[A2k] SUNS: Doha Round - Developing countries' expectations and frustrations

[Sangeeta]

SUNS #6156 Wednesday 6 December 2006

Trade: Doha Round - Developing countries' expectations and frustrations
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Buenos Aires, 5 Dec (Carlos Correa*) -- Many people believe that the attack=
s
on the Twin Towers here in New York City on September 11, 2001 changed
history. And they are probably right.
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Two months later, the 4th Ministerial Conference of the World Trade
Organization (WTO) took place in Doha, Qatar. Working in this highly
sensitized climate, the more than 140 member countries reached a consensus
which, for many people, also signified a milestone in the history of the
multilateral trading system.
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Paragraph 2 of the Doha Ministerial Declaration stated: International trade
can play a major role in the promotion of economic development and the
alleviation of poverty. We recognize the need for all our peoples to benefi=
t
from the increased opportunities and welfare gains that the multilateral
trading system generates. The majority of WTO members are developing
countries. We seek to place their needs and interests at the heart of the
Work Programme adopted in this Declaration.
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In addition, and despite the heavy opposition of the powerful international
pharmaceutical industry lobby, the Doha Conference also adopted the
Declaration on the TRIPS Agreement and Public Health. This Declaration was
promoted by the developing countries as a response to the unjustified
restrictions that some of these countries had faced in implementing
intellectual property rights policies compatible with the interests of
public health.
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Millions of people had no access to medicines, especially those needed to
confront the HIV/AIDS crisis in Africa (the cause of over two million death=
s
every year). Nevertheless, some pharmaceutical companies and developed
countries sought to subject access to medicines to even stricter patent
rights than those granted under the TRIPS Agreement.
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Paragraph 4 of the Declaration established that: "The TRIPS Agreement does
not and should not prevent members from taking measures to protect public
health. Accordingly, while reiterating our commitment to the TRIPS
Agreement, we affirm that the Agreement can and should be interpreted and
implemented in a manner supportive of WTO members' right to protect public
health and, in particular, to promote access to medicines for all."
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The WTO's receptiveness to development concerns seems to have a simple
explanation. It is no secret that there are profound economic and social
inequalities in the world today that are growing even deeper.
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Nobody can ignore the fact that these inequalities are at the root of many
of the problems currently facing humanity, including the insecurity felt by
citizens everywhere on the planet. It is also no secret that these
inequalities could be reduced if there was a fairer multilateral trading
system.
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As I will next discuss, more trade does not necessarily represent a passpor=
t
to development and prosperity. But in some cases, access to markets that ar=
e
currently closed off could generate crucial income for improving the living
conditions of many people now living in poverty.
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To demonstrate the distorting effects of the current trading system, it is
perhaps sufficient to consider the evolution of agricultural imports and
exports over the last 25 years.
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As is well known, the developing countries are efficient in agricultural
production. Nevertheless, the agricultural imports of these countries
(excluding China) as a share of the global total rose from 17% to 25%
between 1970 and 2004, while those of the OECD countries fell from 73% to
68%.
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In the meantime, the total agricultural exports of the developing countries
(as a share of the global total) dropped from 34% to 28%, while those of th=
e
OECD nations grew from 57% to 66%. This is not a result of greater
efficiency, but rather of the accumulated effect of market access barriers,
domestic support measures and export subsidies by the developed countries.
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The Doha Ministerial Conference raised expectations that finally,
development-related issues would be the "heart" - as the Ministerial
Declaration states - of the new round of negotiations. These expectations,
however, have been gradually frustrated.
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The Cancun Ministerial Conference ended in collapse, and the Hong Kong
Ministerial Conference failed to reach the hoped-for agreement. Today, the
Doha Round is playing in overtime, with no certainty of any real results.
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The reasons for the growing frustration are many. I will mention just a few
of them.
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1. The developing countries presented over 100 proposals to resolve
"implementation"-related issues that affect their interests under existing
WTO agreements. Consideration of these issues has been pushed aside, and th=
e
possibility of re-balancing the system through a more equitable
implementation of its rules has been abandoned.
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2. Very little progress has been made with regard to Special and
Differential Treatment (SDT) for the developing countries. Within the
existing agreements, SDT is limited to a series of expressed desires. SDT
should be an integral part of all aspects of negotiations, with the
inclusion of issues related to food security and rural development, and
should ultimately constitute an operationally effective regime.
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3. The mandate established by the Doha Declaration to examine the
relationship between the Convention on Biological Diversity and the TRIPS
Agreement has borne no results. Some member countries have fiercely opposed
a developing-countries initiative to prevent bio-piracy and ensure the
equitable sharing of the benefits arising from the use of genetic resources=
.
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The greatest frustration, however, probably stems from the direction taken
by negotiations on agriculture and market access for non-agricultural goods=
.
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At the Hong Kong Conference, a commitment was made to eliminate export
subsidies on agricultural goods by 2013. While there is no justification fo=
r
maintaining these subsidies until then, this is nonetheless a positive step=
.
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However, the US and EU offers for the reduction of domestic agricultural
support are unsatisfactory, given that substantial levels of support are
maintained. In addition, as was the case with the Uruguay Round commitments
on agriculture and textiles, the protectionist countries could once again
find loopholes thanks to the possibility of granting so-called "green box"
subsidies. Unless these subsidies are eliminated or limited to strict
minimums, it will be impossible to prevent the distorting effects of such
measures on trade.
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In addition, unless the appropriate safeguards are adopted, any domestic
support maintained could be concentrated on a small number of products:
those that most seriously affect the export interests of the developing
countries.
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Moreover, the degree of tariff reductions that the protectionist countries
are willing to concede remains uncertain. The offers tabled until now are
insufficient and imbalanced to the detriment of the developing countries.
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They are insufficient because considerable barriers to market access would
remain in place. For example, in its October 2005 offer, the EU proposed an
average reduction of 39% per tariff line, with smaller cuts for a group of
so-called "sensitive" products. This proposal would affect only a very smal=
l
portion (a mere 6.3%) of the tariffs applied, while high tariffs would be
maintained on a great many agricultural tariff lines.
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Meanwhile, the proposals currently on the table are imbalanced. Paragraph 2=
4
of the Hong Kong Ministerial Declaration recognized that: It is important t=
o
advance the development objectives of this Round through enhanced market
access for developing countries in both Agriculture and NAMA. To that end,
we instruct our negotiators to ensure that there is a comparably high level
of ambition in market access for Agriculture and NAMA. This ambition is to
be achieved in a balanced and proportionate manner consistent with the
principle of special and differential treatment.
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However, the industrialized countries' offers and demands for
non-agricultural market access (NAMA) fall far from realising this
principle. Using the so-called "Swiss formula" and the coefficients propose=
d
by the industrialized countries, the results of trade liberalization would
be as follows:
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* the industrialized countries (using a Swiss formula with a coefficient of
10) would cut their tariffs by around 25%, equivalent to between 1.5 and 1.=
9
percentage points;
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* the developing countries (using a Swiss formula with a coefficient of 15)
would cut their tariffs by more than 60%, equivalent to over 20 percentage
points.
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This proposal reflects very little respect for the principle of less than
full reciprocity. But obviously, this is not only a matter of principles.
The industrialized countries are demanding of the developing countries that=
,
as the price for access to their agricultural markets, they must eliminate
tariffs that not only offer a certain degree of protection to local
industries, but also constitute an important source of fiscal revenue in
several countries.
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The Doha Round has also witnessed an attempted attack on the flexibilities
established in the General Agreement on Trade in Services (GATS),
particularly through the obligation to consolidate member countries' curren=
t
levels of unilateral liberalization to the GATS rules.
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The Doha Round situation gives rise to a number of considerations from the
viewpoint of the interests of development.
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In the first place, development depends on the expansion and diversificatio=
n
of the productive structure. Industrial activity plays a key role in the
creation of value added and in raising the population's income levels. This
requires a sustained process of investment and technological capacity
building.
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History has shown that this process requires active state policies. The
recent experience of many developing countries demonstrates that relying on
market forces alone, as recommended by the World Bank and International
Monetary Fund, can lead to a loss of productive capacity and to more,
instead of, less poverty.
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The generalized reduction of non-agricultural tariffs demanded of the
developing countries will rob them of a tool which, if properly calibrated,
can prove essential for their economic development. This is the same tool
that the industrialized countries used for their own industrialization
processes.
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For example, the United States applied an average tariff on industrial good=
s
of between 40% and 50% between 1820 and 1931. Its average industrial tariff
was 44% in 1913, when its average per capita income was $5,300, in other
words, several times greater than the majority of developing countries
today.
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Secondly, the WTO member countries relinquished the use of important policy
instruments in the framework of the Uruguay Round, thus limiting their spac=
e
for implementing development policies and increasing the relative importanc=
e
of tariffs as a tool in industrial promotion policies.
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The TRIMS Agreement ruled out the possibility of using performance
requirements, such as local content requirements - widely utilized by the
now-industrialized countries - as a means of attracting high quality
investment. At the same time, the developed countries have a limited
capacity to use subsidies in a rational and selective manner when needed.
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In the meantime, the TRIPS Agreement reinforced and expanded intellectual
property rights, thus making it more difficult to achieve the technological
"catch up" processes that were carried out by Japan, South Korea and other
countries within a framework of greater flexibility.
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There is no evidence whatsoever to indicate that the TRIPS Agreement has
fostered a greater transfer of productive technology to the developing
countries, despite the impressive increase in royalty and licensing payment=
s
to some countries, especially the United States. These payments grew from
$61 billion in 1998 to $120 billion in 2004.
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At the same time, the costs imposed on the developing countries by the TRIP=
S
Agreement in terms of higher prices are substantial, especially in the area
of public health. Unfortunately, the system adopted through the August 30,
2003 WTO decision to facilitate access to medicines for countries with an
inadequate pharmaceutical manufacturing capacity does not offer the
necessary framework to effectively confront this problem. The system impose=
s
so many conditions that until now it has not been used even once.
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Thirdly, while trade generally brings about benefits, the relationship
between trade and development is complex and dependent on multiple factors.
It would be naive to think that the same tariff reduction formula will
affect all countries equally.
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There is an understandable need for tools to simplify highly complex
negotiations, but one cannot seriously believe that a single measure will
have the same effects on the close to 150 members of the WTO. It is
particularly naive to think that trade liberalization alone will benefit th=
e
poor countries in the absence of a process of capital accumulation and
technological capacity building.
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Fourthly and finally, the course taken by negotiations raises a central
concern. It would seem that the WTO system is headed towards consolidating
the productive specialization of the North as a source of manufactured
products with greater value added, while relegating the countries of the
South, except for the most advanced, to the role of suppliers of
agricultural products with less value added.
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The accentuation of this division represents a dramatic return to the model
of international division from which the developing countries have sought t=
o
escape. If this is the outcome of the Doha Round, it would be quite just to
call it the anti-development Round.
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To conclude, it is clear that the WTO can make a contribution to
development, but not in the way in which things are laid out in the current
Round. It is also clear that the developing countries would be the ones wit=
h
the most to lose from the failure of this Round. But this does not mean tha=
t
they should accept the conclusion of the Doha Round at any price, and
especially if the price is giving up the little space they still have for
implementing industrial and trade policies.
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It also seems obvious that even if, in the best of cases, the interests of
the developing countries are genuinely addressed in the Doha Round, this
will not be enough to effectively promote development and reduce poverty.
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It will be necessary for other international institutions to play a less
dogmatic and prescriptive role, one which allows countries to design and
implement trade policies in concert with strategies for investment and
technological capacity building that promote their manufacturing and servic=
e
industries.
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(* Carlos Correa is Director of the Centre for Interdisciplinary Studies on
Industrial Property and Economics Law at the University of Buenos Aires and
author of several books on IPRs, TRIPS and WTO issues. This article is base=
d
on a speech that he made recently to the United Nations General Assembly
Second Committee, at a session in which WTO Director-General Pascal Lamy
also spoke.) +

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