TCS Daily

The Hong Kong Debacle

By Alan Oxley - December 18, 2005 12:00 AM

HONG KONG -- The Hong Kong meeting of the WTO achieved only one thing -- a further dumbing down of the WTO's fee market mission. If that's not bad enough, the Hong Kong meeting warns us that Governments are set to dumb it down more. We should start to fear for the WTO's future.

The Hong Kong meeting should have been cancelled once Pascal Lamy announced no effort would be made at Hong Kong to settle the framework on the critical question of reform of trade agriculture because the gap between the EU and the US was too wide. But he only "discovered" the gap was unbreachable two weeks before the start date; too late to cancel given the millions already spent by the Hong Kong Government to set it up.

Is Pascal Lamy a slow learner? There has been no evidence throughout 2005 that EU would move far enough to satisfy Washington (and that wasn't that far -- the Bush Administration has shown little taste for taking on its own farm lobby), let alone commit to opening its agricultural markets by any significant amount.

Jacques Chirac confirmed at the EU Summit which just concluded in Brussels that he does not intend to allow change to the standing EU position that agricultural subsidies are not to be changed until 2013. Lamy should understand Chirac better than most of us -- he is from France's administrative elite.

So what was so bad about Hong Kong? Things went backwards. When negotiations are on track they gain momentum and differences narrow. Although the Doha Round is in the last year of a five year process, there is not yet any such momentum. The convening of the Hong Kong meeting simply widened the differences and hardened positions.

Developing countries are now nearly unanimous that they should not significantly cut protection -- yet protection in the developing world is double that in the industrialized world. They have specifically taken the position that protection of industrial products should only be cut as much as protection in agriculture (anticipating any cuts in agriculture would be small); a large group is formally opposed to liberalization of services (critical to promoting growth and investment); and for good measure, India proposed the WTO's rules on intellectual property be revised so law on industrial property will recognize the social values of pre-industrial society.

The Indian point is laughable but was taken seriously by many, reflecting the lack of seriousness towards trade liberalization which has marked this trade Round right from the beginning in Doha in 2001. At that meeting, African countries, and NGOs such as Oxfam and Medicines sans Frontieres, among others, made a political cause celebre out of the nonsensical claim that WTO rules denied access to medicines in poor countries.

When WTO ministers re-convened two years later for a mid-term stock take in Cancun, Mexico, developing countries stalled the meeting even before the critical question of agriculture was discussed, insisting priority be given to easing any obligation by developing countries to liberalize trade. They regarded this as a success. Caught up in the revel of this anti-globalization moment, Oxfam also applauded this result, despite its headline grabbing campaign before Cancun for cuts in agriculture protection in Europe.

Both the US and the EU decry the developing countries for opposing liberalization of their own economies. They are supported by World Bank analysis. Even in agriculture, protection is higher among developing economies. Subsidies in India are as egregious as subsidies in Europe.

But the failure of the US and in particular the EU to move on agriculture robs them of any moral leadership. Morality is in very short supply in the Doha Round. High tariffs in developing countries harm only their citizens. Yet developing countries believe that inaction in Brussels obviates them of any responsibility to act in the interests of their own citizens. The winner in the loose morals sweepstakes however is Oxfam which gives absolution for developing countries for not cutting tariffs. It tells them there it is positively beneficial to live in a world of managed trade and effectively recommends the model of development which retarded Indian growth for decades.

So what now? Delegations have left Hong Kong focussed on trying to complete the Round in twelve months. If they do, it will be a bad result: very little liberalization of agriculture or anything else and a wide number of concessions to developing countries who are uninterested in trade liberalization. No one will benefit except those who want to see the free trade mission of the WTO diminished.

There is an option. Extend the Round by three or four years and use it to put intense pressure on the EU in the interim. The EU budget is to be reviewed in 2008 and agriculture will be on the table. Jacques Chirac may no longer be President and the US Administration may have even reined in agricultural spending by then.

Alan Oxley, who attended the Hong Kong meeting as Chairman of World Growth, a new free market NGO.


1 Comment

Still confused, why is this mess an EU issue?
The issue should be one of doing instead of blaming. If the EU is not interested in this then it is time for the US to step forward. But the US is not interested in this either and that is truely sad.

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