Aileen Kwa*


GENEVA, August 2003 — THE WTO perpetrates a subtle and pervasive form of re-colonisation and warfare. It calls o­n members to relinquish their sovereign rights and policy freedom (by constraining their ability to put in place domestic regulations) in order to allow pillage by transnational corporations. The saturation of Northern markets makes it imperative that transnational corporations get access to markets in the South. The ever-expanding ambit of WTO rules are designed to do just that; pry open developing country markets, not o­nly through the drastic reduction of tariffs, but by “beyond the border” measures. The result is the further subjugation of economies and peoples in the developing world.


Many well-meaning civil society actors and government players are of the opinion that, while the WTO is far from perfect, reform and the call for fairer trade rules, should be the order of the day. But can such ‘reform’ take place?


Since its very inception and since the first WTO Ministerial in 1996, reforms have been o­n the table. Nothing has come of these efforts except more empty promises of future reforms if the developing world enters negotiations for further liberalisation. The promises o­n implementation, special and differential treatment, public health, agriculture made at the 2001 Ministerial in Doha in exchange for developing countries agreeing to yet another round of negotiations, have not materialized. Some sort of “package” is likely to emerge at the Cancun ministerial, but current indications are that it will be more valuable for the North’s public relations than in addressing the real concerns of poverty, hunger and unemployment. In fact, the major powers are setting their sights o­n Cancun as another milestone in opening up even more markets. If they manage to push such an agreement through, the majority in the South can look forward to more de-industrialisation and ‘de-agriculturalisation’.




AGRICULTURE: Agriculture will be the linch-pin at the ministerial. Developing countries had hoped to benefit from the Uruguay Round agricultural liberalisation but instead found themselves taking o­n liberalisation commitments, whilst the developed countries increased their levels of protectionism. Post-Uruguay Round, OECD subsidies to producers have increased from around $248 billion to about $311 billion and “dumping” – the export of products below the cost of production – has increased. In the US and the EU, money is given to farmers to stay in production, whilst multinationals offer producers rock-bottom farm gate prices. Indirectly, but surely, government subsidies are primarily benefiting the agri-business corporations.


Developing countries’ farmers have been wiped out by dumping. Domestic prices for staples have plummeted in recent years and small farmers in the South are losing the battle to compete with the cheap imports flooding their domestic markets. Rural unemployment and poverty are o­n the rise. WTO rules are not solely responsible for this. IMF and World Bank conditionalities directing national governments to apply very low duties o­n imported foods are also a major cause of the crisis in the rural sector.


Even as the skewed rules are not being addressed, the US and the EU are plotting for yet another round of take-over of developing country markets. China and India are prime targets but so, too, is every other developing country that needs to feed its people – from Honduras and Peru to Zambia, Sri Lanka and Indonesia.


As this is taking place, the latest scandal is that the US and the EU are attempting to impose a formula for further agricultural tariff reductions in the current round. That is, they are figuring out how they can “share” the markets of the developing world, whilst protecting their own. It is no surprise that the negotiations are particularly lax where it comes to tightening the loopholes in “domestic supports” – the mechanism used by the EU and the US to protect their domestic markets. The Cairns Group, led by Australia, New Zealand, and supported by Brazil, Argentina, South Africa, Thailand and Malaysia (to name o­nly a few) are also vying with the US and EU for other countries’ markets. The battle in Cancun will be about how they carve out markets amongst themselves. In order to boost its case, the EU will also be using its CAP reform of shifting subsidy payments away from price related payments to (supposedly) de-coupled direct payments as a pretext for arguing that it has undertaken reforms and that its $50 billion subsidies are mostly non-trade distorting!


The majority of developing countries which do not have a large share of the markets, seem to be setting their sights o­n damage limitation. In the negotiations thus far, they have argued for limited exceptions to be carved-out for certain sensitive food security and livelihood products. However, what the developed countries are offering at this point is hopelessly narrow and insufficient to address the depth of developing countries’ problems. Rather than insisting o­n correcting the dumping legalized under the Uruguay Round as a pre-condition to any further tariff cuts, there seems to be a puzzling resignation by developing country diplomats to comply with yet another round of liberalisation.


TRIPS AND PUBLIC HEALTH: If any agreement has given the WTO a bad name, it must be the Trade Related Aspects of Intellectual Property Rights (TRIPS). The TRIPS agreement requires members to provide a 20-year long patent protection to inventions and even free trade ideologues such as Jagdish Bhagwati have called for the TRIPS to be dropped from the WTO. The agreement impedes the transfer of technology to the developing world. But this is not all. The most outrageous impact of TRIPS is that it gives transnational corporations patent protection over seeds, the very source life, and medicines.


Only because of extraordinary amounts of public pressure did the major powers in Doha agree to a political declaration allowing for countries to take measures necessary to address their public health interests, such as the manufacturing of cheaper generic drugs domestically in order to mitigate public health concerns, like the AIDS crisis and treatable diseases such as malaria and tuberculosis. However, o­ne area the major powers refused to address in Doha was the question of how countries without adequate manufacturing capacity could obtain generic drugs. The deadline for addressing this issue – December 2002 – slipped by without WTO Members coming to agreement, despite intense negotiations. The 16 December 2002 text presented by the TRIPs Council Chair, Mexican Ambassador Eduardo Perez Motta has been agreed to by all members except the US which has stalled, not least, o­ne suspects, because the pharmaceutical industry is o­ne of the biggest campaign contributors to the Bush administration.


Developing countries have made clear that this outstanding issue must be resolved before Cancun. Whilst it is mostly reported in the mainstream press that the US is playing hardball, it is not so widely known that the 16 December text, if agreed to, is in fact an extremely cumbersome and even unworkable solution. A myriad of ‘safeguards’ for the big pharmaceutical firms have been put in place by the European Commission, even as the Commission portrays itself as the good Samaritan in these negotiations.


A host of legal and bureaucratic red tape must be traversed if a country wants to export a generic drug, essentially making it expensive, if not outright impossible for any generic drug manufacturer to be able to make the enterprise profitable. There are similar bureaucratic nightmares for importers. The current 16 December text mandates that any manufacturing company wanting to export a generic drug must first apply for a compulsory license from its government to be able to produce and export the drug. The government would issue a compulsory license with many conditions attached: that o­nly the amount required by an importing country can be produced, the generic drug must look distinctly different from the original. The company will then have to declare o­n a public website what drug has been produced, the quantity, the country to which this will be exported and the distinguishing features. The exporting member government will have to notify the WTO TRIPs council, and will also have to put in place anti-trade diversionary measures – that is, they have to ensure that the product reaches the intended country and is not re-exported elsewhere. The consequences of trade diversion for the exporting country are not clear.


Analyst Brook Baker summed it up thus, “Each license application would be predicated o­n: prior negotiations with the patent holder, preparation of expensive legal documents, and prosecution by legal experts. In other worlds, each license would be costly and time-consuming.”


An importing country wanting to avail of this solution must notify the TRIPs council, undertake an ‘assessment’ to establish that it does not have manufacturing capacity to produce the drug domestically, or that existing capacity is insufficient to meet its needs. Here again, it is unclear what would happen if there are conflicts of judgment about what constitutes “adequate manufacturing capacity”. What is clear, though, is that it opens the door for countries to be pressured into relinquishing their right to import, or severely restricting this right.


The US has already informed the Philippines’ government that it will not be eligible for this solution, hence signaling that many countries at a similar level of development will also be denied access to imports. Developing countries with small markets, such as those in Central America and the Caribbean, would find it too expensive to manufacture these drugs domestically. Furthermore, those manufacturers that do want to export would be locked out of access to important export markets.


The o­nly apparent respite from all these conditions has been offered to countries which are part of a trade blocks where 50 per cent of the members are ‘least developed countries’ (LCDs). This exemption would apply mainly to African countries and seems to be a strategy to buy-off and split African countries from other developing countries. Under this exception, a compulsory license from an exporting country can be applied for a product for the entire trading region, rather than o­n a country-by-country basis. Each importing country, however, must still apply for a compulsory license to import the generic medicine.


According to reports from the recent informal Montreal mini-ministerial in preparation for Cancun (28-30 July), US trade representative Robert Zoellick told Ministers that in order for US to sign o­n to the 16 December text, he wanted Brazil and India to make public announcements that they would not use the solution for commercial purposes – clearly another attempt to split the African countries from India and Brazil. But practically speaking, if Brazil and India do not export these drugs, would African manufacturing capacity in the immediate and medium term be able to provide for the needs of the continent?


The latest development is that the US wants a caveat put into the text (or highlighted in a cover letter by the Chair of the WTO’s TRIPs Council) stating that the solution will o­nly be used for ‘humanitarian purposes’. The actual definition of how broadly or narrowly this will be interpreted is still unknown, but it is clearly another attempt to narrow the coverage and flexibility of any solution.


What could emerge before or at Cancun is a solution that severely limits the ability of developing country manufacturers to export generic drugs and hence limit the availability of cheap medicines where they are most needed. Even more worrying is that developing countries will be asked to pay a high price, in terms of constraints and trade-offs, for a “solution” that is unlikely to go far in solving their public health crises.


Professor John Barton, Chair of the UK Independent Commission o­n Intellectual Property Rights, provides a reality-check o­n how limited these negotiations are in actually solving the enormity of the problem:


“A legal solution of the kind now being negotiated at the WTO o­n compulsory licensing is unlikely to resolve the economic problems that the world will face after 2005. At that point, India, in particular, is required to apply patent protection to new medicines and its new laws will inevitably reduce the ability of its generic suppliers to provide products in competition with those o­n patent.


“Even with ‘liberalised’ compulsory licensing rules, potential generic suppliers will then find it much more difficult to offer to produce medicines at low cost. This will reduce the value of compulsory licensing as a bargaining tool for governments negotiating with suppliers of medicines and will leave prices higher than they otherwise would be. Dealing with this coming situation may require alternate production arrangements; it will certainly require much more than a change in compulsory licensing rules.”


INDUSTRIAL TARIFFS: The other area of major concern that will be discussed in Cancun will be that of industrial tariffs. In Geneva, formulas are being worked out between the US, EU and Canada for steep tariff cuts for the developing world. Earlier proposals by the major powers indicated that the US would like to have tariffs be brought down to zero by 2015 and the EU’s proposal is to have maximum tariffs of o­nly 15 per cent. The latest joint US, EU and Canada plan was sprung o­n developing countries at an informal meeting o­n 12 August, much to the anger of developing country delegations, who fiercely opposed the proposal. The trio had put forward a Swiss formula (that is, bringing all tariffs down to a narrow ‘harmonised’ band) implying that developing countries, which generally have higher tariffs, would have to apply steeper tariff cuts than developed countries. They also called for a line-by-line tariff cut approach (that is, cuts in sensitive products cannot be excluded) as well as a sector for sector approach (that is, harmonization or elimination of tariffs for textiles and apparel, for environmental goods and ‘other sectors to be defined’). If the developed countries get their way in Cancun, the implication is that developing countries’ industrial tariffs would be brought down across the board to very low levels. Tariffs are the o­nly protection most developing countries have against the superior competitive and technological edge of the northern transnational corporations. Slashing tariffs will o­nly cause further deindustrialisation and unemployment.


THE ‘SINGAPORE’ ISSUES -INVESTMENT, COMPETITION, TRANSPARENCY IN GOVERNMENT PROCUREMENT AND TRADE FACILITATION: A critical decision will have to be made in Cancun o­n whether or not to commence negotiations in the areas of investment, competition, transparency in government procurement and trade facilitation. If the US and EU have their way, the agreements in investment and competition will remove the ability of governments to regulate the activity of foreign investors. Eventually, these new agreements would require developing countries to change legislation in order to give foreign companies national treatment, that is the same treatment as local companies. Given the obvious inability of local companies in the South to compete with the transnational giants, any agreement to expand the WTO agenda in the above manner will further exacerbate the inequities of the current trade system.


Some developing country negotiators, attempting to limit the damage, are trying to de-link the four issues and may agree to transparency in government procurement and trade facilitation, but not to investment and competition. More likely, though, all four issues will remain as a package deal demanded of them in exchange for the (non) “solution” to TRIPs and health.


It is argued that “transparency” in government procurement does not mean “market access”. However, it must be noted that the TRIPs agreement began as a clause calling o­n GATT signatories to address the problem of counterfeit goods. In the course of the seven-year negotiations, this seemingly harmless issue turned into a full-fledged and far-reaching agreement. Market access is the thinly veiled aim of the US and EU in these talks. Many developing country governments fear that transparency in government procurement will inevitably open the way for market access in government procurement whereby governments wanting to purchase goods or services would have to give foreign companies equal access to contracts, or presumably be brought before the WTO’s dispute settlement body. This is dangerous since government procurement is often used as a development tool to provide contracts to fledgling domestic companies to help their growth.


Trade facilitation is also seemingly harmless. Which government, after all, would not want their customs facilities to be improved and made more efficient? For the South, the problem here is two-fold if this turns into a full-fledged agreement:


1) Who is going to bear the costs? A country may find that it has to incur billions in order to modernize its customs and port facilities. Should such expenditure be a priority when countries are facing more pressing social and economic problems? 2) Speeding up customs procedures would mean that countries may not be able to uncover fraudulent pricing practices that are not uncommon. This would in turn impact o­n their tariff revenues.


The EC has argued that they would have to “get” the Singapore issues in return for liberalising in agriculture. But the EC is not liberalizing in agriculture, and it will be up to ministers in Cancun to ensure that they do not give up their last bastion of control over their domestic markets in exchange for EC trade commissioner Pascal Lamy’s spurious claims of reform in agriculture (see Kwa, “EU’s CAP ‘Reform’? Let Us Not Be Fooled’, 26 June 2003).




Unless developing countries take the extraordinary step of standing their ground under pressure, the package they will be offered in Cancun is likely to be not o­nly a bad deal but o­ne that will have grave implications for their people. Ambitious targets are being set for liberalisation in industrial tariffs, agriculture, services (a call will be made to improve countries’ offers) and possibly new negotiations in some of the Singapore issues. In return, developing countries will get a less than satisfactory solution in TRIPS and health and some very watered down special and differential treatment clauses that have very little trade value.


Those unfamiliar with the WTO often wonder why developing countries continue to swallow such bitter pills. The main reason is that the WTO tends to make decisions amongst a small select group of about 25 members. Those outside the inner circle will be barred from the most critical meetings during the Ministerial. A deal will be knocked together in Cancun and put before the 146 members. Those stubborn countries daring to resist will be blackmailed, bribed, or threatened. Aid, IMF /World Bank loans will be promised or withdrawn. Market access, particularly any preferential trading arrangement, will be put o­n the line. Complaints and smear campaigns, even through the media as happened to India in Doha, will be launched against any minister, trade diplomat or government daring to step out of line. The severity of such threats for an individual negotiator or minister cannot be underestimated. (See “Behind the Scenes at the WTO: the real world of international trade negotiations,” Fatoumata Jawara and Aileen Kwa, Zed Books, September 2003.)


At the end of the day, the outcome of Cancun and positions taken by developing country ministers will depend o­n their calculation of how best to deal with the conflicting pressures. Will domestic pressures they face from civil society and perhaps even national parliaments, be sufficient to counter the political pressures from the major powers? And a more fundamental question: would ministers, whatever the political pressures, be able to hold to their convictions? For the innumerable vulnerable populations in the South – war is being waged.


A leader the Zapatistas explains this war:


“Globalisation with its free trade agreements, World Trade Organisation, and the Free Trade Area of the Americas, are implements and elements for the extinction of the heritage of each country, its sovereignty and its culture. Facing this war and the threat that globalisation presents worldwide, we can no longer ignore the fact that what is being sought is our humiliation and subjugation.” Comandante Zebedeo, EZLN, Mexico, 9 August, 2003


* Aileen Kwa is a policy analyst with Focus o­n the Global South based in Geneva. She is author of “Power Politics in the WTO” and co-author with Fatoumata Jawara of “Behind the Scenes at the WTO: The Real World of International Trade Negotiations” published by Zed Books. She can be contacted at [email protected].