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Contributions from
the Column
Focus
Taking the development round seriously
The Doha Development Round between wishful thinking and political reality
The "development round" myth
Trade and environmental policy need to support each other
8-9/2003
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On the road to Cancún –
taking the development round seriously
By Heidemarie Wieczorek-Zeul
From September 10 to 14, delegates will gather in Cancún, Mexico, for the 5th WTO ministerial conference – a conference arranged to take stock of the progress achieved so far in what was supposed to be a "development round" of trade talks. Development Minister Heidemarie Wieczorek-Zeul urges the participants to make the round a success and reiterates Germany's demands.
Almost at the last minute, EU farm ministers reached agreement on the framework for future reform of the Community's agricultural policy. Even though the dismantling of product subsidies does not extend to all sectors and will not be 100%, the way has been paved for decoupling subsidies from production - a step which shows that even the EU has realised it needs to come up with something more substantial ahead of the upcoming ministerial conference.
Will the WTO round become a development round?
This is because the conference will help decide whether the promise made in November 2001 to make the current round of WTO talks a development round will indeed be kept. At the end of the 4th WTO ministerial conference at Doha, the participants agreed for the first time to put the interests of the developing countries at the top of the agenda in the next round of talks – and that round ends on January 1, 2005. By then we will know whether the international community is going to fulfil its development policy responsibilities. I therefore call upon all industrialised countries to liberalise global trade in ways which help promote development. Doha must not be allowed to go down in history as just a base used by US armed forces for the war in Iraq in 2003; it should be turned into a synonym for development-friendly trade.
It is a fundamental fact that without global trade for all there can be no development for all. What is really crucial for affluence and growth in developing countries is access to world markets, the opportunity to sell manufactured goods. This close connection has been repeatedly pointed out, not least at the Monterrey conference on financing for development in March 2002 and the world summit on sustainable development in Johannesburg in August/September 2002. Trade can make a considerable contribution to sustainable poverty reduction. Having said that, though, if liberalisation of trade is to have a poverty-reducing impact, it is vitally important that it should be embedded in a comprehensive national development and poverty reduction strategy. This is why German development policy in recent years – especially since 1998 – has addressed the issue of trade and made it one of its three top priorities under the banner "making globalisation fair". This stance is also reflected in the Federal Government's "Action Programme 2015", which was adopted in April 2001 and sets out Germany's contribution to halving extreme poverty in the world by 2015. It, too, emphasizes the importance of fair trade opportunities for the developing countries.
What Germany requests from the talks
So what demands do I want to see the present round of world trade talks meet? Any further liberalisation of trade needs to be in the interests of the developing countries. Where they have exportable products, they have to be given fair opportunities to trade them. In the OECD especially, more coherence is required between development and trade policy. Opening markets and dismantling trade-distorting barriers must not avoid sectors where the developing countries have export potential. At the beginning of 2001, the EU passed a resolution as part of the "Everything-But-Arms" initiative to grant quota- and duty-free market access for a number of products from the world's poorest countries. That is the way we need to be heading. Above all, as stated in the Doha Ministerial Declaration, all forms of export subsidy for agricultural products need to be ended – because farm export subsidies in the rich world are a form of permanent aggression towards developing countries, especially those in Africa. We cannot preach fair trade and then withhold it from the developing world when it doesn't suit us. So the first thing I would call for is a moratorium, a suspension of farm export subsidies for the duration of the round of talks.
What are the issues in Cancún? With a mandate dating from the Uruguay round, the WTO Committee on Agriculture has been locked in negotiations about farming since early 2000. The schedule drawn up by the 4th WTO ministerial conference provided for major preliminary decisions by March 31, 2003 in all of the "three pillars" of negotiations (market access, export subsidies, internal support) as well as on issues not related to trade (e.g. consumer, health, plant and wildlife protection). That target was not met. Despite lots of efforts and a number of successes, the negotiating positions of those involved are at present still wide apart. The offers made by the WTO member states to date are summarised in a first draft document by the chair of the Agriculture Negotiating Group. Those offers, proposing different rules for industrialised and developing countries, concern reductions in customs duties (including a special provision for tariff escalation), minimum market access, dismantling of export subsidies as well as internal support. They also include a special protective mechanism for developing countries, safeguards for the preferential treatment received by the developing countries in Africa , the Caribbean and the Pacific (ACP states) which have special contractual ties with the EU, and other exceptions for the world's least developed countries (LDCs). The key question, as I see it, is this: are the farm talks geared to the interests of the developing countries or are they too one-sided, focused on the liberalisation of trade?
The interests of developing countries are being taken seriously
At the present stage of negotiations, I think it is fair to say that the interests of the developing countries are certainly being taken seriously and in that sense the negotiations are "development-geared" and at least going in the "right direction". This can be seen from the fact that developing countries can claim special protection for "strategic products" (i.e. important staples such as rice or maize) and the list of forms of export support not subject to restrictions is being extended for developing countries but not for industrialised countries with corresponding exports. What is more, the developing countries can take more time over dismantling trade-distorting support than industrialised countries. Indeed, the least developed countries are exempted from the obligation to dismantle support altogether.
However, there are also shortcomings which we need to work on eliminating. This first draft document launches a fairly vigorous attack on EU export subsidies but takes a much more lenient view of equivalent US instruments like export credits, food aid and export monopolies. Also, it does not make adequate distinctions between threshold countries, developing countries and least developed countries. Above all, I want to see all OECD countries finally grant the poorest countries duty- and quota-free access to their markets. There must no longer be any exceptions.
The negotiations on customs tariffs are also a matter of great importance for developing countries in the industrial sector. Here, too, a first draft document has been prepared, proposing that tariffs should be lowered on the basis of a general formula, with developing countries receiving special treatment. The formula is based on bound tariffs; a sharper reduction should be possible in certain sectors of particular importance for the developing countries (textiles, clothing, footwear). Above all, something needs to be done about high duties and tariff escalation. It is scandalous that industrialised countries still impose lower duties on imports from each other than on imports from developing countries. Like agricultural export subsidies, this is an unacceptable injustice denying countries that desperately need help any chance of autonomous development. This issue also shows the industrialised countries' readiness to take their global responsibilities seriously. I therefore call on all the negotiating parties to put an end to this deplorable state of affairs.
Contentious: drugs and services
Since the WTO ministerial conference in Doha, there has been an ongoing debate about how developing countries can get economical drugs to fight dire epidemics. That debate is staged under the acronym TRIPs (Trade-Related Aspects of Intellectual Property Rights). As things stand, compulsory licences for patent-protected products and processes can be issued only as long as the medicines manufactured under them are used predominantly to meet domestic needs and not for export. Where pharmaceutical production in a country is not sufficiently developed to enable such products to be manufactured, however, the issuing of a compulsory licence does not help. For this reason, the Doha declaration on the TRIPs agreement and public health assigned the TRIPs Council the task of working out a solution for this special situation by the end of 2002. So far, however, those efforts have failed because of the attitude of the US government, which has refused to make concessions in order to protect its own pharmaceutical producers and avoid loss of income for an industry with a strong lobby. Now, however, there appear to be signs that the US position is softening, which I would greatly welcome - because controlling AIDS, tuberculosis and malaria is a responsibility for us all. The death of millions of AIDS sufferers, above all in Africa, causes untold distress. What is more, the generations that are dying are those that make up the active population and could contribute to their countries' development. AIDS does not just kill; it also blights the future – and the entire international community needs to take resolute action against it.
The present round of WTO talks also focuses on the liberalisation of services. These negotiations commenced at the beginning of 2000 on the basis of the WTO service agreement GATS (General Agreement on Trade in Services) and were integrated in the new round of talks by the Doha Declaration. Now, as part of the total package, they need to be concluded by January 1, 2005. No decisions will be taken on services in Cancún, but the conference offers a chance to take stock.
Public opinion is divided over the GATS; it is associated with many fears of globalisation and its unfair consequences. Non-governmental organisations, in particular, are critical of the GATS as a whole or individual elements of it. I consider that discussion not only right but absolutely imperative. It reminds us of the objective we set ourselves of helping to make globalisation fair and involving civil society. This is why I urge transparency in the WTO negotiations, so that that discussion can run a successful course.
At this point I should like to stress once again what my basic position on the whole process of WTO talks is: liberalisation is not an end in itself. The liberalisation of trade in services should lead to economic and social development and make a contribution to poverty reduction in the developing countries. The preamble of the GATS clearly states that one of the objectives of the agreement is to increase the level of participation of the developing countries, especially the LDCs, in international trade in services. The GATS explicitly requires the industrialised countries to take liberalising action where markets are of interest for developing country exports. That requirement needs to be fulfilled in the current negotiations. The GATS grants the developing countries a certain amount of flexibility with regard to the degree of liberalisation. They are not expected to open their markets to the same extent as the industrialised countries. They can broaden market access in stages, in step with their development. The developing countries need to be supported here so that they do not agree to liberalisation proposals which are not in their interest, e.g. because the institutional and regulatory systems required are not in place or liberalisation is not in accordance with national development goals.
What is clear from the outset, however, is that the core area of public services of general interest cannot and must not become a subject for debate in the negotiation process, neither here in Germany nor in Europe, nor in the developing countries. The WTO agreement on services contains no obligation to open markets in certain sectors and definitely sets out no requirements to privatise public services. Negotiating pressure in this direction should not be allowed to build up either. We advise developing countries on ways in which trade and development policy decisions can be coherently connected – because trade policy is ultimately just a tool; it is development prospects that are the actual goal!
Strengthening developing countries' capacities
As I have mentioned several times, developing countries need to be able to assert their interests in the round of negotiations, they must not be put under pressure and they do not need to yield to any pressure that may be applied. To ensure this, however, the developing countries need to be able to find a negotiating position that benefits their future development and then actually be able to defend that position. For this purpose, a Doha Development Agenda Global Trust Fund was set up to fund measures in developing countries with precisely this goal. Germany is among those financing the fund. In 2002, we contributed 525,000 euros, this year we paid in 915,000 euros. We also stepped up bilateral trade-related cooperation. At the Monterrey conference, I made an additional 2.5 million euros available for this sector, followed by another five million euros at a later date. Altogether, the Federal Development Ministry funded bilateral trade-related Technical Cooperation to the tune of 75 million euros. All these measures are aimed at strengthening the capacities of the developing countries in the negotiations, helping them implement international projects and improving the standard of developing countries' exports so they stand up to international competition.
The negotiations will only lead to a successful conclusion if more than lip service is paid to the concept of a development round and adequate account is taken of the developing countries' needs and interests. The ball here is in the industrialised nations' court – and what they do with it will decide not only our own future but also whether efforts to make globalisation fair work.
Heidemarie Wiezcorek-Zeul is Germany's Federal Minister for Economic Cooperation and Development.
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