State of Play in the WTO Toward the 11th Ministerial in Argentina
By Deborah James
The 11th Ministerial meeting of the World Trade Organization (WTO) will be held in Buenos Aires, Argentina on December 10–13, 2017. After years of languishing while other “free trade” agreements were negotiated, big business has turned its focus back to the WTO, particularly among the high-tech sector that now includes five of the seven largest corporations globally. They are determined to achieve in WTO what they have yet to secure in any other deal: new rules that will lock in profit-making opportunities in the digitalized economy of the future. The prize they seek in Argentina is a mandate for new negotiations under the rubric of “e-commerce,” but the reality is that these new rules will further constrain the ability of governments to promote prosperity and reduce inequality, even as they suffer the political consequences of the revolts of communities that have been left behind.
There was hope early on that Trump might not be as interested in fronting the interests of the “big tech” industry as the previous administration. As it turns out, members of his trade team have begun referring to e-commerce as a priority for the United States moving forward, including “harvesting” the chapter on e-commerce from the Trans-Pacific Partnership (TPP) for other agreements.
In addition to e-commerce, negotiations are heating up on several key areas related to trade in services that would limit the ability of governments to constrain corporate behavior in the public interest. Talk of likely outcomes from Buenos Aires also includes new rules to discipline fish subsidies that are contributing to a global over-fishing crisis – but these new rules may be a hidden vehicle for helping big fleets at small fisherfolk’s expense.
Unfortunately, negotiators are not paying as much attention to what should be the core agenda: transforming the global agriculture rules that restrict developing countries from ensuring food security for their populations while allowing big agribusiness nearly limitless public subsidies; and increasing flexibilities for developing countries to use trade for their own development.
Danger Ahead: Locking in Corporate Rights and Locking Out Public Oversight
Starting with a U.S. proposal in July 2016, nearly a dozen e-commerce proposals have now circulated in the WTO, many with overlapping proposed provisions. They are designed around a borderless, digitized global economy in which major technology, financial, logistics, and other corporations like Amazon, FedEx, Visa and Google can move labor, capital, inputs, and data seamlessly across time and space without restriction. They also want to force the opening new markets, while limiting obligations on corporations to ensure that workers, communities, or countries benefit from their activities.
Proponents disguise their proposals in the Trojan Horse of being necessary to unleash development though the power of small- and medium-sized enterprises (SMEs) using e-commerce. But SMEs are the least likely to be able to compete with giant transnational corporations, which enjoy the benefits of scale, historic subsidies, technological advances, strong state-sponsored infrastructure, and a system of trade rules written by their lawyers.
Key provisions of the proposals including prohibiting requirements to hold data locally or even have a local presence in the country, plus no border taxes on digital products. But there is no economic rationale as to why digitally traded goods should not have to contribute to the national tax base, while traditionally traded goods usually do. And data is now the most valuable resource; that’s why markets highly value companies that give away their services to consumers for “free.” Locking in rules in the WTO to allow corporations to transfer data around the world without restrictions would forever deny the right of countries to benefit from their own data and intelligence in the future. It also has serious implications for both data privacy and consumer protection. What WTO proponents call “localization barriers” are actually the tools that countries use to ensure that they benefit from the presence of transnational corporations to advance their own development.
We already know the hallmarks of Uber and Amazon include dislocation in labor markets and precariousness of work. That would accelerate if their proposals were accepted in the WTO. Tech giants would consolidate their monopoly power. Their infamous tax evasion would be facilitated by a binding international treaty, and it would be nearly impossible to rein in the resulting financial instability.
WTO members do not currently have a mandate to write new global rules on “e-commerce,” and they should not obtain one in Buenos Aires. Even without new WTO rules on e-commerce, e-commerce is flourishing and SMEs can already sell their products online. Of course, e-commerce can be a force for job creation and development, and certainly has the power to expand innovation, increase consumer choice, connect remote producers and consumers, and increase global connectedness. But this is not the same as having binding global rules written by Google for its own benefit.
Threats to Public Interest Regulation
A similar corporate agenda is behind the effort to have new rules limiting domestic regulation of services. In order to provide a service, there must be an individual, in some cases a trained professional, who often has professional qualifications they must satisfy. There is usually a company, which is often required to be licensed to provide the service. Finally there is the method of delivering the service, and generally governments have technical standards (such as anti-earthquake provisions in construction) to which service providers must adhere.
Unfortunately the focus of proposed rules on Domestic Regulation in the WTO is not to increase the social value or accessibility of the service, but rather seek to ensure that three kinds of regulation – the qualification requirements and procedures, the licensing requirements and procedures, and the technical standards – are “reasonable,” “objective,” “transparent,” and “not more burdensome than necessary to ensure the quality of the service,” and further that the technical standards should be developed in an “open and transparent process.”
These are open-ended terms. How they are interpreted in the WTO could severely undermine the regulatory sovereignty of countries, putting the interests of foreign services providers above the government obligations to ensure that services are operated in the public interest. Who decides whether the administration of labor, tax, environmental or safety laws affecting foreign services firms is “reasonable”? Would a local zoning commission agreeing with local objections to the placement of a big box store near a historic site be “objective?” If a state decided to accept an environmental review’s recommendation to ban fracking as a method of mining gas, would that be considered “too burdensome?” Trade panels rather than local governments could be in charge of deciding community issues that are inherently subjective because they involve important judgment calls.
And note – this is for domestic regulation; the proposed rules would not only apply in the arena of traded services, which is where WTO’s remit should end. Members did agree years ago to develop any necessary disciplines on these measures – but most developing countries, and even the United States, are doubtful as to whether such rules are “necessary.”
Fishing: Subsidizing the Poor or the Rich?
The other big ‘deliverable’ being pushed for Buenos Aires is a way to tackle the problem of overfishing by negotiating limits to the subsidies that governments provide to fisheries. There is a clear path to a pro-development and pro-environment outcome, if industrial fleets that are given subsidies to increase capacity to overfish are disciplined, while artisanal fisherfolk who provide nutrition and livelihoods are further supported to grow in a sustainable way. Unfortunately, some of the WTO proposals appear to place extra burdens on developing countries with limited regulatory capacity, while exempting fossil fuel subsidies to large fleets – which would lead to increasing market share of the big fishing operators. It would be better to wait until all countries are able to assess the possible ramifications of various types of disciplines before ending up harming the smallest producers.
Room for Improvement: Fixing Bad Existing Rules Not Expanding Them
Both e-commerce rules and domestic regulation disciplines would amount to an expansion of the WTO. But most WTO members have argued that existing unfair and damaging rules must be fixed before the WTO can be expanded. This fight was at the heart of the last Ministerial, which concluded with ambiguous language acknowledging that some countries wanted to bring in new issues, while others wanted to continue with the unfinished development agenda in the Doha Round.
Agricultural Rules Must Prioritize Food Security
Top priority for a genuine development agenda would be transforming the current rules on agriculture. There are two key aspects: making the rules more flexible so that countries can feed their people, and reining in the subsidies for products entering the global marketplace.
Unbelievably, it is the rich countries, not the poor, which are currently allowed to subsidize agriculture under WTO rules – even in ways that distort trade and harm other countries’ domestic producers – because countries are still allowed to subsidize at the levels they were giving when they entered the WTO. For the United States and EU, that means USD $19.1 billion and €72.2 billion a year, respectively. These subsidies encourage overproduction and artificially depress world prices, wiping out farmers’ livelihoods in countries that should be benefitting from global agricultural trade. Thus, a major aspect of the current negotiations – and hopefully an outcome in Buenos Aires – would be to reduce the amount of subsidies under the “domestic support” negotiations.
By contrast, countries like India and most African countries are only allowed miniscule subsidies, because they were not subsidizing when the initial WTO rules were negotiated. However, the world has changed vastly since these rules were first put in place in 1995. The interim decades have brought several global food crises, as a result of decreasing domestic production in developing countries, volatile commodity markets, consolidation in the retail and production chains, and climate change, among other factors. Over the years, many developing countries found that the policy dictates of the International Monetary Fund and the World Bank – including abandoning investments in agriculture while opening their markets to imports – left them subject to growing import bills and food insecurity.
Now the pendulum is swinging back towards supporting domestic food production. The Sustainable Development Goals entreat countries to invest in increasing sustainable agriculture, while at the same time there is growing acceptance of the “right to food” as a human right. One of the international best practices for supporting farmers’ livelihoods, ensuring food security, and promoting rural development is the policy of “public stockholding,” in which governments guarantee farmers a minimum price for their production, and distribute that food to hungry people within their own borders. Amazingly, these programs, implemented in about 20 developing countries, run afoul of WTO rules – even though the agriculture supported is not traded in global markets.
A coalition of nearly 50 developing countries in the WTO is advocating that public stockholding programs should not be constrained by antiquated WTO rules. But the changes have been steadfastly blocked by the United States, the EU, Australia and other big agribusiness exporters. The US turning reality on its head by accusing China and India of being the “biggest subsidizers.” But on a per capita basis, their payments per farmer remain miniscule – about USD $348 per farmer for China and $306 for India, as compared to $68,910 for the US.
WTO members agreed to find a permanent solution to the public stockholding programs by December of this year. Unfortunately the positions of countries representing Cargill, Tyson, BRF and Monsanto have remained entrenched. Action from food security and food sovereignty activists could help tip the balance to ensure a positive outcome on this issue in Buenos Aires.
More Flexibility for Development Policies
Along with transforming the global rules governing agricultural trade, developing countries have long advocated for other changes to the existing WTO to increase flexibility for developing countries to enable them to enact policies that would promote development.
In 2015, a group of 90 developing countries made concrete proposals for changes to existing WTO rules that would remove some WTO constraints on national pro-development policies. Many of them are updated versions of the “Implementation Agenda” that have formed the basis of developing country critiques of the existing WTO since the time of its foundation. These include, for example, changes to allow developing countries to promote domestic manufacturing capabilities, stimulate the transfer of technology, promote access to affordable medicines, and safeguard regional integration. Many of these proposals parallel the civil society demands encompassed in the Turnaround Statement of the global Our World Is Not for Sale network, endorsed by hundreds of civil society groups from around the world.
Even in an area that all WTO members should be able to agree on – ensuring benefits for LDCs – there is no consensus yet. Although it was a priority mandate, the small LDC package agreed in the WTO Ministerial in Bali in 2013 is not yet operationalized. This includes ensuring 100 percent Duty Free, Quota Free market access for LDCs’ exports; simplification of the Rules of Origin that define how much of the value of a product has to be produced in the country to qualify for reduced-tariff benefits; and providing actual binding commitments for the LDC services waiver (which allows developed countries to provide market access in services for LDCs without offering reciprocal access to other countries – a “flexibility” which has proven almost impossible to utilize). It also includes mandated reductions in the subsidies that the US and the EU provide to cotton producers – which enrich a few thousand there, but that have unfairly decimated production of hundreds of thousands of cotton farmers in Africa.
Even worse, just one WTO member – the United States – appears to be not only refusing to agree to the development proposals, but also working to ensure that the development mandate in the WTO is forever abandoned. If it succeeds, the world would be permanently locked into the existing inequalities and imbalances – at the behest of one member of the WTO, which claims to operate by consensus.
Much is at stake this December in Buenos Aires. Yet the outcome will depend on the pressure brought by various stakeholders on their governments as they shape policy positions in advance of the actual Ministerial. Some are even saying that a “mini-Ministerial,” in October in Morocco will be the main decision-making moment. Business interests are sure to weigh in with governments. Will civil society – trade unionists, environmentalists, public interest and development advocates – do the same? And most importantly – will governments, facing upheavals domestically and uprisings at the polls – follow their corporate masters or act in the interest of their citizens and change course at the WTO?
Deborah James is the Director of International Programs at the Center for Economic and Policy Research (www.cepr.net) and coordinates the global Our World Is Not for Sale (OWINFS) network (www.ourworldisnotforsale.org) of civil society organizations working for a sustainable, socially just, and democratic multilateral trading system.