European Affairs

Fall 2002

 

Trade and Development
After Johannesburg: U.S.-EU Disputes Remain to be Resolved
By Roger Bate

 

When the World Summit on Sustainable Development opened in Johannesburg in August, not much was expected to emerge from it. President George W. Bush's decision not to attend the meeting was seen by many as undermining its importance, and participants were despondent that few new agreements were under discussion.

Yet the summit was far from a failure: for the first time aspiring nations asserted their concerns at an international meeting and the summit was marked by the emergence of a new group of pro-trade non-governmental organizations (NGOs) - most NGOs that attend such gatherings tend to be anti-capitalist and anti-trade.

These new groups, from developing and developed countries, generally promoted the ideas of Peruvian economist Hernando de Soto, who argues that property rights, enforced by the rule of law, and open trade would lead to far greater prosperity than increased aid to developing countries. But there were major failures, and old, intractable divisions persisted between the United States and the European Union, particularly over the Kyoto protocol on climate change and genetically modified foods. Although there was broad agreement between the United States and the European Union in most policy areas, where there was no consensus the policy divide usually took the form of developing countries allying with either the United States (in favor of nuclear energy) or the European Union (on the need for more aid).

The delegates were there ostensibly to discuss "sustainable development," but there is no simple definition for the concept, even though it has been a key phrase for the environmental movement for the past 15 years.

Sustainable development is most commonly described as "development that meets the needs of the present generation without compromising the ability of future generations to meet their needs." Few can argue with the notion of meeting current and future needs, but there were widespread disputes about how to achieve this aim.

For politicians, the practical reality of sustainable development seems to mean agreeing international approaches to reducing emissions from industrial processes or the depletion of wildlife; for business people, it means reducing the impact of their businesses on the environment; for many NGOs, it means reducing the power of corporations and the World Trade Organization.

Rhetorically, at least, the European Union and the United States are not too far apart in this debate: both agree that development should not harm workers or the environment. In Johannesburg, however, the European Union focused much more on promoting international environmental and labor standards, while the United States wanted to promote conditions favored at local level, even though standards would be lower with this approach. The U.S. position could be summarized as: grow first, worry about precautionary regulation later.

The NGOs seemed to have set the early tone of the meeting because the negotiating text discussed trade far more than had originally been expected. Simply put, the proposed text appeared to undermine the Doha Declaration agreed at the World Trade Organization (WTO) Ministerial Meeting in November 2001 in Doha, Qatar, launching a new round of multilateral trade negotiations.

If some of the language employed had survived it would have strengthened the power of environmental treaties, such as those on hazardous waste, chemical pollutants and greenhouse gases. In essence it would have reversed the burden of proof so that an importing country could reject imports from a country on the grounds that it breached a convention, even if the exporting country was not a party to the convention.

At present an importer that took such action would, with minor exceptions, be breaching WTO rules. This language did not survive since the United States and other delegations pointed out that the Johannesburg meeting was not the correct location to reinterpret a trade declaration. The European Union was less hostile to the proposed language - with some of which it actually agreed, although Australia, China and India had similar reservations to those of the United States.

Nevertheless, the effort to focus the language on trade demonstrated two interesting new developments. The first is that the NGOs have moved firmly inside the policy tent, since they are now arguing for changes in trade policy from within the system, rather than attacking the system from outside. The second is that environmental activists have realized that green treaties do not have many teeth if there is no international consensus on required action.

Since there is no consensus on certain key treaties, for example the Kyoto Protocol on climate change, many NGOs believe that countries must be "encouraged" to act correctly by the threat of sanctions. And the only international body with realistic sanctions power is the WTO, which regulates international trading rules. The United States adamantly opposes this approach, while the European Union is more ambivalent.

Agricultural policy was one of the few areas where the United States and Europe were seen as being equally at fault by the other participants. All the NGOs and developing countries condemned the world's two largest trading blocs for their farm subsidies and other forms of agricultural protectionism.

Since no NGOs were opposed to developing countries having the right to trade, these nations were able firmly to establish their own agenda. This called for open access to the developed countries' markets, especially for agriculture and textiles, the writing off of debt, and the granting of new aid and technology transfers to their countries.

At previous meetings, even as recently as at the WTO meeting in Doha, the developing nations largely failed to establish their agenda. At Doha some feel they were sidetracked by Pascal Lamy, the EU Trade Commissioner, who skillfully manipulated the discussions into a largely meaningless interpretation of language on the availability of essential drugs for the treatment of AIDS, malaria and other pandemics.

The United States took much the same tack. U.S. Trade Representative Robert Zoellick hoped to defuse the debate before Doha with concessions on intellectual property allowing for a "safety valve" for countries without access to AIDS medicines.

That safety valve now looks more like a Pandora's box, with many developing countries reinterpreting it as including access to lifestyle drugs, such as Viagra. Although there is no doubt that Mr. Lamy went further than Mr. Zoellick in opening up the discussions of patent rights for drugs, both men failed to realize the danger of renegotiating the WTO agreement on intellectual property.

That drugs are needed is not in doubt, but attenuation of Western patents, as implied by the declaration language, will do little to aid African nations. Indeed, since Doha, no country has used the provisions of the declaration, except the woeful Zimbabwe in an attempted gesture of contempt to the developed countries.

All poor countries know that it is not patents and drug prices that prevent the poor from being treated for AIDS, but non-existent medical infrastructure, corruption and poverty. Fortunately, the developing countries were not sidetracked this time, and the agenda that they took to Johannesburg was discussed at length.

That agenda, however, sometimes reflects the concerns of the developed nations, which is not always helpful to the people of the poorest countries.

The UN Food and Agricultural Organization estimated that over 14 million people were at risk from starvation in Southern Africa at the time of the Johannesburg meeting. Food aid flooded in from Europe and America and for some the risk diminished, but for the majority the danger is still acute. By early October, over 9 million were still at risk.

The plight of 300,000 Zambians is especially worrying, since they are not allowed to eat the food aid because it is allegedly contaminated. It is not spoiled or poisoned - just genetically modified. At the Johannesburg meeting, there was widespread consternation that food aid from the United States contains genetically modified seed, which many think is not an appropriate technology for Africa.

The curious result was that the long-running, U.S.-EU dispute over genetically modified food, which Europe refuses to accept, was fought out by proxy among developing countries and their various advocates in Johannesburg. Many thought that the United States emerged as victor in this debate for one single reason: all politicians in the developing world realize that Americans have been eating GM food for six years with no ill effects.

The mainstream argument proffered by the United Nations and most NGOs was that the famine had mainly been caused by a bad drought in Southern Africa, exacerbated by climate change, and by a lack of systematic aid.

Skeptics, such as George Ayittey of the Free Africa Foundation, were less convinced. They think the famine is more likely to be due to political corruption and inept state management. As Eustace Davie of the Johannesburg Free Market Foundation dryly remarked, "the worst droughts always occur in socialist countries."

Others, such as Lavshankar Upadhyay, the President of the farmers union in Gujarat, India, think that a lack of technological diversity is part of the problem in Africa. "Without new technologies, such as GM seeds (which are more drought resistant) and agro-chemicals, it is harder to vary growing seasons and maintain crop diversity, which protects against extreme weather events," he said in Johannesburg.

Mr. Upadhyay is firmly in favor of GM food (and thus on the American side) but was in a minority among conference participants, who generally sympathized with the European view. Most were concerned that GM technology encourages the "corporatization" of agriculture by tying farmers to seeds from multinationals.

Other arguments frequently made are that GM technology remains untested and could have irreversible health and environmental effects, such as the development of "super-weeds" and the possible transfer of genes to unrelated crops, with unknown consequences.

The Eco Equity group, which is a coalition of the largest green and development NGOs, such as Greenpeace, Oxfam and Friends of the Earth, argued that the United States was trying to foist GM food aid on impoverished African nations in order to increase acceptability of the technology in Africa.

Vandana Shiva of Eco Equity, who has become something of a green icon, proclaimed that "there is plenty of normal maize in the world available for this emergency, and any government that claims only GM corn is available is lying."

There is little doubt that if the United States' only motive was to help the starving, it could have bought non-GM grain from Europe. That, however, would have undermined its legitimate efforts to promote its own farmers and technologies. And all national aid agencies, including those in Europe, are subject to tacit if not legal requirements to use their own national suppliers for aid.

It is Europe's unscientific (and protectionist) refusal to accept GM food from the United States - following scares over hoof and mouth and "mad cow" disease - that is the root cause of African resistance to GM food aid. African nations are rightly concerned that they would be unable to sell their crops to Europe if they became "contaminated" with GM technology.

Whether intended or not, America's GM food aid stirred up an increasingly vitriolic debate amongst the NGOs. The Indian farmers who marched in Johannesburg in favor of new technologies and open access to Western food markets, under the leadership of Barun Mitra of the Liberty Institute, nominated Vandana Shiva for a special, and deliberately insulting "Award for Sustaining Poverty."

The farmers and Mr. Mitra claim that Ms. Shiva and her allies perpetuate poverty by denying GM seeds to Indian farmers. Their argument is that India recently had as bad a drought as Southern Africa is now experiencing, but because of different technologies, including GM seeds, India's buffer stocks led to a loss of production of only two percent, and virtually no increase in the price of grain. Many experts believe that it is often increases in food prices that cause famine by pricing the poorest out of the market.

Many of the African farmers, such as T. J. Buthelezi, the leader of the South African Ubongwa Farmers Union, are aligned with the pro-GM Indian farmers. "It is imperative that we have all available technologies to address drought in Africa," Mr. Buthelezi argued.

The farmers, however, were rightly more concerned that the really important issue of the removal of EU and U.S. agricultural protection made little progress in Johannesburg. Without action on this point, foreign direct investment in crop development in Africa will remain at a paltry level, since there is so little scope for agricultural exports to the major developed country markets.

As Mr. Upadhyay concluded, protection is set to continue and the developing world must become more self-reliant, which means using the latest technologies, including the genetic modification techniques that the Europeans want to keep it from possessing.

In another area of conflict between the United States and Europe, Greenpeace and some representatives of the business community met in a self-described "unprecedented event" in Johannesburg to urge action on climate change, and especially to demand that the United States ratify the Kyoto Protocol.

Announcing their event, the two groups said: "Greenpeace is well-known for its disagreements with and campaigns against activities of some of the companies who are members of the World Business Council on Sustainable Development (WBCSD)."

The WBCSD, which has over 17O members including some of the world's largest companies, is well-known for advocating a market-based and free trade approach to solving environmental problems, including voluntary measures that often differ radically from Greenpeace approaches.

The joint statement, however, noted that, "WBCSD and Greenpeace share the same belief that the threat of human-induced climate change requires strong efforts and innovation by all sectors in a common international framework." Both groups agreed to convene a dialogue to urge governments to act more forcefully to promote innovation, and the implementation of climate change commitments, through an international political framework.

The détente on global warming among these delegates seemed to have spurred the debate and back stage negotiations. A few days later the Russian delegation took advantage of the publicity surrounding Johannesburg to announce that Moscow would ratify the Kyoto Protocol. Russian ratification would bring the number of countries ratifying the protocol up to the threshold required for it to enter force.

Many developed nations are eager for Russia to ratify since they believe they will be able to buy emission credits from Russia, and hence not have to cut back on their actual emissions. The impact of ratification would be to isolate the United States even more than before.

A most interesting recent analysis from the International Energy Agency forecasts that Europe will increase its emissions by eight percent over its 1990 levels by 2010 - rather than decreasing them by eight percent, the target the Europeans agreed under the Protocol. The Europeans are becoming desperate for Russia to ratify so they can buy the credits.

In a very recent twist, however, it is possible that Russia will ratify and not sell credits. That way the European Union will have to reduce emissions, and the only way to do so will be to switch to less polluting fuels - notably gas - meaning that Russia will be able to sell its huge supplies of gas to the European Union.

It is debatable whether Russia will make more money in the short term from selling gas or from selling emissions credits, but in the long run it will certainly make more from selling the gas and keeping the credits for when its economy finally starts to become productive. Either way, European taxpayers will be asked to foot the bill for implementation if Russia ratifies.

Given that the U.S. administration is acutely aware of this debate, it is even more certain that the United States will never ratify Kyoto. Thus the largest division between the European Union and the United States before the conference has remained the largest one after it.

Although the summit meeting produced agreements on fisheries and sanitation, neither is likely to be achievable. The fisheries agreement, which seeks to increase fish yields to maximum sustainable levels by 2015, is particularly weak because it only applies to fishing in the open seas, whereas 70 percent of fish are caught in national or regional waters, such as those around Europe, where most of the problems are occurring.

Targeting water supply and sanitation at least focuses attention on the main cause of death in the poorest nations of the world, which constitutes an advance for these nations. But no concrete plans have been put in place, and there was so much hostility to the private sector among conference participants that the advances made by companies like Vivendi and Suez are unlikely to be made available to developing nations - at least not through the UN process.

All in all, the meeting was good news for the small public-private partnerships that might actually achieve some progress, and which were strongly supported by the United States. For example, the transfer of genetically modified food knowledge to specific African farm institutes by companies like Syngenta will help.

The Johannesburg gathering failed to deliver the kind of grand declarations adopted by its predecessor, the Rio Earth Summit of 1992. But this was probably a good thing. The credibility of the international green community is flagging, since it has promised so much but delivered so little. Its failure to achieve results has begun to suggest that it was never capable of delivering very much anyway. If it is to continue to expect to be heard it has to make its agreements less grandiloquent, and more relevant to those in poor countries.

Meanwhile, Europe and the United States will continue to be unable to demand action on adherence to environmental treaties from the poorest nations until they have the courage to open up their agricultural markets. That is not only what the poor most want, it would help consumers across the developed world as well.

There is an increasingly widespread view, including in some quarters in Europe and North America, that it is simply indefensible for the United States and the European Union to protect their own farmers at the expense of the rest of the world. Agreements on chemicals, waste, climate change and the other issues that were debated in vain in Johannesburg will continue to be held up until this key issue is resolved.