Future section

 

MEETINGS 2003


240th meeting - Tuesday, November 11th 2003

 

The WTO in Cancun – The negotiations and what went wrong?

A talk by  Dr. Heike Löschmann

Present: Hans Bänziger, Hans-Dieter Bechstedt, Liane Chamsai, Peter Dawson, Colin Hinshelwood, Reinhard Hohler, Sayoko Iinuma, Ken Kampe, Martyn King, Carsten Klöpfer, Hilke Kögl, Dr. Josef Konrad, Jorg Löschmann, Elisabeth Mendoza, Patcharin Nawichai, Deena Rubuliak, Mariya Salas, Clarence Shuttlesworth, David Steane, Vanvadee Suwatanashaw, Timmi Tillmann, Ricky Ward. An audience of 22.

Brief resume 

Dr. Heike Löschmann is director of the Heinrich Böll Foundation (HBF), Thailand and South East Asia Regional Office.

Date of Birth: 22 November 1962

Education - PhD in Southeast Asian Studies, including Pali and Buddhist studies, politics and international relations, development studies (Magna Cum Laude), from the Humboldt University to Berlin (Germany), 1989.

Professional experience -

1999-present    Director of Heinrich Böll Foundation Thailand and Southeast Asia Regional Office (Chiang Mai) www.hbfasia.org and www.boell.de

1996-1999 - Head of Asia Desk, HBF Berlin

1993-1996 - Project Director and Advisor to Buddhist Institute (Phnom Penh)

1991-1993 - Executive Director of the Society for the Study of Khmer Culture (Phnom Penh)

1990-1993 - Lecturer and Tutor, University of Hamburg and University of Passau (Germany)

1989-1990 - Research Assistant and Lecturer, Trade Union Training Center, Bernau (Germany)

1987-1989 - Research Fellow, Humboldt University to Berlin (Germany)

Languages - German, English, Khmer, French, Russian, Thai

 

This is the full text of Dr. Heike Löschmann’s talk:

The WTO negotiations and the failure in Cancun

Historical Background:

The forerunner to the WTO was GATT, the Global Agreement on Trade and Tariffs. GATT was created in 1948 as a post-war arrangement, but it was not long before it became an unofficial, de facto international organisation, which was both a set of trade rules, negotiated in many different rounds, and an informal institution. The Uruguay round, from 1986 until 1994, was the last and largest GATT round, which ultimately led to the creation of the WTO. 

Whereas GATT had mainly dealt with trade in goods, the WTO and its agreements now cover trade in services, and also inventions, creations and designs – intellectual property. These new areas are covered in the GATS, Global Agreement on Trade and Services, and TRIPS, Trade Related Intellectual Property Rights, agreements.

What is the WTO?

The WTO is a global governance mechanism created to liberalise trade, a forum for governments to negotiate global trade rules. Everything the WTO does is essentially the result of negotiations, which are often long and arduous. The bulk of the currently existing trade rules come from the Uruguay round and earlier agreements negotiated under GATT.

The negotiated WTO agreements provide the legal ground rules for international commerce. They are essentially contracts which bind governments to keep their trade policies within agreed limits. Although negotiated and signed by governments, the goal is to help producers of goods and services, and exporters and importers, to conduct their business, while allowing governments to meet social and environmental objectives. This arrangement, however, has some basic flaws as governments are now officially acting on behalf of business interests, interests that often go far beyond national boundaries, which means that governments are frequently negotiating on behalf of transnational corporations.

The WTO’s overriding purpose is trade liberalisation, but even though WTO policy makers are claiming that this is their purpose only as long as there are no undesirable side effects, the practices and realities are different. Many effects of the liberalised trade agenda have negatively impacted on vulnerable groups in the Global South and are contrary to the development needs of the less and least developed countries.

Nevertheless, the multilateral trading system does provide a number of very important basic principles that are actually advantageous to small or economically less powerful and politically less influential nations:

·        The dispute settlement mechanism is a legal system that rules by law, not by influence or economic power. To go against the law would be to openly discredit the WTO. 

·        The formally set up one-country-one-vote system suggests that the WTO is a democratic organisation. The reality however is that actual decision making is done by a process called “consensus”, which enables the big trading powers to impose mutually favourable consensus decisions by putting different kind of pressures on, or use a carrot and stick approach towards weaker trading nations. Critics and inside observers of the WTO negotiation process, in Geneva and at Ministerial meetings, complain that real decisions are made in backrooms, so called ‘green rooms’, by informal caucuses whose members and their agreements are not determined by formal rules and votes, but by informal agreement among significant players. This non-transparent, non-accountable system of decision-making is one of the elements that has contributed to the crisis of legitimacy of the WTO, actually leading the mass protests in Seattle by the global civil society in 1999.

·        After Seattle, there were expectations that reform of the decision making process would be at the top of the WTO agenda. Instead the WTO lurched into the 4th Ministerial Conference in Doha with the decision making structure unreformed, so that Doha has now become a byword for the perversion of democracy and the rule of intimidation, threat and bribery by the strong, i.e. the US and the EU. ( This is been depicted in great detail in Aileen Kwa and Fatumata Jawara´s most recent publication “Behind the scenes of WTO”.)

·        Worldwide, neither the negotiating delegations, let alone parliaments, nor the general public have sufficient opportunities to discuss the items on the agenda and assess their related implications. Third World governments in particular complain about the rushed preparatory process and its lack of transparency. Also, there are complaints that the views of industrialised nations are granted far more space in the draft papers than those of developing nations.

New round of trade negotiations vs. demands to stop the new round

In 2001, the WTO hosted a new round of negotiations, under the “Doha Development Agenda”, in Doha the capital city of the little Arab state Qatar. After the experience of Seattle, Doha was chosen from a strategic perspective, making broad shadow lobbying by global civil society networks during this 4th Ministerial Meeting virtually impossible. Doha saw the launch of a new round of negotiations, the ‘Development Round’ which supposedly took into account the demands of developing nations for trade to suit their development needs. Issues in the Doha mandate, the most contentious of which were the Singapore issues,  were to be taken up at the 5th Ministerial Meeting in Cancun. India however didn’t give explicit agreement for the New Issues to be brought into the new round of negotiations, and the global civil society called to stop the new round, in order that still unsettled issues and problems from previous rounds of negotiations should be tackled first.

The 5th Ministerial Meeting from September 10th to 14th in Cancun, the beach resort on Mexico’s Yucatan Island

Let me start with a few words about the role of the Heinrich Boell Foundation in Cancun.

The social, political, cultural, economic and ecological consequences of globalisation are burning issues in our work worldwide. For the Heinrich Boell Foundation, the WTO Ministerial Conference in Cancun was a focal point in the striving for socially-just and environmentally-friendly structures and rules in world trade.

Under the theme “Don't trade away our future”, and within the framework of several days of events constituting the Boell Forum, the Heinrich Boell Foundation offered an opportunity for productive disagreement and dialogue between various grassroots movements, local and international NGOs, representatives of governments, the economy, and multilateral organisations. The Boell Forum was purposely located in the old city of Cancun where the international civil society met. The official WTO meeting took place at the very top end of the Yucatan peninsula, making it easy for the security forces to control access.

What was the status of negotiations and conflicts on the eve of Cancun?

Cancun was to be a forum only for an interim assessment of the progress of the current trade round, planned to be concluded by the end of 2005. As said, the last WTO Ministerial Meeting in Doha (2001) decided the new liberalisation round primarily to benefit the developing countries (The “Development Round”). Therefore, substantial concessions by the industrial nations regarding protectionist measures and market-access favouring developing countries were expected. For their part, industrial nations hoped the current trade round would be another big step towards liberalisation of global markets that would give a growth signal for a stagnating global economy. These hopes came along with pushes for further liberalisation in the investment and service sectors.

The WTO, although just eight years old, is under considerable pressure vis-à-vis expectations and legitimisation, from its now, after Cancun, 148 member nations. (Bad deals for accession for Cambodia and Nepal were reached in Cancun). The state of negotiations on the eve of Cancun, however, hardly suggested that the conflicting interests between industrialised and developing nations were any closer to being resolved. The majority of developing countries are insisting that they be granted exemptions and preferential treatment (e.g. tariffs, patent protection, etc.) under WTO rule. They are demanding more space to accommodate their development priorities than the WTO rules currently allow. Major players in global trade – essentially the multinationals – expect the WTO to push for further liberalisation. At the same time, the industrial nations are claiming a need for protection of their industries (e.g. agriculture, steel, textiles) through high tariff levels. These actions counter the advocated “free-trade logic” that the North has actually prescribed for the South.

Politicians working in environment, consumer protection and development politics, particularly the red-green coalition government in Germany, NGOs, and trade unions, insist for their part that the WTO rules are not running counter to social, development, consumer and environment policy goals, that corresponding standards are not being discredited as trade barriers, and at the same time not undermining existing UN agreements. (Zu erklären: environmental and labour security and social standards are often denounced by developing countries as protectionism by the rich nations, multilateral agreements on the environment are partly overruled by WTO rules, which is inconsistent with international governance agreements. Another example is the push by the Green German minister for consumer protection and agriculture under the Common Agricultural Policy of the EU to maintain green box subsidies.)

On the eve of the Cancun Ministerial meeting, several areas of conflict were showing on the horizon, with the debate around different drafts and proposals on the renewal of the Agreement on Agriculture (AoA) being the most contentious. The issues of future investment negotiations, and market access for non-agricultural products were displaying the classic features of a North-South conflict.

What was to be negotiated in Cancun? Credibility of the industrialised nations put to the test.

As said, the promise was given in Doha in 2001 that the current round of trade negotiations, to be concluded by the end of 2005, would be a “development round”. The aim of the conference in Cancun was to make an interim assessment of progress. What did industrialised nations have to show in terms of credible steps in the context of the “development round”? How serious were their intentions to follow up on the promises made in Doha?

Elaboration of some of the issues on the Cancun agenda of negotiations:

a) Agricultural negotiations

International agricultural trade is one of the main contentious issues in the ongoing WTO negotiations. The existing Agreement on Agriculture favours the industrialised nations in the area of tariffs and subsidisation policies; developing countries have therefore long been demanding a new orientation.

However, positions vary significantly: while the agricultural exporters forming the Cairns Group [1] are primarily demanding tariff reductions, those countries belonging to the “Like-minded Group” [2] are demanding the freedom to protect their small-scale farmers, who are badly affected by cheap imports, by applying protective import tariffs, at least for a number of “strategic products”. The global alliance of small farmers, organisations such as “La Via Campesina”, goes even further. With regard to the concept of food sovereignty, they are demanding that agriculture be taken out of the WTO system. Among the industrialised nations, the USA is demanding a massive reduction in trade tariffs, while at the same time preserving several subsidy options for domestic support, and the EU, Japan, Switzerland, Norway and South Korea are promoting the concept of “multi-functional agriculture”, with the intention to at least allow subsidies in areas like animal welfare, landscape conservation and rural development.

Following decisions made in Doha, by the end of 2004 market access for developing countries should have improved significantly; trade barriers should have been reduced and all forms of export subsidisation should have been gradually reduced until completely removed. Developing countries should be granted special treatment in order to guarantee their food security and food sovereignty, and rural development.

Progress over the Agreement on Agriculture is considered an important precondition for the continuation of the global trade round. To date the industrial nations have nevertheless not shown much political will to make necessary concessions to move towards potential agreement. On the one hand, the US is insisting on unconditional free trade, to the point of removing environmental and food safety standards and special conditions for developing nations. However, this does not prevent the US from providing massive subsidies to its own agricultural sector. The EU may have gained a little space in the negotiations through the compromise reached in reforming the Common Agricultural Policy in June 2003. The policy of de-linking subsidies from production volume represents a step in the right direction, but this is still a long way from being sufficient.

After a long period of stagnation, on August 13th a joint US-EU paper brought new dynamics into the negotiation process. This paper presents ideas for a structure in tariff and subsidies reduction, but leaves open the concrete figures and a binding timetable. The EU-US proposal also ignores food security/sovereignty issues, and the demand for special rules for strategic products.

Under the leadership of Brazil, a group of 17 countries (the Cairns Group, plus India and China) have submitted an alternative proposal. The forerunner of what we came to know as the G 21 in Cancun was born. In the future, it will be interesting to see how the so called Peace Clause will be used strategically by the developing countries in further negotiations around the AoA. (The Peace clause determines that parties can not complain about trade distorting mechanisms applied by member states. The Peace Clause will run out at the end of 2003 and its extension is in the vital interest of the developed countries, therefore the Peace Clause may well turn into a bargaining tool in upcoming negotiations.)

b) TRIPS and public health

Shortly before the beginning of the negotiations in Cancun, a compromise was reached on another key area of conflict. In Doha, developing countries were successful in obtaining an agreement that, despite the patent protection laid down in the TRIPS treaty (Agreement on Trade-Related Aspects of Intellectual Property Rights), they may produce cheap generics for particular basic medicines, provided they are exclusively intended for domestic use, and not for export. The separate ministerial declaration of Doha confirms inter alia that states should be given the right to protect public health and to enable access to affordable medicines via compulsory licences. However, the question was left open as to how countries which do not have their own pharmaceutical production should be incorporated into these provisions. Nevertheless, the Doha Declaration gave developing countries the right to determine for themselves under what conditions and for what medical conditions compulsory licences are applied (e.g. also for preventive treatment). This ruling went too far for some, particularly the major pharmaceutical companies. In negotiations over the past two years it is mainly the major pharmaceutical corporations which have stirred up fears that countries producing generic medicines could erode international patent protection in order to infiltrate and monopolise new markets. The industrial nations repeatedly stressed that, if possible, they wished to find a solution to the problem before Cancun in order to relieve the Cancun agenda of contentious issues, and to provide some evidence of the practical implementation of the development round. Two weeks prior to Cancun, a compromise was reached in line with US agreement.

According to this compromise, compulsory licences can only be granted in a situation of proven extreme “public” emergency. The exclusion of numerous illnesses appears to have been removed from the list of contentious issues. However, the granting of compulsory licences is linked to further conditions. The EU, USA and other industrial nations have given one another mutual assurances that they will not be making any use of these exemptions from the TRIPS Agreement by producing or exporting cheap copies of pharmaceutical products. Manufacturers in developing countries have consented to use the relaxation of patent protection only for humanitarian purposes and not in order to infiltrate markets. However, there are serious doubts as to whether the compromise achieved ahead of Cancun will meet with the approval of everyone, particularly those WTO members who have no pharmaceutical production, or whose facilities are inadequate. The broader provisions of Doha have thus been abandoned. Development organisations consider this a disappointment.

c) Special and preferential treatment for developing countries

The WTO treaties already contain provisions granting developing countries special and preferential treatment (e.g. trade concessions and transitional periods for the implementation of agreed liberalisation obligations), to even out the existing economic imbalances between North and South. According to the Doha terms, all of these rules are to undergo revision, in order to correct negative impacts from development-policies following previous trade rounds. Here, developing countries are demanding more preferential treatment, e.g. market access, reductions in trade tariffs for strategic products of developing nations (e.g. textiles), as well as a general review of the TRIPS agreement. The industrial countries appear nevertheless unwilling to make any concessions and negotiations are further delayed.

d) Extending WTO power through an Investment Agreement?

For their part, the industrial nations accelerated their own liberalisation agenda ahead of Cancun. At the forefront are the Singapore issues (investment, competition policy, transparency in government procurement, trade facilitation). Most of all, the EU and Japan urged the Cancun meeting to take up the option to begin negotiations on a multilateral investment agreement. The key interest for investors is to get easier access to Southern markets and to obtain better protection for their property rights. Social, economic and environmental duties of investors are not to be determined within the framework of such an agreement.

Along with the negotiations over the Agreement on Agriculture, this issue was one of the most controversial in Cancun. A large number of developing and emerging nations, including India, China, Venezuela, and Malaysia, representative bodies of the poorest countries (LDCs), and the African states, are against a launch of negotiations on the Singapore issues. They consider them non-conducive to their freedom to decide development priorities, particularly when there is no democratic and transparent international system of rules. The developing nations are supported internationally by some individual national parliaments such as the German Bundestag, which is demanding a moratorium on the issues. A broad network of trade unions, NGOs and the anti-globalisation movement, is protesting against the expansion of WTO rules/principles (e.g. dispute settlement, most-favoured nation status, treatment of nationals) to be applied to the field of investment and is instead demanding a convention on social and environmental responsibility of multinational companies within the UN-framework.

While a decision was to be made in Cancun as to the start of investment negotiations, negotiations on the WTO General Agreement on Trade in Services (GATS), discussed prominently in public debates, assumed a secondary role. The negotiations over GATS, which began in 2000, are being negotiated bilaterally and are to be concluded in 2005. Even if the GATS negotiations were not the focus of Cancun, they were a central component of the overall negotiation game. Who promises what and to whom?

Further controversial topics were reform to the WTO Dispute Settlement Mechanism in favour of weaker nations, and the topic “Trade and the Environment”. Here, inter alia, the relationship between WTO rules and international environmental protection treaties feature highly on the HBF agenda. Numerous environmental organisations however feared that the WTO was not a suitable forum for protecting environmental agreements against being undermined by WTO rules.

More room to manoeuvre for the South, or decision-making blockades?

On the eve of the Cancun Ministerial Meeting, there was evidence that the will of the industrialised nations to make initial minimal concessions in the area of agriculture and on public health and TRIPS was limited. The failure of Cancun evidenced that they were not willing to make further concessions leading to a "development round" acceptable to developing nations. In the negotiation game, we observed right from the beginning a close relationship between the interests of industrialised nations to negotiate agricultural matters and the hoped for start of investment negotiations (the Singapore Issues...with the EU particularly interested in investment security rules).

As we know, negotiations on a multilateral investment agreement were rejected by the developing countries, but this does not mean, however, that they are all against them. It was simply a power game in negotiations. Stark concessions leading to a complete phase out of trade distorting export subsidies for agricultural products were the common demand of developing nations in exchange for some concessions on the Singapore issues. Concerns of some NGOs prior to Cancun that minimal concessions in the area of agriculture and the compromise over TRIPS and generica could induce consent to investment negotiations from the developing nations were answered by the collapse of the negotiations.

Nevertheless, the partying on the streets of Cancun did not last long. The failure of the Ministerial meeting is more likely to negatively affect the developing countries, since the major trade powers (US, EU, Japan, etc.) have many ways to achieve their trade and liberalisation interests. Bilateral and regional trade agreements, as well as bilateral investment agreements, are examples of a foreign-trade policy based on the interests of the respective national economies. The industrial nations, and also the NIC´s like Thailand, have an increasing leverage to push their liberalisation agenda through, as we saw here recently during the APEC meeting with a large number of bilateral and regional FTA´s being announced or already in the stage of implementation.

It was obvious that on the eve of Cancun, the industrialised nations had not sacrificed any significant trade privileges or shown any substantial will towards reform. Implementation of a credible development round would need to accelerate market access for goods and services from developing countries to industrialised countries through specific targets and timetables, give developing countries flexible trade policy measures in the context of their development priorities, and make the decision-making processes in the WTO more democratic and transparent. The leading powers in global trade – 60% of the global exchange of goods and services relates to the USA and Europe – would need to come to an agreement among themselves for more specific concessions. Despite all the disputes existing before Cancun, concerning trade in genetically modified products between the USA and the EU, and all the differences of opinion surrounding further rules on international competition, the contradictory interests between the major trade powers, the USA, the EU and Japan, did not appear insurmountable. The differences between North and South are, however, bigger, with the developing nations negotiating in different factions, some with contradictory agendas. (We currently have G 20 +/-, the group of 33 countries going for Special Safeguard Mechanisms for Strategic Products or SSM/SP group, the 80 to 90 ACP countries, and a smaller group of West African cotton producing countries which is demanded the US phase out their cotton subsidies which are diminishing the export potential of these countries to a life threatening extent.)

To conclude, what caused the failure of Cancun?

Primarily the Singapore issues and agriculture, but not as Pascal Lamy, the EU negotiator, put it in a very much publicised statement, “the WTO negotiating procedures which are medieval and not conducive to building consensus”. The collapse stemmed from a fundamental flaw in the WTO system. The point that has to be grasped here is that the WTO, with its rule-based trading system, is thoroughly incompatible with the reality of the de facto division of its members into developed and developing nations. It is simply absurd to think that a single rule that applies to all should work positively and in the same way for all countries at varying levels of development. The reform ahead is a major undertaking and needs to undergo some soul searching around the mandate (which has undemocratically expanded into the area of the work of organisations like the ILO, the FAO or other global governance mechanisms and treaties – e.g. Multilateral Environmental Agreements) of the organisation and its purpose: Free and fair trade which puts the needs of people before profit, and to sustainable ways of development as a preventive measure to conflicts on this planet?!

 



[1] Argentinia, Australia, Bolivia, Canada, Chile, Colombia, Costa Rica, Fidschi, Guatemala, Indonesia, Malaysia, New Zealand, Philippines, South Africa, Thailand and Uruguay

 

[2] Cuba, Dominican Republic, El Salvador, Haiti, Honduras, Kenia, Pakistan, Sri Lanka, Uganda and Simbabwe