Unequal bargain at WTO

So it's not unreasonable to discount his current claim as commerce minister that developing countries (DCs) made impressive gains in the recent Framework Agreement of the World Trade Organisation, which will help them in the tough future negotiations.

Analysis shows that for a majority of DCs, the balance-sheet is red, not black. A minority of DCs from the relatively advanced G-20 group may make modest gains. But the overall cost will be extremely damaging for the Third World.

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True, the Framework Agreement has some components that favour the 1.3 billion Third World people who represent 96 percent of the globe's farmers. Under it, rich countries must abolish export subsidies, and reduce unwarranted support to their farmers by 20 percent in the first year, and eventually cap trade-distorting (or Blue Box) subsidies to 5 percent of the production value.

DCs get some leeway in tariff reduction. They can temporarily designate certain products "special" -- based on food security or "resource-poor" farmers' needs, and regulate imports. The agreement's "Special Safeguards Mechanism" can prevent disruptive imports. The section on cotton favours imports from Africa-Caribbean-Pacific group.

Yet, how much and how quickly the rich countries will improve DCs access to agricultural markets is for detailed negotiation -- and the devil is in the details. The rich are still loathe to cut the unfair $400 billion subsidies to their farmers.

They demand that DCs must agree to "substantial improvements in non-agricultural market access" (NAMA). Put simply, DCs must greatly reduce import duties on Northern industrial goods -- even if that produces job losses and destroys nascent industries.

DCs must accord "national treatment" to Northern services multinationals -- on a par with domestic firms. "Services" will eventually include electricity generation, water, even education!

The bargain is clear: for modest gains in agricultural exports, the South must allow wholesale privatisation of water and power. Privatising natural resources is unethical. It will make water unaffordable for the majority, demolishing a right. As for power, India's Enron scandal is too recent to need re-telling.

Allowing foreign enterprises into education will create islands -- just where we need universal access. It will lead to cherry-picking, destroy schools/universities, and produce dissonance between education and society's needs.

The Geneva Agreement, then, is a triumph for the rich, not poor. The promised 20 percent cut in agricultural subsidies may not mean much. Prof C.P. Chandrashekar of JNU shows the European Union need make no reduction in subsidies provided it can juggle around with the Blue and Green Boxes. These are, respectively, lists of trade-distorting subsidies, and permissible farmer support.

The Agreement allows expansion of the Blue Box. At Cancun, an attempt to enlarge it was unanimously rejected by DCs. The talks collapsed.

The Geneva agreement won't alter the iniquities of world trade: the South, according to the UN Conference on Trade and Development, annually loses $500 billion to Northern protectionism. The accord will cut the development ladder from under the South's feet.

Focus on the Global South, which analyses global trade from the DC point of view, says most DCs will lose. The only possible gainers are Brazil and India -- "two of the Five Interested Parties (FIPS) that played the leading role in drafting the agriculture text."

How did India and Brazil play such a role? The US and EU together spirited them away from the developing states' G-20 into FIPS (including Australia). According to Focus, the rich first failed to split the G-20 through a frontal assault.

But soon, they used wily tactics: "For instance, to get its new expanded Blue Box, Washington distracted the DCs' attention by [demanding] that they reduce their [minimal acceptable] domestic support. Thrown on the defensive, these countries spent much energy justifying their subsidies ... they were only too relieved when the US ... [compromised] ... in return for their agreeing" to expanding the Blue Box.

"Similarly ... the EU suddenly brought in the category of 'sensitive products' to [resist] significant tariff cuts. Worried that the EU might put blocks to their demand for protecting products essential to their food security, the DC negotiators acquiesced."

India and Brazil could be "neutralised" because these governments' interests are to an extent detachable from the least-developed countries' -- the WTO's G-90 group. India and Brazil have a stake in defending high agricultural tariffs, where the EU is an ally. As a major farm-producer, Brazil is also keen on getting Northern farm subsidies reduced.

By contrast, most DCs have few exports to defend.

India and Brazil also aspire to export low-value-added services (carpenters, plumbers, nurses, etc.), which most DCs can't. The US-EU managed to drive a wedge between the two groups.

India and Brazil now cannot claim to lead the South, itself heterogeneous. In fact, even the safeguards to defend farmers' interests were proposed by the G-90, not them!

These provisions may not help much. For instance, India produces some 250 crops; the EU only 20-25. The EU could temporarily designate, say, 7 or 8 as "sensitive." But even in a bad year, India won't be allowed to put 70 or 90 crops into the "special" and "safeguard" boxes.

In the long run, the Geneva Agreement will harm DCs -- like the Uruguay Round agreement on trade-related intellectual property rights, which creates monopolistic patents.

To say this is not to play the BJP's tune. That party has a narrow, parochial motivated criticism of the Agreement, focused on the expansion of Blue Box, rather than on the vital issue of NAMA and privatisation of services.

There's a lesson here. As free-market economist Jagdish Bhagwati admits, you can either have free trade or fair trade, not both. For us citizens, fair trade is a priority. For the Geneva accord, it isn't.

Praful Bidwai is an eminent Indian columnist.