New World Order and all its challenges

by Dilhan

Amidst the wreckage of the Ministerial Meeting of the WTO in July emerges a new world order in which the wealthy, normally unchallenged Western states see their might checked. The discussions ended in failure and 7 years of effort seem to have come to naught.

In spite of the somewhat arrogant accusations of Susan Schwab, it is clearly not the fault of the developing nations. India was held responsible by Ms. Schwab; yet the real culprit is most revealingly exposed by Burkina Faso’s trade minister, Mamadou Sanou. He pleaded that the cotton industry in his country faced “extinction”, exclaiming, “We can hardly control our anger. They wanted me to be here to negotiate on cotton. I have been here for 10 days and I haven’t been able to discuss cotton. There is a risk that the whole system will collapse in our country.”

US subsidies for their cotton farmers are acknowledged to be the cause of artificially depressed world cotton prices. These affect over 50 cotton producers, mainly poor African nations.

In comparison with Ms. Schwab’s protestations, the more intelligent summary of the debacle is in the concluding comments of Indian Commerce Minister, Kamal Nath. He stated to the media after the apparent failure of the Doha Development Round, “we have to correct the structural flaws in subsidies so that it stimulates investment in agriculture in developing countries. The greatest impediment to investment in agriculture in developing countries has been the subsidies, where investment is just not worth it.”

“The manufacturing industries in developing countries are getting more and more competitive, and as we all know, the manufacturing industries of the developed countries are getting more and more non-competitive. Now, to sustain the non-competitive industries of the developed countries, we cannot put at jeopardy the manufacturing sectors of developing countries,” said Nath.

The Europeans and Americans have a different view, believing as Richard Lambert, director general of the CBI, said: “It is particularly disappointing that India was unwilling to compromise, and was a catalyst for the breakdown of the talks.” That is an interesting perspective, only to be expected from stakeholders who are used to having their way. No deal is still better than a bad deal. As producers we thank India, and China which supported it, for its ‘inflexibility’ (as the US sees it). A more balanced viewpoint than Mr. lambert’s can be found in BBC Economics Editor Evan Davis’ commentary.

In a balanced article he writes,

But it would be wrong to lay all the blame for the failure of the talks at the feet of the US. It is true that diplomatically on the last day, it was the US refusal to move that precipitated the final collapse of the talks. It is also true that probably the agricultural subsidy that most egregiously breaches conventional economic logic is the American one for cotton farmers.

But the Doha round has been struggling with European agricultural policy for quite a while too. Not to mention the Japanese. And the OECD figures on support for farmers indicate the EU has subsidies (or equivalent support) that are far more important to European farmers, than the American subsidies are to theirs.

So it is not just the US who can be accused of lacking team spirit on trade.

In context of the massive US consumer support for the betterment of producers, for social justice and for environmental sustainability, the ‘US’ position is clearly not the ‘position of all citizens of the US’. The same applies for the EU Ministers’ position. That makes the issue of global injustice the official foreign trade policy of major developed countries. Perhaps they see in these rising upstarts, once conveniently poor and muted, too much of themselves. An Indian company is likely to be the new owner of the Hummer brand, one already owns Jaguar; the tables are turning and the failure of Doha will only delay the establishment of the new world order.

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