UK parliament report attacks EC's WTO positions (Updated Version)
2 May, 2006
Martin Khor (TWN), 28 April 2006
In particular, the report attacks the EU's insistence that developing countries paythe price of high commitment in cutting their industrial tariffs and opening theirservice markets, in return for the EU making offers in agriculture which it hadanyway committed to do to redress imbalances of previous Rounds.
It concludes that a successful agreement for the Round is one that does not hurtdeveloping countries or provide disproportionate benefits for developed countries,and at present sufficient progress is not being made on this.
It calls on the European Commission to change its position, warning that the EU'must not become the cause of failure.'
The House of Commons Committee is headed by Liberal Democrat MP MalcolmBruce and comprises six Labour MPs, three Conservative MPs and two LiberalDemocrat MPs. Among those who were witnesses or who sent statements to theCommittee were WTO Director- General Pascal Lamy, EU Trade CommissionerPeter Mandelson and senior EC staff, and several European NGOs.
'This round is supposed to shape trade for development, yet what we see is endlesswrangling on the margins on issues that will not benefit the poorest,' said Bruce,when the report was launched. 'The EU must improve its offer. It should not makeits offers on agriculture or wider market access to the EU conditional on reciprocalnon-agricultural market access, services or anything else. A true developmentround gives developing countries unconditional access to developed countries'markets for the widest range of products.'
The report attacks the double standards in UK government policy which on onehand stated publicly that developing countries should have policy space andflexibility, but did not distance itself from the EU's position that countries likeIndia and Brazil must reduce industrial tariffs significantly.
'We consider that the Government is on the one hand defending the right ofdeveloping countries to choose their own policies, while at the same time arguingthat movement in EU agriculture, which is crucial for the developing countries, isdependent on certain developing countries providing greater access to their nonagricultural markets and making offers in services,' says the report.
'Neither the Commission nor the UK should be pressing developing countries inthis way, nor should they be making EU policies dependent on actions of thedeveloping countries. This is contrary to the idea of a development round ingeneral and to the idea of policy space more specifically.'
On the same point, the report criticizes the European Commission for beinginconsistent in its advice to the developing countries. It says: 'The Commission'srefusal to practice what it preaches in respect of liberalisation threatens the EUnegotiating position. The Commission would have much greater credibility in theeyes of developing countries if it were more consistent. The attempt to argue thatfurther liberalisation of European agriculture would be harmful to the interests ofthe G90 is disingenuous.
'The EU made a commitment to a development round which would redress theimbalances of previous rounds by opening its agricultural markets for developingcountries. It should not attempt to renege on this commitment . The Commission'soffer was insufficient to move the negotiations forward.
'The grand bargain which the EU sought - with progress in agriculture beingdependent on access to developing country and US markets - was a 'Northernagenda' and not a development one. The Government's support for it was anegation of its commitment not to force liberalisation on developing countries.'
The report also, in blunt terms, criticized many of the EU's moves and positions atthe WTO, including:
* The EC's attempt to create 'differentiation' among developing countries byusing a new category 'advanced developing countries' that had not been adoptedby the WTO.
* The EC's push for 'bench-marking' in the services negotiations, which the reportsaid was an attempt to 'change the rules of the game at half-time' with targets thatwere 'arbitrary' and should have been rejected in principle by all EU memberstates.
* On the NAMA negotiations, the report recognizes the developing countries'concerns that market opening will threaten or wipe out their industries. Developingcountries should have space to decide on suitable policies and the Committeeexpressed concern that policy space is already limited by the Uruguay Round andshould not be limited further, as developing countries should not be forced toremain commodity exporters by policies that damage their emerging industrialsectors.
* On services, the talks are proceeding without studies on the implications of thesefor developing countries.
* On agriculture, the EU and US offers before Hong Kong did not go far enough toclose the gaps and their lack of urgency raises questions about their commitment toa development round. In particular, the report says that EU Trade CommissionerPeter Mandelson indicated to the Committee that he could reduce the number ofsensitive products if new commitments come from other players. It says that theEU should cut sensitive products but this offer 'should not under anycircumstances in the Round be conditional on actions by developing countries.'
* Mini-Ministerials are unrepresentative and goes against accountability andtransparency, and the government should not condone such a practice.The report's main conclusions and recommendations include the following:
* It emphasises the importance of improved participation by, and policy space for,developing countries in the WTO. A development round should also producedevelopment-friendly agreements to contribute the most to poverty reduction.
* The EU and the US offers before Hong Kong did not go far enough to close thegaps in member states' positions. The apparent lack of urgency in the EU and USapproach to the negotiations raises questions about their commitment to adevelopment round.
* The Government and the EU should not seek to divide the developing countriesinto categories which the WTO does not recognise and which the countriesthemselves have not agreed to. 'We accept that countries such as India and Brazilare competitive in some sectors, and that trade liberalisation in these sectors wouldbe beneficial to them, however, 'advanced developing country' is not a recognisedcategory of states in the WTO.'
* 'We consider that the Government is on the one hand defending the right ofdeveloping countries to choose their own policies, while at the same time arguingthat movement in EU agriculture, which is crucial for the developing countries, isdependent on certain developing countries providing greater access to their nonagricultural markets and making offers in services.' Neither the Commission northe UK should be pressing developing countries in this way, nor should they bemaking EU policies dependent on actions of the developing countries. This iscontrary to the idea of a development round in general and to the idea of policyspace more specifically.
* The proposal by the Commission on bench-marking in services was an attemptto change the rules of the game at half-time. It should not have gone forward as thebasis for negotiations in Hong Kong. The UK, in its Presidency, did nothing toprevent this from happening. The bench-marking proposal was an attempt to settargets for offers in services in order to move the negotiations forward, but thetargets were arbitrary and imposed by the Commission. This should have beenrejected in principle by all the EU member states and by the UK in particular.
* 'We consider that the Commission has been inconsistent in its advice to thedeveloping countries. The Commission's refusal to practice what it preaches inrespect of liberalisation threatens the EU negotiating position. The Commissionwould have much greater credibility in the eyes of developing countries if it weremore consistent. The attempt to argue that further liberalisation of Europeanagriculture would be harmful to the interests of the G90 is disingenuous.'
* The EU made a commitment to a development round which would redress theimbalances of previous rounds by opening its agricultural markets for developingcountries. It should not attempt to renege on this commitment . The Commission'soffer was insufficient to move the negotiations forward. The grand bargain whichthe EU sought - with progress in agriculture being dependent on access todeveloping country and US markets - was a 'Northern agenda' and not adevelopment one. The Government's support for it was a negation of itscommitment not to force liberalisation on developing countries.
* At the WTO meeting in Hong Kong the US did not respond to concerns raisedby cotton exporting states creating a significant amount of ill will which again, asin Cancun, soured the entire negotiations. The US stance was unnecessary giventhat the WTO had already ruled against the US system. It was also contrary to thespirit of a development round. The subsequent repeal of domestic support forcotton is welcome and long overdue.
* Given the limited range of products which LDCs export, and given theirnegligible share in world trade, the minimum criteria for success in a developmentround would be Duty Free, Quota Free access for all LDCs' products to alldeveloped country markets.
* 'We consider the lack of discussion about the content of EU member states'sensitive products to be unsatisfactory. If such products are indeed sensitive wewould like to know the reasons for this. We do question the EU's commitment to adevelopment round if it sticks by anything like 8 percent of its agricultural products.'
* The debate about infant industry protection appears inconclusive. 'We haveheard evidence to support both sides of the argument and evidence which tendstoward a middle ground - some protection is useful, for limited periods of time,and for the right reasons. We believe that these are issues which must be decidedon a case-by-case basis and that it is important for any WTO agreement to providethe space for developing countries to make decisions about which policies aremost suitable.'
* 'We are concerned that this type of policy space may already be limited byagreements made in the Uruguay Round and would not like to see it limitedfurther. Development is a process of diversification and developing countries mustnot be forced to remain exporters of primary commodities by policies whichdamage emerging industrial sectors.'
* 'We consider the rejection of the EU's bench-marking proposal to be a positiveoutcome for developing countries. Our main concern is that the servicesnegotiations are proceeding apace with few, if any, feasibility studies about theimplications of these for developing countries and with decisions being made bypeople who know about tariffs rather than people who know about particularservices. It is important that decisions on services are carefully taken. We areunconvinced that the current timetable provides sufficient time for this.'
* As Ian Pearson (UK Trade Minister) said, 'What we have to do at the veryminimum is kick open the door of the developed world so that the poorestcountries can actually trade with us. We are pleased by this approach, but what iscrucially needed is an agreement which prioritises the needs of developingcountries. The Hong Kong declaration falls short of this requirement. TheGovernment must now invest time and political effort to ensure that adevelopment agenda can be agreed in December 2006.'
* 'Peter Mandelson has indicated to us that there may be some room for areduction in the number of sensitive products within the limits of CAP reform,provided new commitments are forthcoming from other players. We wouldwelcome an offer to reduce the number of products which the EU designates assensitive, otherwise market access for developing countries will be severelylimited and Doha will not be a development Round. In making this offerconditional upon the actions of other states, the EU is going against the spirit ofthe Round. This improved offer should not, under any circumstances in thisRound, be conditional on actions by developing countries.'
* 'We agree with Stiglitz's recommendation that the WTO needs to promote aculture of robust, impartial and publicly available economic analysis of the effectof different initiatives on different countries, and groups within countries, if itis toeffectively identify pro-development proposals and promote them to the top of theagenda. Mechanisms must be found to facilitate industrial diversification. We urgethe Government to ensure that the formula for tariff reductions in NAMA does notdiscriminate against this.'
* There has been limited discussion of Special and Differential Treatment (SDT)in the negotiations, despite a commitment to ensure that SDT would be part of allareas of negotiation. The UK Government should work to ensure that oncenumerical formulas are agreed for agriculture and NAMA, effective SDT ispossible according to the needs of developing countries. Particular attention shouldbe paid to the needs of smaller, low income developing countries, especially thosewhich will lose because of preference erosion.
* The WTO should turn its attention to how the aid for trade mechanism willwork. There is need to clarify the relationship between aid for trade assistance andgeneral development assistance. Aid for trade should be additional to and notsimply a diversion of aid monies already pledged. 'We do not believe that theGovernment should consider aid for trade as part of its general aid budget.'
* The formation of the G110 should not be seen as just a trade union, as wassuggested by Pascal Lamy, rather as a response to an attempt by the developedcountries to exert pressure on developing countries to agree to things which theydid not feel were in their interest. The Commission should step back and ensurethat it is not abusing its position in the WTO.
* 'We accept that the use of smaller ministerial meetings make for easierdecision-making but consider this an unrepresentative approach in an organisationwhich has facilitated greater participation and ownership by developing countriesthan its predecessor the GATT. It is not good from the point of view of eithertransparency or accountability. The Government should not condone such apractice, especially if a development agenda is still the goal of the Doha Round.'
* Much remains to be done in order to bring the Round to a successful conclusion.The minimum criteria for a successful agreement would be one which does notdifferentially hurt developing countries or provide disproportionate benefits fordeveloped countries. 'At present we have concerns that sufficient progress is notbeing made.'
* The Commission position must change, and there is good reason for theCommission to act pre-emptively and make known what it is prepared to offer interms of improved agricultural market access on this since, in the WTO, nothing isagreed until everything is agreed. Such action would demonstrate leadership andpolitical commitment to a development round. The developing countries havemuch to gain from an ambitious outcome. The EU must not become the cause offailure.
The report can be found at http://www.publications.parliament.uk/pa/cm200506/cmselect/cmintdev/730/73002.htm