Introduction
It is a pleasure to be back in this lovely city of Vienna, and to join you in this conference.
I would like to warmly thank IBWE for inviting the International Centre for Trade and Sustainable Development (ICTSD), of Geneva, where I am a Senior Fellow, to participate in these deliberations.
The theme for your conference, “Hot Spots of Global Development”, and its objective of advancing development, while creating opportunities for Austrian businesses, is a timely and intriguing one.
By way of background, the ICTSD, which was created some 15 years ago, undertakes work in different fields, and in different ways. However, suffice to say, that it is the only global organization devoted exclusively to advancing sustainable development in the context of international trade related issues and negotiations. It also embraces regional trade regimes, as well as other multilateral agreements, such as climate change, which incorporate a trade dimension.

Strategically, ICTSD advances sustainable development by building knowledge communities, supporting policy dialogue and empowering policy makers and influencers—with particular attention to those typically excluded from policy processes—to act effectively on trade policy and the trade related policy issues that impact national and global wellbeing.
Given this track record, and your conference theme, I thought it fitting to address you on the current WTO Round of Global Trade Negotiations, otherwise known as the DDA – the Doha Development Agenda.

I believe that he gains resulting from the DDA warrants public and private sector leaders, such as yourselves, lending their active support and leadership.

After all, as the middle “D” implies, the DDA would provide a significant dividend for development. It also represents an important global economic stimulus package, one that would generate major new business opportunities for exporters and related interests, at a time when this is badly needed.

A classical win-win.

The DDA also serves as a reminder of the need to help the poorest countries strengthen their ties with international markets. After all, no poor country has ever become rich without international trade. A 1995 Brookings Institution study revealed that those countries which are open to trade and investment have grown at a rate which is three or four times that of countries which insist on closed economies.

We also are witnesses to the fact that, since opening their economies, China and India have lifted more than 400 million of their citizens from poverty — no small feat!

In addressing the DDA then, let me make four points.

WTO, A Valuable Institution
1. First, I start from the premise that the WTO is an invaluable global institution.
Many people, as evidenced by numerous protests over the years, “love to hate” the WTO. However, while imperfect, the truth is that it plays an important role in our international community.

As a former Canadian Trade Minister, WTO Ambassador, and Chairman of the WTO General Council, I have always felt that the core mission of the WTO is as relevant today as the day the GATT was first created, back in 1947. In fact, one can argue that it is even more important today, thanks to the historic economic changes and integration that the process of globalization has generated.
Indeed, between 1950 and 2005, world merchandise trade has grown almost thirty fold in volume terms, an expansion three times faster than growth in world GDP.
So, if we did not have an institution like the WTO — in a global village where every country has aggressive commercial ambitions, and where rules become an absolute imperative —- we would have to create one.
In the pursuit of trade liberalization, the DDA is the 9th round of global trade negotiations. The predecessors were all successful, and contributed to the long term growth and stability of the world economy. Increased trade has also acted as a bridge between different peoples and countries, helping to foster deeper understanding between societies, and lessening the risk of isolation.
The best guarantee for continued trade access and fair play by all countries — big and small, rich and poor –is through clear, predictable international trade rules. And it is precisely at the WTO, that the family of nations come together to negotiate and implement those very rules.
Without appearing condescending, the WTO is a particularly important forum for developing nations. The reality is that, in the intense race for bilateral trade agreements, sometimes poorer countries get left behind, as other nations seek partners who are well endowed economically.
Yet, at the WTO, which operates on the principal of consensus — one country, one vote — these same countries can leverage their economic interests and trade aspirations individually, as well as by acting in concert with other like-minded members and/or coalitions.
In the global architecture, then, the WTO occupies a central position.

Strengthening the Institution
2. Second, I believe that the WTO can and should be made even better and stronger.
The fact that we already have an institution responsible for global trade does not mean our work is done. Far from it.
We still need to negotiate new rules in order to meet new and rapidly-changing business realities. We also need to reform its political governance structures, so as to adequately respond to the political needs and demands of our times.
The WTO is not infallible, and institutional renewal is not about strengthening a bad organization. It is about improving an already good institution.
In essence, novel ideas and practices can be transformed into policy and political improvements, and help to reinvigorate the WTO. The private sector has a huge vested interest in being engaged and supportive of such an endeavor, since it is business that imports, exports, and invests, and in the process, creates economic and job opportunities.
It is critical, for example, that business leaders help governments to shape and define a future agenda for the WTO. After all, the DDA is almost a decade old, and in that span of time, the world has changed ten times over.
In other words, standing still is the worst possible strategy for an international institution that serves a world that never sleeps.

Bringing the DDA Home
3. Thirdly, it is essential that the DDA be successfully completed and soon.
It is essential for the credibility of the WTO, and for helping to stimulate and improve the global economic environment.
But, is the DDA going to be a journey delayed, or a journey denied?
2011 will mark the 10 anniversary since the Round was launched, an initiative that was to be accomplished in three years. So, the WTO is not exactly practicing the business edict of “on time delivery”! And every day that the meter runs, so does its credibility and relevancy. The institution simply cannot afford to remain in this limbo-like position much longer.
Perhaps more importantly, the completion of the Round would be a welcome signal of confidence for the global economy. It could only help economic growth and stability.
After plummeting by 12 per cent in 2009, trade is expected to grow by 13.5 per cent this year. But the international landscape is still vulnerable and uneven. We also face increasing currency tensions, which can escalate into dangerous and protectionist consequences.
A stable financial system and a healthy trading system are complementary public goods. They require constant vigilance and cooperation, and the DDA speaks to this broad objective.
The DDA has an ambitious agenda. Its core is the commitment to further liberalize the sectors of agriculture, industrial products, and services. Reducing tariffs by a doable 50% would yield savings of over $150 US Billion alone, without accounting for new growth and opportunities. These three constitute center stage, with agriculture — rightly or wrongly — playing the leading lady.
Accordingly, developing countries have taken a unified view; if the excessive levels of subsidies in the West, which badly distort the global playing field in agriculture, are not subjected to significant reforms, then they will ensure that nothing else will move.
Currently, some $1 Billion US, a day, is spent by developed countries in backstopping agriculture. That’s an incredible amount of largesse.
By way of a measurable context, this figure represents two thirds of Africa’s GDP, and is larger than the annual ODA budget.
Put another way, some 3 billion people live on less than $2 a day — the same as what an average cow in Europe receives!
The prevailing situation is morally wrong and economically unsustainable. Farmers should farm the land and not the mailbox.
Consequently, these subsidies must eventually be eliminated.
Two thirds of the world’s poor live in rural areas. And so, from a development perspective, the ‘freeing’ of agriculture stands to be a substantial and invaluable boost, allowing a multiplicity of products from developing countries to access western markets.
Yet, any successful trade negotiation requires a healthy give and take. Balance is indispensible to any deal. Towards this end, while agriculture is an important sector and way of life, it only represents, on average, 2 to 3 percent of the GDP of most developed nations.
Thus, the DDA cannot be exclusively about agriculture. Progress must also be made on the industrials and services negotiations — and here, developing Members have to be prepared to be in a ‘giving’ mode.
While many feel that the DDA process is being ‘hijacked’ by agriculture, the political reality is that the WTO membership must find its collective will to ‘blink’ together, and embrace this window of opportunity.
Otherwise, this ongoing game of “chicken” one day can prove fatal.

The long and winding Road
4. Finally, so where does the DDA journey go from here?
Efforts are still underway in Geneva to narrow the main differences, so as to provide Trade Ministers with the conditions for reaching a breakthrough.
It would appear that the WTO-DDA journey has arrived at yet another fork in road.
One path would see the DDA talks continue for an extended period of time in Geneva among Ambassadors and trade officials, without significant political engagement or breakthrough. This would mean that Ambassadors would be on a ‘stationary bicycle’ — there will be plenty of peddling and sweating, but no movement.
The other path would push Ministers to seriously reflect about the DDA impasse, and to find a way to bridge the gaps and reach a final settlement. In other words, political leaders will have to ask some hard questions;

· What does liberalized trade and a successful trade round mean for an anxious global economy?

· What would a failure mean for the cause of sustainable development?

· And what would the very first trade round to fail mean for the institution of the WTO?

A few days ago, the leaders of Britain and Germany appointed a committee to report on the DDA impasse. While this could possibly help, I’m not sure we need a committee to inform us about what the problems are.

It reminds me of the long-standing Israeli-Palestinian issue; the two parties generally know what they need to do in order to find peaceful co-existence. But the problem is how to get there?!

Effectively, the DDA faces three major challenges.

The first is the massive expansion of the WTO. The membership currently stands at 153 countries, a far cry from the 23 founding countries of the GATT. Political and economic agendas have multiplied, making it more difficult and time consuming to achieve a consensus.

The vast majority of WTO Members are also developing nations, and they have become much more active, vocal and organized in asserting their interests.

This reflects the enormous economic power shift East and South. Developing countries’ share of world trade has grown from a third to over half in just fifteen years — and China has just passed Japan as the world’s second biggest economy, and Germany as the world’s top exporter.  In 1990, less than a third of developing-country trade was with other developing countries; today over half of their trade is South-South.

The old days, where a small core group of developed countries — anchored by the US and the EU— would set and drive the agenda, are gone. And this should be seen as a positive development, if one believes in true multilateralism and in lifting all boats.

But, as a consequence, the process of constructing a balanced deal has suddenly become more complex. New political and economic realities require new responses, approaches, and mindsets.
The second challenge is whether developed country governments can agree to significantly reform and level the agricultural playing field, in return for the appropriate and corresponding offers from their developing country partners on industrial products and services trade?
And finally, the biggest challenge, is the lack of political will.
Governments still operate on the basic ‘law’ that “all politics is local”. This is a formidable hurdle in reaching global consensus, for it means that the international decisions are often subservient to parochial politics back home —- and here, I refer to all homes, rich and poor country capitals alike.
Traditionally, the US (together with the EU) has been the locomotive for the WTO. Yet, today the US finds itself in a weakened political and economic position.
The financial crisis and the jobless recovery have not been kind to America. The US is also being rivaled economically and politically by emerging countries that have clearly emerged. In addition, Washington politics has been very badly divided on most issues. And to make matters worse on the trade file, President Obama faces huge obstacles within his own Democratic Party and his labor constituency.
In terms of trying to move the talks forward, the signals from the US administration have not been hopeful, and this has resulted in a vacuum of leadership at the WTO.
Normally vacuums get filled. Ironically, this one lingers on.
I say ironic, because the world often complains when America leads; we’ve seen and heard plenty of biting criticism of the US, when it attempts to set the agenda and the pace on any given issue.
However, in the case of the DDA, the US is now being blamed for a lack of leadership and vision. At the same time, no other country — emerging or developed — is coming forward to make up the short fall. If truth be told, many linger in the shadows of the US and wait.
No one said that being ‘top dog’ is easy!
Furthermore, the private sector has not been as active or involved in making the business case for the DDA. For example, it was the private sector that largely created the political will and momentum in the Uruguay round, with CEO’s pressing governments to embrace the economic opportunities that liberalized trade offered. Those negotiations simply would not have succeeded were it not for business.

By contrast, the DDA is viewed rather indifferently by the business class. It also comes at a time when many corporations are struggling to fully emerge from the financial meltdown and the economic recession that followed, and when its public perception is rather weak.

Finally — as if we need any more burdens — for much of civil society and the public, the WTO has become a poster child for everything that ails our globalized era.
Many unfair and inaccurate allegations have been thrown at the WTO. Not only does this create a more difficult operating environment, but it also weakens the resolve of many political leaders who, rather than trying to lead their citizens, are content to follow public opinion.

In Closing
In closing, these challenges do not make for an easy DDA roadmap, to say the least. Nor do they make it easy for political leaders to ‘crunch’ final decisions.
But leaders get elected to lead.
They also get paid to project vision, and find common ground.
In this pursuit, the recently established G-20 Forum provides Leaders with the necessary and legitimate political governance platform, that was missing in the past. Unlike the G-8 of course, a critical mass of major developed and developing nations are found around this unique G-20 table, and this presents an opportunity to be seized. Can leaders commit — despite the difficulties — to finding a way to reach across this table and in so doing, bridge the DDA divide?
While any G-20 agreement would be informal and non-binding, it would nonetheless go a very long way in marshalling support from the remaining 133 WTO Members. It would, after all, be about rallying new economic growth opportunities, and reinforcing a global partnership to put trade openings at the service of development.
The G-20 would also act as the ‘quarterback’ for the deal, and thus fill the existing vacuum of leadership at the WTO. It would represent an inclusive leadership, one that would reflect a developing/developed country coalition of the willing.

All 153 countries agreed to launch the DDA back in 2001 and since then, all political leaders have talked a good talk globally.
Let us now hope, with your active encouragement at this hour in the WTO negotiations, that our leaders walk along the global high road, and refrain from taking any local off-ramps.
Thank you.

Ambassador Sergio Marchi is a Senior Fellow with the Centre for Trade and Sustainable Development, in Geneva. He also teaches at Webster University, in the International Relations Department. He formerly served as the Canadian Minister of International Trade and Ambassador to the WTO, including as Chairman of the WTO General Council.

The clause was in a bill that provided funding to several federal agencies. It prohibited the US Department of Agriculture’s food safety service from using funds allocated by the bill to create a rule that would allow the importation of poultry from China. This in effect prevented US food safety inspectors even from examining whether Chinese poultry inspection standards were on par with US requirements - a prerequisite for allowing imports.

The US and China had stopped trading poultry in 2004 due to fears of avian flu. However, China removed its ban after the scare ended, while the US did not.  After President Barack Obama signed the budget bill into law in March 2009, China sought consultations with the US on the issue (see Bridges Weekly, 22 April 2009). But the two sides were unable to resolve their differences, and a panel was created to adjudicate the case.

The US had argued that the measure was justified under the WTO’s Agreement on Sanitary and Phytosanitary Measures (SPS), which allows countries to establish safety requirements based on scientific evidence. China countered that the measure was purely protectionist, pointing out that the EU, Japan, and Switzerland all allowed the imports of Chinese poultry, and that the US law did not allow for risk assessment.

The dispute panel found that the budgetary clause violated the SPS agreement since it was not based on a risk assessment. It also found that the law, which was specifically aimed at Chinese imports, violated the WTO’s fundamental most-favoured nation principle (GATT Article I).  As an SPS measure that breached the requirements of the SPS agreement, the panel found that the clause could not be justified under the general exceptions in GATT Article XX, which spells out the circumstances under which WTO members can deviate from standard obligations in order to protect “human, animal or plant life or health.”

US-China trade relations have taken a hit recently, between tensions over the yuan-dollar exchange rate and a raft of trade spats. Poultry trade alone has been the source of multiple irritants: China is currently levying anti-dumping duties on several US poultry imports, a step seen in China as a sort of reparation for the harm to the Chinese poultry market caused by the US’s import ban.

The panel did not make any recommendations as the disputed US restrictions have since expired.

ICTSD reporting; “WTO rules China win over US imports dispute,” CHINA DAILY, 9 September 2010; “Chinese Tariffs on U.S. Chicken Meat and Feet,” TRUTH ABOUT TRADE AND TECHNOLOGY, 30 September 2010.

The book brings together thoughtful contributions from some of the best known experts in the field, including Alan Swinbank, David Blandford, Harry de Gorter, Masayoshi Honma, David Orden and Alan Swinbank. Staff from specialist institutions such as Brazil’s ICONE, the OECD and Argentina’s Centre for International Economy, offer nuanced analytical insights and there are some well directed development perspectives, for example from Abena Oduro (University of Ghana).

In keeping with its practice of attempting to enrich the WTO negotiating environment with material informed by “empirical evidence, considered opinion and creative, critical thinking”, ICTSD has also taken care to include the views of active players from think tanks (Hewlett’s Ann Tutwiler), NGOs (Oxfam and Birdlife International) and government officials engaged in WTO negotiations as well as academic analysts.

The key questions animating the papers are whether publicly funded Green Box agricultural subsidies exempted from WTO reduction disciplines really meet the fundamental criterion of having “no, or at most, minimal, trade distorting effects or effects on production” and if so, whether they meet their stated social, environmental or developmental goals. The book assembles an array of evidence and opinion in response to these questions and traces debate and proposals on the Green Box during the course of the Doha negotiations.

Detailed reviews are presented of Green Box expenditures of the major developed country subsidizers, the US, the EU and Japan. Less well known is the story the book unveils about Green Box programs in developing countries. In general these are relatively modest because of resource constraints (and indeed public expenditures on developing country agriculture have fallen sharply over the past couple of decades). A large number of developing countries have not reported their expenditures but of those reported, Green Box support is a significant share of overall developing country spending on agricultural support. As several authors in the book point out, however, the significance of Chinese Green Box expenditures in these figures should be noted. China was constrained by the terms of its accession negotiation from embarking on significant trade distorting support programs but now accounts for more than 80% of developing country Green Box expenditures. In absolute terms China’s green box spending is comparable to that of the US and EU with the general services, especially infrastructure and environmental programs, dominating.

The book contains a rich array of contributions reflecting debate over recent years about the extent to which current Green Box measures are in fact significantly trade or production distorting. Chapters by Anton, de Gorter, Galperin and Doporto Miguez and Nasser et. Al. are especially useful in articulating the theoretical and practical issues. It is clear that direct income payment programs are the most controversial and there is persuasive evidence that we should have serious concerns about wealth effects, risk effects, dynamic effects, cross subsidization, cumulation and exit deterrence effects!

The chapter by Steenblik and Tsai is also valuable in working through the environmental impacts likely to be felt through the range of programs being reported in the Green Box. The relationship between support measures and their environmental outcomes is acknowledged to be complex and the chapter’s conclusions are mixed. Programs designated as agri-environmental are seen as generally benign but measures in the general services, research, infrastructure and other categories are judged to produce less clear environmental benefits. On the bright side, however, Steenblik and Tsai think that, despite their reservations, all Green Box programs are probably less distorting than programs reported as Amber or Blue Box.

There has been a lot of discussion about how to make the WTO’s agriculture disciplines more ‘development friendly’ and in the pre-launch and early Doha period, many proposals focused on elaborations or additions to the legal text on the Green Box to add flexibility or include more scope to meet development goals. As Oduro points out these “policy space” arguments for loosening of general disciplines are insufficient and in some cases inappropriate. Rather, more effective use of green box programs as currently permitted “could go a long way to reduce constraints facing African farmers”.

A comprehensive account of the myriad of green box proposals and draft textual amendments during the course of the Doha negotiations has been compiled for this book by ICTSD’s Hepburn and Bellman. This will serve as a valuable reference document for researchers and the evidence shows the disparity in views and ambition across the membership. Other authors in the book such as ICONE’s Nasser et. al. conclude that limited textual change to the Green Box provisions is likely to emerge from the Doha Round.  After the 2004 Framework Agreement commitment to “review and clarify” the non or minimally distorting effects of Green Box measures, a consensus seems to have emerged around a relatively narrow range of adjustments. These mainly focus on elaborating or softening the text to provide modest additional flexibility for developing countries in areas such as disaster relief, stockholding for food security. Some tighter language on ‘fixed and unchanging base periods’ for decoupled income payments is also possible. Perhaps most importantly, the Doha outcome could include stronger obligations for accurate and timely reporting of green box spending by all members and for monitoring and surveillance of those reports.

In the main, contributors to the book seem to agree that very real concerns about the possible distorting effects of reported Green Box measures might have to be settled through WTO panels and litigation rather than through changes to the existing Agreement on Agriculture text. A consensus on appropriate textual changes is simply not capable of being forged at this time.

Such a conclusion is not necessarily the cause for despair. The original intent of the Uruguay Round framers of the Agreement remains clear and in many respects that has been reflected in the shifting of expenditures away from the most distorting forms of support and towards programs reported as Green Box. It may take a number of legal challenges to “review and clarify” the impacts of reported green box measures but the Brazil/US cotton case gives us hope that the panel process can work effectively to this end.

In the meantime, this book is a valuable compilation of analysis, comment and suggestions on the issues and deserves wide exposure.

Joanna Hewitt
26 March 2009

There are no studies estimating the importance of tropical and other commodities using economic, social and foreign trade indicators. Nonetheless, the participation of such products in exports from developing countries is significant: the twenty main tropical products account for 36 percent of developing countries’ incoming foreign currency from agricultural exports. This proportion reaches 46 percent for low income developing countries (Perry, 2008). Many of these products are grown primarily by small farmers in developing countries – as in the case of coffee, cocoa, tobacco and cotton. Others (i.e. sugar, rubber and rice) are vital in the generation of rural employment. Therefore, besides their considerable contribution to foreign currency generation, they also play an important role from a social point of view.

The built-in agenda of the World Trade Organization’s (WTO) Agreement on Agriculture reflects the longstanding priority attached to tropical and diversification products, that “having agreed that in implementing their commitments on market access, developed country Members would take fully into account the particular needs and conditions of developing country Members by providing for a greater improvement of opportunities and terms of access for agricultural products of particular interest to these Members, including the fullest liberalisation of trade in tropical agricultural products […].” The 2004 Framework Agreement reached during the Doha Round notes that the full implementation of the liberalisation of trade in tropical agricultural products is “overdue and will be addressed effectively in the market access negotiations.” However, the way in which the commitment is to be implemented and even the identification of such products remain far from clear.

In the last decade, the commodity issues have re-emerged as central to development initiatives and poverty alleviation strategies. The objective of this Issue Paper by Charles Mather is to contribute to this debate by providing an analysis of the value chains of four tropical commodities (bananas, sugar, cut flowers and palm oil) in a rapidly changing global trade environment. The author seeks to provide insights on the different ways the significant changes occurring in the structure and governance of commodity chains ultimately affect producers’ income and production sustainability. He also suggests recommendations to improve these two variables.

The value chain approach has become an increasingly important framework for examining changes in the global trade of commodities and their implications for primary producers. Rather than describing the broad patterns of global exchange and assessing their consequences for producers and consumers exclusively through market mechanisms and equilibrium price changes, the global value chain (GVC) framework encompasses the production, processing, distribution and marketing of specific globally-traded commodities, and identifies the main stakeholders involved at each stage. It also highlights governance patterns (how these different stages are coordinated) and specifies the role of lead firms in determining market access, defining products and value across the chain (Schmitz, 2005).

The commodity studies in this paper focus on four themes: changes in the geography of production, changes in chain governance, new developments in trade agreements and their impacts on primary producers in different developing countries, and initiatives towards sustainable production, ethical trade and worker welfare. With regard to changes in production, the paper provides insights into new developments in the production of bananas, sugar, palm oil and cut flowers, which have been driven by changes in trade agreements and new investment patterns. In several of the commodities concerned, an important development has been the rise of new low cost producers who will play a role in shaping the global market for these commodities.

This paper was produced under an ICTSD dialogue and research project which seeks to address the opportunities and challenges of the full liberalisation of trade in tropical and diversification products, and explores possible areas of convergence between different groupings and interests in WTO negotiations. The project seeks to generate solutions-oriented analyses and possible policy responses from a sustainable development perspective.

The meeting aims to explore issues around Green Box subsidies and their impact on national public policy goals and sustainable development in both developing and developed countries. It further seeks to identify a research and action agenda that will support trade negotiators and policy-makers who are trying to establish meaningful links between these different areas.