There is little to celebrate in Hong Kong.

After protracted negotiations, the European Union finally agreed to eliminate export subsidies by the end of 2013. But this is not enough. It should have been eliminated many years ago. The target date of latest 2010, acceptable by all others, would have been the minimum but that was not agreed to by the EU.

The Hong Kong outcome has not helped to lessen poverty caused by the high protection of developed countries’ markets and the massive subsidies that have led to years of dumping of artificially cheap agricultural products which have affected the products and livelihoods of farmers in the developing world.

The Hong Kong conference would have been more meaningful if there had been a decision leading to substantial cuts in total trade-distorting domestic subsidies to levels below the current or planned applied levels, and serious disciplines on the Green Box subsidies and their reduction, so that overall domestic support is really decreased. This did not happen.

There is little victory for cotton farmers in developing countries. While export subsidies will be eliminated in 2006, this constitutes only a small portion of the trade distortion. There is no action agreed for trade distorting domestic subsidies which amount to about USD 3.8 billion or 80-90% of total US support for cotton. Domestic subsidies also make up almost all of the European cotton subsidies.

The Hong Kong decision is miserly, and only endorsed the objective that, “as an outcome of negotiations, trade distorting domestic subsidies for cotton production should be reduced”. The African Cotton Producers Association’s response is that “there has not been any concrete proposal on the most essential request”.

Least developed countries (LDCs), who have been given unending rhetoric and whom this Ministerial was supposed to champion most, are left with far less than was promised. They asked for bound duty and quota free market access to rich countries’ markets for all LDC products and countries. The draft does not give a bound commitment. There is also an escape clause that countries having difficulties providing such market access shall provide access for 97% of products. This escape clause allows developed countries to continue to protect “sensitive products” that are of export advantage to LDCs, such as textiles and clothing, rice, sugar, leather products and fishery products. The LDCs are only given rights in areas where they cannot realise these rights.

On other special and differential treatment issues, there is no gain. Neither is there any progress on the developing countries’ proposals on implementation issues. Hong Kong confirmed that the “development issues” mandated in Doha have been put in a corner in a state of comatose.

The worst deal is in services and non-agricultural market access (NAMA). The controversial Annex C on services which did not receive consensus in Geneva, and which was hotly contested in Hong Kong (with most developing countries rejecting its key provisions for almost all the period of the Conference) fundamentally remains the same. It has steered the modalities of GATS negotiations towards the direction demanded by the European Union and other developed countries. New methods of negotiations (plurilateral, sectoral, modal) are agreed to that will erode the flexibilities available to developing countries to liberalise only in sectors they choose to and the extent they want to.

The alternative services proposal of more than 100 developing countries was not reflected in the Ministerial Declaration. The textual changes proposed by developing countries were rejected. The EU’s amendments were taken up instead. The result is that developed countries will intensify their efforts after Hong Kong for developing countries to be subject to pressure to liberalise in 19 broad-ranging service sectors.

In NAMA, the Swiss formula has been been confirmed by the Ministers. For the first time in the multilateral trading system, developing countries will have to be subjected to a tariff reducuction formula, and a harsh Swiss formula at that, and worst of all, on a line by line basis (affecting all products). The flexibilities and exemptions are minimal and even these are under threat. The treatment of unbound tariffs - using applied rates as the basis, which has never been done before and should not be done - has been adopted by the Ministers. These elements together spell a devastating effect on the industrial development prospects of developing countries.

The root of these problems is the intense pressures before and at Hong Kong that the developed countries placed on developing countries to further liberalise their agriculture, industrial goods and services sectors. Developed countries must stop these pressures and allow developing countries to have their own policy space and to take necessary measures to protect their domestic firms and farms in order to meet their sustainable development objectives. At Hong Kong the developing countries lost more policy space.

For more information, contact: Chee Yoke Ling twnet po.jaring.my