WTO talks and lessons for small nations
Ferdaus Ara Begum | Monday, 18 August 2008
DEADLOCK at the ministerial meetings of the World Trade Organisation (WTO) is not a new phenomenon, but the way it collapsed after about nine days of hard but fruitless talks was a capricious play of the big powers where interest of the weak and small nations remained unattended. In this long discourse, the Director General (DG) of the WTO tried to reconcile but failed miserably. Out of a to-do list of 20 topics, 18 had seen positive coverage, but the gaps could not be narrowed on the 19th -- the Special Safeguard Mechanism (SSM) issue for the developing countries.
As the press reports go on the SSM, there were several proposals, but the Group of 33 (G-33) was very strict about ensuring farmers' interests not being hurt by import surges of subsidised agricultural import from the developed countries. They wanted the highest SSM remedies to be triggered by import volume increases of 10 per cent and more, with safeguard duties capped at 30 per cent above bound levels. At one stage, when the US was proposing the rate of product rise at 40 per cent for the duties to be imposed India argued the level was too high to protect its farmers. The latest proposals recover the threshold and permit a developing nation to apply the measures to any farm inputs if the products are shipped in quantities or at prices that cause " demonstrable harm to a country's food security, livelihood security and related development rules". No parameter was mentioned for measuring the demonstrable harm. But the deal was not successful because while India accepted the revised proposal by the WTO DG, Pascal Lamy on the SSM, the US refused to do that and the Doha Development Agenda (DDA) negotiation was stalled.
The collapse has increased uncertainty, insecurity and apprehensions at a time when food security was one of the main issues of present concern, mostly among the WTO net-food importing members. This may make food security issues more complex and costlier.
Quite understandably, it will impact the least developed countries (LDCs) who were willing to take some benefits out of opening of markets for agricultural products. Bound-rate of some of African LDCs are relatively lower than some Asian LDCs whose concerns on agricultural issues were stronger but remained unheard.
Bangladesh's bound tariff for agricultural products was set at 200 per cent except 13 products; any sort of import surge can be off-set by increasing, up to that level so in that respect Bangladesh is not that much of a loser. Gain for Bangladesh may be somewhat positive on the ground that it will take some more days to liberalise agriculture. Market opening will not be able to create so much benefits for us as exports of agricultural products are yet to be prominent in our export basket. On the other hand, the price of food products will, in all likelihood, increase as an eventual result of openness. While it will help those who enjoy competitiveness in agriculture, food importing countries will be the losers.
The negotiation of Non-agricultural Market Access (NAMA) and agriculture are interlinked. Some have competitiveness in agriculture, some have in non-agricultural products. Though it apparently seems to be that negotiation in agriculture is the main reason for the Collapse of the Dhoha Development Agenda (DDA), in actual practice it could be different. The NAMA could be the main reason behind the deadlock. Tariff-reduction commitment for all developing countries was one of the serious concerns; India is one of such countries. In the recent negotiation, G-33 played a great role while in the past we had seen G-20 went in the front role. Among G-20, besides India, China and in the past Brazil played a vital role. This time Brazil was on a different side. Argentina and Brazil have good foundation for agriculture. Their interest for openness of agriculture is more prominent. In the mean time, Brazil has started lobbying for the soonest restarting of the stalled negotiation.
It is no just that in course of discussions and series of ongoing negotiations, developing countries are being asked to give too much concession on the entry of manufactured goods into its markets from the highly industrialised countries. India has been able to play their cards very intelligently to draw the attention of the global players on the plea that about 700 millions of its peasants will be unfed if the situation of safeguard is not been changed. Spokespersons of the respective countries played a vital role in drifting the negotiation in their favour. The role played by the Indian Minister has given a signal that the developing countries have come of age. Bangladesh like India has millions of farmers. We also need to guard ourselves against reaching any compromising trade deals with the highly developed partners.
It is apparent that because of the tussle of rich countries, weak and small countries are losers. The Caribbean nations were in a mood to protect their bananas, rum and sugar and also rice from being further eroded by tariff subsidisation. They were trying to protect their main products from the cheap imports. The sudden end of negotiations would not bring any solutions for them. Lengthy debate, bypassing the small and allowing them only to increase the number of proponents, has definitely reduced thrusts on multilateral negotiations and gradually, countries will be inclined to go for regional and bilateral free trade deals on a larger scale. Bangladesh is the case. In a recent meeting, Bangladesh has expressed its concerns for bilateral long-standing free trade agreement (FTA) with some SAARC countries who were requesting for long for such agreements.
Let us take the case of African cotton growing countries such as Mali, Benin, Burkina Faso and Chad. They were hoping for a reduction in Chinese and American subsidies for cotton. It has given the signal that recrimination among the big players could endanger small member countries and that will largely depend on the whims of the big players to change direction of negotiation issues. Bangladesh is also an example; it could not play its cards appropriately. Duty-free, quota-free (DFQF) market access was an agreed issue in Hong Kong, but continuous delay on this issue has been increasing the burden and making the issue more and more complex. Thus, distance has been increasing towards the achievable targets. In the NAMA draft modalities circulated on July 10, some countries were affected disproportionately because of preference-granting markets. Pakistan and Sri Lanka were included in the list. Bangladesh raised this issue in the regional forum of the SAARC. The proposal for including Bangladesh and Nepal was agreed. All these issues ultimately will need to be channelled through multilateral process.
Burkina Faso, a small country, has again failed to raise its issue on cotton which is its main industry. It could not place the interest of its farmers well. The USA is also a cotton producer and its farmers are highly subsidised. The collapse will help them to continue for some more days to avail themselves of the benefits of the subsidies. The WTO as a democratic organisation with a mandate to bring benefits by opening markets could not produce better results. Doha-the first round of the WTO-which aimed to make transaction easier and cheaper between both sides of global trade divided made the process uncertain.
Countries like Bangladesh will now be interested in going for more bilateral and regional agreements. Though free trade cannot be a substitute for multilateral trading system (MTS), it should be strategically and commercially meaningful in a country-specific context. The interest of the partner countries should be analysed very carefully in ways followed by the WTO and the experiences of MTS can be used to read the nature and minds of the countries.
Appropriate blending of political and business priorities of bilateral issues of regional countries is very difficult to be matched and draw benefits out of it. Lengthy discussions, as carried out in the WTO, could bring some good results. Learning from the recent negotiation could be a vital exercise for the small and weak countries towards increasing investment in export diversification.
Considering the complementarities of the regional countries, a regional value chain for producing high-value added products, involving regional resources and comparative advantages for export to third countries, can be a meaningful substitute. Once there was an understanding that without available basic raw materials and other inputs, export is not possible. The ready-made garments (RMG) sector of Bangladesh has been able to create an example that this is not actually the case. We are now exporting about $10b of RMG products without producing their basic raw materials, particularly cotton. Supply shortage, quality issues, standards etc., are some other important identified problems; regional strengths-sharing can be planned in a win-win manner for addressing these limitations.
Bangladesh, though a late starter, has tried to make electronic transaction and has taken an attempt to provide self-clearance licence to the concerned, upon fulfilling certain criteria. Transport and communication facilities are one of the major drawbacks for increasing trade. There were several studies done under the South Asia Free Trade Arrangement (SAFTA) to address such issues.
Implementation of these projects can bring some benefits for increasing regional exports. In order to get benefits from global trade, we should be more aggressive to take active part in regional, bilateral and multilateral negotiations, to be capable of following the global process.
The writer is a former Executive Director, Saarc Chamber of Commerce & Industry or SCCI
As the press reports go on the SSM, there were several proposals, but the Group of 33 (G-33) was very strict about ensuring farmers' interests not being hurt by import surges of subsidised agricultural import from the developed countries. They wanted the highest SSM remedies to be triggered by import volume increases of 10 per cent and more, with safeguard duties capped at 30 per cent above bound levels. At one stage, when the US was proposing the rate of product rise at 40 per cent for the duties to be imposed India argued the level was too high to protect its farmers. The latest proposals recover the threshold and permit a developing nation to apply the measures to any farm inputs if the products are shipped in quantities or at prices that cause " demonstrable harm to a country's food security, livelihood security and related development rules". No parameter was mentioned for measuring the demonstrable harm. But the deal was not successful because while India accepted the revised proposal by the WTO DG, Pascal Lamy on the SSM, the US refused to do that and the Doha Development Agenda (DDA) negotiation was stalled.
The collapse has increased uncertainty, insecurity and apprehensions at a time when food security was one of the main issues of present concern, mostly among the WTO net-food importing members. This may make food security issues more complex and costlier.
Quite understandably, it will impact the least developed countries (LDCs) who were willing to take some benefits out of opening of markets for agricultural products. Bound-rate of some of African LDCs are relatively lower than some Asian LDCs whose concerns on agricultural issues were stronger but remained unheard.
Bangladesh's bound tariff for agricultural products was set at 200 per cent except 13 products; any sort of import surge can be off-set by increasing, up to that level so in that respect Bangladesh is not that much of a loser. Gain for Bangladesh may be somewhat positive on the ground that it will take some more days to liberalise agriculture. Market opening will not be able to create so much benefits for us as exports of agricultural products are yet to be prominent in our export basket. On the other hand, the price of food products will, in all likelihood, increase as an eventual result of openness. While it will help those who enjoy competitiveness in agriculture, food importing countries will be the losers.
The negotiation of Non-agricultural Market Access (NAMA) and agriculture are interlinked. Some have competitiveness in agriculture, some have in non-agricultural products. Though it apparently seems to be that negotiation in agriculture is the main reason for the Collapse of the Dhoha Development Agenda (DDA), in actual practice it could be different. The NAMA could be the main reason behind the deadlock. Tariff-reduction commitment for all developing countries was one of the serious concerns; India is one of such countries. In the recent negotiation, G-33 played a great role while in the past we had seen G-20 went in the front role. Among G-20, besides India, China and in the past Brazil played a vital role. This time Brazil was on a different side. Argentina and Brazil have good foundation for agriculture. Their interest for openness of agriculture is more prominent. In the mean time, Brazil has started lobbying for the soonest restarting of the stalled negotiation.
It is no just that in course of discussions and series of ongoing negotiations, developing countries are being asked to give too much concession on the entry of manufactured goods into its markets from the highly industrialised countries. India has been able to play their cards very intelligently to draw the attention of the global players on the plea that about 700 millions of its peasants will be unfed if the situation of safeguard is not been changed. Spokespersons of the respective countries played a vital role in drifting the negotiation in their favour. The role played by the Indian Minister has given a signal that the developing countries have come of age. Bangladesh like India has millions of farmers. We also need to guard ourselves against reaching any compromising trade deals with the highly developed partners.
It is apparent that because of the tussle of rich countries, weak and small countries are losers. The Caribbean nations were in a mood to protect their bananas, rum and sugar and also rice from being further eroded by tariff subsidisation. They were trying to protect their main products from the cheap imports. The sudden end of negotiations would not bring any solutions for them. Lengthy debate, bypassing the small and allowing them only to increase the number of proponents, has definitely reduced thrusts on multilateral negotiations and gradually, countries will be inclined to go for regional and bilateral free trade deals on a larger scale. Bangladesh is the case. In a recent meeting, Bangladesh has expressed its concerns for bilateral long-standing free trade agreement (FTA) with some SAARC countries who were requesting for long for such agreements.
Let us take the case of African cotton growing countries such as Mali, Benin, Burkina Faso and Chad. They were hoping for a reduction in Chinese and American subsidies for cotton. It has given the signal that recrimination among the big players could endanger small member countries and that will largely depend on the whims of the big players to change direction of negotiation issues. Bangladesh is also an example; it could not play its cards appropriately. Duty-free, quota-free (DFQF) market access was an agreed issue in Hong Kong, but continuous delay on this issue has been increasing the burden and making the issue more and more complex. Thus, distance has been increasing towards the achievable targets. In the NAMA draft modalities circulated on July 10, some countries were affected disproportionately because of preference-granting markets. Pakistan and Sri Lanka were included in the list. Bangladesh raised this issue in the regional forum of the SAARC. The proposal for including Bangladesh and Nepal was agreed. All these issues ultimately will need to be channelled through multilateral process.
Burkina Faso, a small country, has again failed to raise its issue on cotton which is its main industry. It could not place the interest of its farmers well. The USA is also a cotton producer and its farmers are highly subsidised. The collapse will help them to continue for some more days to avail themselves of the benefits of the subsidies. The WTO as a democratic organisation with a mandate to bring benefits by opening markets could not produce better results. Doha-the first round of the WTO-which aimed to make transaction easier and cheaper between both sides of global trade divided made the process uncertain.
Countries like Bangladesh will now be interested in going for more bilateral and regional agreements. Though free trade cannot be a substitute for multilateral trading system (MTS), it should be strategically and commercially meaningful in a country-specific context. The interest of the partner countries should be analysed very carefully in ways followed by the WTO and the experiences of MTS can be used to read the nature and minds of the countries.
Appropriate blending of political and business priorities of bilateral issues of regional countries is very difficult to be matched and draw benefits out of it. Lengthy discussions, as carried out in the WTO, could bring some good results. Learning from the recent negotiation could be a vital exercise for the small and weak countries towards increasing investment in export diversification.
Considering the complementarities of the regional countries, a regional value chain for producing high-value added products, involving regional resources and comparative advantages for export to third countries, can be a meaningful substitute. Once there was an understanding that without available basic raw materials and other inputs, export is not possible. The ready-made garments (RMG) sector of Bangladesh has been able to create an example that this is not actually the case. We are now exporting about $10b of RMG products without producing their basic raw materials, particularly cotton. Supply shortage, quality issues, standards etc., are some other important identified problems; regional strengths-sharing can be planned in a win-win manner for addressing these limitations.
Bangladesh, though a late starter, has tried to make electronic transaction and has taken an attempt to provide self-clearance licence to the concerned, upon fulfilling certain criteria. Transport and communication facilities are one of the major drawbacks for increasing trade. There were several studies done under the South Asia Free Trade Arrangement (SAFTA) to address such issues.
Implementation of these projects can bring some benefits for increasing regional exports. In order to get benefits from global trade, we should be more aggressive to take active part in regional, bilateral and multilateral negotiations, to be capable of following the global process.
The writer is a former Executive Director, Saarc Chamber of Commerce & Industry or SCCI