The US and EU Challenged to Provide Leadership in Geneva

By Finnigan wa Simbeye

The Perspective
Paris, France

Posted May 28, 2002

FEUDING world economic powerhouses, the United States and the fifteen member European Union (EU), have been challenged to stop customary legal proceedings at World Trade Organisation (WTO)'s trade disputes arbitrary council in Geneva and instead lead the crusade against removal of free trade barriers to allow poor countries access to their markets.

Business chief executives, civil society leaders, politicians and diplomats from both poor and developed countries expressed concern over Washington and Brussels failure to lead by example in their rhetoric free global trade campaign while maintaining subsidies in agriculture and engaging in routine trade disputes over tariffs.

Debating a topic christened "The Multilateral Trading System-Making the Doha Declaration Work for All Countries' at the Organisation for Economic Cooperation and Development (OECD) Forum 2002 last week, Unilever (UK) Chairman Niall Fitz-Gerald warned that the current world trading order is pushing far too many people into poverty in poor countries risking global insecurity.

He denounced latest negative developments in Geneva where rich countries of the North particularly the US and EU members have engaged in trade disputes over tariffs and subsidies while mentioning Washington's recently adopted foreign trade and farm bills, as clear violation of fundamentals laid down by Doha Declaration WTO trade ministers.

"Six months later today, we cannot be sure that the spirit of Doha is still in place," a vividly disturbed Fitz-Gerald retorted.

The Unilever UK Chairman argued that experience and data testify that free global trade without distortion of market forces by subsidies, tariffs and non tariff barriers like standards which have been used far too often to make goods and services from the poor world less competitive at world market, is effective in reducing global poverty.

Kenyan Trade and Industry Minister Nicholas Biwott supported Fitz-Gerald's observation and wondered why WTO rich members are still engaging in violation of free trade principles by massively subsidising their agriculture industry and imposing tariff and non tariff barriers to commodities and manufactured goods from developing countries.

"The issue of subsidies was delt with during the Uruguay Round many years ago but it is unfortunate that today at WTO we are still talking about the need for developed countries to remove subsidies from agriculture," Biwott said.

The 30 members of OECD pay subsidies to their farmers to the tune of between $320 to $380bn per annum while a recent Oxfam International global trade report christened Rigged Rules and Double Standards, estimates that developing countries are losing $100bn per annum in international trade.

Biwott bemoaned WTO's costly trade disputes arbitrary mechanism which has prevented poor countries from seeking an end to continued agro-subsidies by the developed world contrary both to the defunct Uruguay Round and incoming Doha Declaration on free trade.

He said that such heavy legal costs have made the WTO trade arbitrary mechanism a place of the rich countries to engage in trade disputes and counter suits relating to tariff barriers meant to protect domestic markets.

The US and EU have made the WTO trade disputes council their battlefield as they seek to access each other's steel, aircraft and other heavily subsidised domestic producers markets and the right to have equal access to cheap commodities from developing countries such as bananas from the Caribbean.

The recent US foreign trade and farm bills which gave the Bush admnistration powers to offer up to 60% in subisidies (valued at over $180bn) to the country's farmers in the next ten years and levy 30% against imported steel to protect the inefficient domestic producers, have drew condemnation at the OECD forum with many questioning Washington's commitment to WTO rules on free trade.

Biwott called on the developed world to technically help poor countries of the South cope up with the pace of current trends in trade negotiations, disputes and standards computation.

WTO Director General designate Supachai Panitchpakdi pledged his loyalty and indifference to all member states. He stressed the need for the members to move forward quickly on stalled key issues which are yet to be resolved including Trade and Related Intellectual Property Rights (TRIPS) on HIV/Aids anti-retrovirals, issue of continuing agro-subsidies and new wave of tariffs and non tariff barriers against world trade.

"I don’t want to start making enemies now because if I start making enemies now even before I take over office then it ma be very difficult when I finally take over. But I assure all members that we will move fast, very fast to resolve outstanding issues," he pledged.

Panitchpakdi warned developing countries never to relate the issue of technical support from rich countries with Doha Declaration negotiations because the latter are likely to take chances and decide to put emphasis on technical support while critical issues impinging on trade remain unresolved.

The US alone is said to be paying agro-subsidies to the tune of over $360bn while the EU pays $300bn despite a last decade declaration incorporated in the Uruguay Round that called for an end to such allowances.

Soon after the US's declaration of massive subsidies to be paid to the country's farmers last week, world market prices of cotton for which Washington is the world's number one producer fell from 39 to 32 cents per pound this week amidst fears of market saturation.

"Let us not forget, for example, that the $380bn spent annually by OECD members to support their tiny agriculture (less than 1.3% of GDP) could transform development in Africa, Asia and Latin America in less than three seasons of support," Egyptian diplomat at United Nations and WTO chairman of agriculture committee, Magdi Farahat said.

He urged the rich countries to implement Uruguay Round Agreement on Agriculture now that the UR is defunct other than carrying on negotiations to the recently launched Doha Ministerial Declaration.

According to Oxfam International's report, "Rigged Rules and Double Standards," a one percent increase in the volume of exports that the developing world sells at the world market will enable over 120m people living below the poverty line to get out of the trap.

The human costs of unfair trade are immense. If Africa, East Asia, South Asia and Latin America were each to increase their share of world exports by one percent, the resulting gains in income could lift 128 million people out of poverty. Reduced poverty would contribute to improvements in other areas, such as child health and education, the Oxfam International report adds. Over two billion people are said to be living in abject poverty world wide with sub-Sahara Africa alone accounting for over 300 million.

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