Doha Talks Sound The Death Knell Of Industrial Development



By Shobha Shukla, CNS
May 3, 2011
The author is the Editor of Citizen News Service (CNS). She is a J2J Fellow of National Press Foundation (NPF) USA. She has worked earlier with State Planning Institute, UP. Email: shobha@citizen-news.org, website: http://www.citizen-news.org/

The Centre for Trade and Development (Centad) and Third World Network (TWN), in collaboration with Our World Is Not for Sale (OWINFS), recently organized a very lively and informative workshop to discuss the current undercurrents of the Doha talk. The workshop was ably facilitated by eminent personalities—notably Mr Martin Khor, (a Malaysian economist, activist and journalist all rolled into one) Executive Director, South Centre Geneva, S Narayanan, former ambassador to General Agreement on Tariffs and Trade (GATT), Sanya Reid Smith, Legal Advisor TWN, and other experts from various fields.

The gaps between the developed countries and major developing countries like China, India and Brazil, are being viewed as non bridgeable today—that is 10 years after the Doha Round began in 2001. It is jokingly said to be going round and round without coming to an end. The main reason for this impasse is the steady deviation from the original development agenda of the Doha Declaration of 2001. The Brazilian Ambassador Roberto Azavedo, expressing frustration at the unfair demands being made of developing countries by some of the developed countries said, 'if this view (that developing countries have to make even more concessions) prevails, then we not reached the endgame but the end of the game.'

Developed countries (DCs) are mounting pressure on developing countries to agree to new clauses outside the original Doha Mandate. The latest in this line is the Non Agriculture Market Access (NAMA) Sectorals.

Under NAMA some major developing countries like India, Brazil, Indonesia and Venezuela will have to cut their industrial tariffs by 50-70%, while developed countries (like US, EU and Japan) have to cut by not more than 25%. After these cuts under the 'Swiss Formula' most of the bound tariffs in developing countries will be brought down to around 11%, and will in no case exceed 20%.

This clearly contradicts the Doha Ministerial Declaration mandates that 'developing countries are to enjoy less than full reciprocity' in tariff reductions, in the sense that developing countries have to take cuts which are less than those taken by DCs. But what has actually happened is just the reverse of this.

Such low tariffs across a broad range of industrial products will sound the death knell of local industries and stall their future development. They will not be able to support an industrial policy which can create jobs, especially in a country like India where two thirds of its jobs are in the service sector and most of its sectors are government owned.

NAMA is unfair for developing countries as it restricts changes at local levels. As of now, governments can choose what they want to buy and fix the tariff levels as is conducive to them. Under NAMA's bound tariff clause this will not be permitted. If you are bound to a 10% tariff clause then you cannot reduce it below this. This will compromise future industrialization.

As if this was not enough to break the back of developing economies, the US, in particular, is demanding that these countries cut their tariffs to zero, or near zero for three sectors (with stress on chemicals, electronics and industrial machinery). This super liberalization in these sectorals is supposed to be voluntary, but is actually being mandated for the big developing countries. This is proving to be the last straw and may be responsible for a complete breakdown of the talks, particularly so because the glamour of liberalisation has waned in many developing countries who have burned their fingers while flirting with free market policies. Brazil and South Africa are very unhappy with NAMA. Argentina is sceptical too as it has already experienced the havoc caused by opening its banking sector to foreign companies. China aims to produce locally and export globally. It runs an industrial policy where the aim is to tap technology and provide finance to local companies that will take on foreign companies in the local and global market. Brazil does not want local producers to be neglected. In Singapore and Malaysia a new hybrid experiment is currently being experimented upon. In this the government has taken over the foreign companies, but allowed them to be run professionally and efficiently like private companies, without the hassles of red tapism. This unique public-private partnership has proved to be a very successful model for these two countries—especially for Malaysia where an earlier swing towards privatisation of key services had failed and only brought financial crisis for the local people.

The state plays an important role in determining an industrial policy which is conducive to the economic growth of its people, for which it may have to give incentives to local industries and use the tools of finance, trade and IP to help them. It may have to raise tariffs if need be. But the NAMA sectorals in the Doha talk and the Free Trade Agreement (FTA) clauses totally obliterate it.

The developing countries rightly feel that that they are being unfairly picked up to carry not only the entire burden of the talks but also take the blame for its failure.

In the words of Mr Martin Khor "So, at the moment the chances of Doha Declaration coming to a conclusion seem to be very dim. But the prospect of Free Trade Agreement between EU and India being signed are very bright, and this indeed is disturbing. FTA wants tariffs to be brought down to zero not only in three sectors, but on 95% of our products. This is 3 sectorals multiplied many times. It will take away from the government its ability to act like a government for the welfare of its people. The competition principle component of FTA will give foreign companies competitive equality as locals to compete in the local market. The government would no longer be allowed to give preference, subsidy, or advantage to the domestic companies. Government authority will no longer be allowed to sit as a boss over a company owned by it."

Martin Khor gave many examples of the opaqueness with which the Doha negotiations are clouded. He pointed a finger at the US and EU for resorting to various manipulative pressure tactics being mounted on the developing countries to tow the line. These were--closeting few select acquiescing Ministers and force them to agree; asking ambassadors to agree to a declaration without consulting the experts; removing/adding unapproved clauses in the main Draft. It is strange that though the NAMA text of December 2008 had not been accepted by the WTO, yet it is now in the document of 2008 and has been used as a consensus document even by developing countries as a basis for agreement.

Still, as Mr Narayanan rightly felt, China, India and Brazil, need to continue negotiating while trying to improve upon the documents on industry and agriculture rather than throw them in the dustbin. Efforts for a possible Doha outcome should be made without surrendering to the outrageous demands of the US and European Union.

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Posted on: May 03, 2011 07:32 PM IST