The WTO’s changing architecture   January 2006

The head of the Brazilian delegation Celso Amorim and Indian Commerce Minister Kamal Nath, the two spokespersons of the developing countries at the WTO ministerial summit in Hong Kong, were never tired of stressing the growing power of the developing countries. Outlining the changing contours of international trade, they thundered, “The architecture of the international trade negotiations has changed forever and no unilateral decisions can be imposed upon the developing and the vulnerable economies.” But this bravado was not enough to convince the activists, who continue to see the G-20 as a front for the rich countries to pursue their economic agenda. Truth, as usual, lies between these two extreme points of view.

In 2001, the developing countries, for the first time, managed to push the ‘development agenda’ as an integral part of any multilateral trading arrangement. They succeeded in launching a new round of trade talks, and unlike the Uruguay Round, which took nearly eight years to conclude and led to the creation of GATT’s successor, WTO, the Doha Round was supposed to be a quick affair empowering the developing and the Least Developed Countries. The Doha round was also supposed to establish a regime of ‘fair trade’ as opposed to ‘free trade’ by factoring various elements such as vulnerabilities, sustainability and commitment to total eradication of poverty.

At Hong Kong, the member-states agreed to a draft text which does not offer anything concrete. All the contentious issues, listed under ‘implementation’ and ‘modalities’ in WTO-speak, have been referred for further discussions. The sole achievement of the Hong Kong ministerial meeting was securing a commitment from the European Union to end its trade-distorting farm subsidies by the end of 2013.

Meek victims?
The slow progress at the WTO and the reluctance of the rich countries to give the development agenda a fair chance might create an impression that the developing countries and the LDCs are meek victims of the machinations of the rich countries. A closer look reveals a different picture. The developing countries and the LDCs have evolved a two-pronged approach: one, keep fighting for their due rights and tariffs within the WTO; two, create various safety nets in the form of bilateral and regional trading arrangements regardless of the WTO outcomes. 

The first signs of assertion were seen at Seattle. That ministerial meet collapsed as the US, Japan and the EU were insisting on addressing the so-called “Singapore Issues”, with the developing countries rejecting the idea in toto. The violent protests outside the conference venue were just an excuse for the failure, the real reason being the willingness of the developing and the LDCs to slug it out with the powerful nations. Then, when the Doha ministerial started, the rich countries became vocal against a new round, insisting that the ministerial concentrate on the implementation aspects. However, they were defeated and the first ever round under WTO, the Doha Development Agenda, was launched. This is, however, the ninth round since the establishment of GATT in 1947.

One of the major successes at Doha was forcing the developed countries to reopen the debate on the TRIPS agreement. The rich countries, egged by the powerful pharmaceuticals lobby, were maintaining that the TRIPS was a done deal, and should not be revisited. Their insistence was on making intellectual property protections more stringent, but the poor countries managed to reduce restrictions on the production and use of generic drugs.

At Cancun, the developing countries upped the ante and asked the US and the EU to go back to the drawing board and come back with improved offers on agricultural subsidies and trade barriers. Said Kamal Nath: “The rich countries were used to telling us to cut down subsidies, and to avoid trade-distorting mechanisms. But they did not expect us to turn the tables on them. That was the defining moment, when the architecture of the global economy changed forever.” Finally, at Hong Kong, the developing countries were able to force the EU to come up with a date to end its trade-distorting farm subsidies.

Simultaneously, the developing countries and the LDCs have been feverishly working on bilateral and regional trade agreements to protect their domestic industry, to ensure their food security, to enhance trade with least freight loss, and to maximise the advantages of geographical proximity. There is a qualitative difference in scope, intent and implications of the two types of Free Trade Agreements (FTAs): South-South FTAs are aimed to both expand and deepen regional and sub-regional integration in order to increase the bargaining power in the multilateral arena; North-South FTAs, on the other hand, follow the trend called “WTO-Plus”.

For instance, India has accelerated the sub-regional integration process beyond SAPTA (preferential trade area for Southasia) by negotiating FTAs with four of its five immediate neighbours: Bhutan, Nepal, Sri Lanka and Bangladesh (the latter is still to be firmed-up as there are some areas of wide difference). New Delhi has entered into an  FTA with the ASEAN. Meanwhile, India is also in the process of negotiations/implementation of the following FTAs: the India-Singapore CECA; Bangladesh-Bhutan-India-Nepal Growth Quadrangle; the Indian Ocean Rim’s IOARC; and India-China Economic Cooperation; India-Brazil-South Africa Initiative (IBSA). All this, apart from pushing for a pan-Asian economic cooperation initiative known as Asian Economic Community (AEC).

The larger picture, therefore, is not as gloomy as some activists would like us to believe. Nor is it as rosy as what Celso Amorim and Kamal Nath claim. For the rich countries are yet to spell out the finer details of their commitments, and something could always go awry during the ‘modalities discussion’ slated for early 2006.

(greyed portion)
The politics of G-4, G-20, G-7, G-33, G-77, G-90

The first thing that strikes any observer about WTO negotiations is the proliferation of alliances. As of now there are seven major groupings – the G-4, G-20, G-7 plus (or G-8), G-10, G-77, G-90, G-33. There are some countries that have membership in more than three groups and many enjoy the status of special invitee in the other groups. It is important to note what these groups stand for and who their constituents are.

The smallest but, perhaps, most articulate group is called the G-4. They are the four cotton cultivation dependant African Countries – Chad, Burkina Faso, Mali and Benin. This group threatened to walk out of the Hong Kong conference if their major concerns were not addressed seriously and quickly. All four are also part of the G-90.

The G-20 is a group of larger developing countries, including Argentina, Brazil, China, India, Malaysia and Pakistan, which together account for 60 percent of the world’s population. It began life as the G-15 before the Cancun Ministerial Meeting in 2003. Including more than 20 members, it is now called the ‘G-20 plus’. This group has emerged as the main interlocutor between rich and the least-developed countries. 

The G-8 represents the eight leading industrialised countries – Canada, France, Germany, Italy, Japan, Russia, the United Kingdom and the United States. The G-10 is another club of wealthy countries, but those that are net food importers. They include Japan, Switzerland and Norway. Meanwhile, the G-77 was set-up in 1964 as a large alliance of developing countries, which has now expanded to 130 members.

The G-90 comprises African, Caribbean and Pacific Countries, called the ACP countries, as well as the least developed countries from all over. The G-33 includes Indonesia, Philippines and a number of ACP countries as well as India and Brazil from the G-20. This group focuses on securing the designation of effective Special Products and  Special Safeguard Mechanisms for the developing countries in order to protect their small farmers and their rural livelihood.

A S Panneerselvan is a journalist from Chennai, presently Executive Director of Panos South Asia.