Mind The Gap

In his deluded state, Ton Quixote set off on his heroic quest, never suspecting that the ideals he proclaimed had no relevance to anything at all in the real world

Graphic: Roland Ungoed-Thomas

By Barry Coates

New Ground 62
Winter 2001

Labour rhetoric on global inequality was never more at odds with its actions than it was at the last WTO conference, when the UK helped stitch up developing nations with unfair trade rules – just as if Tony Blair’s conference speech never happened. Barry Coates, director of the World Development Movement, was there. He explains what happened in Qatar and what Labour should do next time.

Recent speeches from government ministers might suggest we are seeing the emergence of the biggest New Labour project yet. The scope is world-wide and its potential beneficiaries comprise most of the world’s population. The project is to re-write the rules on the global economy to reduce poverty and promote sustainable development.

As the prime minister said in his conference speech in Brighton: "If globalisation works only for the benefit of the few, then it will fail and will deserve to fail. But if we follow the principles that have served us so well at home – that power, wealth and opportunity must be in the hands of the many, not the few – if we make that the guiding light for the global economy, then it will be a force for good and an international movement that we should take pride in leading."

The vision is important and inspiring. The problem is that there is a mountain of rhetoric built on a molehill of reality. There are two major issues that have to be addressed as a matter of urgency. The easy part first.

International trade rules must be fairer. The World Bank calculates that rich country tariffs on imports from the developing world are four times higher than on imports from other rich countries. In addition, quotas and other barriers block export opportunities.

The potential benefits from opening up to trade from the developing world are huge, dwarfing annual aid budgets. As Tony Blair said in March: "It really is hypocrisy for us, the wealthy countries, to talk of our concern to alleviate poverty of the developing world, whilst we block access to our markets".

Broken Promises
These issues are not new. Rich nations’ protection of their textile and agriculture producers, allowed in the 1950s, was meant to be reduced after the trade negotiations that ended in 1993. Instead, the European Union and others have dragged their feet on phasing out quotas on textiles and clothing. Agriculture is still heavily protected, subsidies have risen; and there has been an increase in anti-dumping actions. These broken promises contributed to the collapse of the Seattle trade talks two years ago. Stephen Byers, then Secretary of State for Trade and Industry, called for "fundamental and radical reform of the WTO". Since then, little has been achieved.

There comes a time when promises should be delivered. If we can believe all the speeches from Tony Blair, Gordon Brown and Clare Short, the time must be now. But all of that was forgotten as the rich nations forced their agenda on the developing world at the World Trade Organisation ministerial meeting in Doha, Qatar last November.

Shamefully, the rich nations used their clout to block progress on these issues and secure more get-out clauses. There were no commitments on textiles after objections from some EU states and the US. On agriculture, the EU agreed to phase out export subsidies, but then added a caveat to say that this aim is "without prejudicing the outcome of negotiations". And new negotiations on anti-dumping rules were allowed provided they preserved "the basic concepts, principles and effectiveness" of existing rules. In short, the rich countries escaped any commitment to open their economies to poor nations.

Developing nations achieved little in Qatar. They fought hard to defend their positions and secured a declaration that allows them to give priority to public health over patents. This will shame the US and its pharmaceutical companies into stopping threats of legal action, but is not legally binding and does nothing to address the deep problems with rules on intellectual property rights.

Forced To Agree Doha Deal
So why did developing countries agree with the Doha deal? They came under huge pressure. Before the Qatar meeting, their proposals for trade reforms that had been submitted since before the Seattle meeting in 1999 were ignored. The draft agenda, which was forced through without agreement of WTO members, reflected the interests of the US and EU. Developing countries were forced to defend their interests against huge odds. In Qatar, the EU had a delegation of 502, while countries such as the Maldives had two. Friends of the US and EU were appointed to the powerful position of chairs of informal groups on each of the negotiating issues. Most developing countries were locked out of the important meetings on the last days and then presented with a take-or-leave-it package.

Rich nations resorted to even more unacceptable tactics, using aid budgets and trade preferences as levers in negotiations. The poorest nations could not make public statements for fear of retribution. The least developed countries made an impassioned plea, saying that they could not agree to a deal that "would cost people their lives". At the end of the meeting, they were left with no realistic choice. Perhaps the most galling moment of the meeting came at the end, when the British government and the EU made statements to press and parliament that this is a "development agenda". This is shameful spin. The hypocrisy continues.

It must be possible to make progress on these issues. Reform would benefit UK citizens, as well as those in the developing world, and reduce the environmentally damaging impacts from farm production subsidies. This makes it all the more puzzling why these reforms are not given greater political importance. One possible answer is the traditional structure of trade negotiations. There are few mechanisms to pursue common interests. The dominant model is deal making for commercial advantage. Trade talks remain a means whereby governments promote the interests of their companies in avoiding competition or gaining access to new markets.

This is the second and more difficult challenge for the new Labour project. The rules on the global economy must reflect the broader interests of society, rather than being dominated by the interests of the corporate sector.

This corporate-friendly approach was evident in Qatar. The UK was the driving force behind an attempt to extend massively the trade rules to cover huge new non-trade issues, such as foreign investment. Developing countries opposed this extension because it would be in the interests of the multinationals. Eventually, developing countries were forced to give way. It was only strong resistance from India that ensured that talks on these issues will not start until all countries agree to them. Another major battle is looming for the next ministerial conference in two years time.

The EU claimed success on the environment in getting agreement to start talks on the relationship between WTO rules and Multilateral Environmental Agreements (MEAs). But there is a dangerous get-out clause. "The negotiations shall not prejudice the WTO rights of any member that is not a party to the MEA in question." This provides an escape route for the US on the Kyoto Protocol and the Biosafety Protocol. It also fails to give environmental and trade agreements equal status – the wording makes it clear that trade rules take precedence. Furthermore, it undermines future MEAs by ensuring that those who do not sign can ‘free ride’ on those who do.

New Risks To Environment
There are also dangers in new negotiations to remove barriers to trade in environmental goods and services. Environmental services are likely to include water supply, waste disposal, waste treatment and incinerators. The EU is pursuing similar aims in the General Agreement on Trade in Services (GATS). Such agreements threaten the powers of governments and local authorities to protect the environment and public health, and to ensure that vital public services are affordable for the poor.

The GATS and other WTO agreements promote the interests of companies over those of people or the environment. Under GATS, countries make commitments to liberalisation across a huge range of 160 services. They are required to specify the restrictions that national and local government may want to make at any time in the future to restrict trade or investment. This is an impossible task for any government, let alone for one of a developing country with little capacity and a rapidly changing economy.

For example, most countries have made commitments to liberalise tourism, but few have retained powers to restrict developments that threaten eco-systems.and local communities or to impose conditions that help the local economy. Under GATS rules, countries will find it difficult, if not impossible, to impose such restrictions later, no matter how much ecologically damaging development takes place. Current talks aim to extend GATS to cover a wide range of services, which raises fears of socially damaging effects from liberalisation of water supply, health and education.

Perhaps the most worrying aspect is the probable closing down of future policies such as sustainable tourism. The WTO Secretariat has described GATS commitments as "effectively irreversible". It is deeply worrying that governments, the UK included, would make commitments under GATS without full public consultation or parliamentary scrutiny.

Growing Opposition To GATS
In 2001, 262 MPs signed an Early Day Motion calling for a full assessment of GATS, and a majority of eligible MSPs signed a motion expressing concern over the potential impact on public health in Scotland. A growing coalition on GATS includes organisations working on development, environment, health, education and women’s rights, together with students, academics, trade unions, churches and consumers groups. These concerns have been met with defensiveness and dismissal by government. By contrast, the government has established close relationships and joint working arrangements with industry lobby groups, some staffed with former trade officials (Lord Brittan, formerly EU Trade Commissioner, chairs one such group, International Financial Services London). Such arrangements enable the Department of Trade and Industry to ensure the interests of business are at the heart of trade policy-making – to the exclusion of other aims.

There is growing public concern about corporate globalisation. The visible protests in Seattle and Genoa are the tip of the iceberg. Hundreds of thousands of people have taken action in other ways, and the World Development Movement has documented protests in developing countries against IMF and World Bank policies by more than a million people over a 10-month period in 1999/2000.

The 19 leading non-governmental organisations in the UK that have formed the Trade Justice Movement are committed to building a powerful campaign. We are not anti-globalisation, but aim for fairer trade, greener trade and a safer world. This means trade on fair terms, not on the basis of exploitation; rules on trade as a means to reduce poverty and promote sustainable development, not more trade as an end it itself; and multilateral agreements based on rules, not on the exercise of power. We are calling for fundamental changes in British trade policy and the policy-making process.

It is time the Labour Party had a real debate on the important issue of what rules should govern the global economy, rather than shallow soundbites about pro- or anti-globalisation. As a recent MORI poll showed, much of the public think the government has it wrong. Only one in eight people agreed that globalisation enhances everyone’s quality of life and nine in 10 people thought government should protect the environment, job conditions and health, even when that conflicts with the interests of multinationals.

Global Inequality Increasing
We live in a world where inequality is increasing and whole continents are sinking further into poverty. On average, each person in sub-Saharan Africa lost 10% of his or her income over the past 20 years. Latin America has stagnated and even growth in most of Asia has fallen compared with the previous 20 years.

Responding to international terrorism must mean something other than the business as usual that was all too evident in Qatar. It should mean re-thinking the government’s rigid adherence to the widely discredited policies forced on the developing world by the World Bank and IMF over the past two decades.

Above all, it should start to close the gap between the rhetoric and the reality in trade policy. Firstly, the government should raise the political priority of reforms to textile trade, the Common Agriculture Policy and anti-dumping. And the government should not be asking developing countries to make further concessions on trade - they have paid already. Secondly, proper assessment and public consultation should precede any further negotiations on WTO agreements such as GATS. Thirdly, the WTO and its processes should be reformed to ensure that negotiations are democratic, fair and sustainable. Deep changes to existing agreements are needed for trade rules to ensure that "markets serve people, not the other way round", in the words of John Smith, former leader of the Labour Party.

As a longer-term aim, the government should recognise that regulation of the global economy is urgently needed. Companies have globalised, but the rules on them have not. There are no enforceable rules on international business, to prohibit cartels, monopolies, financial speculation, unfair competition and tax avoidance; and no framework to ensure companies abide by UN agreed standards with regard to the environment, labour and human rights. Voluntary codes are necessary, but will never be enough in the face of competition from less scrupulous companies. The answer is not to add more and more issues into the WTO, but to develop a fair international system of enforcement. The problem is not technical, but one of political will.

These are obviously not the only priorities. Tackling debt, climate change and the arms trade are also global priorities. But trade is at the core of the debates over globalisation. And it should be at the centre of the Labour project to make the global economy a force for good.