Global Policy Forum

By Yanuar Nugroho

The next crucial trade talks will take place in Cancun, Mexico, in September. This will be the fifth Ministerial Conference of the World Trade Organization (WTO), the most important conference of the WTO in recent years.

The conference, following the previous meeting in Doha, Qatar, in 2001, becomes crucial as developing countries find themselves under pressure -- if not threatened -- by the proposal for a new round, particularly in agriculture, industrial tariffs, services (or GATS -- General Agreements on Trade in Services) and what is called the Singapore Issues (investment, competition policy, transparency, government procurement). What actually matters?

The WTO meeting in Doha ended in international disagreement about whether a new round of trade negotiations was to be launched. The disagreement concerned the start of a new round of negotiations. Doha laid the ground for strong disapproval from the developing countries. But now the U.S. always refers to a new round in all its trade issues.

Why a new round?

The developed, or "rich", countries badly need a new round as their economies have been hit hard by recession. They are looking for markets and thus propose that developing countries open up all sectors of their economies, regardless of the suffering, poverty or reductions in quality of life that this may cause.

It seems that if the developing countries do not speak out for their interests, Cancun will only work in favor of the developed countries.

Founded in 1995, the WTO quickly grew into a very powerful global body. In 1996, a joint statement from the World Bank, WTO, and IMF at the WTO Ministerial meeting in Singapore underlined that the three institutions' most pressing task was to bring about coherence in their policies in order to create a framework of international economic governance to assure global prosperity (WTO, 2003).

Yet, apart from this rhetoric, what makes the WTO important?

While George Soros says that the importance of the WTO is that it is the "only global institution to which the United States was willing to subordinate its national laws," some leading media stamp the WTO as the jewel in the crown of neo-liberal global governance.

But the genius of the WTO is that it sets up a "rules-based" system of world trade that both powerful and powerless, as well as rich and poor economies submit themselves to.

And what are the rules? They are (1) Trade-Related Investment Measures, or TRIMs, (2) Trade-Related Intellectual Property Rights, or TRIPs, (3) Agreements on Agriculture, or AoA, and (4) General Agreements on Trade in Services, or GATS.

They work this way: Since the working of capital in terms of the revolutionary industrial progress has proven profitable, TRIMs was created mainly to secure investment in industries and business, whereas TRIPs was established to protect the advantage of the inventor without regard to public access to the product.

And, at a time when the services industry was creating bigger profits day by day, GATS was established to liberalize the trade of services so that it works in the interests of the rich -- and AoA follows the GATS logic in agricultural products.

These rules, moreover, systematically "lock in" countries which have submitted to them. And this "lock-in" mechanism usually works for the benefit of the rich and powerful countries.

The overall architecture of this system global economics sometimes works -- if not being engineered -- in unimaginable ways.

USAID, for example, has paid over $15.8 million over the past three years to "help" developing countries to comply with the AoA. Its agriculture-related aid is not aimed at enhancing food security and food sovereignty. Instead, it is concerned with the opening up of markets for the agricultural products of developed countries (SEATINI News, July 2003).

Another example is trade liberalization and tariff reduction, which have produced an uneven (and, of course, unfair) playing field in agriculture much to the disadvantage of local farmers, while, by contrast, promoting big business in agriculture.

The governments of the North, moreover, heavily subsidize their agriculture for food security reasons and also for political reasons, while the governments of the South are not allowed to do so.

As for non-agricultural products, developed countries have pushed proposals that practically coerce the developing countries to reduce their tariffs. While the U.S. proposes zero tariffs by 2015 and 6 percent by 2010, the European proposal advocates a larger percentage reduction for high tariffs.

In short, these proposals are basically calling for large tariff cuts from the developing countries. In fact, these powerless countries with weak and vulnerable industrial bases should not have to assume the obligations for tariff reductions, but rather should have the policy freedom and flexibility to decide which sector and at what rate of reduction their commitments are to be.

These examples provide strong reasons why the proposals of the rich countries are inappropriate and therefore should not be accepted by developing countries -- and this is precisely why Cancun becomes very important.

The developing countries like Indonesia do not have to feel forced to take decisions in those areas in which they are not ready. Why? Because the "free-market" advocated by the WTO means in practice that the rich are free to squeeze the economic life out of the poor. Is this the "free market" we all want? Of course not. But, if our negotiators do nothing in Cancun, we will surrender our souls to them.

Cancun is a battle arena where the interests of the most vulnerable should be fought for.

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