Power Plays in the WTO
The African Union — which lacks official standing to participate in the World Trade Organization’s multilateral trade-liberalization negotiations — has nonetheless sparked a high-stakes diplomatic dogfight inside the WTO’s headquarters along the Rue de Lausanne in Geneva. The bitter wrangling threatens to derail the most significant negotiating success — the only such success — that the WTO has enjoyed in nearly two decades. (The WTO was launched in 1995, succeeding its venerable predecessor multilateral trade rules-making institution, the General Agreement on Tariffs and Trade.)
Should the African Union’s power play succeed, the WTO’s credibility would be seriously damaged. “All the air will go out of our balloon,” as one European trade negotiator who asks to remain anonymous puts it. The reputation for effective leadership that has been forged by the WTO’s energetic new director general, Brazil’s Roberto Azevedo, (who succeeded outgoing Pascal Lamy last September) would be tarnished. Most importantly, aspirations that millions of impoverished people from the poorer corners of the world have for better lives once again would be put on indefinite hold.
The story’s backdrop — and the agendas driving some of the secretive operatives whose fingerprints are all over the AU’s power play — dates to the anti-globalist passions of December 1999, when some of the same people famously helped wreck the WTO’s 3rd Ministerial Conference in Seattle. But the current news is pegged to important events that transpired only six months ago, on Indonesia’s famous resort island of Bali.
On Dec. 7, 2013 there were plenty of well-deserved smiles inside the convention center in Nusa Dua, Bali. After four days of intensive negotiations at the WTO’s 9th ministerial conference, the multilateral trade organization’s 159 member countries had finally overcome years of failure to negotiate a truly big international trade deal. “In recent weeks the WTO has come alive,” declared an exuberant Azevedo. “I am delighted to say that, for the first time in our history: the WTO has truly delivered.”
Win-win, for the global economy
Delivered, big time. The deal promised to boost global trade flows substantially, upwards of one trillion dollars in the coming years, according to economic guesstimates. The core of the Bali Package was a so-called “trade facilitation” agreement. Trade facilitation involves a win-win trade-off: more money and technical assistance given by rich Europeans and North Americans to poorer countries in the developing world. Trade facilitation dollars and euros help smooth international trade flows in places that badly need helping hands.
In the poorer parts of Africa, Asia and Latin America, borders are notorious for being clogged. Blame the usual suspects: bureaucratic red tape that raises the costs of transactions by slowing them down, corrupt customs officials, bad roads, inefficient ports, and such. The WTO’s richer countries are already giving about $400 million annually in trade-facilitation aid to help streamline border crossings, according to OECD figures. (Unsurprisingly, Sweden and Norway have been among the most dedicated players, and also the WTO’s International Trade Centre and the World Bank.) According to the OECD, the poorest WTO member countries stand to cut their transaction costs by more than 14 percent, if the Bali Package is fully implemented. And as soon as it is, more trade-facilitation dollars are promised.
Bali was also a big win for multinational corporations — Apple, Vodafone, GE and Caterpillar, FedEx and UPS, Ericsson, E-bay, it’s a very long list — that are poised to profit from seamless movements of goods and services across presently difficult borders. But anyone with a heart would say the biggest winners — the point bears repeating — were the millions of presently poor people throughout Africa, Latin America and Asia who will have new chances to earn decent livings, thanks to the expanded commercial opportunities. Many of these deserving people have probably never heard of the WTO or its Bali Package. So there was good reason for the smiles last December in Bali.
But not everybody left Bali smiling. A handful of the WTO’s more economically troubled members who are always suspicious of rich-country motives — including Ecuador, Bolivia, and some members of the African Union who had resisted the Bali Package — griped that the Bali deal was designed to be legally binding.
Also, in recent months, some countries like Uganda and Tanzania, which had supported trade facilitation in Bali, have apparently had second thoughts about implementing the agreement. “[R]atification of the trade facilitation agreement within the next 12 months implies that Tanzania shall be compelled to import even more goods from developing countries, thus further threaten its ailing local industries and ignite job losses,” reporter Bernard Ampulla noted in April in Tanzania’s leading Daily News. “Moreover, Tanzanian producers find it difficult to meet international competitiveness standards and other technical standards, this being an area which still needs a lot of capacity building.”
In Bali, WTO members had agreed they would draw up a formal protocol to implement the deal by July 31. The legally binding accord would then go into effect by the end of July 2015, or as soon as two thirds of the WTO’s member countries (soon to be 160, with the accession of Yemen) ratify it. Negotiators left the Nusa Dua convention center exhausted, but with high expectations that only the technical language leading to ratification remained to be ironed out.
Most importantly, the atmosphere of distrust and mutual suspicions that had dogged previous WTO ministerial meetings had started to fade away. The success in Bali spurred hopes for quick progress to (finally) conclude the broader Doha Round of trade liberalization negotiations that has made little progress since they were launched in 2001.
But it took only a little over three months for the old resentments to burst back into the open. Now, it is uncertain whether the Bali Package will be implemented on its intended schedule — or derailed.
Surprise attack from Addis Ababa
On April 27, the African Union’s trade commissioner, Fatima Acyl, issued a startling statement from the African Union’s headquarters in Addis, Ababa, Ethiopia. In it, the commissioner revealed that, at an “extraordinary session,” the AU’s trade ministers had decided that the Bali Package should not be implemented until the broader Doha Round would be concluded. (Acyl refuses to identify which African trade officials had attended the meeting.)
Acyl, a former deputy general of the Agricultural Bank of Chad, is a polished young woman, fluent in English, French, and Arabic. She was born in Washington, D.C. on May 5 (her biography does not list the year, nor note that the African diplomat is eligible to hold an American passport). She earned an MBA with honors at Ohio’s Xavier University, in Cincinnati. In the 1990s, she was an associate in PricewaterhouseCoopers’ offices in Chicago, Il. The personable Acyl was subsequently promoted several times, ending up as a manager. Her resume marks her as a rising African star.
But perhaps a lesser star in leading WTO circles in Geneva, where it has been noted that Acyl’s otherwise impressive resume does not identify any previous experience in international trade negotiations. The available public record indicates that since she was named to her present position in October 2012, Acyl has been inside the WTO’s Geneva headquarters perhaps only a handful of times, involving ceremonial occasions. The African Union has only an “ad hoc” outside observer status in the WTO, and has no role in official WTO negotiations. Acyl did not respond to repeated attempts for comment.
But there is no doubt that Acyl’s April 27 statement boldly asserted a leading role for the African Union, in instructing African ambassadors to the WTO on how they should handle implementation of the Bali Package.
“A number of our countries feel that the decisions reached in Bali, while noteworthy and commendable, were not the most optimal decisions in terms of Africa’s interests,” Acyl noted. “We have to reflect and learn from the lessons of Bali on how we can ensure that our interests and priorities are adequately addressed in the Post Bali Negotiations.”
Then she added the sentence that has resulted in the present WTO impasse in Geneva: “It is important that at this Ministerial, we instruct the negotiators of the Africa Group in Geneva to formally submit language on the Protocol of Amendment — the legal instrument that will enter the TF Agreement into force at the WTO — to the effect that the Trade Facilitation agreement will be provisionally implemented and in completion of the entire Doha Round of Negotiation.”
The Doha process has been halted several times in the past thirteen years, most recently in 2008. WTO members have failed to agree on a variety of thorny issues involving agriculture subsidies, intellectual property rights, enhanced access to protected markets for both goods and services, preventing environmentally destructive fishing practices, to cite some of the most politically sensitive.
The Bali Package’s driving idea with separating the Bali Package for early ratification was to demonstrate that the WTO could start delivering important economic benefits to all members — aiming to spark revival of the broader Doha process.
But now the African Union wants to hold the Bali deal hostage, as Africa’s bargaining chip in the overall Doha issues. Acyl admitted as much in her April 27 statement, asserting that withholding formal implementation of the Bali Package “creates strong negotiating leverage to achieve satisfactory outcomes” in the broader Doha negotiations. Whatever one’s views on trade liberalization, the “extraordinary” AU session constituted an extraordinary power play.
Talks in Geneva
Taking its cue from the AU, the WTO’s Africa Group of countries has followed the April 27 instructions. (The Africa Group’s members are essentially the same as the AU’s; with the exception that Morocco isn’t a member of the African Union. In Geneva, Lesotho’s WTO ambassador is the spokesman for the group.)
On May 26 the WTO’s trade-facilitation panel met in Geneva to draw up the official protocol for implementing the Bali Package. At that meeting, Lesotho’s Ambassador Nkopane Monyane, introduced a document that he said reflected the African Union’s April 27 statement — essentially recommending only “provisional” implementation of the Bali Package, based on the outcome of subsequent Doha negotiations. The ambassador suggested informal consultations to resolve the differences.
The next day, Uganda, which speaks for the least-developed WTO members, submitted language that would clearly peg implementation of the Bali Package to conclusion of the Doha Round. In the meetings, Tanzania and South Africa also played important supporting roles, according to diplomats who were present on both days.
Strip away the legalese and the bottom line was clear: The Africans had essentially sought to re-open the Bali negotiations. (Talk about punching above their weight in the WTO: South Africa, Tanzania, Uganda and Lesotho together comprise one-ninth of one percent of global trade flows.)
“No Bali, No Doha”
The African negotiating ploy has not been well received. When he heard about Fatima Acyl’s April 27 statement at a meeting in Paris last month, Karel De Gucht, the European Union’s trade commissioner, hit the ceiling. The gruff Belgian’s outburst was not meant for public attribution; EU officials decline to comment. But privately, several diplomats interviewed for this article say De Gucht issued a very blunt warning to the African Union: No Bali, No Doha. Kill the Bali Package, and you kill the Doha Round.
In last month’s Geneva meetings of the WTO’s trade facilitation group, representatives from a range of countries — including Norway, the EU, the United States, Mexico, Hong Kong, Costa Rica, Australia, New Zealand, and Singapore — have echoed De Gucht’s warnings, although in more diplomatically nuanced language. The Bali deal has very generous terms for the African countries, they have argued. The pro-Bali WTO leaders have noted how the trade-facilitation deal was designed to take the political poison out of the air, and build confidence for the successful conclusion of the broader Doha process. Don’t destroy the crucial good will, the Africans are being urged.
The African side of the story
The only African ambassador who responded to a request for comment was Lesotho’s Nkopane Monyane.
The African Union “is a member driven organ based in Addis Ababa, that takes continental decisions not attributable to any single member,” the ambassador explains. “Lesotho as a member, with a resident Ambassador in Addis, has not made any effort counter the Bali process.”
Concerns that his country is out to delay or kill the Bali deal are based on mere “speculative misinformation,” he insists. “I will guarantee that you will not find any evidence, written oral or in any form of presentation, of Lesotho as a sovereign state advocating a delay in the implementation of the Bali Decision.” The ambassador adds: “Lesotho remains fully committed to the successful implementation of Bali, conclusion of the DDA and stability of the Multilateral Trading System.” (DDA refers to the Doha “Development” Round.)
Other experienced WTO watchers point out that Africans are legitimately concerned that the Europeans and Americans have been slow to detail precisely how they intend to implement their Bali (financial) promises. When the Africans say, “Show us the money” on trade facilitation, they aren’t necessarily being cynical, one senior European diplomat observes.
Moreover, there is plenty of room for skepticism that the rich countries still lack the political will to make the necessary bargains that would resolve the difficult Doha Round issues. The Africans are clearly right to complain that the Obama White House in Washington, D.C. has never assigned a high priority either to the WTO or its Doha process. It is important to understand that there are “good-faith” reasons for African doubts about the rich countries’ intentions, as another well-placed European trade official puts it.
But not all players have reputations for supporting WTO negotiations in good faith. Enter the South Centre. Based in Geneva, the South Centre’s 51 member governments range from Algeria to Zimbabwe. North Korea (not a WTO member) apparently finds the intergovernmental organization as a listening post, as does Iran (not a member, but which has official observer status in the WTO).
On trade, the Centre serves as a useful platform to advance the views of WTO member countries that tend to resist trade liberalization: Malaysia, Bolivia, Cuba, South Africa, Venezuela, and Tanzania. The South Centre does not cultivate a reputation for transparency; it refuses to disclose the sources of its financing, other than to assert on its website that the majority comes from member countries.
Transparent or not, the South Centre’s fingerprints are evident in the ongoing African moves to delay or undo implementation of the Bali Package’s trade-facilitation deal. The legal arguments advanced by the African Union’s Fatima Acyl, for example, dovetail with language used by the South Centre. On Nov. 15, 2013, the Centre published a “South Experts’ Report” that argued that the WTO should reject any Bali Package that would be legally binding upon poor countries. The “least developed countries should be exempted from undertaking binding commitments,” the document asserted. The paper also argued that any deal that might be reached on trade facilitation in Bali only be implemented upon the subsequent conclusion of the Doha Round.
To veteran WTO observers, the fact that the African Union used the same legal arguments first advanced by the South Centre is no coincidence. The South Centre’s executive director, Martin Khor, declines to comment. (A Centre spokesman was not authorized to share any information that wasn’t already on the organization’s website.)
Khor is a well-known figure in Geneva, where his basic approach to the WTO is that it lacks transparency and is a forum where rich countries foist their will upon poor countries.
Khor played a leading role in the vociferous anti-globalist demonstrations that wrecked the WTO’s 1999 Seattle meetings. He opposed the launch of the Doha Round two years later, and in 2003 helped cause the acrimonious collapse of the WTO’s meetings in Cancun. Another South Centre activist who has long been in the same anti-globalist network is Aileen Kwa. Kwa has written a book based on the premise that the WTO’s Doha negotiations are “a byword for the perversion of democracy.”
Last December, Khor worked against adoption of the trade-facilitation deal in Bali as an official member of the delegation from Ecuador.
A Malaysian, he has long been considered close to former Malaysian Prime Minister Mahathir Mohammad. (Long known for his tart tongue when it comes to anything American, Mahathir has recently blamed the CIA for a conspiracy to hide information on missing Malaysian Airlines flight MH370. Khor, a columnist for the Malaysian newspaper, The Star, has also been railing against spying by U.S. intelligence agencies.)
Ironically, while Khor is a strong critic of any economic proposal tainted with American backing, he personally has long benefitted from American financial support. For example, the Rockefeller Brothers Fund, which formerly supported Khor when the activist was with the Third World Network, has given the South Centre $1.6 million since 2009. Last year, the Ford Foundation chipped in another $250,000 — saying that the money was needed because “financial markets need the oversight of democratic institutions to ensure transparency and accountability.” (Another irony: of well-heeled American philanthropy citing transparency as justification for supporting an organization that has North Korea as a member.)
The $1.8 million American cash from Ford and Rockefeller far outweighs what some South Centre members contribute in dues to the WTO. Last year, Kenya, Ghana, Tanzania, and Uganda, for instance, contributed a collective $362,481 in WTO dues. Given the South Centre’s secrecy, it is not possible to compare the sums such member countries give to the WTO.
WTO watchers will have their next opportunity to learn if the Africans have released their Bali hostage when the trade-facilitation group meets again on June 24 in Geneva to consider adopting the protocol for implementing the Bali Package. Stay tuned.
Beggaring Thy Neighbors
Poorer countries no longer have rich ones to blame for inequalities in trade. Now they’re the ones pulling the strings.
BY GREG RUSHFORD | MARCH 25, 2013
The miseries inflicted by colonial powers on Africa, Asia, and Latin America are undeniable to economic historians. Borders were drawn that made no economic or ethnic sense; little was invested in the human capital or the institutional structure needed for growth and stability. And while the sun set on the western colonial empires more than a half century ago, the leaders of what are today called developing countries all have reason to appreciate William Faulkner’s line: “The past is never dead. It’s not even past.”
One living legacy is a crazy quilt of trade preferences and protection buttressed by a mix of geopolitics, nostalgia, and rich-country interest group protectionism — distortions that undermine growth in export-oriented agriculture and make it tough for women in some of the poorest countries in the world to sew their way out of poverty. Indeed, most developing country leaders view rich-country protectionism as the cause of the deadlock in the World Trade Organization’s so-called Doha Round of negotiations aimed at sweeping trade liberalization.
The advanced economies do indeed deserve a disproportionate share of the blame. But as economist Simon Evenett of Switzerland’s University of St. Gallen has observed, “the beggar thy neighbor game is not confined to North-South trade.” The African Development Bank recently reported that only about one-tenth of the continent’s total trade is neighbor-to-neighbor. The numbers for Latin America and Asia are higher (22 percent and 50 percent respectively). Poor countries complaining about commerce-impeding barriers would be well advised to check the mirror to see where their troubles lay.
Most levies imposed by America and Europe have fallen to just 2 to3 percent, while a handful of newly rich countries led by Hong Kong and Singapore have dispensed with tariffs on virtually everything.
Now consider West Africa’s Benin, one of the poorest countries in the world (GDP per person in terms of purchasing power: $1,700). Benin’s meager trade and living standards are held back by agricultural and industrial tariffs averaging 14 and 12 percent respectively. And it’s pretty much the same throughout the poorer corners of the world. In Cameroon (GDP per capita: $2,300), farmers hide behind agriculture tariffs averaging 22 percent, while manufactured goods are hit with 12 percent import levies. The parallel figures for Burundi (GDP per capita: $600) are 20 percent and 11 percent; for Gambia (GDP per capita: $1,900) 17 percent and 16 percent.
India’s economic reforms, which included sharp reductions in industrial tariffs (to 10 percent) are widely credited for the quadrupling of average living standards over the last two decades. But India still protects food imports with 31 percent average tariffs, with peaks up to 56 percent (for coffee and tea).
In the Doha negotiations, the rich countries have agreed to allow Benin, Burundi, and the rest of the world’s poorest countries to maintain their tariffs. (Perhaps not surprisingly: They collectively represent a very modest market for western exports.) But more muscular emerging market economies — notably India and South Africa — have threatened to make further tariff reform a deal-breaker. In fact, they are demanding the right to raise tariffs sharply under some circumstances.
Arguably, the greater barriers to intra-continental trade (especially in Africa) are bureaucratic and logistical. To carry goods from Kigali, Rwanda to Mombasa, Kenya, trucks “have to negotiate 47 roadblocks and weigh stations,” the African Development Bank reported in 2012. At the time, the Bank also noted, there was usually a 36-hour wait at the South African border for trucks to cross the Limpopo River into Zimbabwe. It was much the same story getting through customs from Burkina Faso into Ghana, from Mali into Senegal — actually, from just about anywhere to anywhere in Africa.
Take your pick as to which misery is worst: The mud-plagued, potholed roads that drive up the costs of doing business, or the border checks with corrupt customs officials seeking alms. Paying bribes is so common that the African Development Bank report published a table listing the borders where officials are the most corrupt (Ivory Coast-Mali seems to be the prizewinner).
African reformers freely acknowledge such problems. Nigeria’s trade minister, Olusegun Aganga, has publicly lamented that “billions of dollars” and “millions of jobs” have been lost due to the “the fragmentation of Africa in terms of trade.” And some progress is being made. The World Bank noted that Ghana and Nigeria are discussing cuts in bilateral tariffs and otherwise making their cross-border trade flows more efficient. The New Times, a Rwanda newspaper, recently celebrated the fact that roadblocks between Kenya, Rwanda, Uganda, and Burundi had been pared from 30 to 15 (which are still way too many).
Meanwhile, there is still a Sisyphusian quality to poor-on-poor trade disputes, with modest advances matched by threats of retrenchment. South Africa, which by virtue of its relative affluence and stability is the economic leader of southern Africa, has been railing against cheap chickens from Brazil, metal screws from China, and even artificial turf from rival soccer competitors India, Thailand, and Malaysia. When we do these things, we are only following “common sense,” and not indulging in “protectionism,” Pretoria officials insist.
“Common sense” is apparently infecting middle-income countries not above the impulse to close the door behind them. Argentina is now considering stiff tariffs on plywood from Brazil and China. Turkey is in the process of imposing tax hikes on terephthalic acid (useful stuff that goes into plastic bottles and clothing) from more than a dozen trading partners including Indonesia and Brazil. Malaysia has imposed “antidumping duties” on newsprint from the Philippines and Indonesia. For their part, the Indonesians are in the process of “safeguarding” their domestic sorbitol industry (a versatile sweetener) against competitors in Malaysia, India — and curiously, communist North Korea, which isn’t known for offering sweet deals to anyone.
The ongoing phenomenon of quasi-colonial economic ties has also been a major source of tension — and a major impediment to a Doha-enabling compromise. Countries that were previously extorted for their resources are now receiving preferential treatment from their former colonizers, much to the chagrin of others. Ecuador, a major banana producer, has complained about preferential trade deals France has given its former colonial banana suppliers, notably Cameroon. Mauritius has railed against European farm subsidies, even as it maneuvered to retain its preference to export sugar to the European Union.
Camps are also emerging as blocs of developing countries pit themselves against others. When the Doha talks last went into hibernation (2008), Uruguay and Paraguay were complaining that Indian-led demands, on behalf of 44 poor countries, for continued agricultural protectionism would cripple their exports to Latin neighbors. On the opposite end, Cambodia and Bangladesh’s efforts through Doha to curb the United States’ 15 and 17 percent respective tariff on their garment trade are facing stiff opposition from African countries that already enjoy duty-free access to U.S. apparel markets.
Economists speak in unison on relatively few issues — one of them being the critical role open trade has played in bringing a billion people out of poverty in the last two decades. And it’s hard to imagine that, without more of the same, another billion will be given the means to live above subsistence in the next two. All the more ironic, then, that poor countries are way too often part of the problem in negotiating trade liberalization, rather than part of the solution. As Pogo, the once-celebrated bard of the newspaper comic strip world put it: “We have met the enemy, and he is us.”