Published:THE NEWS, Pakistan, December 25, 2005

By Pradeep S. Mehta and Pranav Kumar

The global South is finally coming together in international trade, though a lot of impediments – from within and from outside — remain to be overcome

Undoubtedly, the outcome of the Hong Kong ministerial meeting is modest by any yardstick. The biggest achievement, however, is that the meeting did not flop. A second collapse after the Cancun ministerial conference would have been really disastrous for the multilateral trading system. While a failed ministerial meeting puts the agenda for liberalising international trade in a reverse gear, a successful one at least sends a positive signal. The second important result of the gathering in Hong Kong is that for the second time in a row Southern countries not only remained united, but strengthened their solidarity by telling the North that enough is enough.

The Cancun Ministerial Conference had ended on a bitter note. Soon afterwards, the members of the World Trade Organization (WTO) indulged in a blame game. The then US Trade Representative Robert Zoellick in his post-ministerial press conference said, “Whether developed or developing, there were ‘can do’ and ‘won’t do’ countries here. The rhetoric of the ‘won’t do’ overwhelmed the concerted efforts of the ‘can do’. ‘Won’t do’ led to impasse.”

Pascal Lamy, WTO’s Director General, who was the chief European negotiator at Cancun, termed WTO as a ‘medieval’ organisation. Arun Jaitley, former Indian commerce minister, summed up the outcome of Cancun in a one liner now taken up by the civil society rejectionists. “No deal is better than a bad deal,” said Jaitley.

From Cancun to Hong Kong
After the Cancun fiasco, it took almost three to four months for the negotiators to sit across the negotiating table again and resume the dialogue. This resulted in the ‘July Package’, a set of broad principles agreed to in August 2004 to keep the negotiations going, which once again raised the expectations of the developing countries. Alas, the euphoria created by the July Package proved to be short-lived. When back home, WTO members succumbed to realpolitik and started singing in different tunes.

As a result, Doha round of global trade talks once again plunged into a serious crisis. This is evident from the fact that in the run up to the Hong Kong Ministerial Conference, the draft declaration was supposed to be released after the General Council (GC) meeting in July 2005, in what was called ‘July Approximations’ but the GC meeting failed to evolve a consensus. The next GC meeting in October met with a similar fate. Finally, when the GC meeting for the third time in November could not break ice, the WTO Director General Pascal Lamy came out with his own draft declaration for the upcoming ministerial conference. This draft was very modest in terms of substance.

What happened at Hong Kong?
The ministerial meeting in Hong Kong began on a very pessimistic note. A day before the inaugural, the attendance was very poor. Delegates of some of the WTO member countries had not even reached Hong Kong. The general impression was that nothing much was going to happen at Hong Kong. It was in this backdrop that the various stakeholders started getting ready for the battles ahead. Soon the Hong Kong meeting turned into a four-sided contest — with G-20 and G-33 on one side, and the European Union, the United States and the least developed countries (LDCs) making up the other three actors.

As usual, the developed countries started shedding crocodile tears for the LDCs. A plethora of hollow promises in the form ‘aid for trade’ and duty free and quota free market access was offered to the LDCs. The main objective was to shift the focus away from the core agenda of trade liberalisation. This was evident from the EU Trade Commissioner Peter Mandelson’s statement that he was at the outer limit of his mandate and has nothing much to offer. At the same time, Mandelson repeatedly skirted the negotiations citing that there was nothing much on the table to negotiate. The US too was non-committal on the LDCs’ demand for duty free and quota free market access for all their products and particularly on the issue of eliminating domestic subsidies on cotton production.

The G-20 and G-33 on their part tried to be practical. They realised that it would be foolish to expect any ambitious result from Hong Kong meeting given the prevailing divergence of opinions on agriculture. They demanded that, as per the ‘July Package’, the WTO members have to agree only on the end date for their elimination of export subsidies, the easiest thing to implement. Unfortunately, instead of discussing the end date of elimination, the two major trading giants — the EU and the US — got entangled into a dog and cat fight over the form of giving food aid to poor countries. The EU argued that cash is the best way to provide food aid alleging that the US’s food aid programme was causing commercial displacement of the people in the recipient countries.

Finally, on December 16, the first ever G-20 and G-90 ministerial level meeting took place. Both the Indian Commerce Minister Kamal Nath and his Brazilian counterpart Celso Amorim were instrumental in building this grand alliance of 110 countries, covering 4/5th of the humanity. This alliance called the bluff of the rich countries to lure the LDCs and divide the Southern unity. The meeting also proved that the Southern unity at Cancun was not a fluke and it will sustain. Only after this meeting, the focus of the negotiations was brought back to the main agenda.

End result at Hong Kong
As already mentioned, the outcome of the Hong Kong meeting is modest, though it was not unexpected. The main demand by G-20 to eliminate the export subsidies by 2010 was not accepted by the EU. Instead a compromise date of 2013 was agreed with some frontloading. What is most unfortunate in this European infatuation with a distant date is that the language on export subsidies has been made more complex. The G-20 can no more say that this will be easy to implement.

Lessons from Hong Kong
The result of the Hong Kong ministerial meeting is not important but the message it sends is of immense significance for the developing countries. Developing countries’ major demand was to seek greater market access in the Northern markets, particularly in the products of export interest to them. The Hong Kong declaration does not promise much on this front as the ticklish issues of modalities and formulas are yet to be sorted out.

So, after having flexed their muscles in the multilateral trade arena and failing, the developing countries need to develop an alternative to the Northern markets. This is only possible through greater South-South cooperation on trade and economic issues. This should also cover the larger issues of technical assistance and capacity building. Greater South-South trade will further strengthen different Southern alliances in the WTO, which at present are more political in nature.

Over the last decade (1990-2001), developing country economies have grown much faster than those of the developed and transition countries and are expected to continue to do so in the coming years. This positive growth performance in the 1990s did result in increased share of South-South trade in world trade. The South-South trade almost doubled, reaching 10.7 per cent in 2001 from 6.5 percent of world trade in 1990. But this is definitely not enough to reduce their dependence on the North and also to diversify exports of many LDCs beyond primary products.

What is required is greater facilitation of the South-South trade. At present the South-South trade is facing impediments from barriers within the South and also from the distortions caused by the protectionist trade policy of the North. Despite significant reductions in the obstacles to trade, the developing countries among themselves still maintain higher tariff and non-tariff barriers. The cost of doing trade is also very high among the Southern countries. It is, therefore, important for the Southern countries to not only reduce tariffs and non-tariff barriers but also seriously undertake the exercise of trade facilitation measures at the regional level.

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