After Hong Kong: Battle Will Resume January 2006


Tumultuous Week but No Big Decisions

By Martin Khor

World Economy and Development in Brief
December 19, 2005

It was a traumatic week for the people in Hong Kong when thousands of citizen groups held peaceful demonstrations and hundreds of activists and farmers staged protests on the streets as the World Trade Organisation held its Ministerial conference. The WTO obviously attracts lots of passion. But the big decisions were not taken at Hong Kong and the talks will resume in Geneva in January.

It was quite a tumultuous week in Hong Kong last week when the World Trade Organisation held its sixth Ministerial Conference. Being such a controversial organization, the WTO meeting attracted not only thousands of officials and journalists but also more than 7,000 people from non-governmental groups, including farmers and trade unionists.

* Headlines won by protests

The headlines were won not by the Ministers and their rather technical-sounding meeting, but the protests in the streets. Most of the NGO events and demonstrations were peaceful, including several street demonstrations held in a festive atmosphere, and chanting and singing by small groups inside the Conference centre itself. On Saturday, however, thousands of Korean farmers, together with activists from several countries, attempted to break the barriers set up by police near the Conference site, and the resulting clashes and pepper spray led to 50 injured and 900 being arrested.

The passions aroused by the WTO arise from the fear by farmers and unionists, and by citizen groups, that the liberalisation promoted through the organization has led to and will increase the closure of local firms and the loss of livelihoods of farmers. As tariffs go down, imports get cheaper, and they displace local products and jobs.

There is of course the bright side of liberalisation, that exports can also increase and this brings with it more jobs and incomes. However, not all countries have the production capacity and efficiency to take advantage. Also, markets abroad may be blocked by protection by others. There are countries that benefit from it (and some by a lot), while others find their gains are limited or even absent. At the WTO conference, both the fear of losing out to imports and the lure of increasing exports to others' markets were at play.

Undoubtedly the villains of the week were the rich countries whose agricultural sector is highly protected. The developing countries, led by Brazil, were pressing particularly Europe to eliminate their export subsidies by 2010. African cotton producing countries and their producers' organizations were making a good case that the US$4 billion in subsidies in the rich countries to a few thousand cotton farmers, especially in the US, were depressing prices and preventing poor African farmers from selling to other countries.

* A few good points ...

For six days there was a big fight over many aspects of a draft Declaration. The draft contained a few good points, but some negative ones as well.

Firstly, the developed countries agreed to end all export subsidies by 2013, and to begin reducing them substantially before that. It took a great deal of pressure to get the European Union on board.

Secondly, the export subsidies in cotton will be cut off by next year. Cotton exports from least developed countries will enjoy zero duty into developed countries. But these wee offset by the lack of commitment to take immediate action on domestic subsidies, which by far are responsible for most of the problems. The dumping of subsidized cotton will thus continue.

Thirdly, the least developed countries (LDCs) fought hard for binding commitments to allow all their products to enter rich countries' markets free of duties and quotas. The Declaration provides for that, but also for an "escape clause". Those rich countries facing difficulties to do that shall provide duty-free and quota-free market access for 97% (not all) of products from the LDCs by 2008 and then improve on that.

* ... but some negative ones as well

Critics point out that the poor countries do not have the capacity to export most products, while the escape clause allows rich countries to block the import of those products that the poor countries are competitive in. The US is afraid of cheap textiles and clothing from Bangladesh, while Japan fears cheap rice from Cambodia.

The Declaration also marks potential setbacks for developing countries. It requires them to take part in new types of negotiations in the WTO designed by the rich countries to get them to accelerate the opening of various sectors (for example, banking, finance, distribution, telecommunications, energy). Most developing countries welcome foreign investment, but want to be able to regulate the entry and operation of the foreign firms, especially in such key sectors as banking, finance, telecommunications and professions such as law and medicine.

The Conference document also confirms that a type of formula be used to cut tariffs on industrial products, which is likely to hit developing countries hard. The tariff cuts may be so deep that cheaper imports will displace local products. Consumers may benefit, but jobs may be lost as those local firms unable to compete have to close.

The Hong Kong meeting did not deal with the big issues of finalizing the "modalities" (formulae and figures) by which agricultural domestic subsidies and tariffs, as industrial tariffs will be reduced. The battle will resume in January as the WTO reconvenes after the Christmas break. And another Ministerial meeting may be needed within three or four months into the new year.

Meanwhile, researchers will analyse what was and was not decided at Hong Kong. And the farmers' groups that were so determined to show their anger over the rules of the WTO, together with other social movements and the NGOs will also analyse the effects of the decisions the governments took, and ponder over their next moves.

More Information on Social and Economic Policy
More Information on The WTO's Sixth Ministerial Conference
More Information on The World Trade Organization

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