Stakes In Cancun

WTO Ministerial Meeting

Amit Sen Gupta

THE Fifth Ministerial meeting of the World Trade Organisation is to be held in September in Cancun, Mexico. The Cancun meeting follows the meeting held in Doha in 2001 and is being seen as the possible site for a major confrontation between the proponents of imperialist globalisation and its victims. The WTO, since its inception in 1995, has been the battering ram of imperialism. In the current phase of globalisation, characterised by attempts to integrate capital flows, markets and production, the WTO has been the moving force in “liberating” the market.  The heady euphoria drummed up in favour of globalisation with the coming into force of the WTO in 1995 and its so-called “rule based governance” of global markets has dissipated in the last eight years. The collapse of the East Asian economies in 1997, the collapse of global stock markets in 2001 and the debacle in the Seattle meeting of the WTO in 1999 have led to even the most strident votaries of globalisation scurrying for cover. This does not however mean that imperialist globalisation is on its deathbed. To the contrary, attempts to resurrect it are afoot. It is in this background that we need to examine the issues at stake in the Cancun WTO meeting.

NEW ISSUES AT CANCUN

It may be recalled that the Doha meeting of the WTO had ended with the virtual setting up of a new round of negotiations. While developing countries had opposed this, the agenda was finally pushed through on the last day of the meeting. The new issues (also called Singapore issues as they were first introduced at the Singapore Ministerial meeting of the WTO in 1997) are: investment, competition policy, government procurement, and trade facilitation. These issues are designed to deepen and intensify the predation of global capital. Let us first examine what some of these issues imply. Alongside this is the attempt to accelerate the ongoing negotiations under the General Agreement on Trade in Services (GATS).

Historically trade agreements involved reducing tariffs, eliminating trade barriers like quotas on imports on goods produced in a country and sold elsewhere. However, this has changed drastically in recent years as, in developed countries, manufacturing has ceased to be profitable because of global competition. Presently, the services sectors have expanded and are growing at the fastest rates in these countries. The service sectors account for two thirds of economy and jobs in the European Union (EU), almost a quarter of the EU’s total exports and a half of all foreign investment flowing from the Union to other parts of the world. In the US, more than a third of economic growth over the past five years has been because of service exports.

As the service sectors of the economies of developed countries grew, exports of various types of services increased. Multinational Corporations started lobbying for new trading rules that will expand their share of the global market in services as governments everywhere spend a considerable amount of their budget on social services.

This is what the General Agreement on Trade in Services (GATS) under the WTO is targeting today. GATS covers some 160 separate sectors. In the WTO meeting in Seattle, the US specifically wanted to focus on free trade in services in the professions, health and education.

The GATS as in all the other agreements contains provisions which allow further deregulation of any national legislation which is seen to be hostile to free trade. GATS identify the specific commitments of member states that indicate on a sector-by-sector basis the extent foreigners’ may supply services in the country. The negotiating process in GATS allows for countries to decide, through ‘request offer’ negotiations, which service sectors they will agree to cover under GATS rules. This refers to the extent to which member states want their services like health and education to be open up to free trade.

In the Third World, much of private services in areas like health and education were provided by non-governmental organisations like charities, religious societies and community oriented associations, which were not entirely profit driven. This will change when with the new dispensation and the corporate sector is poised to play a prominent role especially in countries where there is an affluent elite willing to pay or where there exists a private base in these areas: like in India. This move to open up the social sectors to allow for privatisation and competition from the private sector will mean private corporations taking over the social services of countries for profit, undermining their equitable distribution.

If developing countries commit to fully cover social sectors like education and health under the existing GATS rules, this will lead to irreversible changes in the financing and delivery of these services. Governments will have to open up these sectors to foreign service providers. Foreign providers will be guaranteed access to the services market, which includes the right to invest, to provide these services from abroad and to send professionals to practice. Any preferential treatment for local institutions will have to be eliminated or given to foreign service providers.  Requirements that first preference be given to locals will be eliminated.  Conditions must be created for the private sector to provide or supply any service; the private sector will effectively tap funds that the government spends on social sectors.

GOVERNMENT PROCUREMENT

Under the proposed ‘Agreement on Government Procurement Policy’ the developed countries wants to introduce a process in the WTO whereby their companies are able to obtain a large share of the lucrative business of providing supplies to and winning contracts for projects of the public sector in the Third World.  The aim is to bring government spending policies, decisions and procedures of all member countries under the umbrella of the WTO, where the principle of ‘national treatment’ will apply.  Under this principle, governments would no longer be able to give preferences or advantages to citizens or local firms. Through the government procurement issue, the North will enable its corporate bodies to tap the vast public resources available in the health and social services sector and dismantle the public provision of health care. Public procurement will be the golden goose providing the crucial link to open up the services sector.

COMPETITION POLICY

Privatisation in different sectors will also be facilitated under the proposed ‘Agreement on Competition Policy’. Member states ‘will have to consider making reforms to their regulatory regimes’ such that national regulations should have four central attributes: adequacy, impartiality, least intrusiveness and transparency’, towards corporate interests. Under such an agreement, developing countries would be forced to establish domestic competition policies and certain type of laws. Distinctions that favour local firms and investors would not be allowed.  For example, if there are policies that give importing or distribution rights (or more favourable rights) to local pharmaceutical companies (including government agencies or enterprises), or if there are practices among local firms that give them superior marketing channels, these are likely to be targeted and even banned. If smaller Third World enterprises were treated on par with the large foreign conglomerates, they would not be able to survive. The North will insist that their giant firms be provided a ‘level playing field’ to compete equally with smaller domestic companies. Competition of this type will invariably lead to foreign monopolisation of Third World markets.

INVESTMENT ISSUE

Similarly on the investment issue, the Northern governments want to introduce new rules that make it legal to give foreign investors the right to enter and establish themselves with 100 per cent ownership. Governments then will lose the right to regulate investment to achieve and protect social, environmental and health well being in the national interest—both in the long term and in the short term.

THE DEVELOPMENT AGENDA

While developed countries are keen to push ahead with the road-map they had prepared in Doha, developing countries are understandably loath to allow this to happen. They, on the other hand, are trying to remind the WTO of its promise in Doha to accelerate the “development agenda” of the WTO.  Unfortunately, it is precisely on these issues that the least progress has taken place since Doha. There has been no discernible progress in the areas of agriculture, TRIPS and health and Special and Differential Treatment (SDT).

In agriculture, developed countries continue to subsidise their own agriculture sector while demanding that tariffs be reduced by developing countries. In other words, what they continue to say is: open our markets for our produce but we will continue to protect our markets. The Doha declaration on Trade Related Intellectual Property Rights (TRIPS) and Public health had required that a solution be found that would enable countries with no manufacturing capabilities to import drugs at low prices that may be produced in countries like India. In the last two years the drug industry, led by US based corporations, has systematically scuttled all proposals designed to ensure this with full connivance of the US government.  Special and Differential Treatment implies that developing countries be exempted from obligations, or be able to choose their own rate of implementing the obligations, or having a lower level of obligations vis a vis the different provisions of the WTO. There has been no movement in this area and the best that developed countries are able to say is that this has happened because developing countries have been unable to define areas where they wish to avail of such treatment.

The task of developed countries has been made more difficult because of differences within them in vital areas, leading to a virtual stalemate in some areas. This is most apparent in the area of agriculture where the US is unhappy over the reductions in tariffs offered by the European Union and Japan.

GROWING RESISTANCE

A ploy that is now being used by the developed countries is to say that the “development issues” should be delinked from the “new issues”. In other words saying that developed countries should submit themselves to further negotiations on new issues that would deepen integration of markets, but should not expect any concessions in return. Faced with the resistance from developing countries on the “new issues” there is also a suggestion being mooted that the four issues could be unbundled, i.e. they could be negotiated separately and not as a package as was earlier proposed at the Doha Ministerial meeting in 2001. The major ploy that will definitely be used by the developed countries would of course be to attempt to divide the developing countries. Theoretically, the WTO works on a “one member, one vote” principle. If developing countries remain united, no proposal detrimental to their interests can be pushed through. Unfortunately the decision making process in the WTO has been subverted by introducing the so-called “consensus” method of reaching decisions. What this actually means is that developing countries are forced to take positions because of bilateral pressures that they face from the US and its allies.

Today there appears to be a higher degree of determination amongst developing countries to block proposals from the developed countries. Latin American countries, led by Brazil, have been especially vocal in this regard. African countries too are increasingly coming together as a single negotiating block. That leaves the two largest countries in the world - India and China - whose positions in Cancun could well be decisive. China, till recently, had focused its energies on joining the WTO - which they did only a couple of years ago. Now having joined the WTO, China appears more willing to make common cause with developing countries.

India’s position is more complex. During the meeting in 1999 in Seattle, India clearly betrayed the cause of developing countries and the fiasco in Seattle happened in spite of India’s role. Since Seattle, the Indian delegation to the WTO has been perceptibly better prepared. This was evident in the meeting in Doha in 2001. But even in Doha, after holding out till the end, India succumbed on the last day. Negotiating teams, after all, have to ultimately take positions based on signals they receive from the government of the day. The NDA government succumbed in 2001. The moot question is, will it do so in 2003 again? Pre-Cancun, some brave statements have been made by the government that seem to indicate that they will not surrender in Cancun. For example, India’s Permanent Ambassador in the WTO has said recently that the issue of investments should be dropped from the agenda of the WTO after Cancun. But can a government that today wants to send troops to Iraq to fight under the command of US forces, take an independent position in Cancun. The world will be watching.