[E-rundbrief] Info 344 - Walden Bello: Review on WTO-summit Hong Kong

[Matthias Reichl]

E-Rundbrief - Info 344: Walden Bello: The Real Meaning of Hong Kong: Brazil 
and India Join the Big Boys' Club. About the institutional survival of the 
World Trade Organization.

Bad Ischl, 16.1.2006

Begegnungszentrum für aktive Gewaltlosigkeit

www.begegnungszentrum.at

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The Real Meaning of Hong Kong: Brazil and India Join the Big Boys' Club.

Thursday, 22 December 2005

By Walden Bello*

What was at stake in Hong Kong was the institutional survival of the World 
Trade Organization.  After the collapse of two ministerials in Seattle and 
Cancun, a third unraveling would have seriously eroded the usefulness of 
the WTO as the key engine of global trade liberalization.  A deal was 
needed, and that deal was arrived at.  How, why, and by whom that deal was 
delivered was the real story of Hong Kong.

A Real Deal, not a Cosmetic One

The Hong Kong deal has been characterized in some reports as a "minimum 
package" that mainly functions as a life support system for the WTO.  This 
is hardly the case.  The deal extracted substantial concessions from 
developing countries while giving them hardly anything in return.

The stipulation of a Swiss formula to govern Non-Agricultural Market Access 
(NAMA), which would cut higher tariffs proportionally more than lower 
tariffs, would penalize mainly developing countries since to build up their 
industrial sectors via import substitution they generally maintain higher 
industrial and manufacturing tariffs than developed countries.

The specification of a "plurilateral" process of negotiations in the 
services text erodes the flexible request-offer approach that has marked 
the General Agreement on Trade in Services (GATS) negotiations, injects a 
mandatory element, and will corral many developing countries into sectoral 
negotiations designed to blast open key services.

What the South got in return was mainly a date for the final phase-out of 
export subsidies in agriculture that nevertheless left the structure of 
subsidization of agricultural subsidization in the European Union and the 
United States largely intact.  Even with the phase out of formally defined 
export subsidies, other forms of export support will allow the European 
Union, for instance, to continue to subsidize exports to the tune of 55 
billion euros after 2013.

In sum, this was an agreement with teeth, but the bite will be felt 
principally by the developing countries.

The contours of the deal were already evident before Hong Kong, and many 
developing countries went to the ministerial determined to oppose 
it.  Indeed, there were occasions, such as the formation on Dec. 16 of the 
G 110 by the G 33, G 90, and ACP (Asia Caribbean Pacific countries), that 
seemed to promise that developing country unity might yet emerge to derail 
the impending deal.  Yet, in the end, the developing country governments 
caved in, many of them motivated solely by the fear of getting saddled with 
the blame for the collapse of the organization.  Even Cuba and Venezuela 
confined themselves to registering only "reservations" with the services 
text during the closing session of the ministerial in the evening of 
December 18.

The Dealmakers

The reason for the developing countries' collapse was not so much lack of 
leadership, but leadership that brought them in the opposite 
direction.  The key to the debacle of Hong Kong was the role of Brazil and 
India, the leaders of the famed Group of 20.

Even before Hong Kong, Brazil and India were prepared to make a deal.  For 
Brazil, the bottom line was the specification by the European Union of a 
date for the phase-out of agricultural export subsidies, and this was an 
item that Brazilian negotiators and many others expected would be delivered 
by the EU at the ministerial, though for negotiating purposes the Europeans 
would not reveal it till the last minute.  Brazil also came to Hong Kong 
willing to accept a Swiss formula in NAMA and the plurilateral approach in 
services.  India, for its part, arrived in Hong Kong with its positions 
well known.  It would accept the plurilateral approach in services 
negotiations and the Swiss formula in NAMA and follow Brazil's lead in 
agriculture.  The only question for many was: would India press for 
developed country concessions in Mode 4 of GATSthat is, get the US and EU 
to agree to the entry of more professionals from developing countries? As 
it turned out, it decided not to press Washington on this.

The Prize

It is a matter of debate whether the final agreement will result in a net 
gain for Brazil and India, though if the balance ends up with a net loss, 
this would likely be smaller than for the less advanced developing 
countries.  However, the main gain for Brazil and India lay not in the 
impact of the agreement on their economies but in the affirmation of their 
new role as power brokers within the WTO.

With the emergence of the G 20 during the ministerial in Cancun in 2003, 
the EU and the US were put on notice that the old structure of power and 
decision-making at the WTO was obsolete.  New players had to be 
accommodated into the elite.  The circle of power had to be expanded to get 
the organization back on its feet and moving.  The EU and US's invitation 
to Brazil and India to be part, along with Australia, of the "Five 
Interested Parties (FIPs)," was a key step in this direction, and it was 
agreement among the FIPs that solved the impasse in the agriculture 
negotiations, which led, in turn, to the Framework Agreement at the General 
Council meeting in July 2004.

In the lead-up of the Hong Kong ministerial, Brazil and India's new role as 
power brokers between the developed and developing world was affirmed with 
the creation of a new informal grouping known as the "New Quad".  This 
formation, which included the EU, US, Brazil, and India, played the 
decisive role in setting the agenda and the direction of the 
negotiations.  Its main objective in Hong Kong was to save the WTO.  And 
the role of Brazil and India was to extract the assent of the developing 
countries to an unbalanced agreement that would make this possible in the 
face of the reluctance of the EU and US to make substantive concessions in 
agriculture.  Delivering this consent was to be the proof that Brazil and 
India were "responsible" global actors.  It was the price that they had to 
pay for full membership in new, enlarged power structure.

It took a lot of lobbying before and during Hong Kong, with both 
governments putting their reputation as leaders of the developing world on 
the line, but they succeeded in getting everybody, though not without some 
grumbling, to assent to a bad deal.  It was no mean feat for it involved:

     *
       getting the least developed countries to agree to a "development 
package" that consisted mainly of a loophole-ridden provision for the "duty 
free" and "quota free" entry of their products into developed country 
markets and  a deceptively named "aid for trade" deal that would consist 
partly of loans to enable them to make their economic regulations 
WTO-consistent, increasing their indebtedness in the process;
     *
       cajoling the West African cotton producers to accept a deal whose 
main content was giving the US a whole extra year to eliminate export 
subsidies that it should have eliminated a year and a half ago, following a 
WTO decision against these subsidies, and which totally ignored their 
demand for compensation for the enormous damage these subsidies had 
inflicted on their economies;
     *
       coaxing the holdouts in the services negotiationsIndonesia, 
Philippines, South Africa, Venezuela, and Cubato give up their opposition 
to Annex C of the draft declaration, which stipulated plurilateral 
negotiations; and
     *
       neutralizing the more dissatisfied members of the so-called "NAMA 
11," (of which Brazil and India were themselves members) which wanted to 
tie the North's demands for a fast pace of liberalization in industrial and 
fishery tariffs to the North's concessions in agriculture.

Mutual Admiration Club

The final G 20 press conference in the late afternoon of December 18 was 
notable for its lack of substance and for its symbolism.  As if to preempt 
hard questions on whether the ministerial text represented a good deal for 
developing countries, Brazilian Foreign Minister Celso Amorim repeatedly 
claimed "We have a date," referring to the 2013 phase-out date for export 
subsidies.  Then Amorim and Indian Commerce and Industy Minister Kamal Nath 
engaged in a round of backslapping, congratulating one another for doing a 
great job in coming out with an agreement that protected the interests of 
developing countries.  Then, with so many of those in attendance poised to 
ask questions, Amorim hurriedly cut short the press conference and quickly 
left the room with Kamal Nath, ostensibly for another meeting but obviously 
so as not to be on the line of fire from skeptical reporters and NGO 
representatives.

At the closing session of Sixth Ministerial, Pascal Lamy, the director 
general, said that in Hong Kong, "the balance of power has tilted in favor 
of developing countries."  The statement was not entirely cynical and 
untrue.  The grain of truth in his statement was that India and Brazil, the 
big boys of the developing world, had become part of the big boys' club 
that governs the WTO.

Paradox

It is paradoxical that the G 20, whose formation captured the imagination 
of the developing world during the Cancun ministerial, has ended up being 
the launching pad for India and Brazil's integration into the WTO power 
structure.  But this is hardly unusual in history.  Vilfredo Pareto, the 
Italian thinker, referred to history being the "graveyard of aristocracies" 
that took a hard line against change in power relations.  To Pareto, the 
most successful elites are those that manage to coopt the leaders of the 
mass insurgency that set out to remove them for power and enlarge the power 
elite while preserving the structure of the system.  Though divided on 
agriculture, the US and the EU had as a common priority since the collapse 
of the Cancun ministerial the survival of the WTO, and they successfully 
managed a strategy of cooptation that snatched victory from the jaws of 
defeat in Hong Kong.

Before the events in Hong Kong, the most striking recent cases of 
cooptation involved the Worker's Party-led government of President Luis 
Inacio da Silva in Brazil and the Congress-led coalition government in 
India.  Both came to power with anti-neoliberal platforms.  But in power, 
both have become the most effective stabilizers of neoliberal programs, 
with both enjoying the support of the International Monetary Fund, the 
transnational corporate lobby, and Washington.  It is not unreasonable to 
assume that there is a connection between the domestic record of these 
governments and their performance on the global stage in Hong Kong.

*Executive Director of the Bangkok-based research, analysis, and advocacy 
institute Focus on the Global South.

http://www.focusweb.org/content/view/799/36/

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