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Africa: Trade Talks Spin

AfricaFocus Bulletin
Aug 11, 2008 (080811)
(Reposted from sources cited below)

Editor's Note

The collapse of world trade talks in Geneva in late July was accompanied by U.S. accusations that large developing countries India, China, and Brazil had sabotaged the talks with their failure to compromise. Others countered that it was the United States and Europe that refused to meet the fundamental demands of developing countries. Some commentators portrayed Africa as the passive victim of the failure to conclude this supposed "development" round. But leading trade analyst Martin Khor, of the Third World Network, says in fact it was African countries' refusal to be victimized that blocked an agreement biased towards the interests of the rich countries.

This AfricaFocus Bulletin contains two articles from Khor summarizing his analysis of the last stage of the trade negotiations.

For previous AfricaFocus Bulletins on trade issues, visit http://www.africafocus.org/tradexp.php

For additional analysis of the collapse of the Doha negotiations, see http://www.southcentre.org and http://www.iatp.org

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Additional note to subscribers:

After this issue, AfricaFocus Bulletin will be taking a break from publication until early September. The website will continue to be updated regularly with news. You can also expect to find occasional additions of new book selections to the AfricaFocus Bookshop (http://www.africafocus.org/books/afbooks.php and http://www.africafocus.org/books/afbooks_uk.php). These pages feature books on specific African countries and themes (more to come as time permits and new suggestions are received).

Additions over the last week include pages on Africa Book Publishers and Distributors (http://www.africafocus.org/books/publishers.php), and a page featuring books by over 100 AfricaFocus subscribers (http://www.africafocus.org/books/subscribers.php). If you are a subscriber and have a book that is available on-line at Amazon or another on-line distributor, please check to see if your book is already included. If not let me know at the link on the page, and I'll do my best to get it added as soon as possible..

These bookshop pages include Flash widgets created by Amazon, which require that your browser support Flash animation. One reader has reported incompatibility with a version of internet explorer. If you experience problems in loading these pages, please let me know.

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Africans played pivotal role at turning point of WTO talks

TWN Info Service on Trade and WTO Issues

5 August 2008

Third World Network

http://www.twnside.org.sg

Published in SUNS #6531 dated 5 August 2008

Geneva, 4 Aug (Martin Khor) -- As the dust settles over the failed WTO talks in Geneva of the last fortnight, a fact that has been under-highlighted has become more clear. That is the important and even crucial role that the African and other smaller economies played in the mini-Ministerial process.

Much of the media publicity has focused on the role of the United States and European Union on one hand, and on India, China and Brazil on the other hand. And that is because these were the key players within the group of 7 WTO members that undertook the intense inner negotiations for most of the nine Geneva days (21-29 July).

However, on the two key issues on which the talks took an important turn, the African Group and the other groupings of developing countries -- the G33, ACP, LDCs and SVEs (small vulnerable economies) -- played a significant and even pivotal role.

One of these was the special safeguard mechanism. The inability of the G7 to settle on this issue was the immediate cause of the breakdown of the talks. The other issue was cotton, over which no discussion was held because it was an item lower down the agenda than the SSM. There is widespread belief that it was to avoid this issue that the US took such a tough and rather inexplicably stubborn position on the SSM.

On both these issues, the majority of developing countries took a strong position, and Africa was in the centre of them.

Some developed countries, particularly the US, were trying to portray that India was the only country standing in the way of an overall deal because of its unreasonable position on SSM. Later, China was also lumped together with India, as wanting to use the SSM to block market access to their agricultural markets.

The mainstream media played up this portrayal by the US, adding to the external pressures on India and China. The two countries however also answered back, through the colourful briefings and lobby statements of Indian Commerce Minister Mr. Kamal Nath and the Chinese Ambassador and officials at the Trade Negotiations Committee.

There was also the leadership provided on the SSM issue by the G33 and its coordinator, the Indonesian Trade Minister Mari Pangestu.

The turning point came, however, when the African Group, together with the coordinators of the ACP, LDC and SVE groups, took the decisive step to come together with the G33 (whose leading members include Indonesia, China and India) for a grand alliance to support an effective SSM.

The coordinators of the groupings held a meeting on Sunday 27 July afternoon to discuss their positions and decided to issue a joint statement placing their views on why they found the SSM portion of the 25 July draft of Pascal Lamy, the WTO Director General, inadequate and not acceptable, and placing their own positions on various aspects of the SSM, including the trigger, the remedy especially with regard to the raising of tariffs above the pre-Doha rates, and the need to include FTA imports in the use of the SSM.

When Kamal Nath entered the WTO building on 27 July night for a Green Room meeting, he announced to the waiting media that a hundred developing countries were behind having an effective SSM, and not just India. A hunt began among the journalists to find the joint developing-country statement, which became the "breaking news" of that night.

From then on, it was not possible for the US or other countries to characterise the SSM battle in the G7 as just "an Indian problem." With this solid backing of so many developing countries and their groupings, India was able in the G7, and Indonesia and others in the Green Room and the TNC, to stick to their position, that an effective and easy-to-use SSM is a legitimate demand.

On the cotton issue, the African Group continued to take the lead to back the core group in the cotton initiative, the Cotton 4 led by Burkina Faso, to demand that there be deeper cuts in domestic subsidies of cotton and in a faster schedule than in any general formula or programme agreed on for agriculture as a whole.

Kenya's deputy prime minister Mr Uhuru Kenyatta, near the start of the Geneva talks, said at a press conference that "millions of poor people in Africa are dependent on cotton production but the huge subsidies in developed countries have continued to depress world prices, thereby driving farmers out of production with no other sources of income. We therefore look forward to an effective and long term solution on cotton."

With the cotton issue set aside while other issues claimed the agenda, the many Africa Ministers who came to Geneva were getting increasingly frustrated. At the end, the talks broke over the SSM issue, and cotton was never even discussed.

The African countries, led on this issue by the Burkina Faso Trade Minister, Mr. Mamadou Sanou, were furious with the turn of events. "We have been patient but we now feel betrayed, cotton was never even discussed," he told the formal Trade Negotiations Committee meeting on 30 July, after the talks had collapsed.

And at an African Group press conference on the same day, Sanou expressed great disappointment and distress that the cotton issue had been relegated to the sidelines to be discussed at the last moment, and that moment never even came.

"Now after 10 days we have not discussed the issue we were invited here to discuss. The invitation (from Lamy) said it wanted me to come to negotiate on cotton. You will agree it is very discouraging. The impact is very grave on our cotton farmers. Because of the subsidies to US and EU cotton growers, our farmers are in a very negative position, suffering severe deficits, there is a risk the whole system will collapse in our countries. The cotton system is threatened with extinction in the short term. We are faced with imminent threat and we cannot control our anger when we see the situation in our countries.

"We are disappointed the big countries that ask us to liberalise our trade and economy, that those same countries are afraid to trade with us on a level playing field, on a fair basis."

The African Group press conference, at which the Minister spoke, was held on 30 July, in the morning after the talks had collapsed, and just before the TNC meeting.

The Deputy Prime Minister of Kenya, Mr. Uhuru Kenyatta, who coordinated the African Group throughout the meetings, started the conference by reading a statement of the group.

"We came to Geneva with an open mind, to engage constructively," said the statement. "During the two weeks of our stay in Geneva, we have exercised considerable flexibilities. We accepted the leadership of the G7, hoping that the consultative process would result in moving the process forward.

"As the G7 process progressed, we patiently waited for a positive outcome... However, as you have witnessed yesterday the G7 consultative process did not achieve progress. Taking into consideration the two week we have been here in Geneva, leaving many important national issues in our capitals unattended, we are deeply disappointed with the stalling of negotiations.

"It should be known that most of the key issues of interest to the African continent were not even discussed, especially the issue of cotton...

"Considering that this was a Development Round, we wish to state categorically that we African Ministers came here with a lot of optimism and are disappointed with the lack of progress during the last few days that has resulted in this situation. As stated in this room last week, leadership comes with responsibility. It is rather unfortunate that this does not seem to have been the case.

"We call upon the membership to consider resumption as soon as is feasible and continue with the negotiations. Africa critically needs to realise development and get itself out of poverty through the establishment of fair trade rather than aid. Africa's opportunity to achieve fair trade has therefore been gravely undermined by the lack of progress in the negotiations."

Lesotho's Commerce Minister Popane Lebesa, coordinator of the LDCs, said it was indeed a pity the negotiations did not go beyond the G7. The SSM issue was not resolved. Other issues not even discussed - duty free quota free status for LDC products, preference erosion, cotton and others.

A key part of the food crisis, distortions caused by subsidies, will remain to haunt us, he said. He added that Aid for Trade should continue to be pursued. The enhanced integrated framework (EIF) is lagging behind and should be quickly launched. "We waited too long. It appears a mere pie in the sky."

To a question how soon will the talks resume, given elections in some countries, Kenyatta said "as much as we urge a resumption of talks as soon as possible, we recognise there are events like elections in many countries in the next months which will take priority.

"Though we would like to see a mini Ministerial in the next months, that might be difficult to achieve. But we need to remain focused. This Round should not be derailed by internal politics. We are talking of a fair-trade system that recognises Africa requires the development aspect to be a full participant in global trade.

"The effects of the failure on our cotton farmers will be bad. We discussed reduction of overall trade distorting domestic support (OTDS) here. The OTDS makes cotton farming unproductive in Africa. Were we able to ensure cuts in the OTDS so that market prices reflect real costs it would have impacted positively on African cotton farmers. But we did not get a deal on OTDS. The poor carry the heaviest burden (on that)."

Lesotho's Minister Lebesa said that cotton was not discussed at all. He said the US had offered to continue to discuss it with parties concerned even with this failure. If cotton had been part of conclusion of Doha Round, the conclusion would have been based on multilateral rules. Now the Cotton 4 countries will have to face the US directly rather than at the WTO.

Asked to elaborate what the US is prepared to do with the Cotton-4, and would it be for US to reduce subsidies and would it ask for anything from the C4, Lebesa said that on cotton it is different to negotiate multilaterally or bilaterally. Bilateral talks may give some benefits to the C4, but in longer term a WTO agreed rule on how the subsidy issue on cotton would be handled is better.

The Minister of Burkina Faso, Mamdou Sanou, who chairs the Cotton-4 group, expressed great disappointment at the results of these talks. "At the first TNC meeting (on 21 July) we expressed our concerns. We did not want the cotton issue to be relegated to the sidelines and be considered at the very last minute.

"We always insisted at the Green Room meetings that cotton be considered. We were promised this... But now after 10 days we have not discussed the issue we were invited here to discuss. The invitation said it wanted me to come to negotiate on cotton. You will agree it is very discouraging.

"The impact (of the failure of the talks) is very grave on our cotton farmers. Because of the subsidies to US and EU cotton growers, our farmers are in a very negative position, suffering severe deficits. There is a risk the whole (cotton) system will collapse in our countries.

"The cotton issue is very urgent as the cotton system is threatened with extinction in the short term. This can only make worse the depth of our disappointment. We are faced with imminent threat and we cannot control our anger when we see the situation in our countries. We are disappointed the big countries that ask us to liberalise our trade and economy, and that those same countries are afraid to trade with us on a level playing field, on a fair basis."

Asked to provide details on the US willing to negotiate with the C4, the Lesotho Minister said: "There is no detail, just a statement the US made in the Green Room."

A journalist commented that some countries pushing for the SSM said they were doing this for millions for farmers in developing countries. Do the African countries accept the arguments are in their interests or do they see you it differently?

The Kenyan deputy premier said that the SSM is part of the modalities and the issue is how we protect vulnerable economies and sectors from import surges.

"We find it amazing that it is impossible to accept and understand how a trade negotiation can collapse because of remedies that are supposed to be activated in exceptional circumstances. It is not central to growth of trade or to the development aspects of trade, only a mechanisms and remedy to be used for exceptional circumstances."


Why WTO talks collapsed

By Martin Khor

The Star Online
http://thestar.com.my

Monday August 4, 2008

In the most widespread view, the United States did not want to face the cotton issue to protect the wealth of a few thousand cotton farms.

After the collapse of the World Trade Organisation's mini-Ministerial talks in Geneva, government officials and the Secretariat are picking up the pieces so as to save the Doha negotiations or at least salvage some parts of it.

They are still recovering from the shock of the breakdown of the talks that took place on July 29 after a roller-coaster nine days.

Many delegates expressed regret at the failure. Malaysia's representative to the WTO Ambassador Muhamad Noor Yacob said he was disappointed because it meant an opportunity lost for reducing the developed countries' agricultural subsidies, and also because Malaysia would have had more export opportunities if the tariffs were reduced.

Although some 40 ministers were invited to the talks, most of the negotiations were conducted by only seven ministers (from the United States, European Commission, India, Brazil, China, Australia and Japan) plus WTO Director General Pascal Lamy.

Progress had been made on a number of issues, but on several of the key issues the talks had been stuck. A compromise draft by Lamy to the G7 had a fragile status, with India and China not agreeing to important parts of it.

Meanwhile, frustration was building up among the 30 or more non-G7 Ministers who were specially invited by Lamy to the WTO, only to find themselves waiting for days on the wayside, while the G7 met.

When the end came, the United States and others pinpointed Special Safeguard Mechanism (SSM) as the sticking point of the entire negotiations. Most developing countries wanted this mechanism to protect their farmers from sudden surges of agricultural imports.

The SSM would allow them to raise tariffs above the bound rate if import prices of agricultural products fall below or the volume rises above certain levels.

The US Trade Representative Susan Schwab tried to take the high ground by proclaiming that it was preserving the past 30 years' gains of the trading system from the protectionists led by India and China whom it accused of wanting to raise their tariffs.

It was part of a concerted attempt by the US to shift the blame of any collapse onto India and China, by portraying them as selfishly seeking new protectionist devices. In fact a strong SSM had the support of about a hundred developing countries.

Insiders at the G7 meeting were surprised at the tenacity of Schwab in insisting on an unreasonably high trigger of 150% (of the base import volume) before the SSM could be allowed to raise duties above the bound levels prevailing now.

Lamy tried to break the SSM deadlock by proposing a new draft, but this was rejected by the United States. On Tuesday morning, officials of the G7 laboured to produce an alternative SSM model, which they presented to their ministers. Schwab again rejected the new draft, and this sank the talks.

Many ministers and diplomats are speculating that the SSM was not the real issue that was irreconcilable. In the most widespread view, the United States really did not want to face the cotton issue, which was next on the agenda once SSM was settled.

Since the United States had agreed to cut its overall trade distorting farm subsidies by 70%, it would have to reduce cotton subsidies by more than that as it had been agreed that cotton subsidies be cut more deeply than the average rate.

The 2008 US Farm Bill having planned that cotton subsidies be maintained or increased in the next five years, it would have been difficult or impossible for Schwab to offer a plus 70% cotton subsidy cut.

Without a good cut in subsidies, US cotton would continue to be sold at artificially cheap prices, thus depressing the trade and income of poor African cotton growers.

The failure of the WTO talks would then have been placed squarely on the United States, and it would have been seen as a villain protecting the wealth of a few thousand cotton farms while millions of African cotton farmers would continue to languish in poverty.

This suspicion that the United States wanted to avoid the cotton embarrassment is the backdrop to the comments made by several ministers of developing countries in their press conferences that SSM could not have been the real cause of the talks breaking down, but rather the scapegoat picked on by a major player to shift the blame on to another issue and on other countries.

After all, despite Schwab's portrayal of the protectionist potential of the SSM, the United States itself is a frequent user of safeguards. It was a case of the pot calling the kettle (or rather the potential future kettle, since the SSM does not even exist yet) black.

As Indonesian Trade Minister Mari Pangestu, who led the fight for the SSM, put it: "It is like accusing us of a crime that we did not commit."

As the dust settles, the diplomats and secretariat officials remaining in Geneva are pondering over the next steps.

What will happen when the WTO comes back from its August break? No one can tell. The speculation is that some meetings will continue. But the spirit is gone from the talks, because the United States will be preoccupied with its Presidential elections.

The expectation is that nothing can happen until the new US President and the new Congress settle in next year. By then there may also be a change in government and trade minister in other countries as well.

It could be difficult for the WTO talks to re-start on the same basis as before, and they could just fade away. But the WTO and its on-off talks have been resilient in the past. Who knows, the off button may switch to "on" again one day.


AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter.

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