2008 is crunch time for global trade talks and Pascal Lamy, Director-General of the World Trade Organisation, argues that the WTO has become key to the ambition of developing countries to change the rules of international trade.

A startling transformation has shaken the development and trade communities in recent years, the results of which could herald a new paradigm in alleviating poverty and raising living standards in the developing world.

The dawn of the 21st century brought profound changes in the orientation of the trading system and the last decade has seen developing countries take their rightful place at the front line of activity in the World Trade Organisation. China, Brazil, India, Indonesia, South Africa, Argentina, Egypt, Mexico and many other developing countries have more say in the WTO than ever before. These, and other countries, have formed powerful groups like the G-20, the African Group, the Least Developed Countries Group, the G-33, the Africa, Caribbean and Pacifi c Group or the Cotton-Four, in which information, analysis and strategy are shared. Such groups give collective might to developing country positions in trade negotiations and ensure that even small delegations from very poor countries have their voice heard in all important forums.

Thanks to a dramatic increase in expenditure in technical assistance, negotiators from developing countries have gained a far better understanding of how to participate most effectively in negotiations, and ensure the establishment of positions aimed at bringing maximum returns from the trading system.

As a result the views of developing countries – which today comprise roughly three-quarters of the WTO membership – carry unprecedented weight, arguably unmatched in other comparable international organisations.

At the WTO, we do not vote. We seek consensus, and this gives each member an extraordinary capacity to protect its national interests. Governments must weigh all the competing perspectives among their constituencies and decide the way forward. This means listening to corporations certainly, but it also means listening to trade unions, development activists, health care NGOs and environmental groups. Civil society groups were the driving force behind important WTO decisions: to improve access to essential medicines; to commence negotiations aimed at cutting fi sheries subsidies; to eliminate export subsidies; and to seek ambitious results in cutting trade distorting subsidies in rich countries for products such as cotton, subsidies which have proven so harmful to African agriculture.

The WTO’s dispute settlement system has consistently supported the rights of governments to take actions to protect the health and safety of persons, animals and plants. An important body of jurisprudence now makes clear that governments can employ measures to protect this health, provided they do so in a way which does not discriminate against foreigners.

A recent book by Vanderbilt University researcher Trish Kelly, The Impact of the WTO: Environment, Public Health and Sovereignty, supported this, concluding that the WTO constitutes no threat to national environment and health policies.

And so the trade paradigm has shifted; the arguments have changed. Nowhere is this more evident than on the question of development. For decades arguments raged over whether development was best fostered through aid or trade. Many development advocates resisted the notion that trade openness could provide benefi ts for developing countries. Most believed that the international trading system was skewed against the interests of developing countries, and a large segment of the development community believed the World Trade Organisation was part of the problem, not part of the solution.

Today, we know that the question is not aid or trade, but how to deliver gains from both aid and trade in the most effective manner. Trade provides the most sustainable means of economic development, but many countries lack the capacity to trade. This can mean limited productive capacity, diffi culty in meeting technical standard requirements for exports to rich countries, inadequate infrastructure and outdated customs practices. Aid for Trade, in which the WTO has a co-ordinating role, and involving numerous governments and international and regional donors, has given us a foundation for addressing these capacity shortfalls. DFID’s excellence and long experience in this area makes it a benchmark against which many donors will measure themselves. Total Aid for Trade Disbursements (from individual donors, international organisations and regional development banks) came to $15.4 billion in 2004. Together with our partner countries and other institutions, we aim to raise this figure to $25 billion in 2010. We are establishing enhanced monitoring and evaluation mechanisms so that countries pledging funds for trade capacity are held to account.

We know, too, that openness can unlock wealth creation which, when distributed equitably through sound domestic policies, can be a powerful tool for poverty alleviation. In the last 15 years we’ve seen China, India, Brazil and Vietnam – to name only a few – lift hundreds of millions of people out of poverty. We’ve seen the extraordinarily rapid rise of these countries, and others, into important actors in the global economy, thereby changing the geopolitical landscape in ways we could never have imagined even two decades ago.

We also know that in many respects development activists were right when they said that the trading system did not adequately address the concerns of developing countries. A trading system which permitted rich countries to distort trade in agriculture through subsidies and high tariffs, drove developing country farmers from the land, and kept competitive exports from developing countries out of rich country markets, was inequitable and unsustainable. A trading system in which the highest industrial tariffs levied in rich countries were against precisely the sort of products in which the poorest countries were most competitive, was far from fair.

Which brings us to criticisms of the World Trade Organisation. As the guardian of a system which permitted such trade distortions, some of the criticism of the WTO from the development community rings true. Yet, increasingly, development ministries and activists have come to see that the WTO not only provides developing countries a voice, but hands them a tool for changing the rules of international trade to better meet their needs.

The launch of the Doha Development Agenda in 2001 was an acknowledgement by all WTO members – developed and developing – that the development dimension of trade needed to be better refl ected in the rules. At Doha, WTO members also agreed to clarify the WTO’s agreement on intellectual property protection (known as the Trade-Related Intellectual Property or TRIPS agreement), to emphasise the right of governments to employ measures needed to deal with public health crises – even if that means requiring pharmaceutical patent holders to extend licenses to producers in the importing country. In 2003, members agreed to allow those countries without the capacity to produce such generic drugs, the right to import the drugs from other, cheaper, producers.

These steps, later incorporated into the TRIPS agreement in the form of an amendment, have helped make it far more affordable for developing countries to obtain medication for AIDS, malaria, tuberculosis and other pandemics.

Launching a round is, in itself, an extraordinarily difficult achievement. The Doha Ministerial Declaration, the framework for our negotiations, has been advanced by subsequent agreements among WTO members in August 2004 and in December 2005. With these accords, members have agreed to substantially cut trade distorting subsidies (and to cut cotton subsidies further still), to deeply slash industrial tariffs – particularly on products of interest to developing countries – to open markets for the poorest countries, so that at least 97% of these exports will be imported into rich countries without facing duties or quotas.

Emerging developing countries will be opening their markets to a lesser extent than developed countries, and the poorest countries will not be required to cut their tariffs or their subsidies at all. In all, the negotiations comprise some 20 negotiating topics of importance to developing countries including trade in services, deep cuts in fisheries subsidies, opening of environmental goods and services markets, improved anti-dumping rules and improved rules for customs procedures which would sharply reduce delays at borders which have proven so costly to businesses in Africa, Asia or Latin America. And there is the promise of enhanced technical assistance for developing countries to provide the capacity to turn trading opportunities in the reality of greater export-driven growth.

The negotiations are now at an extremely delicate stage. Negotiating texts on the table would slash rich country subsides to agriculture by at least two-thirds, while farm tariffs in rich countries would be cut by an average of at least 54%. Moreover, the biggest subsidisers would have to cut their support the most, while the highest tariffs on farm imports would face the deepest cuts. Developing countries would have smaller cuts and would be able to shield a portion of their agriculture tariffs from full cuts.

On industrial goods, developed countries would cut their highest tariffs by the biggest margins. This is significant because in most cases these high tariffs are applied to goods like textiles, clothing, footwear and leather products, which are manufactured competitively in the developing world. Advanced developing countries would also have to make a contribution by providing some real market access.

All of this would take us far beyond what any other international trade round has ever brought home for developing countries. But difficult negotiations lie ahead in which the major players must go the final mile to make top-up offers in reducing farm subsidies, farm tariffs and industrial tariffs if this is to succeed. Services negotiators seeking to open up trade for telecommunications, office services, banking and distribution, must engage more intensively to strike the compromises essential to securing an agreement on trade in services. Rich countries need to be more forthcoming on permitting foreign service providers from developing countries to send sales representatives, after sales service staff, engineers and doctors across borders for specific assignments. Make no mistake, there can be no agreement in the Doha round unless a deal is struck on a sound services package.

Major actors like Prime Minister Brown, President Bush, President Mbeki, President Barroso, President Lula, Prime Minister Singh and Chancellor Merkel have all called for a deal to be done in 2008. For that to occur, a breakthrough on agriculture and industrial goods trade must happen soon. Failure to strike a deal this year may consign the negotiations to the back burner, and the much needed development-oriented reforms to the trading system would have to wait – again.

The last decade has proven that the WTO and the multilateral trading system can be, indeed must be, part of the solution. But if we are to truly deliver on the promise all governments undertook at the WTO’s creation to promote sustainable development then an ambitious, development-oriented Doha deal must be agreed. History will be a very cruel judge of us all should we fail.

Pascal Lamy Pointers

• “Development activists were right when they said the trading system did not address the concerns of developing countries.”

• “A trading system which permitted rich countries to distort trade in agriculture through subsidies and high tariffs, drove developing country farmers from the land and kept competitive exports from developing countries out of rich country markets was inequitable.”

• “Developing countries comprise roughly three-quarters of the WTO membership and carry unprecedented weight in the WTO, unmatched in other comparable organisations.”

• “Activists have come to see that the WTO not only provides developing countries a voice, but hands them a tool for changing the rules of international trade to better meet their needs.”

• “Negotiating texts now on the table would slash rich country subsidies to agriculture by two-thirds, while farm tariffs in rich countries would be cut by more than half.”

• “If we are to deliver on the promise undertaken at the WTO’s creation, to promote sustainable development, then a development-oriented Doha deal must be agreed.”