07/25/2006 12:50 pm ET | Updated May 25, 2011

Celebrate, Don't Mourn, Collapse of WTO Talks

The United States and European Union are trading charges over the collapse of the World Trade Organization talks, each blaming the other for the breakdown.

Both sides, and the mainstream media coverage, agree this is a bad thing for poor countries.

In fact, advocates of global justice are -- rightfully -- celebrating the breakdown.

The argument that the WTO negotiations -- known as the Doha Round, for the place in Qatar where they commenced -- will hurt the poor is that they promised to reduce rich country agricultural supports, paving the way for expanded trade from poor countries. Intensified exports is the best hope for development, runs this claim.

This is a nice story, except for two things. First, even on its own terms, this claim is not true. Second, it ignores most of what the Doha Round is about.

At the time the WTO was first adopted (it came into existence in 1995), proponents such as the World Bank made extraordinary claims about the benefits for the poor. Now, mounting empirical evidence shows them to have been false. A major Bank review earlier this year of its support for trade liberalization concludes that the promised benefits have not been achieved. The World Bank, says Yvonne Tsikata, lead author of the report, "was overly optimistic about the immediate and universal benefits of more open trade. It underestimated the constraints and local complexities involved in harnessing those benefits." (The full report is here.)

Over the last decade, the Bank has progressively ratcheted down its claims about the benefits of trade. Unfortunately, this hasn't affected its ongoing cheerleading for trade liberalization -- and proponents of corporate globalization in the media and elsewhere rely on the Bank's general statements rather than the underlying data.

A careful analysis by the Global Development and Environment Institute of that data shows that in fact the overall claimed gains are extraordinarily modest; that they are captured primarily by a few middle income countries (notably Brazil and China); and that many of the poorest countries come out worse.

Among the particular findings:

- All projections of income gains for developing countries as a group are modest, well under 1 percent of GDP and less than a penny-a-day per person.

- Only a few countries capture the bulk of the projected gains, with Brazil and China among the winners. Some of the poorest countries and regions, including Sub-Saharan Africa, see income losses or trivial gains.

- For many countries the loss of tariff revenues with liberalization are greater than the projected gains from a Doha agreement. India, for example, would lose nearly $8 billion in annual revenues from manufacturing tariffs, almost four times the projected gains of $2.2 billion. For the developing world as a whole, a projected gain of just $7 billion would be swamped by $63 billion in losses from tariffs on manufactured goods.

Also ignored by the pro-WTO advocates is the crucial way that WTO rules have forced rich countries to remove preferential arrangements for poorest countries (on the grounds that they discriminate against other exporters). In one notable case, the United States brought a case against the European Union's preferential banana access arrangements for former Caribbean colonies. We generally don't grow any bananas for export in the United States, but the US brought the case on behalf of Chiquita, which wanted European market access for its Ecuador bananas. The overall effect of such preference erosion, concludes the UN Conference on Trade and Development, is quite serious.

The key issue in agriculture for poor countries, and especially for the poorer farmers in those countries, is not whether they can gain access to rich country markets (poorer farmers generally don't, and can't realistically, grow for export) but whether they are protected from dumping -- subsidized, below market exports from other countries into their market.

The issue of dumping and export subsidies is actually the most important one, and it unites family farmers in poor countries with those in rich nations (since the export subsidies tend to go more to corporate farms). Explains Via Campesina (the International Peasants Movement):

As a result [of WTO rules], many countries are facing a surge of cheap food imports. Local farmers cannot compete and therefore, they lose their income and livelihood. Many farmers get indebted, they have no land or lose the land they do have, and they have to migrate to the cities or abroad to make a living. In rich countries, on the other hand, agricultural policies support large industrial farms and export-oriented production. Family farms producing for local markets are disappearing everyday.

That's half the explanation of why the WTO proponents are wrong about the purported harm to the poor from the negotiation breakdown.

The other half concerns what else was at stake in the negotiations: opening up new markets in poor (and rich) countries to multinational corporations.

Proposals were on the table to expand the WTO services agreement, so as to quite radically limit countries' ability to regulate healthcare and other key sectors. About this, see Public Citizen's Global Trade Watch's web page here.

Despite all the hoopla about agricultural market access for developing countries, the rich countries were also asking the developing countries to open up their markets further, exacerbating risks to the poor. They also wanted major reductions in developing country tariffs on non-agricultural products, raising what Walden Bello, executive director of Focus on the Global South and professor of sociology at the University of the Philippines, called "the specter of deindustrialization."

As always, the impacts of these proposals would most adversely affect the poor. As Friends of the Earth International explained,

For example, forests and fish and fish products are both sectors slated for complete or exceptionally high levels of liberalization in the WTO's current negotiations. Yet worldwide, some 60 million indigenous people are almost completely reliant on forest resources for their livelihoods -- for food and fuel, medicines and materials -- and some 36 million people directly employed in small-scale artisanal fishing.

And that, in sum, is why development, environment and global justice advocates believe the collapse of the WTO talks is something to celebrate.

For more details, see:

Friends of the Earth International

Via Campesina and here

Public Citizen's Global Trade Watch

Focus on the Global South and here

Institute for Agriculture and Trade Policy