D+C Development and Cooperation (No. 2, March/April 2002, p. 23 - 25)

The next round in multilateral trade negotiations must be a Development Round. This was demanded before the recent summit of the World Trade Organisation (WTO) in Doha by many member states, including the German government. Have these demands been matched by the results of the Doha meeting? An assessment from a development policy of view.

At the end of the 4^th WTO Ministerial Conference in Doha, Qatar, the representatives of all WTO member states vigorously applauded Director-General Mike Moore when he dubbed the adopted work program for the new round of trade negotiations the "Doha development agenda." Doha - a success for the developing countries? Or is the tag "development round," as Le Monde Diplomatique put it, mere juggling with names?

The launching of a new round of trade negotiations with a broad agenda was the objective persistently pursued by the industrial countries, in particular the European Union, the United States, Canada and Japan. This objective has been achieved. Besides the continuation of the negotiations in the fields of agriculture and services, the Ministerial Declaration adopted by the Conference provides for the opening of negotiations in eleven additional fields. Undoubtedly a success for the industrial countries.

Clear mandate for a new
development round

The negotiating mandate, though, clearly reflects the political will to make the new round a "development round" with the aim of significantly improving the integration of the developing countries into the world trading system. To a large extent it takes into account the specific interests of the developing countries. Certainly a success with which the developing countries can credit themselves. A crucial factor for the course and the successful outcome of the Ministerial Conference was, without doubt, the active involvement of the developing countries in the preparatory and negotiating process.

Doha determines merely
the work program for negotiations

The Ministerial Declaration adopted at the conference merely determines the work program for the new round of trade negotiations. Whether the objective of a development round will actually be achieved can only be judged at the end of the negotiating process in consideration of the overall results. In a comment, the World Bank correctly analyzed that, "... while the Doha decision is an important step forward ..., it may in fact prove to be the easy stage: launching a set of negotiations does not ensure that resulting outcomes will favor development." At the Ministerial Conference in Doha, the WTO member states only agreed on the agenda for the trade talks and a time frame; successfully completing the new round is an entirely different matter.

Three factors contributed decisively to the positive outcome of the Ministerial Conference. There was a broad consensus among the WTO member states that (i.) a second Seattle-like failure would put the WTO’s workability at risk and was to be avoided at all costs (the 3^rd WTO Ministerial Conference in Seattle in December 1999 ended in chaos without the adoption of a Ministerial Declaration); (ii.) the recessionary trends in the world economy were to be countered with the successful conclusion of the Ministerial Conference in Doha to improve the prospects for short-term recovery and, thereafter, sustained economic growth; (iii.) in response to the terrorist attacks of September 11, 2001, there should be a clear commitment to strengthen the rules-based multilateral trading system. Failure was, therefore, not an option. The strategic conclusion drawn from the Seattle failure was to limit the Doha Ministerial Declaration to establishing a broad, generally-worded negotiating mandate for a new round of trade talks that does not anticipate the outcome of the negotiations on controversial issues. The strategy worked. The deliberations at the Ministerial Conference focused on the scope of the negotiating mandate. The task of reconciling the conflicting interests between industrial and developing countries and working out a fair compromise has been left to the forthcoming negotiations.

Recognition of the interests of the
developing countries

In view of the objective of creating a basis for sustained economic growth in the developing countries by better integrating them into the world economy and increasing their share in world trade, important preliminary decisions with regard to the forthcoming negotiations were taken by the Ministerial Conference:

• the Ministerial Declaration stresses the importance of implementing and interpreting the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) in a manner supportive of public health and access to medicines; in recognition of the seriousness of the problem, a separate ‘Declaration on the TRIPS Agreement and Public Health’ was adopted; a number of public-health-related issues have been referred to the Council for TRIPS for further deliberation;
• the Council for TRIPS has been tasked to examine the relationship between (i.) the TRIPS Agreement and the Convention on Biological Diversity and (ii.) the protection of traditional knowledge, taking full account of the development dimension;
• numerous problems regarding the implementation of WTO agreements are dealt with in a separate ‘Decision on Implementation-Related Issues and Concerns’ adopted by the Ministerial Conference; outstanding implementation issues are to be addressed as a matter of priority by the relevant WTO bodies;
• the Council for Trade in Goods will examine the proposal to bring forward the liberalization of the textile sector under the Agreement on Textiles and Clothing;
• as regards agriculture, comprehensive negotiations were agreed on, aiming at: substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support;
• as regards market access for non-agricultural goods, negotiations were agreed on, with the aim of reducing or, as appropriate, eliminating tariffs and non-tariff trade barriers, in particular on products of export interest to developing countries;
• recognition of the principle of special and differential treatment of the developing countries as an integral part of all WTO agreements;
• technical cooperation and capacity building have been recognized in the Ministerial Declaration as ‘core elements of the development dimension of the multilateral trading system’ and firm commitments have been established in various paragraphs.

Turning the Ministerial Declaration’s
spirit into practical policy

With these preliminary decisions regarding the agenda of the forthcoming negotiations, the course is set for the better integration of the developing countries into the world economy. To stay the course, there must be clear commitment and political will on the part of the industrial countries to make the new round a ‘development round’ by taking the developing countries’ interests fully into account, being prepared to make meaningful concessions, and making good on the promise of significantly increased trade- and investment-related technical assistance.

In the course of the negotiations it might prove a problem that many of the obligations in favor of the developing countries are formulated rather vaguely. The Ministerial Declaration is confined to declarations of intent even where - with a certain degree of goodwill - binding commitments would have been politically feasible. The bringing forward of the liberalization of the textile sector, a key demand of the developing countries, has been referred to the Council for Trade in Goods for examination; this is certainly an expression of the industrial countries’ willingness to compromise, but it in no way anticipates the final decision. As regards the objective of duty-free and quota-free access for all products of the least developed countries to the markets of the industrial countries, the Ministerial Declaration simply repeats the commitment which was already expressed in the United Nations Millennium Declaration of September 2000, at the 3^rd United Nations Conference on Least Developed Countries in Brussels in May 2001, and at the G7/8 Summit in Genoa in July 2001. Except for the European Union, no party has put this commitment into practice so far; the United States and Japan in particular have shown little enthusiasm for introducing duty-free and quota-free access for all LDC products.

What makes us believe that the Doha Ministerial Declaration will make a difference? The chapter on agriculture is more specific in that it provides for negotiations aimed at significantly improved market access, reductions/phasing out of all forms of export subsidies, and substantial reductions in trade-distorting domestic support. However, a clear road map including a timetable for the negotiations and specific benchmarks for the reduction targets were beyond Doha’s reach; in addition, the qualifier that the commitment to comprehensive negotiations does not prejudge the outcome of these negotiations leaves a back door open. In conclusion: If you remove the merely rhetorical phrases - such as "we place the developing countries’ needs and interests at the heart of the Work Program adopted in this Declaration", "to take fully into account the development dimension ...", - from the Ministerial Declaration, it becomes quite clear that the text contains relatively few ‘programming elements’ with a view to the development agenda of the forthcoming negotiations.

Fears that the vested interests of the industrial countries will re-gain precedence over development aspects in the course of the negotiating process are certainly not entirely baseless. The ‘steel war’ the United States is about to declare on the rest of the world clearly indicates that the Doha fair weather period is over. Business as usual has returned. The American steel tariff threats prompted EU Trade Commissioner Pascal Lamy to speak of a "perverse signal at a time when the ink is barely dry on the Doha Agreement."

The nongovernmental organizations have a decisive role to play. It is their role to monitor the new round of trade negotiations, to make the negotiating process more transparent, to create public awareness with regard to the issues at stake, and to build up political pressure with the objective of making sure that development aspects are not pushed to one side and that the interests of the developing countries will make their way into the agreements to be concluded.

Coherence of trade policy and
development policy

The negotiating mandate for the new round of trade talks adopted in Doha has brought development politics onto the agenda of the WTO. The mention of development aspects in the WTO set of rules and regulations is not, in essence, new. In fact, the development dimension is recognized as an integral part of the general WTO mandate to foster economic growth. However, the particular importance the Doha Ministerial Declaration attaches to the consideration of development aspects in the negotiation process (it seeks, as it is put there, "to place the developing countries’ needs and interests at the heart of the work program") offers the opportunity to achieve greater coherence of trade policy and development policy. In this respect, the Doha Ministerial Declaration reflects the same trend as the "Everything-but-Arms-Initiative" (EBA) of the European Union. Subsequent to its adoption by the EU member states, Pascal Lamy emphasized the coherence aspect as the characteristic feature of the EBA Initiative (outweighing the shortcomings relating to bananas, rice, and sugar) by saying, "It is the first time that the European Union’s rade policy has been substantially modified by the necessity of contributing to development policy." This perspective also characterized the 3rd United Nations Conference on Least Developed Countries in Brussels in May 2001.

To sum up, it can be said that the Doha conference has sent out an important signal for the process of coordinating trade and development policy with the long-term objective of achieving a coherent policy framework. The next step towards greater coherency can be taken at the International Conference on Financing for Development in Monterrey/Mexico in March 2002.

Sustainable development as the
guideline for further developing the
multilateral trading system

The Ministerial Declaration reaffirms the commitment to the objective of sustainable development, as stated in the preamble to the Marrakesh Agreement of April 1994 (i.e. the Agreement establishing the WTO). However, theory and practice are far apart. The negotiating mandate for the new round is too cautious a step towards integrating environmental and social aspects into the WTO set of rules and regulations to be able to bridge that gap. Looking at the three pillars of the sustainable development concept - economic development, environmental protection, and social protection -, in a nutshell the following can be said:

The negotiating mandate for the new round deserves good grades as far as the first pillar, economic development, is concerned. The course is set for better integration of the developing countries into the multilateral trading system, thus giving them the chance of actually benefiting from further trade liberalization in the form of trade-induced economic growth. The inclusion of the so-called ‘Singapore issues’, investment and competition, offers the prospect of a medium to long-term improvement of the business and investment climate in the developing countries. As for environmental protection, negotiations on a (very) limited scale have been agreed on, the desirability of further negotiations will be examined. This is certainly not a big breakthrough, but a first step towards integrating ecological aspects into the trade rules. Disappointingly (but not surprisingly), social issues were not dealt with at the Doha Ministerial Conference. The developing countries’ resistance to even discussing social issues, such as core labor standards, in the framework of the WTO could not be overcome; the issue was considered an absolute ‘dealbreaker’.

Outlook

The developing countries’ consent to the launching of a new round of trade talks cannot disguise the fact that there are still significant differences of opinion over a number of issues, including such key issues as agriculture, environment, investment and competition, and that there is a great deal of mistrust on the part of the developing countries. The one-day extension of the Ministerial Conference alone is proof of how difficult the process of reaching consensus on the launching of a new round of trade talks and its agenda had been. In order to successfully conclude the new round, the industrial countries have to deliver on their commitments, such as improving market access for goods of export interest to the developing countries and increasing their trade-related technical assistance.

The assurance of increased technical assistance was a major bargaining chip in getting the development countries’ OK for the new round. If insufficient funds for technical assistance and capacity building measures are provided, it will most certainly diminish the chances of getting quick results. In a comment on the forthcoming negotiations, the British Economist also highlighted the credibility aspect and the need for significant concessions, "Poor countries remain deeply suspicious of the rich world’s commitment to truly freer trade. They bitterly remember the Uruguay round, whose benefits went mostly to the rich. For the new talks to succeed, those suspicions must be proven wrong. Europe and America must quickly open up their markets for farm products and textiles. They must show that environmental concerns are not going to become a backdoor excuse for renewed protectionism. They must reform their oft-abused system of anti-dumping rules. And they must deliver on promises to beef up poorer countries’ capacity to deal with the intricate procedures in the world trading system."

The Doha Ministerial Declaration offers the prospect of long-term gains for the developing countries. However, turning potential into actual gains requires tenacity in pursuing policies aimed at improving the business climate and, in general, the framework conditions for economic growth. Increased trade-related technical assistance and improved market access will not automatically result in growing export volumes for the developing countries. In addition, the strengthening and diversification of productive capacity is required. Successful integration into the global economy depends on tackling the supply-side constraints and other ‘behind-the-border impediments to trade’ (ranging from weak infrastructure, insufficient ancillary services and poor governance to macroeconomic instability). The Tanzanian Trade Minister, Iddi Simba, emphasized the complexity of the problems the developing countries are facing in his statement at the Ministerial Conference: "To operationalize the development agenda we need to have adequate capacity building which will go beyond addressing the normal WTO obligations. Adequate resources in the form of financial and technology transfer need to be in place to address the supply-side constraints. Along the same lines, WTO Director-General Mike Moore stated, "Capacity problems [in producing goods and services competitively], not trade barriers, are the major obstacles to growth in developing countries."

Concluding remark

By creating a rules-based multilateral trading system, the WTO set of rules and regulations contributes to the shaping of the process of globalization and to the emerging system of global governance. However, it can hardly be disputed that so far the industrial countries have been the main beneficiaries of the WTO-driven economic globalization. We are still miles away from a true win-win situation. In a recent interview with the German weekly Die Zeit, the Nigerian President, Olusegun Obasanjo, criticized the industrial countries’ hypocrisy, saying, "Globalization is a good thing. But only if there is a level playing field, from which all countries are able to benefit. You tell us that we have to open up our markets for your goods, whereas you keep your markets closed for our goods. Europe protects itself with innumerable trade barriers, everybody knows that. What kind of rules are those?"

That is exactly what matters. The new round of trade negotiations launched in Doha must result in modified trade rules. Trade rules which take account of the specific economic constraints of the developing countries and are more favorable to them. The developing countries must be given the chance to ‘cash in’ on trade liberalization and, strengthened by trade-induced economic growth, to pursue national pro-poor policies aimed at eradicating poverty.

Dr. Michael Hofmann is Director-General (Global and sectoral tasks; European and multilateral development cooperation),