The New Pascal Law

He came, he spelled out his bias and yet he threatened. Pascal Lamy hasn’t changed. Unable to throw away the grotty hat he had been wearing all these years, as trade commissioner for the European Union, he now operates as if he is the chief trade negotiator for the rich and industrialised countries.

Known as a shrewd negotiator and a skilful manipulator in the ongoing trade negotiations, Pascal Lamy, who is now the director general of the World Trade Organisation (WTO), has been indirectly threatening India and Brazil to adopt a ‘flexible approach’ to speed up the negotiations.

In the run up to the April 30th deadline for finalising the modalities in agriculture and the non-agriculture market access (NAMA), Lamy made a quick visit to Brazil and India in the first week of April ostensibly to smoothen the hurdles. Instead, he used the opportunity to sermonise: “Stay alert, stay involved, look at all the scenarios and lobby hard. This will help speed up the negotiations.”

Visibly unfazed by the wide-ranging protests from irate farmers and vehement opposition from stakeholders, including the corporate heads; and not even remotely perturbed of the ‘tough’ position that Commerce Minister Kamal Nath and his team of trade negotiators have taken, Lamy time and again used the carrot and stick. Assuring stakeholders that he was working towards a ‘meaningful’ reduction in agricultural subsidies by the European Union and the United States, he made it crystal clear that there would be no deal unless developing countries were to reciprocate by cuts in actual custom duties for industrial goods.

In short, Lamy is looking for significant ‘offers’ from developing countries to cut import duties under the non-agriculture market access (NAMA) as a bargaining chip for reduction in farm subsidies. In other words, Lamy wants the rich countries to extract their pound of flesh in return for every slice of agricultural subsidy they fork out.

This is Pascal Lamy for you. Not even remotely concerned at the destruction wrought by cheap and highly subsidised agricultural products on the livelihoods of millions of small farmers throughout the developing world, Lamy still churns out growth figures that bear no testimony to the existing ground realities. Knowing well that the promise of phasing out export subsidies, not more than 3 per cent of the total subsidies, by the year 2013 reflects nothing more than an empty promise, he tries to convince the developing country negotiators of the ‘great sacrifice’ the industrialised countries have made.

He talks of the necessity to wind up the Doha Development Round by the end of 2006 without even acknowledging that the developed countries have not even fulfilled the primary obligation to phase out domestic subsidies – presently in the range of US $ 360 billion a year — that they had promised under the Uruguay Round. While India had removed and phased out the quantitative restriction on agricultural products as early as in 2001 (and most developing countries had lowered the tariffs), the developed countries have given a damn to conform by the rules in a so-called rule-based organisation.

Mr Lamy has himself been defying every move to cut down agricultural subsidies. In fact, soon after the Doha Ministerial in November 2001, in his earlier avtaar as the EU trade commissioner, he had made a quick visit to New Delhi. Making it abundantly clear that Europe will not reduce its financial support for agriculture, he had categorically stated: “we need to keep our seven million farmers on the farm. It is a political compulsion for us. So let us not be under any illusion as to we will be doing away with agricultural subsidies.”

And then, he was the main architect of the scandalous July Framework 2004 that actually gave a legal cover to subsidy violations. It allowed the developed countries to increase their agricultural subsidies. First all the efforts made by developing countries to see that trade-distorting Blue Box is removed have been nullified. The new framework allows the developed countries to shift a large chunk of agricultural subsidies (now under the Green Box and Amber Box) to the Blue Box. In other words, the advantage that the developing countries had gained with the termination of the Peace Clause on Dec 31, 2003 (under which the developing countries could not challenge agricultural subsidies in the rich countries) has been negated. They will now be confronted by an equally detrimental Blue Box.

The framework actually provides a cushion to the US and EU to raise farm subsidies from the existing level. As I had said earlier if you read the draft carefully, it becomes obvious that the first installment of a cut in subsidies by 20 per cent is not based on the present level of subsidies but on a much higher level that has been now authorized based on the three components — the final bound total AMS, plus permitted de minimis, plus the Blue Box. For the EU, this should come to Euro 95.76 billion and after applying the first cut the subsidies that can be retained will be Euro 76.63 billion. How can Lamy disown what he himself created in the first instance?

With the US/EU maintaining the actual subsidy levels, Lamy’s task is to ensure that the developing countries shift the focus instead to market access. No wonder, if you have been following the ongoing negotiations, the shift has already taken place. Developing countries are engaged in the negotiating slabs for appropriate market access.

Strong and growing opposition to the unjust trade regime notwithstanding, some developing countries have been informally invited to a mini-Ministerial at Geneva in the last week of April. If the opposition to Mr Lamy’s crafty deal still persists, the dates for a mini-Ministerial will be shifted to mid-July. Like the July Framework 2004, which had no legal sanctity but has the all-powerful political backup, the forthcoming mini-Ministerial of some 30 countries will also see a draft text for agricultural modalities.

“Leave it or take it” being the usual refrain, and knowing the way the developing countries have always buckled at the altar of global trade, the clearly visible inequalities in the Doha Development Round will soon be put in the modalities framework. The fate of some 3 billion farmers in the developing world therefore is likely to be sealed in the days to come. Defying all norms of democratic functioning, the outcome of the mini-Ministerial will then be forced on the rest of the developing world.

Like July Framework 2004 that actually negates all that had been achieved on the contentious issue of farm subsidies, and at least takes the negotiations three steps backward, the final modalities on agriculture and NAMA too would take the entire trade negotiations back to square one – trade has to be a one-way process, from the developed to the developing countries. This is the new Pascal Law for you.

(Devinder Sharma is a New Delhi-based food and trade policy analyst)

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