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Cambodia in the WTO

The recent World Trade Organisation ministerial meeting in Cancun, Mexico, accepted

the membership applications of Cambodia and Nepal before it collapsed in disagreement.

Cambodia will officially become a member 30 days after its agreement with the WTO,

negotiated over many years, is ratified by the National Assembly.

So far as I am aware, no Cambodian political party has advocated that the country

change course and either abandon WTO membership or seek to negotiate different terms.

But a major cause of the Cancun collapse was a simmering dissatisfaction with WTO

rules and processes among Third World countries with which Cambodia shares many economic

features. The failure of Cancun to deal adequately with these complaints raises,

at the very least, serious questions about whether it is advantageous for Cambodia

to rush to ratification.

A timely resource is a recent publication by Walden Bello, the executive director

of Focus on the Global South. In Multilateral Punishment: The Philippines in the

World Trade Organization 1995-2003, Bello argues that WTO membership has been disastrous

for the Philippines, and especially for its farmers.

The Agreement on Agriculture (AOA), requiring reduced protection of agriculture,

was the most important aspect of Philippine membership of the WTO, Bello writes.

Although the country was required to import only 1 percent of domestic rice consumption

in 1995 [30,000 tonnes] and 4 percent in 2005 [227,000 tonnes], actual rice imports

shot "from 263,000 metric tons [tonnes] in 1995 to 2.1 million metric tons in

1998, 836,999 metric tons in 1999, and 639,000 metric tons in 2000".

These imports kept the price of rice low, which discouraged Philippine farmers from

increasing production. The consequence was shortages, which "justified"

government decisions for further rice imports. In this vicious circle, the main losers

were Philippine rice farmers, who were not at all prepared to meet international

competition.

Much the same happened to corn farmers, who are a second major agricultural sector

in the Philippines. "From practically zero imports in 1993 and 1994, corn coming

into the Philippines shot up to 208,000 metric tons in 1995 to 558,000 in 1996, 462,120

metric tons in 1998 and 446,430 in 2000."

Bello notes that from around 1996, the Philippine government appears to have imposed

a lower tariff on corn than was required by its WTO commitments. "This stemmed

from the growing strength of an alliance between foreign corn exporters and local

end-users, such as feedmillers and livestock raisers, that had a great deal of interest

in lower-priced corn imports." That is, there were some layers of Philippine

society who benefited from the increase of imports and whose influence counted for

more than the much larger number of farmers who lost out.

As well, corn prices were driven down by imports under the US PL 480 program, which

gives governments low-interest credit to buy US crop surpluses-a program that is

permitted under AOA rules.

Bello goes on to outline a similar devastation of Philippine sugar, pork, poultry,

and vegetable production. To cite just one example, by 2000, the price of chicken

imported from the United States was 50 percent lower than the domestic price.

To win support for ratification, the Philippine government argued that the AOA would

create 500,000 new agricultural jobs per year and increase agricultural exports,

thereby improving the country's balance of agricultural trade.

The reality proved quite different, "the value of [agricultural] exports ...

rising from $1.9 billion in 1993 to $2.3 billion in 1997, then declining to $1.9

billion in 2000". Agricultural imports, on the other hand, went from $1.6 billion

in 1993 to $3.1 billion in 1997 and $2.7 billion in 2000. "The status of the

Philippines as a net food-importing country was consolidated, with the agricultural

trade balance moving from a surplus of $202 million in 1993 to a deficit of $764

million in 1997 and $794 million in 2002."

The government had argued that farmers driven out of rice and corn production would

go into "high value-added" areas like growing broccoli, cut flowers, and

snow peas. This promise overlooked the fact that these areas require capital investments

far beyond the reach of the farmers who were being displaced:

"Without massive government financial support, there was simply no way that

the Philippines could launch significant production of high value crops, much less

attain comparative advantage in producing them." And even if such support had

been within the means of the Philippine government, it would have been prohibited

under WTO rules.

"In becoming a member of the WTO," Bello writes, "the Philippines

entered the worst of all possible worlds: even as it opened up its agricultural markets

to foreign products, key foreign markets continued to remain closed to Philippine

exports."

Indeed, both the United States and the European Union increased their tariffs on

tuna from the Philippines. And Australia, a supposed "ally" of the Philippines

in the Cairns Group of agricultural exporting countries, in mid-2002 invoked the

alleged threat of pests and disease to ban the import of Philippine Cavendish bananas-which

have been exported to countries with high quarantine standards since the 1960s. The

real reason for the Australian ban may be related to the fact that Philippine banana

producers obtain two and a half times the weight of bananas per hectare as Australian

producers. So much for the rule of "comparative advantage".

It should be stressed that agriculture is an area under WTO rules in which a country

such as the Philippines is able to obtain relatively favored treatment-compared to

manufacturing industries. What hope is there for the latter?

"Prior to the WTO," Bello notes, "developing countries routinely used

trade policy, notably ... quotas and high tariffs, as a key mechanism of industrialization."

This route is being closed off under the WTO, mainly through TRIPs (trade-related

intellectual property rights) and TRIMs (trade-related investment measures). In the

Philippines, Bello reports, it was the US trade representative who "acted as

the WTO's enforcer" on TRIMs and TRIPs-hardly surprising, since it is mainly

US multinational corporations that benefit from them. Procter and Gamble and Colgate-Palmolive,

for example, were able to use WTO rules against Philippines legislation designed

to ensure the use of local coconut-based cleaning agents. Another loser was the Philippines'

fledgling car industry.

An important result of this situation, Bello says, is that technology diffusion becomes

almost impossible. "The TRIPs regime represents what the UN Conference on Trade

and Development describes as a 'premature strengthening of the intellectual property

system ... that favors monopolistically controlled innovation over broad-based diffusion'."

If WTO membership has been such a misfortune for the Philippines, can Cambodia realistically

expect a better experience? Each country, of course, negotiates its own terms for

joining the WTO, and it might be hoped that Cambodia's negotiators have done better.

But Cambodia, with a much smaller economy than that of the Philippines, would not

have had much leverage in its negotiations.

Reflecting this reality, Cham Prasidh, the Minister of Commerce, commented at the

conclusion of the negotiations, "This is a package of concessions and commitments

that goes far beyond what is commensurate with the level of development of a least-developed

country like Cambodia."

To put it less diplomatically, the United States, Europe, and the other developed

countries see underdevelopment, not as a misfortune which they should help to overcome,

but as an opportunity to be exploited. In this situation, the Cambodian government,

with few alternatives, negotiated the best deal it could get.

But the Cancun conference demonstrated that the Third World countries are beginning

to resist the one-sided trade rules imposed by the developed countries. In these

new circumstances, Cambodia may have allies, including from ASEAN, if it chooses

to reject the concessions forced on it.

- Allen Myers - Phnom Penh

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