WTO July 2004 Package of Framework Agreements

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  • by Anup Shah
  • This Page Last Updated Monday, August 02, 2004

The World Trade Organization (WTO) member countries (most of the world) met again at the end of July 2004 to discuss more development and trade issues.

Why Another WTO Meeting?

Attempt to Continue from Previously Collapsed Talks

The previous major WTO meeting was in Cancun, Mexico, in September 2003. However, those trade talks collapsed because:

  • Richer countries wanted to talk about newer issues that mostly they themselves would have benefited from;
  • Poorer countries wanted to finish older issues mostly on agriculture that affected them the most, especially the impact of European and U.S. subsidies on their own agriculture and lack of access to those markets.
  • The continued non-transparent and non-democratic processes in decision-making and draft text writing, combined with procedure-abusing and “arm-twisting” tactics by the powerful blocs such as the US and European Union (EU) has constantly meant that poorer countries are dealt with an unfair deal. This was no different for Cancun.
  • For example, the powerful countries and blocks isolated groups of poorer countries to discuss aspects of the agreements (weakening poorer countries' ability to negotiate and discuss). In addition threats of things like withdrawal of much-needed aid would once again be used.
  • However, for the first time developing countries made a somewhat successful and united stand against the powerful richer countries to represent their concerns.

For more details on what happened at Cancun, see for example, the following:

Attempt to Create a Package of Framework Agreements

After the deadlock, WTO members in Geneva tried to restart the talks. An agreement was reached to have a package of framework agreements by the end of July, 2004. The first draft of the “July package” was circulated on 16 July. Negotiations started in the fortnight beginning 19 July.

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Drafts of Agreement Draws Predictable Criticism from Third World

As with the previous trade meetings, the draft texts drew criticism from most of the third world. For example there was concern on many angles, including the following:

  • The drafts fell short of some of the Doha mandates back in 2001;
  • There was lack of progress on development issues yet again (despite being continually highlighted);
  • Key issues for development were ignored and not even part of the first draft text, such as
    • Commodities;
    • Trade, debt and finance;
    • Trade and technology transfer
    • and Trade Related Aspects of Intellectual Property Rights (TRIPs) in relation to public health
  • Issues of interest to developing countries were not detailed out but other issues of interest to developed countries were detailed;
  • There were concerns about the new “blue box” domestic subsidies presented by the US, seen as a way to protect some of its own industries while also allowing more economic dumping, counter to global free trade principles;
  • There was a low priority on issues of implementation (e.g. anti-dumping, investment (TRIMS), sanitary measures (SPS) and technical barriers to trade) because of the reluctance of developed countries to deal with them.

Some non-trade issues which richer countries had previously wanted to increase their market share were removed such as investment, competition, transparency in government procurement. Side NoteThese are important issues in their own right, but beyond scope of these trade meetings, requiring separate efforts. With richer countries adding these in, without everyone agreeing on all the outstanding existing issues raised criticism from the third world as as example of continued disregard to the third world, while only promoting their own agendas.

For more details at these concerns and criticisms, see the following as an example:

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Final Agreement Reported In West As Success For Everyone. Who Is Everyone?

In the final hours of the long and drawn out meeting, western media outlets reported how US and EU compromises allowed a “historic” deal to be made.

The FIP, or the “Five Interested Parties” were a group of countries that were chosen to overcome the initial deadlocks. These parties were made up of key political and economic players in the world of trade: the United States, European Union, Australia, Brazil and India. The majority of the world’s poor were only represented by two nations.

Politicians such as UK’s Patricia Hewitt and the European Union’s Trade Commissioner, Pascal Lamy, who last year blamed the poor for not accepting their deals and offers, described this round as successful.

What was agreed?

Things agreed included:

  • The agreement of cutting agricultural subsidies and other aid to farmers from rich countries. This is in return for developing countries opening markets for manufactured goods.
  • Updating old customs procedures;
  • EU and US to offer a “down payment” that would see an immediate 20% cut in the maximum permitted payments they make;
  • Marking the beginning of the end of rich countries' farm subsidies that undercut farmers from developing countries;

Were the deals worth celebrating?

A major positive step, despite any concrete details or indications when it would happen, was the agreement for rich countries to reduce their heavy farm subsidies that distort trade and impact the poor countries so much. However, as well as the lack of specifics, there was much to be criticized, and it appeared that the poorer countries once again lost out. For example:

  • Much of the agreement was deliberately vague. Even if the spirit of some text might appear positive, the vagueness will mean powerful countries can (and most likely will) spin it to their own interests nearer the time the issues are raised again. Side NoteWe saw during the Iraq war build up for example, that the U.S. and American U.N. Ambassadors themselves saying that their pursuit of a U.N. Resolution against Iraq did not mean automatic war, yet, nearer the time the war did start, they said that everyone knew this would be the reality. See this site’s section on Iraq for more on these aspects.
  • Crucial information such as a timetable for subsidy elimination was not provided.
  • Actual figures for tarrif cuts were not discussed.
  • While issues crucially critical of richer country policies were vague, poorer countries agreed to open up their markets in return. This means future negotiations may be on condition that the poor countries open up their markets in return for subsidy reductions.
  • Richer countries, it could be argued, should have agreed to cut their subsidies without any compromise. Instead, without needing to agree a reciprocation on manufactured good, this will allow richer countries to retain their unfair competitive edge.

The final agreement was harder for the poorer countries to accept because it was presented so late, without sufficient time to analyze. The Third World Network summarized key and common criticisms from developing countries, which included criticisms of:

  • The process, especially the fact that there was little time for the delegations to read and react to the text and to send it to their capitals and get instructions;
  • Uncertainty and vagueness over the Non-Agricultural Market Access (NAMA) part of the agreement which calls for the liberalization of all natural resources, particularly in fisheries, gems, and mining.
  • In the new agriculture text, there were complaints about:
    • The new “blue box” being retained (although the meeting of the Five Interested Parties was supposed to have agreed to it was supposed to postpone a decision on this for a later stage);
    • The non exemption of developing countries from reduction of minimal domestic support (crucial for many developing countries, as their minimal support is dwarfed by the enourmous first world farm subsidies);
    • The proposal to discuss differential export taxes;
    • The inadequate treatment of special products;
    • The double standards in the text “pandering” to the demands of developed countries (including new demands) whilst the developing countries' demands were not met and they are told to show “flexibility.”
  • Inadequate treatment of implementation issues. That is, details on how to carry out the agreements were missing.

Oxfam noted criticism worth citing here:

Small wins were achieved by developing countries in the form of stronger language on agricultural export subsidies and export credits and the dropping of three out of the four so-called “Singapore Issues” but overall the final text remained disappointing and did little to advance the round of talks, said Oxfam. Apparent concessions by the US on cotton were not legally binding and would not guarantee an end to the harmful regime.

[Celine Charveriat, Head of Oxfam International’s Geneva office]: “Negotiators may trumpet breakthroughs on export subsidies and cotton but there are no cast-iron commitments here and no clear timeline for reform. We need a far more ambitious and radical approach. If rich countries do not immediately put their promises into action, this declaration will become just one more stage in a long journey of disappointment and deception.”

“Arrested Development.” Trade talks move inches but miles remain, Oxfam, July 31, 2004

It is understandable that many non-governmental organizations (NGOs) and developing countries are skeptical of richer countries' commitments, because on many issues, vague promises have turned out to be hollow. Yet, if the rich countries did live up to their stated commitments,

Economists have estimated that a final deal could add more than $500bn a year to the size of the global economy, but some trade negotiators and most development groups warned last night the draft was biased in favour of the West and there was much to do to secure a deal that would benefit poor countries.

Larry Elliot, Deal on global trade holds out hope for poor nations, The Guardian, August 2, 2004

As discussed on this sites foreign aid section, rich country farm subsidies alone are far larger than the amount of aid they give to the poorer countries. For the poor countries then, these issues are crucial. We like to blame the poor for their predicament. Yet, we hardly see how the rich countries contribute, and sometimes are major reasons for their problems.

For more on these reactions, see the following:

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Blame Game Again?

Commenting on the final July 30 draft, Celine Charveriat, head of Oxfam International’s Geneva office added:

After days of closed door negotiations, rich countries have delivered a deeply unbalanced text as a take or leave it option. This puts developing countries in the unfair position of having to accept a bad deal or reject and get blamed by the US and EU for failure.

Oxfam condemns proposed trade deal for failing poor countries, Oxfam, July 30, 2004

Recipe for Continued Poverty

It is almost like watching repeats of a show year after year, where you are now familiar with the series of events that will follow:

  1. The draft text, mostly written with rich countries interests in mind (such as the US and EU) will be criticized by the majority of the world because their concerns are ignored;
  2. The poor countries will start on a back foot, defending their concerns and wasting urgent time to discuss real development;
  3. Conversely, the rich countries will be on a stronger footing where they pressure the poorer countries to either trade off the issues in an unequal agreement, or accept/reject the proposed draft;
  4. The poor countries will not get what they need;
  5. The rich countries will get much of what they want;
  6. Where the developing countries try to take a stand, they will be criticized by the rich countries for de-railing the process, not being flexible, or cooperative, etc. This may get media attention;
  7. Reluctant agreements may be made. Richer country politicians may even call such meetings a success, and their media may even join in their celebrations.
  8. That once again it has been the rich countries de-railing the process, will be met with almost deafening silence.

Long time critic, Professor Walden Belo, presents a summary of a common view of the July 2004 Framework text:

The developing countries have waited nearly 10 years for the trade superpowers that dominate the WTO to show sensitivity to their efforts to change global trade from being an instrument of their domination to serving as a mechanism to advance their economic development. For this patience, they have been rewarded with a succession of anti-development negotiating frameworks and texts culminating in the July Framework.

Walden Bello, D-Day for the WTO, Focus on the Global South, July 28, 2004

International development organization, Oxfam, notes the position the pressures the third world have been facing leading up to this meeting, and will no doubt face after:

For the past three years, despite promises made at Doha, developed countries have not provided ... the conditions for a transition to a fairer and more sustainable trading system, and a set of rules that would favour equitable development. Old-style mercantilism still prevails, in complete contradiction to the international community’s commitment to use trade as a lever to reduce poverty and achieve the UN Millennium Development Goals.

...In advance of the July meeting of the General Council, the blame game has begun again. Developing countries are being put in the unfair position of having to accept a modified framework or take the blame for the collapse of the round. Such an interpretation completely ignores the main factors that have been blocking progress in the round so far:

  • an overloaded, complex negotiation agenda...
  • the intransigence of the United States, delaying reform of the agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) until August 2003, and insisting on the freedom to continue subsidizing its domestic cotton production;
  • the lengthy CAP [Common Agriculture Policy] reform process, which resulted in a modest reform package by June 2003, and the U-turn represented by the US Farm Act, which was enacted a few months after the Doha ministerial conference - both domestic developments contradicted commitments made at the WTO to substantial agricultural reform;
  • non-transparent, chaotic processes, which contributed to the failure of the Cancun conference.

One Minute to Midnight, Oxfam, July 2004

Further above, ActionAid’s report, Divide and Rule: The EU and US response to developing country alliances at the WTO, was mentioned. Commenting on EU and US bullying and arm-twisting tactics, Kanaga Raja reported a number of similar feelings, including the following:

Chakravarthi Raghavan, Chief Editor of the South-North Development Monitor (SUNS) said that as early as 1986 he had witnessed this kind of tactics and relationships [of EU/US arm-twisting and bullying] in an attempt to push the developing countries back into the colonial era of economic relationships.

Since then things have improved in one sense but has created problems in another sense. On the one side, the numbers of journalists now taking interests in these matters and following them in great detail have increased. On the other side, there is a plethora of information that is misleading due to the unavailability of the full picture of what is going on inside.

Kanaga Raja, North tactics to split developing-country alliances exposed, Third World Network, July 26, 2004

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Is another, fairer world possible?

The Institute for Economic Democracy has long detailed how we have moved from “plunder by raid to plunder by trade”, and Raghavan’s comment above about colonial era economic relationships would tend to be a similar conclusion.

Cancun showed that if they tried, the developing countries might be able to tell the richer countries that they need to be fair and listen to their needs. The richer countries seem, in most part, to have come back with more of the same tactics.

The continued inequality risks continuing to feed more corruption and resentment of richer regions.

There are more calls in some circles to disband the WTO as a global institution to facilitate trade because of the political influences and non-democratic processes of the powerful countries. Yet alternatives would likely be met by resistance from those same powerful countries who benefit from the WTO processes. Without more cooperation and fairness from the first world, it therefore remains to be seen if things can really change or not.

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Author and Page Information

  • by Anup Shah
  • Created: Saturday, July 31, 2004
  • Last Updated: Monday, August 02, 2004

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Document Revision History

August 2, 2004Updates on final deal and on how the west reported it as a success, yet there is guarded optimisim, or outright disappointment from others.

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