ANALYSIS-Will a global trade treaty hurt more than it helps?
18 Jul 2008 09:12:00 GMT Source: Reuters
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A child plays among saris drying at a cotton sari factory on the outskirts of the southern Indian city of Hyderabad, June 2008.
REUTERS/Krishnendu Halder
By Laura MacInnis
GENEVA, July 18 (Reuters) - Many poor countries fear they will lose jobs and revenue from a new global trade treaty that trade ministers will try to push towards conclusion next week.
This anticipated hardship is one of the main reasons a World Trade Organisation (WTO) accord on tariff and subsidy cuts -- in its seventh year of negotiation -- has proved so hard to clinch. Conventional wisdom dictates that increasing export opportunities can help poverty reduction by raising incomes in developing countries, whose farmers and manufacturers often struggle to sell their wares abroad.
But some economists believe that the Doha round deal under negotiation would open up borders too abruptly, flooding vulnerable markets with cheaper foreign goods and services, and make developing countries worse off.
"Many developing country negotiators are asking themselves if the emerging deal is better than no deal at all," said Tufts University economic researcher Timothy Wise, who co-authored a new study warning unfettered trade could harm poor farmers.
"It is not hard to understand why many developing countries are questioning the value of a Doha agreement," he added, estimating poorer governments will lose four times more in tariff revenue than they get from a trade-boosting deal.
The talks were launched in the Qatari capital in late 2001 to boost world trade and help developing countries export their way out of poverty.
Amy Barry of the aid advocacy group Oxfam said negotiators from the developing world need to resist pressure to accept WTO proposals that do not adequately overhaul unfair trade rules.
"Developing countries are being squeezed and not getting the flexibility they need to defend vulnerable sectors and ensure food security," she said. "This could further undermine weak agricultural sectors and lead to job losses and hunger."
Shortly after the Doha round talks began, the World Bank projected an accord would generate global gains of $832 billion. It later scaled back that estimate to $96 billion to reflect less-ambitious proposals in the talks, which are politically sensitive in many countries.
According to the Research and Information System for Developing Countries, and Indian-based group, only $16 billion of that smaller total will go to poorer countries, who would also suffer $63 billion in tariff revenue losses under a deal.
BIGGEST LOSERS
Carin Smaller of the Institute for Agriculture and Trade Policy said these factors explained much of the hesitation around Geneva negotiating tables about a deal, especially in light of recent global economic pressures and commodity spikes.
"The Middle East and Africa are going to be the biggest losers if the Doha round is agreed. I think that is quite alarming given the impact of the food crisis on these regions," she said.
Politically powerful farmers in the United States, Europe, Japan and other rich markets may also lose income under a deal, although in theory wealthy-nation manufacturing exporters would gain better access to emerging markets in return.
The new research by Tuft University's Wise and trade experts Mamerto Perez and Sergio Schlesinger, entitled "The Promise and the Perils of Agricultural Trade Liberalisation," said that only Brazilian and Argentinian agro-exporters stand to be clear emerging-nation winners from a Doha deal on farming.
"Developing countries have far less to gain from agricultural trade liberalization than is often promised," they said. "The projected gains are quite small and they don't account for revenues lost to tariff cuts."
Many, including WTO Director-General Pascal Lamy and EU Trade Chief Peter Mandelson believe success in the WTO talks is necessary as a symbol that multilateral negotiations can work in tackling other, potentially more complicated, issues such as the international response to climate change.
Ministers meeting in Geneva next week will seek to strike a deal in agriculture and industrial goods trade, leaving talks on how to open up cross-border services later in the year.
Consensus is needed across all negotiating areas from each of the WTO's 152 member governments for a Doha deal to be struck, meaning that poorer countries have significant influence in the talks whose original aim was to help boost development.
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