Trade truce

Trade truce

the choice of venue was clever and the September 11 attack on the World Trade Center added to the security paranoia. The result was that it combined to give trade negotiators somewhat of a breather when they met in Doha, Qatar, for the fourth ministerial conference of the World Trade Organisation (wto). The massive street protests that marked the Seattle round were non-existent at the Doha ministerial. In the aftermath of the terrorist attacks against the us , anti-globalisation protesters were suddenly disoriented, and several plans for protests at Doha were cancelled. "Are we talking about anti-capitalisation, anti-globalisation or anti-Americanism? It didn't matter before September 11; now it does," says Tom Spencer, director of the European Centre for Public Affairs.

Besides, the organisers were not taking any chances, and the conference venue looked like a fortress. The perceived threat of terrorism was used as an effective way of stopping anyone opposed to the wto -- out of sight, and perhaps out of mind.

With the debacle of Seattle looming large, the negotiators were under pressure to come up with results. And at the end of the six-day marathon meeting, a deal was struck. It was agreed to start negotiations on a new trade round to culminate in 2005. For the North, which was keen to bring issues of investment and competition into global trade negotiations, it was a "given". Most importantly, they got an agreement for a new round of negotiations. The South lost most battles, but was relieved to still be in the reckoning. Most gains were in the backroom "bilateral deals" -- a euphemism for arm-twisting.

Give and take!
The biggest gain for developing countries was on patents and drugs. Countries were granted the right to break the monopoly over patented drugs in case of health emergencies like epidemics. Analysts feel that the issue was clinched only due to the us' predicament over anthrax drugs. But the drug industry has dismissed Doha as a political statement and not legally binding. The European Union (eu) brought an agreement within reach by making a concession on agricultural subsidies. It agreed to "reductions, with the view to phasing out" , of agricultural export subsidies -- something it had always resisted. However, a qualifying phrase was included in the agreement, which said the eu's concession was made "without prejudging the outcome of the (final) negotiations". "It was clear from the very beginning that we have to give and to take also something," said European agriculture commissioner, Franz Fischler. In return, wto members accepted eu demands that investment, competition and environment rules be put on the agenda.

The us agreed to relax some import curbs. And it got an assurance on the anti-dumping issue. The us has given assurance of greater discipline in imposition of anti-dumping provisions. But on the issue of greatest concern to the South, textiles, the us refused to advance the deadline for quota reduction from January 2005. It has, in fact, threatened to impose non-tariff barriers on other imports if pushed.

In return for the concessions made by the eu, negotiators wanted stronger language on trade and protecting the environment. Developing countries, however, did not want the environment to be linked to trade rules. They felt that environmental concerns would be used as an excuse for renewed protectionism. For now, the issue has been put on the backburner. The eu has won the right to talks within two years on how to improve the investment climate for international companies abroad, and how to introduce competition policy into trade law.

The Indian act: deal breaker
India made all the right noises at the meeting, but came back with very little. Indian commerce and industry minister Murasoli Maran, who called wto " a necessary evil", was seen as the champion of developing countries. He was also the biggest stumbling block during negotiations. India, which has just a share of 0.7 per cent of world trade, was wary that a clause on competition would allow foreign companies too much freedom to operate in the country. India's intransigence led to the extension of the conference by a day. Till the last day, the minister seemed to block a declaration. In an effort to reach an agreement, many trade ministers held several closed-door meetings with Maran. But nothing worked. Media reports suggest that the issue was clinched only when the Qatari chief negotiator Yousef Hussein Kamal held a one-to-one meeting with the minister. That meeting changed everything. India finally fell in line. What transpired at that meeting, however, remains unknown.

And all of a sudden, India was party to a declaration that it was fighting all along: a new round of negotiations on trade, investment, procurement and competition policy.

India's poor showing at international negotiations is also due to the lack of consistency on issues. For instance, take its contradictory stands over the issue of trade and environment. It fought tooth and nail at Doha not to link the two. However, at the Convention on International Trade in Endangered Species (cites), it wanted to use trade sanctions against countries trading in ivory or rhino horns. Maran is being showered with encomiums for holding his ground at Doha. In reality, he has only bought more time with regards to issues such as investment and competition. The delay is being seen as a victory -- typical of Indian bureaucracy's shortsightedness. The strategy is to block a proposal without proposing a new one. But as countries tighten the noose in the forthcoming negotiations, India will be forced to accept what it fought all the while.

Can green mean free?
The debate reached a boiling point in Doha, but remained inconclusive

midway through the Doha meeting, eu trade commissioner Pascal Lamy visited Rainbow Warrior , the mascot ship of the international environment activist organisation Greenpeace, anchored in the Qatari seawaters. "Some balance between the trade rules and environmental protection is to be struck, that is why we are here," Lamy said on board his high-visibility platform. The gesture might have struck a chord back home in Europe, but most countries from either side of the economic divide did not agree.

The eu had made it abundantly clear even before the ministerial that inclusion of environmental concerns was in effect a sine qua non for the eu's agreement to ambitious negotiations on cutting back state supports for agriculture. The eu move is perceived as a means to retain some green barriers to its agriculture markets when its agricultural subsidies are eventually phased out as envisaged in the Doha declaration. It is pushing for recognition of the 'multifunctionality of agriculture'. Under this concept, agriculture does not just serve the purpose of providing food but also helps in maintaining rural communities, protect the environment if non-intensive methods are used, preserve culture and promote sustainable development. This possible connection between agriculture and environment is seen as one of the reasons why the eu is pushing environment at the wto .

The South opposes bringing the issues related to environmental protection into the mainstream of multilateral trade talks, saying their potential abuse as green protectionism cannot be ruled out. In the past, the demands for linkages between trade and environment have come not only from Northern non-governmental organisations (ngos), but also from Northern industry and labour unions, which stand to benefit if environmental standards are applied to trade.

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Can green mean free?

Developing countries also fear the huge costs associated with greener technologies, which will be unbearable by their domestic industries. It could make their goods uncompetitive in western markets. This unequivocal opposition to greening of trade is what brings the motley crew of poor countries together. "If there's one thing that unites developing countries, it is opposition to negotiations on trade and environment," said a developing country official before the meeting. "If the eu says it's a deal-breaker, so be it. There are just too many people against it." The Republican Bush administration shares these views (unlike the democrats), and would rather the green issues remain outside the purview of the wto , as they could harm the interests of us industry. For instance, us biotechnology firms stand to lose out, due to the wariness against genetically modified (gm) food.

Despite this opposition, the eu threat that it would negotiate on liberalising agricultural trade only if other wto members agree to talk on trade and environment, eventually worked. The final ministerial declaration controversially proposes negotiations to enhance "mutual supportiveness of trade and environment". The declaration reiterates the eu demand seeking clarification on the relationship between the wto rules and "trade obligations set out in multilateral environmental agreements (meas)" instructs the wto 's committee on trade and environment (cte) to give special attention to, among other things, ecolabelling suggests reduction and even elimination of trade barriers to environmental goods and services, a move that has been mutely welcomed by developing nations seeks to further strengthening the links between trade and environment by proposing negotiations on "procedures for regular information exchange" between the relevant mea bodies and their counterparts in the wto .

Indian industry minister Murasoli Maran dismissed the environment provisions in the declaration as "the price we have to pay for something in agriculture". "We have marginally agreed on environment, which to a large extent, is a political acknowledgement of its importance rather than rebalancing of rights and obligations," he said.

The environmental measures listed in the Doha declaration are not new. They have been part of the discussions at the cte for several years now, and have been discussed in by the wto's dispute settlement mechanism before that. cte was set up in 1995 and is composed of all wto members and a number of observers from inter-governmental organizations. It functions with the understanding that "it does not modify the rights and obligations of any wto member under the wto agreements." A ten-point agenda forms the basis of the committee's work, which includes decisions on environment measures for trade, ecolabelling, environmentally unfriendly subsidies and intellectual property rights.

cte has not reached any conclusions due to the controversial nature of the issues. In 1996, it presented an inconclusive report at the Singapore ministerial due to the fact that its members had failed to reach agreements on most of the issues under discussion. The ministerial made note of the "the breadth and complexity of the issues covered by the committee" and "further work needs to be undertaken on all items of its agenda". The committee was directed to carry on its work.

Although cte discussions have been unfruitful, the trade and environment debate is being addressed in other fora. As the pressure from Northern civil society to take on board environmental concerns increases, the dispute settlement mechanism has come out more and more in support of green issues. In a recent ruling on the shrimp-turtle case, a wto appellate body (ab) endorses a us ban on shrimp imports from countries that do not use turtle excluder devices to prevent harming sea turtles (see box: In through the backdoor). These judgments cannot be taken lightly, since they are making law by setting precedents.

Morevover, as the eu faces pressure from its civil society on the issue of genetically modified organisms (gmos), the Union is unlikely to let go of issues such as the primacy of public health, the precautionary principle, and process and production methods (ppms) (see box: In favour of health).

Developing country concerns over green protectionism are legitimate, but they cannot simply continue to oppose negotiations on the links between trade and environment -- they have to take them head on to make sure their concerns are addressed through legitimate multilateral negotiations, rather than through the back door, by a few people on a dispute settlement panel or appellate body.

Conflict with environment treaties
For instance, the discussion on the relationship between trade rules and meas has been uneasy to say the least. While the wto currently allows importing countries the freedom to choose their own standards in the interests of public health and the environment in their own countries, they are not allowed to impose standards aimed at improving health or environmental practices of exporting countries. But can environmental standards be imposed on another country if a multilateral treaty has been signed to this effect? The eu considers it necessary to ensure that when there is dispute concerning environment-related trade measures, linkages between trade and environment are taken into account so that one does not jeopardise the fulfillment of the other.

Developing countries see the debate on meas as a non-trade issue, but it is in fact in their interests to sort out the issue once and for all, rather than leave the issues open for interpretation by the wto's dispute settlement mechanism. Several feasible options have been suggested in the past, such as moving environment-trade conflicts to tribunals provided specifically under meas; or moving such disputes to the International Court of Justice. But even before agreeing to a venue, developing countries must insist on clarification on a set of overarching rules. For instance, they should insist on a provision that forbids the use of trade sanctions to conserve the global environment, since such sanctions can only be used by the more economically powerful nations against the less economically powerful. Extra-jurisdictional and unilateral action should not be possible even within a multilateral agreement.

Northern green activists were not entirely happy with the outcome at Doha, though for reasons other than those troubling developing countries. The declaration states that negotiations on the relationship between trade and meas shall not prejudice the wto rights of any Member that is not a party to the mea in question . Greenpeace fears that this phrase would prove a powerful disincentive for countries to sign the meas. The declaration also states that negotiations on the effect of environmental measures on market access and the Trade Related Intellectual Property Rights (trips) accord shall not add to or diminish the rights and obligations of Members under existing wto agreements . These environmental activists feel that the final outcome of the negotiations on these points could end up as footnotes rather than effect any change in the wto rules.

Marks of shame?
Ecolabelling star ted out as a consumer awareness aid to help them make better choices. The eu penchant for ecolabelling was on full display in all the pre-Doha drafts. Ecolabelling is a way to ensure that all exports are harmless to humans and the environment -- in itself a rational and benign idea. However, its practice could erect new insurmountable barriers to exports from the poorer countries.

Ecolabelling requires that products be marked environmentally friendly not just because they do not directly harm the environment but also indirectly. At the centre of the debate is the ppm criterion which looks at the environmental-friendliness of the technologies used to make a product rather than the superficially judge the product, the final outcome of the process. Life cycle criterion is another specification applied for ecolabelling. This looks at the ppm , the product and how the product will be eventually disposed, making ecolabelling an even more stringent requirement.

This is has raised hackles in the developing world where state-of-the-art green technologies are seldom considered for their prohibitive costs. Insisting on ppm for labelling would bar most of poorer countries' exports from the northern markets. At the moment this agenda has only been put on a fast track, but it is not for negotiations.

Precautionary principle
The eu locked horns with the us by banning American beef exports on the ground that the beef was laced hormones that could cause cancer and other health problems. The ban was not upheld by the wto because it was not convinced with the scientific evidence the eu had provided to prove its case and that it was imposing its higher standards on health and food safety on others. The eu insisted that it was acting according to the precautionary principle. This better-safe-than-sorry principle lets a country take a similar action like the one the eu took even in the absence of supporting scientific rationale.

The wto had judged the case by the 1996 agreement on sanitary and phytosanitary measures (sps), which favoured a more scientifically demanding risk assessment to the precautionary principle. The us also proved that its beef hormones met standards set by Codex Alimentarius Commission, a world body that develops standards for food additives, pesticides, chemicals and contaminants. The precautionary principle has since become pet issue that the eu pushes in every wto meeting. Doha was no exception. On the fourth day of the talks the eu broached the subject, but intense opposition kept it out of the final declaration.

At the insistence of the Philippines, the us and Iceland the Doha text pushes for negotiations on clarifying and improving wto disciplines on fisheries subsidies . Fisheries subsidies have been seen as a major cause for the depletion of fish stocks due to overfishing. Apart from the environmental impact the subsidies-caused depletion also undermines the livelihood of those dependant on fishing. This is particularly the case in many developing countries as the text also points out.

Though fisheries subsidies have figured in the wto debates and in its predecessor gatt , no agreement was earmarked to cover the issue during the Uruguay Round. At the Seattle 1999 meeting a proposal was made to tackle environmentally harmful and trade-distorting fisheries subsidies but disagreements over which wto body should cover the subject halted progress. The eu is one of the leading providers of subsidies to its fishermen and hence has been shying from bringing the issue into wto forum. The presence of the subject vindicates the view that much give and take has tran spired to prevent Doha ending up as a disaster.

Public health over profits
Developing countries can now override patent laws for life-saving drugs. Still, TRIPS jeopardises the right over traditional knowledge

developing countries have always maintained that the wto's intellectual property accord, known as the agreement on trade related aspects of intellectual property rights (trips), over-protects 'formal' corporate innovators by giving them exclusive marketing rights for 20 years, during which time society bears the cost of higher prices for the innovation. They contend that the trips agreement largely defends the profits of the pharmaceutical, entertainment and information technology sectors, based mostly in the North.

trips-style protection has forced several developing countries to dismantle domestic drug production dependant on copied foreign-patented drugs and slightly altered production processes. Before trips , patents in developing countries used to protect only the process, not the end product, so that as long as the process was changed, the developing country did not have to pay royalties to the foreign pharmaceutical firm. trips put an end to this, raising concern over the morality of forcing the South into buying expensive drugs that its citizens need, but cannot afford. Earlier in the year, a court battle between the South African government and 39 pharmaceutical giants ended in the vindication of the South African government's stand, allowing the country to procure life-saving medicines at cheaper prices for its poor populations in contravention of trips .

At Doha, developing countries won some concessions in this regard. After considerable haggling, they won the right to manufacture cheaper medicines to fight health crises like aids , tuberculosis and malaria. According to a declaration on the trips agreement and public health adopted at Doha, the trips agreement does not and should not prevent members from taking measures to protect public health .

The declaration comes at the end of a bitter struggle between the industrialised and developing world. The former, represented mainly by the us , took up cudgels for its drug companies. The latter, led by Brazil and a group of African countries, is struggling to cope with epidemics. The eu backed developing countries in advocating greater flexibility in the use of compulsory licensing -- licensing without the agreement of the patent owner. According to the international federation of pharmaceutical manufacturers, the eu was "not being an honest broker," and was siding with the poor countries on trips in order to buy concessions on the issues of investment and competition policy it wanted in the new round.

The us and Switzerland were against a broad interpretation of article 31 of trips , which is related to compulsory licensing. The us argued that the strong implementation of patent rights encourages innovation, and serves as an incentive for companies to invest in research to discover, develop, and commercialise new products. Instead, the us put forward a proposal to exempt the world's poorest countries from patent protection for ten years, and introduce a moratorium on making a trade complaint for manufacturing or importing hiv/aids drugs in Africa. But despite frantic phone calls from Washington and lobbying by its us $300 billion-a-year drug industry to scuttle the deal, the South's call for a slightly more compassionate patent regime held sway.

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Public health over profits

However, the Doha declaration does not take a decision on whether countries with insufficient or no manufacturing capacities in the pharmaceutical sector will be allowed to import generic drugs to deal with a health crisis. Instead, it calls upon the trips council to 'find an expeditious solution' to this problem, and report to the wto general council before the end of 2002.

TRIPS and biodiversity
Another reason why the trips agreement is considered a thorn in the side by many developing country governments is that the accord does not recognise and protect traditional knowledge held by communities. This runs contrary to the provisions of the Convention on Biological Diversity (cbd), which calls on countries to respect, preserve and maintain knowledge, innovations and practices of local communities , and also to encourage the equitable sharing of benefits arising from the utilization of such knowledge . cbd emphasises that local communities should have control over their biodiversity-related traditional knowledge and 'informal' innovations.

On the other hand, protected by the trips regime, pirated resources and traditional knowledge have immense and growing value for private Northern companies. Genetic resources provide the foundation for a range of new products and technological applications in biotechnology, agriculture, and medicine. Knowledge developed and held in local communities can provide genetic material for plant breeders to produce new plants with resistance to pest or drought. In one case, incorporating disease resistance from a Latin American corn variety spared us corn crops from devastation and saved the industry an estimated us $6 million. Although article 27.3b of trips allows countries to exclude plants and animals from patents where the prevention within (national) territory... is necessary to protect ordre public (law and order) or morality , it stipulates that countries that opt for this clause must provide for a non-patent sui generis form of protection to plant varieties.

The issue, which has often been raised in the past at the wto forum, was raised once again in a paper presented in August this year by a group of African countries. The African paper questioned mandatory patenting of life forms and natural processes. It argued that only inventions are patentable, not discoveries which the above two represent. Allowing the patenting of discoveries would encourage western corporations to steal and monopolise traditional knowledge and natural resources. The proposal sought a review of trips to protect innovations of indigenous and local farming communities, and allow the continuation of traditional farming practices. This includes the right of farmers to save and exchange seeds and sell their harvests.

The Doha declaration asks the trips council to examine the issues relating to the links between trips and cbd and protection of traditional knowledge and folklore, although no definite deadlines were set for this task. The issue has already been examined in the past -- with no concrete results -- by the wto Committee on Trade and Environment (cte), the trips council, cbd , the Food and Agricultural Organisation (fao), the un Committee on Trade and Development (unctad) and the World Intellectual Property Organisation (wipo).

Geographical indications
'Geographical indications' are used to indicate the regional origin of particular agricultural or manufactured goods, provided that those goods derive their particular characteristics from their geographic origin. Under the trips agreement, a geographical indication is recognised as a form of intellectual property, but currently geographical indicators protection is granted only to wines and spirits. So, for instance, only wines from the Champagne region of France can be called Champagne, and Scotch whisky can only be made in Scotland. The Doha declaration agreed to further this protection, by negotiating the establishment of a multilateral system of registration and notification of geographical indications for wines and spirits before the next wto ministerial conference.

Several countries have, in the past, pushed for such protection to be extended to foodstuff, agricultural and industrial products, and even handicrafts. This would allow for products such as Roquefort cheese, Darjeeling tea, and basmati rice to also be protected under geographical indications. Many see geographical indications as a means of protecting small-scale production of goods based on traditional know-how.

In October this year, India and Switzerland jointly submitted a paper to the wto demanding that trips scope be extended to protect gi relating to agricultural products. The Doha ministerial declaration calls upon the trips council to look into the issue.

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Fair farming

agriculture remains the biggest source of inequity in the world trading system. Unlike telecom, financial, and legal services, farming practices in the North have stoutly resisted the logic of market forces. Farming in the North thrives on prodigious subsidies and price support systems combined with coddling protection through high tariffs on competing imports. The agriculture-reliant South is incapable of providing matching support systems for its produce, rendering it less competitive in the lucrative northern markets.

The developing country demand for lower tariffs and reforms in the domestic agriculture of the developed countries is echoed by the free traders of the North. Chief among them is the Cairns Group of agricultural exporters (composed of 18 countries including Australia and Argentina) and the us . Their common enemy is the profligate eu and Japan. An extravagant 46 per cent of the eu 's total budget goes to farming subsidies. Japan subsidises its equally notorious inefficient farms apparently for maintaining rural communities.

After long hours of negotiations at Doha, the eu had to finally give in to the demands of developing countries and major agriculture-exporting countries on the reduction of its agricultural subsidies. The Doha declaration calls for the reduction of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support . The declaration also agrees that special and differentiated treatment for developing countries shall be an integral part of all elements of the negotiations to enable developing countries to effectively take account of their development needs, including food security and development . The modalities for special and differential treatment are to be established by March 2003.

The wto agreement on agriculture (aoa), effective since the wto was established in 1995, poses a dilemma for development. Allegedly intended to decrease market-distorting subsidies on food products, it ends up allowing industrialised countries to use direct and indirect subsidies for their agricultural produce. At the same time, manipulation of tariff reduction commitments in the North has resulted in a phenomenon known as 'tariff escalation'. This refers to an increase in tax on imports of value-added products. Thus products on higher levels in the production process have higher import tariffs. Notably, profit margins increase as the production process advances. But producers in the South are dissuaded from producing these products because of the higher import tariffs.

Farmers in the South (as much as 70 per cent of developing countries' populations) are thus forced to compete against high subsidies and protected technology in the Northern agriculture (which employs only 4 per cent of Northern populations). Once they are forced out of their farms, they do not have processing plants or higher employment opportunities to turn to. Their livelihoods are threatened. In the North, such a small percentage is employed by agriculture because, over time, people found employment opportunities at different levels of the production process. This, in turns, encouraged and allowed development of more efficient farming technology. Throughout this process, they were not made to compete with more naturally fertile soil in some Southern countries.

The South cannot ignore the massive human fall-out of 'structural adjustment' in a 'competitive' market economy that also happens to be unfair. The existing aoa does provide for some domestic subsides under a 'special and differential treatment' provision, but this has been inadequate protection, compared to the concessions made to the North. In 1997-1998, when countries were preparing their positions for the wto agriculture talks, this sentiment led Southern countries like India to consider a 'food security' or 'livelihood' box. These ideas have been grouped into a so-called 'development box'. Proponents, including Cuba, Dominican Republic, Honduras, Pakistan, Haiti, Nicaragua, Kenya, Uganda, Zimbabwe, Sri Lanka, and El Salvador -- hope this provision will create some amount of space for small and marginal farmers.

In a proposal submitted to the wto committee on agriculture, these countries note that lack of food security can also lead to political instability, and thus should be considered an issue of national security, which gatt article xxi exempts from wto trade discipline. Further, article 20 of the AoA, which mandated the current review of the agreement, also asserts that a continuation of the programme of liberalisation must take into account the implementation experience including effects on non-trade concerns such as food security . Negotiations on a development box have now been made possible through the Doha declaration.

In the final analysis, it could have been worse for developing countries. They may have won a skirmish by not being proactive on issues such as environment and investment, but have definitely lost the war. Simply saying 'no' is just not good enough. It is time Southern negotiators learnt this. Otherwise the ground will continue to slip under us even as we delude overselves that we are standing firm.

With inputs from Sushmita Dutta