Developing countries call for 'Reclaiming development' in the Doha Negotiations

The recent proposals by some major developed countries in the WTO threaten the developmental content of the Doha Development Agenda (DDA) and it is thus timely to reclaim the development content of the Round, nine developing countries said Monday in a submission to the WTO Committee on Trade and Development.

The submission said that the recent proposals by these 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.

"It is thus timely to reclaim the developmental objectives and trajectory of the negotiations," the paper said.

The submission titled 'Reclaiming Development in the WTO Doha Development Round' was made by Argentina, Brazil, India, Indonesia, Namibia, Pakistan, the Philippines, South Africa and Venezuela at a meeting of the Committee on Trade and Development Monday, at which the WTO Director-General Pascal Lamy was also present.

Lamy attended the meeting to introduce a Secretariat paper on "Developmental aspects of the Doha Round of Negotiations" that was written following the mandate of the Doha Declaration (paragraph 51) which instructs the CTD to identify and debate developmental aspects of the negotiations of the Doha Round.

At a media briefing to explain the content of the submission, Ambassador Faizel Ismail of South Africa, who also chairs the Special Session of the Committee on Trade and Development, said that many countries at the CTD meeting supported the thrust of the paper.

Faizel said that the Ministerial Declaration that launched the DDA proclaimed that the interests of developing countries would be placed at the center of the negotiations. This was not an act of charity but based on the recognition that promoting development in developing countries is an essential impetus to sustained global economic growth from which all can benefit. A key to global growth lies in unlocking the potential of developing countries, and to achieve this, developing countries must pursue development and industrialization in sectors where they possess comparative advantage.

The strategic objective for the negotiations is for industrial countries to reduce the protection they grant to inefficient sectors that frustrate the growth potential of developing countries, he said, adding that an early conclusion of the current round of negotiations, consistent with the mandate agreed in Doha in 2001 would deliver the best overall context for such an outcome.

Faizel said that more open and undistorted trade would create an environment in which developing economies could diversify their exports by destination and in higher value production, and deepen their integration into the global trading system. In reclaiming the development content of the negotiations, the principles of proportionality, less than full reciprocity and special and differential treatment in favour of developing countries should be considered along three dimensions.

Firstly, he said, is that the removal of anti-development distortions in international agricultural trade is central to the DDA. Through a combination of high tariffs, massive domestic support and export subsidies, industrial countries retain inefficient agricultural production in their economies at the cost of agricultural development in developing countries. However, developing countries cannot be expected to pay for this needed reform in agriculture by acceding to overly ambitious demands in industrial tariffs and services that do not take into account the realities of their levels of economic development.

Secondly, the DDA must provide enhanced access to industrial country markets for the exports of goods and services of developing countries. On industrial tariffs, development requires that tariff peaks and escalation on products of export interest to developing countries are eliminated. Developing countries would reduce their tariffs proportionately on the basis of less than full reciprocity so that their concessions are commensurate with their level of industrial development.

Thirdly, Faizel said, not all developing countries stand to gain from the DDA in the short term. Least developed countries (LDCs), and other weak and vulnerable economies often do not have the supply capacity to compete for the new export opportunities that will arise. Others will face significant adjustment costs including from the erosion of preferences.

To address these particular concerns of developing countries, Faizel called for the following actions to be taken:

• developed countries should make a firm commitment to work for the provision of duty-free and quota-free market access for all LDCs, and developing countries in a position to do so are also encouraged to make such commitments.
• the launch of an ambitious 'aid for trade' package in Hong Kong to address the trade-related capacity building needs of developing countries. WTO members should also agree to create a grant aid fund to assist developing countries to manage the impact of preference erosion that would arise from the Doha round.
• developed countries should seize the opportunity to increase the gains from the Doha round for all members by making serious efforts to liberalize the temporary movement of natural persons (mode 4), from developing to developed member countries.
• WTO members in Hong Kong should agree to review a number of WTO rules which are now imbalanced in favour of developed countries. For example, the TRIPS agreement has only strengthened the rights of private ownership and should provide equivalent protection for the intellectual property rights of communities.

Ambassador Ujal Singh Bhatia of India said that the Doha Round started on the promise of development but four years on, "we find a lot of frustration." This is due to the fact that there are no deliverables on development, and the debate on development "has been distorted and been hijacked by some developed countries that profess to speak on behalf of developing countries."

Bhatia said that in agriculture, from India's point of view, development means the removal of distortions that affect global trade in agriculture, which has been brought about by huge subsidization in the developed countries and the denial of market access through a variety of non-transparent measures.

The other issue in agriculture is that for millions of farmers in developing countries, agriculture is not commerce but a subsistence.

In NAMA, Bhatia said that what is being seen in many developed countries is denial of comparative advantage through increased protectionism, for example, in textiles.

Developing countries, in order to develop their comparative advantage, require some policy space and protection for infant industries. What is being asked for by the developing countries is a sub-set of flexibilities that were available to developed countries when they were industrializing.
This sub-set is broadly captured in paragraph 8 of the NAMA framework.

"We find today that we are on the defensive on that. The para that was negotiated is part of the aquis of the negotiations. It is now being made hostage to tactical considerations. If these flexibilities are assaulted, then obviously we do not have the basis for success in the NAMA negotiations," Bhatia said.

On services, Bhatia said that if members are to reap the advantages of globalization, it would mean that global economic processes that are being dis-aggregated would require a complementary movement in services, that is, in the movement of skilled professionals. This is being denied again, he said, adding that there is now the situation where the most competitive services economy in the world is not moving forward on this issue since the Uruguay Round.

On special and differential treatment, Bhatia said that one of the basic pillars of these negotiations is that SDT would become more effective and operational. Presently, most SDT provisions are best-endeavour provisions. As of now there is still no progress to report on this issue after four years of negotiations.

Ambassador Clodoaldo Hugueney of Brazil said that when it was agreed in Doha that development should be at the heart of the round, there was also agreement on a deadline on a development package. But this was the first deadline that was missed in the negotiations, he said, adding that he understood the frustrations of the developing countries.

He said that the initiative by the nine developing countries is to try and redress this imbalance. Development must be one of the central aspects of these negotiations, he stressed.

He said that there are two ways of denying the development aspects of the round, the first being to avoid concessions in areas where developing countries are competitive and have gains to make, such as in agriculture and Mode 4 in services. The second is to put to developing countries demands that are completely out of proportion with development concerns of the round, and this can be seen in NAMA and agriculture, for instance.

Hugueney also said that there is recognition that there are certain countries in the developing world that merit special consideration, and that there is need for priority attention to the LDCs and small economies. Also, preference erosion is something that has to be considered and discussed.

He said that the G20 was created as a group having the dual reality of agriculture in mind in the developing world, a reality of productive sectors where most developing countries have their exports but also the reality of millions of people that live at subsistence level. This must be considered in the context of the agriculture negotiations. The G20 has been able to maintain this 'middle-of-the-road' approach to the agriculture negotiations.

Hugueney stressed that agriculture is the central area of the negotiations and this to a certain extent sets the benchmark for the rest of the negotiations. He noted that agriculture is lagging far behind other areas.
Also, restrictions and distortions to trade still persist. Agriculture is central to developing countries and its link to development is recognized by everyone.

He also noted the concern that not only is the mandate on agriculture not being fulfilled, but some countries are attaching conditions to what they are offering on agriculture that is completely out of the question in terms of NAMA, services as well as other areas of the negotiations.

"No one is going to conclude the round where not only the development objectives of the round are not maintained but also the results are completely unbalanced and where the developing countries end up by paying more for the conclusion of the round than developed countries," Hugueney said.

The paper by the nine countries stressed that development should be at the heart of the DDA and in this respect cited paragraph 2 of the Doha Declaration.

The paper highlighted agriculture as a central issue. A development round requires the removal of trade distortions in international trade rules that inhibit the export growth of developing countries. The largest structural distortion in international trade occurs in agriculture through the combination of high tariffs, trade distorting domestic support and export subsidies that protect inefficient farmers in developed countries, principally, the European Union, and the US. Taken together, these measures frustrate the development prospects of many developing countries. Removing these anti-development measures is a core objective of the DDA as it will lead to the expansion of developing country exports and their meaningful integration into the global economy. It is for this reason that agriculture is the central issue of the Doha Round.

The paper added that two thirds of all poor people in developing countries live and work in the agricultural sector, depending on agriculture for their livelihoods. In contrast, agriculture accounts for less than 5% of output and employment in the EU and the US. For some developing countries as in the case of the West African cotton producers of Mali, Benin, Chad and Burkina Faso, high subsidies for rich farmers in developed countries are responsible for the devastation of the livelihoods of millions of poor farmers. For many other developing countries where agricultural production remains largely subsistence based, the need to ensure that WTO disciplines are strengthened so as to enable these developing countries to meet their food and livelihood security, and rural development needs is paramount.

The paper said that the Uruguay Round (UR) brought agricultural policies, and trade in agriculture, under GATT/WTO disciplines for the first time. However, the new UR Agreement on Agriculture created minimal market opening and failed to ensure that the main subsidisers - the EU, US, and other OECD countries, reduced their extremely high levels of farm subsidies. These farm subsidies of the main subsidisers did not decrease substantially even after the Agreement on Agriculture came into force in 1995. Ironically, farm support actually increased in some developed countries.

In sharp contrast, both developed and developing countries have been liberalizing their markets in the industrial sector for over 50 years as a result of over 8 rounds of GATT negotiations.

It is for these reasons that agricultural protection in developed countries must bear the greatest burden of adjustment in this round, the paper emphasized.

The paper also said that contributions to NAMA should be commensurate with the level of development. It recognized that this Round should increase liberalization and foster positive adjustments in all countries, developed and developing, providing genuine market access for all. In addition, whilst recognizing the efforts of many developing countries in making autonomous liberalization commitments, this Round provides an opportunity to increase the level of bindings for all WTO members thus creating a more inclusive and certain trading system.

However, due recognition must be given to the enormous imbalances in the global trading system reflected in the inequitable distribution of the gains from globalization and the continued protection in developed countries against products from developing countries.

The paper said that the developed countries have largely become highly competitive in the industrial sector and will need to make relatively insignificant adjustments in this round. However, many developed countries still maintain high tariffs, tariff peaks and tariff escalation on products of interest to developing countries. In addition, a range of non-tariff barriers, including strenuous technical regulations and excessive anti-dumping measures, are frequently utilized by developed countries to disrupt developing country exports and potential to export their products to these markets.

The bulk of developing countries on the other hand, whilst having increased their share of world trade in manufactures in the past two decades, continue to reform and industrialize their economies, with their industrial sectors still occupying a significant part of their labour intensive employment and output.

Thus, the paper said, the modalities for liberalization in NAMA must accomplish two things simultaneously: ( i) ensure that the remaining high tariffs, tariff peaks and tariff escalation in developed countries are eliminated in this round; and ( ii) ensure sufficient flexibility to accommodate the sensitive sectors and adjustment needs of developing countries, to create the conditions for further liberalization.

"Developing countries cannot be expected to pay for the much needed reforms in the agriculture sectors of developed countries, by overly ambitious requests of them in industrial tariffs that do not take into account the realities of their levels of economic development and their adjustment needs." Developing countries are prepared to make a contribution to the NAMA negotiations in this round, provided that their concessions will be commensurate with their levels of development in a full expression of the principle of special and differential treatment. In addition, the principle of less than full reciprocity, agreed to in the Doha Mandate, needs to be adhered to.

"It is for these reasons that we argued that the paragraph 8 flexibilities that all WTO members negotiated and agreed to in the WTO July 2004 Framework Agreement is an essential element of the flexibilities required by developing countries to manage their adjustment processes. We therefore oppose attempts being made to re-interpret this agreement by establishing further conditionalities on the use of paragraph 8 and thus change the balance of the agreement that was reached by all WTO members in the July
2004 Framework Agreement.

"We view the numbers currently contained within the brackets in paragraph 8 as constituting the minimum percentages required by developing countries. We retain the right to adjust these numbers upwards to enable some of our economies to manage the adjustment of sensitive sectors and prevent the social disruption caused by job losses and closure of enterprises that would result from further liberalization.

"In addition, we emphasize that paragraph 8 is a 'stand-alone' provision in the agreed NAMA framework and its position as such must be recognized if negotiations are to move ahead. Any move to link it, or use it as a trade-off with the tariff reduction formula will create unnecessary difficulties in the negotiations. The two issues are separate and should be treated as such."

The paper also noted that not all developing countries stand to gain from the DDA in the short to medium term. A significant number of developing countries including, small, weak and vulnerable countries and Least Developed Countries (LDCs) will face significant transitional costs, especially those countries that are preference dependant and will suffer significant preference erosion. The particular development challenges of small, weak and vulnerable countries need to be addressed in the Doha round without creating a new category of developing countries and sowing division amongst developing countries. In addition, creative and progressive solutions will need to be found to address the problem of preference erosion for preference dependant countries, without further delaying market access for products from developing countries.

WTO members should launch an ambitious "aid for trade" package in Hong Kong to address the trade-related capacity building needs of developing countries. In addition, WTO members should agree to create a grant aid fund to assist developing countries to manage the impact of preference erosion that would arise from the Doha round.

For the Least Developed Countries (LDCs), "we support the need for a package of development measures to foster their integration into the world trading system and enhanced development. In this regard, the package of five prioritized LDC proposals is an important objective for Hong Kong."

The paper also said that perhaps the greatest gains from the Doha round can be made for both developed and developing countries from serious efforts to liberalize the temporary movement of natural persons (mode 4), from developing to developed member countries. To date, however, developed countries have been reluctant to make any significant commitments in the WTO on mode 4 relaxation of restrictions on temporary entry.

The paper noted that recent proposals of developed countries, including the EU's 28th October proposals, have made demands on developing countries to make commitments in the NAMA negotiations that are totally disproportionate. The enormous burdens of adjustment that developing countries would have to bear in their industrial sectors bear no resemblance to the relatively insignificant adjustments that developed countries will need to make in this sector. Developing countries are being called upon to reduce their tariffs from their applied rates with limited space to manage the adjustments in their sensitive labour intensive sectors.

In sharp contrast, the EU has made insignificant offers to open its markets in the agriculture negotiations, with its call for additional flexibility for the bulk of its sensitive products, allowing it to close off the possibility of any significant new market opening for agricultural products from developing countries.

In addition, the paper said, developed countries are not offering to make any significant cuts in their industrial sectors with their offer to reduce their tariffs by a co-efficient of 10 (using the Swiss formula). This offer will not result in any deep cuts in the high tariffs, tariff peaks and tariff escalation that developing countries called for in the Doha mandate. A large number of industrial products of developing countries can thus still be kept out of developed country markets.

"The EU and other developed countries are thus seeking a round for free! Developing countries are being called upon to bear the burden of any new market opening in this round."

The paper said that the totally disproportionate demands the EU is making of developing countries in this round, compared to its own offer to make much needed reforms in its agricultural sector, threatens to create an imbalanced outcome in the Doha round. The EU proposals in agriculture and NAMA would thus result in an anti-developmental outcome with the hopes and aspirations of developing countries raised by the prospect of a Doha Development Round becoming dimmer and dimmer.

"We urge the EU and other developed members of the WTO to ensure that their offers and demands made on other members comply with the objectives set for this round in paragraph 2 of the Doha mandate. We for our part are committed to work for a genuine development outcome of the round that is fair and balanced and that will create new opportunities for all members, developed and developing, to grow their economies and foster their development," the paper concluded.