Al-Ahram Weekly Online   7 - 13 August 2008
Issue No. 909
Published in Cairo by AL-AHRAM established in 1875

Ayman El-Amir

Rich men frustrated

The collapse of the Doha trade round is good for the world's poor, writes Ayman El-Amir*

The acknowledged failure of the Doha round on international trade has as much a silver lining for the poor as it casts doubts on the raison d'être of the World Trade Organisation (WTO). The seven-year round, which started in 2001, was dubbed the "Doha Development Round" to underscore that the extended, multi- year series of negotiations were designed to improve trading relations to the benefit of struggling developing countries. As it turned out, the collapse of the round came over the time-honoured demand by rich countries that poorer countries lower tariffs, eliminate subsidies and open markets for the exports of the rich.

In common man's language, this would make imported Dutch tomatoes cheaper on the market, say, in Egypt than locally produced tomatoes and thus ruin the local farmer because WTO agreements would bar him from using government-subsidised seeds, fertilisers or insecticides. What is more, farmers in rich countries, like in the US -- who constitute a powerful lobby in Congress -- would continue to benefit from government subsidies to export to poor countries under the USAID programme. Indeed, they would even gain more because of wildly escalating food prices.

What would developing countries benefit? They would have access to the markets of developed countries for cheap products, produced by cheap labour and exported at the price of deeply depreciated currencies. So under these "fair rules of trade" France would have access to the huge market of China in return for Chinese producers or manufacturers' access to the tiny market of France. The Chinese could become competitive if they devalued their currency, eliminated export tariffs and lowered their prices while avoiding any government export subsidies to compete against subsidised French agricultural products.

This is the rich man's formula. However, developing countries' negotiators refused to submit to the aggressive demands made by rich countries on behalf of their agricultural commodity-trading multinationals. India's Minister of Commerce and Industry Kamal Nath argued that the Doha Development Round was supposed to give benefits to developing countries, not extract new concessions. Many developing countries still need a measure of protection of burgeoning industries and sensitive agricultural products that would otherwise be killed off by powerful multinationals that would dump their products in these markets. Industrialised countries can provide subsidies at will, as former US president Reagan did in the 1980s to protect the US automobile industry.

The aborted negotiations came at a prescient time. Food and fuel prices are soaring; the trend to turn to biofuel, using agricultural products like maize, making food unavailable at affordable prices for the poor. The World Bank estimates that nearly 105 million people have been added to the list of the poorest of the poor population as a result of recent rises in food prices. Economists remind that for the first time since 1973, the combination of skyrocketing food and fuel prices is having negative effects on global economic growth and is making the United Nations proclaimed Millennium Development Goals much harder -- if not impossible -- to achieve. World Bank figures estimated that some 41 developing countries experienced a decline of between three and 10 per cent in their GDP since 2007. Led by giants China and India, developing countries opted out of the Doha deal.

However, the Doha round was a watershed in that it gave developing countries some leverage in the unequal battle for fairer terms of trade. For the first time in decades, China's poor are not going to starve because Japan, one of the political giants of the rich world, imposes higher restrictions on rice exports. And despite multi-year drought and floods in wheat growing areas in Australia or the US, wheat exports are still available though at higher prices and decreasing government subsidies. Developing countries, especially in Africa, will continue to struggle through malnutrition and starvation because of decades of drought and dependence on foreign food donations and imports. In the meantime, rich countries put up protectionist hurdles in the face of their agricultural or raw material exports under the misleading slogan of "Let the market decide". This will require that developing countries design a new paradigm for inter-regional trade.

For the past two decades, the US has single-handedly fashioned the terms of international relations -- politically, economically, militarily and financially. It set the pace and style of modern living and imposed its imperial will on countries that needed assistance. It introduced globalisation as a system of partnership that would replace the decades long unheeded call for a "new international economic order". The WTO was created as the medium to harmonise trade relations, subsuming the General Agreement on Tariffs and Trade (GATT). The collapse of the Doha Development Round that followed on the heels of the Uruguay round left the 153 members of the WTO with some lessons to ponder.

First, the unipolar world ruled by the US, assisted by some Western allies, is over -- even militarily after the debacle in Iraq and bleak prospects in Afghanistan. Second, the prophets and proponents of globalisation in developing countries will have to re- examine the fundamentals of the system and their own rationale. Nations that resisted the promised temptations of globalisation will feel vindicated; those who reluctantly joined in will review their commitments in the light of the Doha outcome. Third, global economic and political power that was once centralised in the US is now devolving to the fringes -- to India, China and Russia and their new and old allies. These developing relations are bound to create new trading groups and alliances that may not necessarily be regulated by the WTO. Fourth, developing countries will have to rethink the worth of the WTO to their development and economies. They realise that when push comes to shove the big developed players will ignore the WTO or twist its rules in their favour.

This does not mean a trade war. After all, most global trade, except for oil, is conducted on the basis of bilateral agreements between states. In the near future, it will probably be conducted on the basis of joint regional interests or economic zones. Developing countries do not foresee their future as the backyard plantation of the developed world. To gain autonomy, they will need advanced technology, if only to develop their farming industries. Other countries will need nuclear reactors for power generation, or high-power computing. Both are sensitive areas where individual patent owners will make political, not free trade decisions since they involve the privileges of the weapons industry.

China did not storm the global market by begging the masters of globalisation. True, its membership in the WTO did enhance its oversupply capacity. But it was those masters that came to China's door asking for business, dreaming of penetrating the then one billion-strong domestic consumer market. The historic visit of former US President Nixon in the early 1970s was described in simple terms by former Chinese Chairman Mao Zedong: "Someone came knocking on the door. We opened the door a little bit to see who was knocking."

* The writer is former Al-Ahram correspondent in Washington, DC. He also served as director of United Nations Radio and Television in New York.

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