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Hong Kong a disaster for the poor: the WTO Hong Kong ministerial meeting in December, says Tom Nevin, was a slap in the face of the developing world but a triumph for the industrialised countries who want no change to the status quo. The battle continues.

The WTO Hong Kong ministerial meeting was a lost opportunity to make trade fairer for poor people around the world. Rich countries put their commercial interests before those of developing countries. This was the indictment handed down by observers, pressure groups and representatives from Africa and other emerging regions after the disappointing and inconclusive negotiations at the World Trade Organisation (See African Business, December 2005 issue).


The statement continued: "Most of the difficult decisions were put off to a further meeting later this year, but it is far from clear why rich countries that were unable to show the necessary leadership in Hong Kong will behave differently in a few months' time."

"Hong Kong promised so much for developing nations yet again delivered so little," said one African representative. "We did no more than inch forward. Decisions on issues of any weight were deferred to 'early in 2006'. We were denied progress of any consequence."

Hundreds of delegates and ministers descended on Hong Kong for the 4th World Trade Organisation (WTO) ministerial meeting in December last year with the stated aim of helping developing countries get a better deal in world trade.

Hong Kong was billed the "development round" and was supposed to pick up where the earlier Doha "policy round" left off. In effect, the Hong Kong gathering was the next link in a chain of meetings by world players at least in agreement that the global trading system is unequal and unfair for most of the world.

While that much is conceded, what to do about making the global marketplace more rewarding for all remains elusive.

According to Oxfam International, the bulk of the work in agriculture remains to be done, "notably in disciplining rich country domestic subsidies, which lead to dumping and remain largely untouched".

The final declaration contained some minor gains on agriculture, such as setting up a 2013 end-date for export subsidies and providing developing countries with extra flexibility to protect their small farmers.

"There was some progress on preventing the abuse of food aid as a disguised form of dumping, but on cotton, the steps agreed fell short even of those required by the cotton panel ruling against the US," says the NGO.

Overall, however, the concerns from previous years remained, including the lack of transparency and democracy in the decision-making processes and the power that the rich nations have over the poor to distort trade in their favour.

The previous ministerial meeting at Cancun, Mexico in 2003, collapsed when developing countries defied what they regarded as unfair demands from rich nations. "Since then," reflects Anup Shah of Global Issues, "the same issues resurfaced as rich nations appear to have hardly moved on their countless promises, pledges and obligations."

Rich, poor polarised

Considered a small but significant step forward was the further consolidation in Hong Kong of developing countries to deliver a stronger negotiating voice. In a unified front, the new alliance, the G110, successfully fended off some attempts to force open their markets to northern industrial and service sectors.

But even the toned-down text on non-agricultural market access (NAMA) and services is disadvantageous to development, analysts say. NAMA covers practically all traded goods and services outside of agriculture.

In general, however, a weak and unbalanced trade agreement resulted, allowing rich countries to gain many concessions from the poor, with very little in return.

The success or failure of the Hong Round depended to a large degree on whether you were rich or poor. Typically, if you were from the rich bloc of countries, the meeting outcome was a success. As the European Union trade commissioner, Peter Mandelson, noted: "Today, Europe has gone further in its existing commitment to eliminate its export subsidies by setting a clear end date in 2013.

"I said we came to Hong Kong to do business and this shows we meant it. We have demanded, and received, equivalent commitments from others for similar subsidy reform. This is a genuine advance for the agriculture negotiation and for the development goals of the Doha Round. Europe made it happen and we are pleased to have done so.

"We will continue to demand that others move with us, every step, and every cut until all forms of export subsidy are ended."

By contrast Martin Khor of Third World Network observed: "The Ministerial Declaration was balanced against the developing countries. They gave in on the key market access issues of services and non-agricultural market access. In return they did not receive any significant gain in cotton, market access for LDCs, or 'aid for trade', the three main components of a so-called 'development package'.

"As for the 2013 end-date for elimination of agricultural export subsidies, the most publicised claim of benefits from Hong Kong, it was no victory. This greatest-distorting subsidy of all should have been eliminated many years ago, and no price should have been asked for it."

"Why such diverging views?" asked Khor. "As has happened in the past, these views have often been so divergent because of the audience to whom such statements are made, and for whom the deal is beneficial. For the EU, and other rich countries, it is in their interest to minimise any concessions as they clearly benefit from the current international economic system.

"Small gains for poor countries will thus be spun in as much of a positive light as possible, even if, as in this WTO round, the concession for a 2013 target date to eliminate agricultural export subsidies is a scandal given it should have been eliminated years ago. Thus a defeat can be presented as a victory."

One developing country's ambassador noted: "If it is so hard to get so little from the developed countries, the negotiations will be very tough when they resume in Geneva." That statement gave a glimpse of the feeling of how little the developing countries gained from this meeting.

"Furthermore, the real prize that the major developed countries wanted out of Hong Kong was a change in the negotiating modalities in services, so that they would have new instruments to pressurise developing countries to open up their key services sub-sectors. Despite massive opposition from a very large number of developing countries, including the G90, for five days, the developed countries eventually got what they wanted."


So why sign at all?

Inevitably the question must be asked: If the Hong Kong declaration is so bad, why did the developing countries sign up to it?

One commentator offers the explanation that the mood among most developing countries in the final Heads of Delegation meeting was one of grudging acceptance rather than celebration. Almost all delegates agreed that a Cancun-style collapse would damage the WTO as an institution, perhaps terminally, and were keen to avoid such an outcome.

Beyond the psychology of the ministerial, most big decisions were deferred until later. The doors were left sufficiently open in complex negotiations so that ministers left feeling that at least something could be achieved for their countries in the future. But if developing countries "had not asserted themselves in the way they did, the final text would have been much worse," comments Oxfam. Since the G8 Summit earlier in 2005 and the accompanying Make Poverty History Campaign and Live8 concerts, issues such as agricultural subsidies and their harmful impacts, as well as the high barriers rich countries put up to prevent market access for the poorer countries, have all led to increasing pressure on Europe, the US and others to open up their markets and practise what they preach.

"As a 'development round' Hong Kong's WTO talks were to move closer to elimination of those unfair subsidies," says Khor. "Instead, the poorer countries lost out again."

Rich countries, Europe in particular, hailed the agreeing of the 2013 end-date for the elimination of export subsidies as a great moment for poor countries, and an act to help them. "However," Khor points out, "not only are export subsidies just one small part of the overall subsidies, but rich countries will only eliminate them if poor countries agree to further concessions."

"Unless developing countries stand firm against pressures ... they may be setting themselves up for another highly imbalanced outcome and a more oppressive multilateral trading system.

"These policy choices that developing countries need, and rich countries are denying them, will be no more than what today's industrialised countries used during their period of industrialisation and development, but which they now want to deny to the developing world. Market access for exports of developing countries in the developed world is important, but without policy-space and ability to produce and export 'value-added' goods, market access will not become development."
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Title Annotation:SPOTLIGHT
Author:Nevin, Tom
Publication:African Business
Geographic Code:0DEVE
Date:Feb 1, 2006
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