The rise of mega regional blocs threatens the relevance of the World Trade Organization (WTO), and this is not good news for poor countries like Ethiopia, argues TAMRAT G. GIORGIS, FORTUNE STAFF WRITER. However, the agreement reached for advanced economies to immediately end agricultural subsidies on agriculture – and in two years for developing countries – is “the most significant outcome.”
The 10th ministerial summit by member countries of the World Trade Organization (WTO), held last month in Nairobi, Kenya, has something to show off, unlike many such summits that end in collapse.
When concluded a day later than the originally scheduled December 19, 2015, the summit agreed to phase out agricultural subsidies, and support poor countries in their export initiatives. Least developed countries (LDCs) now have a lesser burden in fulfilling the rigorous requirements of rules of origin and their manufacturers can use up to 75pc of the value of materials imported in what they can export. Member countries have also signed a deal to eliminate tariffs on 201 products of information technology, worth 1.3 trillion dollars a year, in four years.
However, it is the agreement reached for advanced economies to immediately stop subsidies on agriculture – and in two years for developing countries – which, WTO’s Director General, Roberto Azevedov, described as “the most significant outcome.” To the disadvantage of the poor countries, the US and EU alone provide 380 billion dollars in subsidies to their farmers, according to the World Bank.
“Once again, we delivered,” Azevedo declared during a joint press conference with Amina Mohamed, Kenya’s Cabinet Secretary for Foreign Affairs & International Trade.
He was referring to a deal reached in Bali, Indonesia, two years ago to allow developing countries such as India to stockpile food for few years as a safeguard to their population, although it is in breach of WTO rules.
The sense of gratification was not lost on Azevedo. A day after the summit concluded, he tweeted, “Bali in 2013, Nairobi in 2015 – the WTO is making a habit of delivering major multilateral trade deals.”
Despite the enthusiasm though, many who follow negotiations at the world trade body consider these deals modest gains, and rather cherry-picking. That was the feeling from the very beginning when the summit opened in Nairobi on December 15. Trade ministers from African countries, where Ethiopia’s Yokab Yalla was present, were indignant observing negotiators from the rich countries attempting to duck the Doha Development Round, and sideline it on the agenda of the multilateral trading platform.
Congregated in the western wing of Kenyatta’s International Conference Centre, the African ministers fatefully asserted their threat to deny support to any declaration devoid of the “reaffirmation to the Doha Development Round.”
“We haven’t come to Nairobi to bury the Doha Round,” they had declared a few hours before the formal opening of the ministerial summit, by Kenya’s President, Uhuru Kenyatta.
In the end though, the Nairobi Declaration was signed while member countries still had “persistent and fundamental division” on the prospect of the Doha Development Agenda. For Keith Rockwell, WTO’s spokesperson, it was a candid admission to say, “the Doha Development Agenda has not advanced as much as any of the member countries wanted.”
“Members must decide,” Azevedo urged. “The world must decide about the future of the Doha Round.”
Ironically, trade representatives of the major powers in the global trading sphere, the United States (US) and the European Union (EU), did not hide their fatigue at hearing about the Doha Round. They wanted to see the world move on to talking about what they described as the “new rules for the 21st Century.”
The US Trade Representative, Michael Froman, for one, would like to see Nairobi remembered as a place for the start of “a new chapter for economic new realities.” Froman had, however, set the tone clear even before he landed in Nairobi, that as far as his country was concerned, talks on Doha were, “at the end on the line.” In an OP-Ed he published in the Financial Times, he called the world to “free itself from the strictures of Doha.”
“It’s unfair to put [21st Century issues] hostage to Doha,” Froman declared while addressing trade ministers at the WTO ministerial summit in Nairobi. “Moving on Doha does not mean unfinished business.”
For the Africans, that simply sent a grim message that Nairobi should simply be remembered rather as a graveyard to issues they consider dear to their pulse. Froman’s assertions were ample evidence for the African ministers gathered in Nairobi, that the world had lost its appetite to reach a deal on what they considered the most important concession reached to address the plight of their population in the south.
“Some countries don’t want to see the debate take place,” said Chad’s minister of Foreign Affairs & Trade, in frustration.
There was evident posturing that the WTO ministerial in Nairobi was divided among the camps of those who wanted to close the Doha Round and others who were determined to push for Doha to remain active. It is the most contentious issue of “our time,” according to Yash Tandon, a Ugandan national with Indian heritage whose association with the multilateral trading world dates as far back as 30 years. He was a negotiator on his country’s behalf, and a consultant to other member countries in Africa and later on an activist.
Although retired now, he was as vocal in Nairobi as he was head of the Geneva based South Centre, one of the non-governmental organisations active in the promotion of development in trade talks. NGOs have a love-hate relationship with the WTO, causing total collapse of talks in Seattle in 1999 and disrupting the summit held in Cancun, Mexico, in 2003. Nonetheless, they always find accommodation inside the summit, with access to the conference facility but kept at an arms length from where the ministers sit.
In Nairobi, many of the NGOs had camped in tents on the southern flank inside the compound of the Conference Centre, including one where a slogan on a white poster screamed, “Trade is War” could be seen fighting for its very survival as it was threatened to be blown away by the wind. Inside the tent, a lady was selling booklets and books, mainly one bearing the slogan as its title. It is authored by Tandon and argues that the rich north is in an unabated war with the poor south, albeit the change in the nature of this war.
Tandon sees the WTO simply as a war machine the north has deployed into the south.
“The WTO is an extended arm of US and EU trade and foreign policies,” he writes in his book.
The WTO is an offspring of another multilateral trading platform under the General Agreement on Tariff and Trade (GATT). It was one of the three organisations world powers created right after the end of the World War II, with a pronounced intent to “ensure a stable trade and economic world environment.” It was essentially a platform for the advanced nations to negotiate their average tariffs for the export of industrial goods.
Having a changed world in the 1990s, ministers of member countries who met in Uruguay had agreed to change GATT to the WTO in 1995, where Ethiopia continued to have observer status as it had in the GATT. It remains an observer at the WTO, although its application for accession, placed in 2003, is still under negotiation.
The first ministerial summit was held in Singapore a year after the formation of the WTO, in 1996, where division among the rich and poor countries surfaced in the very agenda items tabled for muinisters to discuss. Known ever since as Singapore Issues”, they included government procurement, trade facilitation, trade & investment, and trade & competition. The issue of development was overlooked, and not without reason.
“The very definition of development is a battleground,” wrote Tandon, who was at the summit in Singapore as a delegate for his country.
A battleground it was proved to be five years down the road when trade ministers met in Seattle, to attend the third ministerial inside the Washington State Convention & Trade Centre. Delegates were sharply divided over the agenda with those representing poor countries dejected by the US and the EU attempt to exclude others from their talk to reach deals on agriculture. Planned to be baptized as the “Millennium Agenda”, the summit was doomed to fail from the start, marred by violent street protests that forced the US government to deploy its national guard to contain the crowd.
“WTO bites,” says Tandon.
It has a sanctioning system enforced on countries reneging on their commitments.
World leaders knew better than to squander the subsequent summit held in Qatar, Doha, where delegates agreed to start negotiations on what was then acclaimed as “Doha Development Agenda.” It has 20 chapters, mainly dealing with agriculture, industry and services.
“A breakthrough in agriculture at the WTO is a basis on which negotiations in other areas may move,” says Tandon.
Hopes were high, the big and the powerful finally came to their senses to integrate the poor countries in the global marketplace. Fourteen years have passed since trade ministers met in mid-December 2015, but Doha Round remains a moving target for many, while other agreements were concluded from the controversial Singapore Issues. A deal on trade facilitation was reached during the ninth ministerial held in Bali, Indonesia, in 2013. Now, even the African Chamber of Commerce is urging its member countries to ratify this agreement in their respective parliaments.
But it is in Bali where the rich countries “carried out a systematic destruction” to the most crucial components of the Doha Round, claims Tandon. Special and deferential treatment is a provision granted to the least developed countries, with a proviso that they would be, “reviewed with the view to strengthening them and making them more precise, effective and operational.”
Trade negotiators have yet to do that while at the same time delegates from advanced economies appear to have lost patience to wait endlessly until the world reaches an agreement. They are rather stonewalling the Doha agenda, observed Eveline Herfkens, former Dutch Ambassador in Geneva, speaking at a side event in Nairobi.
“The developed countries of the west are trying their best to obliterate development from the Doha (Development) Round,” Tandon accused during a seminar organised as a side event in Nairobi, by the Geneva office of the Frederich Ebert Stiftung (FES), a German social democratic civic organisation.
His was an accusation echoed by African trade ministers inside the summit.
“There is no indication of the LDC package being presented [in the Nairobi Declaration],” bemoaned the Trade Minister of South Africa.
Indeed, the focus and energy of trade negotiators from advanced countries was elsewhere, observed Heribert Dieter, a senior fellow at the German Institute for International Security Affairs, and a keen observer of developments in the multilateral trading system.
The configuration in the world has changed a lot more now than it was when the WTO was formed. To the dismay of delegates from the advanced economies, some of the countries included in the Doha Development Round as developing countries are no longer in the same category. China is now a world power in the exports of manufactured goods; China’s investment in Africa, for instance, was estimated to reach 40 billion dollars in 2014. So is Brazil competitive in its agricultural shipments, while India is no less competitive in information technology goods. These are countries are no longer called developing countries but are now called newly industrializing nations (NIN).
The EU and the US want to see these countries get out of their boxes and engage them in what the US Trade Representative described as “extended and updated” issues of the 21st Century. Not surprisingly, trade representatives from the three countries were adamant to see the Doha Round reaffirmed, a position the poor countries found it delightful to hear.
The rich countries have their energies put on some other arrangements, which trade experts call mega regional trade agreements.
“Roughly 20 years later, the excitement over the WTO has evaporated,” says Dieter, in his study titled, “The Return of Geopolitics”.
The EU and the US are the main drivers of these developments, which trade pundits see as a process undermining the WTO.
“The WTO is at a crossroad,” Amina Mohamed of Kenya admitted in Nairobi. “The negotiating function of the WTO has broken.”
Dieter blames the return to the world of geopolitics for the weakening role of the WTO as a global body for trade negotiations. The US has now excluded the newly industrializing countries from preferential trade agreements it has concluded with the EU under Transatlantic Trade & Investment Partnership (TTIP), and Trans-Pacific Partnership (TPP), currently under negotiation among the US, Australia, Brunei Darussalem, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam.
These are signs many see in the US interest in creating an “economic NATO,” but at the peril of the single multilateral trading body that has been in business for the past two decades.
“It’s the fragmentation of the multilateral system by creating competing trading blocs,” according to Hubert Rene Schillinger, head of the FES office in Geneva.
This is not good news for poor countries, warn trade experts. They are institutions with an inherent nature of discriminating between countries.
“TTIP snatches market from sub-Saharan Africa in the value chain,” warns Herfkens. “It can hurt Kenyan flowers, Ethiopian vegetables and Ghana’s cocoa.”
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