WTO Ministerial in Hong Kong: Still limited gains, Still huge imbalances

The just-concluded 6th Ministerial Conference (MC6) of the World Trade Organization (WTO) re-affirmed what the world already knows – the architecture of global trade is leveled against the Philippines and other developing countries.

The Doha Development Round (DDR), so named to emphasize the WTO’s preambular call for trade to be in the service of development, is winding up in 2006 with the rules of the WTO still stacked up in favor of the developed countries. Despite some small positive openings, the MC6 in Hong Kong failed to make a substantial dent on the unequal global trade architecture dominated by the big trading powers.

Glaring also in the recent multilateral negotiation was the Philippines TRPs, coined as ‘Tariff Reduction Programs’ that the country implemented since the1980’s and even before the WTO. It brings back to mind what Justice Florentino Feliciano (former WTO Appellate justice) previously said in an FTA conference, ‘we no longer have the marbles to have a better chance in negotiations’ and that the ‘unilateral tariff reduction program was in essence total disarmament’.

In agriculture, the developing countries, with the Philippines playing a significant crystallizing role, got a vague commitment to self-designate a number of their produce as special products (SPs) protected by special safeguard mechanisms (SSMs). But the details of the SPs and SSMs remain to be fleshed out. Moreover, there are no clear commitments from the developed countries how their trade-distorting subsidies amounting to $1 billion a day shall be phased out.

The only concrete achievement of Hong Kong is the promise of the developed countries to phase out by 2013 the export subsidies, which represent 2.95 per cent of their total agricultural subsidies and which are clearly an aberration in a free trading system. These export subsidies should have been phased out in l995, right after the formation of the WTO.

In the meantime, the WTO is bogged down in seemingly intractable technical and complicated agricultural talks on how to treat different boxes (amber, blue, green and de minimis) where the developed countries place their various domestic subsidies. These subsidies, in the aggregate, have ironically expanded to over $300 billion a year during the last 11 years of the WTO. They are the single leading cause of agricultural over-production and dumping in global agricultural trade, which wreaks havoc on the lives of millions of small farmers in many developing countries, the Philippines included.

In industry, the developed countries succeeded in pushing for a uniform and radical tariff-busting Swiss formula under the Non-Agricultural Market Access (NAMA). This Swiss formula is detrimental to the Philippine and many developing countries because it ignores the historical fact that developed countries have reduced their tariffs only after they have achieved a mature level of industrial development and that these countries wield a formidable array of trade weapons to keep at bay unwanted imports such as a tight hold on technology and the patent system, almost automatic application of safeguards against import surges and strict enforcement of product standards, which keep on multiplying.

The only NAMA concession the developing countries got in Hong Kong are that the coefficient to be used under the Swiss formula shall not be singular (and yet all the coefficient simulations below 100 lead to the same radical tariff-busting outcomes). Additionally, the Member Countries can still discuss elements on the binding rates and mark-ups for products.

But at the rate NAMA is shaping up to be, the Philippines stands to lose so much policy space or flexibility on how to promote certain strategic industries needed for long-term development and how to protect its sensitive fishery sector, which affects the lives of hundreds of thousands of fisherfolk and their families.

In services, the policy space for developing countries keeps shrinking in the talks under the General Agreement on Trade in Services (GATS). While they did not succeed in removing the more flexible request-offer modality of negotiating liberalization in the various service industries, the United States and the European Union managed to still insert in the Hong Kong’s Ministerial text liberalization formulas that seriously erode the policy space for developing countries such as the extension of liberalization commitments made under ‘plurilateral’ (meaning bilateral or regional) agreements ‘on an MFN basis’ (meaning extending the same commitments to all).

For the Philippines and many developing countries, the issues under GATS are how to insure that the principle of universal service (meaning providing service for the weak and underdeveloped segments of the economy and society) remains sacrosanct, how to provide effective competition against big foreign and domestic monopoly service providers (thus avoiding what happened to the domestic oil distribution industry), and how to preserve public control over strategic sectors of the economy such as the land market, environmental services, water and energy distribution, operation of public utilities and so on (which, ironically, the unelected Constitutional Commission is now trying to open up).

If there is any major achievement by developing countries in Hong Kong, it is their demonstration of their collective capacity to unite in exposing the huge imbalances in the global trading system and the weaknesses of the narrow liberalization agenda being foisted by the developed countries on practically all sectors of the global economy. Thus, in agriculture, it is exciting to see, even for a historic fleeting moment, how the G-20 and G-33 (which became in reality G-44) coalesced into a bigger G-110 (with the participation of the G-90 of the African, Caribbean and Pacific countries) to support the reform agenda for agriculture calling for subsidy reduction and more flexibility for all through the SP-SSM measures.

Such higher awareness and unity are badly needed in the coming months as the leadership of the WTO tries to put a closure to a trade development round that is constantly in danger of formally becoming an anti-development round.

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Note: Kindly click here to see attached documents to see details of what were agreed upon in the HK WTO Ministerial Conference in terms of AoA, NAMA, and GATS last December 2005.

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