Martin Khor
The WTO's Doha negotiations were launched at the WTO Ministerial meeting in Doha in 2001. Many developing countries complained about the untransparent processes at that meeting, including extending the meeting by one day through a late announcement, and the holding of an all-night "Green Room" meeting of only a few Ministers, to draft the final declaration.
At that time the developing countries did not want to launch a new Round, as they were still trying to digest the Uruguay Round and its implementation. This is why the negotiations were formally called the Doha Work Programme, and informally dubbed the Doha Development Agenda (to make developing countries feel more comfortable).
During the Uruguay Round's conclusion, it was widely understood that there would be no more comprehensive Rounds as the WTO was to be a permanent negotiating body. The "built-in agenda" of the Uruguay Round was that new agriculture negotiations would be held as what was agreed in the Agriculture Agreement was not adequate to get developed countries to really cut their subsidies and high tariffs.
The developing countries (especially in a like-minded group) launched a pro-development programme from 1996 to 2001, to have the WTO consider the re-balancing of what they considered the imbalanced and inequitable outcome of the Uruguay Round and the new WTO rules.
This led to more than 100 proposals by developing countries on Implementation Issues to deal with the problems faced in implementing the WTO rules: firstly, the non realization of benefits to developing countries that they had anticipated from the Uruguay Round (especially in agriculture where the developed countries' subsidies remained high) and secondly the problems they faced from their new obligations in intellectual property, in liberalising their agriculture and in curbs to their subsidies.
At Doha, the developed countries agreed to having a new mandate for agriculture (as already mandated in the Uruguay Round) but they also insisted on including new issues into WTO rules (known as the Singapore issues: investment, competition and government procurement), and a new round of industrial tariff cuts (known as NAMA). In effect, the developed countries were bargaining that for doing what they had already agreed to (agriculture), the developing countries had to take on many new and heavy commitments.
Most developing countries fought against the Singapore issues but in the end it was agreed that working groups be created to prepare for the launching of negotiations (leading to new treaties) on the three new issues. Several African countries were also against NAMA, arguing that tariff cuts (under the IMF-World Bank conditionalities) had already been de-industrialising their continent, but NAMA was still included with some safeguards about "less than full reciprocity".
In exchange, the "implementation issues" as well as proposals to strengthen special and differential treatment (SDT) clauses in WTO rules were also agreed to at Doha. These were the direct development issues, meant to re-balance the inequitable WTO rules towards development concerns.
The Doha declaration also included in its paragraph 2 the pledge to put the developing countries' "needs and interests at the heart of the Work Programme."
The development aspects of this Doha Agenda were understood to be at least (i) a rebalancing of the WTO rules through amendments of the rules proposed in Implementation Issues and the strengthening of existing SDT provisions; (2) removing agricultural trade distortions by phasing out export subsidies and substantially reducing trade-distorting domestic support. (3) strong special and differential treatment elements in the new market access negotiations in agriculture, NAMA and services.
Trade experts such as B.L. Das and C. Raghavan already warned at Doha's launching that the outcome would be profoundly anti-development, despite its development nickname, especially if new treaties emerged in the Singapore issues.
The Cancun Ministerial meeting in 2003 failed because of flawed process. A majority of the developing countries declared they wanted the three Singapore issues out of the Doha programme. In July 2004, it was agreed that they be removed from the Doha negotiating agenda.
The Doha talks meandered through the July 2004 meetings (in which the basic framework for agriculture and NAMA modalities was set) and the Hong Kong Ministerial of 2005. By then most of the direct development issues of Implementation and strengthening SDT had been downgraded and almost totally marginalized. However, there was recognition of the need for duty free quota free market access for LDCs in developed countries, but only for 97% of tariff lines.
Meanwhile, the focus shifted away from development and increasingly to market access issues, and even then market access for developed countries to developing countries' markets.
Through twists and turns, including the WTO multilateral working group meetings, the G6 (US, EU, Japan, Australia, Brazil, India) meetings, the failed July 2006 and July 2008 "mini-Ministerial meetings" held at WTO, the developed countries kept pressing to open up the markets of developing countries in agriculture, industrial tariffs and services, while giving little away and in fact increasing the policy space for themselves (especially in greater flexibilities in agriculture).
They succeeded to put their proposals in the centre of the present dominant draft texts. In December 2008, the Chairs of the agriculture and NAMA groups issued their latest reports on modalities of how tariffs and subsidies would be reduced. The results of these two, especially taken together, are grossly imbalanced against developing countries.
In agriculture, the major developed countries (US and EU) would have to cut their maximum level of "overall trade distorting support" (OTDS) but the maximum levels are still above what the current subsidies being used or are planned to be used, thus there are no actual or real cuts. Moreover, they have the loophole of the so-called non trade-distorting subsidies, commonly known as the Green Box subsidies, which they are allowed to use without limit and which have weak disciplines. Many studies show that in fact the Green Box subsidies are also trade-distorting and a large part of their agriculture would not be viable if they did not use these subsidies. The major developed countries have moved and continue to move from OTDS to Green Box subsidies, and thus they can be comfortable with the December 2008 draft. They also have significant flexibilities in tariff reductions, due to the designation of "sensitive products" which are allowed more lenient treatment.
Meanwhile developing countries also have to cut their agriculture tariffs according to a formula, and on average by a maximum of 36%. LDCs are exempted from any tariff reduction, while "small, vulnerable economies" are allowed more lenient treatment.
Developing countries who have defensive interests (led by the G33) have also been fighting to establish two "special and differential treatment" elements: "special products" (SPs) and a special safeguard mechanism (SSM). They are concerned that further tariff cuts would worsen import surges and displace their domestic farmers. These countries proposed that developing countries can designate some products as "special" that would have no or very low tariff reductions. There is debate on the number of SPs to be allowed, and their tariff reduction. The Chair's December draft proposed that 12% of tariff lines can be designated as SPs, that 5% of tariff lines can be allowed zero tariff reduction, while on average the tariff cut for SPs would be up to 11%. This is still not agreed to.
On SSM, the G33 proposed that developing countries be able to use a special safeguard against import surges. The principle of a SSM has been agreed but members with an export interest proposed many restrictions on when the SSM can be used and how much extra duty can be imposed. The G33 continues to insist the SSM must be simple to use and effective. The fear of G33 countries is that the export-oriented countries may allow the SSM only if it is practically of no or little use to the defensive developing countries. The deadlock on this issue is one of the reasons why the July 2008 meeting failed, and remains a key sticking point.
On the talks on industrial tariffs or NAMA (Non-Agricultural Market Access) the major proposals on the table have been least development-friendly. A new system is being created that will remove or reduce the present development flexibilities in the General Agreement on Tariffs and Trade (GATT). If the new NAMA system is adopted, it could well result in the worsening of the deindustrialisation of developing countries.
First, Members will have to bind all or almost all their industrial tariffs (at present each country can choose what they want to bind). Second, unbound tariffs will have to be bound at low levels, according to a formula put forward (at present, countries can choose at what rate they bind their tariffs). .
Third, for the first time, developing countries will be subjected to a formula to reduce tariffs. This is a "Swiss formula" which cuts higher tariffs more deeply than lower tariffs. Since most developing countries have quite high industrial tariffs, their tariffs will be cut more steeply than the tariffs of developed countries. But this goes against the principle of "less than full reciprocity" that is mandated in the Doha Declaration.
Fourth, the depth of cuts also depends on the coefficients agreed to. The December 2008 draft fixes a coefficient of 8 for developed countries, which would mean that the average bound tariff of the three major developed countries would be reduced by about 28% (i.e. EU by 33%, US by 29%, Japan by 22%).
The text fixes coefficients 20, 22 and 25 for developing countries (with different flexibilities for each coefficient). A choice of the middle coefficient 22 would reduce the average tariff of developing countries like India, Brazil, Indonesia, and Venezuela by about 60%. Thus, the developing countries affected by this formula would have far greater tariff reduction rates than the developed countries.
Their bound tariffs would average 11-12% and only a few tariffs would be above 15%. This low level will not be able to support industrial development. During their development stage, the developed countries industrialised under the cover of high tariffs, and this is now sought to be denied to developing countries.
Fifth, the cuts are to be done on a line-by-line basis. This means that every product will be cut by this drastic formula (except for a few that is given "flexibility"). In the Uruguay Round, developing countries had to cut their tariffs by an overall target of 30%, but they could choose at which rate to cut which product's tariffs, so long as the overall average came to 30%. This flexibility is to be removed.
Finally, there is a "sectoral approach" in which tariffs will be eliminated in certain sectors. This is supposed to be on a voluntary basis, but developing countries such as China, India and Brazil have been pressured by developed countries to eliminate almost all tariffs in key sectors, such as chemicals, industrial machinery and electronics.
LDCs are exempted from NAMA tariff cuts, and a more lenient treatment (a tiered formula rather than a Swiss formula) is given to small economies. This opened the road to the drastic tariff cuts demanded of the other developing countries. However the poorer countries are by no means allowed to "escape" as they are caught by a worse fate outside the WTO. In the Economic Partnership Agreements between the EU and ACP countries, the EU is demanding that the ACP countries (most of which are LDCs or small economies), cut 80% of all tariffs to zero.
The developing countries are facing three major imbalances: the imbalance within agriculture, the imbalance within NAMA and the imbalance between agriculture and NAMA.
The development component has vanished in agriculture and NAMA and ironically the special treatment is mainly enjoyed by developed countries instead. Also, the developed countries were supposed to make major concessions in agriculture, in exchange for some concessions from developing countries in NAMA. However in agriculture there are few commitments from developed countries, while the developing countries have to make drastic tariff cuts in NAMA.
This is why the equations in the Doha talks have been often dubbed an "unequal exchange" weighted against developing countries.
Yet the developed countries, in particular the United States is not able to adopt the December 2008 drafts. High-ranking trade officials from developing countries are aghast that the US does not seem to confirm that it stands by the cap on agricultural domestic subsidies that it had agreed to (US$14.5 billion for overall trade-distorting domestic support).
And the US in bilateral talks and in recent mini-Ministerials seemed to be demanding more from major developing countries (especially in sectoral elimination of NAMA tariffs) as well as remaining against an effective SSM.
Reports from Washington carry the message that the US is demanding to see big gains in increased exports to developing countries, even more than what it would already get from the imbalanced proposals in the December 2008 drafts.
The developing countries that are pressed the most are not prepared to agree to what they perceive as even more outrageous demands, on top of what they have already consented to.
This is at the heart of the Doha impasse. And the deadlock may continue until one side or the other gives way.
