A Critical Study of What India Gains from WTO Hong Kong Ministerial Meeting

A Critical Study of What India Gains from WTO Hong Kong Ministerial Meeting

Dr. Tejinder Singh Rawal

Chartered Accountant

tsrawal@tsrawal.com

We are living in a world today where lemonade is made from artificial flavours and furniture polish is made from real lemons.

Alfred Newman

India and other developing countries have secured significant gains in the Hong Kong Ministerial meeting of the World Trade Organisation (WTO). Agreement on duty free and quota free market access for 97 per cent of exports produced by the world's poorest nations and developed countries eliminating all forms of export subsidies in agriculture by 2013 could be considered to be the major achievements of the six-day meeting that concluded on December 15, 2005.

That developing countries were able to forge groupings such as G-20, G-33 and the much larger G-110 has been considered a great achievement at Hong Kong. What is of greater relevance is the fact that these groupings seem to have been held in the face of some intense negotiations and counter proposals from the developed countries. India proved its importance by assuming leadership of the developing world.

However, some members of G-110 and some anti-WTO campaigners have alleged that what could not be achieved in earlier rounds of negotiations by the US and EU , could be pushed through this time by them by winning India and Brazil to their side by way of doling out goodies to them and playing a typical divide and rule policy. India and Brazil played a large role in pressuring other developing countries to go along with what is essentially the US and EU’s agenda.

In this article an attempt is made to critically examine where we stand after the Hong Kong meet.

Down ,Down, WTO! : The meeting was held in the background of protests coming from many quarters. On December 11th, thousands of locals organized by the Hong Kong People’s Alliance marched along Causeway Bay carrying signs like “Migrants are Not For Sale,” “WTO Means Death for Thai Farmers” and “Down, Down, WTO!” In spite of a local media campaign designed to instill fear of foreign anti-WTO protesters, groups like the Indonesian Migrants Workers Union, the Philippines Domestic Helpers General Union, and the Hong Kong Confederation of Trade Unions still managed to recruit thousands of marchers for a colorful and joyous trek.

Right in the middle of WTO Director General Pascal Lamy’s opening speech two days later, dozens of people associated with the global Our World Is Not For Sale network – sporting a giant orange banner that read “No Deal Is Better Than a Bad Deal” in 10 different languages – jumped up and chanted “No More Lies, Lamy!”

Also on the opening day, a group of about 100 Korean fishermen jumped into the freezing Hong Kong bay, bobbing their message that the WTO’s negotiations on fisheries would devastate family fisher-folk in favour of giant-scale corporate fishing.

Water activists from Bolivia, Canada, the Philippines, Uruguay, and others unfurled a giant Water Out of the WTO banner in the main conference lobby. At a press conference launching an international campaign of the same name, leaders of the African Trade Network revealed how private companies in Ghana continued to cut drinking water service during a cholera epidemic that killed hundreds of people in his country, sighting this as the cruel outcome of rampant globalisation.

Star protesters were the Korean farmers and trade unionists. Each day they organized a different colourful, vibrant action, mostly in matching outfits and with militant discipline, such as the day they dressed up in similar long robes, took three steps, bowed and prayed, took three steps, bowed and prayed, over 1,000 times. The image of hundreds of outraged Koreans that had been plastered all over the local media was suddenly transformed into a compelling portrait of grief and reverence for life, beseeching trade bureaucrats not to negotiate away their futures. But after protesting peacefully every day, the Koreans promised they would ratchet things up later in the week. On December 18th, farmers and workers from the People’s Action Against Neoliberalism and Globalization from South Korea pressed up physically against police barricades and managed to get within a few hundred feet of the Ministerial meeting.

Standing off with police for hours just outside the convention centre, a few dozen finally managed to break through and scrambled towards the doors. Suddenly, the mood shifted. Police batons quickly reasserted power over unarmed protesters. Hundreds of people were beaten, and well over a thousand people from all over the world were tear gassed while peacefully standing in an intersection. In the end, more than 1,000 people were arrested, most of them in the dead of night.

The breakthrough: The stories of negotiations and protests reveal certain lessons about the meaning of Hong Kong. United States and European Union are so invested in maintaining the current model of corporate globalization embedded in the WTO, that they were willing to do anything to get a declaration signed and prevent a “failure.”

The WTO has failed to successfully conclude even one round of negotiations since its founding in 1995. It is still in the midst of a round begun in 2001 and named after the city Doha, in Qatar, where it was launched. The “Doha Round” was to have been completed last year, but negotiators acknowledge that they have yet to finish even the general parameters or “modalities.” The WTO’s goal in Hong Kong was to complete the “modalities” – while the protesters wanted the negotiations to collapse, as they did in Cancun in 2003.

In Hong Kong, a declaration was eventually signed. While WTO proponents have admitted that the declaration does not get them much closer to concluding the round, the declaration does mandate a number of harsh concessions from developing countries that will have serious implications for the their future development. And it keeps WTO negotiations hobbling along, at a time when the entire model of corporate globalization is experiencing a serious legitimacy crisis.

The following were agreed to in Hong Kong with respect to agriculture:

1. An end-date of 2013 for European export subsidies in agriculture;

2. A Development Package on key issues such as subsidies on cotton, market access for the Least Developed Countries (LDC’s), or development aid;

3. The US and European Union give huge subsidies to their agricultural sectors, subsidies which gives their products an unfair advantage in the world market and depress global prices, wreaking havoc on farming communities worldwide. Agricultural exporters like Brazil and Argentina have been battling for a reduction in US and European domestic and export subsidies by 2010, so Brazilian and Argentine soy, citrus, sugar, and beef could be sold in the US and EU markets on a level playing field. This greatest-distorting subsidy of all should have been eliminated many years ago, and no price should have been asked for it.

4. The US made what appear to be significant offers on agriculture, and tried to shift the blame onto the Europeans. It seemed like the Ministerial was going to break down over the EU’s lack of willingness to reduce its massive export subsidies by a fixed date. But at the last hour, having extracted as much in return for it as he could, the EU Trade Commissioner Peter Mandelson agreed to a target date of 2013 for export subsidies, leaving the issue of much larger domestic subsidies undecided.

5. The G20, the group representing agriculture-exporting developing countries that opposed the US and EU offer in Cancún, took the offer rather than allow another failed Ministerial to be blamed on them. And then they helped pressure other poor countries to go along with the deal.

6. One should not forget that most developing countries are net food importers, and are more concerned about protecting their base of farmers from subsidized foreign imports than gaining access to other countries’ markets. These countries have been advocating for a designation called Special Products, which would allow them to place certain restrictions on food items based on food security, livelihoods, and rural development.

7. Another key issue for some of the poorest developing countries is cotton. US cotton subsidies to agro-industrial producers so distort the market that millions of farmers in India, Burkina Faso, Mali, Benin, and Chad lose out on billions of income because of the artificially low prices. They have demanded an end to US domestic subsidies by 2006. They got a vague promise that the US would reduce its subsidies “over a shorter period of time than generally applicable.” Nothing more than crumbs, on an issue that costs farmers their livelihoods every day.

8. In the draft declaration, developed countries could decide which type of products to protect in this manner, but developing countries were going to have to allow the WTO to decide it for them, with many restrictions. They finally gained the right to “self-designation” of Special Products at Hong Kong, but this is extremely vague, as only an “appropriate number” of products – to be determined through future negotiations in Geneva – will be allowed for designation.

This may seem like a complex, insignificant detail. But when farmers from South Korea and other countries are killing themselves to protest the WTO, and farmers represent over half the population in most developing countries, it’s no small matter.

What India stands to gain?:

In spite of all the negotiation tactics employed by the US and EU to extract their pound of flesh in respect of the concessions which they were even otherwise obliged to concede; India and the developing nations do stand to gain a lot from the Hong Kong round.

In respect of agriculture, India has gained in that the deal not only ensures that there would be no restraint on the government's ability to provide domestic support for farmers, it also permits the developing nations to protect farmers against unfair competition from imports. The government could raise import duties on farm produce either because of surge in imports or because the import price was too low.

In the longer run the elimination of subsidies to farm produce from the developed world would end the artificialities of world prices. This declaration can be seen as a reversal of the perpetuation of the inequities of global trade.

India has also gained from the fact that the deal calls for intensified discussions to be completed by June this year on geographical indications and biological diversity. While the former will mean that India will be able to prevent others from using labels like Basmati rice or Darjeeling Tea, the latter will enable the government to do more to protect the rights of communities over genetic material and traditional knowledge in areas like ayurveda.

The phasing out of export subsidies on agricultural products by 2013 is claimed to be the biggest single concession wrested from the developed countries. For this to be effective, certain loopholes that allow hidden subsidies in export-credit and food aid will have to be plugged. The phase-out is a small but important step but much needs to be done in the area of domestic support, where only the broad modalities for subsequent negotiations have been arrived at.

Even the deal on cotton, expected to benefit some of the poorer African countries - is subject to an agreement being reached on eliminating all export subsidies by the end of 2006. Under this arrangement, while the U.S. will abolish export subsidies on cotton this year. India and other developing countries can retain higher tariffs to protect their farmers and ensure that food and livelihood concerns are met. Their need for a special safeguard mechanism based on price and volume trigger has been recognized.

In Non-Agriculture Market Access (NAMA), developing countries are not required to cut tariffs to the same extent as the developed countries. While the principle of "less than full reciprocity" has been recognized, there is no agreement on the exact mechanics for such reductions. Only subsequent discussions will bear out whether the developing countries have given away too much under NAMA in return for concessions in agriculture.

The EU finally agreed to do away export subsidies on agricultural products by 2013 thereby contributing to the most visible result. India and Brazil, two large countries deeply involved in agricultural issues, led the discussions on behalf of all developing countries. Again in agriculture trade, developing countries were able to ensure that a mechanism will be created to counter low priced agri-imports that can hurt the interests of their farmers. This major safeguard could not have been institutionalized, but for the widespread support from many other countries.

The smaller developing countries actually showed tremendous resistance and alliance-building efforts during the negotiations. Keep in mind, about 30 developing countries don’t even have the resources to field permanent staff in Geneva, where the WTO negotiations are ongoing – so the challenge to even know how the negotiations will affect your country can be overwhelming. A huge group of 110 countries met in Hong Kong to coordinate positions, in what is probably the largest meeting of developing countries within WTO history.

Conclusion: But a final agreement is a long ways off. And as the credibility of the entire model of corporate globalization continues to erode, based on its failure to promote growth and development, it can still be stopped.

A careful reading of the Hong Kong Ministerial text shows that despite days of hype about development being at the core of the Doha agenda, the relevant paragraph 38 literally is a “cut and paste” of language from the original 1994 WTO agreement! After ten years of negotiations at the WTO, developing countries have given enormous concessions, but in return they have gained a restatement of the WTO’s charter agreement.

This means that developing countries were pressured to trade the privatization of their services and industrial future for a 2013 target date to eliminate export subsidies that should have been abolished long ago, and a promise of future development aid, most of which is actually designed to “aid” countries in restructuring their domestic economies to accommodate the privatization of their services and the selling off of their industrial futures.