WTO:POSTCANCUN SCENARIO

Prof Anand, Lecturer, Department of Commerce & Business Management, 

Guru Nanak Dev University, Amritsar 

ABSTRACT:     

This paper focusses on various strategies being pursued by developed nations at various ministerial conferences, so as to mould the functioning of the WTO in their favour, with special attention on the Cancun and Hong Kong talks. It discusses the causes of failures of these two meets. Finally, It offers some useful suggestions to confront with emerging post Cancun scenario.

I. INTRODUCTION   

The World Trade Organization (WTO) is the international, multilateral organisation. The basic purpose of its establishment was to set the rules for trading among its members and solve their disputes over trade.Before the creation of  WTO poor and rich states tried in their past to increase the relative share of economic benefits from the economic transactions. However due to owning better resources and technology the rich states have secured greater benefits in the global economic transactions on the other hand states in the periphery, have been at receiving end of such transactions. That is why the developing nations signed the agreement of GATT in 1994 with the hope that WTO that replaced GATT would provide them the right platform and mechanism to deal with the international economic relations. On the other hand developed countries had a different set of logic to swear by WTO. The rich nations were confident enough that once WTO is through they would be in a better position to enjoy booming international trade. Thus WTO at the time of its birth was apparently the best bet for both developed and the developing nations. At the time of establishment of WTO developed countries demanded that if services and intellectual property rights would be included into trade agenda they would provide major concessions to developing countries in agriculture and textile quota. But now it is a different story. While the developing & backward countries implemented all the WTO conditions the developed countries did nothing for them for them.

Objectives of the Study

• To explore the causes of failure of the Cancun and Hong kong meet.

• To understand the impact of the these meetings on future negotiations of WTO.

• To find out what should be India’s stand on WTO negotiations after these conferences.

II. WTO & THE CANCUN MEET

The Cancun Meet

The fifth Ministerial Conference of the 146 members of WTO held in Mexico at Cancun during 10-14 September in2003. This meeting was supposed to take stock of the progress in the Doha Development Agenda negotiations and set the tone for the future events. Indeed Doha Development Agenda negotiations supposed to be a boost to the Multilateral Trading System & it was important that Cancun should have delivered on the promises that were built into the Doha Negotiations. But the body failed to produce a Ministerial Declaration at Cancun, as it could not develop consensus amongst its members due to rigid stand and hidden agenda of developed countries.

Causes of failure of Cancun Conference:

Ø      Rich countries are giving huge subsidies to the farmers. Protection to agriculture in developed countries was four to seven times more than that for the manufactured goods. The stimulated overproduction in high cost rich countries is shutting out potentially more competitive products from the developing nations. Developing countries were of the view that domestic import subsidies and export subsidies given by developed countries have distorted and subverted the global market. The draft text that was released in the conference not only sought to perpetuate the current prevalent distortions in agriculture but also would have allowed developing countries to give their consent to the measures to increase such distortions.

Ø      In the draft developing countries were badly treated in market access. On the issue of NAMA (Non agriculture market access) it was rejected by underdeveloped countries due to its horrifying impact on the economies of these countries leading to de-industrialisation, by opening the doors to cheap imports of manufactured goods from developed countries. At the same time tariffs are also a source of revenue for developing countries till they are able to find alternative source of income. The draft text imposed a blended formula on them and they would have to reduce some tariffs by an average formula, but the other portions of tariff would have been subjected to a Swiss formula, under which the higher the tariff, the steeper would be the tariff cut. It basically affects the backward countries only as it is they who have tariff barriers on industrial imports while developed countries mostly have non-tariff barriers to deny market access to goods from the other countries.

Ø      The controversy was also regarding Singapore issues (investment, competition, transparency in government procurement and trade facilitation). The draft called for the beginning of negotiations on trade facilitation and transparency in government procurement even as there was no explicit consensus to do so (as against mentioned in the Doha Agenda). Also the draft kept investment and competition policy on the agenda of WTO – as EU wanted – by setting a date to agree on modalities on investment negotiations with those of agriculture and NAMA. A 16-member alliance including India opposed the Singapore issues. India along with other members of alliance was of the view that all the Singapore issues are not trade related and WTO is not the right forum to discuss these issues and the trade negotiators are not the right people to deal with movements of capital (investment issue) that have dynamics of their own.

Ø      A group of 16 countries led by Malaysia and India with the support of 30 LDCs had sought further clarification on Singapore issues rather than giving a negotiating mandate. In addition, a group of 74 African, Caribbean and Pacific region countries also sought to continue with the Clarification process. However, in utter disregard to these submissions, the revised draft ministerial text issued on September 13, wanted to give negotiating mandate on all these issues except for competition (Incidentally, competition was dropped because of the unwillingness of the US to negotiate the same).

Ø      On S&D (Special and Differential) treatment provisions, the draft offered only the ‘best endeavor clause’ and disregarded the long list of S&D issues.

Ø      When the draft text was released it became clear that the facilitators were hand in glove with developed countries or were completely sidelined in the preparation of draft. Some even questioned the appointment of ministers from members as  ‘facilitators’ particularly the one on the Singapore- issue Canada’s International Trade Minister – a votary on negotiations on four Singapore issues.

Ø      The draft was clearly against the Spirit of Doha Development Agenda and heavily loaded in favour of developed countries and was primarily responsible for the collapse of the conference (Bhargava, 2003)

WTO and The Hong Kong meet

The Sixth Ministerial Conference of WTO was held at Hong Kong during 13-18 December 2005. The conference took place amidst the huge demonstrations against the WTO and its anti-poor agenda. The demonstrators gathered two days before the conference. During this period throughout Hong Kong there were big protests. On the very inaugural day demonstrators particularly from South Korea clashed with riot police. Besides Hong Kong demonstrations were taking place through out the world including India.

At Hong Kong meet, it was the second draft that was finally adopted, which basically set a framework to be finalized by the General Council of WTO by April 2006. After five days of intense haggling, this declaration was signed by the 149 member countries, thereby keeping the Doha Agenda alive after collapse at Cancun. It can be said that there was no real progress, except that it has manage to keep the Doha Development agenda negotiable, not allowing to meet it to a natural death (Kaur op. cit., 2006).  .

As usual in this meet as well agriculture remained the focus of negotiations, consuming most of the time on export subsidy. The EU and US pledged on a new date to phase out the export subsidies on farm products by 2013. It was supposed to be a big victory of backward countries at the meet. But this itself is a big hoax. For three fourths of WTO members feel that they have to wait eight long years to reduce the minimal gains, because of its small impact on the markets. All of them understand that export subsidy doesn’t play that big role in agriculture distortions as is done by the domestic support. The $5 billion of such subsidies on farm products is nothing compared to the domestic support given of $1 billion a day. So its removal will have hardly any impact on their prices.

For LDCs  (Least Developed Countries) what WTO witnessed in Hong Kong meet was an appeasement of LDCs. These countries were allowed duty free, quota free access to developed countries’ markets of atleast 97% of their goods. But this much-propagated concession to the LDCs i.e. to allow the poorest countries to export their products to the west duty free, quota free, is being considered as another farce. The EU pushed this hard as they already have such a programme running. But the US & Japan insisted that the duty free and quota free market access could not apply to all the products and must be applied selectively. The US also promised West African cotton producers to reduce its cotton subsidies more quickly than other farms support; but US was again silent on the huge hand outs that Washington gives to its southern farmers in various other ways. Poor West African countries have been facing extreme deprivation because of the distortions in global cotton markets caused by the US, which has less than 25,000 farmers who yet receive billions of dollars of subsidies every year. All that US have committed is the reduction in the export subsidy to the cotton growers. It pledged of phasing out of the cotton subsidies by the end of the end of 2006. But the point is that such a promise was made earlier too, to African nations but nothing has fructified since.

In service sector too there was further set back for the backward countries. This is a main focus point of the imperialists as today the service sector amounts to over 50-60% of the GDP of any country and the profit margins are often huge. In the draft declaration that went to Hong Kong, Annex C, which argued for accelerating the liberalisation of the services, was bracketed implying that there was no agreement on this. In a surprising development the whole Annex C is now not bracketed with some minor changes and it was only Cuba and Venezuela that formally expressed their reservation on this change. 

Finally being perceived as a ‘development round’ there was no mention even of other developmental issues such as progress on TRIPs or Special & Differential treatment. However, a remarkable aspect of this ministerial is that it gave birth to a group, the G-110. The unity of faith, purpose and togetherness allowed the G-20 and G-90 to mobilise the lesser economies to graduate to G-110, which stood firm in the common bargain despite EU and Us efforts to break the unity. The only other positive development of this ministerial is that a feeling of acute cynicism or failure towards the multilateral trade regime governed by WTO hasn’t set in. It hasn’t seen as a repeat of Cancun or Seattle. It hasn’t triggered a thought towards forming regional trade arrangements, unlike immediately after Cancun. Still Hong Kong hardly did a job of promoting trade. (Kanunga, 2006)

III. POST CANCUN SCENARIO  

Though during Cancun imperialists could not succeed in making further inroads while developing countries succeeded in not letting others make further in-roads in their territory yet the failure of Cancun has not brought any noticeable change in the attitude and strategy of imperialists to bring about consensus among all the WTO members.

EU and its friends have succeeded in placing one obstacle or other – starting with the Singapore issues. Thanks to Cancun ministerial and subsequently due to the framework agreement reached in July 2004, three Singapore issues – investment, competition policy, and transparency in government procurement – have finally been removed from the Doha agenda. Only negotiations on trade facilitation – the fourth Singapore issue – are currently underway.

The developing countries that were basking in celebration after Cancun for proving their importance at the Cancun retract from their stand at Hong Kong. Where as the imperialists are not ready to give concession to in trade negotiations to the backward countries and seek only to deliberately extract more and more. They are strictly following the policy of, “free trade for the world, protectionism for the imperialist”. (Suman, 2006)

IV. WHAT SHOULD BE INDIA’S STAND ON WTO NEGOTIATIONS AFTER CANCUN & HONG KONG MEET?

The emergence of a solid block of developing nations, G-21, and the fact that as many as 100 developing and least developed countries (LDCs) rejected the grossly wicked draft declaration at Cancun and emergence of G-110 which stood firm in the common bargain at Hong Kong is the cause for cheer for the developing world. Still the collapse of the talks at Cancun (September 10-14) and little relevance of Hong Kong meet (13-18 Dec.) for making consensus among various members is a blow to the image of the World Trade Organization as a facilitator of fair global trade since the fiasco at Seattle in 1999. This is no doubt a setback to the multilateral trading system that is harmful for the interests of both developed and developing countries.

The World Bank report has estimated that a good agreement could boost incomes anywhere from $270 billion to $520 billion by 2015, depending on the assumptions. Developing countries would stand to benefit anywhere from half to two-thirds of the total benefit that could help lift some 144 million people out of poverty. Unfortunately, however, this may have to wait till the developed world is prepared to address the genuine concerns of the poor. So far as the developing countries and the LDCs are concerned, most experts have expressed the view that no deal at Cancun was better than the grossly iniquitous one-sided deal that the US and the EU were trying to push through. Now what next?

First of all, it is important for the developing and the least developed countries to stay united and insist on the removal of inequalities of agreements. It needs to be emphasised that trade has to be a two-way street and that there is a need for clear, transparent and rule-based agreements.  It should be remembered that when two regions like US and EU with diametrically opposite interests can enter into alliance, why can’t the countries with similar interest can do the same. The countries can go for issue base alliances and it does not necessarily mean that the group must have common viewpoint or interests on every issue.

In the case of agriculture, pressure should be maintained on rich countries to cut both direct and indirect subsidies drastically. The EU and US pledged on a new date to phase out the export subsidies on farm products by 2013.  Many developing countries feel that they have to wait eight long years to reduce the minimal gains, because of its small impact on the markets. All of them understand that export subsidy doesn’t play that big role in agriculture distortions as is done by the domestic support and for the time being developed countries are silent on the huge domestic support given by them to their farmers.

Under such circumstances, it would be grossly unfair to expect developing countries to lower tariffs and allow their non-subsidised farmers to compete with their highly subsidised counterparts from developed nations. And this is the position, which India should never atone. India has one of the largest farm sector populations in the world. They are resource poor farmers and it is not possible to subsidise all of them. The stress should be on getting a commitment for phase-out of domestic support- the real dampener, from US and EU by a realistic deadline. So opening of the markets by developing countries and removal of agriculture domestic support & export subsidy must become operational simultaneously (Kaur op. cit. , 2006).

In the negotiations on non-agricultural products, the G-20 should insist on discussing the issue of protectionism in an integrated manner by tackling both tariff and non-tariff barriers. Tariffs are a source of revenue for developing countries till they are able to find an alternative source of income. India also has sensitive sectors like small-scale industry that are the largest employers in India and require some element of protection. In a country of India’s size – which has one sixth of the world’s population, and high levels of poverty and unemployment as well, there are several sectors in whose case the timing of tariff reductions has to be suited to the dynamics of its own politics. It is not wise able to close down the units one after the other and people to be left on roads.

The developed nations have put up various non-tariff barriers such as health standards, technical standards, labour standards and sanitary measures that block access of developing country products into developed countries. The developing countries should make it clear that they would lower tariffs only if there is an adequate lowering of non-tariff barriers by the developed countries. They should also insist that tariff liberalisation should be linked to a member's stage of development.

The balance of benefits in the negotiations on free trade would accrue to the extent to which service providers from developing countries will be allowed to supply services in important overseas markets either from remote locations or through temporary movement of natural persons.

Moreover if resource rich developed countries have advanced technology and competitive products then developing world has market for these products as market in the developed countries have already been stagnated. Most of the world’s population is residing in the developing and backward countries. That is why the developed world has been focusing at their market. So it is not that only developing countries need brotherly relations with the developed world but the same is also important for the developed nations so as to dump their products in the markets of these countries.

As a counter strategy to the developed countries’ threat of bilateral agreements developing countries should also go for South-South trade and try to extend bilateral assistance to LDCs. For some of the issues raised by LDCs at Cancun and Hong Kong against the developed countries, were also raised by them against India, which is a large and relatively more developed economy.

More regional trade agreements and Free trade agreements with the south block can be used as a tool to extract more pressure in the future negotiations. Making these points would not necessarily have led to immediate changes, as the opposition is powerful and considerable. But, atleast it will make Indian negotiating position more aggressive.

To be internationally competitive India should move ahead with economic reforms, financial liberalisation, liberalisation of FDI policy, and higher infrastructure investments.  Greater attention must be paid to increase agricultural productivity and creation of exportable surpluses. Indian agriculture needs more public investment and policy support in several areas, including rural infrastructure, research and development and institutional credit. Far-reaching changes are needed in our land ceiling laws to enable farmers to development economic holdings. Economically, viable land holdings are necessary to encourage flow of private investment in the sector and for diversification of agriculture to produce commercial crops (Ibid.).

On the trade front, India should make serious efforts to raise its share in world exports to at least two per cent from the present poor rate of 0.8 per cent if it has to step up its GDP growth rate and play a legitimate credible role in the world trading system.

At the domestic level, there is a strong need for development of a cadre of specialised trade negotiators to effectively argue India’s case at WTO level.

Conclusion

Cancun has failed to achieve any breakthrough due to lack of consensus among WTO members. Though it was ended in deadlock but for the developing nations the success of the Cancun meet lies in the fact that they have succeeded in making the developed world reailsed that if they want WTO talks to succeed, they cannot sideline the interests of the poor countries. The Cancun meet was partially in the favour of developing countries as ‘No deal is better than a bad deal’. But one cannot deny the fact that the success of WTO is in the interests of all the member countries. Moreover the problems that are being faced by WTO members exists in the bilateral and regional agreements as well as for every country, the domestic concerns are of supreme importance. Developing countries like India should adopt the multi pronged strategy of forming alliances with other developing and backward countries & keep the same intact and should make their agriculture and industry competitive so as to compete in a better way with their developed counterparts.

References

Bhargava, Sunil, (2003) “WTO & Cancun Conference”, ‘The Chartered Accountant’, December. (Pg 637-639).

Kanunga, Anil, (2006); “Hong Kong A Ministerial of vague promises”, Jan 02

www.news.oneindia.in/2006/03/00/b/3study of-wto-hong-kong-ministerial-meet.html, accessed on April 10,2006.

Suman, (2006), “WTO-6^th Ministerial Conference: Further sell-out to imperialists”, www.peoplesmarch.com/archieves/2006/Feb2k6/wto.htm. , accessed on April 15,2006

Kaur, G. (2006), “WTO After Cancun”, Term Paper Submitted to Guru Nanak Dev University, Amritsar.