MacroScan (Printable Version) - What is at stake in Doha ?

The ongoing WTO Ministerial Meeting at Doha in Qatar was the focus of controversy well before it started. The WTO has been subject to growing criticism not only from governments of developing countries but also from civil society in developed and developing countries. It has been found that the way in which the Uruguay Round Agreement has worked in practice has contributed not to the promised increases in trade and economic prosperity, but greater income disparities, livelihood insecurity and reduced access to essentials like life-saving drugs for people across the world.

Protests against these outcomes, both on the streets and within the meeting rooms, led to the failure of the Seattle talks. For a while it even seemed as if the Doha meeting would not go through, because of security fears of the US and other developed country delegations after September 11. In fact, this has reflected itself in reduced participation at the senior level : for example, the number of people in the official US delegation has shrunk from about 300 to 40, and neither the US Secretary of Commerce nor the Secretary of Agriculture is present, nor is there a representative of the US Congress.

That the Doha meeting is still being held reflects several forces : the sheer embarrassment at the multilateral level, at having to postpone such a meeting which is formally mandated by the GATT accord and which has been planned for two years; the need to make up for the failure of the Seattle meet; the desire of some developed countries to initiate a new Round of trade negotiations which would include non-trade issues such as investment and competition policy and reductions in industrial tariffs

Simultaneously there have also been other, more insidious, attempts to treat the September 11 attacks as a means of pushing even more external liberalisation down the throats of developing countries. The pretext is that such terrorism is an attack on free trade which will supposedly deliver prosperity for all. And the US Trade Representative made it very clear that he saw the need for even greater and more comprehensive trade talks because of, not despite, the terrorist attacks and the subsequent war.

However, most developing countries, and certainly most ordinary citizens in all countries who have some knowledge of the actual experience with trade patterns and the effects of external liberalisation on domestic output, employment and livelihood security, are understandably sceptical about such an argument. In fact, as shown below, the experience since 1995 has been very disappointing.

Projected gains from the Uruguay Round Agreement

At the time of signing the GATT agreement in Marrakesh in 1994, there were widely publicised reports of the supposed gains to all countries from the various measures covered in the Agreement. These gains were supposed to come from tariff reductions, opening of agricultural trade and reduction of subsidies by developed countries, liberalisation of trade in textiles and clothing and better market access for all exports. In economic terms, these were then supposed to involve the following kinds of gains

1) "Static gains" due to a reallocation of resources to areas of comparative advantage (that is, those that are relatively better at producing particular goods).

2) "Efficiency gains" that would result from reduced slack in economies that have been highly protected.

3) "Dynamic gains" due to improved technical efficiency or lower input use per unit of output and technological change.

While the first was supposed to result from a shift international production patterns, the second and third were supposed to emerge from stronger competition within and between national economies. The projections of such gains in terms of increased value of world trade ranged from $180 billion to $ 230 billion over ten years, around two-thirds of which was supposed to accrue to developed countries and one-third to developing countries.

It was largely the promise of such gains that lured most developing countries into signing the entire Final Act, even though many specific agreements such as those relating to intellectual property and investment measures were seen as detrimental to their interests, and aspects of the other agreements were also problematic for them. Even the Indian government presented the case in favour of signing the Marrakesh Agreement in terms of the benefits that would come from increased exports of agricultural and textile products as well as more inflows of investment because of greater international trade in general.

Actual trade patterns over the 1990s

In what follows, we consider the broad patterns of world merchandise trade over the 1990s. As will become evident, most of the expectations have not been realised, and the projections of increased trade flows were far too optimistic. In fact world trade growth has been slower in the second half of the 1990s, after the signing of the Uruguay Round agreement, than in the first half of the 1990s. And many developing countries feel that they have even greater problems of market access and protectionist barriers to their exports than they had before. This is why implementation issues have become so important among developing countries in the WTO.

There is no doubt that international trade has become far more significant in the world economy, and over the past two decades world trade has grown faster than world output growth, as Chart 1 shows. However, as evident from Chart 2, over the 1990s the value of world trade has fluctuated substantially over the major product groups, and only in mineral products (which include petroleum) has it gone up rapidly, mainly because of rising oil prices in world markets over the second half of this period. In fact, in agriculture, the value of world trade has stagnated and then fallen over the 1990s, while manufacturing exports grew more slowly in the second half of the decade.

This becomes even more clear from Chart 3, which shows annual compound rates of growth of exports in dollar values for the major product groups, over the two halves of the decade. Note that this division also marks the period before and after the formation of the World Trade Organisation, which was supposed to lead to a rapid and exponential expansion in world trade. In all the major commodity groups except mining (for which the increase in export value growth is almost entirely the result of rising oil prices) rates of growth of exports in world markets have fallen, and for agricultural exports they have turned negative.

Obviously, the promise of rapid trade expansion consequent upon the signing of the Uruguay Round GATT agreement has thus far turned out to be a false one. A basic reason for this has indeed been because the expectations of increased market access for developing countries have not been met. In the areas where developing countries expected the most gains – tropical agricultural products and textiles and ready made garments, market access conditions for developing countries have worsened.

And this has happened completely within the legal provisions of the GATT Agreement. This tends to confirm the point made by critics at the time, that these agreements themselves were flawed and unequal, drawn up in forms which were inimical to the interests of developing countries as well as workers and consumers in developed countries.

The combination of stagnant or reduced market access and increased export dependence of many developing countries has meant that many developing countries have had to respond to this by trying even harder to push out exports, at lower prices if necessary. In fact this downward pressure on many export prices has been evident even in developed countries, and in both primary and manufactured goods.

Chart 4 describes the movement of unit values of exports over the 1990s. It shows how, other than for oil, unit export values have declined continuously from the rather low peak of 1995. For agricultural exports, which have been the hardest hit, unit values of exports have fallen by nearly 20 per cent just in the five year period between 1995 and 2000. Even for manufactured goods, unit values have fallen by 17 per cent over the same five year period. These translate into very sharp annual average declines of nearly 5 per cent and 4 per cent respectively, as Chart 5 indicates.

These world trade price declines are especially evident in the case of primary commodities other than oil. Chart 6 shows how prices of raw and processed food have fallen over the 1990s, and Chart 7 makes it clear that minerals and metals other than petroleum have also faced stagnant or falling prices. Incidentally, as can be seen from Chart 8, even crude petroleum prices have only risen significantly in the last two years of the decade, and that has created the impression of buoyant prices in this category.

The interesting point that emerges from the Charts 9 a, b, and c is that in the two decades since 1980, the share of developing countries in world trade has not increased, which is quite contrary to general position. Even in the decade 1980-1990, which was the period of rapid expansion of manufacturing exports from the East Asian economies and other newly industrialising nations, the overall share of developing countries in total world exports fell quite sharply, largely because of the decline in primary exports in value terms. The subsequent recovery in share over the 1990s in turn can be traced once again to primary exports – essentially the rise in oil prices – rather than manufactured goods exports as such.

The point in all this is of course that that the expectations about greater access to developed country markets, or about trade deregulation leading to much expanded volumes of trading activity and greater prosperity for developing country exporters as well, have proved to be false thus far. It is misleading to argue that all these benefits would become evident only by 2005 : the point is that the GATT Agreement was supposed to have unleashed dynamic processes which would already have made themselves felt through more buoyant trade, but in fact the opposite has occurred.

It is in this context that developing countries’ demands for review and implementation of the existing treaties must be seen. The point is that developing countries have not received trade benefits which would have made it worth their while to give up so much in terms of the adverse consequences of the TRIPS agreement, their own import liberalisation which has affected domestic output and employment, and loss of sovereignty in other decision making. And therefore the calls for review of the agreements, their implications and implementation, followed by possible renegotiation of these agreements, are perfectly legitimate demands.

The pre-Doha negotiation process and the Draft Ministerial Declaration

What has made the Doha meeting even more controversial has been the practice adopted by the current WTO Secretary General, Mike Moore, and the Chairman of the General Council, Stuart Harbinson of Hong Kong. The pre-Doha negotiations were intense and many developing countries put in tremendous energy and effort using scarce resources to put in their arguments and present papers which outline their positions in some detail. However, the first version of the Draft Ministerial Declaration paid only the slightest attention to these papers and demands.

The second draft, which is being presented at Doha, is even worse because It is being presented as a “clean” text, without brackets and indications of areas of disagreement, supposedly to simplify matters and make the draft easier to discuss. In reality, of course, it has become a statement of the position of a few powerful Northern WTO members, especially the US and the EU.

This has been a source of extreme disaffection for more than 30 developing country negotiating teams, including those of India, Indonesia, Malaysia, Egypt, the least developed countries group and other Sub-Saharan countries. One umbrella grouping of civil society organisations which have been closely monitoring the negotiations found it necessary to issue a statement which condemned the process by which the draft Ministerial Declaration has been transmitted to the Doha Ministerial Conference. The statement makes the following points :

“The draft has not been given the consensus agreement of WTO Members, and there are serious differences between countries in many of its sections and paragraphs. In particular, many developing countries have repeatedly disagreed that negotiations should be launched on "new issues" (investment, competition, government procurement transparency and trade facilitation).

Yet the draft specifically commits Ministers to agree to such negotiations, and does not provide for options. This totally ignores the views of the people and governments of a majority of developing countries.

Many developing countries also proposed to have a study process on the effects of past industrial tariff reductions on closure of local industries and job losses instead of negotiations. Yet paragraph 16 commits the Ministers to launch negotiations, which can damage developing countries' local industries and cause serious job losses.

By not reflecting the differences in view (either through square brackets or showing the various options), the draft gives a very deceptive impression that there is already agreement, or that the views given command unanimous or overwhelming support. The deception in such a "clean text" has the serious effect of favouring the developed countries that have campaigned for the new issues, whilst placing the developing countries opposing these issues at a great disadvantage.

This incident is another outstanding example of the untransparent, discriminatory, biased and manipulative process of decision-making at the WTO, that favours a few major developed countries at the expense of the many developing countries. It is ironic and hypocritical that such untransparent and discriminatory practices are so prevalent in an organization that claims transparency and non-discrimination as its core principles.

We consider the draft Declaration as illegitimate and a threat to the development and economic and social viability of developing countries.

It has also failed to address the grave concerns of civil society on the effects of the WTO agreements (and future proposed rules) on food security, human rights, access of consumers to essential goods and services, and the right of local communities and workers to secure livelihoods.

In particular the TRIPS agreement has been debated and condemned by the public worldwide for its role in depriving consumers of access to essentials. An organ of the UN Human Rights Commission has noted that implementation of TRIPS conflicts with the realisation of economic, social and cultural rights. Yet the draft Ministerial Declaration does not deal with the wide range of issues brought up by citizen groups (including biopiracy) whilst the attempts by developing countries to clarify that nothing in TRIPS should prevent public health measures is being undermined by a few developed countries.” (quoted from the Joint NGO Statement on the Draft Doha Ministerial Declaration)

The Government of India’s position

For once, the Indian government stand thus far at the WTO and at the Doha meeting in the first few days has been a correct one, that all further trade negotiations must be postponed until a proper and democratic review of the past agreement and its implementation has taken place. Such a review would immediately expose that most developing countries have gained little or nothing, especially in the areas of agriculture and textiles, while they have opened up their own markets and adversely affected their own incomes and employment.

However, while this position is most certainly to be welcomed and supported, it is also true that the same Government of India has itself engaged in the most sweeping and unjustified external liberalisation in the past few years, even well beyond any requirements and commitments made to the WTO. Therefore it is not clear whether this is a case of public posturing at an international forum in order to gain some domestic credibility, even while giving up on the important issues in terms of actual economic policies.

It is also not clear the extent to which the Indian government is prepared to stand up to pressure from the powerful Northern countries. A number of other developing countries have already succumbed to pressure, or gone in for bilateral deals which have muted their opposition to a new Round which would incorporate issues such as investment and competition policy. The outcome of the Doha Ministerial Meeting is still not clear; but what is definitely true is that strong domestic public opinion and the pressure of social movements may contribute to a more democratic outcome even in the closed door negotiations at Doha.



Themes > Features	13.11.2001


What is at Stake in Doha ?

The ongoing WTO Ministerial Meeting at Doha in Qatar was the focus of controversy well before it started. The WTO has been subject to growing criticism not only from governments of developing countries but also from civil society in developed and developing countries. It has been found that the way in which the Uruguay Round Agreement has worked in practice has contributed not to the promised increases in trade and economic prosperity, but greater income disparities, livelihood insecurity and reduced access to essentials like life-saving drugs for people across the world. Protests against these outcomes, both on the streets and within the meeting rooms, led to the failure of the Seattle talks. For a while it even seemed as if the Doha meeting would not go through, because of security fears of the US and other developed country delegations after September 11. In fact, this has reflected itself in reduced participation at the senior level : for example, the number of people in the official US delegation has shrunk from about 300 to 40, and neither the US Secretary of Commerce nor the Secretary of Agriculture is present, nor is there a representative of the US Congress. That the Doha meeting is still being held reflects several forces : the sheer embarrassment at the multilateral level, at having to postpone such a meeting which is formally mandated by the GATT accord and which has been planned for two years; the need to make up for the failure of the Seattle meet; the desire of some developed countries to initiate a new Round of trade negotiations which would include non-trade issues such as investment and competition policy and reductions in industrial tariffs Simultaneously there have also been other, more insidious, attempts to treat the September 11 attacks as a means of pushing even more external liberalisation down the throats of developing countries. The pretext is that such terrorism is an attack on free trade which will supposedly deliver prosperity for all. And the US Trade Representative made it very clear that he saw the need for even greater and more comprehensive trade talks because of, not despite, the terrorist attacks and the subsequent war. However, most developing countries, and certainly most ordinary citizens in all countries who have some knowledge of the actual experience with trade patterns and the effects of external liberalisation on domestic output, employment and livelihood security, are understandably sceptical about such an argument. In fact, as shown below, the experience since 1995 has been very disappointing. Projected gains from the Uruguay Round Agreement At the time of signing the GATT agreement in Marrakesh in 1994, there were widely publicised reports of the supposed gains to all countries from the various measures covered in the Agreement. These gains were supposed to come from tariff reductions, opening of agricultural trade and reduction of subsidies by developed countries, liberalisation of trade in textiles and clothing and better market access for all exports. In economic terms, these were then supposed to involve the following kinds of gains 1) "Static gains" due to a reallocation of resources to areas of comparative advantage (that is, those that are relatively better at producing particular goods). 2) "Efficiency gains" that would result from reduced slack in economies that have been highly protected. 3) "Dynamic gains" due to improved technical efficiency or lower input use per unit of output and technological change. While the first was supposed to result from a shift international production patterns, the second and third were supposed to emerge from stronger competition within and between national economies. The projections of such gains in terms of increased value of world trade ranged from $180 billion to $ 230 billion over ten years, around two-thirds of which was supposed to accrue to developed countries and one-third to developing countries. It was largely the promise of such gains that lured most developing countries into signing the entire Final Act, even though many specific agreements such as those relating to intellectual property and investment measures were seen as detrimental to their interests, and aspects of the other agreements were also problematic for them. Even the Indian government presented the case in favour of signing the Marrakesh Agreement in terms of the benefits that would come from increased exports of agricultural and textile products as well as more inflows of investment because of greater international trade in general. Actual trade patterns over the 1990s In what follows, we consider the broad patterns of world merchandise trade over the 1990s. As will become evident, most of the expectations have not been realised, and the projections of increased trade flows were far too optimistic. In fact world trade growth has been slower in the second half of the 1990s, after the signing of the Uruguay Round agreement, than in the first half of the 1990s. And many developing countries feel that they have even greater problems of market access and protectionist barriers to their exports than they had before. This is why implementation issues have become so important among developing countries in the WTO. There is no doubt that international trade has become far more significant in the world economy, and over the past two decades world trade has grown faster than world output growth, as Chart 1 shows. However, as evident from Chart 2, over the 1990s the value of world trade has fluctuated substantially over the major product groups, and only in mineral products (which include petroleum) has it gone up rapidly, mainly because of rising oil prices in world markets over the second half of this period. In fact, in agriculture, the value of world trade has stagnated and then fallen over the 1990s, while manufacturing exports grew more slowly in the second half of the decade. This becomes even more clear from Chart 3, which shows annual compound rates of growth of exports in dollar values for the major product groups, over the two halves of the decade. Note that this division also marks the period before and after the formation of the World Trade Organisation, which was supposed to lead to a rapid and exponential expansion in world trade. In all the major commodity groups except mining (for which the increase in export value growth is almost entirely the result of rising oil prices) rates of growth of exports in world markets have fallen, and for agricultural exports they have turned negative. Obviously, the promise of rapid trade expansion consequent upon the signing of the Uruguay Round GATT agreement has thus far turned out to be a false one. A basic reason for this has indeed been because the expectations of increased market access for developing countries have not been met. In the areas where developing countries expected the most gains – tropical agricultural products and textiles and ready made garments, market access conditions for developing countries have worsened. And this has happened completely within the legal provisions of the GATT Agreement. This tends to confirm the point made by critics at the time, that these agreements themselves were flawed and unequal, drawn up in forms which were inimical to the interests of developing countries as well as workers and consumers in developed countries. The combination of stagnant or reduced market access and increased export dependence of many developing countries has meant that many developing countries have had to respond to this by trying even harder to push out exports, at lower prices if necessary. In fact this downward pressure on many export prices has been evident even in developed countries, and in both primary and manufactured goods. Chart 4 describes the movement of unit values of exports over the 1990s. It shows how, other than for oil, unit export values have declined continuously from the rather low peak of 1995. For agricultural exports, which have been the hardest hit, unit values of exports have fallen by nearly 20 per cent just in the five year period between 1995 and 2000. Even for manufactured goods, unit values have fallen by 17 per cent over the same five year period. These translate into very sharp annual average declines of nearly 5 per cent and 4 per cent respectively, as Chart 5 indicates. These world trade price declines are especially evident in the case of primary commodities other than oil. Chart 6 shows how prices of raw and processed food have fallen over the 1990s, and Chart 7 makes it clear that minerals and metals other than petroleum have also faced stagnant or falling prices. Incidentally, as can be seen from Chart 8, even crude petroleum prices have only risen significantly in the last two years of the decade, and that has created the impression of buoyant prices in this category. The interesting point that emerges from the Charts 9 a, b, and c is that in the two decades since 1980, the share of developing countries in world trade has not increased, which is quite contrary to general position. Even in the decade 1980-1990, which was the period of rapid expansion of manufacturing exports from the East Asian economies and other newly industrialising nations, the overall share of developing countries in total world exports fell quite sharply, largely because of the decline in primary exports in value terms. The subsequent recovery in share over the 1990s in turn can be traced once again to primary exports – essentially the rise in oil prices – rather than manufactured goods exports as such. The point in all this is of course that that the expectations about greater access to developed country markets, or about trade deregulation leading to much expanded volumes of trading activity and greater prosperity for developing country exporters as well, have proved to be false thus far. It is misleading to argue that all these benefits would become evident only by 2005 : the point is that the GATT Agreement was supposed to have unleashed dynamic processes which would already have made themselves felt through more buoyant trade, but in fact the opposite has occurred. It is in this context that developing countries’ demands for review and implementation of the existing treaties must be seen. The point is that developing countries have not received trade benefits which would have made it worth their while to give up so much in terms of the adverse consequences of the TRIPS agreement, their own import liberalisation which has affected domestic output and employment, and loss of sovereignty in other decision making. And therefore the calls for review of the agreements, their implications and implementation, followed by possible renegotiation of these agreements, are perfectly legitimate demands. The pre-Doha negotiation process and the Draft Ministerial Declaration What has made the Doha meeting even more controversial has been the practice adopted by the current WTO Secretary General, Mike Moore, and the Chairman of the General Council, Stuart Harbinson of Hong Kong. The pre-Doha negotiations were intense and many developing countries put in tremendous energy and effort using scarce resources to put in their arguments and present papers which outline their positions in some detail. However, the first version of the Draft Ministerial Declaration paid only the slightest attention to these papers and demands. The second draft, which is being presented at Doha, is even worse because It is being presented as a “clean” text, without brackets and indications of areas of disagreement, supposedly to simplify matters and make the draft easier to discuss. In reality, of course, it has become a statement of the position of a few powerful Northern WTO members, especially the US and the EU. This has been a source of extreme disaffection for more than 30 developing country negotiating teams, including those of India, Indonesia, Malaysia, Egypt, the least developed countries group and other Sub-Saharan countries. One umbrella grouping of civil society organisations which have been closely monitoring the negotiations found it necessary to issue a statement which condemned the process by which the draft Ministerial Declaration has been transmitted to the Doha Ministerial Conference. The statement makes the following points : “The draft has not been given the consensus agreement of WTO Members, and there are serious differences between countries in many of its sections and paragraphs. In particular, many developing countries have repeatedly disagreed that negotiations should be launched on "new issues" (investment, competition, government procurement transparency and trade facilitation). Yet the draft specifically commits Ministers to agree to such negotiations, and does not provide for options. This totally ignores the views of the people and governments of a majority of developing countries. Many developing countries also proposed to have a study process on the effects of past industrial tariff reductions on closure of local industries and job losses instead of negotiations. Yet paragraph 16 commits the Ministers to launch negotiations, which can damage developing countries' local industries and cause serious job losses. By not reflecting the differences in view (either through square brackets or showing the various options), the draft gives a very deceptive impression that there is already agreement, or that the views given command unanimous or overwhelming support. The deception in such a "clean text" has the serious effect of favouring the developed countries that have campaigned for the new issues, whilst placing the developing countries opposing these issues at a great disadvantage. This incident is another outstanding example of the untransparent, discriminatory, biased and manipulative process of decision-making at the WTO, that favours a few major developed countries at the expense of the many developing countries. It is ironic and hypocritical that such untransparent and discriminatory practices are so prevalent in an organization that claims transparency and non-discrimination as its core principles. We consider the draft Declaration as illegitimate and a threat to the development and economic and social viability of developing countries. It has also failed to address the grave concerns of civil society on the effects of the WTO agreements (and future proposed rules) on food security, human rights, access of consumers to essential goods and services, and the right of local communities and workers to secure livelihoods. In particular the TRIPS agreement has been debated and condemned by the public worldwide for its role in depriving consumers of access to essentials. An organ of the UN Human Rights Commission has noted that implementation of TRIPS conflicts with the realisation of economic, social and cultural rights. Yet the draft Ministerial Declaration does not deal with the wide range of issues brought up by citizen groups (including biopiracy) whilst the attempts by developing countries to clarify that nothing in TRIPS should prevent public health measures is being undermined by a few developed countries.” (quoted from the Joint NGO Statement on the Draft Doha Ministerial Declaration) The Government of India’s position For once, the Indian government stand thus far at the WTO and at the Doha meeting in the first few days has been a correct one, that all further trade negotiations must be postponed until a proper and democratic review of the past agreement and its implementation has taken place. Such a review would immediately expose that most developing countries have gained little or nothing, especially in the areas of agriculture and textiles, while they have opened up their own markets and adversely affected their own incomes and employment. However, while this position is most certainly to be welcomed and supported, it is also true that the same Government of India has itself engaged in the most sweeping and unjustified external liberalisation in the past few years, even well beyond any requirements and commitments made to the WTO. Therefore it is not clear whether this is a case of public posturing at an international forum in order to gain some domestic credibility, even while giving up on the important issues in terms of actual economic policies. It is also not clear the extent to which the Indian government is prepared to stand up to pressure from the powerful Northern countries. A number of other developing countries have already succumbed to pressure, or gone in for bilateral deals which have muted their opposition to a new Round which would incorporate issues such as investment and competition policy. The outcome of the Doha Ministerial Meeting is still not clear; but what is definitely true is that strong domestic public opinion and the pressure of social movements may contribute to a more democratic outcome even in the closed door negotiations at Doha.



© MACROSCAN 2001