December 18, 2005

Suddenly, it's very quiet...

It's 1:15 p.m. in Hong Kong. Officially the conference has less than 4 hours to go, and ministers are still locked in confidential "green room" negotiations trying to work out a deal. It's very quiet in the press center now - nobody is talking to us, which may be a sign that negotiations finally got serious at the very-very-very-last-minute.

Early this morning the Indian Trade Minister, Kamal Nath came out to announce they had a deal, only to be contradicted by the Europeans minutes later. I guess ministers have gone from tired-and-cranky to exhausted-and-delirious.

Since there's nothing to do today but sit and wait, I thought I'd share my thoughts on some of the specific matters being negotiated here.

I think it's funny how the dynamics of these negotiations seem to push ministers into spending huge amounts of effort on issues that, in the end, don't really matter that much. As some disagreements drag on, they take on a symbolic dimension entirely out of proportion with their economic importance.

Cotton is a case in point. While the issue is very important to a few very poor countries, cotton is far from a major world market. Besides the Sahel, it's not even very important to the rest of the Least Developed Countries. But cotton has become very important symbolically, on two levels. First, it's just such a stark symbol of iniquity: 50,000 coddled gringo farmers get an astonishing $4 billion dollars a year in cotton subsidies, subsidies that aren't even WTO-legal under the existing agreements, huge subsidies for a tiny constituency that create serious problems for millions of the poorest farmers in the world. Whatever its grand-scheme importance, there's just no defending the current cotton regime, and there's no chance of persuading people the WTO is fair if it continues to allow this kind of tom-foolery.

But cotton is also important in terms of the cohesiveness of the developing country block. While Brazil has an interest in cotton, most of the other G20, G90, and G33 countries do not. So cotton became a kind of test-case for the solidarity of the developing country block. Would countries without a direct-stake in the negotiation stand firm in solidarity with the West African producers, or would they quietly let the cotton dossier slide as they negotiated agreements that mattered to each of them directly? So far, they've stuck together - which sends a strong signal to the US and the EU that the developing country coalition is sturdier than it has been in the past.

Another largely symbolic issue - and the one that negotiators seem to be spending most time on - is the call to set a definite deadline to end agricultural export subsidies. The issue is symbolically important because the use of export subsidies is such a blatant violation of the whole spirit of the WTO: their entire purpose is to distort world prices, they are inherently unfair. And, indeed, export subsidies have been banned in every market EXCEPT agriculture for ten years. So their continued use in the US and the EU is a grating form of trade injustice - to the developing country block there's just no plausible excuse for continuing to use them. What's more, all WTO members have agreed, in principle, to end agricultural export subsidies. It's just that they keep dragging their feet on setting an actual date. The developing country block has turned the end-date into a point of honor.

I'll grant that agricultural export subsidies are not economically insignificant, but it's also clear that they are far from the most significant distortion in agricultural markets. Domestic subsidies - the ones that aren't explicitly linked to exports - are much bigger than export subsidies, and far more trade-distorting. What's more, depending on which study you believe, first world agricultural tariffs are either as distortionary as export and domestic subsidies put together, or they're much more distortionary than domestic and export subsidies put together. Nobody disputes that: everyone knows that export subsidies are a pretty minor piece of the agricultural distortion puzzle. But the issue has acquired this symbolic significance in the negotiation, and so it takes center stage.

But the out-of-all-proportion issue that really stands out for me is services. Here, the gap between the significance of what's being negotiated and the superheated rhetoric surrounding it is really bizarre. In particular, the lefty NGO community has decided that Service liberalization is where the neoliberal onslaught is going to come in this round, so they're going all out to oppose a deal. In fact, the text being discussed is pretty damn innocuous, but they still attack it ferociously.

The fear is that bringing WTO disciplines to services could force countries to privatize essential services like public utilities, schools, hospitals, that sort of thing. But there is no element of compulsion in the text. All the EU was asking for was that countries commit themselves to negotiate bilaterally or in groups if another country (or group) expressed an interest in accessing one of their service markets. There was no "benchmarking" in the proposal, no requirement that countries liberalize a given number of markets, in fact, no requirement that they liberalize anything at all. Just a requirement that they negotiate.

This, if you listen to ATTAC, is the end of the world. The thin end of the wedge. Poor countries forced into negotiations would not be able to withstand the pressure to liberalize. Neoliberalism gone wild. Frankly, I find that attitude pretty patronizing: if there's one thing developing countries have shown in Hong Kong is that they can and will stand up for their interests in tough negotiations with developed countries. Getting your panties all up in a bunch over "compulsion" when all you're being compelled to do is negotiate seems like overkill to me. But, again, the service negotiation has a symbolic dimension that blows its importance out of proportion.

However, enough G90 (Africa, the Caribbean, and the Pacific Island States) members were concerned about this to take a tough negotiating stance that managed to get the "shall" changed to a "should" - developing countries, in the current draft, would not be compelled to negotiate if they don't want to. That seems to have been enough to mollify most of the G90 countries' concerns...which leaves Venezuela alone in taking a hard stance against the services agreement. But then, I guess it's not surprising Venezuela would take its lead from the PSF left in these negotiations.

I guess the reason these issues end up looming so large is "outrage displacement." Agreeing on agriculture broadly is very hard; agreeing on cotton and export subsidies narrowly seems much more doable. Given the mood of despair over the difficulties involved in the broader negotiations, countries tend to focus on "deliverables" - specific issues where agreement seems more likely. But the negotiating energy lavished on these deliverables gives them a symbolic dimension, and pretty soon negotiators start talking about them as though they were fundamentally important.

They're not, but in the Cabin Fever atmosphere of a ministerial it's easy to lose sight of that.