Global Policy Forum

By Kevin Watkins

Northern governments launched a brave new world of international trade rhetoric last November when they promised to make the current round of multilateral trade negotiations a ``development round'' aimed at strengthening the links between trade and poverty reduction. As trade ministers from more than 140 countries prepare to mark the first anniversary of the World Trade Organisation ministerial meeting in Doha, Qatar in Sydney today and tomorrow, it is time to ask whether pleasant words have been translated into meaningful action.

The answer to this question matters for two reasons. First, unfair trade relations are at the heart of the extreme inequalities that divide rich and poor countries, underpinning a system of globalisation that perpetuates mass poverty in the midst of plenty. Second, failure to deliver on the commitments made at Doha will destroy the already threadbare credibility of the WTO itself, jeopardising the survival of a rules-based system.

Early signs are not encouraging. The European Union and the United States have spent much of the past year backtracking at world record pace on the commitments made at Doha, making a mockery of their commitment to a ``development round''.

Whatever their differences at the WTO, both economic superpowers continue to share in common a truly impressive capacity for hypocrisy and double standards in their trade policies towards developing countries _ and nowhere more so than in agriculture. The Bush administration preaches free trade better than most, especially when offering advice to developing countries. But under the 2002 Farm Act it has increased subsidies by around 10%, to $20 billion a year.

These subsidies are devastating poor countries. For example, American cotton subsidies, currently running at $4 billion a year, have lowered world prices by 25%. Exporters in West Africa, where over 10 million families depend on cotton production, are losing some $200 million annually as a result. Countries such as Burkina Faso and Mali lose far more because of US trade policies than they receive in aid and debt relief.

Not that Europe is any better. The sordid deal struck between France and Germany at last month's EU summit puts reform of the Common Agricultural Policy on the backburner until 2006 at the earliest, and maintains farm subsidies at current levels (adjusted for inflation) until 2013. This guarantees the continuation of structural surpluses, especially of sugar, dairy and cereals products _ and their subsidised disposal on world markets.

President Jacques Chirac proclaims the deal a triumph for the ``rural way of life'' in France, overlooking the fact _ brought to his attention by British Prime Minister Tony Blair _ that millions of farmers in the developing world will pay a heavy price for his reckless pandering to the big farm lobby.

For many developing countries, reform of world agricultural trade is vital if they are to secure a greater share in the benefits of globalisation. Their smallholder farmers are innovative, efficient and capable of competing on a level playing field. What they cannot compete against is the world's richest treasuries.

That is why governments across the developing world demanded _ and received _ a clear commitment in the Doha declaration by the EU and US to phase out agricultural export subsidies. In the event, the ``farm superpowers'' have wrecked the WTO agricultural talks before they have even begun. Pork barrel politics have triumphed over international responsibility. And the vested interest of rich farmers and powerful agri-business companies have trumped concern for the welfare of the rural poor in developing countries.

Much the same is true in other areas of world trade. When poor countries export labour-intensive, manufactured goods to rich countries, they face average tariffs some four times higher than those applied when rich countries trade between themselves _ not to mention a bewildering array of non-tariff barriers.

Take the case of garments and textiles _ the single biggest export from developing countries. During the last round of trade talks, northern governments agreed to phase out the import quotas imposed under the Multi-Fibre Agreement by 2005.

Well over half of the quotas should have gone by now. Instead, the US (with an eye to the South Carolina garments industry) has liberalised around one fifth and the EU one third of quota restrictions. Even after the removal of quotas, tariffs will remain some four times higher for garments than the average for industrial goods.

In many areas, the negotiating agenda emerging in Europe and the United States bears the heavy imprint of corporate influence, allied to a reckless disregard for poverty. Both sides are seeking to drive through rules that will circumscribe the right of developing countries to regulate foreign investment, and enforce rapid liberalisation in the services sector.

To take but one example, the EU is seeking to use the General Agreement on Trade in Services (GATS) to demand the rapid liberalisation not just of financial services such as insurance and banking but also basic utilities like water.

The limited regulatory capacity of many countries makes this a prescription for financial instability and the exclusion of poor people from basic services. More generally, the case for using the WTO to extend the investment rights of transnational companies is fundamentally flawed. Some of the most dynamic developing countries _ such as South Korea and Taiwan _ have used measures to strengthen the links between foreign and local investors that will be outlawed if the European Union and the United States achieve their goals.

Then there is the WTO intellectual property agreement (TRIPs). As the independent Commission on Intellectual Property set up by the British government noted, there is clear evidence that more stringent patent protection is driving up the costs of basic medicines in poor countries.

Looking to the future, it will raise the cost of importing technology in poor countries, and increase the foreign exchange rents gathered by technology leaders, notably the US. In an increasingly knowledge-based global economy, this has grave implications for inequality and the capacity of poor countries to increase their share of world trade.

In the face of these twin threats, northern governments have failed to act on a clear pledge made at Doha to ensure that public health considerations will take precedence over the claims of patent holders. And there has been a stubborn reluctance to revise the WTO's intellectual property rules by allowing for weaker patent protection in poor countries.

Behind the new trade rhetoric, the narrow vested interests of the global pharmaceuticals industry and the northern transnational companies that account for 90% of patents worldwide continue to dictate events.

So what needs to happen to change this picture?

First, the US and the EU need to agree on a binding schedule for the elimination of agricultural export subsidies.

Second, they need to accelerate the phasing out of quotas on garments and textiles, and to eliminate tariff and non-tariff barriers for the poorest countries.

Third, issues such as the liberalisation of investment, finance and basic services should be dropped from the Doha agenda, both on practical grounds (the agenda is already overcrowded) and on development grounds.

Finally, the new round should include a fundamental review of the intellectual property agreement aimed at rebalancing the claims of patent holders in industrialised countries and the rights of developing countries.

Taken individually, these measures would represent a modest step towards a more equitable global trading system. Considered collectively, they would signal that rich countries and the WTO are capable of delivering the world's poor something more than empty platitudes and broken promises.

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