The huge gap that exists between nations of the North and South, and the gap within the nations, will become a permanent feature of globalisation and skewed development. Any talk of a developmental state will be a mere empty rhetoric, meant to mislead our people and the world. Any talk of addressing the crisis of nearly 40% unemployment in our country will be a pie-in-the-sky illusion that can never be achieved. The current all-round crises of development will escalate into a full blown political and social crisis with the poor paying exceedingly a heavy price.

The draft currently being considered is basically the same version previously presented by the chairs of agriculture and NAMA on 10 July 2008. It reflects the basic imbalances (developed vis-à-vis developing countries). The outcome is wholly unfair to developing countries. The instruments of flexibility for developing countries are wholly inadequate and will not provide the space for development and poverty eradication. We attach a more detail analysis of the deal for information of the media and our people.

The developed nations have used every means in the possession to bully small and developing countries into accepting a deal that would increase their economic domination over these small scale economies forever. They promised a developmental round in the Doha round and agreed on the principle of development and less than full reciprocity. After 7 years of filibustering they (developed nations) appear to have exhausted the under-resourced and less powerful negotiating partners and have bullied them into accepting a deal they have gallantly rejected for the past 7 years.

COSATU had expected South Africa to provide strong leadership by outrightly rejecting this new text. We are now working hard with the government to ensure that our concerns as the country and as part of the developing countries are strongly and uncompromisingly affirmed in the processes.

If our government signs a deal, based on the current text, it will amount to sentencing our economy and future to a certain death sentence. COSATU will urge its alliance partners to convene an urgent meeting with government, with the view of taking hard actions. This will include a really long protest strike. At that stage there will be nothing to lose for workers and the poor!

Our Parliament and NEDLAC, which includes workers and the employers have given the South African negotiators a clear mandate to ensure that the outcome of the Doha Negotiations is a development round and the modalities, in particular that NAMA takes into consideration South Africa’s special and historic circumstances. South Africa was defined as a developed nation in the Uruguay Round and thus took deeper tariff cuts than any other developing country. This led to hundreds of thousands of job losses with the consequences that we have not been able to break the extraordinary high levels of unemployment in our country. Our unemployment is higher than any other middle income country.

COSATU demands that the South Africa delegation in Geneva upholds and respects the mandate they have. It must be clear in rejecting at all cost the proposals presented yesterday. We cannot allow a round that will lead to a disastrous outcome for South Africa and for other developing countries.

BRIEF ANALYSIS OF LAMY DRAFT OF 25 JULY 2008

The Lamy draft of 25 July 2008, in the form of key points on modalities of agriculture and NAMA is basically a version of the texts of the Chairs of agriculture and NAMA (issued 10 July 2008). It therefore reflects the basic imbalances (developed vis-à-vis developing countries) within these two texts as well as between the two texts (agriculture vis-à-vis NAMA). There is thus an outcome that is unfair to developing countries and in certain ways damaging to their economic interests. The draft caters to and reflects the concerns and sensitivities of major developed countries, while rendering the instruments of flexibility for developing countries inadequate or ineffective.

Overall trade distorting domestic support (OTDS)

The allowable OTDS for the US is to be cut by 70%. This is mid-point within the range in the Chair’s paper of 66-73% cut. Thus the present $48.3 bil level is cut to $14.5 bil (which is mid-point between the Chair’s range of $13 - 16.4 bil). The $14.5 bil level is far below the estimated 2007 actual OTDS of $7-8 bil. The US actual or applied OTDS level in 1996-97 was also $ 7 bil before rising to $19 bil in 2005 (according to the US date notified to the WTO) before dropping to $11 bil in 2006 and $8 bil in 2007 (according to G20 estimates).

Thus the Lamy-proposed $14.5 bil allowable level is double the 2007 level, allowing the US to have a lot of "water to increase from the present $7 to 8 bil.

The allowable OTDS for the EU is to be cut by 80%. This is in line with what the EU has said it would do (i.e. to be 10 points higher than the US). This is also mid-point in the 75-85% range in the Chair’s paper. The EU’s present allowable OTDS is Euro 110.3 bil. A cut of 80% would bring it to Euro 22 bil. (This is mid-point between the Chair’s range of Euro 16.5-27.6 bil). In 2004 the EU’s applied level was Euro 57.8 bil (according to Canadian simulations in a WTO paper). According to an estimate by J. Bertholet, the estimated level in line with CAP reform would be Euro 27 bil in 2008, and according to another estimate it is expected to drop to Euro 12 bil at the end of the CAP reform in 2014. Thus the cut to Euro 22 bil, through it appears to be large, would allow for "water" vis-à-vis what is planned.

The lowering of the allowable and applied OTDS is also accompanied by a rise in the Green Box support (which is not part of the OTDS). A large part of the domestic support of the US and EU has shifted to the "Green Box", which is supposed to be non trade distorting and on which there is no limit placed. The EU subsidies are rapidly shifting from OTDS to Green Box in the CAP reform. While actual OTDS is cut, subsidies are shifted to the Green Box and total domestic support may not decline. Recent studies (eg UNCTAD India; Marita ) have shown that the Green Box support can also be trade and production distorting. As BL Das (2006) has pointed out: "The really significant escape route is the Green Box which amounts to US$50 billion and Euro 22 billion in 2000 respectively in the US and EU and the possibility of unlimited increase in future…Thus the Green Box, particularly its window of ’decoupled income support’ (paragraph 6 of Annex 2 of the AoA) will continue to be the route to give farmers unlimited amounts as subsidies." The proposals for amending the Green Box (which are not covered in the Lamy draft) does not limit the amount of Green Box support.

Thus the cuts in allowable OTDS for US and EU may appear large (70%, 80%) but in fact will not reduce applied or planned reductions in OTDS and moreover these will be offset by an increase (in the case of he EU) in the Green Box. The subsidies should not be there in the first place due to the distortions they cause, and their reduction should not be "paid for" by developing countries through the high price in market access in NAMA and agriculture and services being demanded of them.

The figures 70% cut in OTDS for US and 80% cut for EU are not adequate as they do not constitute effective and substantive or real cuts. In particular, the $14.5 bil OTDS for the US is not adequate, and the level should go below the range in the Chair’s text ($13-16.4 bil) especially because of the changed situation of prices which have led to reductions in applied levels in recent years. In particular, the $14.5 bil level cannot be used as a "trigger" to demand such high obligations from developing countries in agriculture, services and NAMA.