WTO HONG KONG MINISTERIAL
Will It Deliver?
By SANJAYA DHAKAL
The scenes outside the convention center in Hong Kong where officials from 149 countries are taking part in the Sixth Ministerial of WTO spoke volumes how divided the world opinion is about the fairness of globalization and free trade.
As the developed countries and developing countries have been unable to bridge their differences particularly over the issue of reduction of existing farm subsidies given by the US and EU to their farmers, the analysts fear that Hong Kong Ministerial, too, could end up in a fiasco like the Cancun.
In 2003, the Cancun Ministerial failed after it was unable to decide on the issues identified by the Doha Ministerial in 2001 – better known as Doha Development Agenda or Doha Round. In order to salvage the WTO process, in July 2004, the General Council of the WTO members adopted five key issues (known as July package) for further discussions during the 13-18 December Hong Kong Ministerial.
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The July Package includes five key issues: agriculture, non-agriculture market access, services, trade facilitation and development dimension.
Among these five issues, the agriculture has become the major bone of contention. While the US and the EU have committed to lower their farm subsidies, the major developing countries like India, Brazil and Argentina have been calling for total and time-bound elimination of farm subsidies, export subsidies and domestic support before they can agree for the opening up of their market for industrial products. Till Wednesday (December 14) morning, there was no indication that the two warring sides had reached into any agreeable position. Already, WTO general secretary Lamy has spoken about ‘re-calibrating the outcomes” – which is a WTO-speak for swift downgrading of expectations.
“The haggling on the specifics of the formula for reduction in domestic support and market access is an attempt of the developed countries to continue to protect their markets and distort agricultural trade. The disagreement on the coverage of products that will be allowed to be considered ‘sensitive products’ and exempted from tariff reduction commitments is also a reflection of their protectionist intent,” writes Navin Dahal, executive director of South Asia Watch on Trade, Economics and Environment (SAWTEE), a leading NGO engaged in campaigning, informing and researching on the implications of the global trade regime, in his recent article on Expectations and Realities of Hong Kong Ministerial.
According to Dahal, while the interest of the developed countries in agriculture is to protect their markets, their main interest in non-agricultural market access (NAMA) is to open the developing country markets for their industrial products. “The very fact that the Draft Ministerial Text talks about tariff reduction under Swiss formula in the case of industrial products and a linear formula in the case of agricultural products exposes the intention of the developed countries. The debate on ‘less than full reciprocity for the developing countries’ also reflects this. The Draft Text itself indicates that Members are far away from achieving full modalities on NAMA,” Dahal further writes.
Nepal’s Position
This is the first time Nepal is participating in WTO Ministerial as a full-fledged member country. Being an LDC, Nepal has little interest in directly engaging in the current conflict between the developed and developing nations over issues like farm subsidies.
This time Nepal is aligning itself with the LDCs as well as other issue-specific common groupings. Nepal, along with 31 other LDCs, have agreed to put a common case at the WTO Ministerial. Their common agenda was adopted in the meeting of LDCs in June in Livingstone, Zambia.
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Garment products: Of export interest to Nepal |
According to officials at the Ministry of Industry, Commerce and Supplies, on the issue of Agriculture and Non Agriculture Market Access (NAMA), Nepal being an LDC does not have to make further commitments as per the July package and, therefore, it will just support the voices of developing nations. However, the official added, Nepal will carefully look to what extent other countries will reduce their custom tariffs.
On the services front, Nepal will present common voice of the LDCs and raise the issue of free movement of natural persons from LDCs to developed nations. Furthermore, it will also raise the issue of binding the existing preferential access provided by developed countries to LDCs at the WTO. The Nepali delegation at Hong Kong is led by Minister for Industry, Commerce and Supplies Buddhiman Tamang.
In fact, months before the Hong Kong Ministerial, Nepalese civil society leaders had identified key issues in the interest of Nepal. “It is in the advantage of countries like Nepal to demand for binding the duty and quota free preferential market access being provided by developed countries. At present, such access is unilateral and the provider can withdraw it any time. Besides, since overwhelming majority of our trade is conducted not with developed but developing countries, we need to ask for similar facilities from the latter as well,” Dr. Posh Raj Pandey, chairman of SAWTEE, had said at a recent program.
Contrary to popular perception that Nepal and other LDCs should vehemently demand the developed countries to reduce/eliminate domestic support and or export subsidies (in order to make their products competitive), Dr. Pandey advised Nepal to be careful and cautious in this issue. He said that withdrawal of such support and subsidies could trigger steep rise in price of products, thereby increasing the import bill. “This is risky for a net food importing country like Nepal,” he said.
According to him, Nepal has to prioritize issues it has more stakes in. He called for raising the issue of market access, special safeguard measures, preference erosion and food aid (in that order) rather than calling for the elimination of domestic support/export subsidies. He also advised for alliance with other LDCs and other groups on case by case basis – based upon the likely advantages to Nepal.
Nepal also has the interest in demanding effective Technical Assistance from developed and developing members to enhance institutional and human resources necessary to implement WTO agreement such as SPS (Sanitary and Phyto Sanitary) and TBT (Technical Barriers to Trade).
Likewise, Nepalese civil society had also adopted a 37-point resolution in June suggesting Nepal – in strategic alliance with the LDCs - to call upon the developed (and in many cases also the developing) countries to stop subsidy on agriculture; eliminate Non Tariff Barriers (NTBs); bind various preferential trade facilities as well as EBA (Everything But Arms) initiative by the EU at the WTO; push transit as a right; demand effective technical assistance to address SPS (Sanitary and Phytosanitary); allow free movement of natural persons in all categories (skill, semi-skilled and unskilled); expedite the process of reconciliation between TRIPS (Trade-related aspects of Intellectual Property Rights) and CBD (Convention on Biodiversity); restrict patenting of life forms; recognize National Certification System; and so on.
Officials say Nepal has selected five priority issues in which it will present its position at the Hong Kong ministerial including Agriculture negotiations; Special & Differential Treatment for LDCs; Non-Agricultural Market Access; Trade in Services; and Trade Facilitation in that order.
What After Hong Kong?
If any dramatic shifting of positions does not occur, the initial indications suggest that Hong Kong Ministerial might not be able to complete the Doha round of negotiations. In all probability, the WTO officials will decide to sit for next round of meeting in the middle of 2006 to complete the Doha round – which must be completed by the end of 2006.
“Whatever happens in Hong Kong, a short period of extremely intense negotiations can now be expected between January and March/April next year, with the clock ticking towards the “really final deadline”. Negotiating brinkmanship – where the players keep their cards from others’ view to see if they can get the best deal for themselves -- will probably be played to the very last minute,” says Martin Khor of Third World Network – a Malaysia-based INGO.
According to Khor, the lowered expectations for Hong Kong is a major – but not fatal – blow to the timetable for concluding the Doha Work Program (now widely dubbed the “Doha Round”) by the end of 2006. “After finalizing the full modalities, a period of some 8 to 9 months is needed to further negotiate details and prepare schedules of commitments, before the final agreement can be signed. In turn, some six months are required after the agreement is concluded for the United States to bring it to its Congress for a vote. By July 2007, President Bush’s present authority for fast track approval of trade deals will expire, and it would be very difficult for him to get an extension, given the mood in Congress, which has turned against free-trade agreements. Without Congressional approval and US participation, the Doha final deal would not be worthwhile or operational for other members. Thus the real deadline for the Doha negotiations is the date of expiry of the US President’s fast-track authority, and the Doha agreement has to be concluded by the end of 2006 to have a vote in Congress before that expiry date,” Khor states.
Therefore, missing the “full modalities” deadline in Hong Kong thus “forces the WTO to cut the timing extremely fine, as the next deadline of March/April 2006 for the full modalities seems to be quite final.”
Rush For FTAs
Such total or partial failure of WTO process could trigger the further rush for signing RTAs (regional trading agreements) and BTAs (bilateral trade agreements). Since January 1995 (when WTO formally came into being, 130 Free Trade Arrangements (FTAs) have been notified to the WTO.
“There are two facets to this proliferation: on the one hand, the establishment of the WTO (and its Single Undertaking) has facilitated the expansion of FTAs by setting a set of common trade obligations, particularly disciplines on non-tariff measures; on the other hand, setbacks in advancing the multilateral agenda through Ministerial Conferences have created new outlets for consideration of bilateral and regional options,” write Murray Gibbs and Swarnim Wagle, in a discussion paper titled “The Great Maze: Regional and Bilateral FTAs in Asia.”
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Trade of goods: Waiting for further liberalization |
The slow-pace in multilateral progress has created a situation where even traditional multilateralist countries like Japan are entering into FTAs with other countries or regions. “Until 10 years ago, South Asian countries had profound faith in multilateral trade regime and till Doha meeting, South Asia had a collective voice. But over the years, the WTO fatigue crept in. So, the South Asia has taken short route towards SAPTA and now SAFTA,” said Dr. Saman Kelegama, executive director of Colombo-based Institute of Policy Studies (IPS). Likewise, South Asia has also seen a burst in BTAs like between India and Nepal; India and Sri Lanka; Sri Lanka and Pakistan and so on.
But the experts fear that FTAs between developed and developing/LDC could have negative implications for the latter. “In such north-south BTAs, there would be WTO-plus obligations by which countries will be locked into extension of WTO positions,” said Minh Pham, regional manager of UNDP Regional Center in Colombo, Sri Lanka. He was addressing a “Training Program to South Asian economic journalists on BTAs” held, in December first week in Colombo, jointly by the UNDP and IPS.
Added Bhagirath Lal Das, a prominent expert and former chief of UNCTAD, “In the FTAs between north and south countries, the latter are being asked to give in areas other than trade like in TRIPS, security etc.”
Furthermore, WTO-plus obligations like in environment and labor standards, intellectual property rights etc are included in such FTAs, which could be detrimental to the interest of developing nations. “Since developed countries could not have their way in WTO, they are trying to inject such WTO-plus obligations through FTAs,” said another expert. “The developing nations must resist from agreeing to such WTO-plus obligations,” added Ratnakar Adhikari, program specialist at the UNDP Regional Center.
Despite these reservations, there are also positive aspects of BTAs as they can lead to genuine opening up of markets, which in turn could foster mutually beneficial trade relations. However, there is a need to pay particular attention in resisting from going overboard just for the sake of signing a BTA with a developed country without fully assessing the hidden impacts. Mere opening of market, say for garments, could lead to undesirable situations also.
Just like Manoj Basnyat, deputy manager at the UNDP Regional Center said, it is important for developing nations and LDCs to take advantage of trade “because trade can be a very important tool for reducing poverty.” Whether the WTO process will live up to the expectations of billions of poor people around the world remains to be seen.
