Global Policy Forum

WTO Deal This Year Won’t Deliver Development


Poor countries concentrating on damage limitation

June 28, 2006

Any deal done this year to conclude the Doha Round of world trade talks will fail to deliver development to poor countries, international agency Oxfam warned today on the eve of the World Trade Organization Ministerial meeting in Geneva. After nearly five years of WTO negotiations, Oxfam says that the current offers remain riddled with flaws and the "development" potential of the round has been lost because of the narrow self interest and stubbornness of the EU and the US.

"If this deal collapses there should be no doubt as to why and who are to blame," said Celine Charveriat, head of Oxfam's Make Trade Fair campaign. "The US wants more access to European farm markets than Europe will give, and the EU wants more cuts in US subsidies than the US will grant and both seem prepared to sacrifice this round, along with all its promise and potential, rather than compromise."

"The US and the EU have played their game of brinkmanship for too long and unless they make a last minute U-turn, a once in a generation opportunity to agree new trade rules that would really drive development will be lost, said Charveriat. "The essential ingredients are still missing from a deal that would help poor countries. The grand promise of "development" has been stripped almost completely away," she added.

The current offers would allow rich countries to increase their current trade-distorting farm subsidies rather than reduce them, as poorer countries were promised. The US offer would allow it to increase its farm subsidies from $19.7bn (2005 level) to $22.7bn, while the EU offer would allow it to increase its farm subsidies from $22.9bn (post CAP estimate) to $33.1bn.[1]

"The biggest and richest EU and the US producers will continue to over-produce and dump their cheap surpluses onto world markets. This is precisely what developing countries entered these talks to stop," Charveriat said. "The fact that today's offers don't solve this problem is one of the greatest betrayals."

The EU has proposed a formula to open world industrial markets that would see developing countries having to cut their tariffs by up to 70%, but rich countries by as little as 25%.[2] A WTO deal would lock in these cuts, putting jobs at risk in the developing world. To make matters worse, rich countries want to protect up to 8% of their agricultural tariffs lines from these cuts – while at the same time they're trying to limit the number that developing countries want to protect to a handful of products. This is despite developing countries needing to protect more of these "special products" because they are crucial to poor people's livelihoods and food needs.

UN figures say that developing countries will actually lose as much as $63bn in total revenue because they'll have to cut their agricultural and industrial tariffs so harshly.

The world's poorest countries could earn $2.5bn extra each year if they would get "duty-free and quota-free" access to rich markets. But what's on the table is only 97% free access, meaning that products in which poor countries are most competitive, like textiles, will be excluded.[3] "Developing countries believed the promise that a deal would give them more access into rich Northern markets. But in reality, the offers on the table now will do the opposite, ripping open their own markets with precious little in return," Charveriat said.

Oxfam says that there are "silver linings" in the offers that would undoubtedly help developing countries, including the pledge by the US and the EU to cut their export subsidies by 2013. "But on balance we believe that there is more in these offers to hurt developing countries than help them," Charveriat said. "But these countries are under huge pressure to sign or else be blamed for failure."

Notes to Editors

[1] For the US: Comparison between estimated trade distorting subsidies in 2005 and proposed Doha round cuts. Data comes from official simulations done by the Canadian government on behalf of the EU, the US, Australia and a few other WTO members. For the EU: Comparison between estimated trade distorting subsidies post CAP reform and proposed Doha round cuts. Data comes from Oxfam and Canadian government simulations.

[2] Calculations based on proposed cuts by the EU using average tariffs for industrial goods of selected developed (Canada, US, Japan, EU and Norway) and developing countries (Brazil, India, Indonesia, Pakistan, Paraguay).

[3] The EU or Canada already provide Duty Free Quota Free Market access while Japan and the United States don't. However complex rules of origins are still impeding on access to all developed country markets, except possibly in Canada.

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