Global Policy Forum

By Kevin Watkins

Last November, trade ministers from Europe and the United States experienced a rare consensus. In Doha, Qatar, they solemnly pledged to make the current bout of World Trade Organisation negotiations a "development round".

The development of poor countries? Try again. This is a trade round geared towards the development of rich country self-interest and corporate profit - and it will reinforce a pattern of globalisation that is perpetuating mass poverty and extreme inequality.

Beneath the rhetoric about poverty reduction, trade policy in rich countries is driven by old-fashioned pork barrel politics. Protectionist lobbies and agribusiness subsidy grabbers want developing country exports kept out, and assorted corporate interests want the WTO used to prise open markets and expand investor rights. The result is the pursuit of a global trade regime that institutionalises closed markets in rich countries, coupled with rapid liberalisation in developing countries.

Developing countries exporting to the industrialised world today face trade barriers four times higher than those applied by rich countries to each other. These barriers reduce their export earnings by $100bn annually. Apart from reinforcing poverty today, foreign exchange losses on this scale undermine the ability of poor countries to import the new technologies needed to raise growth and productivity.

The poorest developing countries see this WTO round as an opportunity to address long-standing grievances over textiles and agriculture, which account for 70% of their exports. They are demanding improvements in market access and an end to the subsidised dumping of agricultural goods. I hope they are not holding their breath.

Average tariffs on imports of textiles and garments from poor countries into industrialised countries are 15-20%, compared with 3% for industrial goods. This helps to explain why Bangladesh, one of the world's poorest countries, pays the US $314m a year in import taxes - about the same as France, the world's fifth richest economy. Textile exports are further constrained by an elaborate system of quotas introduced on a "temporary" basis 30 years ago.

In principle, industrialised countries have agreed to phase out these quotas by 2005. In practice, both Europe and the US are way off track. More than half of the quotas should have been removed by now, but the EU has withdrawn only a third and America a fifth. Following lobbying by textile magnates from South Carolina, the Bush administration is backtracking on its market-opening commitment, signalling its intention to retain quotas and high tariffs.

Even the folly of textiles policy pales into insignificance against the collective lunacy of European and American farm policies. Agricultural subsidies run at $1bn a day, six times annual aid flows. The vast surpluses that result are dumped on world markets, driving down prices. Developing country exporters lose market share and foreign exchange, and smallholder farmers have their livelihoods destroyed by cheap imports.

The "free trading" Bush administration has dashed any hopes that the WTO talks will change this. Pandering to lobby groups, it has adopted a farm bill that will increase spending on agriculture by 80%, or $8bn a year. More than three-quarters of the benefits will go to the richest farmers and agribusiness companies. The costs will be borne by a wider constituency, including cotton farmers in west Africa, rice farmers in Vietnam and maize producers in the Philippines, who must adjust to the surge of cheap US exports.

Few political leaders can match George Bush in talking tough on free trade. But, confronted by powerful protectionist interests, this is an administration that is all cowboy hat and no bullocks. Not that the EU is much better. When it offered last year to drop tariffs on goods from the world's poorest countries, partial exemptions were arranged for sugar. Mozambique loses an estimated $100m as a result.

Only in their demands on poor countries do rich ones behave like free traders, using international agencies as a battering ram for market entry. Through their control over IMF-World Bank loans, they have imposed rapid import liberalisation on Africa, where 17 countries are now more open than either the EU or the US. In the WTO, the transatlantic economic superpowers are seeking a prohibition on national policies allowing temporary protection of infant industries.

Such approaches are unjustified. The most successful developing countries, notably in east Asia, have liberalised slowly and in a sequenced way, lowering trade barriers as productivity rises. They have refused to swallow the medicine that rich countries so enthusiastically prescribe for developing countries.

Nowhere are the redneck liberalising instincts of northern governments more in evidence than in the WTO negotiations on services. Guided by Barclays Bank, American Express and other corporate interests, the EU has tabled what amounts to a blueprint for "big bang" deregulation, seeking to open up everything from banking and insurance to water and sanitation. The implications for financial stability and public welfare have not even been considered.

Corporate self-interest is also paramount in the WTO intellectual property agreement. Northern-based companies account for 90% of world patents. More stringent protection for those patents will raise the cost of technology imports for poor countries, stifling innovation and undermining their efforts to close the technology gap at the heart of global inequalities.

Europe and the US developed their economies by pursuing policies that are being outlawed in developing countries. Ask any EU or US trade negotiator and he or she will tell you that times have changed. But some things never change - such as the infinite capacity of the rich and powerful for hypocrisy.

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