2006 Spring Meetings

Is the Doha Agenda Moving Away from Development?
Thursday, April 20, 2006 / 14:00-16:00 pm

MEETING NOTES

In this panel, representatives of civil society, the World Bank, and the International Monetary Fund (IMF) assessed the challenges and limitations of the current Doha Development Round of trade negotiations. They focused on the growth model underpinning the negotiations and on the implications of success or failure.

The panel included Chandra Patel from the Southern and Eastern Africa Trade Information and Negotiations Institute; Tom Palley from Economics for Democratic and Open Societies; Sandra Polaski from the Carnegie Endowment for International Peace; Richard Newfarmer from the World Bank; and Michael Hadjimichael from the IMF. Liane Schalatek from the Heinrich Boell Foundation moderated this session.  The session was co-sponsored by the International Working Group on Trade and Finance and the Heinrich Boell Foundation.

Opening Remarks by Liane Schalatek (Heinrich Boell Foundation)

Ms. Schalatek opened the meeting by commenting that there is increasing concern from almost all observers about the progress and direction of trade negotiations started in Doha, Qatar in November 2001. There is also an overarching feeling that the Doha Round has little to do with development anymore. The panel assembled for this session will be examining what system, what underlying economic paradigms, and what trade rules are the most appropriate to spur economic development and poverty reduction. Are the ones that the WTO is currently promoting the right ones? And what would be necessary to put development back into the Doha Round? The most fundamental assumption when we are talking about how trade contributes to development, she said, is that growth is only good for development when it is inclusive and reduces inequality, when it creates good jobs, and secure livelihoods.  She noted that the World Bank’s own World Development Report 2006 has pointed out that in addition to growth, a reduction of inequalities will be necessary for development. This is one of the main issues the panelists should try to address.

Presentation by Chandra Patel (Southern and Easter Africa Trade Association)

Chandra Patel works in Geneva, where the World Trade Organization (WTO) is headquartered and follows the Doha negotiations as closely as possible. He discussed some of the details of the negotiations and reported that there was considerable   uncertainty about whether members can take the crucial next steps in the Round. These steps included, in particular, the completion of modalities for agriculture and NAMA negotiations and will include all of the details needed to draft a schedule of commitment; these were to be completed by the end of April. Adding to the uncertainty was the recent decision by African trade ministers not to accept partial modalities that do not include the concerns of African countries. Among priority issues for African ministers included obtaining special treatment for developing countries in agriculture (especially special products and special safeguard mechanisms) and a solution to the problems resulting from preference erosion.

In order to spark momentum in the negotiations, the director general of the WTO had proposed convening a meeting of 30 or 40 ministers for the end April meeting in Geneva. But over 100 civil society organizations have expressed serious reservations about the meeting’s format, and the fact that it will exclude a large majority of developing country and some developed country participants. Many developing countries excluded from the en-April meeting have likewise expressed their concerns about the process underpinning the negotiations. Members have also expressed the view that any agreements struck at such a meeting cannot have any credibility. Therefore it is unlikely that this meeting will result in any significant push forward.

The moment of truth will come in July when the membership will decide critical questions such as whether to prolong the deadline for concluding the Doha Round beyond the end of this year. So far, the agenda has failed to yield any consensus or even to significantly narrow most of the differences that existed before, except perhaps in service negotiations.  Even on this it is unlikely that there will be really significant progress between now and July.

Presentation by Sandra Polaski (Carnegie Endowment for International Peace)

Most of Ms. Polaski’s remarks were drawn from a report she authored titled “Winners and Losers: Impact of the Doha Round on Developing Countries” which modeled various trade scenarios including some that are similar to the proposals that are on the table in the Doha Round. Her research showed very small overall gains from trade for developing countries even under ambitious scenarios.  If preferential treatment is given to developing countries’ agricultural sectors, neither rich countries nor developing countries that are net exporters lose very much.  Her report represents a renewed call for protecting the interests of developing countries because by all estimates, not just hers, the potential gains from the round are small, the potential losses are very real, and they would rebound hardest to the countries that are least able to bear them.

However, she posited, a positive win-win-win outcome is still possible in the Doha Round. This would be an outcome where most countries (high, middle and low income) would see some small marginal gains in terms of their export possibilities and their overall income. But to achieve this result would require much more attention to the defensive interests of developing countries and, she warned, failure to address these defensive interests, primarily in agriculture but also in preference erosion across a range of sectors, would risk imposing net losses on many developing economies. In other words, a globally negotiated agreement could actually set back and shrink economies and be harmful for global economic growth, stability, and security. Achieving a positive outcome would require the following things:

• Very careful sequencing of liberalization measures, so that developing countries have time to grow the sectors of their economies where they do have comparative advantage and absorb labor from sectors that will be declining. 
• Special and differential treatment for developing countries, especially in agriculture.
• Development assistance targeted specifically to diversify and modernize agricultural sectors in developing countries.
• A “duty free quota free” agreement extended beyond 97 percent. Enough studies have already emerged to show that if the US continues to shelter 3 percent of tariff lines it could in effect exclude all of the competitive products of many Least Developed Countries (LDCs). 
• Countries that are just above LDC in terms of their income but have undiversified economies also should receive some preferential benefits on a sector-by-sector basis.
• Finally there should be cross border or multilateral assistance to developing countries to target transitional trade adjustment assistance to the poor and to losers within those economies.

Presentation by Tom Palley (Economics for Democratic and Open Societies)

Mr. Palley’s presentation was built around his opening statement that “ideas really do matter in this debate” especially regarding the big picture. The World Bank, the IMF and the WTO, have visions based on the same principles. Two basic paradigms drive the economic thinking and policies that come out of these three preeminent institutions of the global economy.  One is export-led growth and the other is neoclassical growth theory. Export-led growth came into fashion in the late 1970s. The main elements of this paradigm are simple: tariffs and quotas are reduced and exports are relied upon as a major engine of growth in the economy. The other paradigm is neo-classical growth theory, which defines the problem of development basically as a problem of capital accumulation. Essentially it views the problem as a supply-side problem, so the solution to the problem is to promote capital accumulation. Bank, IMF and WTO economists currently focus, he maintained, on the impediments to the accumulation of capital and how the market does not allow certain countries to accumulate capital.

Mr. Palley argued that development policies pay inadequate attention to developing the demand side in developing countries. The development policy challenge, therefore, is how to develop the structures of income and demand generation that wealthy counties have.  Further, demand-side development complements supply-side development. However, the WTO agenda currently deeply undermines domestic demand-side development and aims to institutionalize export-led growth. This traps developing countries in a race to the bottom. He also proposed two things that he said the WTO has not favored in the past: one is regional trade agreements and the other is standards, such as labor standards. He pointed out that labor standards could help developing countries capture more value. Using the idea of a value chain, he noted how increasingly more value is being captured by distributors and retailers in developed countries. Labor standards can help developing countries capture more of that value by containing south – south competition that largely benefits developed country multi-national corporations and importers.

Presentation by Richard Newfarmer (World Bank)

In opening his remarks, Mr. Newfarmer reported that it is his conclusion that the Doha Round is in such serious trouble it might meet its demise very soon, and he made note of the current political context in both the US and Europe that are impediments to the consideration of any multilateral trade agreement by governments in the North.

He then put forward two alternatives for what could happen if the round fails. One is that the whole process would be thrown into the judicial part of the WTO, which he described as having a weak political foundation. The other is a proliferation of bilateral and regional free-trade agreements. Neither of these alternatives would benefit poor countries, but rather put them in the weakest of bargaining positions vis-à-vis rich countries. The Doha Round is still the best option for developing countries. First, because, although the potential gains for poor countries might be small, based on Bank analysis, the potential gains are larger and the potential losses smaller than other panelists have concluded.  Second, countries working together offer a better solution to trade as a tool for development than countries going it alone. In fact, he concluded, everyone should call their government representatives to call for the conclusion of the Doha Round since the alternatives to a successful Doha Round are not very good for those committed to reduce poverty.

Presentation by Michael Hadjimichael (IMF)

Mr. Hadjimichael praised the vision and the development goals of the Doha Round, while noting that progress has been clearly disappointing. The dream was to reduce poverty in low income countries through the brokering of a multilateral agreement and thus promote growth and development.  The Doha Round was to manifest itself in improved access in agriculture, improved domestic support for agriculture, the elimination of export subsidies for agricultural products to improve trade facilitation and, where necessary, special treatment for developing countries. It is important now to look at what should be done and what can be salvageable from the Round. He said it is still possible to make measurable gains and he urged that all WTO members make concessions and work in the coming weeks to agree on the basics in order to move forward.

In his presentation, he addressed the development dimension of the Doha Round, aid for trade, and the importance of preserving the multilateral trading system. He called the evidence that trade liberalization and integration into the world trading system is positive for growth and development irrefutable, and he suggested that instead of resisting tariff reductions and trade liberalization, developing countries would be well advised to develop comprehensive trade strategies using the proper diagnostics, technical expertise, and financial assistance of the IMF and the World Bank to improve these strategies. He also stressed that aid for trade is a complement and not a substitute for a successful outcome of the Doha Round.  He also mentioned that both the Fund and the Bank will continue to address issues such as social safety nets to protect vulnerable groups.

He raised the possibility that failure at the Doha Round could put the multilateral trading system at risk, and argued that the preservation of this system is in the best interest of both the developed and developing world. Finally, he underscored points made by Mr. Newfarmer, that failure of the Round would encourage a further proliferation of bilateral and regional trade agreements, and that these were not in the best interest of developing countries.

The discussion period was brief due to time constraints. A few panelists responded to each other’s comments. Mr. Chandra referred to Mr. Palley’s comment on the importance of ideas and mentioned that for the first time in trade negotiations, academics and other experts are part of the Doha Round and the new analysis and contributions are having an impact on negotiators, who are questioning many of the assumptions of previous rounds. Ms. Polaski commented that she is glad to see the Bank giving much more attention to rural development. She noted that for much of the last thirty years, the Bank, other development institutions and many national governments had neglected agriculture and rural development, and that this neglect explains in part why many developing countries were still unable to compete on global agricultural markets. She also expressed concern over the potential revenue losses in developing countries if they lower tariffs.

Mr. Palley and Ms. Polaski agreed that a slow down in negotiations could be a good thing, if it produces a more balanced agreement in the end, and Mr. Palley clarified his support for regional trade agreements, saying that he is in favor of expanding the market amongst those countries that are similarly placed and which have commodities to trade among themselves. He also pointed to the huge deficits US trade deficits, and suggested more analysis needs to be done on how attempts to shrink those deficits might impact developing countries trade prospects.

One participant noted that it appeared to be many people in the room who do not think the collapse of Doha Round would be a bad thing. There was considerable concern expressed about the low level of gains to developing countries even in the best case scenarios; potential losses of income; and the move away from a development focus in the Doha Round. In addition, one participant urged giving indicators like household incomes more weight in measuring development; and another raised concerns about intellectual property rights in the negotiations.  Panelists took the last few minutes to highlight and summarize their last responses to the questions.

List of participants in the discussion

Photos

More Information:
2006 Spring Meetings Civil Society Dialogues Program - main page
2006 Spring Meetings - general information for CSOs