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Next steps for the WTO

Jon Barnes analyses the issues at stake following the WTO's Hong Kong summit, and looks at the dynamics of the trade body.

According to the official version of events, the declaration emanating from December's World Trade Organisation (WTO) summit in Hong Kong provides a rough plan for governments to conclude the current round of talks.

But commentators of different stripes question whether this uneasy compromise will succeed in moving the WTO towards its new deadline of reaching a deal by the end of 2006. They say too little time may be left for governments to overcome the tensions of Hong Kong and agree a blueprint within the first half of this year.

For their part, many WTO critics and campaigners, concerned by the direction of the talks, have suggested that missing this date might actually be desirable if it means avoiding a rushed settlement that's essentially bad for development.

Nevertheless some pressure for a deal will be maintained this year. The key factor here is expiry in 2007 of US President Bush's authority to seek 'fast track' congressional approval of trade deals (congress can only give a yes-or-no decision, without making specific amendments).

An indication of progress will be given at a high-level WTO meeting planned for the first quarter of 2006.

A bad deal for development?

In their assessments of Hong Kong, civil society organisations claim that rich countries have failed to live up to the promises of the so-called Doha Development Agenda – the official title of this round of talks – which began in 2001.

For many observers the debate on agriculture, seen as key both to the interests of developing countries and to unblocking the Doha stalemate, was one of the biggest disappointments of the summit.

While the US and EU grabbed the headlines – and claimed success with an agreement to abolish agricultural export subsidies by 2013 – many developing countries complained they had been sidelined as spectators on an issue of strategic importance to them.

They also pointed out that eliminating agricultural export subsidies, while welcome, was not a major concession; an in-principle commitment had been made at Doha in 2001 and should have been honoured by now. Indeed, in the case of the EU, such subsidies are already falling and being phased out under Brussels' own timetable for agricultural reform.

Furthermore, critics said that yet again a WTO ministerial conference had done little to reduce and discipline the huge levels of state support the rich countries provide for their own producers and agri-businesses. An important factor in the scourge of agricultural dumping therefore remains, as highlighted by Hong Kong's failure to address the predicament of African cotton producers damaged by US domestic subsidies.

In defence of their development credentials, the rich industrial countries pointed to the so-called 'development package' agreed in Hong Kong.

But its elements seem similarly double-edged. For example the decision to provide Least Developed Countries (LDCs) with duty-free and quota-free access for 97 per cent of their products may look like a positive move. But the remaining 3 per cent could be a loophole for some of their most important products, such as textiles, to be excluded.

On the eve of Hong Kong, the industrial countries had also backed a much-criticised amendment of global intellectual property rules, arguing that it would allow greater access to cheaper generic copies of essential medicines needed to deal with health challenges such as HIV/AIDS.

Civil society critics dismiss these moves as self-interested sops to lure developing country into acquiescence at Hong Kong, while failing to address their fundamental trade concerns.

Liberalisation: mixed blessings

Agriculture was linked to tensions over other controversial negotiations at Hong Kong – on how to reduce barriers to trade in manufactured goods (the NAMA talks) and services (GATS).

The EU made it plain that any deals on agriculture would depend on developing countries ceding ground on cutting industrial goods tariffs and on speeding up access to the increasingly important and lucrative services sectors. Several civil society organisations have claimed that dangerous concessions were extracted from the developing countries in these areas.

For example, on NAMA the Hong Kong text approved application of the so-called Swiss formula involving sharper cuts of higher tariffs. According to campaigners, developing countries, which generally have higher tariffs, are in danger of being deprived of the protective barriers they can use to build up their international competitiveness.

And on GATS, critics say the Hong Kong text threatens to strip countries of their in-principle right to decide whether and how to offer service sectors for liberalisation, in line with the voluntary, bottom-up approach to negotiations so far.

Now it seems that WTO members will be obliged to consider liberalisation requests from groups of countries interested in particular sectors, according to a rapid timetable in the first half of 2006.

But some pro-free trade media commentators have attacked the campaigners, arguing that they are guilty of bad economics and overlook the benefits of trade liberalisation. They say that developing countries have everything to gain from often more efficient foreign manufacturers and service providers having greater access to their markets.

Other observers claim that developing countries, while under considerable pressure in Hong Kong, did manage to fight an effective rearguard battle that enabled them to avoid the worst of major concessions demanded of them and even pull off modest gains in certain areas.

Of note are commitments to address tariff escalation on industrial goods (higher import taxes at each stage of processing); a 'special products' category that allows developing countries to protect vital food security crops; and a special safeguard mechanism to cope with import surges and price fluctuations of agricultural products.

What lies ahead

Indeed, there was no repeat of the breakdown in negotiations seen in Cancún in 2003. And developing countries, despite the manifest unhappiness of many of them with the Hong Kong text, did after all sign up to it.

One factor in the uneasy compromise at Hong Kong is the fact that the various groupings of developing countries, while often sharing common development problems, by no means have identical trade interests in the negotiations, given differences in their levels of participation in world trade and in their perceptions of the pros and cons of liberalisation: tensions and divisions transcend North-South lines.

There is no doubt that, as the Doha round has progressed, developing countries have sought to strengthen their political voice in the WTO. But whether this will involve balanced representation of all developing country groupings in the WTO has begun to emerge as an issue of debate.

Indeed, one major talking point at Hong Kong was the role played by leading members of the G20 group, notably Brazil and India, both of whom reportedly helped to broker final agreement of the summit's declaration.

For some, the rise of Brazil and India as necessary deal-makers marks a welcome power shift in a WTO traditionally dominated by the major industrial powers, offering the potential for a more democratic WTO and for developing country interests overall to be more effectively represented.

But others have warned that Brazil and India, in seeking also to establish their credibility and recognition by rich country players, are in danger of co-option as part of an emerging new elite within the WTO, and that less powerful developing country groupings could be left out.

Some radical critics have even suggested that Brazil and India sold the wider community of developing nations short at Hong Kong.

Whatever the future course of negotiations in 2006, it is clear that vital debates are now taking shape over the future of the WTO.

Some argue that the organisation was set up as a bargaining forum for trade liberalisation and that reforms are needed to make sure its performance is effectively focused on the core task of removing barriers to trade and investment.

In this reading it has been inappropriate or undesirable for the WTO to be asked to focus on the challenge of development. Calling Doha a 'development round' has caused confusion and unnecessarily raised expectations.

Others assert that sustainable development is part of the WTO's mandate and that, at a time when the international community is stressing the importance of global poverty reduction, the world trade body must be expected to adapt its operations to help meet this objective.

Jon Barnes is head of our globalisation programme 

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