Interview with Martin Khor

For Martin Khor, Southern countries are threatened by the threefold burden of the climate crisis, the economic crisis and the bad solutions that could be adopted. In Copenhagen, developed countries must commit themselves to reduce greenhouse gas emissions and to help Southern countries do the same without endangering their development. At the WTO, they should not adopt protectionist measures under the pretext of combating climate change. And a hasty conclusion of the Doha Round will not help overcome the financial crisis. Rather, we need new international economic governance under the auspices of the United Nations.

Climate change and Copenhagen

Martin Khor, what is the main challenge of Copenhagen?

Facing the fact that climate change is a serious crisis that can only be solved by international action. Yet, there are different solutions and we need to find one that is fair and just, especially to the poorer people in the world. Otherwise they will have to bear a threefold burden of poverty and economic crisis, climate change, and misguided solutions that will press them even harder. We need to solve the climate problem without worsening the development problem.

What do you think would be the main components of a fair deal between industrialized and developing countries?

In terms of principle, we have to recognize the historical record and responsibility of industrialized countries that have used up so much of the fossil fuels and of the atmospheric space. Then the global deal has to see the developed countries meeting their responsibilities in a way that allows developing countries to contribute to the solution too. The most important thing we need in Copenhagen is a firm and strong commitment by developed countries to begin drastically cutting their own emissions – at least 40 per cent by 2020, even if this is not enough – as compared to 1990. We need a confirmation of the Kyoto Protocol that expires in 2012.
We have to bring the USA on board in the major move toward drastic cuts, even though it is not party to the Kyoto Protocol. It should either join in, or commit itself under the convention to an effort comparable to that of other countries.
Second, under the convention on climate change, the developed countries have committed to provide finance and technology to the developing countries so that they can also take climate action without affecting their development prospects. The convention recognizes the dilemma of developing countries, which have polluted little but today must continue their development in a way that leaves a smaller carbon footprint. It will be more difficult for them to cut their emissions than for developed countries. We are asking the developed countries to solve the problem of affluence: “Could you please moderate your great wealth?” But we are telling developing countries: “You are not rich yet and maybe you will never be able to get out of poverty because you cannot emit any more carbon. There may be some technology that could miraculously help you do this, but we are not very sure.” To the developed countries we are saying: “You have three cars per family, can you please use less, or produce cars that don’t use so much petrol, not drive every week-end to the mountains in Switzerland, but perhaps once a month or less?” It is very difficult, but not as tough as saying to poor countries: “I am sorry, but you cannot take the same path as developed countries because the space is all taken up; we know you are very poor, but what can we do?” That is 10,000 times tougher than the target we are setting for developed countries.
So the fair deal in Copenhagen must consider this disparity and how to avoid it in the future. That’s the complexity of this conference.

What is your feeling about the attitude of the Obama Administration?

The previous administrations did not take climate change very seriously, especially Bush in the last eight years, so the USA has some catching up to do. That will be more difficult for them but they need to do it, and according to the Bali Action Plan, all developed countries will carry out actions in a comparable manner. This means that even countries not party to the Kyoto Protocol, like the USA, but which are party to the climate change convention, will have to undertake commitments.

Do you not think that emerging countries like China and India, which are also heavy polluters, should also assume some commitments?

First let us see what the developed countries can do. They have been polluting for the last 150 – 200 years and based on that pollution they have had very high economic growth and built infrastructure, highways, buildings, technology, the human brain that can invent new things and the human capacity to change society. Developing countries have now taken this path and are still at a very early stage. They do not have the capacity to cut their emissions while building the infrastructure, technology or the human capacity to organize the society to achieve a high standard of living without being carbon-intensive. For developed countries it is an organizational and public relations issue. But for developing countries it is totally different.

Is it legitimate that countries like China or India say no to emission cuts?

The matter is not to say no to emission cuts, but how these countries can raise their living standards without being so carbon-intensive. The only way is to transfer financial resources and technology and this is the responsibility of developed countries. If they meet their responsibilities, then developing countries will have to follow. But if we are not helping them, but only ordering them to cut emissions, it will be very unfair, a top-down order from people who have become very rich by exploiting the environment. Telling the rest of the world that you are poor and you should remain poor is like telling a child: “You have to take responsibility, like an adult, but we are not helping you to grow, we cannot give you food and money, you have to go and get your income, even though you are two years old.” That is not fair.

You have followed the negotiations very closely. Do you think something concrete will result?

The negotiations are very complex because the issue is a combination of environment, economics and social equity. It would be fantastic if we could get a total result in Copenhagen, but what matters most is getting on the right track both in terms of the ambition to reduce greenhouse gases and to do so in a fair manner. Then the deal will be socially stable because it is fair. That is how we should judge Copenhagen, whether it is a final solution or an interim result. It may be an interim result, but it will be a milestone.

Financial crisis and follow up to the UN conference

You closely followed the UN conference on the financial crisis in June. In terms of follow-up, what are the key issues for developing countries?

The UN conference was significant and successful because, even though negotiations had gone on for just one month, delegations were able to produce a final declaration. They have succeeded in putting many issues in the declaration. The most significant aspect was the creation of a working group to follow-up on all the issues. The first is that the crisis has affected many developing countries in terms of their foreign exchange earnings. The foreign exchange shortfall is estimated at between USD 1 trillion (World Bank – IMF estimate) and USD 2 trillion (UNCTAD). If the developing countries do not obtain these resources within 6 to 12 months, they will be in a serious trouble. How to meet this shortfall is a key development issue of our time. NGOs and the development community have to find out where the shortfall lies, which countries are being affected and how much it is, and must meet it in a way that does not create new debt.

The second big issue is that this crisis is likely to lead to a new debt crisis for many developing countries because of the foreign exchange shortfall. In the final declaration, governments have committed themselves to help developing countries avoid a new debt crisis. How to translate that principle into concrete action is a very important part of the working group's agenda.
Another aspect that was discussed was a debt moratorium: countries that cannot pay their debt should be allowed not to service it until the crisis is over. Another proposal is to examine new structures for treating and working out debt. This recalls the whole idea of the UN as an international arbitration court, but in the meantime it must be decided how to share the burden between countries and the creditors that will not be repaid in full. It is partial debt cancellation upfront. It is very much like what they are trying to do for Chrysler, General Motors or Opel. If the motorcar companies can be forgiven their debt, so can the African or the Asian countries.

The third issue is the policy space left to developing countries. Many wish to address the crisis but may be hampered by certain WB and IMF policies, bilateral free-trade agreements, the WTO or aid conditionality. The document recognizes that developing countries should be able to exercise their right to make use of the policies they require, including control over capital outflow and temporary debt standstill.

The fourth area is the reform of the international financial system, part of which is the reform of the IMF and WB, including the policies and mandate, conditionality and governance of the financial institutions. The document also sets a deadline for the reform of the IMF. It is the first time that a deadline is being set, and not by the IMF itself but by the General Assembly (GA). There are also proposals for the re-regulation of financial markets and the reform of the surveillance system by the IMF or other developed country institutions whose policies have such a great international impact.

Fifth, it is recognized that the word's reserve system has to be re-examined and perhaps reformed, because it is now too dependent on a single currency – the US dollar – and there must be a better currency system that is more stable and fair.
Finally, the conference discussed the use of Special Drawing Rights (SDRs). The G20 London summit decided to issue USD 250 billion worth of SDRs, but that was done in accordance with IMF quotas, which meant that developed countries can access most of these SDRs, while very little goes to developing countries. The conference document states that governments will explore the expanded use of SDRs, a proposal by the G77 and China that the poorest countries should be provided with USD 100 billion worth of SDRs at no cost and other developing countries with USD 800 billion in SDRs that they could reimburse after the crisis. This is a means of rapidly providing liquidity to meet the foreign exchange shortfall. It is akin to creating funds at the international level without having to rely on the taxpayers of the Western world.

But Northern countries did not show much interest in this conference…

This raises the issue of the role of the UN and of developing countries in a fair system of global economic governance. We know that people are not presented with rights as a gift, but instead must fight for them. Here we are witnessing the spectacle of developing countries, especially those outside the G20, having to fight for their rights. There was great dissatisfaction amongst countries that felt they were not given the right to participate in the decision-making on a global event such as the economic crisis, which has had a major impact on them even though they did not cause it. The creation of the G20 is not a satisfactory answer, so they want the UN to take up this issue. During the negotiations, some Western countries argued that IMF reform or SDRs should not be discussed at the UN, but at the IMF. The G77 and China very effectively argued, however, that the UN is not only a legitimate place but the most legitimate one. If the G20 can decide that the IMF should issue USD 250 billion in SDRs, why cannot the UN also take such a decision?
One of the key issues will be whether or not this working group can discuss the reform of the IFIs, financial markets, the use of SDRs and the reserve system. Some countries are arguing that it can.

How are its decisions to be enforced, particularly on states?

The implementation is done by the IMF. The working group can take decisions, but it may not be able to implement them. Some decisions can be implemented by the UN itself, for example concerning UN agencies. But if all governments decide and everyone agrees that Switzerland is to contribute or do something and Switzerland accepts, then the decision will be taken back to Switzerland and the government will try to implement it and report back.

Has the working group already been set up?

I don’t think so, but it should be set up any time now. It will be open-ended, which means that it is open to every government. If we take it seriously, our government will take it seriously too.

WTO and ministerial conference

There is a big debate around the Doha Round. Some think we have to finish, others say we have to go beyond it. What is your position?

The Doha Round was launched in 2001, when the world was quite different. Meanwhile there have been many changes and a huge financial crisis. We have to see whether the major proposals are still relevant today.
When the Round was launched, there were three major development concerns: special and differential treatment (SDT) for developing countries and implementation issues, both of which were meant to re-balance the WTO away from being too biased in favour of the developed countries. The third subject area comprised the new fields of negotiation, particularly agriculture, industrial products and services. The fourth area of the Round was the introduction of the Singapore issues – investment, competition and government procurement – which had been very controversial from the beginning, and it was therefore decided to remove them.
Today, except for a few remaining issues, implementation and special and differential treatment are no longer on the table. This is a major problem because the rebalancing of WTO rules in favour of developing countries is no longer there. The last remaining aspect is the question of whether we have development at the centre of agriculture, industrial tariffs and services. If you do an objective analysis you will find that the answer is no, particularly in industrial tariffs. The major proposals contained in the December 2008 Chair’s text are not at all pro-development. According to the Doha mandate, developing countries should enjoy less than full reciprocity, which means that they should cut their tariffs by less than developed countries. But according to the latest proposals, many developing countries that are affected by this formula in NAMA will have to cut tariffs by much more than the developed countries. This clearly does not fulfil the developmental aims.
We are very concerned that the application of this formula in industrial tariffs will contribute to lessening the industrial development prospects of these developing countries.
Agriculture was supposed to be at the centre of the Round. But if we look at the major proposals, developed countries will still be able to maintain very high subsidies in one way or another. The form may well change, but the total subsidies will remain, they will simply move from one box to another. In any case, the effect will still be trade-distorting. Green box subsidies are also trade-distorting, but if you remove them, many farmers in developed countries will have to close down. If you merely shift the boxes, farmers in developing countries will still suffer.
I myself have done a study on Ghana showing that the agricultural sector was doing very well in tomatoes, poultry, and rice. But because they were forced by the IMF to cut their tariffs from the mid-1980s onwards, they were flooded with heavily subsidized imports of tomatoes and chicken from the EU and rice from the USA, which severely damaged farmers’ livelihoods. Therefore, not only are subsidies in agriculture continuing to play a role, but are having a devastating effect on the livelihoods of farmers in developing countries. The major proposals on the table in the December text are not going to impose sufficient discipline on European, American or Japanese agriculture, and African farmers will therefore continue to suffer.
The G8 recently decided to pump 20 billion dollars into Africa so that it can grow its own food. But unless we change the IMF and aid agencies' policies towards Africa – very low tariffs and no government subsidies in the agricultural sector – while Europe and the USA continue to maintain very high subsidies, the 20 billion dollars will not help the continent at all.
In services, the main benefit to developing countries would have been the relaxation of mode 4, i.e. labour services, but we do not see that happening. On the contrary, developed countries are very reluctant to open up their borders to migrant workers.
The developing countries therefore do not stand to gain much from this Round. Rather, there is much potential for harm, especially if tariffs are reduced, since governments will loose revenue, something they can ill afford in this period of economic crisis. In the WTO today, it is important to look at content from the perspective of development, as was promised in Doha, and for developing countries to able to benefit from a more development-oriented conclusion of the Round. Many developing countries are fighting for a Special Safeguard Mechanism. It is highly unfair for them not to have this instrument, while developed countries do - it is called the special agricultural safeguard.
Unfortunately the USA and some other members have attached so many conditions to the use of the SSM that it makes the mechanism particularly ineffective. It is not true that concluding this Round is the solution to the financial crisis.  The issue is to get the content of the deal right and then conclude the Round.
But some developing countries really do wish to conclude the Round.
Everyone does if it is favourable and fair to them.

Some NGOs would like to take agriculture out of the WTO. What is your position?

In principle, agriculture should be part of the trading system, provided it has fair rules and it imposes discipline in subsidies. The WTO is beginning to have rules on this. For example in Hong Kong they decided to eliminate all export subsidies by a certain date. Our demand should be that the EU and USA respect this deadline even if the Round is not concluded – this is called an “early harvest”. If agricultural rules are within the purview of the WTO, then we can discuss agricultural subsidies that are trade distorting and giving an unfair advantage to large agricultural companies, whilst not disputing the poor small farmers in the developed countries too have the right to exercise their livelihoods, to produce food for their own family and their domestic population. But we do not think that big farmers, absentee farmers or landlords should be receiving subsidies even when they are absent, or that food processing companies should have at their disposal these hundreds of millions of dollars in subsidies, which they can use to control the world food market at the expense of farmers in developing countries. If this is the case for agriculture in the WTO, then we should keep it there. But if big powers and their companies are able to strangle farmers in developing countries and use the WTO to maintain dominance, then it will tarnish the organization's reputation. Rules that should help legitimate farmers are being used to ruin them.

Pascal Lamy recently stated that developing countries are the ones pushing for more trade liberalization.

Yes, they want more liberalization of agriculture in the developed countries, discipline with regard to subsidies, reduction of very high tariffs, and the liberalization of the textile industry. There is much protectionism in the world and much is allowed by the WTO at the moment, on which developing countries are trying to achieve discipline. The fact that developed countries are not liberalizing or are finding other forms of protectionism shows that the WTO system is currently a combination of liberalization and protectionism, and that Northern countries are trying to protect themselves while at the same time liberalizing developing countries. It is a very complex matter. Today developing countries are clamouring for developed countries not to impose new protectionist measures such as "buy American", or protectionism in the name of climate change such as the carbon taxes being envisaged in a bill that has already been passed by the US Congress.

What is the relationship between climate and trade?

In the Convention on Climate Change, all parties agreed that the main burden of adaptation will be on developed countries and that there will be no disguised protectionism. The Waxman-Markey bill in the USA is violating all these principles. Southern countries meeting in Bonn in August proposed a provision for Copenhagen whereby no developed country would impose trade measures in connection with climate change, be it a border-tax adjustment or increased tariffs. This is a major development in the climate negotiations and it was opposed by the USA.
Inside the WTO, the developing countries are also very worried that these new forms of protection run counter to the spirit of the WTO and perhaps also against WTO law. If this is legal, then WTO law should change. In any case, the USA should do no such thing and neither should Europe follow suit.
We are now blaming the victims and putting the burden of adaptation on them. They will not be able to produce goods with less pollution than the North. The South is falling victim to the climate crisis, the development crisis and to the misguided solutions to the climate crisis.

What are your expectations for the ministerial?

It was meant to be a routine conference and that is the way it should be treated. It should review the situation of world trade today. There should be no major effort to make it a huge negotiation agenda. The WTO should change its culture so as to be true to its original intent –putting an end to major rounds. And it should not be seen as a failure if nothing very dramatic comes out of it.

Martin Khor

Since March 2009, Martin Khor has been at the head of the South Centre, an intergovernmental organization based in Geneva the members of which are 51 developing and emerging countries. Three months before the Copenhagen Summit on climate change and the WTO ministerial conference, we met him to discuss climate change, trade and the follow-up to the UN conference on the financial crisis.

This represents a change in continuity for this activist from Malaysia who, in 1995 in Penang, launched one of the most influential Southern NGOs, the Third World Network. His pertinent analyses of trade issues and the impact on the poor of the WTO, founded in the same year, make him one of the intellectuals most respected by governments, civil society and international organizations.
www.southcentre.org
www.twn.org

 Coyright: Alliance Sud - Swiss Aliiance of Development Organisations