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WTO: Doha Destructive Round


Expressing hope over efforts to revive the deadlocked World Trade Organisation (WTO) negotiations, Indian Prime Minister Manmohan Singh said: “Development dimension must get the prominence and attention — not in term of words, but in terms of solid deeds.” He was on his way back from the recently concluded G-8 Summit at St Petersburg.

Nearly eleven years after the WTO came into existence, as the impasse over a multi-lateral trade regime continues, it is the ‘development’ aspect that has been sacrificed at the altar of international trade. For the developing countries, WTO offers hardly any promise of development, but in reality puts millions of jobs in the manufacturing sector at risk. In agriculture, it promises to turn a majority of the developing countries into food importers thereby playing havoc with food security and adding on to global poverty and hunger.

The Doha Development Round has in fact turned into a Doha Destructive Round. Developing countries stand to gain from a failed WTO.

Although the WTO Director General Pascal Lamy has been claiming that the developing countries have everything to lose if the Doha Development Round fails, his intentions have come under a cloud. Lamy in his earlier avtaar as the European Union’s Trade Commissioner is in reality the architect of the inequalities that have been woven into the negotiations. He is primarily responsible for ensuring that the European agricultural subsidies, the highest in the world, are not challenged in the WTO till the year 2013.

Pascal Lamy’s interests therefore are very clear. He is trying very hard to convince the developing countries of the need to have farm subsidies in the rich and developed countries. No wonder, developing country trade negotiators and civil society leaders are being taken on tour to America to explain the importance of farm subsidies. In nutshell, both America and European Union are reluctant to make any appreciable cuts in their huge agricultural subsidies. But are exerting all kinds of pressures to open up the developing countries to one-way trade – from the rich and industrialized countries to the poor and developing countries.

With the US/EU refusing to remove the huge agricultural subsidies, and having further strengthened the fortress around domestic agriculture after July Framework 2004, the modalities in agriculture that are now being finalized will surely wipe out developing country agriculture. Before we look at the implications from the proposed modalities that are to be finalized, let us first take a look at what are the project gains if the present talks succeed.

Projections of global gains from full trade liberalization were initially put at $ 832 billion, of which the developing countries gain was estimated at $ 539 billion. These projections were later scaled down to $ 287 billion; with developing country share coming down to $ 90 billion. Before the 2003 Cancun Ministerial, World Bank had projected the gains at more than $ 500 billion for the developing countries. After Hong Kong Ministerial 2005, the projections showed a “likely Doha scenario” of just $ 16 billion, out of a global total of $ 96 billion. According to a paper by Timothy A. Wise and Kevin P Gallagher ofthe Global Development and Environment Institute at Tufts University (Medford, USA) adjusting for Special and Sensitive Products in agriculture, developing country gains come to just $ 6.7 billion out of a total of $ 38.4 billion.

In other words, $ 6.7 billion is the total welfare gain that is expected from a successful Doha Round. What it means in reality is that 110 developing countries will have to share a welfare gain of just $ 6.7 billion. If this is all that the developing countries have to gain from ‘development’ it needs a serious rethinking on what constitutes ‘development’. And if this is ‘development’, Pascal Lamy needs to tell us as to what in his dictionary does the word “destruction” stand for?

The Carnegie Endowment for International Peace (CEIP) has also used a different set of projections, and has arrived at still depressing projections. For India, there are no gains, only losses — minus 0.04 billion dollars. The International Food Policy Research Institute, Washington DC, too estimates the gains in agriculture for the developing world between the range of $ 8-20 billion. This is all that benefits 110 developing countries, but when translated into human cost it will mean millions of livelihoods lost. For India, it means nothing since its annual Budget for the Rural Development Ministry is higher than the total gains the entire developing world is being promised. In turn, signing on the WTO would mean the beginning of the end of domestic agriculture. The bells would toll for food self-sufficiency so assiduously built over the past few decades. India and for that matter most of the 110 developing countries will then turn into food importers. If the first ten years of WTO is any indication, the (dis) agreement on agriculture has already played havoc with agriculture and would further exacerbate the marginalisation of the farming communities.

After all, if the impact of the trade liberalization policies in the ten-year period 1995-2005 is any indication, several million farmers all over the developing world have been pushed out of agriculture. With their livelihoods lost, these farmers and their families have mostly migrated to the urban centers in search of menial jobs. Whether it is Africa, Latin America or Asia, the story is the same. What was termed as the decade of economic growth has actually turned into a dark decade for at least 54 developing countries whose economies has worsened. For the remaining developing countries, the situation is no better.

Latest data from simulation studies using various coefficients to analyze the impact of “Swiss formula” for Non-Agricultural Market Access (NAMA) shows that for the major developing countries – India, Brazil, South Africa, Argentina, Mexico and Indonesia – it would translate into millions of job losses. The International Confederation of Free Trade Unions estimate that in all major labour-intensive sectors in India would be negatively impacted if a coefficient of 15 is used. Even if a coefficient of 30 is used (as proposed by Pakistan), India will have to cut its average bound tariff by 53 per cent, which will displace millions.

WTO trade negotiators have a responsibility to be sensitive to this human problem. It is now generally recognized that removing state support to agriculture and diluting import restrictions in developing countries during the past 15-20 years has led to degradation of farming in developing world, instead of growth and development. In India, imports have been increasing as tariffs are lowered. So is the case with most of the developing countries. Between 1996-97 and 2003-04, agricultural imports into India have gone up by 270 per cent by volume and 300 per cent in value terms. For an agrarian economy, importing food is like importing unemployment.

After all, for a country which alone has nearly one fourth of the world’s farming population – nearly 650 million farmers — sustainable agriculture is the only means to provide viable livelihoods. While the link between farmers suicides and impact of cheap and subsidized imports has not been studied in detail (over 1,00,000 farmers have committed suicide between 1993-2003, and the number keeps on increasing with every passing day), certain evidence does exist pointing to declining import prices leading to depression in domestic prices and eroding the income of farmers.

Let us take a look at the destruction wrought in India. During the period 1990- 2005, the import of cotton lint increased at a compound growth rate of over 75 per cent. India is the biggest producer of milk in the world. Indian dairy farming is however characterized by cooperatives involving millions of women and men. Dairy products showed a significant increase in imports of 371 percent during 2001 and 2004.

From a near self-sufficieny level in 1994-95, India has now emerged as the world’s biggest importer of edible oils. This had severe implications for millions of farmers languishing in the harsh environs of the dryland regions. In 1999-2000, India imported five million tones of edible oil thereby once again emerging as one of the biggest importer of edible oils. In 2005, the import bill soared to $ 3.2 billion.

Sharp declines in international prices of edible oils and depressed unit value of imports have not only adversely impacted coconut oil producers, but also 3.5 million producers of coconut. In addition, price of coffee fell by 59 percent, tea 41 percent and pepper 69 percent during 1997-98 and 2002-03. The fall in the price of primary products was associated with a significant drop in productivity of tea, coffee and pepper. In spices, imports increased by 542 percent between 1995 and 2004. No wonder, the two districts of Kerala with the highest suicide rate in the State predominantly grew coffee and pepper.

What makes Indian agriculture significantly different from the industrial agriculture in America and European Union (and for that matter in other OECD countries) is that Indian agriculture is diverse and based on available biodiversity wealth. India grows 260 crops every year whereas Europe and America cannot count more than 30 crops, of which 10 crops or so are commercially important. In India, each of the 260 crops is linked to millions of livelihoods.

And yet, the international magazine The Economist (July 8, 2006) wrote: “India is more worried about upsetting subsistence farmers than it is excited by the prize of freer trade in the services that now matter so much to its economy”. What it fails to tell us is that the gains in services only provides employment to less than 1.5 million people whereas 650 people are directly dependent upon agriculture and another 200 million are indirectly banking upon farming for survival. Moreover, the gains in services would have happened in any case with or without WTO since the service sector required cheaper manpower.

Such kind of stupid arguments have led the trade negotiators to believe that saving WTO at whatever cost is a necessary prelude to economic growth and development. Unfortunately, except for the rhetoric, there is no economic evidence of any significant welfare gains to the developing countries. Nor has the multilateral trade agreement helped in reducing the number of more complex bilateral trade agreements. In reality, bilateral and regional trade agreements have seen an unprecedented upswing.

It is therefore important that the WTO first tells the developing nations of the ‘development gains’ from the so-called Doha Development Round – “not in term of words, but in terms of solid deeds” as Prime Minister Manmohan Singh asked for. Despite the last-minute offer of some ‘flexibilities’ from the US and EU in what appears to be a desperate bid to keep the hopes alive, the time has come down to pull down the shutters on a badly mutilated multilateral trade regime.

Failing to do so should be construed as an act of betrayal by the developing country negotiators. After all, it is not a statistical game, but involves the very survival of the at least three billion farmers in the developing world, and millions of those employed in the manufacturing sector. #

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

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