Wealthy nations secure their interests at the World Trade Organization

Ensuring Socio-economic Justice

M.S. Ahmed

Rajab 16, 1425 2004-09-01

World

by M.S. Ahmed (World, Crescent International Vol. 33, No. 7, Rajab, 1425)

The interim deal recently struck in Geneva by the World Trade Organisation's 147 members, which purports to commit rich countries to slashing their trade-distorting farm-subsidies and opening their markets to agricultural products, has been described variously as "historic" and as a "catastrophe for the poor". It is not surprising that those who praise the agreement include WTO officials and the principal rich countries, such as the US and members of the EU, that stand to gain from an arrangement that has prevented the talks from collapsing but has not even set a deadline for transforming vague commitments to the removal of subsidies into a binding accord. Nor is it surprising that those condemning it belong to activist groups. The deal is, of course, not one-way, as rich countries extracted a promise from the poor ones to open up their markets to industrial goods and services by removing tariffs.

Supachai Panitchpakdi, the WTO director-general, described the occasion as a "historic moment for this organisation", adding that "we have proof again that when our members set their heads and minds together we can overcome all kinds of obstacles." The trade talks, known as the Doharound, had collapsed twice before, and failure to reach any deal would have been a disastrous setback for the organisation and its officials. But the deal only delays a probable final collapse of the Doha round, and Panitchpakdi's triumphant mood is contrived and temporary. Officials of rich countries, however, have a more substantial cause for celebration, as any delay of a final accord on the removal of their farm-subsidies is in their interests. That explains why Bob Zoellick, theUS's top negotiator, described the deal as a "milestone" and "a crucial step for world trade" that could benefit millions. Pascal Lamy, the EU representative, said that "the results are good for the EU, for developing countries and for others."

But pressure groups and independent analysts were highly critical of the Geneva accord, describing it as a betrayal of the interests of poor countries. Aileen Kwa, a senior analyst of Focus on the Global South, an Asian trade policy group, said that the deal was "a betrayal of the world's poor." And the head of Oxfam's Geneva office, Celine Charveriat, criticised the lack of serious commitments on the part of rich countries to remove their subsidies to farmers, which make it impossible for farmers in poor countries to compete. "There are no cast-iron commitments here, and no clear time line for reform," she said. "The lives and jobs of millions of people depend on these talks, but rich countries are still failing to show leadership, pandering instead to vested interests and forcing developing countries to adopt a strategy of damage limitation."

The subsidies paid by the US and EU to their farmers are distorting world trade badly. The US, for instance, heavily subsidises its 30,000 cotton farmers, depressing world prices and damaging the economies of West African countries, which can grow cotton three times more cheaply than American farmers. The people of some of these countries depend on cotton for 30 to 50 percent of their national income. But the subsidies to American farmers make it impossible for the Africans to compete on the world market. The EU also subsidises its farmers heavily, spending £1.4 billion on dairy products and £1.2 billion on sugar per annum. The sugar subsidy, which is more harmful to growers in poor countries, will stay, as will the dairy subsidy. The American subsidy on cotton will not be removed either, for political reasons. It was president George Bush who boosted the subsidies by signing an extremely illiberal farm bill in 2002, although the Doha negotiations were in progress. John Kerry, the Democratic presidential candidate, has shown no interest in the Doharound either; in fact he has promised to review all trade agreements if he is elected president in November. In any case, whoever wins will need to have his authority to negotiate the Doha round ratified by Congress, and that may take a long time.

One of the problems facing the Doha round is that every country has the power of veto, and it is difficult to see how 147 of them can agree a fair compromise. Moreover, the rich countries have the weight to pressurise many of the poorer ones to drop proposals that clearly challenge their privileged positions. The powerful rich countries meet in secret, agree a strategy, and then set to work on the representatives of the less privileged countries to accept it.

But there is a new development, which should be of great concern to Muslim countries, namely the emergence of "rich developing countries" such as India and Brazil, that are working closely with the US and EU countries, while using their enhanced positions to bargain more effectively and wrest concessions not available to other negotiators at the Doha round. Both India and Brazil, for instance, have praised the deal that pressure groups and independent analysts have criticised so strongly. "Developed countries have recognised that agricultural trade with a heavy subsidy component is not free trade," said Kamal Nath, India's minister of trade; they have done nothing of the sort, of course, and it will take a long time even to discuss the issue at the Doha round. The first formal meeting is in December 2005, and there is no time-limit for the completion of negotiations.

It is clearly in the interests of Muslim countries to work out a common negotiating platform that takes the issue of global trade seriously, as it is not only of economic but also of political interest. The prospect of their adopting such a platform is bleak, at a time when leading Muslim countries, such as Pakistan and Egypt, are cooperating with the US-Western "war on terrorism" (i.e. on Islam and Muslims), and military dictators are in full control not merely of those countries but also of others that are pivotal to an effective economic counter-offensive. Nevertheless the issue should be given greater prominence and discussed publicly in as many forums as possible. It is unfortunate, but not surprising, that the Organisation of Islamic Conference (OIC) does not have any policy for or interest in global trade and the Doha round. But even policy and interest will do no good without strength and a sound ethical platform to work from, and it is this last item that neither the OIC nor any Muslim government seems capable of developing.

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