Financial Times

WTO sparks great united front from developing countries
By Arthur Rhodes at the WTO in Hong Kong
While protesters clashed with Hong Kong police on Saturday in the streets outside of the city's Convention Center, World Trade Organization (WTO) negotiators worked into the night (Saturday) to save the latest round of free-trade talks. The agreement that emerged, which has been described as "modest" by the European Union negotiator Peter Mandelson, accomplished just enough to stave off the collapse of the ministerial meeting, which was intended to create rules for promoting development through trade.

Two of the last four WTO ministerials have crashed due to failure to reach consensus, and the threat of failure loomed heavy in the days running up the weekend as trade officials clashed over agricultural subsidies; ending subsidies to farmers in rich countries is viewed as a vital to promoting the world's developing nations. "Trade subsidies create artificial competitiveness," says Indian Trade Minister Kamal Nath. "It is time for the developing world to realize that they are not competitive in agriculture." The text of the final deal agrees to end all export subsidies in agriculture by 2013, a compromise between the European Union, which was hoping to avoid setting an exact date to the end, and Brazil, which had called for an end date of 2010.

The deal also increased the funding of the "aid for trade" program, which provides trade-promoting grants to the World's least developing countries (LDC's). It also provides "quota-free, duty-free" access for LDC's into the markets of rich countries for 97.5 percent of goods. Larger developing nations such as China, India, and Brazil also agreed to sign on to the market access for the LDC clause of the agreement, though they said that they would implement it with special exceptions.

The trade deal, however, failed to achieve any headway in the realms of service liberalization and market access for manufactured goods. Service liberalization became a hot topic in the latter days of the conference, with developing countries and civil society groups protesting the call from rich to developing nations to set specific dates by which they would open their service sectors.

Large service providers in both the US and EU see the untapped markets of the developing world as an enormous growth opportunity, and they have been placing a great deal of pressure on their own trade negotiators to push for a concrete agreement. The ministerial's failure to reach a deal on services is seen as a victory for the developing world by many who believe that the opening of service markets puts poor citizens at risk and only benefits the rich.

Talks on market access collapsed because of a failure to reach consensus on a proper tariff-cutting formula. While developing countries want to see tariffs cut in richer nations, they want to protect their own manufacturers from cheap imports. High tariffs and quotas increase the cost of doing business in a particular country, and thus discourage business owners from the developing world from expanding into large markets such as the US and EU.

Market access was a key aspect to Sri Lanka's negotiating position. With Sri Lanka's textile manufacturers looking for new markets and increased access to old ones, market access reform is seen as a key issue for promoting the island's growth. Sri Lanka's chief negotiator, KJ Weerasinghe, told The Sunday Times FT that increased access to foreign markets, especially that of the United States where Sri Lanka currently holds a 1.8 per cent market share in the textile industry, is a crucial point in their agenda.

It is unlikely that this will be accomplished in multilateral talks, however, as the US is likely to put textiles on its "sensitive products" list, and thus exempt it from any deal to lower tariffs.

Perhaps the most interesting development of the conference was the emergence for the first time of a truly united front on the part of the world's developing countries. Because of the power disparities that arise in bilateral talks between a large country, such as the US, and small countries, such as Sri Lanka, multilateral trade negotiations, such as those hosted in the WTO, hold greater potential benefits developing countries, which can unite under a common purpose against the agenda of the developing world. Brazilian Trade Minister Celso Amorim, called the unity showed by the developing world in Hong Kong "one of the greatest achievements of the weekend."

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