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South African Unions Call for International Solidarity to Block Jobs-Destroying WTO Agreement

Posted to the IUF website 18-Apr-2006

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The Congress of South African Trade Unions (COSATU) is launching a massive national and international campaign in opposition to a proposed agreement on Non-Agricultural Market Access (NAMA) which is being vigorously pursued by the developed countries and the World Trade Organisation (WTO). We will also be opposing the proposed further liberalisation of services through the WTO negotiations. COSATU, and many other union federations and NGOs around the world, see the proposed NAMA agreement leading to a catastrophe. It is an agreement designed solely to benefit the rich and powerful Northern nations, which will have devastating consequences for the majority of the world's population in the poor Southern nations.

This 'Doha' round of negotiations at the WTO was supposed to be about promoting development. Developed countries were expected to do away with their many agricultural subsidies that distort world agricultural markets, and to give greater access to their own markets for developing countries. Once again, however, developed countries have failed to extend a hand of solidarity to the poor. Instead, they are offering developing countries a terrible trade-off. This takes the form of reduced trade-distorting agricultural subsidies and increased access to the markets of developed countries for agricultural products, in return for significant market liberalisation in developing countries, particularly for industrial products. Their current proposals could result in massive job loss and deindustrialisation in South Africa, and many other developing countries.

In fact, what the USA and EU have offered developing countries in agriculture only pays lip service to commitments they had already made. They have offered only extremely modest cuts in domestic agricultural support, leaving a large amount of resources for them to continue to subsidise small uncompetitive farmers in those countries. They have not offered adequate market access in agricultural goods to developing countries and will still be able to block significant agricultural products from these countries. At the same time they expect developing countries such as South Africa to make significant cuts into our bound and applied tariffs for non-agricultural goods.

The proposed tariff cuts will cut very heavily into our labour-intensive sectors. For example, using the tariff cutting formula proposed by the developed countries (the so called Swiss formula) with a coefficient of 30 (the variable they propose that influences how steep the tariff cuts will be):
- Tariffs in passenger vehicles would be cut from the current applied rate of 34% to a rate of 18.8%. This represents a real decrease of a massive 45.5%
- Tariffs in clothing would be cut from the current applied rate of 40% to a rate of 18%. This represents a real decrease of a massive 55%.
- Tariffs in televisions would be cut from the current applied rate of 25% to a rate of 15%. This represents a real decrease of a massive 40%.
- Tariffs in furniture would be cut from the current applied rate of 20% to a rate of 12%. This represents a real decrease of a massive 40%.
- Tariffs in final plastic products would be cut from the current applied rate of 20% - 25% to a rate of 12% - 13.6%. This represents a real decrease of a massive 40% to 46%.
- Tariffs in auto components e.g. brake pads and linings, would be cut from the current applied rate of 30% to a rate of 15%. This represents a real decrease of a massive 50%.

Developed countries have argued that developing countries should not be concerned about the tariff cuts, as they will be allowed some flexibility through excluding 5% of their tariff lines from tariff reduction or allowing 10% of tariff lines to take a smaller reduction than proposed by the formula. The reality is that these flexibilities will not sufficiently protect workers and light industry in South Africa and many other developing countries. To take a South African example, we will see a substantial decrease in 255 tariff lines affecting clothing. If we calculate how many of these we could protect through the provisions for exclusions, we find that they are already 4.63% of all tariff lines. If you include the wider range of clothing, textiles footwear and leather, 15.3% of tariff lines are affected. This means that clothing, textiles, footwear and leather alone would not be protected by a 5% exclusion. There would be no space to even think of including automotive and components, plastics, furniture, downstream metals and the range of other labour-intensive sectors. Using the formula to reduce our tariffs will also not allow South Africa to industrialise in the future, as we will not be allowed to raise tariffs to a sufficient level to protect developing or labour-intensive sectors. This will condemn us to being providers of raw materials for exports.

However, it is not only South Africa, as a developing country, that will suffer. Many other developing countries will face the same fate. This threat is widely acknowledged by researchers around the world. For example, Mehdi Shaffaeddin (who formerly headed UNCTAD's Macroeconomics and Development Policies Branch), recently argued that: "The application of the proposed Swiss formula (in the WTO's NAMA negotiations) has a significant detrimental long-term effect on industrialisation of developing countries, besides their loss in government revenues." In a paper, "Does trade openness favour or hinder industrialisation and development?", Shaffaeddin said the industrial sector of most developing countries is underdeveloped, thus they need to apply higher tariffs to some of their industries than developed countries. "The low tariffs rates, as proposed by developed countries, will make them lose an important policy tool for upgrading their industrial structure. Further, binding of tariffs at low levels would not allow a developing country to raise them beyond a certain low level when it faces balance of payments problems."

Evidence has shown that increased liberalisation poses a threat to industrialisation. For example, according to Shaffaeddin, an UNCTAD study on 50 developing countries showed that half of those that liberalised imports experienced deindustrialisation. Only 10 of the 50 countries expanded their manufacturing value added. The South African government has played a leading role in a coalition called the NAMA 11 (Argentina, Brazil, Egypt, India, Indonesia, Namibia, Philippines, South Africa, Tunisia, and Venezuela). The NAMA 11 has consistently argued for a developmental outcome to the round in which the level of ambition in NAMA is comparable to the level of its ambitions in agriculture: that the biggest adjustments need to take place in the areas where there is most distortion - that is the agricultural sector in the developed countries, with smaller adjustments taking place in developing countries and taking into account special and differential treatment. Developed countries would also have to accept deeper cuts into their non-agricultural goods than developing countries.

COSATU has also received information that the Director General of the WTO, Pascal Lamy, will be holding 'green-room' sessions at the end of April 2006 and beginning of May 2006, in an attempt to ensure that agreement is reached in the NAMA negotiations. He has also been lobbying governments around the world, including South Africa, to try and ensure agreement is reached. COSATU condemns any attempts by the WTO to coerce key governments to reach agreements on NAMA, in small secretive meetings, and then try and push the rest of the WTO membership to sign this agreement. In addition to the NAMA negotiations, parallel negotiations are taking place to dramatically liberalise services, including services in developing countries. This means that developed countries would have greater access to our services markets, and the South African government will be less able to deliver services to the poor in order to drive development. Our future would lie in the hands of those who want to make profits instead of in the hands of our democratically elected government, with a mandate to eradicate poverty. If allowed, services such as education, health, water and transport will be provided by powerful multinational companies, sidelining the governments. Since we all know that their strategic goal is profit maximisation, this means further sidelining of the poorest of the poor. The poor in our country and in the world cannot afford to allow these services to be completely taken over by the multinational conglomerates, which will only worsen their situation. Services to the poor will be turned into commodities that only those with money will be able to afford. This matter is so serious that unless action is taken at the highest level, we face the likelihood of a WTO agreement that will spell the end of any prospect of South Africa being able to seriously combat poverty and unemployment. We will lose a significant part of our manufacturing sector and become simply a producer of primary products for exports and a destination for tourism. If this is the case we will truly be condemned as basket cases that require charity for many decades in future.

COSATU is engaging in a range of activities to ensure that the developed countries are not able to perpetuate an unbalanced round that will promote underdevelopment. We have written urgent letters to the President, Deputy President and Minister of Trade and Industry urging government to continue to work to strengthen coalitions of the developing countries in opposition to the proposals of developed countries on NAMA and services, and to continue to promote development. We are engaging government officials on the positions they are taking on NAMA. We have called for a meeting in South Africa with the General Secretary of the European Trade Union Confederation to urge them to move beyond public statements in support of development to put pressure on the European governments to withdraw their proposals that further liberalise goods and services We have written letters to the International Confederation of Free Trade Unions (ICFTU), to which COSATU is affiliated, urging it to ensure that its affiliates, in particular from the developed countries, act to promote development in the Southern countries and reduce poverty and unemployment. We have written similar letters to the COSATU counterparts in all developed countries. Together with the CUT of Brazil and KCTU of South Korea we are working to convene an urgent summit of unions from the South to strengthen coalitions of the South and civil society against the intense pressures from developed countries to divide and force their demands down our throats.

We have made similar calls to our friends in civil society and NGOs, at home and abroad. In particular we have called on NGOs globally to lobby their governments to ensure a development outcome; As part of our Jobs and Poverty Campaign, we are convening sectoral summits between 9-24 April 2006 to plan for our strike actions against unemployment. Each of these sector summits will develop a detailed programme of action to back our and developing countries' just claims at the WTO. This programme will include pickets and demonstrations targeting the European Union Commission, specific countries from Europe and the USA. We call on all progressives at home and abroad to join the campaign and stop new forms of colonialism that will condemn all developing countries into exporters of raw materials and becoming tourist destinations for the citizens of the developed nations.