10 June 2004: the crisis in world trade

The Brazilian city of Sao Paulo is, from 13–18 June 2004. host to representatives from 192 member states, more than 200 non–governmental organisations (NGOs) and a host of international bodies at the eleventh United Nations Conference on Trade and Development (UNCTAD XI). They take part in a week of discussion and debate on a plethora of trade and development issues, ranging from coffee to corporate social responsibility (CSR), globalisation to gas reserves, maize to market access. The aim of this year’s conference is to explore how developing countries can protect their own economic interests and industries while at the same time participate in and benefit from globalisation and the growth in world trade.

Amy Barry’s daily despatches from Sao Paulo were posted in openDemocracy’s Trade, Economics, Justice theme

UNCTAD was created forty years ago as a forum for the promotion of trade and development policies that help poor countries. It sits in Geneva and meets every four years to review policy and priorities. Now more than ever, UNCTAD and the research it carries out are sorely needed. There is a crisis in world trade. As globalisation gathers apace, the majority of poor countries are missing out on their share of the benefits.

While the rich grow richer, six of the ten poorest countries in the world are less prosperous than they were twenty years ago. This is a lot to do with the fact that they are reliant on exports of basic commodities, like coffee, cotton and cocoa, prices of which have plummeted in the last decade. It is also because they are trapped in a world trade system where the rules are rigged in favour of the rich .

The World Trade Organisation (WTO) makes most of the rules that determine how countries trade with each other. But talks at the WTO have been stalled since the ministerial summit in Cancún in September 2003, when the refusal of rich country governments to deliver on reforms they had promised led to a stalemate that has yet to be overcome.

But while WTO talks remain stagnant, UNCTAD XI offers a vital opportunity to stimulate debate and inject a sense of urgency into considerations of reform. It also gives developing countries a chance to have their say in a more open and equal environment than the WTO.

Chief among the issues to be addressed in Sao Paulo is the crisis in commodities that is keeping so many people poor and depriving them of income security. UNCTAD XI should also tackle the continuing iniquity of rich country agricultural subsidies and export dumping that undermines farming in the developing world. Around the world, almost 900 million people live on less than $1 a day. Trade could be an instrument to lift these people out of poverty but much needs to be done before this becomes possible. UNCTAD can and should lead the way in calling for the necessary changes.

Friday 11 June: an exciting prospect

The curtain is slowly lifting here in Sao Paulo on the 11th United Nations Conference on Trade and Development (UNCTAD XI). The delegates are arriving in their official cars. The journalists are drifting in, laptops and press briefings in hand. The glamorous Brazilian assistants at the conference centre are beginning to look less decorative and more like they have a lot to do.

The conference proper doesn’t start until Sunday but the sideshow events have begun in earnest. Today there is a meeting of the G77 – a group of developing countries formed at the same time as UNCTAD with many of the same interests at heart. This is mainly a commemorative event – a fortieth birthday – but also a moment to reinforce the importance of the issues both UNCTAD and the G77 stand for: a voice for developing countries and a fair chance for all to benefit from globalisation.

Tomorrow, the G20 meets. This group, formed at the last World Trade Organisation (WTO) ministerial in Cancún and chaired by Brazil, has caught the attention of many people following trade issues. At the Cancún conference, negotiations collapsed and a stalemate ensued that still persists. There is nothing to celebrate in this lack of progress, but Cancún is a fascinating turning–point in world trade negotiations. The emergence of the G20 is the birth of an assertive and unified voice for developing countries no longer prepared to accept the compromises and conditions imposed on them by rich country negotiators. People doubted its chances of survival, but now, almost a year later it is flourishing.

Tomorrow the G20 are expected to discuss the three key issues of agricultural negotiations: market access, export competition and domestic support. Progress in these areas is vital if the Doha round of trade talks is to be revived and its development agenda met. The G20, along with the European Union and the United States have much to do to move this forward. It is an exciting prospect.

Saturday–Sunday, 12–13 June: a moment of optimism

On Saturday, the G20 meet to discuss their joint position ahead of the WTO meeting in Geneva in July. They emerge from the meeting late in the afternoon and the unity and strength of purpose they display are impressive. The cheerful Brazilian foreign minister, Celso Amorim, chairs the press conference afterwards and is joined on the panel by the ministers from Nigeria, India, South Africa and Argentina. All reiterate their commitment to the group and to making progress in the Doha development round.

The group discuss their market access proposal, released a couple of weeks ago in Geneva. They confirm the agreement to move towards opening markets between G20 countries, but also highlight the importance of allowing special and differential treatment for less–developed countries who need to protect vulnerable or fledgling industries.

On the other two areas of the agricultural negotiations, export competition and domestic support, the responsibility was placed firmly on the EU and US to agree clear proposals, particularly on export subsidies, before the trade round can resume.

Then, on Sunday, there was a meeting of the so–called non–group of five, which includes Australia, India, Brazil, the EU and US. Much expectation surrounded this meeting. EU trade commissioner Pascal Lamy and US trade negotiator Robert Zoellick flew in especially. Zoellick was in the country for less than twenty–four hours – through apparently he still found time to go jogging!

The non–G5 meeting was important because it was the last time these five key players at the WTO would get together before the July meeting. Progress in their meeting would be good for the July negotiations. A deadlock would be very bad. The negotiations last all afternoon. Press conferences are scheduled then cancelled. Rumours about what was happening proliferate. As the temperature drops, journalists, delegates and lobbyists shiver in corners over cups of coffee, or linger in the lobby waiting for the meeting to break up. In the end, at 7.45pm, Lamy, Zoellick, and their colleagues hold a brief press conference. The message is determinedly positive. They had had a “very constructive” meeting and had “made progress on all three pillars of the agriculture negotiations”. The optimism and unity are surprising; many people had expected the EU and US to fail to reach an agreement over export credits and therefore block the meeting.

But despite the positive spin we are warned there is “still a lot of work to be done”. So, leaving aside the encouraging noises, the truth remains that in less than six weeks these guys have to engage with the other 143 members of the WTO and agree a framework for the rest of the negotiations. Will they have enough time?

Monday–Tuesday, 14–15 June: breaking the barriers

UNCTAD XI is settling down. After the high–level fuss of the G20 and non–group of five, the conference is focusing on what it is good at: discussing and finding solutions to the challenges faced by developing countries in the areas of trade and development.

At the opening plenary session, Brazil’s president, Luiz Inácio Lula da Silva announces a renewed commitment to reducing trade barriers between developing countries. Lula says the Global System of Trade Preferences (GSTP), first conceived in 1989, is one way for developing countries to gain a fairer share of the benefits of world trade.

Oxfam welcomes the announcement but warns that because there are great differences in the size and level of development of “third world” economies, complete liberalisation of trade between developing countries would not be desirable. Less–developed countries must retain the right to protect vulnerable farm sectors and infant industries. Furthermore, a focus on south–south trade must not be used to relieve rich countries of their responsibilities. They too must remove barriers to trade, as well as ending export subsidies and reforming their trade–distorting domestic support.

Lula speaks again on Tuesday morning at a high–level round table on financing for development. Kofi Annan and Rubens Ricupero, the secretary–general of UNCTAD, join him. All the speakers stress the importance of increased aid for developing countries, including the reaching the target of donors giving 0.7% of GDP. Annan emphasises the importance of meeting the Millennium Development Goals; Lula says that the extra $50 billion a year needed to achieve them is “nothing” in comparison to rich country spending on wars or agricultural subsidies.

Meanwhile, the conference halls and corridors at the Anhembi Conference Centre, buzz with people from all walks of life – considering in earnest a range of subjects from the globalisation of the sugar market to the roles of gender in trade policy to market access for small coffee producers.

A drink in the cafeteria will find you sandwiched between Haitian coffee producers and members of the British government delegation. A chat with the person on the computer next to you may lead to a debate on the economics of globalisation, the likelihood of the WTO negotiations restarting, or whether England is winning at Euro 2004 in a choice of languages – Portuguese, Spanish, French…take your pick.

Tomorrow, discussions will focus on fair trade and commodities. Representatives from civil society, including Oxfam, World Vision, the Global Alliance on Commodities and Coffee (Glacc), the (Brazilian) National Federation of Workers in Agriculture (Contag) and Artisans du Monde will discuss how fair trade can move beyond the market niche and provide solutions to low prices and market concentration in the agricultural food chain. The G77 are also expected to talk in more detail about the Global System of Trade Preferences proposals. What will they say?

Wednesday–Friday, 16–18 June: cotton triumph, and a long road

The last few days of UNCTAD XI here in Sao Paulo are hectic but interesting. On Wednesday, the decision of the G77 to extend the Global System of Trade Preferences (GSTP) is confirmed: a positive sign of developing countries’ willingness to negotiate on trade liberalisation. While opening their markets, they recognise the need for special and differential treatment for smaller developing countries that must retain their own right to protect fledgling industries and farm sectors. Whether China would be joining the GSTP is not confirmed – a key question to track in the coming weeks.

Thursday is an exciting day for Oxfam. We stage a stunt with three coffee producers – from Haiti, Brazil and Honduras – to call attention to the global coffee crisis. Millions of producers face ruin because coffee prices have fallen by 50% in the last decade. Big roasters continue to make massive profits while small farmers are forced to sell their coffee below the cost of production. The three coffee farmers came to UNCTAD XI with their donkeys carrying sacks of coffee to ask for help. UNCTAD has done excellent work in the past on commodities and it is important that it continues to do so. Rubens Ricupero comes to meet the coffee farmers and promises to do his best to help them. He also signs Oxfam’s petition to make trade fair.

The success of the coffee stunt encourages us to look forward to Friday and a planned event related to the coming announcement of the WTO panel on cotton. In the morning we had three big puppet heads – representing Bush, Blair and Chirac – dump cotton and sugar on maps of Africa and Latin America to symbolise the export dumping facilitated by certain rich country subsidies.

In 2003, Brazil appealed to the WTO against US cotton subsidies. It accused the US of paying subsidies to its cotton farmers, pushing world prices down and therefore damaging developing country producers. In the interim ruling the WTO found that the subsidies were illegal; today, the final ruling seems to vindicate the claims of Brazil and the four West African “observer” countries!

The US will have to reform its farm subsidies. This is an amazing moment for trade justice and will have very wide implications for the way rich countries subsidise their farmers and flout WTO rules.

The final declaration of UNCTAD XI is released, and is a mixed bag. The progress made on south–south trade is welcome, as is the news that a commodities taskforce will try to find solutions to the problem of price instability in the commodities market. But the absence of strong language on corporate social responsibility (CSR) is disappointing. Oxfam joins Greenpeace, Third World Network and Friends of the Earth International in condemning the US for weakening the 2002 Johannesburg World Summit on Sustainable Development text and lobbying to limit UNCTAD’s work on CSR.

Amy Barry’s account of the UNCTAD conference can also be read in Oxfam’s Make Trade Fair website

A week of highs and lows ends. The cotton ruling is a triumph; perhaps, step–by–step, the rules of world trade are becoming fairer. But there is still a long way to go. Until the next time…