WTO’ Sixth Ministerial Conference (Hong-Kong, 13th to 18th of December): Issues at Stake and Objectives.

1. General Reminders on the WTO and on the Previous Rounds


The issues at stake at Hong-Kong’s Conference (from December 13 to 18) are, apart from agricultural subsidies, global growth, eradication of poverty and WTO reform.

But before going any further on these subjects, a few reminders seem necessary.

The World Trade Organization (“WTO”) was established in 1995 as a result of the Uruguay Round of multilateral trade negotiations (1986-1994). It is an international organization that sets global rules of trade between nations. The core of the WTO system, referred to as the multilateral trading system, are the WTO agreements which lay down the legal ground rules for international trade as well as the market-opening commitments taken up by its Members (1). On December 11th, 149 countries were full members of the WTO, with Saudi-Arabia becoming a full member at this precise date.

The WTO's procedure for resolving trade quarrels under the Dispute Settlement Understanding is vital for the enforcement of the rules and therefore to ensure that trade flows smoothly. A dispute arises when a member State believes another member State is violating an agreement or a commitment that it has made in the WTO. Ultimate responsibility for settling disputes also lies with member States, through the Dispute Settlement Body (2).

The WTO’s objective is to liberalize international trade, arguing that it would inject billions of dollars in the world economy and lift millions of people out of poverty (3).

WTO Members have engaged in a broad round of multilateral trade negotiations, called “the Doha Development Agenda”, since the 4th Ministerial Conference that took place in Doha, Qatar, in November 2001. The round of negotiations, called “Development Round”, stays within the general pattern of United Nations’ Millennium Development Goals (“MDGs”), meaning the elimination of poverty and the economic development of Developing Countries (“DCs”) in the first place but more specifically the development of Least Developed Countries (“LDCs”).

When the Doha Conference aimed at defining the subjects on which negotiations were to take place, the Cancun Conference (Mexico, November 2003) was the first example of a multilateral conference in which developed countries faced an organized opposition from developing countries. Not only had developing countries gained weight individually, but many of them joined their forces in a group called G20 to protect a common agricultural position – an alliance that allowed them to better defend their interests.

For a majority of observers, the Cancun Conference failed to reach any substantial agreement. It was considered, at the beginning, as a mid-term step of the negotiation Round, during which an agreement was to be reached on agricultural and non agricultural products. Nevertheless, the summit did not conclude on any agreement, since Developing Countries preferred having no agreement at all rather than what would be a bad agreement in their point of view.

In May 2004, negotiations got back on track with a series of propositions from the European Union (“EU”). These propositions raised intense debates that ended with the July 2004 Framework Agreement. This Agreement sets the agenda and the parameters for the negotiations on agriculture, industrial tariffs, services, “Trade facilitation” and development issues. One will notice that this agreement was only a step forward in the negotiations process. Indeed, as the Hong-Kong conference is approaching, Member States were called to work out concrete figures on each topic mentioned above. And what is currently considered as a “deadlock” was born from the difference between the various figures.


2. The Agricultural Issue


2.1 General Issues

Agriculture has great importance for a majority of countries. Indeed, many are quite sensitive to food sovereignty, to the cultural specificities of agricultural products and to the agricultural labour market. In other respects, the economy of certain countries depends essentially on agriculture, and the WTO considers that a breakthrough on this issue would allow agriculture-dependent countries to grow wealthier.

It would be absurd to reduce the agricultural issue to an opposition between North and South, because many southern States are engaged in direct or indirect commercial disputes. We can mention in particular the banana quarrel: the EU signed a special agreement with the ACP group (4), giving its members preferences on their products. Nevertheless, this agreement was denounced by Latin-American countries that are also great producers of banana. If tariffs were to be harmonised between the two groups of exporters, we would witness a massive arrival of Latin-American bananas on the European market that would penalise the ACP group, since their economies are much more dependent on this product.

More generally, in every country there are forces that are favourable to agricultural liberalization, and forces that are much more reluctant. Thus the agreement must represent a synthesis acceptable by all, taking into account the specificities of every country so as to call this “Development Round” a success.


2.2 Position of WTO Members

There are three main issues related to agricultural negotiations: market access, export subsidies and production subsidies. On the one hand, there is a group of countries (5) that would like to liberalize agriculture rapidly, thus eliminating all forms of subsidies. These are mainly net exporters of agricultural products that have comparative advantages in this sector. On the other hand, there is a group of countries (6) that do not wish to open their market too much and right away, because it would have negative repercussions on their labour market. Finally, a third group of countries (7) would like to generalize the “Special and Differential Treatment” system (“SDT”).

On October 28th, 2005, the EU submitted a final offer on agriculture to its partners (8). This offer, considered as serious by the WTO Secretary General and some Developing Countries, was rejected by the United States (“US”) and the Cairns Group for being insufficient. In addition, some EU Members also rejected it because they believed that too much was offered. Therefore, the EU made new concessions at the end of November: first on Cotton (9), then on Development Issues (10) and finally on sugar (11). Since Hong-Kong seems to be heading towards a “deadlock”, the EU does not want to take the whole blame for a hypothetical failure on development issues.


3. The Other Negotiation Areas


As things are at the end of November, it seems likely that no substantial agreement will be met at Hong-Kong. The EU won’t make any new offers on agriculture without a breakthrough on services and non industrials products. The US for its part is ready to make concessions on agriculture only if the Europeans do so. As for the G20, it won’t make any propositions on services or industrial goods without a more generous offer on agriculture. Finally, the G90 (12) isn’t ready to make any concessions without a reinforcement of the SDT system.


3.1 Non Agricultural Products

The goal of the liberalization of non agricultural products is to harmonize tariffs between Member States and to reduce other trade barriers (legal, quotas, technical). In its last offer the EU conditioned its offer on agriculture to a diminution of tariffs on services and non agricultural products. The G90 States, for their part, call for an “intervention and flexibility space” that would allow them to freely elaborate their industrial policies and to define their national objectives regarding development. More generally, these countries wish that the liberalization of non agricultural products does not contribute to their impoverishment due to trade inequalities: this justifies the “preference mechanisms”, among others. Finally, the G90 expects LDCs to be exempted from any liberalization.


3.2 Services

This sector is by far the most important for Developed Countries. Enjoying comfortable comparative advantages in this sector, these countries are pushing for liberalization of services (13). But due to constraints linked to their capacities, the Member States of the G90 cannot afford any move in this sector for now, because their companies would not be able to compete with Developed Countries. This feeling is shared by most Developing Countries.


3.3 “Trade Facilitation”

“Trade Facilitation” is one of the four “Singapore Issues” (14) on which Developing Countries accepted to negotiate, showing a compromise spirit after the EU proposal in May 2004. “Trade Facilitation” would imply substantial ameliorations of custom procedures and infrastructure development such as the construction of efficient and operative seaports. This implies of course an additional cost for Developing Countries.

The other “Singapore Issues” were removed from the “Doha Agenda”.


3.4 The Development Issue

One of Doha’s objectives is to allow Developing Countries to grow wealthier via commerce. This is why, concerning the Development issue, G90 Member States submitted a series of demands that seem necessary, in their opinion, to reach these development goals: generalization of SDT system; technical assistance; capacity reinforcement; technology transfer; and they also suggested that their needs be looked into individually, not as a whole.

Oxfam reminds us that the demands of Africa, the poorest continent, have not yet been taken into account for the coming Hong-Kong Conference (15), especially on the Cotton issue. Up until now, this round of negotiations sounds more like a commercial round than a development round. And it seems likely that LDCs will have to pay an additional price for their development, in particular concessions on services and non agricultural products.


4. The WTO Reform


A whole series of unfavourable agreements to Developing Countries were signed since the creation of the WTO. And until the Cancun Conference, Developing Countries have had many difficulties in organizing themselves to defend a common position.

Moreover, the WTO has often been reproached with a lack of transparency. This refers to separate meetings of some Member States, especially the G5 meetings (US, EU, Japan, Brazil, India). The decision mechanisms chosen during these meetings are not always very clear to other Member States.

The WTO is an organisation that has been granted enormous power. As the world is becoming more globalized, its decision and actions have far reaching effects on the lives of billions of people. Sooner or later, it will have to take into account other criteria in its negotiating system to strengthen its legitimacy as a globalization regulator, such as environmental standards, social rights or sustainable development.

After a decade of experimentation, the road to the WTO reform, although if it is considered necessary by many experts and Member States, is still far away, especially given the fact that the issues at stake seem so contradictory.


5. Conclusions and Perspectives


What can be expected from Hong-Kong’s Conference? As things are going right now, most observers believe the Conference is heading towards a “deadlock”. Indeed, all negotiations have been subordinated to the clash on agriculture, on which Members are ready to make concessions, but not at all costs. Being aware of this situation, WTO Secretary General Pascal Lamy suggested lowering the expectations for Hong-Kong: instead of reaching the 2/3 of the round as planned, he asked Member States to expect less from the coming Conference, but he also stressed the necessity of keeping what had been achieved. That’s why he proposed that another Conference be organized at the beginning of 2006 (16).

Another WTO setback could be perceived as a humiliation by many Developing Countries and stir up their discontent towards Developed Countries. Indeed, one can ask how these mixed messages will be received. On the one hand, Developed Countries have committed themselves to help Developing Countries through development policies and debt relief. But as soon as Commerce is involved, the message changes, and Developed Countries are less willing to make any concession that would go against their national interests. Many concerns were also raised about the inadequacy between development policies and trade policies. These contradictions can’t be perpetuated without creating great risks for both sides, and we can only hope that Hong-Kong closes on something else than a collective consent of impotence.


(note elaborated by Christophe Peguillan)


For more information, refer to GERM’s folder on WTO


Endnotes:
(1) http://europa.eu.int/comm/trade/issues/newround/index_en.htm
(2) http://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm
(3) Read Pascal Lamy’s Allocution, WTO Secretary General.
(4) The ACP group is composed of many small countries from Africa, the Caribbean and the Pacific. These countries’ economies are very dependent on agricultural exports.
(5) These countries are the US, the G20 and the Cairns Group (net-exporters of agricultural products for the most part).
Member States of the G20: Argentina, South Africa, Bolivia, Brazil, Chile, China, Cuba, Egypt, Guatemala, India, Indonesia, Mexico, Nigeria, Pakistan, Paraguay, Philippines, Tanzania, Thailand, Venezuela and Zimbabwe.
Member States of the Cairns Group: South Africa, Argentina, Australia, Bolivia, Brazil, Canada, Chile, Columbia, Costa Rica, Guatemala, Indonesia, Malaysia, New Zealand, Paraguay, Philippines, Thailand and Uruguay.
(6) These countries are the EU, the G10 and the G33 (net-importers of agricultural products for the most part).
Member States of the G10: South Korea, Island, Israel, Japan, Liechtenstein, Maurice, Norway, Switzerland and Taiwan.
Member States of the G33: Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia, Green-Cap, Comoros, Djibouti, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Guinea equatorial, Haiti, Salomon Island, Kiribati, Lesotho, Liberia, Madagascar, Malawi, Maldives, Mali, Mauritania, Mozambique, Myanmar, Nepal, Niger, Uganda, Central African Republic, Democratic Republic of Congo, Laos, Tanzania, Rwanda, Samoa, Sao Tome-et-Principe, Senegal, Sierra Leone, Somalia, Sudan, Chad, Togo, Tuvalu, Vanuatu, Yemen, Zambia.
(7) The WTO agreements contain special provisions which give developing countries special rights. These special provisions include, for example, longer periods of time for the implementation of agreements and commitments, or measures to increase trading opportunities for developing countries.
http://www.fao.org/DOCREP/003/X7353E/X7353E00.HTM
(8) For more details on the European offer:
http://europa.eu.int/comm/trade/issues/newround/doha_da/pr281005_en.htm
(9) For more details on the European position on Cotton:
http://europa.eu.int/rapid/pressReleasesAction.do?reference=IP/05/1443&format=HTML&aged=0&language=EN&guiLanguage=en
http://www.wto.org/english/news_e/news05_e/cotton_18nov05_e.htm
(10) For more details on the Development issue: http://europa.eu.int/rapid/pressReleasesAction.do?reference=IP/05/1448&format=HTML&aged=0&language=EN&guiLanguage=en
(11) For more details on the European reform on sugar:
http://europa.eu.int/rapid/pressReleasesAction.do?reference=IP/05/1473&format=HTML&aged=0&language=EN&guiLanguage=en
(12) The G90 is composed by the Africa-Caribbean-Pacific group (« ACP »), the African Union (« AU ») and the Least Developed Countries (« LCDs »). Despite their diversity, the G90 countries proved a great maturity in accepting to make concessions that would display the solidarity and unity of the group, and by adopting a common position in the negotiations.
(13) Developing Countries Urged To Open Financial Markets Through WTO , November 2005, US Department of State
(14) The “Singapore Issues” are i) investments, ii) transparency in public procurement, iii) competition, iv) Trade facilitation. For more information consult previous GERM notes on WTO:
5ème Conférence ministérielle de l’OMC à Cancún, Mexique : enjeux et objectifs
Objectifs et enjeux de la quatrième conférence ministérielle de l'OMC à Doha, Qatar
(15) “Africa and the Doha Round: Fighting to Keep Development Alive” , November 2005, Oxfam.
(16) Pascal Lamy’s Allocution , November 2005.