Hong Kong, 16 December (Chakravarthi Raghavan) - At Hong Kong, unless developing countries stand firm against pressures, they may be setting themselves up for another highly imbalanced outcome and a more oppressive multilateral trading system.

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Hong Kong, 16 Dec Chakravarthi Raghavan (*) - At Hong Kong, unless developing countries stand firm against pressures, they may be setting themselves up for another highly imbalanced outcome and a more oppressive multilateral trading system.

The Doha Work Programme (DWP) launched in November 2001 had in fact very little development content. Four years of talks have produced nothing in relation to the developing countries’ proposals on special and differential treatment and implementation issues, only an apparent willingness to tackle peripheral issues.

Market access for exports of developing countries in the developed world is important, but without policy-space and ability to produce and export value added goods, market access will not become Development. But the Doha Round has in fact has a built-in agenda to enable the industrialized world to invoke instruments that would further restrict developing country policy space.

The developing countries have been virtually bombarded with propagandist talk of an economic disaster, for the world economy and for developing countries, if the talks fail. The US and the EC, aided by Mr. Pascal Lamy, have warned that if deals are not clinched now, the majors would even increase their agricultural protection and domestic support. Lamy voiced such a view at the recent Arusha meeting of African Ministers.

For doing nothing or almost nothing in agriculture, the US, EC and Japan are demanding that developing countries make concessions by drastically reducing their industrial tariffs, and by opening up their service sectors. If the developing countries yield, this will put their economies back to the colonial era - excepting that developing country governments will be policing and safeguarding the interests of the foreign corporations.

Everyone now seems reconciled to the view that Hong Kong would be unable to meet its target -- leaving the Geneva process to ink in the details and bring the talks to an end. But developing countries are being warned that even this will not be possible if they do not yield, and if the negotiations end in failure, the world economy and the developing world face disaster.

However, several leading academics and trade and development experts (Gerry Helleiner,Prof Robert Wade and Prof Dani Rodrik, among them) have challenged this doomsday scenario. In several writings, they point out that failure at Hong Kong or of the Doha negotiations will be no great disaster - for the world economy or the developing countries.

In this background, it will be in the best interest of the developing countries, big and small, to call a halt, and end the sham of a Development trade round.

In suggesting such a course, Prof. Dani Rodrik, Professor of International Political Economy at the Kennedy School of Government, Harvard University, has provided on his website a commentary on the Doha negotiations.

"Imagine that the world's trade ministers simply walked away from their Hong Kong meeting with a simple declaration: 'We have failed to reach an agreement; we shall try to do better next time.' This would bring the so-called Doha 'Development' Round to an unsuccessful conclusion, but it would hardly be a disaster."

However, it is unlikely that the developing world's leading personalities and ministers will heed this sane advice. Far too many of them have invested so much of their time and energy on these talks that they would be loath to accept and announce failure.

But they should at least not do something worse: accept and endorse in any way the Draft Ministerial Declaration text and annexes sent to them from Geneva, and send it back to Geneva for further work on the basis of those texts.

They should incorporate as a part of the draft declaration text and annexes, the cover note from Geneva signed by Pascal Lamy and General Council Chair Ambassador Amina Mohamed of Kenya -- which ought to have been an integral part of the drat sent from Geneva. But in the rule-less way in which the 'rules-based organization' functions, it was sent as a covering letter, but without any ministerial conference document number. The ministers at Hong Kong should make this covering letter a part of the draft declaration and annexes, put square brackets around each of the texts in the annex, without expressing any ministerial endorsement or view, and send it back to Geneva and ask negotiators to work further.

Says Prof Rodrik in his commentary: "There is the possibility that trade negotiators will patch together a last-minute deal in Hong Kong, and emerge claiming victory. We will then end up with an agreement that will have been wildly oversold and is sure to lead to disappointment down the line - especially in developing countries. And we will have given up the opportunity to have a real development round next time around. 'Success' in Hong Kong poses perhaps greater risks than 'failure'."

It is not merely academics who suggest that a failure at Hong Kong or of Doha would not be a disaster. Even the former Brazilian negotiator during the Uruguay Round, and former UNCTAD Secretary-General, Mr. Rubens Ricupero, now a professor at the Armando Alvares Penteado Foundation, Sao Paulo (Brazil), in an interview to Agencia Brasil, advocated that Brazil should reject the offers made in the context of negotiations in the WTO, lest the country's development be compromised. "At this moment it is better to have no agreement than a bad agreement... The Brazilian government should remain firm."

In Ricupero's view, accepting minor concessions that have been offered by developed countries with respect to agricultural products and, in return, having to forgo protecting important sectors of Brazilian industry, "is a bit like exchanging our future (as a country that can proceed to export products with greater added value and more technology) for our past (as an exporter of agricultural commodities)."

Under the current proposals, Ricupero added in his interview, sectors like automobile and electro-electronic industries would be endangered, since import duties would be slashed by 50%. Even though the proposals (for accord at Hong Kong?) are insignificant, he adds in the interview, "they will be rolled up in such propaganda that it will give the impression that whoever refuses is assuming the onus of wrecking the global trade system."

And in a recent conference in Brasilia (organised by Brazilian industry), no less a person than the Vice President of Brazil was highly critical of current economic policies and what he saw as dominance of finance capital at the cost of industrial capital.

India, the other part of the developing world in the new Quad, through its Finance Minister, has also said that India has offered to cut its industrial tariffs by 50%.

The Indian policy makers appear to be placing their faith in the future of the country in software exports, and over time, commercial agriculture. On the latter it has never been clear how such an agricultural development, and an industrial sector prematurely exposed to import competition through low tariffs, would be able to find employment for about 500-600 million now engaged in rural wage labour or subsistence farms.

Even the Minister Mentor of Singapore Lee Kuan Yew, in delivering in New Delhi in November the Jawaharlal Nehru Memorial Lecture, cautioned Indians that India could never hope to become an economic power if it does not industrialize but rely on IT software and services.

At the 2004 World Bank's Annual Development Conference, Prof Gerry Helleiner of the University of Toronto), suggested that "it is more important for the WTO and other rules systems to be broadly fair and acceptable, however long it may take to get them right, than to rush to further liberalization as interpreted by major economic powers.... If the current round of WTO negotiations fails it will not necessarily be, as some suggest, a disaster for development... If the Development Round fails, we shall have to try again."

(*) Chakravarthi Raghavan, editor emeritus of SUNS has been following and monitoring the GATT and its successor since 1978. A longer version of this article is in TWN Briefings for Hong Kong No. 4, available also at the TWN website).

Sixth WTO Ministerial Conference With a deadline of 2006 looming to finalise the WTO's Doha Round of free trade talks, disputes over agriculture threatens to permanently derail the four-year-old blueprint for breaking down barriers to global commerce. See the Choike special coverage of the meeting to be held 13-18 December 2005 in Hong Kong, China.