Might is right, but wont carry too far

Written by Malcolm Subhan | Updated: Dec 24 2005, 06:57am hrs
Might is rightnot only when armies clash, but also in trade wars. In short, might is right on the battlefield and in the World Trade Organisation (WTO).

The recent Hong Kong Ministerial provided the most striking proof of this time-worn adage. And, the point was hammered home by the global development agency, Oxfam. As exhausted trade ministers caught their home-bound flights, Oxfams Brussels office pointed to worrying signs that (the EU and US) are reverting to their traditional might is right negotiations. The European Union and US certainly fielded the biggest battalions in Hong Kong well over 300 delegates each, compared with Burundis three delegates, according to Oxfam.

Led by India and Brazil, the 120-odd developing countries the advanced and emerging, the vulnerable and least developed joined forces in an attempt to get the developed countries, and the 25-nation EU and US in particular, to match their development rhetoric with deeds. They didnt get very far, even as regards the issue on which they staked everything trade in agricultural products.

Frances 600,000 farmers won the day: export subsidies on farm products will be eliminated by 2013. (This is just two years short of the 10-year transition period the EU and US secured in 1994 for the elimination of MFA quotas on textiles and clothing.) This is a genuine advance for the agriculture negotiation and for the development goals of the Doha Round, EUs chief trade negotiator, Peter Mandelson, declared the morning after the draft ministerial declaration was formally adopted in Hong Kong. His colleague, EUs agricultural commissioner (and herself a farmer) gave the game away. I am happy that 2013 is...the phase-out date for export subsidies, she declared, adding, this is clearly linked to the period when the current (EU) common agricultural policy reforms will be fully operational.

In other words, farmers in the worlds poorest countries have been taken hostage by farmers in some of the worlds richest countries. It is absurd to think that it could be otherwise. Its obvious that a body set up to define the rules for international trade will dance to the tune of its major players; their interests are paramount, as they account for the major share of world trade.

The worlds leading trading nations established the General Agreement on Tariffs and Trade (Gatt) in 1948 to free up trade among themselves. It was not until 1964, when the UN Conference on Trade and Development (Unctad) was set up in Geneva in response to demands from developing countries, chief among them India, that a link was formally established between trade and development. But Unctad, unlike Gatt, could only make recommendations, and by 1980 it had all but disappeared from the scene.

The fact is that greater market access does not necessarily lead to increased trade; development probably is a pre-condition to increased trade. Take the case of the 70-plus African, Caribbean and Pacific (ACP) countries that enjoy duty-free and quota-free access to the EU market for most of their exports under the Cotonu Convention.

More than half of them have enjoyed such preferential access to the EU for the last 30 years. And yet, as recently as 2004, the ACP countries (excluding South Africa but including oil producing countries like Nigeria) accounted for under 3% of total EU imports.

The picture is not very different as regards the duty-free and quota-free access which the WTOs director-general, Pascal Lamy, granted the 49 least developed countries. Their share of total EU imports was slightly more than 1% in 2004, with Bangladesh alone accounting for 30% of this, largely because of its garment exports.

India and Brazil obviously are two developing countries the EU (and US) regard as key partners in any trade negotiations. China is another. The fact is that not more than 20 countries together accounted for three-quarters of EUs imports and exports in 2004. If trade deals are to be struck, the EU obviously would like to strike such deals with these 20 countries in the first instance.

None of the ACP countries, with the exception of South Africa, and none of the least developed countries appears on this list.

It does include, however, seven Asian countries; major oil producing countries like Saudi Arabia and Algeria; Brazil; and Switzerland, Russia, Norway and Turkey. Now, if trade negotiations were between these countries, and a handful of others, such as Israel, and the EU and US, these two would find it virtually impossible to assert their might at the expense of the others.

The EU and US could try to gang up against the others, but they would find it very difficult to revert to their traditional might is right negotiations, in the words of Oxfam.

Trade negotiations limited to the countries that account for a high percentage of world trade is not possible in the WTO framework, of course. The alternative, however, is negotiations which would drag on, but for the fact that the fast track authority, which the US Congress has granted President Bush, expires in 18 months from now.