Will the WTO Survive Hong Kong?
Six years ago in 1999, at the Battle of Seattle, we heard for the first time the chant, “Hey-hey! Ho-ho! The WTO’s got to go!” It’s a chant we’re likely to be refamilarizing ourselves with when the World Trade Organization hold its fifth ministerial meeting in Hong Kong, China, this coming December.
The Hong Kong ministerial is being billed as pivotal for completing the so-called Doha Round of global trade negotiations. The framework for this came out of the ministerial held in Doha, Qatar, in 2001, following the collapse of the Seattle ministerial two years earlier. To date, the main negotiations have focused on new trade rules for agriculture, industrial products and services.
The Doha agenda was first sold as the “development” round. This was done in order to secure the support and address the concerns of developing countries in the global South. For the most part, however, the negotiations have not served the development priorities of the global South. Instead, they have served to forward the market expansion interests of the industrialized countries and their corporate clients in the global North.
In this sense, Hong Kong could well turn out to be a defining moment for the WTO’s future. If the Hong Kong ministerial succeeds in advancing the Doha agenda, then it could consolidate the WTO as the engine for transnational corporate global trade liberalization. If, on the other hand, the Hong Kong ministerial bombs, the momentum for trade liberalization could be reversed. If this happens, the legitimacy of the WTO as an instrument of corporate globalization will be seriously damaged.
Seattle, Cancun, Hong Kong: A Future History of Failure?
The WTO has already witnessed two major breakdowns over negotiations. The first took place in Seattle, when the WTO talks collapsed over the conflict between the EU, the U.S. and developing countries on agricultural issues. The second breakdown occurred in 2003 in Cancun, Mexico – this time not only over agriculture, but also over the resistance of developing countries to the idea of adding new negotiations on issues of investment, government procurement and competition policy. The failure of the Hong Kong meeting would represent a third breakdown.
Of course, it should be borne in mind that for every setback the WTO encounters, it has staged a comeback. Two years after global trade talks broke down in Seattle, the architects of the WTO cobbled together a new “development” agenda in Doha. And less than a year following the collapse of the Cancun ministerial in September, 2003, a new “framework agreement” was hammered out in Geneva in July, 2004, to complete the Doha Round.For Hong Kong to succeed, then, the WTO needs key agreements in three areas: agriculture, non-agricultural market access (NAMA) and services. At the WTO General Council meeting in Geneva at the end of July, 2005, however, no real progress was reported in moving any of these three sets of negotiations forward. Outgoing WTO director General Supachai Panitchpakdi called the situation “disappointing but not disastrous” and insisted that the “picture remains a mixed one over all.”
Between now and the Hong Kong meeting, then, we can expect numerous power plays and hardball tactics being used by the U.S. the EU and other northern countries, including Canada, to coerce developing countries into make the concessions and compromises the rich countries want to make Doha a done deal. And, as Walden Bello of the group Focus on the Global South astutely observes, there is already a built-in trap. “The negotiating frameworks set by the July, 2004 Framework Agreement,” says Bello, “are so narrow that they cannot but produce proposals which essentially foreclose development under the guise of achieving compromises.”
The Centrality of Agriculture
For the global South, these agricultural negotiations are of enormous importance. This is because over 70 per cent of the population of most developing countries today depends on agriculture for its livelihood. In countries like Mexico, which have already opened up market access in agriculture under NAFTA, the pressure on the land means that millions of peasants have been compelled to leave and move to overcrowded cities. Part of the reason for this is that, while the countries of the global South are constantly pressured to eliminate agricultural tariffs and provide market access in agriculture, the EU and the U.S. continue to provide huge domestic and export subsidies that strengthen the hands of agribusiness corporations in their own countries. To prevent this situation from deteriorating further, in Cancun a bloc of developing countries known as the G-20 was organized and proved to be effective in halting the signing of a bad agricultural agreement.
Three critical issues now dominate the agricultural negotiations: domestic subsides, export subsidies and market access. To date, no progress has been made on domestic subsidies. The U.S., for example, has neither reduced nor eliminated the subsidies granted by the 2002 U.S. Farm Bill. EU farm support, meanwhile, remains at a higher level than that of the U.S. However, the EU has suggested that it will soon make an announcement about the dates and schedules for its promised phase-out of its export subsidies for agriculture. This could obviously affect the momentum of the negotiations. Moreover, the G-20 group of developing countries tabled a proposal in a mini-ministerial meeting in Dalian, China, this summer, which provides a breakthrough in the negotiations on market access in agriculture. And since agriculture has been the lynchpin in the WTO negotiations up to this point, forward movement in agriculture could provoke a breakthrough in industrial products and services.
Tariff Protection and Industry Growth in the South
Industrial negotiations refer to what is known as “non-agriculture market access” (NAMA). These have to do with reduction of industrial tariffs. For the most part, northern industrialized countries like Canada no longer require a substantial degree of industrial protection and have either lowered or eliminated their tariffs on imported goods. Developing countries, however, need tariff protection in order to build up their own industry.At the moment, it appears that a general consensus is taking shape on a formula for tariff reduction. This so-called “non-linear” Swiss formula would apply to all industrial products. Under the terms of this formula, those countries that have higher tariffs on industrial goods like computer parts or farm-machinery products would be subject to greater proportional cuts than those that maintain lower tariffs. In this way, says Martin Khor of the Third World Network, developing countries are bound to be penalized much more than industrialized countries simply because they maintain higher tariffs on many key industrial goods, something they need to do if they want decent rates of growth in terms of production and jobs.
Recently Pakistan tabled a proposal outlining in more detail how tariff reductions might be applied to both developing and industrialized countries within this basic formula. In other words, some developing countries like Pakistan are now putting forward “constructive ideas” within the Swiss formula for industrial tariff reductions rather than challenging the model itself. Other countries, however, continue to resist. The Caribbean countries, for example, have put forward a proposal that essentially rejects the Swiss formula, while in Brazil, the CUT, the labour union central, has called on its government to reject the NAMA negotiations.
The Services Sector: Forms of Southern Resistance
The General Agreement on Trade in Services (GATS) provides the framework for the set of WTO negotiations that includes public services like education, health care, water, electricity and environmental services, among others. Not surprisingly, all of the major industrialized countries have tabled offers to open up markets in key sectors of their services. To date, however, only 70 out of 148 of the so-called developing countries have made offers. This is an increase from 47 at the beginning of 2005. To date, India, China and Brazil have made offers to open up their service markets, while South Africa and Venezuela have not.
On September 13, 2005, the EU, backed by the U.S., Japan, Switzerland, Australia and Korea proposed a series of mechanisms for accelerating the negotiations. These included benchmarks requiring that developing countries make significant “offers” in certain key service sectors. The proposals also call on developing countries to remove restrictions on corporate investment in particular service sectors. If these measures are adopted, developing countries will be required to open up a minimum percentage of sub-sectors for the participation of foreign-based, for-profit service corporations and providers. The imposition of these benchmarks, however, would represent a violation of the principles of flexibility and “bottom-up” procedures that are built into the GATS negotiating process.
Other developing countries may be holding back on their commitment in services. Take, for example, India and countries like the Philippines and Bangladesh, which want to export more of their labour force. India wants the U.S., the EU and other industrialized countries like Canada to make more substantial concessions on Mode 4 of the GATS, which allows for the cross-border movements of natural persons. This would especially affect their high-tech workers. So far, these northern countries have refused to make this concession due to domestic concerns about immigration. But they also know that many of their client corporations want to maximize opportunities for cheap labour, especially cheap skilled labour. If the U.S. and the EU were to make binding commitments in a working visa category for high-tech workers, India would likely reciprocate. In turn, this would generate serious momentum in the GATS negotiations.
It is in light of this kind of situation that Walden Bello has warned that civil-society groups need to be vigilant and beware what he calls a “nightmare scenario.” It’s quite possible, says Bello, that in the lead-up to the October General Council of the WTO, the EU will announce a schedule for the phase-out of its agricultural export subsidies and the U.S. will respond by announcing its openness to consider placing disciplines on its food aid and export credits. The U.S. and the EU might then announce their willingness to make concessions with regards to the entry of cheap skilled labour from developing countries.
These hypothetical moves would put immense pressure on developing countries to make concessions in the agriculture, NAMA and GATS negotiations. And they would also have strategic impact on neutralizing two of the key players in the global South: Brazil and India. The net result could be the generation of sufficient momentum to make Hong Kong a success.
In this respect, the next WTO General Council meeting, scheduled for October 19 to 20 in Geneva, will be a critical moment. If the WTO is to survive Hong Kong, it must clear several hurdles. A key player in all this will be the incoming director general of the WTO, Pascal Lamy, who was formerly the European trade commissioner. He is known as a consummate politician and negotiator. He is also a skilled manipulator, who is capable of showing concern and sympathy for the priorities of developing countries while vigorously acting on behalf of the interests of the EU, the U.S. and the industrialized North.
The Challenge Ahead
Although it may look like the WTO is heading for more failure in Hong Kong, it’s important to be aware of the strategic maneuvering behind the scenes. These developments could effectively pull it back from the brink. There are tremendous pressures to come up with a deal, and the developing countries don’t want to be blamed for another Seattle or Cancun. There are also serious time constraints for the WTO, like the need to wrap up the Doha round by the end of 2006, before fast-track authority for the U.S. president runs out.
Civil-society groups thus have their work cut out for them. In each country, concerned groups need to build a counter-offensive to inform their public about the anti-development path upon which the WTO is now embarked. In Canada, we need to pressure our government to reverse this course. The dangerous impact of what is being proposed in the negotiations on agriculture, industrial tariffs and services must be highlighted. Countervailing strategies must also be organized to prevent power plays designed to coerce developing countries into accepting deals that undermine development priorities.If Hong Kong becomes strike three for the WTO, thereby scoring a major blow to its legitimacy as the engine of corporate globalization, then civil-society groups will need to put priority on building an alternative trade agenda based on principles of economic justice, environmental sustainability and democratic accountability. Recent work has begun to map out alternatives along these lines through organizations like the International Forum on Globalization and the Our World Is Not For Sale network.
Only by doing this will the chant – “Hey-hey! Ho-ho! The WTO’s got to go!” – take on real meaning.