THE PARADOX OF GATT:
Damned If You Do, Damned If You Don't
Erik Growen
The Uruguay Round of talks restructuring GATT (General Agreement on Tariffs and Trade) finally came to fruition on January 1st 1995 after seven years of negotiations. The final document, which included the creation of the WTO (World Trade Organization), seemed to be a clear-cut victory for neo-liberal, free-market economics, and in a way it was. The theory was the driving impetus for the rules and regulations pertaining to the developing world, but there was another angle to the new GATT which allowed the increasingly protectionist industrialized world to keep all the privileges of its position while giving up nothing in return. In spite of this obvious two-tired system the "developing countries [were] stuck somewhere between a rock and a hard place, facing the prospect either of a Uruguay Round agreement on investment, financial services, [agricultural policy] and intellectual property which [was] entirely inappropriate to their development needs, or a new phase of even more aggressive unilateralism."(1)
In this light, the motivations and theories behind GATT will be examined in brief, as well as the realities which it created for the developing world, specifically in the two areas of agricultural policy and intellectual property rights and patent laws. Contradictions between the two and the decision of the Southern countries in the choosing of the 'lesser of two evils' will also be explored.
GATT was originally created to be a "rule book for international trade"(2) based on liberal free-market tenants of maximum freedom for the movement of goods with minimum government interference. The new belief that has driven the latest Uruguay Round is that protectionism is inherently bad and once it sets in it creates "a chain reaction that causes the world economy to implode"(3) creating a global depression. Armed with this belief the industrial nations (more specifically the US the EU and Japan) have created a document and organization that will sacrifice the developing world upon the alter of profits, at any cost. There can be no barriers to the free flow of capital and goods, and in this process "someone has to suffer"(4); it will not be the TNCs (Trans-National Corporations).
GATT is formally a democratic institution, but actual voting is very rare as decisions are generally arrived at through consensus and coercion before being 'rubber-stamped' into existence. "From a Southern perspective, GATT is an undemocratic and closed institution, dominated by a small number of developed countries which promote the interests of Northern multinational corporations."(5) The 'consensus' arrived at is usually through private consultations between the Northern governments and their respective TNCs. These TNCs have become ever more adept at converting their economic power into political power to the point where they are now arguably more important than national governments in the modern political economy. For instance, the largest fifteen TNCs have gross incomes which are larger than the GDP of 120 countries.(6)
It is these TNCs which force the developing countries to cede authority over investment, deregulate financial services, accept absurd patent laws and drive them towards export-led economies so they can earn just enough capital to cover their foreign debt load. These countries simply do not have a voice in this process. As Kevin Watkins so aptly put it "the show can't go on without them, but nobody is remotely interested in what they have to say."(7) This can be seen clearly in the two cases of agricultural policy and intellectual property rights.
For the developing countries, agriculture is an area of almost overwhelming importance. It accounts for approximately 2/3s of total employment and 1/4 of the GDP of the South, versus less then 5% for each category in both the US and the EU.(8) In spite of this the US and the EU wrote the GATT agricultural policy after bilateral negotiations, presenting the rest of the countries with a fait accompli. It is a ridiculously skewed system which allows the US and the EU to continue to heavily subsidize their agricultural sector allowing them to undercut Southern farmers; a situation made all the worse by an "obligation on developing countries to reduce restrictions on agricultural imports by 13%."(9)
This whole deal amounts to the conversion of Southern "subsistence production of food into a 'market' for TNCs"(10) with subsides being shifted from "poor producers and consumers to big agribusiness."(11) These subsides, as well as import restrictions and guaranteed price supports, were geared towards providing cheap food for public distribution in an attempt to reach the goal of self-sufficiency in food. This new system of growing cash crops over sustainable crop growth and even over the feeding of one's own people, is appalling. The question of what the small farmers are supposed to do when run out of business by the agricorps in countries without any sort of social 'safety-net' in place has been ignored. It would seem that liberalization equates with hunger for the poor and profits for the TNCs. This whole system is made even worse by the World Bank and the IMF (International Monetary Fund) austerity programs which are in place in most developing countries and have forced the liberalization of the banking sector making agricultural credits for small farmers a thing of the past. This coupled with rising costs in machinery, seed and transportation due to deregulation is crushing small farmers.
To put this into the realm of the truly absurd, under the new regulations on intellectual property rights and patents, farmers would not even be allowed to save their own seed from previous harvests because by doing so they would be going against the newly established royalty laws.
There is only one group who benefits from the new intellectual property laws: the Northen TNCs. It will strengthen their monopolistic position (Northern TNCs own more than 90% of patents world-wide)(12) while driving the developing countries further into debt and widening the already huge technological gap between the North and the South. Under GATT the life-span of patents increased and more products were placed under the regime including genetic resources. This last has been termed an "act of unbridled piracy"(13) as the bulk of genetic materials originate in the South and they receive nothing, while research and development labs in the North get a huge influx of royalties. Farmers who have cross-bred strains will also come up short because they cannot, as a TNC can, turn the find into an internationally marketed product. Thus "intellectual property rights are recognized only when knowledge and innovation generate profit"(14) There must be an industrial application that can be realized.
GATT will draw off even more money from the developing countries through these new royalty payments without any return. The rising debt will diminish the Southern countries access to new, expensive, technologies thereby cutting their competitive advantage which increasingly relies upon new technology and the innovative use of these technologies. The gap between 'knowledge rich' and 'knowledge poor' countries will widen.(15)
The Uruguay Round has also successfully bypassed a number of UN (United Nations) initiatives on these very topics such as the UN Food and Agricultural Organization which was trying to establish community, not individual, rights in seed, which would include the right to save seed from a previous harvest. There were also negotiations for a Convention on the Conservation of Bio-Diversity (CCBD) under the UN Conference on the Environment and Development, as well as discussions in UNCTAD (UN Conference on Trade and Development) which were trying to create an international code for patents. All of these were ignored by the US, EU and Japan in order to push through their TNC driven agenda.
The US position was rather baldly stated by a trade negotiator to the Congressional Committee on GATT: "We cannot have countries accounting for 5% of world trade in services dictating to those accounting for 95%"(16) This is, of course, ignoring the obvious fact that 15% of the worlds population is presently dictating to the other 85%.(17) There is an irony in the US position on GATT which stems from the very theoretical basis they are espousing. Protectionism and managed trade policies have gotten the US, EU and Japan to the economic position they hold today. "Far from being necessarily inimical to economic development, protectionism has often been a precondition for it."(18) The hypocrisy is extremely apparent in the agricultural case. "Lowering food prices in the US is achieved by precisely those measures such as subsides, which the World Bank, IMF and GATT want to remove in the Third World countries through their conditionalities."(19)
It seems almost amusing that the industrial countries cannot see that their policies are self destructive as well as being devastating for the developing world. Massive unemployment is a result of these policies as well as the driving down of wages to the lowest common level. If your people do not work, they cannot consume which drives others out of work in a vicious circle. Also, "if you cut wages, you just cut the number of your customers."(20) This logic has apparently escaped the North and their TNCs.
The question ultimately must come down to: if not this, then what? The most likely scenario seems to be a stepping up of bilateral trade pressure, a new 'gunboat-trade diplomacy' already in extensive use by the US. The infamous Section 301 of US Trade Law gives the government "the right to impose unilateral trade sanctions on countries deemed to be following trade policies inimical to the interests of US corporations."(21) The US has used this coercive tactic over thirty times in recent years and they are not alone, the EU has a similar system in place.
There is also the phenomena of regionalism to consider which has led to more inward-looking regionally based trade policies and protectionist barriers being raised against goods coming from the South. These two factors have led to the South's reluctant support for GATT. In spite of all of its many faults, it is at least rules-based and provides a forum, if nothing else, for the South to attempt to defend its interests in. In spite of the document being so obviously disastrous for the developing countries, most of them regard the deal as a fait accompli to be merely rubber-stamped by them: "The draft is reflective of the distribution of negotiating power and wether or not we are prepared to accept it as a reasonable basis for the future phase is academic."(22)However, "there may come a point when the social costs of free-trade flows more than outweigh the economic benefits."(23)
The system created by GATT is completely untenable. There is a finite limit to the amount of capital the TNCs and industrial countries can squeeze out of the debt-ridden developing countries. How these debt payments are supposed to be maintained when tariff and trade barriers in the US, EU and Japan deny these nations the ability to generate income, coupled with the new royalty payments to Northen TNCs, is almost impossible to fathom. The collusion of the industrial governments, the GATT Secretariat and TNCs against the developing world is not only immoral but, in the long-run, self-destructive. The major economic countries should not use their power to "oppose industrial policies in developing countries aimed at creating a dynamic for export-led growth."(24) The self-restraint of those powers is imperative for the creation of a sustainable global trading system. The hypocrisy inherent in GATT must be realized. "One may question whether economic deregulation and the scaling down of state intervention will stimulate growth in the fashion predicted,"(25) especially as Northern countries have been doing the exact opposite by raising protectionist regional barriers and ensuring the barriers already in place receive the blessings of GATT.
The ball is truly in the North's court and it would seem the South can do nothing but pray that the
North comes to sense the reality behind the rhetoric and cease dictating policies to the
developing world which lead to disorder and unrest in their countries and directly to starvation,
civil disorder and death in the Third World.
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