If, at all, it simply salvages the trading body from another Cancun-type debacle and keeps alive the hopes for a global trade deal in 2006.
The so-called commitment to end all agricultural export subsidies by 2013 by the United States and the European Union — a cause of much celebration in the West — is apparently a face- saving device because it is not these subsidies which are the real bone of contention.
The actual cause of the lingering conflict, that continues to keep the WTO divided on North-South basis, is the $360 billion a year farm subsidies paid to farmers in various forms. This has not been touched in the declaration. The export subsidies are not even one per cent of the total support and their elimination would not, in any way, cause discomfort to the EU or the US.
No wonder, the selection of year 2013 has good reason to be more palatable to the EU than a widely-supported deadline of 2010 which it resisted in the ‘Green Room’ meetings the whole week; the 2003 reform of its Common Agricultural Policy (CAP) is scheduled to eliminate most such subsidies by 2013.
Still, this was cheered as a key achievement by many member nations since there was nothing else to celebrate and since it was more than manifest that no breakthrough on the crucial issues was forthcoming and another Cancun was staring them in the face.
“It is not enough to make this meeting a true success,” said Peter Mandelson, the European Union’s trade commissioner, referring to the declaration. “But it is enough to save it from failure.”
By averting the collapse, the industrialized countries hope to make gains in the coming months when they reopen negotiations and go for hard bargaining to clinch a new trade pact to complete the Doha development round, agreed to by all in 2001.
One must concede that an outright failure would have badly damaged the credibility of both the WTO and the rich West’s intentions to allow a fair trade regime and would have paved the way for proliferation of bilateral agreements among nations and protectionist trends in industrialized countries, thus defeating the very rationale of WTO’s existence.
But the failure of big powers to steer the proceedings to their way by applying the carrot-and-stick method — which did work on occasions in the past — should be attributed to the growing clout of the developing countries and emergence of their coalitions — a new development that has diluted the hegemony of the developed world to some extent.
For instance, the G-20 group of major developing countries which played an instrumental role in determining the direction of the proceedings and influencing the decision-making process was able to put both the European Union and the United States on the defensive.
Similarly, the G-90 — which brings together African, Caribbean and Pacific (ACP) countries, the African Union and the least developed countries — also played an effective role and hence won some concessions for their members. It was a rare spectacle to see these groups sitting in the ‘green room’ where only negotiators from OECD countries could go in for unofficial discussions.
And it was because of their activism that the rich states promised duty-free access to agricultural products of 32 least-developed countries to their markets. However, they reserved the right to protect three per cent of their product categories, which means many of the important ones.
Pakistan hopes to benefit from this three per cent left-over for its textile products for being an important contributor to the war on terror.
The link between trade liberalization and poverty remains problematic and little more than a rhetoric. The World Bank recently scaled down its estimates of the poverty-reducing impact of complete trade liberalization. Rather than saying that 320 million people would be lifted out of poverty, it estimated that between 66 million and 95 million would be lifted above the $2-a- day line.
Some critics of globalization cited this revision as an evidence that trade liberalization does not necessarily contribute to prosperity.
Although lifting 60 million-plus people out of poverty is no less a worthy task, the fact remains that the advanced countries do not show any commitment to trade liberalization when they behave so “timidly”, in the words of The Washington Post, at the WTO forum and prefer to go ahead with their own agenda and lay more stress on regional and bilateral trade deals.
According to the Post, “this points to the heart of the problem with global trade talks: The economic case for trade may be more broadly accepted than at any time in history, but political resentment of globalization and of global organizations is profound.”
That is why, it says, countries such as India and China, which once believed in self-sufficiency, are now opening their economies but they don’t find global trade talks a congenial forum in which to make further tariff-cutting promises.
Similarly, poor African countries, which suffered a great setback when an intellectual-property agreement reached in Cancun to relieve pressure on Aids drugs, later turned out to be a farce, now lack trust in the WTO and approach global trade talks with extreme suspicion.
From the beginning, prospects of success for the trade talks in Hong Kong were poor. Yet, trade ministers were expected to agree on a new system of formulas for cutting tariffs for farm and industrial goods.
In the weeks leading up to the conference, the EU, facing pressure from France, made a modest proposal of cuts that also exempted eight per cent of product categories.
The US and many other nations wanted deeper tariff reductions and a one per cent exemption. The US Trade Representative Rob Portman stated that market access in agriculture could bring about the desired breakthrough needed to achieve the Doha goals. That didn’t happen.
For more than two years, West African countries, which rely heavily on cotton exports to support their economies, have demanded that the US do away with subsidies for its 25,000 cotton farmers as these have driven down global cotton prices and severely hurt millions of African farmers. The dispute over cotton has been a major factor in the collapse of the WTO ministerial at Cancun.
Now the declaration calls for the elimination of export subsidies for cotton by the end of 2006. It was another farce enacted by the rich West at Hong Kong. These subsidies are, in fact, already on the way out. These have also been determined to be illegal by the WTO.
US Congress, in fact, is expected soon to repeal the so-called Step 2 subsidy programme for cotton exports.
In the US, trade agreements must be approved by Congress. That the WTO should complete the Doha round and draft a new trade accord by the end of 2006 has been agreed to by the US primarily because by the middle of 2007. President Bush’s authority on trade promotion would expire.
The fact remains that the United States and the European Union were so blatant in pursuing their selfish interests at the expense of the poor countries that they “nearly wrecked” the Hong Kong ministerial, in the words of Oxfam. And unless the two trade powers change their ways in the coming months, the WTO’s troubled Doha Round could drag on into the next decade.
According to Oxfam, the talks remained log-jammed between the EU and US self-interest, and the final declaration —- with an EU pledge to end farm export subsidies by 2013 —- was only approved because poorer countries feared a worse outcome.
Then, everyone wanted to avoid a total collapse for fear of terminally damaging the WTO, and “rich countries played this card in putting pressure on developing countries to sign a deal.”