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• The State of the DDA: A Cause for Critical Concern

The State of the DDA: A Cause for Critical Concern

Date: 21 Jun 2005
Speaker: Secretary-General Don McKinnon
Location: WTO Headquarters, Geneva

2005 has been widely showcased as a "make or break" year for international trade. If this is true, then the coming weeks will be a good indicator of whether or not the high hopes of a real breakthrough are justified.

I've been taking soundings over the last few months with leaders throughout the Commonwealth's 53 member governments. I've spent time in capitals throughout Sub-Saharan Africa, as well as talking to those on the developed side of the ledger: in Washington, Brussels, Ottawa, Paris and London. 

Frankly, I'm afraid the prospects for the Doha Development Agenda (DDA) are not encouraging. There is an absence of political momentum, and the momentum that does exist just became seriously complicated by the turn of events in the EU. There is also an absence of a genuine commitment to a development round - the very flaw in the WTO negotiations that led to the collapse at Cancun. Political leaders are voicing their commitment to pro-poor outcomes in the DDA, and saying so loud and clear in public arenas. But too many leaders are also still instructing their negotiators in Geneva to pursue at any cost national rather that international objectives. And the expiry of Fast Track is now just over the hill.

I was struck during my soundings to hear one of my contacts say back in February that the root problem is that developing countries need to have their levels of ambition managed down. Apart from the fact that this is totally at odds with the pro-developing country agenda of the DDA, it is also appalling that this is what is thought in private but not openly said and challenged.

I am particularly concerned that the current political turmoil in Europe is likely to lead to more entrenched positions in countries like France and Germany, particularly on the issue of agricultural trade subsidies. The UK has taken a bold and commendable step by challenging the European Common Agricultural Policy - a policy which damages the prospects of farmers in the developing world and robs them of their livelihoods - but it would be surprising if France and Germany drew back from their position any time soon.

And while the recent agreement to write off some of the debts of the world's poorest countries is great news, it remains to be seen whether the G8 meeting will take the fundamental and bold steps needed to deliver change on the one issue that can make a significant difference in the lives of people in the developing world: trade access.

That is why the Commonwealth has focused so much of its work and energy on pushing this major issue and on helping to facilitate a breakthrough on international trade in recent years.

Of course, the Commonwealth does not constitute a formal trading bloc. But with its diverse membership, the Commonwealth is ideally placed to generate consensus on the politics of international trade. Our membership is present in every single key grouping around the WTO table and beyond: the G8, G20 G90, the Quad, the Cairns Group, the OECD, the G77 and so on. Our organisation finds some of its major historical roots and contemporary relationships in cross-border trade.

I am convinced that any consensus on trade that can be achieved in our diverse group of countries will help advance trade in a significant way, especially here in the WTO forum.

But ultimately, whatever efforts we and other organisations make, no progress can ever be achieved without strong, sustained, consistent political impetus at the highest level. There is no issue that is more political today than the issue of trade. Of course, the mechanics of trade are about economics and capital flows, but the engine of trade is political.

Indeed, some of the main obstacles to creating a level playing field in global trade are political: governments in rich countries are reluctant to face the anger of powerful farming lobbies, whose members have been mollycoddled in government handouts for the past 50 years.

Take the cotton industry: The US alone hands out nearly US$4 billion a year of taxpayers' money to 25,000 cotton producers every year. Their overproduction smothers world markets, pushing down prices and depriving competitive African smallholders of their livelihood.

How can a farmer in Cameroon, barely grossing US$400 a year on 2 hectares of land, hope to compete with large American cotton producers who receive US$160,000 a year in government handouts? This is not just David fighting Goliath. It's David blindfolded with his hands tied behind his back.

Why should 25,000 cotton farmers - 0.00009% of the US population - hold millions of people in West Africa to ransom and deprive them of their livelihood?

I am told that the solution put forward by the US government is to help Western African farmers diversify and "explore alternative sources of income". I would have thought it would have been rather easier - and more logical - to help US farmers diversify and explore other sources of income.

The EU Common Agricultural Policy is also responsible for causing poverty in the developing world. Take the sugar industry: every year, European governments spend over US$1.5 billion to support European farmers and sugar refiners, at the expense of more efficient producers in the developing world.

The cost of producing a pound of sugar in the EU is five times higher than in Zambia. The impact on poor countries in the Commonwealth - and beyond - is huge: Oxfam estimates that EU subsidies and market restrictions on sugar will cost Mozambique US$38 million in 2004 and Malawi US$32 million - more than that country's budget for national health care.

Would the US and the EU allow developing countries to build motor cars at 4 times the world price and dump them in developed countries at half the average world price?

Agriculture employs less than 1% of the US population and generates around 0.9% of the US GDP. The figures are similar for the EU. By contrast, 70% of the population of developing countries in the Commonwealth and beyond depend on agriculture for their subsistence and farm products represent between 60 and 80% of their GDP.

I was in Washington a couple of weeks ago and my message to the American Administration - which I repeated on CNN - was clear: if you are serious about fighting world poverty, give poor countries real opportunities to trade. If you are determined to spread freedom to the developing world, start by giving them the freedom to sell their products to rich countries' markets.

Of course, many leaders are worried about upsetting powerful and entrenched lobbies, which have been using their bargaining power for so long. That is natural. But I would respond to those leaders that the strong movement to eradicate world poverty is today's key lobby - and this is the group and the argument on which you don't want to be on the wrong side. There is strong popular support for governments that are committed to increasing aid and opening their markets to developing countries.

If people in Europe were asked in a referendum: "Do you want to eliminate trade subsidies and, as a result, pay less tax, reduce your weekly shopping bill and give developing countries a fighting chance to lift themselves out of poverty?" the result would be, without a doubt, a resounding yes.

So what is the Commonwealth doing about all this? As usual with our organisation, we are using our global network of political contacts which is the envy of many. And we are using it to develop practical and results-oriented outcomes which support the DDA - both its substance and its political intent.

At the beginning of the year, we held a high profile trade seminar in London. Peter Mandelson was among the participants and I was encouraged by his emphasis on the need to put development first in international trade talks. This was not just political rhetoric - I detected a genuine willingness to 'walk the walk'. But you don't need to trust my judgement on this one! The EU's commitment will be tested not only in the DDA but in the EU Economic Partnership Agreements, where we are helping the ACP countries to prepare high quality and testing goods and services, offers. 

We held that seminar back in February in London. Looking ahead, we are going to run a series of regional workshops to examine how development issues can be appropriately reflected as we move forward from the framework agreement for negotiations adopted last July.

That will see us through to the CHOGM in Malta in the last week of November. It will be a meeting of the Commonwealth's 53 Heads of Government taking place just weeks before the Hong Kong Ministerial. It is a golden opportunity for the Commonwealth to make some very clear statements about what one third of the world's population expects from Hong Kong. We already have the Aso Rock Statement on Multilateral Trade from the CHOGM in Abuja which defined the Commonwealth's position on the Round, and will be looking to build on that.

Then at Hong Kong itself, I am convening a meeting of Commonwealth Trade Ministers on the Monday at the start of the week. I have invited Pascal Lamy to address Ministers on that occasion. It will give our Commonwealth membership a head-start in the week ahead: they will be fully up-to-date and with a strong collective political message in their hip pocket from the CHOGM.   

Meanwhile, we also have our ongoing work, especially in building trade capacity. The Hub and Spokes project is already under way thanks to strong collaboration with the European Commission. 5 of the 6 hubs are in place, with the sixth due this week. 12 of the 29 spokes are in place with all to be deployed by September. This should increase the negotiating capacity of developing countries tremendously. 

You are all also familiar with the support we provide through the Commonwealth trade adviser we have based here in Geneva, Vinod Rege. I am pleased that his assignment has been going so well and enjoys your support.

We are also continuing to support the academic underpinnings of these negotiations. You will no doubt recall the work we commissioned last year by Joseph Stiglitz. This year, we have been giving momentum to fresh work on a multilateral agreement on investment, and we also hope to complete a study on, "Uruguay Plus 10" - the costs and benefits a decade after the last Round.

We have it in mind, too, to commission a study straight after Hong Kong with a working title of, 'Closing the Round', focusing especially on the implications for the G90.
 
A great deal of our work is also targeted at providing assistance to the 32 small states within the Commonwealth community and helping them cope with their specific vulnerabilities.

It is important that trade barriers are tackled in a way that does not leave small states suddenly exposed to the hurricane winds as opposed to the cooling breezes of liberalisation. This was recognised in the Aso Rock Statement, which talks of the need to minimise transition costs, and the need for concerted action to assist diversification where countries lose their trade preferences.

The Commonwealth has been working on this. We are currently promoting a fund that channels financial support to the private sector in small states. This fund would provide a safety net for those who risk losing their livelihoods with the loss of preferences, and would help producers and exporters to diversify and develop more competitive industries.

We are also helping small member states cope with the growing problem of international recruitment of their scarce teachers and nurses in two clear-cut and practical ways. Every year, small states spend millions of dollars training teachers, doctors and nurses, only to lose them to wealthier countries which can afford to pay them more. This can often have a disastrous effect on a poor country's capacity to educate its people and provide decent health care.

First, the Commonwealth has developed codes of conduct to ensure that international recruitment is carried out in an ethical way, which takes into account the needs of developing countries. Secondly, we are promoting a Mode IV initiative. This will require recruiting states to participate in the training of nurses in their home country; those nurses are then hired and brought into the recruiting states on fixed term contracts, ensuring the resources of developing countries are used in a sustainable way. The concept is getting clear levels of support in the Caribbean working in partnership with Canada, and a similar sort of concept is being thought through in the South Pacific.

You, our Commonwealth Ambassadors, can play an important role in taking all this forward. You are the ones who are in those rooms balancing national positions with international interest, balancing the instructions in your pockets with the greater good on the table in front of you.

As you enter the intensive period of July before the August shut-down, my request to you is to ensure that strong political messages get sent back to your capitals. Developed countries must be willing to give more than they receive in this Round; they took some steps at Cancun, notably on the Singapore issues, but half-measures and steps taken reluctantly don't build confidence. The Aso Rock Statement was clear: 53 leaders said, "Where there is significant consensus on particular trade issues, we pledge to bring the full weight of the [Commonwealth] to bear on them." That is the compass setting and I hope a renewed commitment to it will allow us to turn around the lack of political ambition which is undermining the DDA and will get us positively and productively to Hong Kong and beyond.

Thank you.

 

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