What is at stake for LDCs in Nairobi?

11 November 2015

If the upcoming WTO 10th Ministerial Conference should fail, the biggest losers would be those that have no responsibility for the current deadlock: the LDCs and Africa. They should take the lead in proposing solutions that cannot be refused in order to save Nairobi and the inclusive system.

 

There is less and less consensus among WTO members on what the on-going negotiations are all about.  The only thing WTO members seem to agree on is that it will not be possible to obtain a result in Nairobi that could be presented as the achievement of the Doha Development Agenda (DDA). The main issues (agriculture, NAMA, services and development) do not seem to have gotten much traction. Moreover there is no agreement on how to proceed.

Some major powers have clearly indicated that they are not coming back to the negotiation table on the basis of the DDA. They argue that 15 years without results have shown that it is impossible to come to a consensus based on the current mandate; the world market situation has changed, and both the mandate and the negotiation process must also be changed. As a matter of fact, they have largely abandoned the inclusive multilateral system in favor of exclusive deals, such as megadeals and plurilateral agreements.

Other important players (India and other emerging countries) are starting to boycott any decision in Nairobi, preferring a clash rather than agreeing on de facto abandonment of the DDA. 

Most WTO delegations are not in a consensus-seeking mood. There is neither a sense of urgency nor crisis, nor a serious effort to save the inclusive multilateral system through a search for compromise. Some negotiators seem to have already abandoned the inclusive multilateral negotiating system because they have turned to more efficient, exclusive ways of promoting their offensive interests, while others have abandoned it because they have lost any faith that the negotiations can deliver a result that would be  acceptable to them.

As we are celebrating the 20th birthday of the WTO, there is a genuine risk of  Nairobi failing, which would jeopardise not only the DDA, but also the WTO’s negotiation function leading to a diminished role of the inclusive trading system.

What does this mean for LDCs and what can they do about it?

It is the profound disagreement between the big trading powers regarding the redistribution of rights and obligations among them that is preventing any consensus from being reached, thereby constructing the main obstacle in the path to Nairobi. However, the Least Developed Countries (LDCs) are the ones who will suffer most from this disagreement.

It would be foolish to believe that the LDC package would be effective if the big issues were put aside: the only thing that LDCs could hope for would be some small, but tangible proof that the other WTO members are responsive to their plea for development.

The influence of LDCs on the course of the negotiations is limited: they have little to contribute, and hence, little negotiating power. However, they have never had nor will they ever again have as much political clout as they do now. Everybody agrees in principle that the first WTO ministerial conference in Africa has to deliver something for them. Whether that clout will translate into concrete actions depends largely on the LDCs, themselves.

When the big trading powers are more interested in confrontation than consensus, proposing compromises will be up to those who have the most to lose from a deadlock.

When the big trading powers are more interested in confrontation than consensus, proposing compromises will be up to those who have the most to lose from a deadlock.

Possible strategy for Nairobi and beyond

LDCs fundamental interests are twofold: 1) LDCs should receive some tangible proof that the other WTO members are responsive to their issues. The general climate of the negotiations, however, does not currently allow for solutions to the issues. Limited, but economically relevant small steps in the right direction are necessary and achievable. 2) LDCs should ensure that, the unresolved development issues continue to be a major objective of inclusive trade negotiations, even if the DDA should fail.

Both objectives are today in jeopardy, but still attainable. LDCs can and must contribute proactively to attaining them proactively by refusing to give in to the prevailing negative mood.

The LDC package

Members seem more interested in defining the impossible rather than the possible within the LDC package. It seems that delegations are focusing on placebos (such as best endeavours and aid for trade) rather than real commitments. LDCs have now presented their legitimate requests and expect a response from partners who have not yet entered into serious discussions. It is up to LDCs to propose tentative steps towards a response to their concerns, steps that their partners could not refuse in good faith.  Such proposals are possible for practically all LDC requests:

  • Cotton: a solution to the issue of subsidies is not within reach. Asking for substantial reductions in US cotton subsidies is not practical. However, it is possible to ask the major players on the international cotton market to take small, but specific steps towards a solution to the issues faced by LDC/African cotton growers. The US can be asked to limit its subsidies to the amounts calculated by their own budget committee when they approved the farm bill; China can provide DFQF market access to LDC cotton and accept some level of disciplines for the management of its stocks; India can limit the maximum amount of cotton subsidies it has been providing to its cotton growers. While this does not solve the cotton issue, it would send a clear signal that WTO members are willing to make a gesture towards a solution.
  • Duty-Free Quota-Free market access: 100 percent DFQF appears to be an unachievable goal for Nairobi. However, all major trading powers can respond to specific and economically relevant requests to increase the number of products that benefit from DFQF marker access. It is up to the LDCs to make specific and targeted requests for tariff lines that are currently excluded in the various DFQF and GSP schemes.
  • RoO: the realistic LDC proposal on principles to be adopted by the Ministers does not seem to be attainable as a binding commitment. The alternative, however, cannot simply be yet another best endeavor clause.  A compromise (in which the principles are adopted as best practices with a commitment by each member country to propose and implement specific measures they are willing and able to undertake to come closer to those best practices within a given time frame and a credible monitoring system) may very well be a useful and realistic outcome for Nairobi.
  • Services waiver: it is expected that further notifications under the services waiver will be forthcoming for Nairobi and that there would be a credible package of concessions in this area that Ministers could include in their declarations/decisions.  A ministerial commitment to engage in bilateral discussions with LDCs about facilitation of internal procedures (visa, certifications, etc.), which often negate the market access that is theoretically granted, could be introduced into any declaration and would be a useful additional step.

The post-Nairobi process

What may be even more important for the LDCs than the content of the LDC package is ensuring that the unresolved issues are addressed and that the inclusive negotiation process within the WTO is preserved. Simply saying that the negotiations will continue is not credible. To reinvigorate a credible process, the Ministers must face reality:

  • 15 years of negotiation without any consensus provides a powerful argument to those who claim that the DDA is doomed;
  • Negotiations that do not reflect the rapid evolution in world trade over the past 15 years both in terms of the content of trade (value chains, services), the distribution of trade (emerging countries) and the architecture of trade (megadeals, plurilaterals) are simply unappealing. That said, replacing non-resolved but still valid issues with new issues is not a viable solution either.

In Nairobi, Ministers should therefore define a credible way forward, which brings all parties back to the negotiation table. Restoring the negotiation function of the WTO requires:

In Nairobi, Ministers should therefore define a credible way forward, which brings all parties back to the negotiation table. Restoring the negotiation function of the WTO requires:

  • Basic agreement on how to handle the fact that some developing countries have become major trading powers, thereby proving that they do not need same the Special and Differential Treatment as poorer developing countries, while still acknowledging that they have the characteristics of developing countries;
  • Agreement that the unresolved 20th century issues have to be addressed, but that 21st century issues cannot be ignored without making the negotiations irrelevant for some WTO members;
  • Agreement on the principles that should be observed by all members to ensure that megadeals and plurilaterals outside the WTO do not undermine the inclusive MTS.  Facilitating the insertion of plurilaterals into the MTS, provided that they fulfill certain criteria and ensuring that megadeals do follow the basic WTO principles thereby avoiding that they undermine the achievements obtained at the multilateral level should be possible;
  • Proposals for a more efficient future negotiation process by closer association and involvement of Ministers and high officials, among other measures.

Author: Nicolas Imboden, Executive Director, IDEAS Centre.

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