From Cancun to Hong Kong: WTO Update


By Maria Pia Hernandez*

Center of Concern
March 2005

The Sixth WTO Ministerial Conference will be held in Hong Kong, China, from December 13-18, 2005. It is critically important that it put into action the development promises of the 2001 Doha Ministerial to make the multilateral trading system work for the poorest countries. Ministerials, which take place every two years, are the highest level of decision-making at the WTO. Their purpose is to enable ministers to make decisions on how to move forward on all matters under any of the multilateral trade agreements. The history of WTO Ministerials, as well as the WTO itself, has been characterized by an uneasy relationship among governments, civil society and the press. Of the nine Ministerials since 1988, four have broken down, the most recent example being the 2003 Cancun Ministerial.

The Cancun Story

The Cancun Ministerial collapsed due to the profound divisions between developed and developing countries over key negotiating issues such as the Singapore Issues (investment, competition, trade facilitation and transparency), Agriculture and the Sectoral Initiative on Cotton. The Singapore issues were a priority for the EU and were pushed ahead until the final days of the Cancun Ministerial, when they were finally dropped. Developing countries had consistently opposed their inclusion in the negotiating agenda, arguing that the subject and scope of these issues is unclear and that they lack the technical capacity to implement them.

In agriculture, developing countries viewed the EU-U.S. position as put forward in their pre-Cancun proposal paper completely inadequate because it failed to address their calls for elimination of export subsidies and substantial reductions in domestic support and tariffs in the North. These measures undercut local production in poor countries, suppress world prices and prevent efficient exporters in poorer countries from selling their produce. Developing countries reacted to EU-U.S. proposal by forming a coalition called the "G-20", a grouping including Brazil, India, South Africa and China with significant agrarian populations and large growing markets of interest to the North.

The tension increased even more with the presentation of the "Sectoral Initiative on Cotton by a group of West African countries (Benin, Burkina Faso, Chad and Mali)" that described the damage caused to them by cotton subsidies in richer countries, particularly in the U.S. The proposal called for the subsidies to be eliminated and for compensation to be paid to the four countries. Despite this initiative's meeting with considerable sympathy, the draft Ministerial text that eventually appeared offered them no real concessions, but reflected the U.S. position that affected countries should diversify their production away from cotton. All these elements led to the breakdown of the Cancun Ministerial with governments blaming other governments and/or civil society groups for this outcome. Developed countries accused developing countries of using Cancun for political grandstanding and some of them suggested they would move towards more bilateral and regional negotiations. Others called for a reform of the decision-making processes at the WTO. Developing countries have suggested that developed countries were simply diverting attention from some of their own actions, such as their unsustainable agriculture policies in regard to subsidies, which probably would have led to the failure of the Ministerial anyway.

After Cancun

In July 2004, WTO members in Geneva agreed on the so-called July Framework, which put the Doha negotiations back on track by establishing detailed directions to move the negotiations forward in core areas such as Services, Agriculture and Non-Agricultural Market Access (NAMA). Developing these modalities for the negotiations is a highly technical and intense process of formal and informal meetings both at the WTO and in the capitals. While this technical phase is integral to the process of negotiations, the decisions and outcomes will certainly be characterized more by the inevitable political processes used among members to achieve their particular goals. With the July Framework Agreement, members outlined the negotiating road that should be followed towards Hong Kong, which basically reaffirms the commitment of all members to give support to the development objectives and programs of work adopted in the Doha Ministerial. According to these objectives, it is opportune to ask if the July Framework Agreement has facilitated the understanding and narrowed the gap existing between developing and developed countries on core negotiating issues. The answer to this query is certainly not easy or definitive; it depends on internal and international factors that are to be determined through the current process of negotiations.

After a careful reading of the Agricultural Annex in the July Framework Agreement, one could say that its language is vague and procedures are imprecise on issues that required an active engagement and greater political commitment from the developed countries. The key issues are the difficult and contentious questions on all forms of export subsidies and domestic support systems, the formula for tariff reductions and the inappropriate use of food aid to cover dumping practices in global food markets, particularly in developing countries.

The language of the Agriculture Annex is also unclear in regard to achieving effective and integral Special and Differential Treatment for developing countries. A concrete example of this is the language established in paragraphs 41 and 42 of the Annex on Special Products (SPs) and a Special Safeguard Mechanism (SSM). These are the two proposals put forward by developing countries in response to the threat of surges of low-priced food imports that are devastating for poor farmers. The provisions were initially dismissed by developed countries, but were ultimately included; however, the language is ambiguous. The two provisions are:

  • The definition of Special Products (SPs) by developing countries would permit them to designate certain crops based on principles of food security, livelihood and rural development. Developing countries would have the opportunity to maintain and protect these crops by using appropriate tariffs.
  • The designation of a Special Safeguard Mechanism would allow developing countries to increase tariffs temporarily to deal with short-term fluctuations in the price or volume of imports in order to reduce the impact on domestic farmers.

The Road To Hong Kong

The technical and political process following the July Framework has showed little movement in Geneva or at international level. Furthermore, deep divergences among developed and developing members on key negotiating issues continue. They are the same divergences that shaped the Cancun outcome: on one side developed countries maintaining their agriculture policies, particularly in regard to export subsidies and domestic support; and on the other side developing countries struggling for better access to developed markets and the effective implementation of Special and Differential Treatment provisions in all areas of negotiations.

Furthermore, the current multilateral scenario has also been weakened by the proliferation of negotiations of bilateral and regional trade agreements. In most cases, these agreements have proven to be detrimental to the interest of developing countries because they are negotiated under unequal conditions among trade partners and their outcome often brings more obligations than benefits for the most vulnerable in the developing world. The complexity of the existing context induces few optimistic predictions for Hong Kong. But the negotiations towards Hong Kong and the Hong Kong Ministerial itself are crucial opportunities to ease the tensions among developing and developed countries--and demonstrate that trade could be used as an important means to achieve sustainable development and as an instrument for achieving the Millennium Development Goals agreed by the international community.

The history of the international trade negotiations has frequently demonstrated the difficulties encountered by developing countries at national and global levels when committing to and implementing processes of trade liberalization in several critical sectors. They are faced with economical, technical and political restrictions. If they are to avoid repeating history, developing countries need to prepare themselves better this time and organize their work and priorities in a more consistent manner. They need to implement a bottom-up approach that reflects their real internal needs and circumstances. They can achieve this by ensuring the integration and observance of core developmental and negotiating concepts that should be used as basis for defining international agreements and strategies to achieve positive results.

Developed countries, should also respect special needs and priorities of developing countries so that the world trading system could be used in such a way that developing countries are given both strong incentives and better opportunities to use trade integration more actively for development. After all, the trade agenda of the North cannot be sustainable in the long term if the existing gaps between developed and developing countries persistently increase.

About the Author: Maria Pia Hernandez is the Coordinator of the Geneva Office of the International Gender and Trade Network (IGTN).

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