The Guardian (London) | By Duncan Green | June 23, 2003
The world's trade bureaucrats seem gripped by acute historical amnesia as they prepare for September's global trade summit in Cancun, Mexico.
Both short and long term memory have been affected. Just 18 months ago, at the previous summit of the World Trade Organisation in Doha, they fell over themselves in promising a "development agenda" that would bring real benefits to poor countries.
They undertook to sort out global agriculture, which sees subsidised crops from Europe and America dumped on the world market with devastating impact for the 97% of the globe's farmers who live in developing countries; they would ensure that the poorest countries were not forced to pay through the nose for essential medicines; and they would deal with a long list of developing country complaints about WTO rules. Every deadline set in Doha has been missed, not one issue has been resolved, and the trade negotiators at the WTO headquarters in Geneva seem to have forgotten the "development agenda" entirely, reverting to business as usual horse trading based on economic and political clout. Long term memory loss seems even more acute. Blithely ignoring how they themselves developed, the EU - and in particular the British government - is now proposing a new WTO agreement on investment that would restrict other countries' abilities to follow the path to development.
A survey published today* of the history of now developed countries in North America, the EU and East Asia shows that when they were poor nations setting out on the road to prosperity, all of them imposed regulations on foreign investment in order to ensure that it contributed to their long term development.
These findings are particularly important because the main "demandeurs" of investment negotiations in the WTO - the EU and Japan - insist that the WTO "core principle" of national treatment (that is, that treatment of foreign investors should be no less favourable than that for domestic firms) should be a central aspect of any agreement.
Almost all of the now developed countries once restricted foreign investment. When it was permitted, governments placed requirements on incoming firms, such as obliging them to form joint ventures with local companies.
Only once domestic industry had reached a certain level of sophistication and competitiveness did governments move towards a greater degree of non-discrimination and deregulation. Such liberalisation is an outcome of development, not a cause.
British and European commission officials counter that any WTO investment agreement will be flexible, with developing countries allowed to discriminate in favour of locally owned industries where they need to. But since non-discrimination is a "core principle" of the WTO, however much flexibility is initially provided, there will be an inevitable tendency to chip away at developing countries' national policy space.
Despite the lessons of history and widespread opposition from developing countries, the EU is trying to bludgeon them into accepting an expansion of trade talks at Cancun to include investment and a number of other new issues. The danger is that this will provoke a collapse of the entire Doha round of trade talks - taking with it the crucial development gains that were promised in Doha but never delivered.
The WTO seems incapable of reaching agreement outside the diplomatic pressure cooker of summit meetings. The answer therefore has to be "shrink or sink". The EU should ditch its demands for the WTO's expansion and call for the Cancun summit to concentrate on agriculture, patents on medicines, and special treatment for developing countries. Until those issues are resolved, nothing else should be allowed on to the table.
A switch to this two-stage approach would stand a much better chance of delivering on development, could introduce new momentum into the negotiations and would be a clear signal of the commitment to making this a genuine "development round".
*The Northern WTO Agenda on Investment: Do as we say, not as we did, Ha-Joon Chang and Duncan Green, South Centre/Cafod, June 2003.
Duncan Green is a public policy analyst at the Catholic aid agency, CafodThe Guardian (London):
