Commentary on "trade round" failure
Source Jim Devine
Date 08/07/31/13:43

A bad deal all round: It was US intransigence that killed the WTO talks.

Developing countries were right to walk away

by Timothy A. Wise and Kevin P. Gallagher
Wednesday July 30 2008 / The Guardian

LAST MINUTE TALKS ON GLOBAL trade policy at the World Trade
Organization in Geneva this week came close to agreement - but no
cigars were lit. For talks that started in 2001, rich country
negotiators lost sight of the fact that the round was supposed to be a
"development" round to help lift standards of living among the world's
poor. This week's proposals by the US and its partners pulled
development out of the equation, and subsequently pulled the rug on
the round, at least for now.

For the sake of saving the integrity of the WTO, developing country
governments were close to accepting a deal that would have included
very modest reductions in agricultural protections in the rich
country, in exchange for equally modest cuts in industrial tariffs on
the part of the developing world. This was already a sacrifice on the
part of the developing countries. According to the World Bank, the
deal on the table in Geneva would have only increased the welfare of
poor countries by just 0.16% of GDP, while Unctad estimated that the
costs in terms of tariff revenue losses for developing countries would
be close to $60bn.

[can someone do some calculations to make these two numbers comparable?]

Rich-country negotiators, and even those from agricultural export
powers like Brazil, expressed surprise that the issue that brought
down the negotiations was something as seemingly arcane as the
"special safeguard mechanism" - the right for developing country
governments to raise tariffs in the event of sudden or large increases
in imports that threaten to undermine domestic producers. They
shouldn't have been. The measure is exactly the kind of "policy space"
for development that the poorest countries have sought from this
so-called development round.

Although prices for food are now high, according to the International
Monetary Fund's latest World Economic Outlook, they are destined to go
down again. That, coupled with rich country advantages in industrial
agriculture, may lead to the import surges that plagued the
countryside in many developing countries just a few years ago, by
swamping local markets and further marginalising small farmers.

India and China were widely blamed for refusing to lower their
demands, but they had the backing of a large number of the poorest
developing countries. By all accounts, the US proved the most
intransigent in refusing to grant safeguard rights, insisting on
conditions that would have made the measure virtually useless in most
cases where imports would overwhelm local producers.

Our own research confirms the validity of such concerns. In our recent
report, The Promise and the Perils of Agricultural Trade
Liberalisation, we found the same story in country after country in
Latin America. Governments opened their agricultural markets in the
hopes of gaining market access for exports. Cheap, subsidised imports
of staple foods - markets the US and other developed countries
dominate - flooded local markets, driving down prices and putting
already-poor farmers out of business. Each country became more
dependent on imported food, losing its capacity to produce its own.
Then prices spiked, exposing the life-threatening danger of such

Any government that wants to take the food security of its residents
seriously needs precisely the kind of policy instruments India and
China were demanding.

The hypocrisy of the US demands are stunning. Virtually every
developed country, including the US, protected its food-producing
sectors in the early stages of development. In today's globalised
agriculture, such protections are even more warranted. Indian commerce
minister Kamal Nath made clear from the start that he would not
negotiate away subsistence and livelihoods. In the end, what would it
have cost the rich countries and the other agricultural export powers
to concede the point?

Nath summed it up best: "It is unfortunate that in a development round
we couldn't run the last mile because of an issue concerning
livelihood security."

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