Pascal Lamy Holds Court at the Oriental

Pascal Lamy Holds Court at the Oriental
Walden Bello
and Chanida Bamford
Focus on Trade No. 86, April 2003

On April 1, 2003, in what was described as an effort to "reach out" to civil society,
European Union Trade Commissioner Pascal Lamy met with representatives of
several Bangkok-based NGOs at the riverfront Oriental Hotel. While the meeting
did not produce fresh revelations on the ongoing World Trade Organization
(WTO) negotiations, it nevertheless yielded interesting insights on the EU's
negotiating perspective, strategy, and tactics.

The Harbison Draft: A Tactical Blunder

Not surprisingly, agriculture dominated the agenda of the brief one-hour meeting.
Lamy had few nice things to say about the draft agreement on agriculture
prepared by chief agricultural negotiator Stuart Harbinson. With negotiators in
Geneva missing the March 31 deadline for agreement on the modalities of a new
agreement, Lamy put the blame squarely on Harbinson, whom he charged with
committing a "tactical mistake" for being "too precise" in his proposals for
liberalization "at this stage of the discussion". This was obviously referring to the
tariff and subsidy cuts that Harbinson proposed, which the EU considers too
deep.

"We don't like the Harbinson draft", Lamy declared flatly, and he went on to cite
two reasons. "First", he said, "it does not take into account non-trade concerns,
such as sustainability, the link to the environment, rural landscape, and animal
welfare. In agriculture, you do not just produce a commodity but also a service, a
collective good that doesn't belong to just anybody, which means you need not
just trade policy but public policy". The EU, in short, is not retreating on its stand
on "multifunctionality".

The second reason cited by Lamy was Harbinson's lack of flexibility in dealing
with EU subsidies and other forms of domestic support. According to him, the
draft failed to recognize several trends. One, that EU export subsidies are one-
fourth of what they were ten years ago. Two, that the EU offer is substantial - "fifty
per cent reduction in domestic support, fifty per cent reduction in export
subsidies, and increasing market access by one third". Third, the Harbinson
draft does not reflect appreciation of the fact while the US has been moving
towards "market distorting" mechanisms to support its farming interests, the EU
"has been moving towards non-trade distorting forms of subsidization by
adopting Green Box measures like direct payments to farmers decoupled from
production".

Was there anything positive in the Harbinson draft? Yes, said Lamy, pointing to
what he called the "food security box". This proposal would allow developing
countries to list a few "strategic products" which would be subject to less tariff
reduction than other agricultural products. Unlike Lamy, it might be noted, many
developing country representatives have dismissed it as a feeble concession
that cannot balance the detrimental consequences of the comprehensive
liberalization that their agricultural sectors will undergo.

Lamy was at pains to paint EU agriculture as sharing a similar dilemma as many
developing economies. He claimed that like many developing economies, the
EU was largely an importer when it came to agriculture. "We only export a bit",
he claimed, implying that the impact of its domestic support and export subsidies
on global markets was limited.

Exploiting Developing Country Differences

He went on to assert that two camps of developing countries had developed in
the current agricultural negotiations: the big agro-exporters that were members of
the Cairns Group and the other developing countries. "There's Brazil, on the one
hand, and there's India", he said. Brazil and Thailand were painted as strong
promoters of liberalized trade, which Lamy doubted was in the interest of other
developing countries. African countries, he claimed, "could not live with
liberalized trade in agriculture".

While Lamy claimed that there "has to be a compromise between these two
camps", in fact, the EU has moved quickly to exploit the conflict to fortify its
negotiating position. On February 28, the EU, Norway, and Switzerland
presented a statement signed by many developing countries, including India,
endorsing a Uruguay Round formula for tariff cuts, which would provide more
leeway in protecting sensitive products than the Harbinson formula. According
to Focus on the Global South analyst Aileen Kwa, "this left the US and Cairns
Group stumped and feeling quite isolated in their pro-liberalization approach".

Moving to implementation issues, Lamy disagreed with the charge that the Doha
Declaration put implementation issues-the top agenda item for developing
countries-on the backburner. "In fact", he contended, "the Doha Declaration
integrated implementation issues for the first time as a central agenda item. This
was the big prize for the developing countries". He acknowledged, however,
that negotiations on implementation had not gone forward, but he put the blame
squarely on developing countries whom he claimed "could not agree on the top
two or five implementation issues to be discussed".

Managing Expectations

Asked whether the current round of negotiations was threatened with derailment
owing to lack of progress, Lamy affected not to be worried. On agriculture, he
said, "we are only halfway in the negotiations-we have till the end of 2004".
There were different rates of progress in the different areas under negotiations,
he said, with "some areas already one third done and others one two thirds
done". He cited the negotiations on Trade Related Intellectual Property Rights
(TRIPs) as "98 per cent complete, with all of us knowing what that remaining two
per cent is". This was a rather bizarre way of describing the way the US has
blocked any movement in negotiations with its demand that, contrary to the Doha
Declaration's broad intent, patent restrictions on the production and export of
drugs be lifted only for a few specified diseases.

Lamy, it seemed, was in the early stages of managing expectations about the
outcome of the Cancún Ministerial in September. A gap between the
expectations of significant new liberalization that the EU trade commissioner
himself has helped cultivate and actual meagre results would be a political
disaster that would practically stymie negotiations in all other areas after Cancún
and set the stage for the specter haunting Lamy and other free traders: the
reversal of globalization.

Copyright 2003 Focus on the Global South