“One fifth of humanity live in countries where many people think of spending $2 a day on a cappuchino. Another fifth of humanity survive on less than $1 a day” UN Human Development Report 2005
Trade is a matter of life and death for many of the world“s poorest people. But the rich and powerful are pursuing trade policies that put profits before the needs of people and the planet.
People & Planet, as part of the Trade Justice Movement, has been collecting thousands of Votes for Trade Justice, calling on the UK Government to:
- fight for rules that ensure governments, particularly in poor countries, can choose the best solutions to end poverty and protect the environment. These will not always be free trade policies;
- end export subsidies that damage the livelihoods of poor people around the world;
- make laws that stop big business profiting at the expense of people and the environment.
On the 8th December, just days before the UK delegation departs for crucial world trade talks in Hong Kong, the hundreds of thousands of votes collected so far will be handed in to 10 Downing Street, to demonstrate the strength of the demand - in the UK, and internationally — for trade justice, not free trade.
Why vote for Trade Justice? Read our briefing
From the 13-18 December trade ministers will meet in Hong Kong to discuss the future of rules that govern international trade. The question is whether it will be a future that delivers justice for the world’s poor, or a future that continues to advance the interests of big business and the rich.
“The test of this Round is whether it benefits those who earn a dollar a day or $5,000 a month.” Indian Commerce Minister, Kamal Nath
The background to the Hong Kong Ministerial
“Under the right conditions, trade can be a powerful catalyst for human development. The Doha ‘Development Round’ of World Trade Organisation (WTO) talks , launched in 2001, provided rich country governments with an opportunity to create those conditions. Four years on, nothing of substance has been achieved. Rich country trade polices continue to deny poor people and poor countries a fair share of global prosperity, and they fly in the face on the Millennium Declaration. More than aid, trade has the potential to increase the share of the world’s poorest countries and people in global prosperity. Limiting that potential through unfair global trade polices is inconsistent with the Millennium Development goals. More than that it is unjust and hypocritical.” UN Human Development Report 2005
International trade is worth around US$9 trillion each year and dominates the international agendas of most countries. Trade could be a massive help to poor countries, enabling them to sell what they make and buy what they need. But today the global trade system is only working for the rich.
At the heart of the international trade system is a set of rules agreed by governments and overseen by the World Trade Organisation (WTO). The WTO was formed in 1995 and currently has 149 member countries.
WTO fact box
- Established: 1 January 1995
- Headquarters: Geneva, Switzerland
- Members: 149, over three quarters of which are developing or least developed countries. The members account for over 97% of world trade. Approximately 30 others are negotiating membership.
- Created by: The “Uruguay Round” of international trade negotiations (1986-1994)
- Director-General: Pascal Lamy (formerly the EU’s Trade Commissioner)
- UK representation: The UK is represented with the rest of the EU by Peter Mandelson, ex doctor of spin, now European Trade Commissioner. He works most closely with the Department for Trade and Industry, but other departments, such as the Department for International Development also have an interest in trade issues.
- Main Aim: The WTO’s stated objective is “to help trade flow smoothly, freely, fairly and predictably”.
- Main functions: Administering trade agreements; Acting as a forum for trade negotiations; Settling trade disputes; Reviewing national trade policies; Assisting developing countries in trade policy issues, through technical assistance and training programmes; Cooperating with other international organizations
- Budget: £70 million (2005)
- Staff: 600
Prior to 1995 trade rules had been negotiated under the General Agreement on Tariffs and Trade (GATT), which was established in 1948 to promote free trade. Early discussions had mainly involved rich countries and so tended to reflect (and protect!) their interests and concerns. So trade was liberalised in areas where the rich countries had a comparative advantage — such as industrial sectors — but the story on areas where developing countries could do well - such as agriculture and textiles — has been very different.
Trade rules are negotiated in ‘rounds’ of talks over a number of years. The WTO was born from the Uruguay Round of negotiations. The Uruguay Round expanded trade rules to reach into significant new areas — such as services, intellectual property and investment, and gave the WTO ‘teeth’ to enforce its rulings — greatly increasing its potential to affect people’s everyday lives.
Developing countries have been struggling ever since to come to terms with the implications of what they signed up to. Many face huge problems implementing the stringent measures contained in WTO agreements, whilst the richest countries ignore any commitments they don’t feel like honouring.
It took eight intense years of negotiations to conclude the Uruguay Round and developing countries were reluctant to embark on a new round of talks that were not in their interests. The current round was finally launched in Doha in 2001 with the promise of a focus on development. The round is supposed to conclude with the Hong-Kong Ministerial, but unresolved disagreements mean talks are now likely to continue into 2006.
If developing countries are getting such a bad deal, why do they bother with the WTO?
The WTO provides a system of international trade rules that are agreed multilaterally (between many countries). Many developing countries feel such a system is better than the alternatives. Bilateral negotiations (two way negotiations) often result in an even worse deal, as those countries in a weaker negotiating position can be even more vulnerable to being bullied into a bad agreement. Developing countries may be better placed to resist pressure by working together as a group within the WTO than they would be outside it. Many joined the WTO hoping it would be an opportunity to make sure the issues that concerned them were put on the agenda. For example, the Uruguay Round included negotiations on agriculture - of great interest to many developing countries who hoped for changes in the rules so they could compete with farmers in the North. Rich countries promised to cut the levels of support they provided to farmers — but have actually increased the level of support they provide since! Countries in the WTO now account for 97% of world trade.
Can we really call the WTO a ‘rules-based system’ or is still power that counts?
Decisions at the WTO are reached through consensus as a result of an ongoing process of negotiation. The idea is that the outcomes are agreed by and acceptable to all the participating countries. But while ‘consensus’ makes the WTO sound democratic, it is still how much money you have that counts. In practice, poor countries often find themselves subject to bullying and exclusions from key discussions and decision making. Rich countries have all the power influence, and resources, and the outcomes of WTO negotiations reflect this. “You get out what you put in. If they have 100 people working, and you have only one, they are 100 times ahead of you.” African delegate to the WTO
The Ministerial Conferences
The highest body of the World Trade Organisation is the Ministerial Conference, which meets every two years
Recent Ministerials:
- 1999 Seattle: Talks collapse as both developing countries inside the meeting and protesters outside resist further expansion. Inside the meeting, developing country governments had had enough of being excluded from the real decision-making process. The people on the streets of Seattle were a diverse movement of environmentalists, Southern activists, trade unionists, students, consumers, reflecting the numerous negative impacts of WTO rules, suffered by people across the globe.
- 2001 Doha, Qatar: The current round of trade talks was eventually launched, characterised as a ‘development round’ that would redress the imbalances of the Uruguay Round agreements. Rich countries would right the wrongs of a system that reinforced the disadvantages faced by developing countries and skewed the benefits of global integration towards developed countries. For the poorest countries it was supposed to be a ‘round for free’ — they would not be asked to make further concessions until powerful countries had done their bit. But this picture obscures the reality — the talks came close to collapse, and were finally concluded a day late, after many delegations had already left. Even as the talks concluded the Ugandan delegation was saying, “The EU has been the major victor, and the United States has also won.”
- 2003 Cancun, Mexico: Talks again ended in failure when rich countries — including the European Union - tried to force their agenda on to poor countries. Developing countries’ were reluctant to open their markets to competition without rich country movement on agricultural subsidies, but the final straw was the EU’s insistence on launching negotiations in new areas of trade before fulfilling its existing (broken) promises to the poor. Thousands of Mexican farmers, whose livelihoods were threatened by trade agreements, were among those who protested outside the talks. A South Korean farmer, Lee Kyang-hae, who was previously the head of South Korea’s Federation of Farmers and Fishermen, climbed the fence and stabbed himself to death after distributing a statement on the damaging impact of trade rules.
- 2005 Hong Kong, China: The characterisation of the Doha Round as a ‘development’ round is starting to ring very hollow. Developing countries have resolved to resist a bad deal: Indian commerce minister Kamal Nath has said “We’re not going to have just any result, we must have a result which is consistent with the object of a development round,”
Hong-Kong
This year’s Ministerial, in Hong Kong, takes places from the 13-18 December.
What will come out of Hong Kong?
Meetings and negotiations on trade rules take place all the time between various groups of countries — some formal and some informal — but the Ministerial is when all the WTO members come together. The aim of the meeting is reach an agreement between all WTO Members. This will be in the form of a Ministerial Declaration that will then form the basis of all further negotiations.
The Hong Kong Ministerial was supposed to conclude the Doha round of talks but unresolved disagreements mean talks are now likely to continue into 2006. Although officials have spent the last few months trying to dampen down expectations for what Hong Kong will achieve, they are still keen to get the bulk of the work out the way, so it is possible to reach an agreement in the next year.
Which is worse: no deal or a bad deal?
“This process is not just about trade: it is about preserving the credibility of the WTO and multilateralism” Peter Mandelson, European Trade Commissioner
“If we don’t get significant movement in Hong Kong and subsequently there is a danger that the whole round fails and that would be disastrous for economies - developed and developing” Tony Blair.
Many of those who are trying to push an anti-development agenda through the WTO, have also been the ones stressing how crucial it is to the interests of the poor that a deal is reached.
The argument for a deal
It is argued that if talks collapse and a deal cannot be reached, more countries will look outside the multilateral system of the WTO, and turn to bilateral deals — meaning developing countries lose out even more.
In addition, the US trade negotiators are given a mandate to negotiate on trade issues by the US Congress, but President Bush’s authority for approval of trade deals expires in July 2007. When the current mandate expires the ability of the US negotiators to reach new deals will be restrained, and so it is crucial a deal is reached before this time.
But…
…Even with the ongoing multilateral talks continuing, bilateral negotiations are taking place, for example, the controversial Economic Partnership Agreements (EPAs) the EU has been negotiating with ACP (African, Caribbean and Pacific) countries. Already, bilateral deals often make tougher demands than WTO rules — for example, in many regional and bilateral trade deals, developed countries demand that developing countries sign up to “TRIPS plus” agreements — so called because they go far beyond what is demanded by WTO rules (read more on TRIPS below) Secondly, even if the US negotiating mandate is not renewed this will affect their ability to undertake bilateral negotiations as much as multilateral negotiations.
No deal is better than a bad deal
‘No deal’ doesn’t mean that the entire multilateral system is doomed — but it may mean that there is more space to finally redress some of the imbalances of past negotiations, and to re-examine some of the processes and structures that leave developing countries in a weaker negotiating position.
Threats of collapse suit those trying to force through a bad deal; the implication is “take this, or it could be even worse”. Yet by signing up to a bad deal developing countries will lock themselves further into agreements that are working against their interests.
“The recent proposals of some major developed countries have attempted to sow division among developing countries, re-interpret the framework and trajectory of the negotiations and, in a self-serving manner, narrow, limit and — ultimately — undermine the developmental objectives of the Doha Development Agenda.” Statement from Argentina, Brazil, India, Indonesia, Namibia, Pakistan, the Philippines, South Africa and Venezuela to the WTO Committee on Trade and Development
Developed countries are keen to be able to claim a success at Hong Kong. But success cannot just be reaching ‘a deal’ — success will only be a deal that finally puts the interests of people and the environment ahead of the interests of rich countries and big business.
The Key issues
Agriculture
What’s its significance?
“Cotton farmers in Burkina Faso are competing against US cotton producers who receive more than $4 billion a year in subsidies-a sum that exceeds the total national income of Burkina Faso. Meanwhile, the European Union’s extravagant Common Agricultural Policy (CAP) wreaks havoc in global sugar markets, while denying developing countries access to European markets.” (UN Human Development Report 2005)
Dumping: Exporting a product at a price lower than the cost of production
Rich countries, in particular the EU and the US, pay their farmers millions of pounds in subsidies. Subsidies are damaging because they lead to dumping. Farmers in poor countries can’t compete with these under-priced goods, and are driven out of business and further into poverty. Subsidies are estimated to cost developing countries billions of pounds a year. While many developing countries have been forced — through WTO rules and conditions set by the World Bank and the International Monetary Fund — to reduce the support they can give their farmers, rich countries have kept enormous subsidies in place. And while rich countries can sell their cut-price goods in developing countries, developing countries are prevented from exporting their goods to the rich countries by high tariff barriers!
Rich countries need to make both significant cuts to the subsidies that lead to surpluses and dumping, and also to reduce the tariffs that prevent developing countries from selling their goods in the North.
The Agreement on Agriculture was negotiated as part of the Uruguay Round and is a prime example of the double standards employed in trade negotiations. Subsidies were frozen at existing levels which in rich countries were very high but in poor countries very low. Poor countries are therefore prevented from using subsidies effectively to protect their farmers while rich countries are able to continue subsidising theirs. A round that is righting the wrongs of the Uruguay Round needs to address these imbalances.
What’s on the table?
The EU and the US have both made ‘offers’ ahead of the WTO talks on reducing their subsidies. They insist they have made generous offers and gone as far as they can, yet what is on the table will actually change very little. Oxfam have estimated that the terms under which the offers are made mean that in the case of the EU, it could even increase its support for its farmers by $13bn a year. The US proposal for cuts would bring its maximum spending level down to a level that is still above what they already pay (figures estimated by Oxfam).
Non-Agricultural Market Access (NAMA)
What’s its significance?
NAMA covers industrial goods and also includes areas such as forestry and fisheries. Negotiations on NAMA focus on opening up markets to industrial goods. When poor countries open up their markets to manufactured goods from rich countries it makes it harder for them to develop their own industries. Developing industrial capacity is vital for developing countries as it allows them to climb the value chain.
Countries that have already developed industrial capacity reached their current position by providing protection for their infant industries, through tools such as export subsidies and tariff barriers. However developed countries are now trying to ‘kick away the ladder’ for developing countries by preventing them adopting similar polices themselves. Local businesses will be forced to compete with massive multinationals from the rich North.
When Ecuador opened its markets to industrial imports in the mid 1990s, thousands of workers lost their jobs and many small and medium-sized companies went bankrupt as they could not withstand the exposure to stronger foreign competition. Conditions for many workers deteriorated and poverty levels increased, partly as a result of trade liberalisation.
NAMA negotiations also push for a boost in trade in natural resources, such as forestry. Proposals on forestry risk increasing deforestation — affecting both the environment and the 1 billion people worldwide who depend on forests for a living. NAMA could also impact on environmental standards and labelling — affecting consumers’ ability to make ethical choices.
The WTO agreements should not force liberalisation upon poor countries. Instead they should allow developing countries ‘policy space’ so they can choose the best policies for their economic development.
What’s on the table?
Rich countries are on the offensive. Despite failing to put anything meaningful on the table in terms of agriculture, the EU has claimed that its agricultural offer is conditional on significant concessions from developing countries in other areas. It is hard to believe that the EU has the nerve to ask for ‘compensation’ from developing countries in return for putting in place cuts they were supposed to make anyway — and it is even more outrageous when these cuts are so meaningless. The compensation they demand includes the opening of markets in developing countries.
Tariff: Tax imposed on imports and exports. Can be an important source of revenue for a government. Can also be used to make imports more expensive in comparison to locally produced goods, protecting local traders.
The main debate is around tariff reduction. Any agreement is supposed to take into account the principle of `less than full reciprocity“ - which recognises the different needs of developing countries. However, rich countries are trying to push through a deal that will result in developing countries facing steeper tariff reductions than developed countries. This will threaten the viability of industries and deprive developing countries of the ‘policy space’ that the developed countries have enjoyed for so long.
Within the negotiations, there is clearly wide-ranging disagreement on a number of issues, and groups of developing countries have made several alternative proposals. However, many of these proposals have not made their way into the most recent ‘Chairman’s report’ on this issue (the Chairman’s report which is supposed to represent the position of negotiations and be used as a basis for reaching agreement at the Ministerial). Many developing countries see this as an attempt to rail-road them into an agreement they are not happy with.
“The NAMA negotiations are heading towards a development disaster. If the developed countries have their way and force the developing countries to massively cut industrial tariffs on a line-by-line basis in an irreversible manner,the future prospect of industrial development, and therefore economic development, in today’s developing countries is truly bleak.” Ha-Joon Chang, Cambridge University
Services
What’s its significance?
Services are covered by the General Agreement on Trade in Services (GATS). This extended the remit of trade negotiations into a whole new area. Services has been said to cover ‘anything you can’t drop on your foot’, and includes public goods such as education, water and healthcare. The GATS extends trade liberalisation into everything from telecommunications to teachers, and rubbish collection to space travel. Liberalising services allows service companies such as banks to operate overseas more easily. This can mean restricting government regulation — some rules designed to protect the interests of society and the environment can be deemed ‘barriers to trade’. Essential services are more likely to be privatised and seen as a business opportunity to be exploited, rather than as a a way to meet basic needs. Access to education, healthcare and even water becomes dependent on whether you can afford it, and it is the poor and vulnerable in society who lose out.
What’s on the table?
Rich countries claim that the GATS is ‘flexible’ and does not force countries to do anything they don’t want to. The negotiations work on the basis of offers and requests between groups of countries. The EU is proposing a ‘benchmarking approach’, which sets minimum standards and targets that developing countries have to meet. This forces countries to sign up a certain number of sectors for liberalisation. The EU proposal involves developed countries increasing the number of sectors it offers by 31%, while developing countries are being asked for an average increase of 86% - contradicting the principle of non-reciprocity as developing countries are again being asked for more.
The Trade Justice Movement is asking the UK to:
- call publicly for the EU to make a statement in support of the right of all developing countries to abstain from making either initial or further offers in the services negotiations
- make good on its claims that GATS is flexible by calling publicly for there to be no `benchmarks“ prescribing minimum levels of liberalisation commitments, and instead confirm the right of all countries to decide how much or whether to commit individual service sectors under GATS
Read about People & Planet’s past GATS campaigning
TRIPS
Current WTO rules on TRIPS (Intellectual Property) are effectively restricting access to treatment for those suffering from HIV/AIDS, despite a promise to prioritise public health over patent rights. But rich countries are pushing for these rules — which developing countries have called ‘unworkable’ - to be made permanent at Hong Kong. Read P&P’s full briefing