momagri’s remarks on the speech made by Pascal Lamy, Director General of the WTO, to the Economic and Social Committee.
This article is WOAgri’s observation on Pascal Lamy’s speech made to the Economic and Social Committee on 14th June 2006.
Pascal Lamy, director-general of the WTO, kindly agreed to answer questions from members of the ECS on current WTO negotiations.
Pascal Lamy introduced his speech by two very informative remarks of an institutional nature on how the WTO functions :
> The number of employees at the WTO (800) is a third of that at the OECD, although the missions of the former, without denigrating those of the latter, are just as important !
> His role as director-general is undefined and he finds himself working within a “vague, even erratic” framework!
“Sometimes a shepherd, sometimes a confessor, sometimes an orchestra conductor, sometimes a doctor”, any action he takes seems miraculous, especially when he hesitantly asserts the little real authority he has.
After this introduction and a history of the WTO, Pascal Lamy explained the different parameters of the equation that defines their action:
> economic growth,
> market efficiency,
> optimum allocation of production factors achieved through the liberalization of exchanges;
> creation of well being.
He then justified the theory behind its action, “the liberalization of commercial exchange leads naturally to an optimum allocation of factors of production, which is the basis of better market functioning and growth dynamics”..
These, according to Pascal Lamy, are the foundations of a theory, which, as we will see, do not take into account the disparities of social standards and work legislations! We will come back to this subject, which was the focus of several questions posed by the ESC members!
Turning to current negotiations, Pascal Lamy immediately confirmed that they were particularly difficult because an agreement could be reached only on condition that a consensus on the 20 major issues is obtained simultaneously from the 150 Member States.
To explain the difficulty of reaching this agreement, he gave three reasons:
> The range of subjects is much wider than negotiations in the past!
> Ambitions are much higher, notably concerning the reduction of agricultural subsidies (between 2 and 3 times higher)!
The WTO has thus adopted “a new method of calculation” for the reduction of custom duties: for 50 years, the technique of an average reduction was the rule, which enabled the Member States to reduce customs duties, a little or a lot, to their advantage, according to the import and export structure of the product.
Today, a rule demands that the highest custom duties be reduced to a greater extent.
> The demand for better justice within the system in favor of developing countries is declared in “Doha, the development round”.
Replying to critics of the WTO, Pascal Lamy claimed, “the WTO’s value lies in the very existence of the organization”, because if it did not exist, the world would be confronted with a void which would be detrimental to the peaceful resolution of trade conflicts!”
Finally, and before the questions started, Pascal Lamy reminded the audience of the importance of the end-of-June deadline, as negotiations must be finished before the end of the year, or the beginning of 2007 at the latest!
The members of the ESC (Jean-Claude Pasty, chairman of the WTO committee, Michel Fosseprez, chairman of Invivo and member of the cooperation group; Jean-Paul Bastian, FNSEA – National Federation of Farmers’ Unions; M. Boisgontier, small farmers’ confederation; Mme Pungier (FO); M. Coquillon (CFTC – French Confederation of Christian Workers); Mme Crozemarie (CGT – General Confederation of Labor); M. Duquesne, chairman of ATD Quart Monde…..) asked many questions to which Pascal Lamy sometimes replied with great prudence. Here are the most important ones:
Question : Is the WTO institution adapted to the complexity of current globalization, or is it still, as Pascal Lamy indicated when he was European Trade Commissioner, an “antiquated institution”?
Answer : The necessary modernization of the WTO is still on the agenda but will not be dealt with until after the end of the current round.
Question : Why are European partners still so demanding, after Peter Mandelson’s proposal in October 2006, seeing that they have not yet proposed anything similar themselves?
Answer : The role of director-general is neutral and he must therefore exercise certain reservations.
Question : Wouldn’t taking into account criteria such as the respect of social standards and of international labor laws, monetary under- or over-evaluations… in the simulations of the liberalization of exchange, create a fairer liberalization and therefore even a regulation of globalization?
Answer : The problem of coherence is a well-worn subject in international organization, which is based on the principle of the specialization of institutions. The possibility of an association between the OIT and the WTO has been examined by the Member States and finally rejected, because the developing countries were against it !
The mandate attributed to the WTO does not therefore take into account social data in trade negotiations. If this were the case, debates on the principles of comparative advantages would take a completely different turn!
As international organizations exist only because the sovereign Member States have wanted them (since the 1648 Treaty of Westphalia), it is therefore up to the Member States to give them coherent mandates! But according to the “transitivity of coherence”, if the Member States are coherent, the organization is also coherent!
On the question of monetary rates of exchange, Pascal Lamy believes that the under-evaluation or over-evaluation of currency has only a short-term impact on competitiveness whereas the WTO’s mission is long-term. This is therefore not an issue in itself!
Question : Are there no means of conserving cultural specificity, and the specificity of people’s right to feed themselves within the framework of the current liberalization of exchange?
Answer : Pascal Lamy repeated that the WTO’s leeway to act depended on the mandate it received from the Member States.
However, the current mandate makes no provision for specific treatment of either cultural or agricultural products
On the question of agriculture, Pascal Lamy insisted that there were two schools of thought at the WTO:
> the first believes that agriculture is the same as any other economic sector and that international competition must not be impeded by specific treatment for agriculture: the saying “may the best man win” well illustrates this philosophy!
> the second shows that the principles of international competition cannot be applied as such to agriculture because there are multiple externalities! The markets cannot adapt to the non-adjustment between supply and demand, the interactions of agriculture with the environment, food security….!
Although these two currents of thought are equally represented, it is interesting to note that the first belongs to countries with comparative advantages (e.g. the Cairns group), and the second to those who do not benefit from comparative advantages in the agricultural sector!
Question : Insofar as the major ethical challenge the world is facing is the eradication of extreme poverty, members wondered how the WTO could contribute to the respect of fundamental rights.
In this respect, it is important to remember that in 2001, every 7 seconds and in 2004, every 5 seconds, a child died of malnutrition or of an illness related to malnutrition. How, therefore, can we guarantee that the process of the liberalization of exchange will increase or at least not diminish people’s rights to the access to food?
Answer : The WTO, by reason of its mandate, has a sector-specific action, the opening up of exchanges, which can only further development!
Nevertheless, Pascal Lamy acknowledged that this opening up of exchange is necessary but not sufficient! Other situations must also be dealt with, within the perimeters of each international organization (FAO, WHO, OIT…)!
Question : Would the fact of evaluating all the practices that have a distorting effect on international trade on a global and not on an individual level, avoid unfair agreements, which divide the planet between the winners and the losers in negotiations?
In this respect, some public figures question the fact that the demand to reduce export subsidies and customs duties is not formulated on a common agreement, which would also include marketing loans or boards!
On this question of diversity of tariff or non-tariff barriers, Pascal Lamy confirmed that the different factors concerning member states would be taken into account.
The question of social dumping is more delicate because the different situations of the member states make it almost impossible to define this term, if we compare for example Canada and Bangladesh!
Finally, and logically, Pascal Lamy reminded us of the necessity to reflect on the future of the WTO, because if an institution such as this were to disappear, there would be no chance of regulating globalization!
WOAGRI’S COMMENTS :
WOAgri believes that Pascal Lamy is not unaware of the utility of the regulating globalization and understands that the director-general is in a somewhat uncomfortable position with regards to the number of reforms to be addressed in order to achieve this goal.
This is exactly why our movement is proposing to initiate this essential regulation through the assessment and rating of agricultural policies by a specific agency called the NAR Agency.
In accordance with the principles of the Vigéo, Moodys or Standards and Poors assessment agencies, the NAR Agency, on the basis of an economic model adapted to the specific character of agriculture1, and of indicators on the respect of different social and environmental standards… will publish recommendations on the “sustainability” of agricultural policies.
Thus, we believe that it is dangerous to wait until the “two schools of thought” concerning agriculture reach a consensus, which is very unlikely, on how to deal with the agricultural sector!
The men with hands-on experience, such as Xavier Emmanuelli, Luc Montagnier and Marc Gentilini know that it is necessary to tackle the problems of agriculture in a specific manner and not in the same way as in the industrial or service sectors! How in fact can we ignore the various consequences, resulting from the gradual disappearance of certain sections of subsistence farming in Africa, on the nutritional balance and the health of the populations concerned!
Why did the different States want a development round without first having thought about the consequences that the liberalization of exchange of agricultural products would have on the ability of people to feed themselves?
Our movement believes that it is urgent to act in favor of global action at the risk of exposing ourselves in the near future to a social divide concerning the development of globalization and liberalism.
With this approach, which involves challenging Europe to improve their proposals, without asking for compensation, WOAgri is sure that a skilful campaign of “brainwashing” will work towards this.
WOAgri therefore asked Pascal Lamy the following question: “why are Marketing Loans or Boards not included in the assessment of the distorting effects on international trade? He reminds us that he presented another negotiation strategy in April 2006 to ensure a better balance of opposing forces. It would be useful if Mr. Lamy acquainted himself with it!
We are therefore disappointed that the States have not made the modernization of the WTO a priority, which would give the Doha Round more chances of success!
Although WOAgri recognizes the WTO’s role of watchdog in the application of defined trade rules, their actions must aim at a vision of world policy.
This policy should aim at well being for all populations. It is completely false to believe that trade liberalism alone, which is bound to cause excessive price volatility, will provide a solution.
This price volatility can only cause a tenuous situation for producers, which is contradictory to the need to satisfy all food requirements on the planet!
It is high time, and we suggest to Pascal Lamy that we work together with the WTO, the FAO and the international institutions concerned, to define the principles of governance and regulation of agriculture on a world level. This does not require a mandate from the Member States because it is the direct responsibility of the director-generals of the WTO and the FAO to discuss future policies!
1 WOAgri’s team of economists is currently creating the NAR model.