GIFT Paper 4, Chandran Nair: Hong Kong and the WTO
Chandran Nair discusses the background, issues at stake, and points of contention in the sixth ministerial conference in the upcoming Doha round of talks, and how host Hong Kong may wish to approach them.

Background
Recent talks in Geneva have made some meaningful advances to free trade agreeing to eliminate agriculture-export support and other subsidies. Under the WTO deals, industrial tariff cuts will be made along sectoral lines with elimination in some specific industries. Wording in the ensuing agreements will be crucial. In late 2005, Hong Kong will play host to the next round of ministerial talks. Previous rounds in Cancun and Seattle have been marked by public statements of opposition by developing country representatives, international media frenzy (representing ideological positions) and the wave of civil resentment on the way that many of the trade issues currently under WTO’s jurisdiction have been handled. At the heart of the debate are the issues of fair share for all, sustainable development for the less developed nations, labour standards and the perception of environmental damage resulting from global free markets.

Civil society’s view
The premise of WTO Agreements are the principles of trade liberalisation, and the permitted exceptions. These include individual countries’ commitments to lower customs tariffs and other trade barriers, and to open and keep open services markets.

Civil society activists argue that the WTO is neither a democratic nor transparent institution with rules written by and for corporations with inside access to the negotiations. Arguments raised include the notion that WTO rules have hastened inequality between rich and poor countries by opening up the latter to foreign investment and thereby making it easier for production to go where the labour is cheapest and most easily exploited and environmental costs are low. This is borne out by the fact that, according to United Nations data, during the most recent period of rapid growth in global trade and investment (1960 to 1998) inequality worsened both internationally and within countries. The UN Development Program further reports that the richest 20 percent of the world's population consume 86 percent of the world's resources while the poorest 80 percent consume just 14 percent.

The WTO’s consensus basis is under keen scrutiny by civil society activists. It is a widely held view that numerous important decisions get made in a process whereby poor countries' negotiators are not invited to closed door meetings and many countries do not even have enough trade personnel to participate in all the negotiations or to have a permanent representative at the WTO. This reportedly severely disadvantages poor countries from representing their interests. The consensus reached in Geneva is seen as a step in the right direction but viewed again by many to be the result of tough positions taken by the developing nations in Cancun, principally China, India, Brazil, South Africa and Russia (the BRICS). In addition, many countries are too poor to defend themselves from WTO challenges from the rich countries, and change their laws rather than pay for their own defence.

Points of contention
Key issues that the WTO has to address to build true consensus amongst its members and to deflect the criticism of activists include the following:

Agriculture
Developed countries provide high domestic subsidies for export crops – many of which escape prosecution as ‘dumping’ cases under WTO rulings, and antitrust cases against transnational agribusiness pose little deterrent to these countries. Tariff escalation (the practice of increasing tariffs with the level of processing) and high import tariffs on processed and semi-processed commodities further impact on commodity-dependent countries unable to diversify into higher stages of the commodity values chain.

Fair Trade
Cash crops like coffee, cocoa, sugar and bananas represent the largest source of income for developing countries. A Fair Trade system based on cooperative economics, farmer empowerment, direct relationships, increased transparency in global trade and decreased power of purchasing monopolies, would guarantee fair prices and community empowerment.

Services
The General Agreement on Trade in Services (GATS) includes a list of about 160 public services that are open to privatisation including education, health care, energy and water. Privatisation i.e. the selling off of public assets - such as radio airwaves or schools - to private (usually foreign) corporations, to run for profit rather than the public good would favour those who could afford to pay for such services at the detriment of others less privileged.

Environment
WTO rulings are reportedly employed by corporations to dismantle hard-won local and national environmental protections, which are attacked as "barriers to trade." The first WTO panel ruled that a provision of the US Clean Air Act, requiring both domestic and foreign producers alike to produce cleaner gasoline, was illegal. The WTO has also declared illegal a provision of the Endangered Species Act that requires shrimp sold in the US to be caught with an inexpensive device allowing endangered sea turtles to escape. The WTO is attempting to deregulate industries including logging, fishing, water utilities and energy distribution, which it is argued could lead to further unsustainable exploitation of these natural resources.

Health care
Pharmaceutical companies’ 'rights to profit' have enjoyed WTO protection under 'Trade Related Intellectual Property' rights (TRIPs) against governments who would otherwise seek to safeguard their people's health by providing lifesaving medicines in countries in areas like sub-saharan Africa, where thousands die every day from HIV/AIDS. Developing countries won an important victory in 2001 when they affirmed the right to produce generic drugs (or import them if they lacked production capacity), so that they could provide essential lifesaving medicines to their populations less expensively. In September 2003, many new WTO conditions were agreed to that will make it more difficult for countries to produce those drugs.

Hong Kong and the WTO
Hong Kong will be in the spotlight late next year as the WTO MC6 members assemble to discuss the latest round of trade agreements. Whilst the economic details of the talks are crucial, there will be much attention on the debate on global free trade and the impacts on social equality. In the run up to the meeting, Hong Kong will play host to many pre-summit meetings, briefings and conferences. Many of these will focus on the issues highlighted above. Hong Kong and the HKSAR Government has an opportunity to shape these events so that Hong Kong is seen as more than just ‘hosting an event’ given its special relationship within China for whom the WTO issues are critical.

Before and during the meeting, many leading and outspoken NGOs will be in Hong Kong to present their views, and it is vital for the administrative parties to take this element into account. Whilst the focus will be on trade liberalisation, the social, environmental and labour dimensions of the debate will (as it has always been) undoubtedly be a rallying call for many of these groups. This is a particularly delicate and sensitive matter, and if not properly handled, could result in bad publicity and seriously affect Hong Kong’s international image.

In 1999, during the Seattle conference, the Los Angeles Times reported, "On the tear gas shrouded streets of Seattle, the unruly forces of democracy collided with the elite world of trade policy. And when the meeting ended in failure ... the elitists had lost and the debate had changed forever." It is prudent to be forearmed.

What is needed?
In summary, Hong Kong and the HKSAR Government need to be aware of the perils of ignoring the lessons of Seattle and Cancun. The following actions are recommended for a successful outcome for MC6:

• Thorough and sound understanding of the positions taken by the less developed countries (e.g. China, Brazil, India, South Africa and Russia) in relation to the impacts of trade and globalisation;
• Early engagement of NGOs representing the civil society views on global trade and the WTO’s role;
• Establishment of appropriate platforms in Hong Kong for the initial discussions and airing of opinions before the major debate begins;
• Clear channels of access between the various parties so that communication is transparent and unambiguous;
• Understanding and filtering of issues for both local and international deliberation in the ensuing talks; and
• Finding credible international “champions” who can build bridges between the various parties and facilitate consensus building before and during the meeting.

Through sound understanding and management of these issues, Hong Kong will be in a position to demonstrate, in a tangible manner, its commitment and contributions to the WTO as a full and separate member and underline the strength of it political stability since the implementation of the ‘One Country, Two Systems’ under the Basic Law. Furthermore in the eyes of the international arena, Hong Kong’s profile will be elevated, for the right reasons, and this will be an excellent opportunity to showcase Hong Kong as ‘Asia’s World City’ as MC6 becomes the focus of international media attention.