The WTO's Geneva Decision: Implications for the Third World - Abigail Dymond

Following the collapse of the talks in Cancun, the World Trade Organisation held a General Council meeting in Geneva which culminated in a ‘framework' to restart talks, the so-called ‘Geneva Decision' (see Elinor Wakefield's articles in the Autumn edition of DIA for details on these developments). But what does this Geneva Decision mean for the third world?

There are three main ways in which it could be regarded as positive. First, as Elinor Wakefield notes, three of the four Singapore issues (competition policy, government procurement and investment) have been dropped. This is beneficial as they risked detracting from unresolved issues of critical importance to the third world (e.g. cotton subsidies) and binding the third world to costly and highly damaging provisions. However, trade facilitation has still been included—and whilst this is the least harmful, it may still entail additional costs for marginal benefits. Moreover, the agreement states that ‘no work towards negotiations … (on the three Singapore Issues) will take place…during the Doha Round' and thus leaves the door open for the working groups to continue, as well as for these issues to be introduced in the next round.

Second, export subsidies are to be totally eliminated, a significant achievement for the third world. However, the phrasing of the provision leaves much to be desired; no end date has been set and, through the insertion of the phrase ‘parallel elimination,' the US and the EU are not mandated to remove their export subsidies until the other one does so. But it is necessary to question not only the wording of the provision but its very premise; whilst those countries with highly competitive, export based agricultural sectors (e.g. Brazil) may benefit, the vast majority of third world countries who are net food importers (e.g. much of sub-saharan Africa) will suffer greatly from the increased food prices this will result in.

Third, the agreement will apparently reduce overall levels of subsidies by 20%. But yet again, the story is more complicated than it would appear. For this 20% reduction is offset by a supposed ‘cap' on product specific subsidies at their ‘respective average levels'. However, bearing in mind that both the US and the EU have been reducing such subsidies anyway, if the cap is based on a period before such reductions took place, first world countries will have WTO approval to actually increase their level of domestic support!

Thus such ‘gains' as have been made are limited at best. Yet the irony is that in exchange for such ‘victories', the third world has had to agree to a whole raft of first world demands with damaging implications. In the agricultural section they have agreed to an expansion of the ‘blue box'. This blue box of WTO permitted subsidies was originally meant to encompass only subsidies linked to production reducing programmes, but has now been expanded to include direct payments to production limiting programmes and direct payments that do not require production. All these measures are now legal—fortunate enough for the US , which has thus gained approval for its counter-cyclical payments (amounting to $1.9 billion) under the 2002 Farm Bill!

In the Non Agricultural Market Section the agreement is the same one that third world countries rejected in Cancun . Under the ‘non linear formula,' tariffs are not reduced equally, but higher industrial tariffs are subject to higher cuts, which falls hardest on the third world. These countries not only have higher industrial tariffs than the first world; they are also more in need of them to protect and cultivate newly emerging industries. Moreover, the third world's capacity to nurture its industries has been further retarded by the fact that 95% of tariffs have to be included—there is little agency or flexibility for countries to target which tariffs to reduce. Finally, as if the scope and scale of liberalisation were not dramatic enough, the framework includes a ‘sectoral tariff component'—selected lines (an earlier draft mentioned 7) which will be selected for even faster reductions.

Last but not least, the section on services—comprised mainly of vague, generalised statements—has deliberately been kept unspecific so as to arouse least opposition to service liberalisation. However, such liberalisation has often been damaging to the third world; this framework fails to recognise the right of developing countries to exclude crucial sectors such as water, education or health. This is in spite of infamous failures such as Bolivia , where water services were privatised only to result in a 35% price increase! In fact, this agreement puts additional pressure on third world countries to liberalise; whilst the General Agreement on Trade in Services was previously voluntary, it is now mandatory. Furthermore, the deadline set for revised submissions of service liberalisation offers (May 2005) is extremely soon given that many countries have not yet submitted initial offers. Tellingly, it is before deadlines set for issues of importance to the third world (i.e. the deadline for a review of special and differential treatment provisions is July 2005)!

So the Geneva Decision has dire implications for third world countries, in part due to the behaviour of their representatives at Geneva (India and especially Brazil), who have not so much aided as betrayed them for their own self interest. However, as it is merely a framework, once these implications are realised, both third world countries and NGOs have a chance to offset some of these negative provisions at the next Ministerial Meeting in Hong Kong this December. This is the challenge facing us in 2005—there is, indeed, ‘everything to work for'.

Further Reading

Bello , W and Kwa, A (2004) G20 Leaders Succumb to Divide-and-Rule Tactics: The Story behind Washington 's Triumph in Geneva http://www.focusweb.org/main/html/Article408.html . See also other articles written by these authors, and more, accessible through the home page.

Berthelot, J (2004) South short changed in agriculture by US, EC sleight of hand . http://www.twnside.org.sg/title2/5633a.htm

Khor, M (2004) Preliminary Comments on the WTO's Geneva Decision http://www.twnside.org.sg/title2/JulyDecision.doc