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Global Trade Talks Remain Stuck

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By R. Nastranis and Kinda Mohamadieh*
IDN-InDepth NewsAnalysis

GENEVA (IDN) - Uncertainty clouds the fate of the current round of global trade negotiations under the umbrella of the World Trade Organization (WTO), which commenced in November 2011 and have been stalled since July 2008. All eyes are now set on the ninth ministerial conference (MC9) to be held on the Indonesian island of Bali December 3-6, 2013.

The reason behind the impasse, according to Dr Rubens Ricupero, a former UNCTAD Secretary-General, is that the advanced economies are retracting on their promises given at the WTO's Fourth Ministerial Conference in Doha, Qatar, in November 2001.

They are also aggressively pushing to extract additional concessions from other WTO members, irrespective of negative impacts on development prospects of developing countries, he said at a panel session organised by the South Cenre on February 1 in Geneva. Ricupero warned that if the promises given are not followed up, then "we need to be worried about the current state of trade negotiations".

The aim of the negotiations is "to achieve major reform of the international trading system through the introduction of lower trade barriers and revised trade rules". The work programme covers about 20 areas of trade. The Round is also known semi-officially as the Doha Development Agenda (DDA). Its fundamental objective is to improve the trading prospects of developing countries.

The Round was officially launched in Doha, when the Doha Ministerial Declaration provided the mandate for the negotiations, including on agriculture, services and an intellectual property topic, which began earlier. In Doha, ministers also approved a decision on how to address the problems developing countries face in implementing the current WTO agreements.

Ricupero stressed that reactivation of the Doha Round should consider the macroeconomic framework defining the trade negotiations. In this context, he highlighted the role of countries with a trade surplus in providing the necessary increase in world demand, which could allow international trade to pick up.

For example, Germany's current account surplus stands at three times that of Japan and twice that of China. On the other hand, most developing countries have either large deficits or small surpluses compared to the pre-crisis period. In view of this, he said, it was surprising that there were no calls upon Germany to do its part in contributing to world demand.

Seven assurances

Ambassador Srinivasan Narayanan, former Indian representative to the WTO, said that India and other developing countries were initially sceptical about starting a new round of negotiations. But they agreed in the wake of seven major assurances given and built into the Doha Ministerial Declaration.

The declaration assured that: (1) the needs and interests of the developing countries will be placed at the heart of the Doha work programme – as stated in paragraph 2 of the Ministerial Declaration; (2) negotiations on all outstanding "implementation issues" would be an integral part of the Doha work programme – as stated in paragraph 12 of the declaration; (3) a clear mandate for the implementation of Article 20 of the Agreement on Agriculture for further liberalisation of trade in agriculture will be developed; and (4) the "less than full reciprocity" principle will be incorporated in negotiations around non-agricultural market access (NAMA).

The declaration further assured that: (5) the liberalisation of trade in services will be pursued according to Article XIX of General Agreement on Trade in Services (GATS), upholding respect for the level of development of individual members and flexibility for developing countries; (6) a commitment to the objective of duty-free quota-free (DFQF) market access for least developed countries (LDCs) will be upheld; and (7) a decision on commencement of negotiations on the 'Singapore issues' (i.e. investment, competition, government procurement, and trade facilitation) will be postponed.

Of the seven assurances, only the assurance about the Singapore issues was fulfilled, apart from trade facilitation, along with partial fulfilment of DFQF for LDCs, said Narayanan.

He said that the reasons behind the impasse include the impacts of the global economic crisis, and the slowdown of developed economies associated with high rates of unemployment, limiting their ability to offer concessions. But at the same time they were making unreasonable demands on the so-called "emerging countries" like China, India and Brazil to make concessions mainly for the benefit of developed countries.

He added that unlike in the Uruguay Round, developing countries have become increasingly aware of the implications resulting from accepting binding commitments. Developing country coalitions like the G33, NAMA-11, small and vulnerable economies (SVEs), LDCs, etc. have helped in collectively resisting the unreasonable demands, he said.

Developed countries, he said, claim that the reasons behind the stalemate were lack of enough offers of negotiations on the table. As part of their narrative, developed countries note that the world has changed and the mandate needs to be "re-balanced". They claim that "emerging countries" have benefited from the liberalisation undertaken by developed countries since 1948 and should pay back, he added.

Narayanan stressed that contrary to the claims that "emerging economies" are achieving convergence with OECD countries in terms of economic achievement, the World Bank figures (2012) show that the gap between "emerging economies" and the OECD countries persists in terms of per-capita GDP. While average per capita GDP of OECD countries was $41,225 in 2011, it was $12,594 in Brazil, $8,070 in South Africa, $5,445 in China, $9,977 in Malaysia, and $1,489 in India.

Moreover, "emerging economies" are home to large numbers of the poor of the world, living below US$1.25 per day, he said further.

With an eye on the upcoming Bali Ministerial Conference in December, Narayanan stressed that the credibility of the global trading system necessitates a balanced outcome that is in the interest of developing countries. He underlined that Bali should not become "the farewell ministerial for the Doha mandate". He added that "Doha Round must be completed with the development mandate intact and on the basis of the single undertaking".

Narayanan urged developing countries to resist attempts and proposals aimed at changing the basic structure and modality of decision-making in the WTO, and stressed that the outcome of the Bali Ministerial should necessarily include the core LDC issues, including DFQF and cotton, as well as the G33 proposal on food security.

Adding that agriculture has been the most important sector in the current round from developing countries' perspective, he underlined that "abandoning the agriculture negotiations (built in Article 20 of the Agreement on Agriculture) will upset the rights and obligations arrived at, at the end of the Uruguay Round, to the disadvantage of developing countries".

He further pointed out that agriculture has been kept out of the negotiating agenda for 60 years to the benefit of developed economies. The December 2008 draft negotiations' texts were the products of seven years of negotiations, and should not be jettisoned, Narayanan stressed. He called upon developing countries to resist the pressures to add new issues like investment, competition, and energy security to the negotiations agenda, at the cost of the Doha Round.

Narayanan cautioned that powerful WTO members are hoping for divisions among emerging economies. They try to promote suspicion between "emerging economies" as a strategy to attract them to join the negotiations on a plurilateral agreement. He noted a heavy responsibility on "emerging economies" towards other less-developed countries in order to ensure that the idea of a plurilateral agreement does not succeed. "The long term interest of developed countries is in the development of the developing countries," he said.

Three major trends

Ambassador Faizel Ismail of South Africa urged developing countries to prepare for Bali and what lies ahead in the post-Bali period, based on a longer-term approach to the global trading system. He highlighted that three major trends have emerged during the Doha Round impasse since 2008.

First, a large number of commentators and academics declared the Doha Round effectively dead; second, a large number of writers argued that one of the reasons behind the impasse is that "emerging economies" are not offering enough and should be graduated out of the current developing country status; and third, a new narrative on trade is emerging, revolving around "global value chains" (GVCs), and linked to promotion of "new pathways" for the WTO, said Ismail.

He explained that the policy prescriptions passed to developing countries within this context focus on reducing barriers to these supply chains, including barriers to movement of goods and services. They include as well an argument in support of the trade facilitation agreement.

He added that the approach to "new pathways" is reflected in attempts to promote changes in the WTO negotiations away from the principles of single undertaking and consensus-based decisions, towards majority voting, issue-by-issue negotiations, request-and-offer approach, and plurilateral agreements – agreements that have narrower group of signatories than the full WTO membership, and that apply only to those signatory member states.

Ismail critiqued a report entitled "Enabling Trade: Valuing Growth Opportunities", which was released by the World Economic Forum in collaboration with Bain & Company and the World Bank (January 2013). The report claims that "reducing supply chain barriers to trade could increase global GDP up to six times more than removing tariffs". He challenged the statistical background behind this analysis, including how barriers to GVCs are quantified. He also questioned the impacts of reducing barriers to GVCs on growth and welfare.

Ismail argued that such analysis makes simplistic assumptions that imports create exports. This kind of simplicity pushes aside the debate on the need for active policies on national and international levels to address beneficiation, diversification, building capacity, and assisting developing countries to make real gains from trade and to move up the value chain.

He added that the arguments for a self-regulating market remain divorced from concerns around unemployment, inequalities, and poverty. It does not consider the asymmetries of global power that define the global economy, he said further.

As a strategy towards the Bali Ministerial Conference, developing countries should put LDC issues, including agriculture, as a priority, noted Ismail. He concluded by calling upon developing countries to "build their own narrative about what they want from the current Doha Round, and how they view the multilateral trading system and the key elements and principles underpinning it".

He added that developing countries have articulated many of these principles, including inclusiveness, participation, special and differential treatment, and equity. Still, there is urgency for developing countries to articulate their vision on how the WTO needs to be reconstituted and redefined, said Ismail.

LDCs

Lucas Saronga, acting permanent representative of Tanzania to the WTO, stressed that "MC9 should not be an end of the line but a stepping stone on a longer term roadmap leading to the conclusion of the Doha Development Round" and that the "Doha Development mandate should be respected and not eroded".

He added that "the outcomes of MC8 should be respected and should be a basis for MC9", while "full participation of all members, inclusiveness, and transparency should be maintained".

Saronga noted that the LDC issues should be top priority to resolve despite the current impasse in the negotiations. He added that "no balance is required for LDCs because of their negligible weight in the world economy". LDCs have put forward the proposal of duty-free quota-free market access for their exports in the first WTO Ministerial Conference back in Singapore (1996), he said.

In the Millennium Declaration (2000), the international community had pledged to adopt a policy of DFQF market access, he recalled. Currently, most developed countries are implementing DFQF schemes while developing countries are increasingly taking necessary steps. WTO members had reaffirmed their commitment to an explicit decision on cotton at the Hong Kong Ministerial Conference. But these issues have still not been resolved, he added.

On plurilateral agreements, Saronga said that such arrangements would lead developing countries and LDCs to lose their special and differential treatment flexibilities under the WTO.

He added that while LDCs may not be targeted to join such agreements, creating more plurilateral agreements, such as the International Services Agreement, would eventually lead to a "club" within a "club". Such developments, he underlined, would have "systemic implications for the WTO and will erode the multilateral nature of the institution", while undermining the single undertaking principle.

Saronga noted the attempts of developed countries to introduce new issues (i.e. investment, competition, energy security, climate change, etc.) as replacement for completing the Doha Round. However, he stressed that 20th century issues, including implementation, special and differential treatment, as well as the LDC package issues, should be resolved first.

On the LDCs' extension under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), Saronga explained that the extension of the transition period for LDCs under Article 66.1 of TRIPS ends on 1st of July 2013. However, the economic situation of LDCs has not significantly changed in terms of technological base and the overall constraints they face. LDCs are asking for maintaining the flexibilities in accordance with Article 66.1 of TRIPS as long as those constraints remain.

He said that Article 66.1 of TRIPS provides that the Council for TRIPS "shall, upon duly motivated request by a least developed country Member, accord extensions of this period". The LDC group has tabled a draft proposal of a "duly motivated' request to the TRIPS Council.

Accordingly, Saronga underlined, the extension is supposed to be automatic. He recalled that MC8 invited the TRIPS Council "to give full consideration to a duly motivated request from LDCs". He called on the support of developing countries and other member states when the proposal will be discussed in March 2013.

*Kinda Mohamadieh is a senior researcher associated with the Arab NGO Network for Development. This article is based on a report he wrote for SouthNews. It was made available to IDN by the South Centre. [IDN-InDepthNews – February 22, 2013]

Image: WTO headquarters, Geneva | Credit: WTO

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