No fear of failure: Will Africa stand firm in Hong Kong?

In just a few days, Hong Kong will host one of the most important
meetings of the World Trade Organisation (WTO). After the failure of
the last ministerial meeting in Cancun (Mexico) two years ago, there
are fears that history may repeat itself, because so far there is no
consensus on some of the key issues to be discussed. The Draft
Declaration issued by the Director General on November 26, 2005 and
revised on December 2, 2005, has been criticized by several
developing countries as being biased in favor of developed countries
in many of the issues under negotiation, notably on services and
industrial tariffs.

For African and other developing countries the stakes are clear: will
this round be a real development round or will it be subverted by
developed countries, notably the United States and the European Union
(EU), to push for more liberalization and the opening up of
developing countries’ economies to multinational corporations?
Indeed, the current round of negotiations, called the Doha
Development Round (DDR), was supposed to foster development and give
more attention to issues of interest to developing countries. In
particular, it was supposed to correct the egregious inequities and
imbalances of the Uruguay Round Agreement on agriculture which
allowed industrial countries to increase their support for their
farmers, leading to a dumping of subsidized products on developing
countries’ markets and to big distortions in the world prices of
agricultural products.

But the Cancun fiasco and the current impasse illustrate the gap
between developing and industrial countries regarding the
interpretations of the Doha Round. The major sticking points of the
negotiations include agricultural subsidies by developed countries,
liberalization of the services sector and non-agricultural market
access (NAMA).

Over the last two years, African countries have tried to harmonize
their positions so as to strengthen their solidarity and defend more
effectively their interests. This is especially the case for African
least developed countries (LDCs) which joined other LDCs to raise
their specific concerns. In their last meeting held in Arusha
(Tanzania) on November 24, 2005, African trade ministers issued a
statement called the Arusha Development Benchmarks for the 6th WTO
Ministerial in Hong Kong, in which they exposed their views on some
of the key issues to be discussed in Hong Kong.

Agricultural subsidies

They stressed the inadequacy of the proposals made so far on
agricultural subsidies, which are one of the most contentious issues
in the current negotiations. As is well known, cotton subsidies are
the best illustration of the inequities and injustice inherent in the
world trading system. The United States, which controls around 40
percent of the market, spends between $3 and $4 billion annually to
support 25,000 farmers. This has had the effect of depressing cotton
prices in world markets, hurting some 10 to 11 million African
farmers. For African countries, the elimination of agricultural
subsidies has become one of the key tests of the sincerity of
developed countries to correct the imbalances that characterize the
world trading system. In their statement, African trade ministers
insist that agricultural subsidies be phased out by the year 2010 and
call for the removal of all other structural distortions.

Given the formidable pressure from African and other developing
countries on agricultural issues and the fear of another failure, the
United States and Europe are maneuvering to shift the blame to
developing countries. Both have made superficial concessions recently
aimed at ‘meeting’ developing countries’ demands. For instance, on
October 10, 2005, the United States issued a proposal indicating that
it is ready to slash its agricultural subsidies by 60%. However the
proposal is conditional on the EU and Japan agreeing to slash their
subsidies by percentages, already rejected by both. In other words,
the US proposal leads nowhere. On the other hand, the European Union,
while criticizing the US proposal as ‘unrealistic’ and not feasible,
has put on the table a proposal of its own, which puts the onus on
the US.

Industrial tariffs

African trade ministers insist that obligations of African countries
in this area should be commensurate with the continent’s development
level and that they should be granted flexibilities and retain policy
space. Moreover, any appropriate formula should allow Africa to
pursue development objectives, such as industrial policy, employment
creation and product diversification.

This position contrasts with developed countries’ push for drastic
tariff reduction and rapid liberalization of industrial markets. The
satisfaction of these demands would have a devastating impact on
African economies. Already, crippled by structural adjustment
programs, the remaining African industrial base would be eliminated
and industrialization would be put on hold for an indefinite period.
With little industrial prospects, Africa would attract ever fewer
FDIs, except in the mining and extractive industries, which would
reinforce the continent’s specialization in primary products.
Industrial impasse will translate into the acceleration of the ‘brain
drain’, further clouding Africa’s development prospects. Therefore,
African countries should not heed the call for significant tariff
concessions. They should retain these tariffs as a development tool.

Trade in services (GATS)

In this area, African trade ministers have rejected the call for
rapid liberalization and the introduction of new approaches to the
GATS framework. They have reiterated Africa’s right to regulate the
services sector, to open up and liberalize fewer sectors in line with
its development level and priorities. African resistance in this area
is strongly echoed by other developing and emerging countries.

To understand the stakes in the services trade, one must keep in mind
that they permeate all aspects of economic, social and cultural
development. They range from education to health, from transportation
to housing, from banking services to trash collection. Trade in
services accounts for more than 25 percent of world trade and is
growing rapidly. In several developed countries, services account for
about two thirds of economic activity and over half of the world
economy.

Therefore, liberalization in trade in services would represent a
tremendous opportunity to boost these countries’ economies and pave
the way for foreign control of key sectors in developing countries,
as already is the case in many African countries. Indeed, a further
liberalization in this sector would deal a major blow to African
development prospects since this would lead to market delivery of
many of these services, making them inaccessible to the overwhelming
majority of the population. Moreover, liberalization in services
would increase the role and power of foreign investors, thus
hampering or severely limiting state-led development strategies.
Furthermore, this would reinforce the current division of labor. In
light of this, African countries are right in opposing further
liberalization and the opening up of their services sector. They must
have the right to use them as development tools under the control of
national authorities to serve national development objectives.

The African agenda in Hong Kong

In light of the above, for African countries, a successful conclusion
of the Hong Kong meeting should mean the satisfaction of the following:

- Removal of structural distortions in agricultural goods markets as
a result of industrialized countries’ policies;

- The sovereign right to use industrial tariffs and other instruments
to pursue their development objectives, especially to promote
industrialization and full employment;

- Non-reciprocal market access and trade liberalization given the
asymmetry between African and industrial countries in the world
trading system;

- The right to protect their agricultural sector and use other policy
tools to enhance the welfare of their citizens, in particular the
right to food sovereignty;
- Set a firm deadline and a timetable for the elimination of
agricultural subsidies, with transparent and verifiable monitoring
mechanisms;

- Set up compensatory mechanisms for the trade losses due to those
subsidies;

- Opposition to the imposition of services liberalization and the
right to regulate services and liberalize them in line with their
development priorities;

- Maximum flexibility in identifying special products (SP);

- Implementation of effective special and differential treatment
(SDT) measures;

- Inclusiveness and transparency in the negotiation process.

Conclusion

Given the gap between African and other developing countries’
positions and those of developed countries, the Hong Kong Ministerial
will give rise to rude battles and fierce negotiations. African
countries will face an uphill battle. Agricultural issues will be the
make or break issue in Hong Kong. As things stand now, only
concessions by the US and the EU on subsidies and on other areas may
break the deadlock and give a chance to the Doha Round.

The efforts of the United States and the European Union to convince
world public opinion that they have made all the concessions needed
have received the help of several leading multinational corporations.
On November 8, 2005, CEOs and Chairmen from a number of these
corporations published an editorial in the Financial Times, calling
on WTO negotiators to conclude the negotiations “on time”! This
elicited a swift response from several NGOs, which published a
statement in the November 15, 2005 issue of the same Financial Times.

All this shows that governments of industrial countries and
multinational corporations are united in pressuring developing
countries into accepting to make concessions to further liberalize
their economies to the detriment of their own populations. This
campaign aims to intimidate developing countries’ negotiators and
implicitly send the message that they would be to blame if the Hong
Kong meeting were to fail. Intense pressure, heavy tactics and even
physical threat may be applied by the US and the EU to get African
and other developing countries’ negotiators to accept what they have
refused since Cancun.

However, African trade ministers must stick with their demands and
resist the pressures put on them. They must have in mind the
fundamental interests of their countries and citizens. They must not
fear another failure of the WTO, because Africa has nothing to lose.
In reality, another failure of the WTO ministerial will further
expose the hypocrisy, lies and injustices of the current trading
system and illustrate its illegitimacy.