “Issues in the Bali Package where legally binding outcomes could not be achieved will be prioritised… Work on issues in the package that have not been fully addressed at this Conference will resume in the relevant Committees or Negotiating Groups of the WTO,” according to the Bali Ministerial Declaration.

In short, the developing and least-developed countries will have to carry their fight as there are no “legally binding outcomes” on any of their issues. That is the message from the Bali Ministerial meeting.

Also, the Bali meeting shall be remembered for the manner in which the developing and the poorest countries remained divided thanks to a grand strategy adopted by the Northern countries.

“Unless the developing world remains united it is highly unlikely that they will make progress on their issues in the next year, and this is even more true in a period when the North is going to push hard its new trade agenda,” said a trade minister who preferred not to be identified.

Second day of the WTO's ministerial conference in Bali, Indonesia. Credit: © WTO/ANTARA

By Ravi Kanth Devarakonda
BALI, Dec 4 2013 (IPS)

The World Trade Organisation’s ninth ministerial meeting at Bali, Indonesia has morphed into a fierce battle between the countries seeking social safety nets for hundreds of millions of poor people and those insisting on having advanced import-facilitation programmes in the developing countries on par with the industrialised nations.

These two narratives openly clashed at the plenary meeting Tuesday. “Millions of people depend on food security and millions of people are going to see what will be done on this vital issue,” Kenya’s foreign minister Amina Mohamed told IPS.

“In Africa there are millions of people who need food security and they are all waiting to see if the ministers in Bali are going to be sensitive as an international community to the livelihood and survival concerns of the most vulnerable people,” she said.

She urged the trade ministers “to come up with a solution to send a message that we heard what you are saying and that we want to support your issue and we acknowledge food security is a vital issue.”

India’s trade minister Anand Sharma said at the plenary meeting that “Food security is essential for four billion people and is an important goal of the millennium development goals.

“Food security is non-negotiable,” said Sharma, maintaining that India cannot accept the current interim mechanism because it fails to provide legal certainty. Public stockholding of food grains to ensure food security must be respected, he said.

In the run-up to the Dec. 3-6 Bali meeting, India along with a group of countries including Bolivia, Cuba, Kenya, South Africa, Venezuela and Zimbabwe pressed hard for improved rules to ensure that their public stockholding programmes for food security are not undermined by flawed trade rules.

The rules in the WTO agreement on agriculture were largely crafted by the European Union and the United States during the 1986-1994 Uruguay Round of negotiations. While the rules insulate mega subsidisers from clear discipline, they are somewhat indifferent to the concerns of countries with large populations. “Dated WTO rules need to be corrected,” Sharma said

More importantly, “any trade agreement must be in harmony with our shared commitment to eliminate hunger and ensure the right to food, which we accepted as part of the MDG agenda,” the Indian minister said.

At issue is whether developing countries like India and Kenya, which have massive public stockholding programmes, particularly procuring food grains from small and poor farmers at minimum support prices, should face legal challenges due to rules that are inconsistent with current global economic realities.

Over the last 15 years, prices of essential food items have gone up by over 250 percent.

India, along with the members of the G33 coalition of 46 developing countries led by Indonesia, made a strong case for changing some parameters in the current WTO agreement on agriculture.

The G33 called for updating the external reference price in the WTO agreement to reflect current global prices. The coalition also demanded that excessive inflation be taken into consideration when assessing the commitments.

The industrialised countries, led by the U.S. and EU, vehemently opposed the G33 demand last year, saying they would never allow any change in the rules. But after sustained sabre rattling and intimidating threats, the developed countries backed down from their initial position, promising a more flexible response.

They offered what is called a “Peace Clause” as part of the Bali package, which would provide temporary respite – for no more than four years – from any trade disputes. But although they agreed to continue the discussion, they did not commit to finding a permanent solution.

In sharp contrast to their opposition to food security proposals from the developing countries led by India and Kenya, the industrialised countries pressed for a brand-new agreement on trade facilitation, which involves comprehensive changes in the customs and import procedures. The new TF agreement calls for a number of changes in the previous WTO rules.

If concluded at Bali, the trade facilitation agreement would save around 441 billion dollars for developing countries, said the EU trade commissioner Karel de Gucht. In fact, the International Chamber of Commerce claimed that a WTO trade facilitation agreement would provide gains to the tune of one trillion dollars for the developing and least developed countries.

WTO director general Roberto Azevêdo has also made similar claims over the last three days to drum up support for the Bali package.

The trade facilitation agreement, said de Gucht, is “essentially a way to help many countries cut red tape at their borders, to become more efficient and effective traders.”

Although the industrialised countries have constantly repeated the mantra that trade facilitation would deliver enormous gains, they have so far offered no conclusive evidence to that end.

“Unfortunately, these figures depend on too many unjustifiable assumptions to be relied on,” wrote Jeronim Capaldo, an academic at the Global Development and Environment Institute at Tufts University near Boston in the U.S.

Inaccurate estimates and unclear gains have become the order of the day. “It is hard to see how uncertain gains and unequal distribution of costs [underlying trade facilitation estimates] can justify diverting resources to trade facilitation from badly needed policies such as the strengthening of social safety nets,” Capaldo argued.

The Bali meeting has brought the simmering conflict into the open. Participants described it as a clash of these two narratives – a food security-plus approach as proposed by India and other developing countries versus a TF-plus approach pushed by industrialised nations and some developing countries.

South Africa’s trade minister Rob Davies cautioned against the imbalances in the Bali package, particularly the tilt towards trade facilitation.

Kenya’s foreign minister Mohamed, meanwhile, said “I agree with India, and we all want a clear solution…I’m hopeful that language will be found to move forward on this issue… I don’t think it is in anybody’s interest to allow this ministerial to send the wrong signal that we cannot come together and that we cannot find language to satisfy millions of poor people. It is important we achieve a concrete result on this at the Bali meeting.”

The fate of the Bali package now hangs in the balance. In the next 72 hours, the world will know whether a solution could be found for addressing the food security issue – or whether the Bali package will be torpedoed due to unbridgeable differences.

A water truck in Port Louis, Mauritius. Credit: Nasseem Ackbarally/IPS

By Carey L. Biron
WASHINGTON, Dec 4 2013 (IPS)

As government representatives gather Tuesday in Indonesia for what could be final negotiations towards a global trade agreement under the World Trade Organisation (WTO), environmentalists and social justice campaigners are urging them to specify that water resources cannot be treated as commodities.

Critics of the privatisation and “financialisation” of natural resources are pointing to mounting interest by multinational investors in viewing common water resources as tradable, a change that development advocates worry could impact particularly on poor and marginalised communities. While international agreements enshrined a universal right to water (and sanitation) in 2010, international trade agreements have yet to follow suit – a gap that some say is becoming increasingly dangerous.“These entities have made bets that water will eventually be distributed and sold much like petroleum is today." -- William Waren

“Our concern is that the financialisation and privatisation of water is already very much a long-term goal of major multinational companies and investors,” William Waren, a trade policy analyst with Friends of the Earth U.S., a watchdog group, told IPS.

“These entities have made bets that water will eventually be distributed and sold much like petroleum is today. They know that global warming will make water resources increasingly scarce, so they want to get ahold of these resources and eventually sell it at their asking price.”

Of those who have made such bets so far, Waren mentions Suez Environment, the French water giant, as well as T Boone Pickens, the U.S. oil tycoon-turned-alternative energy magnate. Regardless of where these investors are based, however, their focus is international.

Just ahead of the start of the WTO ministerial talks, taking place Tuesday through Friday in Bali, Friends of the Earth International offered a series of case studies on the experiences of a dozen countries around the financialisation of common water resources. The report argues that a confluence of international financial institutions and corporations are “paving the way” for this process.

Yet these forces are being offered crucial aid by international trade agreements, both the vagaries of current accords and the more explicit strategies in those still under negotiation, particularly spearheaded by the United States.

These “key drivers of the deregulation and liberalization processes that have opened the water and sanitation sectors to corporate profiting-making, and as key building-blocks to the architecture of impunity that protects it,” the report states.

“Standing out amongst them are the new and increasingly less transparent and non-democratic modalities of transoceanic partnerships led by the United States … and the World Trade Organization’s agenda on environmental services.”

Old public commons

Key in this discussion is an international trade agreement signed more than a half-century ago. The predecessor to today’s WTO, created in 1995, was an accord known as the General Agreement on Tariffs and Trade (GATT).

Today, GATT provisions continue to coordinate policy for the trade in physical goods. Yet Waren says neither GATT nor the WTO has ever clearly defined what constitutes a “good” or whether it includes water.

“The traditional view in international law is that water belongs to the public commons, so back in 1948 there was no consideration of what the big corporations are contemplating today – the complete control of the system from well to tap,” he says.

“So, we need to make sure there’s language in new trade agreements offering specific assurances that water is regarded as part of the public commons that is not a good or product.”

Likewise, the WTO’s discussion on trade in services remains under negotiation, largely made up of countries offering their own commitments. Yet thus far no country has made substantive commitments regarding domestic water supplies, while advocates worry that a suite of GATT commitments could substantially increase corporate control over common water resources.

Meanwhile, this week’s discussions in Bali are being seen as a last chance for the WTO to come to a multilateral agreement, as negotiations have dragged on under the current round of talks for a decade. Amidst mounting frustration, much of the momentum has instead shifted to state-to-state trade treaties and investment agreements.

Two of the largest ever contemplated are currently under negotiation, both led by Washington: the 12-member Trans Pacific Partnership and another free trade area between the United States and the European Union. If the two were to come to fruition, they would cover the vast majority of the world’s economy.

Yet these so-called U.S. models also come with stringent pro-business requirements and quasi-judicial enforcement mechanisms that put investors on the same level as sovereign states.

“There is a clear and present danger in these investment agreements, and water policy is an almost constant issue,” Waren says.

“Part of the problem is that much of investment case law has an explicit right to export. So countries acting to deal with a dwindling water supply, especially in the Global South, may not realise they’re giving the right to investors both to make investments and to export.”

And despite the United Nations’ 2010 agreement on the universal right to access to water, the international tribunals that adjudicate disputes under investment agreements typically don’t recognise international humanitarian law. For critics, such a system underlines the importance of the WTO explicitly engaging with the issue of water as a tradable good.

A third more expensive

It is somewhat ironic that the push towards increased multilateral financialisation of water could be coming from the United States, where the experience surrounding the privatisation of public water utilities has been notably negative.

The country’s largest private water company, American Water, was formerly owned by a German company. But that owner pulled out in large part due to public resistance towards both private and foreign ownership of water resources.

“There has clearly been resistance to private ownership,” Mary Grant, a researcher with Food & Water Watch (FWW), an advocacy group, told IPS. “Communities have made clear that they want local ownership of their systems in order to control both quality of service and the rates charged.”

FWW surveys have found that investor-owned utilities in dozens of U.S. states have typically charged a third more than those owned by the public, a lack of efficiency corroborated by other investigations. Profit-driven systems also experience problems in deciding where to extend service, with companies at times proving reluctant to do so in low-income areas or very small communities.

“The U.S. experience shows that water privatisation has been a failure,” Grant says. “It hasn’t resulted in better services even while it has led to higher rates and, often, worse service. Local, public provision is the most responsible way to ensure that everyone has access to safe and affordable water.”

Poorer countries will find it hard to gain access to bilateral trade agreements unless the WTO helps them do so. Credit: Amantha Perera/IPS

By Amantha Perera
TOKYO, Nov 29 2013 (IPS)

For years, it was the power chamber at the headquarters of the World Trade Organisation (WTO) in Geneva – the Director General’s Conference Room, more popularly known as the Green Room, where a handful of delegates would gather for important discussions and meetings.

The traditional power quad – the U.S., EU, Japan and Canada – would gather in the Green Room to “decide on global trade deals,” according to Masahiro Kawai, the head of the Tokyo-based Asian Development Bank Institute (ADBI), a think tank. That, however, was in the past.

“They sat in the Green Room and came up with agreements, but not any more,” Kawai said.

The erosion of power within the Green Room discussions, and more specifically that held by rich nations like the U.S. or Japan, is primarily linked to the rise of emerging nations such as India and China, and of newer, leaner and meaner trade groups like BRICS (Brazil, Russia, India, China and South Africa), as well as the change in traditional global supply chains.

A quarter of a century ago the share of global GDP held by emerging and developing economies was below 20 percent, according to World Bank and International Monetary Fund statistics.

As of 2012, they had almost caught up with the G7 powerful industrialised nations (Canada, France, Germany, Italy, Japan, UK and U.S.). The G7 share was around 48 percent while the emerging nations’ share was just below 40 percent.

They have already overtaken the G7 as the largest trading bloc in the world, accounting for just over 40 percent of all global trade. The G7 share of global trade has fallen from a peak of above 50 percent in the first half of the 1990s to around 35 percent.

“No wonder the voices of the emerging and developing nations have risen at the WTO,” Kawai said.

Another reason for the erosion of power held by the G7 is the change in global supply chains. Whereas decades back global trade would be dominated by end-products, now it is predominantly a market for intermediary products.

“Today, nearly 60 percent of the world merchandise trade is trade in intermediary products,” Kawai said.

When he researched the supply chain of the iPhone, ADBI Director of Capacity Building and Training Yuquing Xing came up with a starling statistic. Of a production cost of 178.96 dollars (2010 values), China’s manufacturing cost was a mere 6.50 dollars. The remaining costs came from over a dozen companies in five countries. The most expensive component, according to Xing’s research, was the flash memory, at 24 dollars, which came from Toshiba Co in Japan.

This new trading pattern allows China to export over 11 million iPhones a year to the U.S., the country where it was developed and where the company that markets the product is located, Xing said.

But this reinvention of global trade negotiations does not bode all that well for poorer nations and lower-middle-income nations, according to ADBI experts and others. Why? Because the emerging nations and G7 members are now eagerly negotiating and entering into regional and bilateral free trade agreements, mostly with equally powerful trading partners.

According to ADBI, there are 379 such trade agreements in force globally, with more being negotiated. There are ongoing discussions for the Trans-Pacific Partnership, which would bring together 10 countries on either side of the Pacific: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S., and Vietnam.

Equally closely watched are the discussions on the jumbo Association of Southeast Asian Nations (ASEAN) Plus Three partnership that would bring together the ASEAN nations and Japan, South Korea and China.

“The non-tariff trading regimes are the current weapons of choice,” said Rodolfo Certeza Severino, the former secretary general of ASEAN between 1998 and 2002 and currently the head of the ASEAN Studies Centre at the Institute of Southeast Asian Studies in Singapore.

What these jumbo and super powerful trading agreements do is leave middle-income and poorer countries in an unenviable position of being left on the sidelines, unable to get in.

For example, none of the eight countries in the South Asian Association for Regional Cooperation (SAARC), a political association, feature among India’s fifteen largest trading partners.

India’s largest South Asian trading partner is Sri Lanka, with which it did four billion dollars worth of trade last year. But here too the trade has been lopsided, with Indian exports amounting to over 3.4 billion dollars in 2012.

“These free trade agreements are setting the new realities,” Kawai said.

These new realities dictate that while the richer nations negotiate, argue and cajole for more preferential trade, the world’s poor are being left further adrift.

A recent report by the U.N. Conference on Trade and Development said that the 49 least developed nations recorded job growth of just over two percent in the last few decades, barely above population growth levels.

ADBI’s Kawai however sees a role for the WTO to break the trading cycle that favours the rich. The organisation should act as a catalyst for trade negotiations and as an effective arbitrator of disputes, he said. More multilateral and regional trade agreements should be promoted, with the WTO playing a critical central role, he added.

“A revamped WTO process could achieve global trade and investment liberalisation through consolidation of regional agreements, creation of cross-regional agreements, and harmonisation of rules across agreements,” he said.

Former ASEAN Secretary General Severino agreed. “In fact most of the provisions in these [free trade] agreements have to be WTO-consistent,” he said.

But with the WTO hobbled, still unable to conclude the Doha round of negotiations that started in 2001, the chances of it playing a decisive role in trade negotiations remain low, at least in the short term, both experts agreed.

The battle lines are clearly drawn. At a time when food security in the developing countries is snowballing into a major trade conflict between the developed and developing countries, what in reality is at stake is the livelihood security of an estimated 1.5 billion small farmers in the majority world.

Food security is simply a smokescreen to provide a cover-up for the global efforts being made to dismantle the very foundations of Third World agriculture.

Numerous U.S. farm groups have written to U.S. Trade Representative Michael Froman as well as U.S. Agriculture Secretary Tom Vilsack objecting to linking food aid with price support programmes.

Devinder Sharma

Not finding anything wrong in legitimate domestic food aid programmes, 30 farm commodity export groups have however expressed concern at the “price support programmes, which have more to do with boosting farm incomes and increasing production than feeding the poor.”

These U.S. farm commodity export groups, which ironically receive monumental federal support every year, have questioned the need to provide any relaxation in current discipline even on a temporary basis. Accordingly, such an exemption will result in more subsidy outgo and result in further damage to U.S. trade interests.

This response comes in the wake of a representation by 15 of the major farmer unions of India, including the Bhartiya Kisan Union (BKU) and the Karnataka Rajya Ryota Sangha (KRRS), to Indian Prime Minister Manmohan Singh: “Forth-seven years after the green revolution was launched, India is being directed at the World Trade Organisation (WTO) to dismantle its food procurement system built so assiduously over the past four decades.

“[T]his ill-advised move is aimed not only at destroying the country’s hard-earned food security but also the livelihood security of over 600 million farmers, 80 percent of them being small and marginal.”

India, a country which lived in the shadows of a ‘ship-to-mouth’ existence – when food would go directly from the ship to hungry mouths – has over the years emerged self-sufficient in food production.

This historic turnaround was possible only because India had adopted the two planks of what I call a remarkable ‘famine-avoidance’ strategy: providing farmers with an assured price support for their produce, and introducing a food procurement system that provided for a guaranteed market and at the same time helped get food to the poor in the deficit regions through a network of ration shops.

Withdrawing the price support for farmers or freezing it at the de-minimis level of 10 percent as applicable under the Agreement on Agriculture will make farmers vulnerable to the vagaries of the market.

Since Indian farmers do not receive any direct income support (as producers do in the U.S./EU), this move alone will destroy millions of livelihoods and force farmers to abandon agriculture and migrate to the cities. Already, with agriculture becoming economically unviable, close to 300,000 farmers have committed suicide in the past 15 years.

As per the de-minimis criteria, Article 6.4 (b) of the Agreement on Agriculture provides for total support not to exceed 10 percent of the total value of production for most developing members (except for China, where it is 8.5 percent as part of its accession commitments).

In India, as per WTO calculations, farmers are getting 24 percent more minimum support price for paddy crop since the base period of 1986-1988. Restricting the farm gate prices at a maximum of 10 percent will only push more and more farmers to take their own lives.

Nor does it make any economic sense. Considering that between 1986-1988 and 2013, the prices of rice and wheat have increased by more than 300 percent, and prices of inputs like fertilisers have risen by 480 percent in the same period –
according to World Bank commodity price data – the base period of 1986-1988 certainly has become outdated.

Instead of asking India to accept the Peace Clause for a period of four years, WTO chief Roberto Azevêdo should in fact be asking the 159-member organisation to look for a permanent solution to the vexed issue.

The best solution would be to change the reference period from 1986-1988 to something more recent, especially after 2007, when the world witnessed a global food crisis that resulted in food riots in 37 countries.

But that is not acceptable to the U.S./EU, which are pushing aggressively to do away with the commitments of ensuring food security to 67 percent of India’s hungry population under the newly enacted food security law.

Still worse, the U.S./EU are openly continuing not only their domestic subsidies but also their export subsidies.

Not complying with the 20 percent reduction in Aggregate Measure of Support, they have very conveniently shifted these subsidies to the notorious Green Box to continue and even increase them without limits.

And as the Indian farmers’ unions said, “the U.S. has more than doubled its subsidy from 61 to 130 billion dollars between 1995 and 2010, while the EU’s subsidy of 90 billion euros in 1995 came down to 75 billion euros in 2002, but rose again
to hover between 90-79 billion euros between 2006-2009.”

According to the U.S.-based Environmental Working Group, the U.S. had paid a quarter of a trillion dollars in subsidy support between 1995 and 2009. These subsidies have not been reduced in the 2013 Farm Bill.

Moreover, the U.S. does not find its own 100 billion dollars in support for its various food aid programmes in 2012 as trade-distorting, but has problems with 20 billion dollars in support that India is expected to provide to feed its 830 million hungry people.

U.S. farm subsidies are therefore unquestionable. These are considered to be non-trade-distorting,
and are not even on the negotiating table at the Dec. 3-6 WTO Ministerial at Bali, Indonesia.

Well, the writing is on the wall. What is at stake at Bali is not food security, but the very future of Third World agriculture. Feeding the hungry is possible by importing food, and that is what the U.S. farm commodity export groups have conveyed.

Putting more income into the hands of Third World farmers is not acceptable, as it makes developing country agriculture economically viable and therefore deals a blow to U.S. agribusiness trade interests.

* Devinder Sharma is a renowned Indian food and trade policy analyst, an award winning journalist, author, writer and thinker, whose incisive analyses makes him a leading voice from the developing world.

(END/COPYRIGHT IPS)

By José Graziano da Silva
ROME, Nov 11 2013 (IPS)

A sense of urgency brought on in recent years by food price volatility inspired collective action to reduce the likelihood of further price spikes and food supply shocks.

Now that international food prices are declining and food commodity markets are calmer, it is time for countries to harness this heightened resolve to work together, using it to tackle the root causes of volatility.

Food price problems are far from over, and some regions, countries and communities are feeling the pressure more than others. The high and excessively volatile food prices of the last few years have caused disruptions to the global food system and undermined the efforts of developing countries to reduce hunger and poverty in a lasting and sustainable way.

Two recent international meetings pointed to the continued threat of volatility ­ the September meeting in St Petersburg of leaders from the G20 group of nations and the October meeting of agriculture ministers at the Rome headquarters of the United Nations Food and Agriculture Organisation (FAO), which also drew representatives of up to 130 countries.

José Graziano da Silva. Credit: FAO/Alessandra Benedetti

Participants in both meetings acknowledged the need to keep a close and continued watch over the agricultural commodity markets.

Improved global governance has already paid off, playing an important role in preventing the food price spike of July 2012 from developing into another potential crisis. The Agricultural Market Information System (AMIS) created by the G20 in 2011 proved effective, providing reliable information and increased transparency that helped to calm international food markets.

Still, there are a number of outstanding issues that require further examination, including food price speculation and its regulation, policies on biofuels, trade policies, and the potential role of public food stocks in managing price risks.

At the October meeting, ministers underlined the need for better regulation and transparency in commodity futures markets in order to limit excessive speculation and its effect on price volatility.

They also agreed that concrete and consistent steps are needed to improve sustainability in the use of natural resources, the production and consumption of food and the role that both can play in dealing with climate change.

A recurring theme in all these discussions was the need for policies and action to yield more inclusive, across-the-board access to economic, social, and policy-related benefits that reach the most vulnerable groups.

Protection of the most vulnerable groups from the adverse effects of sudden spikes in food prices should be a policy priority. In many poor countries, safety nets and social protection programmes need to be strengthened. This, however, should not overshadow the longer-term objective of increasing productivity in a sustainable manner and strengthening the resilience of production systems, especially in poor countries.

Decision-makers can actively support this process by keeping sustainable development ­ a necessary condition for lasting food security – squarely on the table in the discussion and design of policies and programmes related to production, trade and energy.

One such opportunity is the upcoming Ninth Ministerial Conference of the World Trade Organisation (WTO). Participants at the Dec. 3-6 meeting will look at, among other issues, compatibility between WTO rules and domestic support measures aimed at food security, such as food aid and food stockholding programmes.

On the sidelines of the conference, a FAO-organised session at the Bali Trade and
Development Symposium will engage non-governmental thought leaders in a discussion of trade and market policy interventions in support of food security, and lessons learned from such measures.

Whenever decision-makers gather at the international level, they open the door to an exchange of ideas and a chance to build consensus on crucial issues. Turning that opportunity into concrete, long-term improvements in productivity, sustainability and food security will ultimately hinge on how far they are willing to take the conversation and how successfully they can translate that talk into action at home.
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By Martin Khor
GENEVA, Oct 1 2013 (IPS)

A fight taking place in the World Trade Organisation (WTO) negotiations towards the Bali Ministerial Conference shows how the rules on agriculture allow developed countries to continue to shell out huge subsidies while penalising farmers in developing countries.

Food security is one of the key issues now being negotiated at the WTO as part of its preparations for the Bali Conference in December. For developing countries, food security and the livelihood and incomes of small farmers are top priorities.

Reducing and eventually eliminating hunger worldwide is one of the key Millennium Development Goals (MDGs) adopted by governments at the United Nations. In the present negotiations in New York on formulating Sustainable Development Goals in the U.N., food security, nutrition and agriculture make up one of the key clusters of issues.

Against this background, there is a remarkable discussion now taking place at the WTO as part of the preparations for Bali. Developing countries grouped under the G33 are asking that their governments be allowed to buy food from their small farmers and stock the food without this being limited by the WTO’s rules on agricultural subsidies. Some governments plan to provide food to poor households free or at subsidised rates.

Martin Khor

However their proposal is facing resistance, mainly from some major developed countries, especially the United States, whose official position is that such a move would “create a massive new loophole for potentially unlimited trade-distorting subsidies”.

This clash is an outstanding example of how the agriculture rules of the WTO favour rich countries while punishing developing countries, including their poorest people.

It is well known that the greatest distortions in the trading system lie in agriculture. This is because the rich countries asked for and obtained a waiver in the 1950s from the liberalisation rules of the General Agreement on Tariffs and Trade (GATT), the predecessor of the WTO.

They were allowed to give huge subsidies to their farm owners, and to have very high tariffs. This was at the expense of developing countries, which have a comparative advantage in agriculture.

When the WTO was set up, it had a new agriculture agreement that basically allowed this strong farm protection to continue. The rich countries were obliged only to reduce their “trade-distorting subsidies” by 20 percent but could change the nature of their subsidies and put them into a “Green Box” containing subsidies that are termed “non trade-distorting or minimally trade-distorting”.

There is no limit to the Green Box subsidies. And several studies have shown that many of the Green Box subsidies are in fact trade-distorting as well.

With this shifting around, the rich world’s agricultural subsidies have been maintained, or have actually soared. For instance, WTO data show that total domestic support in the U.S. grew from 61 billion dollars in 1995 to 130 billion dollars in 2010.

A broader measure of farm protection, known as total support estimate, which is used by the Organisation for Economic Co-operation and Development, shows that the agriculture subsidies of the developed country members climbed from 350 billion dollars in 1996 to 406 billion dollars in 2011.

The effects of continuing developed-country subsidies have been devastating to developing countries. Food products selling at below production costs are still flooding into the poorer countries, often eating into small farmers’ incomes and livelihoods. Ironically most developing countries are in a situation where they are not allowed to have the same huge subsidies.

The reason is that the agriculture rules say that all countries have to cut their trade-distorting subsidies. So if a developing country has not granted subsidies before, it is not allowed to give any, except for a small minimal amount (10 percent of total production value) known as “de minimis” support. Most developing countries had no, or few, subsidies when they joined the WTO due to lack of funds.

This is where the present WTO controversy comes in. The developing countries under the G33 are asking that food bought from poor farmers and stocked by the government should be considered part of the Green Box without conditions.

The present rule sets an unfair condition. Even if governmental stockholding programmes for food security purposes in developing countries are placed under the Green Box, there is a provision that the ‘subsidy’ element in such a national purchase scheme should be accounted for in the country’s AMS (aggregate measure of
support), which is the main category of subsidies considered to be trade-distorting, and which for most developing countries is limited to de minimis amount.

Other Green Box subsidies, including those that developed countries mostly use, do not carry such a condition.

The unfairness of this condition is worsened by the way the subsidy element is calculated in the Agriculture Agreement, as the difference between the acquisition price and the external reference price.

The problem is that the acquisition price is the current price level, while the ‘external reference price’ is defined as the average world price level in 1986-1988 (during a period when the Uruguay Round that led to the WTO was being negotiated).

Since 1986-1988, global and local prices of food items have increased tremendously. The 1986-1988 price is thus obsolete and much too low to be used to determine whether a developing-country government is subsidising its farmers.

Countries that are in danger of exceeding its AMS or de minimis maximum level include India. Its parliament has just passed a food bill that entitles the poor (two-thirds of the population) to obtain food from a government scheme that buys the food from small farmers.

But the estimated 20 billion dollars the government will spend annually may exceed the allowed AMS and de minimis levels, because India was not a big subsidiser before the WTO rules came into force.

Other developing countries that provide subsidies to their farmers and consumers, such as China, Indonesia and Thailand, may also one day find themselves the targets of complaints.

For rich countries that are paying a total of 407 billion dollars a year in subsidies to disallow poor countries from subsidising their small farmers is really an especially bad form of discrimination and hypocrisy.

Whether this controversy can be settled fairly before the WTO’s Bali Ministerial Conference remains to be seen.
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By Pascal Lamy
GENEVA, Aug 21 2013 (IPS)

On Aug. 31, I will be stepping down after eight years as Director-General of the World Trade Organisation (WTO).

We have lived through eight transformational years. We have seen the rise of China to number one world exporter, and significant progress in meeting the Millennium Development Goals. And developing countries now account for more than half of the world’s economic activity and more than half of global exports.

Pascal Lamy

But we have also seen challenges such as two food crises, the biggest financial and economic crisis since the 1930s, pandemics and natural catastrophes which have severely impacted the functioning of global production chains.

More than 100 years ago, the Spanish philosopher George Santayana said “those who cannot remember the past are condemned to repeat it”.

The founders of the global trading system took him at his word. They saw the merit in creating the system in part because they remembered the past so well.

They remembered U.S. congressman (Willis C.) Hawley and senator (Reed) Smoot, whose pictures I have in my office to remind me of who the real founders of the WTO were. And they remembered how their notorious protectionist act accelerated the downward spiral that led world trade to contract by two-thirds from 1929 to 1934.

A system for opening trade through international rules and within the principles of non-discrimination, transparency and predictability has provided us with an insurance policy against the kinds of policy excesses of the 1930s. And it has provided a platform for growth, development and poverty alleviation around the world.

Over time, the General Agreement on Tariffs and Trade (GATT) evolved into the World Trade Organisation, and the WTO itself has evolved in ways both large and small. Our dispute settlement system, unique in the field of international conflict resolution, has contributed to peacefully resolving trade differences.

The Aid for Trade Programme which we oversee has mobilised 200 billion dollars since it was launched in 2005. The organisation’s monitoring and surveillance capacity has helped to keep protectionism in check.

Trade has changed a great deal in the past ten years. Today, the patterns of trade, the actors involved with trade and the obstacles to trade are very different than they were a decade ago.

Global value chains have profoundly changed the way we trade. Whereas before we traded in goods, today we trade in tasks.

The fact that goods are increasingly made in the world rather than in any single country means we need to measure trade in value-added rather than gross terms to better understand how global value chains contribute to local economies and to help us devise more effective and realistic trade policies.

The actors have changed too. In 1980, China had one percent of the world’s exports; by 2011 the proportion was 11 percent. During that same time, South Korea more than tripled its share of global exports and Mexico doubled its share. For the first time in history, the South is responsible for more than half of the world’s economic activity and more than half of global exports. South-South trade now comprises 24 percent of world trade, double what it was in 2000.

Moreover, the emergence of powerful developing countries like China, Brazil, India, Mexico and Indonesia has altered the dynamics of multilateral negotiations; in trade, certainly, but elsewhere too including climate change.

These large and rapidly growing economies have also changed the way we think of developing countries. Are they rich countries with many poor people, or poor countries with many rich people?

In the past, trade negotiations were simpler: between rich countries, reciprocity was the template for negotiations while the main theme for poor countries was flexibility. Today, these lines have blurred and emerging countries have taken on greater commitments than ever before.

And the barriers that we encounter in trade today are very different from the standard tariff, the measure of choice for centuries because of its effectiveness in protecting producers. When one talks to businesses today, however, you quickly learn that tariffs are not the problem they find most onerous. Rather, they say the real difficulty is non-tariff measures.

Today, the barriers that exporters encounter are more likely to be of a regulatory nature pertaining to car emission limits, bank regulations, product and food safety standards or customs procedures.

While we can never predict anything with complete certainty, we are confident that these trends will continue into the future. As Santayana suggests, when charting a course for the future, history is among our best tools. Examination of the way that trade has changed in the last decade offers clues that can make navigating the future more manageable.

But history is a compass, not a roadmap or a GPS. History tells us what routes have been successful thoroughfares and which have been culs-de-sac. But it won’t identify every sharp turn or bump in the road.

We cannot foretell every economic shock or the impact of the next technological breakthrough. But we know there will be future economic turbulence and we know that tomorrow’s technological innovations will shape the trading environment of the future just as computer tablets, mobile telephony and satellite navigation influence the patterns of trade today.

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