John Madeley

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In my opinion: Leading the way to fairer world trade for all,

RSA Journal. January 2004.

Dumping by subsidised western farmers remains one of the most contentious issues in global trade

After the failure of the World Trade Organisation (WTO) meeting of ministers to reach agreement in Cancun last September, a state of shock descended on the WTO. Yet Cancun was the second failure of a WTO ministerial in four years - the November 1999 talks in Seattle had also spectacularly collapsed in chaos.

Following Cancun, trade ambassadors of the WTO's 146 member countries waited for a month before they met again, and then had one of the shortest meetings on record, where only five people spoke. Post-Cancun shock appeared to run deep. On a positive note, a more open expression of views emerged only days later, on 17 October, at a meeting of the UN Conference on Trade and Development (UNCTAD). Delegates agreed that a multilateral trading system can help encourage development and eradicate poverty, but cautioned that trade must not be treated as a panacea; rather it should be seen as a means for sustainable development.

The crucial question is, what needs to change to enable the system to benefit the poor? Set up in 1995, the WTO sets the rules of world trade. Still, its rules and principles are in many ways unhelpful. Take non-discrimination for instance. 

The WTO does not allow a government to favour companies in its own country; it has to offer the same terms to companies abroad. In short, the policies a country wants to take to further its economic development must run second behind trade rules.

WTO rules nonetheless allow for "special and differential treatment" for developing countries, although such action has been little in evidence so far. One of the key issues is whether richer countries will agree that the poor need genuine concessions in certain areas. "We need special and differential treatment in order to help our small farmers to survive," says Indonesia's minister of industry and trade, Rini Soewandi. "About one million people have lost their jobs in Indonesia," he continues, "because of cheap imports of soya, which sell on local markets at prices much lower than local produce."

In Cancun 33 developing countries formed an alliance calling for the protection of "special products" and a special safeguard mechanism in the WTO. This would allow developing countries to designate products of significant interest - to poorer farmers, for example - that would be exempt from WTO rules. It could safeguard the livelihoods of many people, claims the alliance, and is an area where progress in the WTO is most likely. If we truly believe that people and livelihoods are more important than trade rules, then modifications to those rules are needed. 

A big question is whether such changes would allow developing countries to keep dumped agricultural produce out of their markets. The large subsidies paid by western governments to their farmers has led to overproduction and dumping which, developing countries say, is losing them millions of farm jobs. This continues to be one of the most contentious issues in international trade. With the US and the EU changing the nature of their farm supports rather than reducing them, the concessions are unlikely to stop either overproduction or dumping.

In the Doha development agenda, launched at the 2001 WTO ministerial, western countries committed themselves to "comprehensive negotiations... with a view to substantial reductions in trade-distorting domestic support. We agree that special and differential treatment for developing countries shall be an integral part of the elements of the negotiations". The question surrounding the agenda, due to be completed by the end of 2004, is whether real bargaining will take place this year to allow it to succeed.

Another great barrier to negotiations is the WTO's decision-making processes. The organisation has no rules about procedures for its meetings, either at ministerials or in Geneva. And although US and European trade negotiators have criticised its decision-making structure,
an attempt by developing countries in early 2002 to press for procedural rules was blocked by the EU. Again, this is an area where agreement should be possible.

Any attempt by the EU to reintroduce recent contentious issues into WTO negotiations would not be helpful. After all, it was over these issues - an investment treaty, competition policy, trade facilitation, and transparency
in government procurement - that the Cancun meeting finally collapsed. Including these issues in the WTO meetings would further the process of liberalising trade, but, as trade liberalisation has hardly benefited developing countries, there is widespread agreement that these issues should be dropped.

There are deeper questions about the WTO and whether it is the right body for building a trade system that could contribute to sustainable development. The WTO has played no role in helping countries that rely on trade in primary commodities such as coffee, tea and cocoa. This
is probably because it is an organisation comprised of countries, and it is corporations that trade, not countries. Almost 70% of world trade is between transnational corporations and the WTO plays no role in regulating the transnationals. Through their governments, the corporations can, however, influence the WTO. Clearly, substantial reforms are needed in world trade rules, in trade-related policy, and in the WTO itself.