AFRICA ACTION
Africa Policy E-Journal
June 29, 2003 (030629)

US/Africa: Trade Wars, 1
(Reposted from sources cited below)

As President Bush prepares for his trip to Africa from July 7-11,
trade is high on the agenda. The official speeches during the trip
are sure to tout the mutual benefits of trade, as host countries
hope to gain additional access to U.S. markets. At the same time,
however, U.S. and African agendas are diametrically opposed on
most issues being considered by the World Trade Organization
which will hold its summit in Cancun, Mexico in September. The
trade summit is held every two years, with Cancun following four
years after Seattle's protests and two years after the meeting in
Doha that was labelled as beginning a "development round" of trade
talks.

Since Doha, in fact, the rich countries have fought a stubborn and
so-far successful battle to block advances on priorities laid out
by African and other developing countries, with the U.S. taking the
hardest anti-African and anti-development line. The details of
these debates are so buried in technical language and diplomatic
understatements that it is difficult to discern the issues at
stake, or the scale of the disagreements. Nevertheless, the
consequences, in areas ranging from agricultural subsidies to the
availability of generic AIDS drugs, are matters of life and death.
The casualties easily compare with those from more visible armed
conflicts. Clear statements such as the one below by Mali President
Amadou Toumani Toure, laying out the damage done to West African
cotton producers by international trade rules and calling for
compensation to be paid, deserve far wider attention.

This set of two e-journal postings focuses on key trade issues, by
highlighting recent African statements as well as analyses from the
Third World Network, a group that closely monitors global
negotiations on these issues. In order to cover a range of issues,
the e-mail version of these postings contains brief excerpts only
(as non-technical as possible) from a variety of documents. More
details can be found in the archived version of the postings (goto
http://www.africaaction.org/docs03/chr03.htm) or in links to other
websites.

These issues will also be among topics covered at a July 2 Briefing
for White House Press Corps and other media "Heart of Darkness: The
Truth about Africa Policy under the Bush Administration"

For recent speeches and documents highlighting official
perspectives on expanding trade, see the website for the African
Growth and Opportunity Act at http://www.agoa.gov as well as
the allafrica.com section on AGOA http://allafrica.com/agoa

The latest U.S. African Trade Profile, released in March, shows
U.S./African trade for 2002 down 15% over the previous year, with
both exports and imports declining
[see http://www.agoa.gov/resources/TRDPROFL03.pdf">

+++++++++++++++++end summary/introduction+++++++++++++++++++++++

(1) Double Standard on Subsidies - President Amadou Toumani Toure

While rich countries and international financial institutions press
for minimizing "market-distorting" government subsidies in African
countries, often at enormous human cost, the most massive
interference with international agricultural markets comes from
European and U.S. subsidies to rich farmers. This issue has gained
new attention in recent years, as the World Bank has critiqued rich
country governments and Europe and the U.S. have pointed their
fingers at each other's offenses. But there has been little
progress in changing this double standard.

West African cotton-producing countries have now filed a formal
complaint with the World Trade Organization for damages to their
cotton industries. In a statement submitted to the House
Inernational Relations Subcommittee on Africa last week, Mali
President Amadou Toumani Toure noted the damage done to African
agriculture around the continent by $300 billion of U.S. and
European subsidies. "We have decided to pull the alarm bell," he
said.

For additional background see:

Cultivating Poverty. The Impact of US Cotton Subsidies on Africa
http://www.africaaction.org/docs02/ag0209a.htm

Additional statements from the hearing, from Subcommittee Chair
Edward Royce and ranking Democrat Subcommittee member Donard Payne,
are available on the committee's website at
http://wwwa.house.gov/international_relations/afhear108.htm

- - -

Mali President Says Agricultural Subsidies Undercut Development

House International Relations Committee. Africa Subcommittee

June 25, 2003

U.S. and European agricultural subsidies have undercut the ability
of developing countries to export their products, weakened the
commodity prices on world markets, and severely undermined African
economies, Malian President Amadou Toumani Toure told members of
Congress June 24.

In written testimony presented to the House International Relations
Subcommittee on Africa, Toure said these subsidies paid by
developed countries to their farmers have been the major reason,
for example, for a "drastic" fall in world cotton prices. The
consequences of the subsides for developing countries have been
significant, he reported: Mali's GDP dropped 1.7 percent and
export receipts fell 8 percent in 2001; Burkina Faso lost 1
percent of GDP and 12 percent of export receipts; and Benin lost
1.4 percent of GDP and 9 percent of export receipts.

Toure cited cotton as an example of low prices created by subsidies
in developed nations having caused poverty, which he warned, "leads
to rural depopulation," unrest and terrorism.

"The paradox in the situation is that African producers can no
longer live on their cotton," he told the lawmakers, "which still
remains the most competitive product in the world."

Illustrating his point, Toure said "when the price of cotton was 35
cents a pound, in late 2002, the production cost was, on average,
47 cents a pound in Western and Central Africa against 73 cents a
pound in the United States. Production costs in Europe (Greece and
Spain) were even higher.

"African cotton-producing countries draw no profit from this
comparative advantage because international trade rules, as defined
by the World Trade Organization, are biased by the substantial
subsidies granted to European, American and Chinese cotton
producers," he said.

Those subsidies were estimated, in 2001, he said, at $700 million
in Europe, $2.3 billion in the U.S. and $1.2 billion in China.

"Facing the growing deterioration of our economies and the threats
on the survival of our cotton sector, we have decided to pull the
alarm bell" and seek "an equitable solution in favor of African
cotton producers," he said.

Toure said African leaders are "delighted" that the U.S. Congress
has come to understand the problem and has begun holding hearings
on the subject.

[The Malian President was referring to opening remarks by Ed Royce
(Republican of California), who chairs the Subcommittee on Africa.
Royce said that "no sector of the world economy ... is more laden
with rules, tariffs, quotas, subsidies and other government
interventions in the market than agriculture. While tariffs
worldwide average roughly four percent on industrialized goods, the
average on agricultural products is 62 percent." These tariffs
effectively shut out many African products, deterring investment in
African agriculture, he said. Farm subsidies, he said, "are another
hurdle," encouraging overproduction, depressing world market prices
and reducing the competitiveness of African agricultural products,
both domestically and as an export."]

Following are excerpts from the text of the Malian President's
remarks:

Written Statement by H.E. Mr. Amadou Toumani TOURE, President of
the Republic of Mali, to the International Relations Committee,
Sub-Committee on Africa, House of Representatives.

June 24th, 2003

...

More than 70% of our fellow-citizens live in rural areas, and if
the economy were to develop, it would surely do so through
agriculture. Agriculture is the backbone of Mali's economy. As
such, it stands for 42% of our country's GNP, and provides both
the government and communal authorities with 75% of our exports
receipts as well as a large portion of tax revenues.

That is why we are committed to make intensive agriculture the
driving engine of Mali's development.

Agriculture provides us with more than food. It is the source of
income for most of our 11 million fellow citizens. ... To put it
simply, a prosperous and profitable agriculture is absolutely
essential to enable Mali pursue her democratic development in
peace. That is why, my Government has placed agriculture and rural
development at the core of our economic development strategy, and
last year we increased our budget allocated to agricultural
development by 30%.

In underscoring Mali's case, I wanted to concretely illustrate my
talk. What you should retain from it is mainly the fact that I
could have said the same thing talking about Burkina Faso, Benin
and Chad: because the problem facing our cotton sectors is the
same.

...

A few years ago, cotton was a source of wealth for us. Nowadays, it
has turned into a burden, a factor of impoverishment. This trend
mainly worsened over the last three years, marked with a drastic
fall in world prices, which reached their lowest level, at 35 cents
a pound in late 2002. ,,,

Beside the macro economic impact of these losses in receipts caused
by subsidies in developed countries, it is worthy to note the
socio-economic repercussions on the 15 million people out of which
two million producers live directly on cotton. ... According to a
survey conducted by the International Cotton Advisory Board, the
withdrawal of US cotton subsidies shall increase Malian cotton
farmers' income by more than 31%, from $500 to $659 a year, a huge
amount in a country where very few people earn $1 a day. For the
Malian economy as a whole, that will generate a gain of more than
$55 million per year, a sum that is higher than the total value of
the United States' assistance to my country. ...

international trade rules, as defined by the World Trade
Organization, are biased by the substantial subsidies granted to
European, American and Chinese cotton producers. Those subsidies
were estimated, in 2001, to $700 million for Europe, $2.3 billion
for the USA and $1.2 billion for China.

Facing the growing deterioration of our economies and the threats
on the survival of our cotton sector, we have decided to pull the
alarm bell ...

A lasting settlement of the African cotton crisis shall be achieved
through:

1 -- A recognition of the strategic importance of cotton in our
development and in cutting poverty in our countries;

2 -- The total elimination of support measures to cotton production
and export;

3 -- The setting up in Cancun, by the 5th WTO ministerial
conference to be held from 10th to 14th September 2003, of a
system to gradually reduce and eventually totally eliminate -- all
cotton subsidies;

4 -- In appliance with the results of the Doha cycle, and until a
total withdrawal of subsidies, compensations to be paid to the
least advanced countries producing cotton in order to make up for
the losses they incur. ,,,

************************************************************

(2) African Trade Ministers Declaration

Meeting in Mauritius June 19-20, 2003, trade ministers of the
African Union re-affirmed African demands that the World Trade
Organization address development issues that have been stalled, and
rejected demands that the Cancun meeting in September move on to
new issues requiring further market liberalization.

The U.S. agenda for Cancun will be key behind the scenes, if not in
the public spotlight, on President Bush's Africa trip. As for
previous WTO meetings, the pressure from the U.S. and Europe to
divide African and other developing countries and push through new
agreements will be enormous. [On Seattle and Doha, see, for
example: http://www.africaaction.org/docs99/wto9912.htm and
http://www.africaaction.org/docs01/wto0111.htm">

- - -

African Ministers Affirm Opposition to New Issues in Cancun
by Tetteh Hormeku, TWN-Africa
Grand Baie, Mauritius, 20 June, 2003

Third World Network Africa http://www.twnafrica.org

See also statement from Civil Society Organizations present at the
Mauritius meeting:
http://www.twnafrica.org/news_detail.asp?twnID=372

African Union ministers of trade, meeting in Mauritius, have
re-affirmed the long-standing position of African countries that
the forthcoming Cancun Ministerial Conference of the World Trade
Organisation (WTO) should focus on addressing their developmental
concerns in the existing agreements, instead of starting
negotiations for new agreements, particularly on the so-called
Singapore issues i.e. of investment, competition, government
procurement and trade facilitation.

In a declaration adopted unanimously in Grand Baie, Mauritius, on
Thursday June 19, the trade ministers noted that "WTO members do
not have a common understanding on how [the Singapore issues]
should be dealt with procedurally and substantively." ...

At the same time, the Ministers focused attention on the missed
deadlines in the current negotiations on issues such as
agriculture, TRIPS and public health, special and differential
treatment and implementation-related issues. ... a diverse range of
speakers - Ministers, representatives of sister groupings like the
ACP group of countries, as well as African civil society
organisations -- all urged unity around a common African position
as necessary to ensure that the core concerns of Africa prevailed
in Geneva and Cancun, whatever pressures are brought to bear on
these countries.

The Ministers stated that agriculture was of critical importance to
Africa's development, with the potential to "lift millions of our
people" out of poverty. They added that progress in the
agricultural negotiations was essential for the successful
conclusion of the Doha work-programme, and strongly urged members
to fulfil their Doha commitments. Ministers also noted the need for
African countries to continue to enjoy agricultural trade
preferences, calling for action to address the erosion of these
preferences. Finally, they called for LDCs to be exempt from any
obligations to reduce tariffs.

In relation to services, the Declaration charged the Services
Council (of the WTO) with failure to satisfy the requirement in the
General Agreement in Trade in Services (GATS) to carry out an
assessment of trade in services. Furthermore, in a clear reference
to the pressures from developed countries to liberalise their
service sector against their will, the Ministers called for due
respect for their rights to regulate trade in services and
liberalise according to their national policy objectives. ...

On the Doha mandate regarding measures to enable countries which
lack manufacturing capacity to access medicine for public health,
the Ministers re-stated their support for their compromise deal
reached in December last year, and wrecked by the United States.
This deal, they added, still remains a means for members to fulfil
their obligations as required by the Doha declaration.

For industrial tariffs, the Ministers stated the objectives of the
negotiations as being to facilitate the development and
industrialisation of African countries. ...This required, among
others, fulfilment of the principles of special and differential
treatment, as well as the principle that developing and least
developed countries must not make full reciprocal commitments to
reduce their tariffs. ,,,

The Ministers also expressed deep concern that the proposed
modalities for liberalisation do not take into account the
vulnerabilities of African industries, especially in clothing,
fisheries and textile sectors, as well concern of African countries
over the erosion of their trade preferences. They called for
appropriate modalities to address these concerns. ...

In his welcome address to the Ministers, Honourable J Cuttaree,
Minister of Industry and International Trade of the Republic of
Mauritius asked Ministers to draw their strength and decision of
purpose from their unity in order for Africa's pressing concerns
over the core issues of the Doha agenda to be recognised in Geneva
and Cancun.

He reminded ministers that nineteen months after the hope and
optimism evoked with the launch at Doha of trade negotiations under
the "title of Development Round", the development agenda is
stranded in missed deadlines. ...

Cuttaree stated that "had the WTO been effective in finding
expeditious solutions to the problems of TRIPS and Public Health,
we should have seen an improvement for millions of people in Africa
who are suffering from deadly diseases". Nor have African countries
had any comfort "on their basic concerns in the areas of special
and differential treatment, agriculture, and textiles.

He pointed to the double standards at play in the area of
industrial tariffs. Here, proposals to drastically cut and
eliminate tariffs, which African countries have already declared a
recipe for disaster, are being pursued by countries that had
themselves used this instrument in the early stage of their
industrialisation process. "Having used the ladder for so long, it
is not fair that they should kick the ladder off to the detriment
of our countries". ,,,

African civil society organisations, who for the first time were
allowed to meet under the auspices of the conference and to address
the Ministers, underscored their support for the collective effort
of the Ministers for international trade rules which reflected the
needs and interests of the people of Africa.

In their statement, presented on their behalf by Jane Ocaya-Irama
of Uganda, the civil society organisations called on the Ministers
to focus on addressing the inequities of the existing agreements of
the WTO, and reject any attempt to launch negotiations on the
Singapore issues in Cancun. They made detailed recommendations for
redress of imbalances in areas such agriculture, TRIPS, services,
S&D.

In addition they drew attention to the undemocratic, and
untransparent processes of the WTO, and called for the elimination
of such abusive practices such as exclusive informal meeting, mini-
ministerials, and such other untransparent devices as "friends of
the chair". ...

The very presence of civil society organisations formally at the
gathering of Ministers and the fact that they addressed their
concerns directly to the Ministers was a welcome precedence for AU.
But while the civil society organisations lend support to the
Ministers, it was clear that their demands were stronger, and went
far beyond what the Ministers were able to adopt in their
Declarations. ...

+++++++++++++++++++++Document Profile+++++++++++++++++++++

Date distributed (ymed): 030629
Region: Continent-Wide
Issue Areas: +economy/development+ +US policy focus+

************************************************************
The Africa Action E-Journal is a free information service
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************************************************************

AFRICA ACTION
Africa Policy E-Journal
June 29, 2003 (030629)

US/Africa: Trade Wars, 2
(Reposted from sources cited below)

As President Bush prepares for his trip to Africa from July 7-11,
trade is high on the agenda. The official speeches during the trip
are sure to tout the mutual benefits of trade, as host countries
hope to gain additional access to U.S. markets. At the same time,
however, U.S. and African agendas are diametrically opposed on
most issues being considered by the World Trade Organization
which will hold its summit in Cancun, Mexico in September.

This set of two e-journal postings focuses on key trade issues, by
highlighting recent African statements as well as analyses from the
Third World Network, a group that closely monitors global
negotiations on these issues. In order to cover a range of issues,
the e-mail version of these postings contains brief excerpts only
(as non-technical as possible) from a variety of documents. More
details can be found in the archived version of the postings (goto
http://www.africaaction.org/docs03/chr03.htm) and in links to other
websites.

Trade issues will also be among topics covered at a July 2 Briefing
for White House Press Corps and other media "Heart of Darkness: The
Truth about Africa Policy under the Bush Administration"

Another posting for today contains (1) a speech by Mali President
Amadou Toumani Toure, (2) a report by TWN Africa on the most recent
African trade ministers' declaration. Below are excerpts from
analyses on several other topics, including genetically modified
food, patenting of life forms, and opposition to opening new
negotiations on a WTO investment treaty,

+++++++++++++++++end summary/introduction+++++++++++++++++++++++

(3) Genetically Modified Food and African Trade

In the leadup to his Africa visit, President Bush has repeatredly
attacked European countries for promoting hunger in Africa by
discouraning African access to genetically modified food products
(GMO) exported by the United States. Even apart from issues of
safety and damage to local seed varieties, however, a new empirical
study distributed by Third World Network - Africa discounts the
claims of GMO agriculture proponents that their products contribute
to increased food supplies.

The study by Aaron deGrass, entitled "Genetically Modified Crops
and Sustainable Poverty Alleviation in Sub-Saharan Africa: An
Assessment of Current Evidence," evaluated GM cotton, sweet
potatoes, and maize, in terms of their effectiveness and
environmental sustainability under African conditions, particularly
in Kenya and South Africa. He concludes that in these cases
promotion of these crops is based not on evidence but on marketing
by the leading producer Monsanto and its allies.
See http://www.twnafrica.org/docs/GMCropsAfrica.pdf

For additional background on the U.S. trade challenge to Europe on
genetically modified crops, see the Global Trade Watch report at
http://www.citizen.org/publications/release.cfm?ID=7248
On GM crops and hunger, see
http://www.actionaid.org/ourpriorities/foodrights/gmtechnology/
gmcrops.shtml [type URL on one line]

***********************************************************

(4) Patenting of Life Forms

African countries have taken the lead in arguing against the
application of intellectual property rights to patenting life
forms, and proposed alternate measures to protect rights to
traditional knowledge and biological diversity. The Third World
Network Info Service summarized new developments in the debate.

The full paper, distributed on June 11) is available on the
website of the Third World Network (http://www.twnside.org.sg).
Key excerpts on the African position are included here.

TRIPS (Trade-Related Aspects of Intellectual Property Rights)
Council Debates Patents on Life, Traditional Knowledge and
Article 27.3(b)

By Martin Khor, Third World Network Geneva, 6 June 2003

The World Trade Organisation's TRIPS Council on 4-5 June debated
proposals on the three interconnected issues of the review of
article 27.3(b) of the TRIPS agreement (dealing with biological
materials), traditional knowledge and folklore, and the
relationship between TRIPS and the Convention on Biological
Diversity (CBD)....

The Africa Group reiterated its position that the TRIPS Agreement
should be amended to prohibit patents on all life forms, as such
patents are contrary to the moral and cultural norms of many
societies. It also stressed that the requirement to protect
plant varieties should not in any way undermine but support
Members' rights to public goals such as food security and poverty
elimination. There is thus no basis to require Members to adopt
inappropriate regimes for plant varieties protection.

It proposed that the WTO adopt a Decision on Traditional
Knowledge which would establish a WTO Committee on traditional
knowledge and genetic resources to oversee the protection of
traditional knowledge and enforcement of rights of WTO Members.

The Group expressed concern that the review of TRIPS Article
27.3b has not been finalized and that the deadline of December
2002 set at Doha had passed. Protection of genetic resources and
traditional knowledge will not be effective unless international
mechanisms are established within the TRIPS framework. Other
means, such as access contracts and data bases for patent
examination, can only be supplementary to such international
mechanisms which must contain an obligation on members
collectively and individually to prohibit and prevent
misappropriation of genetic resources and traditional knowledge.

"Patents on life forms are unethical and the TRIPS Agreement
should prohibit them through modifying the requirement to provide
for patents on micro-organisms and on non-biological and
microbiological processes for the production of plants and
animals. Such patents are contrary to the moral and cultural
norms of many societies in Members of the WTO." ...

On possible areas of agreement, the Group wishes that delegations
confirm a common understanding on the following:

* Members have the right and freedom to determine and adopt
appropriate regimes in satisfying the requirement to protect
plant varieties by effective sui generis systems. Such regimes
may draw upon the ITPGR, the CBD, UPOV 1978 and the Africa Model
Legislation on protecting local communities, farmers and breeders
and the Regulation of Access to biological resources. Systems of
protection should address local realities and needs. The Africa
Model Legislation and Regulation of Access is one example of a
sui generis system which was developed to protect the rights and
knowledge of farmers, indigenous peoples and local communities,
in a manner suiting the circumstances of Africa.

* The non-commercial use of plant varieties and the system of
seed saving and exchange as well as selling among farmers, are
rights and exceptions that should be ensured as matters of
important public policy to ensure food security and preserve the
integrity of rural or local communities.

While the legitimate rights of commercial plant breeders should
be protected, these should be balanced against the needs of
farmers and local communities. Any sui generis system should
enable Members to retain their right to adopt and develop
measures that encourage and promote the traditions of their
farming communities and indigenous peoples in innovating and
developing new plant varieties and enhancing biodiversity. ,,,

* Traditional knowledge and inventions of local communities
should be protected. It is important to develop international
mechanisms ensuring equity in the use of genetic resources and
traditional knowledge through appropriate international
arrangements to supplement domestic laws and measures.

* Genetic resources and traditional knowledge should be
documented to assist searches and examining novelty and inventive
step.

...

On areas of disagreement, the Africa Group proposes the
following:

* Patenting life forms: The Group maintains its reservations
about patenting any life forms. It proposes that "Article
27.3(b) be revised to prohibit patents on plants, animals,
micro-organisms, essentially biological processes for the
production of plants or animals, and non-biological and
microbiological processes for the production of plants or
animals." ...

* Misappropriation of genetic resources and traditional
knowledge: Such misappropriation has taken the form of
obtaining patents in developed countries inconsistent with the
will of the communities and countries that have sovereignty over
the resources.

The Group paper noted efforts such as developing access contracts
and databases for patent offices (used to examine patent claims
for novelty, inventiveness and usefulness) that are being
undertaken in WIPO but considered them inadequate as these do not
amount to effective international mechanisms. ,,,

Where any invention is derived from traditional knowledge or
based on in situ genetic resources of any member, then no
intellectual property rights shall be granted in any member
unless CBD requirements have been fully complied with. Members
shall require in their laws that any IPRs granted in breach of
this Decision shall be cancelled forthwith. No IPRs shall be
granted without recognition of the traditional knowledge
involved. ...

************************************************************

TWN Info Service on WTO Issues (June 03/5) 13 June 2003

NGOs Voice Opposition to WTO Investment Negotiations

by Kanaga Raja, Geneva 10 June 2003

A new global investment agreement proposed for negotiations at
the WTO could inflict lasting damage on the livelihoods of poor
people in developing countries, says a new report by the UK-based
development agency ActionAid.

In its report "Unlimited Companies" released here Tuesday,
ActionAid said that an investment agreement at the WTO would
carry huge risks for the world's poorest people and called on the
EU to drop its insistence on such an agreement.

[The ActionAid report is available on the ActionAid website at:
http://www.actionaid.org/newsandmedia/agreement.shtml">

It also recommended that in the run-up to the Cancun Ministerial,
developed countries should not attempt to persuade developing
countries to trade off their interests with regards to investment
in the hope of gaining in other areas such as agriculture.

Instead of a WTO investment agreement, the international
community should support the establishment of a binding
international regulatory framework on multinational corporations,
outside the WTO, that will strengthen the ability of developing
countries to manage foreign investment to benefit the poor.

The ActionAid report was released just as the WTO Working Group
on the Relationship between Trade and Investment (WGTI) is
holding its final meeting here on 10-12 June before the 5th
Ministerial in Cancun.

At a press briefing on 10 June, three other other
non-governmental organizations Third World Network, the Center
for International Environmental Law (CIEL) and the International
Union of Foodworkers joined ActionAid in calling for a stop to
efforts and pressures towards a WTO investment agreement.

According to the NGOs, the WTO members have been divided in their
views on virtually every issue that has been discussed at the
WGTI. They said that it was clear that no consensus exists on if
or how to approach the issue of whether to begin negotiations on
investment.

Steve Porter, lead attorney for CIEL, said, "At the beginning of
the final scheduled meeting of the WGTI, we are of the view that
in moving towards Cancun, there does not appear to be any
consensus, let alone an explicit consensus, on how to move
forward on investment negotiations at the WTO."

Peter Rossman of the International Union of Foodworkers,
representing 12 million workers in 142 countries, said that in
the international labour movement there is a divergence of views
on the inclusion of an investment agreement at the WTO but a
consensus exists that the current proposals within the current
framework at the WTO must be opposed.

Rossman explained that many global trade unions under the Global
Unions Group, had taken a joint position that investment
agreements should exclude provisions on expropriation and
national treatment as they limit the scope to pursue development
strategies. "The current proposals at WTO fall far short. As
things stand, we cannot support trade ministers in Cancun giving
a green light to commencement of negotiations on investment at
the WTO."

Goh Chien Yen of the Malaysia-based Third World Network said that
NGOs around the world have been voicing their demand that
negotiations on investment not begin in the WTO. He said that at
the discussions in the WGTI, it was clear that there has not been
agreement among the WTO members, nor has the "clarification of
issues" mandated at Doha been adequately carried out.

This lack of agreement applies to all the issues, including on
scope and definition of investment; whether the
non-discrimination principle should apply in investment,
development considerations; and how disputes should be settled.

Since this is the final meeting of the WGTI before Cancun, it is
important to recognise that there is a lack of convergence of
views on these different elements of a potential investment
agreement and that insufficient work has been done on the
implications for developing countries.

He highlighted a divergence of opinion even on the most crucial
issues of scope and definition. Some developed countries have
been asking for a very broad definition that includes not only
FDI but also portfolio investment, whereas the developing
countries have been demanding that the definition be kept narrow.
Given the experience of developing countries with financial
instability, a very broad definition of foreign investment could
lead to financial difficulties in these economies.

Many countries have questioned whether the WTO is an appropriate
forum for an investment agreement. They have argued that the
application of the WTO principles of national treatment and MFN
may be useful for trade in goods, but is inappropriate and should
not be extended to investment which is a different entity
altogether.

He pointed out another area of disagreement: some countries like
India, Pakistan, Kenya, and China have proposed that the
discussions should cover the obligations of foreign investors and
their home governments, but this has been rejected by developed
countries on the basis that this is not part of the clarification
process.

Given the present state of disagreements, there is simply no
basis for a decision to be taken by explicit consensus in Cancun
to start negotiations on a prospective investment agreement" Goh
maintained.

John Hilary of ActionAid, the author of "Unlimited Companies",
said that the report is based on new case studies from a range of
countries around the world, including Uganda, Haiti, Thailand,
Mozambique, South Africa, India and Brazil.

He said foreign investment can be a powerful force for good,
citing clothing factories in Bangladesh, China, Cambodia and
Lesotho where investment has created meaningful developmental
change by providing jobs, particularly for poor women.

On the other side however, Hilary said, "we are equally struck
from research around the world of examples where foreign
investment had not been a force for development or a force for
good."

The ActionAid report says that the case studies examined
demonstrate that foreign investment can also cause great damage
to the rights and livelihoods of vulnerable communities, for
example, in Brazil, Uganda, Haiti, Thailand and India.

In Thailand, a Udon Thani concession to mine potash in a 85,000
hectare area that was granted to a Canadian-based company Asia
Pacific Resources has raised fears among villagers and experts
over the local environment (the mine is expected to generate
about 20 million tonnes of salt waste) and on the rice crop on
which 32,000 people depend.

In Plachimada, in Kerala state, India, a Coca-Cola bottling plant
was set up in 1998. Coca-Cola's average extraction of 350,000
litres of water per day from its new deep wells has severely
depleted the local communities' water table, leaving villagers
with acute water shortages and environmental contamination, the
report points out.

In Brazil, meanwhile, 90% of the corn seed market has been taken
over by 4 multinationals, with 60% of the market controlled by
Monsanto alone. Similarly, in its dairy sector, Nestle and
Parmalat control more than 50% of the market in the late 1990s.
In Minas Gerais state, prices fell by 50% and 70,000 poor
producers had to stop supplying the largest companies between
1996 and 2002.

Hilary said that these examples are "on top of what we already
know of the economic risks of foreign investment particularly
where you have local producers who are exposed to competition
from far greater multinationals."

"At the macroeconomic level, if China is taken out of the
equation, over half of all foreign investment to developing
countries is not 'greenfield' investment i.e. most productive new
plants, but are in the form of mergers and acquisitions."

"We believe that the multilateral investment agreement that is
proposed by the EU, Japan, Korea and others threatens developing
countries, particularly the poorest communities in those
countries, because it risks having further liberalization of
investment in the same way we have seen in the damaging case
studies in the report."

Hilary highlighted two threats arising from this agreement.
Firstly, it threatens to open up the sensitive sectors of the
economy that have been deliberately kept closed such as
agriculture in Thailand, India and Ethiopia, and particularly in
terms of food security.

The second threat comes in areas that are already open to foreign
investment because the policies that developing countries use to
maximize the development benefits of investment could well come
under attack, as has been seen in services liberalisation under
the GATS.

Pro-development policies taken by developing countries such as
joint venture requirements or equity caps on investors coming
into the country as well as performance requirements can come
under thereat at the WTO.

The ActionAid report reiterates that one lesson from the GATS
negotiations is that developing countries can indeed be
pressurised to open up new markets to foreign investors, even
when it is not in their interest to do so.

Another lesson from the GATS is that even though key WTO members
may try to protect key development policies by registering them
as limitations to their liberalization commitments, those
policies are targeted for removal by other countries in
negotiations at the WTO.

Developing countries have had their key development policies
targeted for removal by other countries in the current round of
GATS negotiations, including joint venture requirements and
equity caps in countries such as Indonesia, Pakistan, and
Thailand, among others.

The report also counters the EU claim that an investment
agreement at the WTO will be in the best interests of developing
countries. This claim does not stand up to examination, as the
proposed agreement will not increase investment flows; the WTO
principle of non-discrimination or national treatment is not
development friendly; developing countries will be overburdened
with another set of complex negotiations on top of the Doha work
programme; and the proposed agreement does not address the needs
of poor communities.

+++++++++++++++++++++Document Profile+++++++++++++++++++++

Date distributed (ymed): 030629
Region: Continent-Wide
Issue Areas: +economy/development+ +US policy focus+

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