The Hindu Business Line : WTO Ministerial: A nuanced discourse

IN THE Odyssey, Odysseus goes on a specialised kind of discourse almost every time he speaks, in which he sets out a pair of opposing possibilities for the situation at hand, and then selects the one which seems best, and then puts that into action. The Commerce Minister, Mr Kamal Nath, is one such man. He thinks both ways before moving — comparing alternatives, and no longer trusting gut reactions, or the sense of what is right.

In the run up to the Hong Kong Ministerial Conference of the World Trade Organisation (WTO) scheduled for December 13-18, the meeting of G-90 countries last week in Brussels was a "mood barometer". While the participants were critical of the US and the EU, they warmly applauded India's position when Mr Kamal Nath, said that "development impact" will be the touchstone against which the ongoing Doha Round negotiations will be judged. Addressing the G-90 Summit of the African-Caribbean-Pacific (ACP) countries, he said that perverse impact of policies in developed countries may bring financial benefits to a section of their people, but extract its price in blood, elsewhere.

The bold Indian stand comes at a time when South-South trade is growing rapidly; the G-90 countries can surely aiding one another. India's participation in the G-90 grouping is significant from the standpoint of its traditional leadership role among developing countries. The clear message that came through at the G-90 was that developing countries need to be ever persistent and ever vigilant — persistent, till developmental goals are met, and vigilant that this is achieved without sowing division cropping up among them.

But, unfortunately, at the end of their meeting in Brussels, they were indeed confronted with a rift among themselves that threatened to complicate their position in global trade talks.

And, it seems very likely that trade liberalisation negotiations launched in Doha will be deadlocked largely over the degree to which rich countries offer financial support to their agriculture sectors. Negotiators are struggling to prepare the ground for Hong Kong, where ministers are to debate the broad outlines for a trade liberalisation deal that would take effect next year.

The European Union and the United States have vowed to cut subsidies to their farming sectors, though several major agriculture exporters insist the EU and the US offers do not go far enough.

But poor developing countries that currently enjoy preferential access to certain rich country markets worry that sweeping trade opening measures in agriculture will hit them hardest.

At the same time, some developing — or emerging market — nations with competitive farming sectors such as Brazil stand to reap considerable gains under a multilateral trade deal.

Mr Kamal Nath highlighted this point: "We need to resolve (the problem of) preference erosion without affecting market access to other developing countries."

Brazil acknowledged that the issue had divided developing countries as a bloc in negotiations.

The issue of preference erosion that has been often used as a "tool" to divide countries since it may be presented in a way that puts developing countries against one another.

With just over a week to go before the Hong Kong ministerial, there is more pessimism in the air than a few weeks ago. The brave smiles are being replaced by long faces and the main players are desperately trying to pull themselves together to be content with the fact that mountains cannot be moved.

NGOs have become even more vocal in their opposition to the fundamental basis of trade liberalisation. In their view, the opening of markets in less developed countries could be disastrous for the economies and the livelihoods of citizens of the developing world besides having serious repercussions for the environment.

The EU is proposing in the Hong Kong package:

1. New market access in agriculture, industrial goods and services. Alongside progress in these areas, the EU is proposing that the WTO agree to adopt a package of

development measures designed to reinforce the development goals at the heart of the Doha Round.

2. All industrialised WTO members to commit to providing duty- and quota-free access to all products from all LDCs. This is what the EU has been doing since 2001 through the `Everything But Arms' initiative. Despite pledges made at various occasions, other developed countries have however not followed suit. The EU is asking for a firm commitment, by all developed countries.

3. Adoption of a package of special and differential treatment proposals to improve the flexibilities for LDCs that already exist in the WTO. The EU is to propose a Round For Free for Least Developed Countries — no obligatory tariff cuts.

4. Agreement to enshrine in the WTO's intellectual property agreements the conditions for a better access to cheap drugs against pandemics, and look favourably at requests for extension of LDCs' exemption from TRIPS.

5. A strong Aid-for-Trade package similar to the measures agreed at the Gleneagles G-8 Summit. This is key to strengthening the capacity of developing countries to trade. The EU alreadygives more Trade-Related Assistance than the rest of the world combined. It is time for others to make the same commitment.

6. Many G-90 countries have expressed the fear that serious cuts to tariffs will erode the preferential access they currently have to the EU market. The EU believes that that the solution to this problem lies in reducing tariffs in a way that allows for adjustment for these exporters, and the provision of Aid-for-Trade assistance to help exporters adapt to the erosion of preferential access.

7. On cotton, the EU calls for ambitious and accelerated commitments, above and beyond agreements on other agricultural products.

The EU calls for

a) eliminating export subsidies for cotton ; drastically reducing trade distorting domestic subsidies and

b) reduction or elimination of all import tariffs on cotton by all developed countries.

Here are the positions:

The WTO Director-General, Mr Pascal Lamy, is urging optimism as to the outcome of the talks. According to him, what was already on the table could lead to positive results and that to lose it would be `disastrous'. He is also of the opinion that the needs and the interests of developing countries are at the heart of the Doha development round.

The EU Trade Commissioner, Mr Peter Mandelson, is emphasising the far-reaching nature of the EU offer. In his view, the average agricultural tariff will fall from 23 per cent to 12 per cent, which is the same as the US level. Taken as a whole, this is the most substantial offer ever made by the European Union in any trade round. It will create significant opportunities for agricultural exporters without wiping out preferential access for poor developing countries or doing excessive damage to the EU agricultural sector.

NGO groups, however, do not agree. Failure at Hong Kong, says Friends of the Earth, would be "a victory for the environment and for impoverished people worldwide." According to them, the trade proposals on the table are "outrageous and serve big business rather than impoverished people and the environment".

They are demanding a need to halt trade liberalisation negotiations and an urgent review of the impacts of international trade rules on the impoverished and the environment.

To counter such criticisms, the Commission has examined the evidence of the benefits of trade liberalisation to developing countries. It details a number of studies from the World Bank, the International Monetary Fund and independent sources which show that, although there may be short-term hardship, in the long run the opening up of trading markets will mean substantial gains for the developing world.

The WTO itself calls accusations that it widens the gap between rich and poor "simplistic and inaccurate." In Its view, "trade can be a powerful force for creating jobs and reducing poverty."Expectations for the mid-December Hong Kong meeting have been scaled down as negotiators grope for agreement on details to be discussed at the gathering.

But Mr Lamy said he was waiting for the moment when the current trade liberalisation talks would advance so that participants would realise there are already considerable gains on the table.

Yes, he is right. Odysseus' logicism never delves into deep or mysterious things. There is a moment that people change their minds and say that they must decide in order to get what is on the table. That is the moment when the negotiations advance. However, that moment has not come yet, as the start of the Hong Kong conference looms.

(The author is former Europe Director, CII, and lives in Cologne, Germany. Feedback may be sent to mohan.murti@t-online.de)

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