The Gloves are Off
Vol - XLIX No. 25, June 21, 2014 | D Ravi Kanth Web Exclusives
After having got developing and least developed countries to assent to a binding trade facilitation agreement at the 2013 ministerial meeting of the World Trade Organisation in Bali on the understanding that their bread-and-butter issues in agriculture and development would be addressed in the Doha Round negotiations, the US and the European Union do not seem to be in a mood to take things further. The post-Bali narrative indicates that a new agenda that does little to address distortions in the global trading system is about to be foisted on members when the Doha Round resumes.
D Ravi Kanth (email@example.com) is a writer based in Geneva reporting on the multilateral organisations headquartered in Switzerland.
It was a moment of triumph when 159 members of the World Trade Organisation (WTO) concluded an agreement at the ninth ministerial meeting in Bali, Indonesia, six months ago. “After an 18-year drought,” said Roberto Carvalho de Azevedo, the then recently-elected director general of the trade body from Brazil, “Bali proved that the WTO can deliver negotiated outcomes.” A binding agreement on trade facilitation (TF), along with several best endeavour outcomes, provided a glimmer of hope that the paralysed Doha Development Agenda (DDA) negotiations would come back to life.
That the TF agreement is a payment to the United States (US), the European Union (EU) and other exporting countries for returning to the Doha negotiating table is an open secret. The developing and the least-developed countries, which remained divided in the run-up to the Bali meeting, agreed to TF on the assumption that their bread-and-butter issues in agriculture and development would be addressed. The weaker members of the global trading system were promised that they will receive substantial technical and financial assistance to implement ambitious TF commitments for tearing down so-called “red tape” and “bureaucratic” hurdles.
More importantly, it aimed at harmonising customs procedures and rules in the industrialised and developing countries, such as China and Korea. At one go, the new TF agreement will provide market access for companies such as Apple, General Electric, Caterpillar, UPS, Pfizer, Samsung, Sony, Ericsson, Ebay , Hyundai, Huawei, and Lenovo, among others, to multiply their exports to the poorest countries. It is a different issue whether a majority of the people in sub-Saharan Africa or south Asia or other developing countries are endowed with the resources to use these gadgets. It is like a Marie Antoinette paradox of letting the poor consume high-end gadgets when they are impoverished. Several estimates of benefits, ranging from $64 billion to $1 trillion, were bandied about to sell the importance of the TF agreement.
In an attempt to balance what some commentators called the fictitious Bali package, the developing and poor countries were promised several cosmetic best endeavour outcomes in agriculture and development. In agriculture, they include general services (such as land rehabilitation, soil conservation and resource management, drought management and flood control, rural employment programmes), public stockholding for food security purposes, an understanding on tariff rate quota administration, export competition, and some progress in phasing out trade-distorting cotton subsidies (provided largely by the US) in agriculture. The developmental outcomes cover non-binding outcomes on preferential rules of origin for the export of industrial goods by the poorest countries; an operationalisation of waiver on preferential treatment to services and service suppliers in least developed countries (LDCs); duty-free and quota-free market access for LDCs; and a monitoring mechanism for special and differential treatment flexibilities.
Despite the “asymmetrical” and “unequal” Bali package, the developing and least developed countries joined the consensus as they were assured that the unfinished business in the DDA negotiations, particularly in agriculture and other areas, would be taken up on a war footing. “We instruct the Trade Negotiations Committee to prepare within the next 12 months a clearly defined work programme on the remaining Doha Development Agenda,” the Bali Declaration stated. “This will build on the decisions taken at this Ministerial Conference, particularly on agriculture, development and LDC issues, as well as other issues in the Doha mandate that are central to concluding the round.” The developing and least-developed countries were promised that “where legally binding outcomes could not be achieved they will be prioritised.” It meant very clearly that the best endeavour outcomes to developing country issues arrived at in Bali would be converted to binding commitments on a priority basis. This is the compromise that developing countries made at Bali to set the ball rolling and avoid being called spoilsports by the dominant countries in the WTO.
More than 180 days after the conclusion of the Bali meeting, the time has come for a reality check on whether the Bali best endeavour outcomes and the new TF agreement have progressed on an equal footing. Also, whether the speed and the focused attention on implementing the TF roadmap is demonstrated in other areas such as agriculture, particularly cotton subsidies, where the poorest west African countries continue to suffer. What about the progress on the food security text on which India waged a grim battle? Is there any forward movement on the developmental benefits promised to the poorest countries? Are the landmarks of the Doha mandate, which include the 2001 Doha agenda, the July 2004 framework agreement, the 2005 Hong Kong Ministerial Declaration, and the December 2008 draft modalities in agriculture and industrial goods, the basis for formulating the post-Bali work programme to conclude the Doha negotiations? Have the developing and least developed countries, including China, India, Brazil, South Africa and Argentina, closed ranks to put up a common stand in the face of a combined push from the industrialised countries to give short shrift to the 2008 draft texts?
These are some issues on which the emerging narrative from the Centre William Rappard, the WTO headquarters in Geneva, is anything but encouraging. Although there is considerable activity at various levels, the progress so far has been only in one direction -- implementing the TF roadmap, while turning a deaf ear to the issues raised by the developing and poor countries. A constant refrain from the director general is first delivering on TF by implementing the deadlines set out in the Bali agreement. Otherwise, the DDA will soon turn to ashes if members choose to bring any linkage between TF and other Bali issues. African countries are threatened with dire consequences if they create any hurdles in implementing the TF roadmap, which includes drawing up the Protocol of Annexation and notifying the Category A commitments that come into force once the agreement is ratified. Developing country members are told, during closed-door meetings, not to doubt the intentions of the US and its commitment to the Doha negotiations.
The African countries which remain aggrieved since the Bali meeting about the lack of balance in the results have recently adopted a position that they would accept the TF agreement only on a provisional basis. At a meeting of African trade ministers in Addis Ababa in April 2014, they felt the Bali outcomes “were not the most optimal decisions in terms of African interests,” according to the African Trade Union commissioner, Fatima Acyl. “We have to reflect and learn from the lessons of Bali on how we can ensure that our interests and priorities are adequately addressed in the post-Bali negotiations,” she said. The African ministers instructed their negotiators “to formally submit language on the Protocol of Amendment—the legal instrument that will enter the TF Agreement into force at the WTO—to the effect that the Trade Facilitation agreement will be provisionally implemented and in completion of the entire Doha Round of negotiation”.
The African countries have cited paragraph 47 of the Doha Ministerial Declaration for their negotiating position to adopt TF on a provisional basis. That paragraph says,
With the exception of the improvements and clarifications of the Dispute Settlement Understanding, the conduct, conclusion and entry into force of the outcome of the negotiations shall be treated as parts of a single undertaking. However, agreements reached at an early stage may be implemented on a provisional or a definitive basis. Early agreements shall be taken into account in assessing the overall balance of the negotiations.
There is a hue and cry about the African decision as if it has killed the TF agreement. After all, the TF and other issues were plucked out of the Doha agenda after the eighth ministerial meeting (under paragraph 47) on the ground that these were low-hanging fruit ready for consummation. Even though the draft TF text contained more than 800 square brackets in 2012, it was rushed through because of a concerted push by the US and its allies in total disregard to other issues in agriculture and industrial goods.
Since the African countries have adopted a common position seeking provisional agreement on TF, all hell has broken loose at the WTO. “Don’t worry, nobody is going to walk away with your money,” the African countries were told at a retreat in Annecy, France, three months ago.
Ignoring 2008 Modalities
When it comes to agriculture, the dominant theme is how to give short shrift to what is called “Rev 4” or the December 2008 Fourth Revised draft modalities in agriculture as they are not acceptable to the US and the EU. Indeed, the director general’s statements about the Rev 4 text have caused grave doubts as to where he stands on this central issue. “If any of you insists that those [2008 draft modality texts] are cast in stone and unalterable, then you have made a choice; a choice that irreparably condemns our efforts to failure,” Azevedo told members at a trade negotiations committee meeting on 7 April 2014. “We therefore must resume our task of finding the balance and the convergence that would enable progress towards the conclusion of the Round.” This statement from the director general is neither here nor there about how to proceed on drawing up the post-Bali work programme on agriculture.
It is inexplicable how the director general arrived at this position on Rev 4 because in the past he said assiduously that they represented a “delicate balance” and “the basis” for negotiations. “Two general principles have guided Brazil and the G-20’s [Group of Twenty] positions in the substantive discussions on agriculture,” Azevedo wrote with Braz Baracuhy in an article titled “Agriculture -- At the Centre of DDA Negotiations.” (in Reflections from the Frontline: Developing Country Negotiations in the WTO, CUTS, 2011):
The December 2008 draft modalities are the basis for negotiations and represent the end-game in terms of the landing zones of ambition. Any marginal adjustments in the level of ambition of those texts may be assessed only in the context of the overall balance of trade-offs, bearing in mind that agriculture is the engine of the Round....
The draft modalities embody a delicate balance achieved after 10 years of negotiations. This equilibrium cannot be ignored or upset, or we will need readjustments of the entire package with horizontal repercussions. Such adjustments cannot entail additional unilateral concessions from developing countries.
But the US has made up its mind in agriculture and other areas of the Doha negotiations for some time now that it will under no circumstances accept the 2008 texts because of the change in realities in which China, India, and other countries have emerged as major exporters over the last five years. However, Washington wants market access in agriculture, industrial goods, and services in the emerging countries over and above what was decided in the draft 2008 modalities. Sadly, the Cairns Group led by Australia and the EU, which used to be a counterweight to the US in the previous trade negotiations, have joined forces with the US despite their differing trade agendas that fail to correspond to the demands raised by Washington.
Another major development is the sudden disappearance of the G-20 farm coalition led by Brazil in setting the agriculture agenda since last year. After all, it was the G-20 that played a major role after the ignominious Cancun ministerial meeting where trade-distorting subsidies in cotton and other farm products came to centre stage. The conspicuous silence of the G-20 in recent months has left the agriculture negotiating ground wide open to trans-Atlantic trade majors to score goals.
The post-Bali narrative came into the open at a recent retreat convened by Switzerland. In a day-long event held outside Geneva to discuss what each member is willing to accept and what each is willing give, the US set the stage by declaring that the 2008 draft texts were unacceptable because their domestic constituencies did not see much merit in them. The US, then, went on to pound India and China for causing all the problems in agriculture by providing farm subsidies and denying real market access. The EU and other members at the retreat joined the US in declaring that the 2008 texts were irrelevant because of changed realities. Indeed, the negotiating tactic adopted by the big boys in the recent past is one based on naked belligerence, all aimed at the so-called emerging countries such as India, China, South Africa, Brazil, Indonesia, and Argentina, among others.
While India remained largely silent at the retreat without defending its interests, South Africa and China told the big boys how they pocketed all the gains in agriculture by securing a range of flexibilities without any payment. Since the election of Azevedo to the post of director general, Brazil has remained more or less silent on issues on which it once used to strongly articulate a common developing country position. In short, the ground is now set for embarking on a narrative set by the big boys, who have already tasted success at Bali, with active collaboration from the Centre William Rappard.
That narrative has little to do with the evolving Doha mandates from 2001 to 2008. And the salient features of this new narrative include tariff-reduction commitments based on a simple formula in agriculture; turning a blind eye to reforming trade-distorting farm subsidies; a simple formula for tariff cuts with a request-and-offer approach for tariff elimination in some sectors; and pursuing global value chains by liberalising trade in core services in areas such as banking, asset management, insurance, logistics, multi-brand retail, courier services, telecommunications, and information and communication technology. Once the core elements of the TF agreement are stitched by the end of July, a new agenda will be foisted in September when members return from their summer break.
It will ensure that the Doha Round is successfully completed by shrinking the DDA to vanishing point and declaring a grand victory. It will be a round that does absolutely nothing to the grave distortions in the global trading system, yet will claim cosmetic results. Hey presto, you have done something, but in reality nothing. An emperor without clothes will once again rule the roost at the WTO.