THE WTO-DEVELOPING COUNTRIES' DILEMMA

By Pacharo Felix Munthali

As the May 19 swiftly approaches, it is highly expected that the World Trade Organisation (WTO) secretariat will be hosting ministers aimed at finding a "breakthrough in the global trade talks," which the WTO Director General Pascal Lamy has described as talks seeking "an outline deal on Doha Round."

The negotiations aimed at striking a global trade deal started in 2001 in an attempt to bring about smooth flow of exports around the world, with greater emphasis on offering developing countries a conducive environment which can help them deal with grappling poverty culminating in the developing countries being easily integrated into the world economy.

Over the years of heated debates, the Doha Round which is intending at freeing global trade and extending the benefits of the globalization to developing countries, it seems is aloof from bringing about a win-win conclusion.

Marred by more break downs in talks than agreements leading to successes, the WTO has huge task hovering over its secretariat.

In 2003 in Cancun the talks intended at forging the agreements on the round's objectives collapsed after a strong North-South divide on agricultural issues, where the middle-income and poorer developing countries rejected the deal which they viewed as very unfavorable.

The latest being the talks in Geneva in 2006. This one failed to bring an agreement on reducing farm subsidies and lowering tariffs, a scenario that forced Pascal Lamy to formally suspend the Doha Round.

Amongst the most treasured issues by the developing countries are agricultural market access and agricultural subsidies.

Although agriculture constitutes 8% of the world trade, it represents the main source of income for approximately 2.5 billion people, the majority of whom are those in the developing countries. In the developing countries fifty out of every hundred individuals make their living from farming and agriculture. In some instances it goes to as far as eighty people out of every hundred, a scenario which Malawi becomes a good example.

To this end agriculture and levels of poverty have direct linkage. It is no wonder that three-fourth of 2.5 billion people who are trapped below a threshold of a dollar per day work and live in the rural areas, with agriculture being their main income earner..

Between 80 to 90% of Malawians live in the rural areas and depend on agriculture. According to Malawi Growth and Development Strategy 65% of the rural people live below the poverty line. Agriculture therefore plays a vital role in fight against poverty, which is also a central aspect in Millennium Development Goals.

With such revelations of taxing poverty and relatively lower production coupled by less capabilities to successfully compete on the world market, farmers from the poor countries are finding it an uphill to compete with excessively subsidized exports from the European countries, USA and even Japan.

They see it as suicidal to open up they markets which they view as likely to cripple even further their already incapacitated local industries, which mostly are agro-based.

Despite Doha Ministerial Declaration extensively reflecting the concerns of the developing countries that, "SDT for developing countries shall be an integral part of all elements of the negotiations so as to be operationally effective and enable developing countries to effectively take account of their needs, including food security and rural development," the past experience with the trade liberalization during the last decade ore so has shown that these have led to renouncing to policy tools that can foster development while not redressing imbalances that allow for massive subsidization and protection of agriculture in major developed countries.

This is further re-affirmed by the fact that developed countries face less pressure to open up their markets.

The WTO rules have not prevented developed countries from resorting to trade-distorting, domestic support and export subsidies, with the developing countries – who mostly rely on heavily on tariffs and border measures to protect and support their agriculture, have been pressured to open up their markets and reduce their trade barriers to the entry of agricultural products. Such a tendency is coming in because of ongoing round table discussions, as well as due to top down policy advice emanating from donors and international organizations.

Among a colossal of outstanding issues, there is "sensitive product" issue that developed and large developing countries would like to protect, with the group of six namely US, EU, Brazil, Canada and Australia having hot disagreements amongst themselves on joint proposal. The disagreements will surely have either a positive or negative impact on the plot of smaller countries like Malawi, which exports to Europe.

While "Tropical Products countries" like Cost Rica are pushing for faster liberalization of their products to the EU, the ACP countries are haggling for a lower libaralisation process, especially for the products which the ACP exports to the EU under preferential terms. With these conflicts between the rich and the poor, the rich between rich, and the poor between the poor, it re mains a conundrum that will need a bottom up solution, not the closed door meetings in the Green Rooms with hope that the developing countries will rubber stamp everything because they depend on the very rich countries for aid.

With the fragile and undiversified economy that Malawi has, which wholly depends on agriculture, as May 19 approaches for the conclusion of the talks as Pascal Lamy puts it, the landscape looks very bumpy than ever. The developed countries with their highly protected agricultural sector have bashed the submissions by the chair of the negotiating committee on agriculture Crawford Falconer, who suggests that a minimum requirement cut of tariff by the developed countries should be 54% against 36% for the developing countries, a move which was welcomed by the developing countries.

It seems to be the hardest period. With EPA negotiations hitting a gridlock, oil prices soaring records high, and now the WTO negotiations becoming unfavorable to the developing countries, this moment is possibly the most trying for the countries in the caliber of Malawi.

As May 19 is at the door stop, Malawi is facing a dilemma. The Western governments are the ones that fund a better part of its budget, its industries are fragile, the local farmers have little abilities to compete with their Western counterparts, yet anyhow rejection of the deal may bring another chaos. It remains to be seen how the outstanding issues will be resolved.