Four years after its last minister-level gathering in Hong Kong in 2005, the 7th Ministerial Conference (MC) of the World Trade Organisation (WTO) is slated to take place in Geneva from 30 November to 02 December 2009. The MC is being held during an unprecedented period of global economic turbulence and ecological challenges. The global financial crisis that originated in rich, industrialised countries in 2008 continues to wreak havoc on many economies including developing economies; and the reality of climate change and its adverse consequences have rapidly moved to the forefront of the most urgent issues confronting the international community today. What then can we expect from this global trade summit?

Trade and the global financial and economic crisis

The trade summit will be held under the overarching theme of “The WTO, the Multilateral Trading System and the Current Global Economic Environment” in recognition of the financial and economic difficulties that continue to define the times.

There can be no argument that the present global economic environment demands international cooperation, political intervention at the multilateral level, and strong and credible institutions. This year, global trade is predicted to shrink for the first time since 1982 by around nine percent in volume terms;[1] while global production is expected to decline by nearly three percent.[2] Even as major economies are slowly pulling out of the deepest recession in the last 80 years, demand for goods and services worldwide remains at an all-time low and the ranks of the unemployed remain undiminished.

But trade is not merely impacted on by movements in global production and demand. Arguably, it could also serve as an instrument for economic expansion, particularly of the advanced industrialised countries of the North. “Free trade” has long been promoted as the main “engine of growth” by the economic orthodoxy led by the World Bank (WB), International Monetary Fund (IMF) and WTO. Predictably, therefore, these influential multilateral financial and economic institutions continue to advance market liberalisation – the agenda driving the Doha Round of trade talks – as an important leg of the package of solutions to the global economic crisis.

The World Bank’s 2009 Global Monitoring Report stresses that:

“A quick and successful conclusion to the Doha Round of trade negotiations would help to ease protectionist pressures, keep markets open, and strengthen the rules-based multi­lateral trading system. It would also provide a much-needed boost in confidence to the global economy at a time of high stress and uncertainty…Maintaining and improv­ing developing countries’ access to interna­tional markets is therefore a key element of the development agenda.[3]

At an IMF-sponsored conference in Dar es Salaam in March 2009, the Managing Director of the IMF, Dominique Strauss-Kahn, likewise called for the resumption of the Doha Round of trade talks, which would integrate developing countries, including those in Africa, into the global trading system, spurring global and regional development and facilitate attainment of the Millennium Development Goals.[4] Speaking at a meeting of the Trade Policy Review Body last April 2009, WTO Director-General, Pascal Lamy, stated that the best collective stimulus package is to conclude the Doha Development Agenda.[5]

However, the WB, IMF and WTO are missing the point. Unfettered trade liberalisation represents a chunk of the problem. Even before the current financial and economic slump, many developing economies were in crisis. In the last couple of decades, the lowering of barriers to the entry of imported goods and services had resulted in the phenomenon of de-industrialisation in many developing countries, particularly in Latin America.[6] In the rural sector, millions of farmers in the developing world lost their livelihoods and bases of survival due to the influx of cheap, heavily-subsidised agricultural products.7 Structural asymmetries between rich, industrialised nations and poor nations in terms of capital, technology and knowhow translated to highly uneven trade outcomes that benefited the former nations at the expense of the latter nations.

Moreover, the liberalisation of financial services, including under the auspices of the WTO’s General Agreement on Trade in Services, and speculation in commodities markets have been implicated as factors that helped to trigger the global financial crisis. The developing economies that were battered the most by global financial turmoil were those that had a high degree of trade openness.

It is against this background that a consortium of African civil society organisations (CSOs) is calling for a complete moratorium on the Doha Round of negotiations with the aim of assessing the consistency of the proposals on the table with policy measures necessitated by the global financial crisis.[8] Participants in an African civil society consultation in preparation for the 7th MC of the WTO rejected the various texts that have emerged as the basis for further negotiations in the Doha Round, asserting that:

“Developed countries must cut their domestic subsidies, including drastic reductions to their so-called trade-distorting domestic support, and impose severe restraints on the so-called green box subsidies. African and other developing countries must retain robust defensive and protective measures, including tariff policy. In this regard, proposed mechanisms like the Special Product and Special Safeguard Mechanism must be revamped and rehabilitated. At the very least, the African and other developing countries must return to the original forms of the proposals as they submitted them. The cotton subsidies in the advanced industrial countries, in particular the US must be eradicated.”[9]

Trade and climate change

If the 7th MC is not attracting as much attention as previous trade summits, this is in part because of the timing of the gathering. Currently, all eyes are on the upcoming 15th Conference of Parties of the United Nations’ Framework Convention on Climate Change, which will be held in Copenhagen just a week after the MC. As the environmental and socio-economic impacts of a warming atmosphere become ever more apparent, climate change and multilateral negotiations around it have increasingly hogged international headlines and have been brought to the centre-stage of international politics. So far, however, little is being said and done on the role of trade in global warming. Where linkages are being made, there is some cause for worry.

A recent joint WTO and United Nations Environment Programme (UNEP) report on the intersections between trade and climate change acknowledges that greater openness in trade will most likely generate higher greenhouse gas emissions that cause climate change.[10] But at the same time, the report attempts to take the edge off this finding by asserting that trade liberalisation and addressing climate change can be “mutually supportive”. More specifically, the press release for the report claims that:

“…trade and trade opening can have a positive impact on emissions of greenhouse gases in a variety of ways including accelerating the transfer of clean technology and the opportunity for developing economies to adapt those technologies to local circumstances. Rising incomes, linked with trade opening can also change social dynamics and aspirations with wealthier societies having the opportunity to demand higher environmental standards including ones on greenhouse gas emissions. In addition there is evidence that more open trade together with actions to combat climate change can catalyze global innovation including new products and processes that can stimulate new clean tech businesses.”

In the context of the Doha Round, environmental goods and services are being earmarked for liberalisation. There are two tracks to the overall logic behind this proposal. First, the reduction of tariffs and elimination of non-tariff barriers in environmental products would reduce their price and therefore facilitate their use. Second, the liberalisation of trade in climate-friendly goods would provide incentives and domestic expertise for producers to expand the production and export of these goods.

However, the negotiations are largely focused on opening up markets of developing economies to rich countries’ environmental services and technologies. As we have seen in many industries in developing countries that were subjected to liberalisation, there is a huge danger that domestic producers of environmental services in developing countries could be prevented from establishing themselves in their own markets especially with trade restrictions on government support or subsidies for climate-friendly products and technologies.[11]

The WTO’s TRIPS Agreement has been trumped up as an important mechanism to promote innovation in green technologies. Yet previous research on patents and technological innovation, climate-friendly or otherwise, indicates that this is not necessarily or automatically the case, especially for affordable technologies that are needed in the poorer parts of the world.[12] Patents could artificially inflate the cost of clean technology and thus hinder its transfer to developing countries. Furthermore, patents may contribute to the vulnerability of rural communities, who will be among the hardest hit by climate change, by making it difficult for farmers to practise traditional mitigation and adaptation techniques and by promoting a less biologically diverse agriculture.[13]

Rich, industrialised countries are also discussing the use of trade policy to introduce climate measures, including the imposition of a customs fee on carbon-intensive goods. While such a tax could indeed help to curb greenhouse gas emissions and encourage low-carbon production and distribution, there is a concern that such measures could be abused to erect new trade barriers in rich economies for goods from developing countries that are considered climate-unfriendly.[14]

Hardly an opportunity to make a difference

In an ideal and alternate reality, the 7th MC of the WTO could be a venue to map out trade strategies in response to the financial, economic and ecological situations and to address some of the structural roots of financial and climate crises that are linked to trade. But in the last decade, the WTO has lost a lot of credibility in failing to sufficiently recognise the asymmetries within the multilateral trading system and in failing to genuinely respond to the development (including ecological) challenges faced by poor nations. Business interests of rich, industrialised nations continue to dominate trade negotiations: hence, the relentless focus on opening up developing country markets to products from the developed world against all costs. It is worrisome that the same interests are also beginning to dictate climate talks. Social movements and civil society networks such as Our World is Not For Sale are rightly urging governments to “change trade, not our climate”.[15]

Endnotes

1    WTO (2009), “WTO sees 9% global trade decline in 2009 as recession strikes”, retrieved from http://www.wto.org/english/news_e/pres09_e/pr554_e.htm.

2    WB (2009), “The Financial Crisis: Charting a Global Recovery”, retrieved from http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/0,,contentMDK:22216733~pagePK:64165401~piPK:64165026~theSitePK:469372,00.html .

3    WB (2009), Global Monitoring Report 2009, retrieved from http://siteresources.worldbank.org/INTGLOMONREP2009/Resources/5924349-1239742507025/GMR09_overview.pdf.

4 Dominique Strauss-Kahn (2009), “Changes: Successful Partnerships for Africa’s Growth Challenge”, Dar es Salaam, Tanzania, 10 March 2009, retrieved from http://www.imf.org/external/np/speeches/2009/031009.htm.

5    Pascal Lamy (2009), Director-General’s Report, retrieved from http://www.wto.org/english/news_e/news09_e/trdev_14apr09_e.htm

6    S. M. Shafaeddin (2005), “Trade Liberalization and Economic Reform in Developing Countries: Structural Change or De-industrialisation?”, UNCTAD Discussion Paper No. 179, retrieved from http://www.unctad.ch/en/docs/osgdp20053_en.pdf.

7    Sophia Murphy (2009), “Free Trade in Agriculture - A Bad Idea Whose Time is Done”, retrieved from http://www.iatp.org/iatp/commentaries.cfm?refID=106576.

8    Africa-wide Civil Society Preparatory Meeting for 7th WTO Ministerial Conference (2009),”Statement of Demands”, Cape Town, 01-03 October 2009, retrieved from http://www.twnafrica.org/index.php?option=com_content&view=article&id=212:atn-statement-of-positions-and-demands-towards-wto-ministerial&catid=47:atn&Itemid=72.

9    Africa-wide Civil Society Preparatory Meeting for 7th WTO Ministerial Conference (2009).

10 WTO and UNEP (2009), Trade and Climate Change, retrieved from http://www.unep.ch/etb/pdf/UNEP%20WTO%20launch%20event%2026%20june%202009/Trade_&_Climate_Publication_2289_09_E%20Final.pdf.

11 Helene Hoggen (2009), “Trade and Climate Hand in Hand?”, retrieved from http://www.kirkensnodhjelp.no/en/News/Political-Newsletter/Trade-and-Climate-Hand-in-Hand/.

12 Helene Hoggen (2009).

13 Helene Hoggen (2009).

14 Helene Hoggen (2009).

15 OWINFS (2009), “Change Trade, Not Our Climate”, a Statement from the OWINFS Working Group, retrieved from http://www.ourworldisnotforsale.org/en/signon/climate-statement.


Athena Peralta is a consultant for the Poverty, Wealth and Ecology Project of the World Council of Churches