|Criticisms of the WTO
What's wrong with the WTO?
An international body for regulating world trade is a good idea,if only to stop the rich countries bullying the poor, but the WTO as currently constituted is failing to do that.
Dogmatic attachment to liberalisation
The 15 WTO agreements were drawn up at the height of the enthusiasm for free market economics, and are a product of dogmatic attachment to liberalisation and deregulation. The world may have moved on since then, but the WTO has not. It sees trade liberalisation as an end in itself, rather than a means to an end (such as eradicating poverty). There is plenty of evidence that while liberalisation in some circumstances can help the poor, in others it can do serious harm, for example by letting in floods of cheap food imports that wipe out the livelihoods of small farmers. Maize prices received by poor Mexican farmers have halved since Mexico opened its borders to cheap US maize, causing havoc in the countryside. One Latin American negotiator in Geneva concludes: "If you have a really open economy like ours, it's impossible to protect your farmers with WTO rules."
This ideological bias may explain why the WTO pays almost no attention to the impact of its agreements. A recent report by the UK parliamentary international development select committee concluded: "We are astonished at the lack of empirical study of the Uruguay Round on developing countries. Adequate resources must be provided to fund such a review." To date, no such review has even begun.
Northern double standards
In the words of one North African ambassador at the WTO, "The message from North to South in the Uruguay Round was 'you continue to liberalise, we'll continue to subsidise.' The Uruguay Round is a story of unkept promises." Northern governments and companies have proved adept at including loopholes in the agreements to benefit themselves. According to the UN, northern protectionism is robbing the developing world of an export income of $2bn a day, many times more than the total inflows of aid.
Developing countries feel cheated. Take the Agreement on Agriculture, which commits governments to reduce subsidies to farmers, arguing that these drive down prices and damage the livelihoods of farmers elsewhere. Yet the loopholes agreed in the Uruguay Round have allowed the northern governments to increase their support to farmers to an annual rate of US$360bn. That works out at US$20,000 a farmer. Added to their greater access to technology,land and bank loans, this gives northern agribusiness a massive and unfair advantage over developing country farmers.
But double standards also exist on a deeper level. With few exceptions, today's successful economies built up their national industries behind protective barriers. Today, WTO agreements are closing that option to developing countries.One Andean negotiator concludes: "Because of trade liberalisation, we cannot pursue the policies developed countries used in the past."
Deregulation introduced by governments under pressure from the World Bank and the IMF can be reversed if electorates so wish. But governments signing the WTO agreements effectively "lock in" the WTO's bias in favour of the unregulated market. While WTO officials present lock-in as a positive step, insulating governments from the influence of domestic vested interests, it is just as likely to insulate them from democracy and stoke public fears that governments have surrendered to unaccountable market forces.
The WTO covers a lot more than trade and tariffs. Increasingly, it involves itself in domestic issues such as investment rules and patenting regimes. If the EU's proposal for a broad agenda is adopted by the WTO, this "mission creep" will extend into many new areas: government procurement, investment, competition policy, labour standards and the environment. International rules on these matters are needed, but the WTO will bring to them its own agenda of liberalisation and deregulation,and its imbalances of power. For that reason, many developing countries and NGOs oppose further extension of its influence.
Corporations v governments
On paper, the WTO merely deals with governments. In practice, however, transnational corporations have a large, though often invisible, presence. Pharmaceutical and life science companies drove the discussion on intellectual property rights that led to the agreement on Trade-Related Intellectual Property Rights (TRIPs), extending corporate control of the knowledge economy. In the talks which established that agreement, 96 out of the 111 members of the US delegation of negotiators were from the private sector. Closer scrutiny of the 650 "NGOs" accredited to attend the Qatar ministerial meeting as observers revealed that at least 240 of them were in fact industry representatives, including the Motion Picture Association, the American Sugar Alliance and the United Egg Producers Association.Unlike Westminster, with its increasingly stringent rules, the WTO has no rules governing disclosure of corporate lobbying.
From CAFOD, “Rough Guide to the WTO
The Independent July 18, 1999
Focus: Trade Wars - The hidden tentacles of the world's most secret body
By GEOFFREY LEAN Environment Correspondent
Powerful multinationals are using the World Trade Organisation to control the lives of ordinary people
Behind the imposing entrance of a grand 1920s building on the shores of Lake Geneva lies what is probably the most powerful organisation on Earth. Far more potent than any government, its decisions are already affecting our lives and unleashing international conflicts.
It can stop us choosing what we eat. It can strike down laws passed by even the strongest, democratic governments. It can start or sanction trade wars. And it can set at naught the provisions of international treaties which have been solemnly ratified by the world's nations.
It's not Nato, despite its victory in Kosovo. It's certainly not the weak and underfunded United Nations. It's not even the IMF, although it directs the economies of scores of countries. No, the building on the lakeside - set in fine gardens with a magnificent view of Mont Blanc - belongs to a much less well-known but much more powerful body, the World Trade Organisation (WTO).
This organisation, which sets the rules that govern how nations trade with each other, is about to become the centre of a gigantic battle for public opinion. This autumn it will begin a push, backed by many of the richest nations, to extend its powers even more. And some 700 organisations from 73 countries have sworn to stop it.
Ranging from big outfits such as Oxfam, Friends of the Earth and the Japanese Consumers' Union to small grassroots networks in the Third World, they have signed a joint declaration to "oppose any effort to expand the powers of the World Trade Organisation", saying that it has worked "to prise open markets for the benefit of transnational corporations at the expense of national economies, workers, farmers and other people".
Already the temperature is rising. Last week, the WTO ruled that the EU must drop an 11-year ban - imposed to safeguard health - on US beef treated with hormones. It authorised the Clinton Administration to penalise European goods until it does.
The row will come to a head on 29 November, when world trade ministers meet in Seattle. The EU, despite its experience last week, will be pressing for a new round of negotiations - called the Millennium Round - to give the WTO power over even more areas of world trade. It will be backed by Japan, Canada and, to a lesser extent, the US. The grassroots campaigners and some Third World governments, including India, Egypt, Malaysia and a coalition of African countries, will resist.
It was never supposed to be like this. The WTO is the inheritor of a 50-year push to promote free trade - a cause once as uncontroversial as freedom itself - to prevent a repeat of the unhappy era of beggar-your- neighbour protectionism between the wars. In eight rounds of talks since 1947, its predecessor - the General Agreement on Tariffs and Trade (Gatt) - gradually opened world markets. The Uruguay Round, completed in 1994, set up the WTO. It was charged with monitoring and enforcing the new rules and given unprecedented powers to make legally binding rulings on trade disputes between countries, and authorise retaliatory, punitive trade sanctions.
The way it has used these powers is leading to a growing suspicion that its initials should really stand for World Take Over. In a series of rulings it has struck down measures to help the world's poor, protect the environment, and safeguard health in the interests of private - usually American - companies.
"The WTO seems to be on a crusade to increase private profit at the expense of all other considerations, including the well-being and quality of life of the mass of the world's people," says Ronnie Hall, trade campaigner at Friends of the Earth International. "It seems to have a relentless drive to extend its power."
Environmentalists and health campaigners fear that after slapping down such diverse "impediments to free trade" as small Caribbean banana farmers, clean petrol, endangered turtles, and health precautions, it will now help the US government, Monsanto and other biotech companies make it impossible for people to refuse to eat genetically modified food.
The US and Canada have already officially complained to the WTO about the increasing measures in Britain and other European countries to label GM products. Even though these are only being brought in after much public disquiet and enshrine the principle of consumer choice, they may fall foul of the trade rules.
If they do, European governments will have to scrap the labels or face massive retaliatory action on wholly unconnected industries (targets for sanctions so far include jam and tea-makers, bed linen and handbags, cheese and motorcycles).
Enter a little-known, but immensely powerful body, the Codex Alimentarius Commission, a living embodiment of the effectiveness of the bureaucratic dodge of disguising the importance of an institution by giving it an obscure name.
Run by two UN bodies, the Food and Agriculture Organisation and the World Health Organisation, it is supposed to be used by governments to set food standards. In practice its assemblies and decision-making committees are packed with representatives of the food industry, who meet in secret to set rules to govern their own conduct. They are, unsurprisingly therefore, not very demanding.
The WTO makes the world observe these standards and no other. A democratically elected government cannot choose to set tougher ones to protect its people. If it tries, the WTO can rule the measures illegal and hit the country with punitive sanctions.
Environmentalists fear that the WTO will outlaw voluntary labelling, like the successful schemes to identify wood produced by ecologically friendly forestry. A Dutch timber labelling scheme has already been scrapped after a threat to take it to the WTO. Another target may be the increasingly popular "fair trade" initiatives, which identify tea, coffee and other products produced in ways that benefit the world's poor.
All this, protests the WTO, is in the interests of "deregulation". But it is also forcing developing countries to introduce rules which could enable multinationals to patent foods and natural medicines that their people have used for centuries: one US company has "patented" basmati rice. Poor people may thus be forced to pay for products they have traditionally used.
The WTO and its supporters - trade ministers of the wealthiest countries - insist this liberalisation will benefit the poor. It is not working out like that. Under the trade rules, for example, the Philippines is importing American corn that is far cheaper than its local equivalent. As a result, says Oxfam, half a million poor Filipino farmers risk losing their livelihoods. And, it adds, the subsidy to each American farmer, at $29,000 (pounds 17,000) a year, is 100 times higher than the Filipino growers' entire average income.
Aren't such subsidies an impediment to free trade? The WTO seems to have a selective view. While Third World countries are forbidden to subsidise their crops, Western nations quintupled their agricultural subsidies from $47bn to $247bn in the first four years of the WTO's existence.
The biggest winners of the Uruguay Round, studies show, are the EU, US, Canada and China, while African countries lose out. Kevin Watkins of Oxfam points out that the poorest countries' share of world trade has shrunk.
In Seattle objectors will be demanding that the WTO puts its house in order. They can draw on the success of two of the most successful recent grassroots campaigns - against GM foods and for the cancellation of poor country debt. But the little-known lakeshore institution remains their toughest target yet.
THE ATTACK ON THE POOR
FOR MORE than 20 years the EU has helped small West Indian banana growers scratch a living by favouring imports of their fruit. As farmers of poor soils on steep hillsides, they cannot compete with cheaper fruit grown on giant estates in Latin America by big US companies such as Chiquita. The EU scheme gives them a chance, while not doing much to affect world trade. Although the fruit makes up 60 per cent of the islands' exports, it only accounts for three per cent of world trade. Despite its pro-Caribbean stance, Europe still buys nine out of 10 of its bananas from the big US firms.
Three years ago the Clinton Administration complained to the WTO that the EU scheme was unfair - even though the US has never exported a single banana. The complaint closely followed a $500,000 donation from Chiquita to the Democratic Party. The WTO upheld the complaint, ordered the EU to stop its help, and authorised the US to start a trade war by penalising imports of a host of European goods - from Italian handbags to British bath salts - with $191.4m (pounds 112m) in trade sanctions. The EU backed down. Experts expect the unemployed farmers to switch to growing cocoa and marijuana for smuggling into the US.
THE ATTACK ON HEALTH
THE US meat industry feeds cattle with hormones to make them grow and fatten faster. The EU stops its farmers from using the hormones and has long banned the import of meat from cattle given them, fearing that they could cause breast and colon cancer.
In 1995 the Codex Alimentarius Commission narrowly voted to adopt food standards that allowed the presence of the hormones in meat. The next year the US, after lobbying from its agrochemical industry, complained to the WTO. It said that the EU was merely trying to protect its own meat industry; the EU cited its health concerns and pointed out that Europeans have made it clear they do not want to eat beef with hormones anyway.
The WTO ruled for the US. Last Monday - after the EU had still refused to lift the ban - it authorised the Clinton Administration to impose $116.4m (pounds 65m) of trade sanctions on European goods including Roquefort cheese, chewing gum, raspberry jam and motorcycles.
Critics fear the US will enlist the WTO in the same way to force Europe to import genetically modified milk and foods, despite widespread public abhorrence.
THE ATTACK ON THE ENVIRONMENT
LAWS TO safeguard the environment have fallen prey to free-trade rules. In its first ever case the WTO stopped the US cutting air pollution by cleaning up petrol, on the grounds that this would discriminate against producers of dirtier oil, such as Venezuela. This overruled a vote in the US Congress and forced the Administration to change its Clean Air Act.
The WTO stopped the US requiring nations from which it brought shrimps to bring in regulations to ensure that their boats did not catch critically endangered sea turtles. The US is trying to get it to stop the EU recycling components of electrical goods. And under similar free trade rules, the EU has taken Denmark to the European Court for bringing in laws to make bottles returnable.
Environmentalists fear that the WTO could strike down provisions in long- agreed treaties to protect the ozone layer, control the dumping of toxic wastes overseas, and to ban trade in endangered species. The WTO has not yet ruled on such a treaty, but this is only because it has not received a complaint about one. Ominously it has so far failed officially to recognise any of the treaties, and experts believe that it is only a matter of time before they are challenged.
August 1, 2008
Johann Hari: Do you want free trade - or fair trade that helps the poor?
Whenever the world trade talks begin to seem like a coma-inducing bore-a-thon, I am jolted back to consciousness by the throat-stripping smell of rubbish; miles of rotting rubbish. A few years ago I found Adelina - a skinny little scrap of an eight-year-old - living in a rubbish dump, where this stench made her eyes water all the time. It is this smell - and her sore, salty eyes - that hung over the corpse of the Doha trade talks this week.
Just outside the Peruvian capital of Lima, there is a groaning valley of trash, and, inside it, hordes of children try to stay alive. Adelina spends her days picking through the refuse looking for something - anything - she can sell on for a few pennies. Then she returns to the few steel sheets she calls home to sleep on a crunchy carpet of cans. She has never left the rubbish dump; its walls are the walls of her consciousness. She told me three of her friends had recently died by falling into the rubbish, or being pricked by fetid needles, or slipping on to broken glass. I asked her how often she eats, and she shrugged: "I don't like to eat much anyway." She will be 10 now, if she has survived.
When we juggle the dry, dull statistics of world trade, we are really asking if Adelina will remain in her rubbish dump - and if her children, and grandchildren, will live and die there.
The way we - the rich world - organise the world trading system today traps Adelina. But it just broke. This week, in Switzerland, the poor countries of the world refused to play along with the Doha trade negotiations. The mass movement of ordinary people demanding our governments Make Poverty History that rose up in 2005 needs urgently to reconvene.
To help Adelina, we need to start with a basic question: how do poor countries turn into rich countries? The institutions that dominate world trade - especially the World Trade Organisation (WTO) - have a simple answer: all markets, all the time. They tell poor countries to abolish all subsidies, protections and tariffs that protect their own goods. If you fling yourself naked at the global market, you will rise. If the poor countries disagree, they are cajoled to do as we say.
There's just one problem: every rich country got rich by ignoring the advice we now so aggressively offer. If we had listened to it, Britain would still be an agrarian economy manufacturing raw wool, and the US would be primarily farming cotton.
Look at the most startling eradication of poverty in the 20th century: South Korea. In 1963, the average South Korean earned just $179 a year, less than half the income of a Ghanaian. Its main export was wigs made of human hair, and Samsung was a fishmonger's. Today, it is one of the richest countries on earth. The country has been transformed from Senegal to Spain in one human lifetime. How?
South Korea did everything we were pressing the poor at Doha not to do. Dr Ha-Joon Chang, a South Korean economist at Cambridge University, explains in his book Bad Samaritans: "The Korean state nurtured certain new industries selected by the government through tariff protection, subsidies and other forms of government support, until they 'grew up' enough to withstand international competition." They owned all the banks; they controlled foreign investment tightly. The state controlled and guided the economy to the international marketplace.
But we are so pickled in market fundamentalist ideology that we have blotted out this history - and even our own. Until the Tudors, Britain was a backward rural country dependent on exporting raw wool. Turning that wool profitably into clothes happened elsewhere. Henry VII wanted Britain to catch up - so he set up manufacturing bases, and banned the export of wool, so clothes were manufactured here. It's called protectionism. His successors kept it up: by 1820, our average tariff rate was 50 per cent. Within a century, protected British industries had spurted ahead of their European competitors - so the walls could finally be dismantled. Dr Chang explains: "Trade liberalisation has been the outcome of economic development - not its cause."
The US did the same. By 1820, the average tariff was 40 per cent; Abraham Lincoln then pushed them higher, and they stayed there until the First World War. Yet if Lincoln had been at the Doha trade talks, the United States of 2008 would have described him as a "fool" who was "harming his own people" with "despicable policies".
Before you make your child work, you give him an education and skills and abilities. Before a country pushes its infant industries on to the world market, it needs to do just that. Nokia, Samsung and Toyota all had to be cushioned with subsidies and tariffs for decades before they made a cent. Every one of these companies would have been stampeded to death on the open market as a toddler otherwise.
Yet the reaction to the poor world's rejection of Doha in our media has been mostly bemusement. Why have these simple-minded povvos declined our medicine? Are they mad? Amy Barry of Oxfam provides a quiet counter-balance, pointing out that if the agreement on the table at Doha had gone through, Brazil alone would have lost 1.2 million jobs, and "most poor countries would have deindustrialised, or never industrialised at all".
From the rubble of Doha, a new world trade system needs to be built - on the principle of fair trade, not free trade. If we really want to end extreme poverty, then we need to open up the markets of rich countries, while allowing poor countries to protect and subsidise theirs. It is the recipe that ensured you, today, are not hungry and tilling the fields.
But the WTO can only ever achieve half of that goal, at best. It is built on the market vision that there should be no trade barriers or "distortions" anywhere. That means opening up rich markets, which is great. But for each step in that direction, they demand a symmetrical concession from the poor. It is like telling Bill Gates and Adelina they both have to make sacrifices - and Gates won't shift until she does.
Here in the EU and US, there are hefty forces determined to smother fair trade in its cot. The current system works well for corporations, who get to wrench open poor economies without any risk of local competitors rising up. It works well for some slivers of workers here too, who thrive on rich-world subsidies. These forces are regrouping, but their system is lying in a crunched-up heap by the side of the road.
Our governments will always find a way to put these powerful sectional interests first - unless we, the people, make them do otherwise. Today, Adelina needs Make Poverty History to rise again to demand fair trade, not on a few fancy supermarket shelves, but as the principle governing world trade. Let the poor do what we did. Let them rise. Otherwise, those rivers of rubbish will be home to generation after generation of Adelinas the world over, and the stench will never clear.
The WTO responds to criticisms
The Doha Development Agenda (Doha Round)
What was/is the Doha round?
Why did it fail?
Paul Maidment 07.29.08
Strike the "H" from Doha and you are left with DOA, which is pretty much the state the round of world-trade talks has been in since it was launched six and a half years ago.
When I first wrote that sentence in January, at the working lunch many trade ministers hold during the World Economic Forum annual meeting in Davos, Switzerland, there was still a surprising, if fragile, optimism that Doha might somehow survive, that a deadlock over cutting agricultural subsidies in the rich countries and lowering industrial and agricultural tariffs in developing ones could be eased sufficiently to get a deal struck.
But now, that hope is over. Doha is dead. "There's no use beating around the bush; this meeting has collapsed," says World Trade Organization Director General Pascal Lamy after nine days of last-ditch summiteering in Geneva.
The "Doha round," as the longstanding world trade negotiations are known, had goals of promoting growth in developing countries--something often forgotten. That, it was thought, in Davos at least, provided a higher purpose to justify concessions on both sides in what would otherwise be seen as just tit-for-tat negotiations.
But in the end, discussions did descend into tit-for-tat, with the U.S., China and India pointing the finger at each other, intransigent over a last-minute compromise "framework" proposal from Lamy, under which developed nations would make cuts to their agricultural subsidies in return for more access to developing countries' industrial (and, potentially) service sectors.
The poorer countries felt they were being asked to bear the brunt of the lowering of trade barriers necessary to strike a deal. The U.S. was "asking a price as high as heaven," said China Commerce Minister Chen Deming. "The U.S. is looking at enhancing its commercial interests, whereas I am looking at protecting the livelihood of farmers," said his India counterpart, Kamal Nath.
While U.S. trade official David Shark claimed China and India were being overly protective toward their own farmers, he got little help for their cause from some other developed nations. Some rich farming countries like France and Italy didn't like the concessions they would have to make over cherished foods like Camembert cheese.
Monday, China came off the sidelines of the talks for the first time, knocking the lingering breath out of Lamy's proposal by insisting on its right to protect its sugar, cotton and rice producers with tariffs.
But there are no saints in any of this.
This really is it for Doha, because the forthcoming U.S. presidential election imposes a hard if arbitrary deadline on the process. The U.S. Congress, like many other national legislatures, would have had to ratify the agreement, and time has all but run out for that this political season.
There is a cost to Doha failure that goes beyond it just being a pity. It gives succor to projectionists and sends a disheartening signal when global economic openness is under threat from economic nationalists.
Striking a deal, European Union trade commissioner Peter Mandelson had said at Davos, would be "one in the eye for protectionists, one up for trade, one up for trade-led development, one up for multilateralism."
A dead Doha is none up. What remains is a patchwork of bilateral and regional deals that risk smothering multilateral trade.
That all said, there is a case for putting Doha out of its misery and moving on. The past six years has seen the erosion of many tariff barriers. And the pressing trade issues when this round started were those of the turn of the century. Doha barely touched on environmental sustainability, climate change and carbon trading.
Give Doha a decent burial. Then wipe the slate clean and start again.
Failure of the Doha Round
Edward Gresser - 7/29/2006
Leaders of developing nations anticipated that negotiations of the Doha Round could lead to even-handed trade practices, particularly in agriculture. With the talks collapsed, the wealthiest nations will not suffer nearly as much as the developing nations, according to trade analyst Edward Gresser. The real losers, he says, will be cotton farmers in West Africa, textile workers in low-income Asian and Muslim states, and low-income shoppers in the poorest quarters of America and Europe. Previous international trade agreements on manufacturing and services provided substantial economic wealth for the developed nations. Policies on agricultural or textile trade are far more controversial, largely because they often reflect national identity and political clout of groups involved in those sectors. Yet crops and low-cost manufacturing are the best products that poorest countries can offer to the global market. While time has run out for the Doha Round – especially with the US president slated to lose his fast-track approval for such trade agreements in mid-2007 – Gresser points out that wealthy nations can still eliminate duties on goods shipped from poorest nations. He recommends that world leaders reflect on their own policy shortcomings in promoting fair trade and honestly convey the issues to their citizens. That would be a start to the entire world achieving economic progress together, and not at the expense of the poor.
On Monday, after a meeting designed to give the Doha Round one last try, World Trade Organization Director-General Pascal Lamy admitted failure and suspended not only the meeting but the Round itself. "There are no winners and losers in this assembly," he glumly observed, "Today there are only losers." In truth, the real losers are those whose representatives were not in the hall and could only watch the breakdown.
Charged by Lamy with saving the Doha Round, trade and agriculture ministers from the US, the EU, Japan, India, Brazil and Australia assembled, only to break up a day later in quarrelsome disarray. The participants – as well as some who stayed away – do indeed emerge damaged. But their countries are not losers. Doha agreement or not, trade among the big countries is booming, their growth rates rising, with unemployment lines shortened. The wealthy nations can live with a stalemate.
The real losers are cotton farmers in West Africa, textile workers in low-income Asian and Muslim states, and low-income shoppers in the poorest quarters of America and Europe. The Doha Round was supposed to help the world’s poor, by lowering subsidies that keep Mali’s cotton out of textile mills, tariffs that limit the flow of Cambodian T-shirts and other clothes to shelves. The big countries had a chance to help the poor and flopped.
In the background to Monday’s failure – perhaps part of its cause – lurk six decades of success. Over these 60 years, the trading system’s members concluded 12 big multilateral trade agreements. The first, in 1947, was a modest effort to reduce tariffs on miscellaneous items like cash registers, glue, zinc, chocolate, rails and so on. Then 11 more agreements followed, the most recent dating to 1997 and 1998, dealing not with familiar tariffs but financial services, telecommunications and electronic commerce.
During this time, trade grew from $10 billion to $12 trillion. Exports were the equivalent of 5 percent of the $200 billion world economy of 1950, and now account for 60 percent of a $60 trillion economy. Allied leaders who launched initial talks, hoping to break open the closed world of the Depression and ease relations among the great powers, would probably be gratified by the result.
But success has created a nasty inequity. There is no reason to excuse the Geneva negotiators for failing to fix it, but it is only fair to observe that their task was difficult.
About $11 trillion of the $12 trillion in exports move swiftly and easily around the world. By now, barriers to trade in sophisticated manufactured goods, high-tech products, natural resources and tropical products are inconsequential or gone. Services industries move even faster, using the internet, satellites and fiber-optic cable to reach around the world.
The last trillion dollars or so is more sluggish. These are older industries – agriculture and textiles in particular, but also fisheries, leather and sports equipment. Here, trade barriers remain common and high. The OECD’s $300 billion farm subsidy count is nearly half the annual $700 billion in farm exports. Tariffs on sugar, meat, juice and butter commonly rise to 50 and 100 percent. Rich-country tariffs on clothes are often 10 and 20 percent, with those of big developing countries sometimes much higher.
Trade negotiators left these industries for last because – especially in farming and fishing – they often reflect national identity and political favor. The result – trade policies in almost every big country are easy on rich countries, but tilt steeply against poor countries that specialize in food and clothes, and against poor people who spend greater proportions of income on life necessities.
The Doha Round's hope was to fix the inequity. After five years of talks, with the US government's trade negotiating authority running down, Lamy told the negotiators that they faced a "moment of truth." As it turned out, the truth was that the negotiators were not up to the task.
The Bush administration insisted that it could not make big cuts in farm subsidies unless the EU sharply cut its agricultural tariffs. Europe argued that the US should cut farm subsidies before demanding more tariff cuts of Europe. Both said the big developing countries should agree to steep cuts in manufacturing tariffs. Brazil and India expected the richer countries to do the most and soon. All make good points about their partners’ flaws. None, except Australia, was willing to admit its own shortcomings.
The Bush team argued that America has relatively lower farm subsidies and tariffs than Europe or Japan. True enough – but demands for deeper subsidy cuts from the US reflect the administration’s sharp 2002 increase in US farm programs. Had it agreed to reduce the programs to the levels inherited from the Clinton administration, all might be well.
The EU looks no better – failing to pass its constitution last year, it now blocks farm trade reform to help the poor – and much the same can be said of Japan. Nor do Brazil and India have much reason for pride – successful exporters and fast-growing economies, they often treat poorer and smaller neighbors even more harshly than the rich countries do. And China, the world’s most dynamic big economy, chose to take no risk to support the system at a critical juncture.
More important than blame, though, is the direction for the future.
Lamy has reason to be glum. Farmers and seamstresses, as they read his gloomy speech in the newspapers of Bangladesh and Honduras, or listen to it on the BBC’s Niger service, are right to feel as though the big players let them down.
But neither Lamy nor they should despair. The WTO and its predecessor, the GATT, have had breakdowns before, if never quite on this scale. Their members always rebounded. They can do so again, and might start with two ideas:
First, members must provide some practical, smaller-scale help for the poorest countries. All the big economies pledged in December 2005 to give duty-free treatment to goods from the world’s “least-developed” countries – sub-Saharan Africa, the Pacific islands, Haiti, Afghanistan, Yemen, Bangladesh, Cambodia, Laos and East Timor. Europe and Japan can start with a meaningful gesture on farm products.
The US Congress should renew a textile benefit in the African Growth and Opportunity Act, and improve the Bush administration's hedged offer to abolish tariffs on 97 percent of goods from the poorest countries. This is one of those ideas that sounds good, but can be very tricky. The US divides products into about 11,000 types, each with its own "tariff line." The least-developed countries produce only a few of these goods. By excluding only 330 tariff lines covering textiles and farm products, the administration could keep virtually all imports from Afghanistan, Nepal, Bangladesh and Cambodia off the duty-free list.
The other course is a more engaged, serious involvement by the heads of governments. The collapse of the Geneva talks proves, at minimum, that trade negotiators cannot do the job alone. They need public support, and for this they need the leaders to level with their citizens not only about the sins and flaws of foreign countries, but in their own policies as well. The issue is too important for leaders not to come clean. An honest admission of the issues at stake is what the WTO – not to mention the world’s poor – needs most.
Edward Gresser is director of the Progressive Policy Institute's Project on Trade and Global Markets. Reprinted with express permission from YaleGlobal.