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Asia's take on
Cancun
By John Berthelsen
With the World Trade Organization (WTO) Fifth
Ministerial Conference going into its final throes in
Cancun, Mexico, where officials had retreated in a vain
hope that they could get away from anti-globalization
protesters, Asian nations' goals diverge depending on
their export strengths or weaknesses.
In any
case, a happy ending appears out of the reach of the 146
trade delegates who showed up there. The meeting is due
to end on Sunday.
About 4,000 protesters, including a
South Korean farmer who stabbed himself fatally in the
chest to protest industrialized nations' trade policies
(see Trade gets a martyr
), charged police
barricades and rallied several kilometers from the
conference site where trade ministers are trying to come
up with new trade rules to reduce poverty and boost
development in poorer nations. Those goals were set two
years ago at the WTO's last meeting in Doha, Qatar,
because at the previous meeting First World countries
were regarded as having fashioned trade rules that put
the developing world at a disadvantage. The smell of
tear gas that has come to characterize international
trade meetings permeates the air.
The sticking
point from the start has been agriculture, in which farm
subsidies by the United States, Japan and the European
Union amounting to US$150 billion a year are shutting
poor countries out of rich-country markets. Overall,
agricultural subsidies in the wealthy countries
belonging to the Organization of Economic Cooperation
and Development (OECD) amount to $300 billion, of which
$250 billion is paid directly to producers. The effect
is to stimulate overproduction and shut out potentially
more competitive products from poor countries. Breaking
down these subsidies seems unrealistic, however, given
the political power of farm lobbies across the nations.
The poorer countries have what they might
consider an unexpected ally in the World Bank, which
released its 300-page Global Economics Prospects
report prior to the meeting. In that report, World Bank
officials write: "Protection facing developing-country
exporters in agriculture is four to seven times higher
than in manufactures in the North and two to three times
higher in developing countries." Tariff peaks are
particularly high in rich countries against products
from poor countries, with hefty specific duties
particularly common in rich countries.
For
instance, OECD countries' subsidies to sugar producers
alone amount to $6.4 billion a year - nearly equal to
all developing-country exports of all kinds. US
subsidies to cotton farmers totaled $3.7 billion, three
times US foreign aid to Africa. Rice support in Japan
amounts to 700 percent of production at world prices.
More than 70 percent of the subsidies in rich
countries mostly end up in the pocketbooks of corporate
farmers with incomes that are higher than the average
incomes in Japan, Europe and to a lesser extent the
United States, the World Bank study found.
Betting into such a rich hand is perilous
indeed. Inside the Cancun hall, the trade ministers face
plenty of tension in their goal to formalize a calendar
that would cover the next two years of negotiations,
primarily because of the actions of a group of
developing countries, originally called the Group of 20
and now expanded to the Group of 21. The group, led by
Brazil, China, India and Argentina, has rejected the
official agriculture agenda and is demanding that its
own points lead the negotiations. The developing
countries, insisting that they have gained little from
past liberalization, have changed the dynamics of the
WTO agenda, which never before has tolerated so much
open discontent.
Edgardo Ramos, director of
international programs at Mexico's economy ministry,
said in an Inter Press Service interview that
"spectacular decisions" should not be expected in
Cancun, because it is a follow-up meeting and that
discrepancies persist among the member countries. If the
Doha Agenda were to be implemented and if the farm
subsidies applied by the nations of the industrialized
North are gradually eliminated, global welfare would
improve to the tune of $748 billion, says the WTO in its
2003 annual report.
Trade growth associated with
the reduction of agricultural subsidies would allow a
reduction in poverty worldwide of no less than 13
percent by 2015, according to the WTO.
Asia
Times Online correspondents analyzed what goals Asian
nations are pursuing at Cancun.
China
For China, attending its first WTO ministerial talks
since it was admitted to the organization in January
2002, little has been said in the state press about the
battle of trade interests unfolding at the Cancun
summit.
"There is no doubt that they want to be
seen as the economic leader for the developing countries
at the talks," a Beijing-based diplomat from the
developing world said in an interview. "But if the rift
between rich and poor at Cancun becomes too big, China
might jump off the boat at the last moment because they
don t want to jeopardize trade with their biggest trade
partners," the diplomat added.
Beijing's
official line so far has been to pledge support on the
side of the developing nations. "For more consensus in
the new round of negotiations, it is necessary for the
rich economies to listen to the opinions and proposals
of the developing ones," Commerce Minister Lu Fuyuan
said on Wednesday.
Added an editorial in China
Daily: "For the moment, it is important that developing
countries interests find representation and are
protected in and beyond the Cancun talks."
China
will not let the market play the decisive role in
determining its exchange rate until the economic impact
of China's joining the WTO has settled down. What
worries Beijing most is the reform of Chinese state
banks and the opening up of the trade sector, officials
said.
China's currency peg to the dollar has
galvanized businesses and governments around the world,
with manufacturers blaming competition from Chinese
exports for the closure of many plants in the United
States and elsewhere, and critics say an undervalued
yuan (the Chinese currency, also called the renminbi)
pegged at 8.28 to the dollar is keeping the price of
these goods artificially low.
However, Beijing
asserts, the time is not ripe economically as
politically for China to adopt a floating-exchange-rate
regime. "The critics that believe that China manipulates
the renminbi's value assume that every currency in the
world should be floated in the market," said a signed
commentary in the English-language China Daily last
week. "This assumption is porous."
It added:
"Should China now give it to pressure only to face dire
consequences later? No way." After pledging to allow
greater exchange-rate flexibility in the longer term
without giving a timetable, Beijing concluded that a
stable yuan is in both the United States' and China's
interests. Beijing fears that capital-account
liberalization in a weak domestic financial sector could
trigger financial and economic crisis.
China's
state-owned banks are loaded with dud loans, with
non-performing loans of the four major banking
institutions that dominate the sector officially
averaging 24 percent in the first quarter of 2003.
Experts say the figure could be much higher.
Then there is the political challenge to the
rule of Chinese Communist Party given that the continued
opening of the economy since the 1970s, sealed by the
entrance to the WTO, has tossed millions of workers and
peasants out of work.
"Some 70 percent of
China's population are farmers," Sun Zhenyu, China's
ambassador to the WTO, said in an interview with the
Beijing Youth Daily on Thursday. "On one hand, we have
to guarantee their employment, on the other hand we have
to raise their living standards. If market
liberalization goes too fast, the livelihood of many
people would be in danger."
While committed to
further opening of trade and services, Chinese leaders
can be expected to proceed with their customary caution
and bide their time while the painful transition from a
centrally planned economy to a market-based one settles
in.
One of the most important reasons for
China's joining the WTO was that it wanted guaranteed
access to developed country markets. To sustain its
spectacular economic growth over the past decade, China
has relied on surging foreign investment - and it is
unlikely to do anything that could jeopardize its flow.
Arguing against yuan appreciation, Chinese
economists often point to the role of foreign investors
in driving China's export growth. Increased overseas
sales by foreign-invested enterprises generated
two-thirds of the $143 billion rise in China's total
exports recorded in 1997-2002.
Indonesia
The Indonesian delegation is
demanding a better deal from developed countries on
agriculture and reduced First World subsidies. The team
is expected to come back from Cancun having helped swing
WTO policy into helping the poor and hungry rather than
the opposite, but this is a tall order indeed. The most
likely outcome for some 210 million people will be an
olive branch or two, at best, perhaps in respect of
developed countries' own protectionist measures.
Indonesia has been hit by anti-dumping taxes slapped on
by some Western countries when faced with competition
from Indonesian goods.
Those representing the
country have been given a special mission, sparked by a
recent two-day gathering of some 75 non-governmental
organizations (NGOs) and farmer and labor unions from
across Indonesia, who warned that the controversial
"Singapore issues" of investment, competition policy,
government procurement and trade facilitation would
likely be raised by the EU and the US.
They
collectively called on the government to fend off any
attempts to bring these issues to the table. All were
raised during the first-ever WTO ministerial summit in
Singapore in 1996 and then again during the third
ministerial summit in Seattle in 1999.
NGOs
including the Federation of Indonesian Farmers Unions
(FSPI), the Institute for Global Justice (IGJ), the
National Front for Indonesian Workers' Struggle (FNPBI),
the Indonesian Consumers Foundation (YLKI), the
Indonesian Women's Coalition (KPI), and the Indonesian
Forum for the Environment (Walhi) lobbied the government
on a number of related issues. In a position paper, the
NGOs claim that any policies ensuing from the debate
would harm the interests of poor and developing
countries.
The WTO, the paper says, has mostly
benefited developed countries, while Indonesia, as a
developing country, has had to kowtow to these
countries' interests by pushing through laws to boost
liberalization at the expense of the poor.
While
the WTO recently agreed that the developing world should
have the right to produce medicines to treat such
diseases as AIDS cheaply, the Indonesian NGOs still want
their government to fight for real access to affordable
life-saving drugs, which are still unaffordable to the
masses in countries where AIDS is killing off large
swaths of the poor.
The NGOs are not keen on
transparency in government procurement procedures
either, claiming that when large foreign corporations
participate in government bids, local companies are
squeezed out.
Issues on agriculture are of
crucial importance to Indonesia, and the country seeks
policies that will protect its poor from the vagaries of
international commodity markets. Indonesia believes that
if the developed countries were to reduce tariffs
enough, allowing developing countries better access and
thereby boosting their foreign-exchange earnings, those
same countries could buy the food they needed from world
markets.
The Indonesian NGOs also called on WTO
members to exclude agriculture and food from any talks
on import tariff reduction, saying both are not simply
trade commodities but are also linked to the lives of
farmers, and any reduction in import tariffs of staple
food stuffs would have a negative impact on Indonesia's
already marginalized farmers.
India
Indian business executives have
reasons to be upbeat about free trade, as the
information-technology (IT) sector has reaped major
benefits. Leather merchants, however, are looking at the
emerging scenario with alarm. An exporter in the Madras
Special Export Zone runs a unit that imports unprocessed
leather and re-exports it, after giving it the finish
his European clients want.
"We pay excise duty
of up to 60 percent for imports and are subjected to
severe environmental inspection. Any environmental
parameters agreed at the WTO for exported leather would
further destabilize our business. We have around 60
percent of traders in and around Chennai, who all will
be affected by decisions at the WTO," he said.
Academicians such as Sundar Ramaswamy, professor
of economics at the Madras School of Economics and an
expert in international economics, insist that
developing countries must be wary about proceedings on
Sanitary and Phyto-sanitary (SPS) measures, as this
could be used by the developed countries to fend off
competition from the developing countries.
"We
all agree that the WTO is a referee of the global trade,
but one can't be too sure of its neutrality looking at
issues like SPS. Proceedings in Cancun would be vital on
the organization's ability to strike a balance between
free trade and concerns of developing countries," Sundar
contended.
However, he pointed at the fact that
India's path to free trade isn't all that bad and cited
the country's edge over others in the IT and
biotechnology sectors. "We should be able to develop a
strategy that is both constructive and still show
caution on certain aspects of free trade for which we
aren't yet prepared," Sundar said.
He cited the
example of investment, the definition of which is not
clear. "We don't know if it's going to be foreign direct
investment or portfolio and other short-term forms of
capital flow. In this respect, it's encouraging to see
developing countries like India, China, and Brazil
trying to forge a united front, voicing the concerns
over issues that hurt them," he said.
Not far
away from Chennai's city center is the farmland of
Narayanan, who tills his tiny 0.8-hectare plot. Any
reduction in subsidies would put him into competition
with more efficient international agriculture interests
and affect his farming. Already, many small farmers like
him in the southern Indian state of Tamil Nadu are
braced for the prospects of withdrawal of a free power
supply, a subsidy once guaranteed to them.
"We
hardly get any information on what the government agrees
or disagrees in the international forum, happening far
away from where we live. But if our ministers and
officials are going to come back and tell us they can't
support us any more, farmers like me may have to give up
our occupation," Narayanan said.
The recent
issue concerning excessive levels of pesticides in soft
drinks such as Pepsi and Coke has created a degree of
resentment about foreign brands among ordinary people in
India. Any agreement in Cancun to open up the
agricultural sector would only aggravate such feelings.
"The government should engage in disseminating
information on its strategy and take the citizens into
confidence. Otherwise, they run the risk of being
accused of selling out the country's interests," Sundar
said.
Call-center executives would like to see
developed nations being pushed to an agreement on
agricultural subsidies. "Developed nations like the UK
have already started feeling the pinch, especially in
the movement of thousands of call-center jobs. I think
the WTO is a democratic forum, where countries like
India can force [the] US and Europe to cut their
subsidies," said one.
However, success for India
depends on progress in development issues. Sundar said
India must pursue agreement on TRIP (trade-related
aspects of intellectual-property rights) and public
health, which would boost its position as a leading
spokesman of the developing countries.
"Ultimately this, like the previous rounds of
talks, shows WTO and free trade is a reality that
countries like India have to live with. In theory, free
trade should help create a better quality of life. The
Indian experience shows it can be achieved in the
overall perspective, but job losses and business
downturns [from competition] seem inevitable. The
question before every developing is what they would do
to redress the loss suffered by these people," he said.
Malaysia
On the contentious so-called
"Singapore issues" - investment, competition,
transparency in government procurement and trade
facilitation - Malaysia is among 40 countries likely to
choose to continue the clarification process in working
groups as opposed to starting negotiations, which the EU
and Japan insist upon.
Malaysia's delegation,
reportedly sent with marching orders from Prime Minister
Mahathir Mohamad not to deviate from the government's
agreed positions, generally does not agree that new
issues should be introduced. For instance, the
delegation says the costs of a multinational investment
pact costs would outweigh the benefits for developing
countries.
Malaysia does not see the need for a
WTO competition agreement, which it feels would add more
burdens and obligations on developing countries.
Moreover, many developing countries still do not have a
competition law regime and thus are not ready for such
an agreement.
Malaysia is also sticking firmly
to the philosophy of being able to provide preferences
in government procurement.
Given the lack of
progress in key existing areas such as agriculture,
non-agriculture market access, implementation issues and
special and differential treatment for developing
country members, Malaysia believes starting negotiations
on new issues is premature and inappropriate.
On
financial services, Malaysia wants to go slow, and does
not plan to further liberalize the sector, but instead
is taking stock of the liberalization that it already
has committed itself to. In those services sectors that
the developed countries want to liberalize further,
Malaysia says it needs more data before making any
commitments. It joins many other developing countries in
taking the position that unless the rich countries make
concessions and fulfill their commitments on reducing
tariffs in agriculture, they will not open up further in
the services area.
As with other Association of
Southeast Asian Nations (ASEAN) member states, Malaysia
says it has been frustrated at developing countries'
insistence on establishing an emergency safeguard
mechanism for services. They want safeguard measures to
be made available to developing countries to use during
unforeseen developments such as a surge in services
imports threatening local firms.
Malaysia also
joins other developing countries in calling for
establishment of a program to deal with the crisis posed
to primary commodity-dependent countries by the
continued decline in the commodity prices. Though
specific proposals to address tariff peaks, tariff
escalation and other market access measures were
relevant, they are not enough. More comprehensive
measures are needed that would allow commodity-dependent
countries to manage supply and prices.
On
non-agricultural market access, Malaysia wants to see
deeper cuts in industrial tariffs to allow Malaysian
products to penetrate other markets. In this respect
they share the US-EU position calling for deep cuts,
despite concern expressed by some other developing
countries to the detriment this would have on local
firms and enterprises.
Philippines
Despite having held it
close to the chest, the Philippines turns out to have a
rather unremarkable hand. The Philippine delegation to
the WTO ministerial in Cancun presents a cautious
position hewn close to expectations.
In
agriculture, the Philippines has joined the chorus of
developing countries in demanding (1) a reduction in
rich-country farm subsidies and (2) greater access to
rich-country markets. In the avowed interest of
achieving development aims, it has called for an
expansion of developing-country maneuverability under
the provision of "special and differential treatment",
and, in an exercise of this maneuverability, has raised
tariffs on its sugar and vegetables.
Otherwise,
and in other sectors, the Philippines has asked for
nothing and offered nothing. For non-agricultural
products, it has kept its tariff rates at 2001 levels
(averaging 6 percent). It has said no to the new issues
backed by Singapore (including investment, competition
policy, government procurement, and trade facilitation),
and, regarding the General Agreement on Trade in
Services (GATS), has opted to stick to old commitments
made in 1994 with its accession to the WTO.
The
administration of President Gloria Macapagal-Arroyo has
stated the guiding principle behind its position in
blankly benevolent terms. While affirming greater
liberalization as "a desirable end-state", Trade
Secretary Mar Roxas recognizes development as the
greater priority. "My goal in Cancun is to ensure that
the global trading system as administered by the WTO is
equitable and genuinely contributes to our development."
The undistinguished Philippine position in
Cancun, however, belies Roxas' ambition. It would
suggest, rather, chastened expectations of the WTO as a
development body.
Such expectations are perhaps
warranted. The legacy of WTO policy intervention in the
Philippines has been ambivalent at best, particularly in
the agricultural sector. Leading anti-globalization
thinker Walden Bello has pointed out that, since 1994,
the balance of trade in agriculture has worsened, gross
value added for agricultural products has increased only
minimally, and employment in the sector has hardly
increased at all. Moreover, the gains hailed by pro-WTO
technocrats, such as the creation of high-value export
crop industries, have proved largely illusory.
While government officials have defended
Philippine membership in the WTO by citing gains in the
efficiency of resource allocation and overall growth,
anti-WTO sentiment has nevertheless caught on. In
particular, it has become a lightning rod for the
Philippine left.
The left sees the WTO as an
imperial instrument used to subordinate national
development to multinational corporate interests. For
leftist groups such as Stop the New Round! Coalition,
while the immediate campaign may be to derail the Cancun
ministerial, the long-term goal is nothing short of the
abolition of the WTO itself.
Bello is fond of
likening this campaign goal to a bicycle, a comparison
he borrows from free-trade advocate C Fred Bergsten: "It
collapses if it does not move forward." Bello believes
that a "Seattle scenario" will befall the Cancun
ministerial: that the ministerial will collapse, as it
did in Seattle in 1999.
Anti-WTO sentiment also
has a popular base, particularly in farmer and
fisherfolk areas, where the negative effects of
liberalization have been felt most keenly. These sectors
have urged the government to raise protective tariffs
for their industries and provide more domestic support.
"Our livelihood is at stake here," said Pablo Rosales,
spokesman for Kilusang Mangingisda, a fisherfolk
organization.
To be sure, the Philippine
position in Cancun has been shrewdly contrived to
appease - or at least keep from antagonizing - a number
of competing interests, including nationalist and
anti-globalization civil-society forces, national and
international business elites, and foreign governments.
The government's attempts to please has it speaking,
says Bello, "at both ends of its mouth".
In the
run-up to Cancun, however, it seemed the two ends were
moving closer together. Arroyo, who, when she was a
senator, rallied for Philippine membership in the WTO in
1994, now rails against unfair trade rules, the perils
of "unbridled globalization", and the "clever tricks"
rich countries use to put poor ones down. The Philippine
delegate to the WTO Agriculture Special Session, in
perhaps an unguarded moment (or a shrewdly calculated
one), complained: "Our farmers are being slaughtered in
our own markets because of cheap imports. We cannot
afford the political and social implications of
liberalization." This would have been dismissed as NGO
cant just a few years ago.
As frustration with
the WTO grows, not only in society but among former
liberalization stalwarts in the government, the
slightness of the Philippine negotiating position seems
more comprehensible. While the position itself may be
unremarkable, its marked cautiousness is significant. It
would seem that the Philippines is afraid of getting
taken - again. And so perhaps the true guideline behind
the Philippine position is the advice of former trade
secretary Jose Concepcion: "No deal is better than a bad
deal."
With additional reporting by Marco
Garrido in the Philippines, Chee Yoke Heong
in Malaysia, L Subramani in India, Bill
Guerin in Indonesia and Inter Press Service in
China.
(Copyright 2003 Asia Times Online Co,
Ltd. All rights reserved. Please contact content@atimes.com for
information on our sales and syndication
policies.)
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