WTO NEWS: SPEECHES DG PASCAL LAMY
Annual 2008 Session of the Parliamentary
Conference of the WTO
Inter-Parliamentary Union and European Parliament
Ladies and gentlemen,
This year I am the bearer of — how should I put it — “news that is not all that good!” You, the Parliamentary Conference on the WTO, have been following our work, and in particular the Doha Development Agenda, closely since its launch in 2001. The Doha Round which took almost 7 years of negotiations had been widely expected to bridge an important “milestone” towards its conclusion at the Ministerial meeting convened this July.
The meeting was expected to adopt “modalities” for agricultural, and industrial goods, and to make progress in the services negotiations. In WTO jargon, “modalities” mean the parameters on whose basis Members would establish their new commitments, whether in terms of lower tariffs, subsidies, or new disciplines.
The meeting did not succeed. It collapsed to the detriment of a world economy that is much in need of a bit of blue sky; to the detriment of the poor who would have benefited the most from the lowering of prices that trade opening brings about; and to the detriment of the developing world who has fought long and hard to bring greater equity to international rules, in particular to the field of its greatest comparative advantage; agriculture.
I often hear it said that one of the greatest flaws of the WTO is that it does not deal with inequality at the national level. It opens markets, and then claims that its role ends there, passing the bucket to governments to deal with winners and losers. This, in my view, does not fully reflect reality.
Had the July package stabilized, much greater equity would have been brought about. Few realize that through the opening of markets, trade does more to making basic goods and services accessible to the poor than many income redistribution policies. Throughout history, trade has enhanced the purchasing power of the poor across the globe, enabling them with their limited dollars, to buy more for less. Thanks to more open markets a basic T-shirt that would have cost $3 dollars behind a tariff wall, can today cost less than half or even a third of that price.
But, of course, as you Parliamentarians know very well, those who gain from trade are seldom as loud in the political arena as those who lose. In fact, those who gain, are seldom aware that global trade rules may have had something to do with their gain. A T-shirt sold at a department store does not come with a label saying: “This T-shirt comes to you with a 50% reduction due to new WTO rules.” That label is simply not present, and hence the missing awareness too.
Yet, the persons you hear from are those whose factories are shutting down because they cannot sustain the competition; in other words they cannot offer a T-shirt for $1, but only for 2 or 3. Now, while consumers are made better off by trade, producers must also be assisted in adjusting to more open markets. Hence the need for accompanying policies to trade, whether social, infrastructural, environmental or otherwise. It is only with such accompanying policies that domestic producers can better adapt to trade opening. Similarly, it is only with awareness raising that consumers can come to understand the full magnitude of the benefits they reap. And, as we all know, producers are also consumers — they're one and the same!
The package before Ministers in July had combined all of the following: the reduction of unfair agricultural subsidies; the reduction of tariff walls on industrial and agricultural goods; the reduction of barriers to trade in critical services, such as banking, insurance, energy, and environmental services; and beyond that a myriad of new trade rules. Rules that would have made the multilateral trading system fairer, in particular for the developing world. To give you, but a few telling examples of what was foregone in July, I would mention the reduction of the rich world's agriculture subsidies which would have been sliced by 70-80%, and of their highest agricultural tariffs that would have fallen by 70%, not to mention the commensurate effort that they would have made on industrial goods. I hasten to add that all efforts in the Doha Round would have been made in accordance with the principle of Less than Full Reciprocity, with the developed world making 2/3ds of the contribution, and the emerging part of the developing world only 1/3d.
But behind those headline catching numbers, was a new set of rules — which while the media paid scant attention to — were perhaps just as important as the headline-grabbing figures I just cited. For example, the subsidies that the rich extend to agriculture would have not only been reduced in an aggregate manner, but new ceilings per product would have also been established. Hence, players such as the United States, the European Union and Japan would have no longer been allowed to concentrate the bulk of their support on only a few commodities. Do I need to spell out for you what this would have meant for cotton! The litmus test for the development dimension of the Doha Round! It is indeed a great shame that this package did not materialize at that time.
To the Parliamentary Conference on the WTO, the trading community owes an explanation. What exactly happened in July, how did such a package slip through our fingers? What were the issues that were resolved, and which were left outstanding? I will try to respond to these questions as faithfully as I can since I believe that greater accountability lends force to what we do, and that your voice will be vital to re-energizing the negotiations.
WTO Members entered the July Mini-Ministerial looking at agricultural subsidies, agricultural tariffs, industrial tariffs and services. In a short space of time, they accomplished what some never thought they would.
They found convergence on the issue of agriculture subsidies, even if the specific extra reduction for cotton subsidies remained to be negotiated. They went a long way on the issue of agricultural tariffs. The same can be said about industrial tariffs, even if a few issues remained for further clarification. And they had a promise before them of attractive services offers, based on the Services Signalling Conference that had been held.
In agriculture, various elements of the Doha Package had been designed to address both the developed and the developing world's many sensitivities. In July, much progress was achieved on “sensitive products” for developed and developing countries, and on “special products” reserved exclusively for the developing world — these are all products that would take either a lower tariff reduction than the norm or no reduction at all, to make trade opening more gradual. The flexibilities were intended to allow for a “tailor-made” package as opposed to a “one-size-fits-all.”
But where the negotiations collapsed, was on the details of the Special Safeguard Mechanism for agriculture for the developing world. Countries could not agree on the circumstances in which this Safeguard could be used — the extent of volume surge, or price decline of imported products that would have to occur for it to be triggered. And nor could they agree on the extent of the remedy that it would provide when set in motion — the magnitude of the extra duty that would be imposed on imported goods to protect the domestic market.
Efforts were made until the very last minute of the meeting to find a compromise over the Special Safeguard, but it eventually became clear that this thorny issue would require more work to build convergence. It was not, in the end, as ripe as some thought it was. Because the negotiation stopped at the Safeguard, negotiators never made it to other critical issues, such as cotton. The Cotton-4, Benin, Burkina Faso, Chad and Mali — not to mention the rest of Africa — walked away in extreme disappointment.
So, what now? Do we throw in the towel, and do we give up? Most WTO Members have already said that this would be highly irresponsible. To let a 7-year international effort to essentially “do good” collapse would be a calamity. Who is ready to shoulder that responsibility? Are we really willing to tell the taxpayer who has funded us for this long that we've wasted his/her money! Not only that, are we willing to tell producers and consumers alike that we blew away in a single month their hope for more open markets, and a more equitable, and development-friendly, trading system? Are we willing to tell them that topics that would have followed these modalities, such as trade facilitation for small businesses, market opening for environmental goods and services and the reduction of environmentally-harmful fisheries subsidies, are now off the table without even a chance at a Ministerial discussion?
There is simply no way. Hence the stance taken by WTO Members, asking that we preserve the enormous progress that had been achieved and to build on it for a final agreement. August has been a very active month for the WTO family. A fair amount of travelling and phone diplomacy has taken place to not let this opportunity slip through our fingers. My sense is that there is scope for renewed engagement over the coming weeks, as confirmed by the technical discussions that have been held here in Geneva these past two days.
Today I ask you to help us close the July package. While it has now become clear that we cannot complete the Doha Round by the end of this year, let us at least aim to complete modalities in 2008, so as to conclude the Round in 2009.
In conclusion, let me add that completing the Doha Round is intimately linked to the themes that you have chosen for this conference, food security and climate change. The wave of rising food prices that we witnessed, would find at least a partial answer through the Doha Round, allowing increases in supply to adjust to increases in demand in different corners of our planet with much greater ease.
As for climate change, I must confess to you that what has happened in the WTO in July has left me with a bitter taste. If the international community cannot find the courage to do what it has done many times before — which is to open markets collectively through a trade round — will it have the courage to tackle what has “never” yet been tackled! Not to mention that the Doha Round contained the first-ever environmental chapter of a trade round of negotiations. Does busting that chapter in any way pave the road to a post-Kyoto regime?
What we now need is a bit more leadership and courage. You have shown both with your unwavering support for the WTO. Please try to transmit this same spirit to your country's negotiators. Please convey the message back home that, in view of the package that is currently on the WTO table, the Doha Round must see the light of day. Further delays would weaken the multilateral trading system, our collective capacity to achieve the Millennium Development Goals, and endanger other major international negotiations which are needed to stabilize our risky planet; such as the one on climate change.
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