Return of the WTO: The battle of Cancun continues this July

By Mary Lou Malig*

Agriculture negotiations have always served as the sticking point in the WTO as many developing countries have stated their refusal to consider other negotiations until they achieve some satisfaction in agriculture.

Indeed, o­ne of the major stumbling blocks in Cancún was the agriculture negotiations. In particular, the tariff-cutting approach suggested by the US and the EU ahead of Cancun was roundly rejected by the G20 (1), the Cairns Group and the G33 (2) and while the position of the G20 still begged for improvement, the group played a key role in stalemating the negotiations.

In Cancun, the collapse in agriculture talks triggered a domino effect o­n other areas of negotiations. It is no wonder therefore that the post-Cancún strategy of the EU and US has been to push for an agreement o­n agriculture in an effort to free the log-jam. The General Council Meeting this July is being built up as the breakthrough in the current stalemate, with the EU and the US hoping it will produce a framework o­n agriculture and, ergo, push all other negotiations forward.

Agreeing a framework carries very serious consequences: o­nce agreed upon, it cannot be modified and it can take several years before it is revisited.

There are three pillars in the existing framework: market access, domestic support and export subsidies. The three are very much interlinked but are treated as separate entities by developed countries and some developing countries. Many developing countries want stronger linkages between the pillars so that the final agreement is “balanced”. However, up to now the spotlight has focused o­n the most controversial of pillars: market access.

The EU and the US tabled their proposal o­n market access before Cancun but it was rejected by developing countries. In response, the EU and US called o­n developing countries to submit their own proposal. The G20, in anticipation of the June agriculture negotiating sessions at the WTO, released their position paper o­n market access o­n May 28, 2004.

In the proposal, the G20 outlines the elements of a framework o­n market access. Unlike the EU-US proposal, it does not propose a formula. Rather, it details the basic guidelines for a framework. A Brasilian negotiator explains this is to ensure that the proposal is not shot down so easily, “We are laying out the basic principles for a framework and if we agree then we can discuss the details of a formula.” The G20 argues that their proposal is broad enough to accommodate very different positions (3) and makes it very difficult for the developed countries to reject it.

It addresses all issues in the market access pillar: tariff reductions, special and differential treatment (S&D) for developing members, least developed members (LDCs), preference erosion and recently acceded members.

The main principles of the G20 proposal are:

1) “The formula shall ensure progressivity in tariff reductions through deeper cuts in higher tariffs.” According to a G20 source, this is the most basic principle in the entire proposal. Deeper cuts in higher tariffs, he says, are an essential element in reducing bound tariffs.

2) Addressing the sensitive nature of some products through a combination of tariff reduction and tariff rate quotas (TRQs).

3) Ensuring a fair and equitable outcome by having S&D for developing members which includes application of lower rates of tariffs for a longer timeframe vis-a-vis developed members, application of differentiated tariff cuts and the establishment of a special safeguard mechanisms (SSM) and the designation of special products (SP).

The G20 position, though, has several shortcomings:

1) No linkage is made between tariff cuts and domestic supports or export subsidies. Since the start of negotiations in 1998, developing countries have been stating that a link between the market access and domestic supports / export subsidies pillars is essential for the agreement to be balanced.

Surprisingly, the G20 is conceding to cutting tariffs and more market opening commitments through TRQs without getting the guarantee that US and EU subsidies or dumping will be mitigated, much less eliminated. Without disciplining the US and EU in this round, the discussion and opportunity to address US/EU dumping — which has been so destructive to the Third World –would be foreclosed for many years to come. Indeed, the currently iniquitous agreement o­n agriculture (AoA) paradigm of patently unfair trade rules would be further entrenched.

2) Insufficient elaboration o­n the Special and Differential Treatment (S&D) components:

The G20 proposal merely states that a percentage of tariff lines should be considered as special products (SP). The G20 should be more specific about what they want out of the SP. If left to a later stage of negotiations, the SP concept could be so watered down it would be of more value as a public relations instrument for the US and EU, than a policy instrument for developing countries. (4)

3) Similarly, the special safeguard mechanism (SSM) which the G20 says “shall be established for use by developing members” is not elaborated upon. If developing countries are accepting that tariffs are to be cut, it would be wiser for them at this stage to negotiate exactly what kind of SSM and SP they are going to get in return for the commitment to reduce tariffs. The SSM should be made available for all products and for all developing countries. This should also be a separate instrument from the SP concept.

What is critical now is a coming together of the developing country coalitions and a strengthening of their common position o­n agriculture. In Cancun, the G20, G33 and G90 (5) were different groupings, yet they supported each other’s position and were able to make their voices heard: it was o­nly by coming together that they forced the EU and US to listen to their long ignored concerns. However, if the G20, led by Brasil and India, are serious about taking into consideration the plight of their small farmers they must realize that their current proposal does not address the inequities (and iniquities) of the AoA.

The G33, called by o­ne its negotiators a “ragtag group”, has the potential to push for special safeguard mechanisms for developing countries. The EU and the US are threatened by this and are resorting to typical “divide and rule” strategies. The EU, in an ingenious move, has called for a differentiation of developing country groupings – between the less developed and more “advanced” developing countries. This will not o­nly erode bargaining and political capacity of the South but will also have systemic consequences, which go further than the current agriculture negotiations. The EU is doing this by offering the G90 the “round for free”, promising that they would not need to undertake tariff reductions in agriculture. This is an empty gift because, among other complications, it comes at a high price vis-a-vis industrial tariff bindings in the non-agricultural market access (NAMA) negotiations, opening markets in services and the “Singapore issues” of competition, trade facilitation, investment and government procurement.

In informal interviews, Geneva-based developing country negotiators all recognized this move as an attempt to divide the developing countries. o­ne developing country ambassador stated that if the differentiation were to be carried through, his country could very likely not fall under the G90 umbrella yet, in terms of GDP, they are no different from many G90 countries. Also, o­ne G20 source warned that the EU trade commissioner Pascal Lamy qualified that the offer was for “essentially” G90 countries, which can translate to the EU later o­n choosing which countries it will include for the Trojan gift.

A July framework based o­n the current proposals will be beneficial to the developed countries. Developing countries should not be bullied into agreeing to an unbalanced and unfair agreement. As o­ne minister said after Cancún, no deal is better than a bad deal, and in this case, a framework bullied through by the EU and the US will haunt coming generations.

The collapse of the WTO Ministerial in Cancún was a victory for social movements, farmers, peasants, trade unions and poor people in both developed and developing countries. It is essential to hang o­n to this victory and not let the EU and US push for the comeback of the WTO. The WTO is drowning and a framework o­n Agriculture this July will give it its lifeline.

While developing country formations served to block the EU and US hegemony in the talks, hence derailing Cancun, it was in large part an outcome of many years of work by social movements in Brazil and elsewhere. The current situation of developing countries is proof enough of the inadequacy of tinkering with fundamentally unfair agreements. It is time to drive the final nail into the coffin of the WTO and end these neoliberal agreements that kill small farmers and put corporate profit over people.

1. The G20 countries as of June 2004: Argentina, Bolivia, Brazil, Chile, China, Cuba, Egypt, India, Indonesia, Mexico, Nigeria, Pakistan, Paraguay, Philippines, South Africa, Thailand, Tanzania, Venezuela, Zimbabwe

2. Lead by Indonesia, this group of over forty countries is also known as the Alliance o­n Special Products and Special Safeguard Mechanism (SP/SSM)

3. Brasil, Indonesia and other G20 countries confirmed that this paper was done in close consultation with other coalitions, specifically the G33 and the CAIRNS group.

4. Developed and a few developing countries opposed to the SP concept in the WTO have recently suggested that the SP be confined to o­nly 3 products at the 8 digit HS level (ie, almost worthless in terms of carving out exceptions for food security). It was also suggested that it be limited for use to products with tariffs of 25% or below. Most products would not be eligible.

5. The G90 is composed of the Least Developed Countries (LDCs), the African Union countries and the ACP (African Caribbean and Pacific) countries.