New estimates by the World Bank put the developing country gains of the "likely" outcome of the Doha Round of World Trade Organization (WTO) negotiations to be US$ 16 billion, or less than a penny a day per person in the developing world. In contrast, the developed world stands to gain US$ 96 billion, or 83 percent of the total.

While most developing countries would scarcely benefit at all, Brazil’s agricultural sector will get 23 percent of the developing country gain – US$ 3.6 billion. Although those gains clearly will not be distributed evenly across the entire population, if they were it would amount to 4 cents per person.

Those are the gains, but what are the costs? There is growing concern among many development economists that countries like Brazil will trade away their policy space for the industrial policies that have made them such vibrant players in the world economy.

Some key industries in Brazil, such as aircraft and motor engines, integrated into the world economy through a mix of markets, tariffs, subsidies, and the strategic use of foreign investment. WTO rules for industrial tariffs, services, and intellectual policy make that much more difficult.

Not only will WTO rules constrain the ability of nations like Brazil to make policy, they pose economic costs as well. Most of the costs in terms of losing industrial competitiveness and the blow to Brazil’s industrialist class are hard to measure, but there are data available for some things.

Juxtaposed to the US$ 16 billion in developing country benefits, the United Nations Conference on Trade and Development (UNCTAD) predicts that the losses in tariff revenue for developing countries will range between US$ 32 and US$ 63 billion annually – two to four times the $16 billion in benefits. For Brazil, tariff losses are projected to be as high as US$ 3.1 billion – almost the entire projected benefit from the Doha Round.

Perhaps more significantly, the welfare losses of surrendering patents to developed countries under new intellectual property rules are dramatic. World Bank estimates of the amount of South-to-North profit transfers due to the WTO are US$ 41 billion annually, or 2.5 times the US$ 16 billion developing country benefit. According to the World Bank, Brazil loses US$ 530 million each year from such profit transfers.

The actual welfare losses can be as much as six times the transfer costs. A World Bank/Yale University study of one type of antibiotic in India found that the annual welfare losses to the Indian economy were US$ 450 million. The profit gains to foreign producers were only US$ 53 million per year.

In addition, studies show that the cost for the average developing country to implement WTO agreements is US$ 130 million annually. So for Brazil, add the tariff losses, patent transfers, and implementation costs together and you get $3.76 billion. In other words, the net impact of the WTO deals lead to a loss for Brazil of US$ 160 million.

When strategizing for the upcoming Hong Kong talks in December, Brazilians should ask themselves if it is worth it for a handful of agricultural interests to gain while the rest of the economy suffers.

Kevin P. Gallagher is a professor of international relations at Boston University, senior researcher at the Global Development and Environment Institute at Tufts University, and editor of the new book Putting Development First: The Importance of Policy Space at the WTO. He is a frequent contributor to the IRC Americas Program at www.americaspolicy.org.

According to Lula, this agricultural assistance from the rich countries harm the poorer countries, because they artificially enable European, US, and Japanese agricultural goods to compete with what is produced in developing countries.

"I think that each of the Mercosur presidents could grab the phone and call one of his counterparts in Europe and the United States, for us to begin to apply pressure, because, otherwise, all of us will spend 20 more years watching the poor get poorer and the rich get richer," he said, during his participation at the 29th Mercosur Summit meeting in Montevideo, Uruguay, on Friday, December 9.

The end of agricultural subsidies will be one of the main topics on the agenda of the ministerial meeting of the World Trade Organization (WTO), scheduled for December 13-18, in Hong Kong.

Last week, in telephone conversations with US president George W. Bush and British prime minister Tony Blair, the Brazilian president suggested a meeting among heads of State of rich and poor countries to find a way out of the negotiating impasse on this matter in the WTO.

In Lula’s opinion, the question should be discussed by the presidents of the countries, not their advisors. "This decision is so important that it shouldn’t be just another decision for our technical staffers or ministers to make. It should be handled by the presidents."

He went on to say: "It is not possible that in a decision of this magnitude, affecting the fates of millions and millions of human beings, many of them without any power to take part in multilateral organizations, most of all the WTO, they will not be dealt with through a humanitarian, solidary trade policy on the part of the rich countries vis-à-vis the emerging countries."

President Lula’s original idea was for the meeting to take place before the WTO ministerial meeting. Now the plan is for the heads of State to get together in January. The President said he intends to speak to the governments of Germany and France about the proposal too.

Agência Brasil

Before a multinational audience composed of entrepreneurs and heads of state attending the World Economic Forum in Davos, Switzerland, President Luiz Inácio Lula da Silva once again asked all countries to commit themselves to the global war on hunger and poverty.

Lula participated, January 28, in one of the Forum’s sessions, entitled “Funding the War on Poverty.” The president of Microsoft, Bill Gates, British Treasury Secretary, Gordon Brows, and the Italian Minister of Economy, Domenico Siniscalco, joined Lula on the dais.

Lula called for an end to the agricultural subsidies granted to local producers and entrepreneurs in the rich countries.

“It is necessary to establish policies that enable poor countries to sell and produce agricultural products. This is a structural question,” the President alerted.

The President recalled the advance represented by the committment assumed last September in New York by various national leaders at the United Nations (UN) General Assembly. According to the President, at the time a proposal was made to create a fund financed by taxing arms sales.

“It could be [a tax] on commercial transactions, money derived from tax havens, something robust and intended for the poor countries,” Lula suggested.

“The name of the fund is immaterial, what matters is for us to assume the commitment that a small share of the money that circulates in the world be used to constitute a large fund so that we can dream of a more just world 20 or 30 years from now,” he declared.

Lula had already called on foreign entrepreneurs to contribute 0.01% of all their financial investments to the campaign against global hunger and extreme poverty. A minimal rate of 0.01% would provide US$ 17 billion per year.

Translation: David Silberstein
Agência Brasil