Global Policy Forum

By Joseph Yu

A grand global fight looms in Hong Kong in December—a fight between the rich corporations and governments of the First World, and the vast number of people in the Third World worst hit by the W.T.O.

With two failed ministerials out of five, the World Trade Organization (WTO) faces a crisis as it prepares for its Sixth Ministerial Conference on December 13-18 in Hong Kong. The US and European Union (EU) need to close an agreement in December to open new markets for their agricultural and industrial overproduction and stave off their intensifying economic crisis.

The Ministerials, held every two years, are the WTO's highest decision-making body. Their purpose is to enable trade ministers to make decisions on how to move forward on any of the multilateral trade agreements. But ministerials in Cancun and Seattle have ended in deadlock as developed and underdeveloped countries have failed to reach agreement on vital issues.

A third ministerial collapse would present rich countries with the almost impossible task of salvaging the WTO. Hence, a grand global fight looms in Hong Kong between First and Third World countries, and between transnational corporations (TNCs) and the vast number of people worst hit by the WTO.

The ‘Doha Development Agenda'

Set to be discussed in Hong Kong is the "Doha Development Agenda" which was launched at the Fourth Ministerial at Qatar in 2001. The Fifth Ministerial held in Cancun in 2003 was supposed to have concluded the current round of negotiations under the Agenda but it collapsed as WTO members failed to come to an agreement on key negotiating issues.

The Doha program includes the mandated review of the Agreement on Trade-Related Intellectual Property Rights (TRIPS), the renegotiation of the Agreement on Agriculture (AoA) and the General Agreement on Trade in Services (GATS), as well as negotiations on non-agricultural market access (NAMA) and the four Singapore Issues (investment, competition policy, government procurement and trade facilitation).

The completion of the Doha Agenda is being promoted by the WTO and its supporters as necessary to enable the multilateral trading system to work for the poorest countries. But past experience has shown that the WTO's major agreements have merely served to strengthen the monopoly power of the world's largest corporations, many of which are based in the US.

Intellectual Property

One notorious example of how the WTO upholds corporate power is the TRIPS agreement, which corporations are using to deny poor countries access to low-cost generic versions of patented medicines. Although TRIPS allows compulsory licensing and parallel importing in the name of promoting public welfare, these have been challenged before the trade body by the big drug companies.

For example, South Africa imports cheap AIDS drugs from India, which produces generic versions of such medicines for a fraction of what is charged elsewhere. The US pharmaceutical industry is threatening to challenge this practice before the WTO. If successful, millions of sick people in poor countries may be unable to afford much needed medicines.

Further, since intellectual property as defined by TRIPS allows plant varieties to be patented, the agreement undermines the food security of poor countries by exacerbating the already limited access to food and seed by poor farmers. Under the TRIPS, local farmers must pay annual fees to use seeds patented by corporations, even if such seed varieties were the result of cross-breeding by farmers' ancestors. Farmers who plant for their own and their family's consumption can hardly afford to pay licensing fees and this would effectively deny them the right to use these seeds.

Agriculture

Among the most contentious negotiations in the Hong Kong ministerial will be those regarding agriculture. A deadlock in talks over agriculture liberalization was one of the major reasons for the collapse of the Cancun Ministerial. Under the AoA, border protections other than set tariffs are prohibited, and even these tariffs have to be reduced progressively. The AoA also requires WTO member-countries to allow minimum market access for each individual agricultural product. Rules were also created under the agreement for domestic support and the reduction of export subsidies.

The restructuring of global agriculture under the AoA is premised on the theory of comparative advantage, which says that free market competition will result in each country specializing in a product that it can produce efficiently and at a competitive cost. In a globalized marketplace then, each country will be able to export the product it specializes in and import what it needs from other suppliers.

However, a decade after the multilateral trade body was founded, agricultural subsidies in First World countries have remained high while elimination of quantitative restrictions and tariff cuts around the world have facilitated a dramatic increase in dumping of agricultural commodities in Third World markets. Hence, the WTO regime has proven to be a mechanism for developed countries to open Third World markets to their imports, to the benefit of giant agribusiness corporations.

Majority of Third World countries are basically subsistence agrarian economies. A large number of the populace in these countries relies on agriculture as their major source of food and livelihood. These farming families are threatened by the influx of cheap agricultural imports brought about by liberalization. A study conducted by the Institute for Agriculture and Trade Policy reported that the US has been dumping five major agricultural commodities in the world market: corn, wheat, soybeans, cotton and rice.

Another study estimates that underdeveloped countries lose over $40 billion of net agricultural exports and $24 billion agricultural and agro-industrial income annually because of subsidies and protectionism by rich nations. In Asia, underdeveloped countries lose some $6.6 billion from agriculture as a result of developed countries' protection of their farm sectors.

This has driven millions of poor subsistence farmers off their lands, while small agricultural producers fall into bankruptcy in the face of competition from dumped products. Thus, liberalization leads towards concentration of land in the hands of a landowning elite, the marginalization of small farmers, growing peasant landlessness and the indigenous peoples' loss of control over their ancestral lands.

Services

The growth of the global services sector presents a lucrative opportunity for transnational corporations (TNCs): for instance, world expenditures on water now exceed $1 trillion annually; on education, over $2 trillion; and on health care, over $3.5 trillion. From 1990 to 2000, commercial services exports, monopolized by TNCs, grew seven percent. In 2004, the value of global exports of commercial services reached $2.1 trillion, a 16% increase from the previous year.

Hence, it should not be surprising that rich countries like the US and EU are aiming to further open up the services sector of Third World countries through the GATS agreement. GATS is the first and only set of multilateral rules governing international trade in services. Its scope is such that it covers all services and applies most favored nation (MFN) treatment to these.

This has raised concerns that the reach of the GATS could extend even to vital public services such as education and health, leading to their commercialization. Commercialization means that user fees will be raised to "cost-recovery" levels, putting these services out of reach of the poor.

Locally, this trend can already be seen in the privatization of water services in Metro Manila. When private concessionaires Maynilad and Manila Water took over the operation of services from the state-owned Metropolitan Waterworks and Sewerage System (MWSS) in 1997, basic tariffs were at P4.96 and P2.32, respectively. By 2004, rates had grown to P16.18 and P10.43, or increases of 226% and 350% respectively.

NAMA

The reduction of tariffs on industrial goods has actually been part of the original purpose of the General Agreement on Tariffs and Trade (GATT), the multilateral trade agreement that eventually gave birth to the WTO. However, it was during the Fourth Ministerial Conference in 2001 that WTO members launched multilateral trade negotiations to expand liberalization on industrial products. These negotiations are known as the non-agricultural market access or NAMA.

However, it is clear that industrialized countries will be the biggest winners if tariffs on industrial goods were reduced or eliminated since they are among the largest traders in manufactured goods. In 2002, the EU and the US jointly accounted for more than half of world exports and imports of manufactures.

First World TNCs are also among the most active in lobbying heavily for the elimination of tariffs in manufactured goods. As a United Nations report on the NAMA talks in the WTO points out, "the most obvious objective of governments in these negotiations is to create improved market access opportunities for their exporters."

But the reality is that many Third World industries remain at the simple processing/assembly stage. They are simple processors of raw materials or subcontractors of foreign corporations who assemble semi-processed inputs imported from other TNC subsidiaries. Exposing these nascent industries to an onslaught of finished imported products resulting from liberalization would kill them or force them deeper into dependence on foreign corporate interests. It should also be noted that the scope of NAMA also extends to fish and fish products, thus also threatening to affect the livelihood of fisherfolk in poor countries.

Singapore Issues

The Singapore Issues refer to four working groups set up during the WTO Ministerial Conference of 1996 in Singapore, which consist of investment protection, competition policy, transparency in government procurement and trade facilitation. Most developing countries were unconvinced of the necessity of negotiating multilateral rules on these issues, which they see as being of primary interest to developed countries.

On investments, for example, the EU is pushing for the inclusion in the WTO agreements of new trade rules that would provide foreign investors new rights to enter countries more easily and operate more freely. On competition policy, the EU is also advocating a new agreement that would restrict domestic laws or practices in developing countries that favor local firms, on the ground that they are inconsistent with free competition.

On government procurement, the US wants an agreement to liberalize procurement to give their companies the right to have a large share of the lucrative business of providing supplies to and winning contracts from the public sector in developing countries. On trade facilitation, the US and EU are demanding the removal of other hinderances to trade such as bureaucratic processes and red tape.

Avoiding "Failure"

With both developed and developing countries still widely divergent in their views, it seems clear that the Hong Kong ministerial may once again end in deadlock. Thus, the WTO is scrambling to try and save Hong Kong from being termed a "failure". At a "super Green Room" meeting held early November attended by Ministers, and/or officials and Ambassadors of 28 delegations, participants significantly scaled down their expectations of the outcome of the Hong Kong ministerial. This scaling back of goals represents a setback in the timetable for completing the negotiations by end-2006. In September, WTO Director-General Pascal Lamy had set the target for two-thirds of the Doha round should be completed by Hong Kong.

This was generally understood to mean that full modalities (negotiating frameworks including approaches, formulae and numbers) for agriculture and NAMA would be agreed upon, and clear progress attained in other areas such as services, special and differential treatment for developing countries, implementation issues, trade facilitation and intellectual property. With Hong Kong expected to miss this goal, there is now expectation that another ministerial would likely be held in early 2006 to finish what was unable to be completed in December.

Unrest over the WTO

It is clear that trade liberalization has not benefited the world's poorest people, and in fact, has even driven many of them deeper into poverty. This is why there is growing widespread unrest against the WTO. The multilateral trade body has already seen two dramatic upheavals in Seattle and Cancun, with the strong possibility of a third this December in Hong Kong. These breakdowns represent real victories for the people's movements that have mobilized against WTO-mandated trade liberalization to assert their countries' rights to economic sovereignty and genuine development.

People's movements have succeeded in influencing public opinion against liberalization under the WTO by exposing the skewed nature of the trade negotiations, which blatantly favor the rich countries. They have also helped strengthen the opposition of Third World governments to being railroaded into making a deal, contributing to the ministerials' breakdowns.

But a third collapse in Hong Kong would not represent a decisive people's victory against corporate-led globalization. Even if trade talks broke down, the corporations would still maintain their immense economic power and their stranglehold over the world economy. Only constant vigilance and a continued struggle by people's groups would reverse the spread of neoliberal globalization and uphold the economic sovereignty of the world's developing countries.

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