Death of a nation under global trade

Death of a nation under global trade

Alexander C. Chandra, Jakarta

Indonesia will soon have to renegotiate its position in the
World Trade Organization (WTO) nonagricultural market access
agreement (NAMA). This agreement was a product of the Doha
Mandate, which, primarily, regards development as the central
issue, particularly for developing countries. In reality,
however, negotiations on the NAMA have so far neglected the needs
of developing countries in achieving their developmental
objective.

The modalities that will be used to lower tariffs remain the
subject of contention between the developing and developed
countries. Meanwhile, Indonesia's position in the existing
negotiations on NAMA is still rather unclear.

Prior to the ministerial meeting in Cancun, the Indonesian
government stipulated that Indonesia would prefer to get involved
in the implementation of NAMA on a voluntary basis. However,
looking at the proposed modalities produced by the Negotiating
Group on Market Access (NGMA), which was issued in May 2003, it
is likely that further commitment to the NAMA agreement would put
Indonesia's nonagricultural sectors in jeopardy. Indonesia will,
once again, become another nation suffering enforced global trade
liberalization.

Although the core agenda of the Fourth WTO Ministerial
Conference in Doha, Qatar, on November 2001, was to reduce tariff
and nontariff barriers on industrial goods, developed and
developing countries are still in contention over the way in
which this objective should be implemented.

The proposed methods included in Girard's text (named after
NGMA chairman Pierre-Louis Girard), which was issued during the
WTO Ministerial Meeting in Cancun, Mexico, last December, were
based on the Swiss formula that requires all participating
countries to make drastic cuts in tariffs.

Developed countries argued that the proposed methods for
tariff elimination were not sufficient enough to ensure global
trade liberalization in the foreseeable future. The U.S., in
particular, gave the most ambitious proposal to date, in which
tariff levels should be no more than 8 percent by 2010 and,
subsequently, zero by 2015. The European Union also warned that
the formula used should not reward those countries that
maintained a high level of duties.

Most developing countries generally resisted the proposed
methods because of the lack of attention given to their needs and
interests.

First, developing countries generally consider that the
mandated deadline for NAMA negotiations to conclude by January
2005 is too fast.

Second, tariffs are of critical importance for many developing
countries because they generate revenue for the government and
the promotion of industrialization and employment.

Third, tariffs are also crucial to protect small and infant
industries. The seven industry sectors identified in the NAMA
negotiations (electronic and electrical goods; fish and fish
products; footwear; leather goods; motor vehicle parts and
components; stones, gems and precious metals; textiles and
clothing) are often considered critical for developing countries.

Fourth, the lowering of tariffs on industrial goods may also
damage domestic agricultural production. There is a possibility
that trade liberalization on nonagricultural sectors could lead
to a massive exodus of labor and capital from agriculture to
industrial sectors.

Fifth, liberalization on industrial goods would have a
devastating effect on the environment because it could lead to
the intensification and consumption of environmentally sensitive
products. On the whole, developing countries still need to impose
tariffs on many of their nonagricultural sectors to avoid
deindustrialization and to build domestic competitiveness.

Unlike developed countries that push for nonlinear approaches
in tariff elimination, developing countries prefer to adopt a
linear approach. The emphasis on the nonlinear approach would
simply mean that developing countries had to make drastic tariff
cuts, with few gains in return.

It will come as no surprise that in the next WTO General
Council Meeting, at the end of July, developed countries will
press harder for the NAMA to come into realization.

Early this year, for example, U.S. Trade Representative Robert
Zvellick stated that he did not want 2004 to be a lost year for
negotiations during his visits to various counterparts in Asia,
Africa and Europe.

As far as Indonesia is concerned, the government has not been
in a strong bargaining position to influence the formulation of
the Girard text.

Prior to the WTO meeting in Cancun late last year, Minister of
Industry and Trade Rini M.S. Soewandi also hinted that the
voluntary approach would be the most appropriate method for
tariff reduction. However, pressing ahead with this approach
would only slow down total liberalization in Indonesia

It is, therefore, imperative that the Indonesian government
take a very cautious approach in the next NAMA negotiations. The
government's decisions in the negotiations should reflect the
needs and interests of its domestic constituents. Indonesia's
weak bargaining power in the negotiations will not help
Indonesian farmers, laborers and entrepreneurs.

The last thing we want to see is the death of our nation under
global trade liberalization.

The writer (chandra_alex@yahoo.co.uk) is studying for a PhD at
Hull University and is a researcher at the Institute For Global
Justice.