Introduction
*The WTO and Emerging Economies
* The author defines "emerging economies" as the
developing and least-developed countries
The primary objective of the World Trade Organization (and GATT) is and has always been
the facilitation of trade to make it fairer and freer, this objective is evident within
the multilateral agreements and framework of the institution. Since GATT's creation in
1947-48 there have been eight rounds of negotiations, at the heart of these negotiations
include implements to eliminate tariffs and rules on non-discrimination (MFN), in policy
it is unquestionable that the World Trade Organization is the very representation of
economic liberalism. However, even with respect to this fact we can not deny that in
practice the World Trade Organization is not without flaws. Consequently, it is not enough
to acknowledge that as a result of the WTO, trade has become freer and fairer, we must
take this argument further by asking freer and fairer for who?
It is my contention to illustrate
the weaknesses of the World Trade Organization in regards to its insolence towards the
developing countries (and especially the least developed countries.) By indicating these
points I am not disproving the accomplishments achieved by the World Trade Organization,
nor am I suggesting that the policies of the organization are solely to blame for the
impediments faced by these emerging economies. In contrary, I believe that many
impediments faced by the poorer nations are self-inflected and in no way reflect the
credibility and impartiality of the WTO's policies.
Unfortunately, I have realized that to
achieve a comprehensive analysis and description of every impediments facing the emerging
economies is an impossible feat considering the limited length of this paper.
Consequently, I will merely provide a general overview of what I consider to be the
primary impediments facing these groups of nations, in which case I must beforehand
acknowledge that there are additional ulterior factors which though will not be discussed
in this paper are nevertheless crucial factors to consider.
The objective of this paper is to
illustrate many existing impediments faced by emerging economies which if tackled by the
World Trade Organization, would enhance the role that the organization can perform as a
global actor, whom can claim both universal aims and interests.
"Africa considers that there is
not much to celebrate...For many decades, the GATT has had a legacy of treating developing
countries like second class members of a rich men’s exclusive club.
As a result, the GATT-based multilateral
trading system could not address, and in many ways, contributed to the difficulties faced
by developing countries."
Zimbabwe’s Minister of Industry and
Commerce, Shamuyarira, at the 2nd WTO Ministerial Conference.
The prospects for the economies of the
least developed countries in the WTO system has not been favorable, according to an UNCTAD
secretariat report to the Ad Hoc Working Group on Trading Opportunities in the New
International Trading Context, the cumulative loss until the end of this century to the
least developed countries as a result of the Uruguay Round would be as much as US$3
billion.
The UNCTAD secretariat report further
warns that as a result of the implementation of the Uruguay Round accords, the world's
poorest nations, the 47 least developed countries (LDCs), would lose an estimated $163 to
$265 billion in export earnings, while paying $145 to $292 million more for food imports.
Unfortunately, on account of pressure
from the European Commission, the Commission has blocked the UNCTAD secretariat from
undertaking a similar assessment on the gains and losses of Uruguay Round for all
developing countries. A brain-storming session that the secretariat had convened some
months ago on this issue was forced by the EU Commission to be confined to the problems of
LDCs. The EU Commission argued that UNCTAD's mandate for the Ad Hoc Group should be
confined to finding positive trade opportunities that the developing countries could
benefit from - and not assess the negatives or how to compensate the losers.
Furthermore, two other reports before the
Ad Hoc Group, on the Uruguay Round agreements on Agriculture as well as that on Textiles
and Clothing, assessing both their rule-content as well as the actual way their provisions
are being implemented, suggest that, any gains to the Third World won't begin to trickle
in for another ten years and even afterwards could be susceptible to new protective
instruments that the major industrialized countries could come up with.
Nevertheless, even though the problems
faced by developing countries were never addressed by UNCTAD, I am of the opinion that the
problems faced by the developing economies and LCD's
are similar in nature (though very
different in the scale.) These shared problems can be categorized into two main levels;
one, difficulties in distinction to domestic and internal sources, and two, obstacles
resulting from the external sources such as those resulting from the rules and regulations
of the WTO and the practices of its more powerful trading partners.
Firstly, I shall explain how the domestic
systems of emerging economies are inadequate both in the pursuit of their own proposals
and in defending themselves against the proposals of others.
One, presently, the subject of
international trade, particularly WTO negotiations is being handled in the emerging
economies by specific ministries such as, for example, the ministry of commerce or foreign
affairs. However, often the implications and even the coverage of the subjects spread over
the jurisdiction of several ministries which may have differing interests making it
difficult (and inappropriate) for any one ministry to handle them. Consequently, it is
evident that there is hardly any subject covered by the WTO which does not involve a clash
of interests in the domestic economy. A comprehensive examination of the issues is
urgently required, so that the various interests involved are properly weighed, and a
balanced position is worked out in the best interest of the country as a whole.
Ironically, given the magnitude of the economic and social problems which most of these
countries face at domestic level, the political parties and general public have also so
far shown little interest in the issues discussed at the international level, particularly
in the rule-making area.
Moreover, the ineffective and
weak-decision process of the emerging economies span beyond national interests, it further
erodes domestic and bureaucratic cohesion within the nation. Most of the issues discussed
in the international organizations require inter-departmental cooperation. It is, however,
well known that bureaucrats do not always like to cooperate and share work with other
ministries; they therefore tend to choose an option that would enable them to advance
their individual perceptions and interests of the department in order to control the
policy rather than choose the one that would bring the highest benefit to the nation as a
whole. A mechanism for arranging inter-departmental consultations in order to determine a
policy that best accommodates national interest and reduce inter-ministerial rivalries
(similar to the USTR) should be established in the emerging economies, to facilitate and
enhance that nations positions concerning specific issues.
Often the lack of an effective
inter-ministerial consultation mechanism would yield the most difficulties for the
negotiators themselves; in the case of negotiators from the emerging economies , a
handicap arises because of their lack of knowledge of the precise implications for their
economies and their trade of the proposals that are under discussion.
Repeatedly participants from developing
countries have, even during the most crucial stage of the negotiations, remain uncertain
of the probable effects on the economy and trade of their countries of the proposed rules.
As a result of ambiguous and conflicting directives from their capitals, most of the
developing-country negotiators remain uncertain, even during the crucial and even
concluding phase of the negotiations, about the benefits that would accrue to their trade
and of the economic costs they would have to bear. This uncertainty only makes them react
to the proposals during the negotiations, with a view to avoiding the negative effects and
to contain the damage, rather than negotiate for the maximization of their economic
benefits.
In short, an effective independent
consultation commission would not only serve to resolve inter-ministerial rivalries, most
importantly it would also help to undertake comprehensive examinations based on economic
and social conditions while keeping in view the differing interests and linkages with
different aspects of the economy. A tasks which is too enormous and complex to be handled
by the normal machinery of any particular ministry in any government, but nevertheless a
task which is imperative if a nation requires to achieve competitiveness in such a
competitive environment.
Two, beyond the inadequacy in the
bureaucratic systems of the emerging economies there is a simpler explanation why these
nations can not compete on an equal footing with the developed nations, lack of
capability. The emerging economies plainly lack the political and economic tools to
negotiate with its more powerful trading partners, a situation further aggravated by the
fact that the WTO itself has no effective means of enforcing its decisions.
The WTO's dispute settlement system would
best demonstrate how the emerging economies are disadvantaged even with the best of
intentions. Even though the dispute settlement system is often lauded as one of the
achievements of the multilateral trading system, it is nevertheless beyond the reach of
many poorer nation. Unfortunately, the dispute settlement system has predominantly served
the developed countries. Since its inception, not a single least-developing country has
found recourse in it.
First, the ultimate recourse which is
exercised by nations in the event of a trade dispute is trade retaliation, an option which
is only viable for nations affluent enough to risk such an alternative, and obviously not
an effective option for smaller economies. Ultimately, the dispute settlement process is
ideally suitable for disputes between the partners that are almost equally powerful, and
therefore not a practical option for emerging economies especially as a means of
retaliation against its more powerful trading partners.
For an affected developing country it may
be difficult for various reasons to take retaliatory measures. Politically, it may not be
prudent to take action against a strong partner. Economically, retaliation may not be
convenient, as it has a cost. Hence a weak trading partner, particularly a developing
country, may sometimes find that relief through the dispute settlement mechanism is not a
practical nor a viable option.
Second, dispute settlements procedures
simply costs too much money, and requires a high level of legal expertise, resources
lower-income countries cannot afford. For the past few years, the work of the panels has
tended to be intensely technical. The panels have started going into fine points of law.
It is fast becoming difficult for the authorities of developing countries to prepare their
cases and make presentations before the panels with their own technical resources. This is
particularly so when the other party involved is a developed country and information on
details from that country is required to be collected and analyzed. Often, the authorities
of the developing countries have to employ lawyers and other experts from developed
countries, which proves very costly. Moreover, there have even been instances where
foreign lawyers hired by smaller countries were pronounced unsuitable representatives as
they were not nationalities of those countries. In such a system, it may be more
beneficial for poorer countries both politically and economically to remain quiescent to
the "abuse" of more powerful nations as the cost of justice is not worth the
price of retaliation.
Consequently, the WTO should aim at
rectify the inequity within the system. If the erring member fails to take the corrective
action, the retaliation should not be left solely to be undertaken by the affected member;
rather there should be a joint action by all members. After all, GATT 1994 does provide
for joint action by Members in certain circumstances. Alternatively, there should be a
provision for the panels awarding costs to the affected developing countries which should
be paid by the erring developed country, both in terms of the cost of opportunity lost
from irrevocable trade revenues, and the cost of resources consumed during the
settlement procedures.
It is evident that from the perspectives
of the emerging economies themselves, that they are not ready nor capable of competing
equally in such a system. In the past, developed nations have given provisions in various
rules for special treatment, essentially longer time horizons to comply, and promises of
possible extensions of these in individual cases. However, these provisions are not enough
(especially for LDC's) if the developed nations wish to avoid a further increase the
marginalization in the world economy and, in particular, in world trade. However, the
future still appears bleak for the poorer nations, when considering the fact that they are
not merely burdened by the own domestic problems, but they must also face external
coercion; a system which is predominantly dominated by the developed countries.
Secondly, the emerging economies are
further burdened by external factors; a system which is dominated by developed nations. I
am of the opinion that this influence imposed by developed countries has resulted in other
subsequent obstacles to arise, all of which have impeded the role of the emerging
economies in the domain international trade. This presupposition is based on the idea that
the hegemony exercised by the two major players, namely the US and the European Union, has
resulted in a disposition where the agenda for the negotiations as well as the principles
on which the new rules have been based and are largely determined by themselves. This
monopoly of the power within the WTO has resulted to the following consequences:
One, as a result the
developed nations are able to monopolize and determine their own agendas, the major
trading nations are still holding the trade organization in their grip and able to use it
to use it for their own interests, despite the dissatisfaction of many developing
countries.
The first WTO Ministerial
Conference in Singapore confirmed that the interests of the developed countries as well as
the higher income developing countries were prioritized before issues pertinent to the
emerging economies, especially in areas such as textiles and agriculture. Moreover, not
only the agendas but also the decision-making process clearly reflected this favoritism;
the main negotiations took place in informal group meetings between about 30 countries out
of the total 127 members. This group was chosen by the chairperson of the conference and
the Director General Renato Ruggerio. There had been no prior consensus about how the
composition of the group had been arrived at. This left many delegates of the developing
countries unaware of where the critical negotiations were talking place
and what the latest developments were.
Although the developing countries form
four-fifths of the WTO's membership, and the WTO is supposed to decide by consensus, the
minority of developed countries were able to force the agenda with their monopoly of the
decision-making process. The imbalance at the Conference was reflected in the way
liberalization of their information technology products was put on a super-fast track via
the ITA, whilst liberalization of products exported by developing countries (for example,
textiles and clothing) were neglected. Concerns of the emerging economies over continuing
protectionism by the developed nations, for example, by the extension of the unilateral
trade actions of the US and the protectionist use of anti-dumping measures against Third
World products) were brushed aside. The developed countries succeeded in using the
Conference to extend the boundaries of the WTO's authority to cover new areas (investment,
competition, government procurement) that they intend to use to further pry open the
markets and resources of the emerging economies.
The NGOs expressed concern that this
non-transparent and undemocratic method of functioning "is most biased towards the
developed countries who, with their large delegations and well- prepared agendas, are able
to make use of the small informal group system to isolate the majority of WTO members and
get their way in the negotiations."
Unfortunately, similar to the
first Ministerial Conference in Singapore where the US pushed for the completion of
liberalization of Telecommunications and the Information Technology Agreement (ITA), the
Second Ministerial Meeting in Geneva was again a platform for the US to impose its agenda,
this time the declaration of Electronic Commerce.
Worldwide, e-commerce is predicted
to account for 13 per cent of consumer shopping by 1999. This share will double to 26 per
cent by 2007, the Internet is expected to expand its market share from 2 per cent of all
electronic sales today to about 50 per cent in 10 years time. The US will benefit most
from these changes as their businesses and IT service providers are best poised to take
advantage of the IT infrastructure and services demands the growth of e-commerce will
create world-wide. The WTO estimates that by 1999, 70 per cent of e-commerce sales are
expected to come from retailers in the US.
Unsurprisingly, the Draft Declaration
that trade negotiators had been working on up until the Ministerial did not contain any
mention of e-commerce. However, by the end of the Ministerial, the US’ trophy was the
"Declaration on Global Electronic Commerce’ stating that by September 1998, there
would be a ‘comprehensive work program to examine all trade-related issues relating to
global electronic commerce." Even though the proposal had been rejected by government
trade negotiators, the US eventually managed to secure consensus on the issue, by shrewdly
calling together a high-level meeting of ministers and managing to get agreement there.
Moreover, further imbalances are likely to occur in the WTO Agreements through the
introduction of new issues, such as the proposed agreement on investment which seeks to
ensure free entry of investors in a country without any concern for the needs and
priorities of the host countries, and the consideration of corruption which aims at
attacking the credibility of the authorities and institutions of developing countries. It
is clear that major trading nations have both the ability and intentions of prioritizing
unilateral issues through the use a multilateral forum.
Two, as a result of this monopoly of
power not only are the agendas of developed prioritized, but inversely the agendas of the
emerging economies have become secondary. The developed nations are ultimately able to
impose protectionist policies upon the goods of emerging economies ,causing the gains from
trade liberalization to become asymmetrical. Consequently, areas of special interest to
developing countries such as textiles and agriculture are being liberalized at a slower
pace than areas serving the interests of developed countries.
Moreover, it was noted during the Second
Ministerial Conference in Geneva by several ministers of developing countries that the
average tariff reduction in tariff rates has been steeper for products generally exported
by developed countries than for products of interest to developing countries. In fact, the
escalation of tariffs in developed countries still occurs in those sectors of export
interest to developing countries. The two issues that best represents this asymmetry is
that of Agriculture, and Textiles.
First, in the area of agriculture, OECD
countries still maintain high subsidies. Many developing countries cited the OECD’s
staggering US$280 billion support to farmers in 1997 alone, as a cause of concern, and
evidence of the double standards which exist, despite the Uruguay Round’s Agreement on
Agriculture. Under the Agreement, non-tariff barriers have been converted into tariffs. In
certain cases, the US, EU and Japan have translated some of these trade barriers to
tariffs of 200 to 500 per cent.
Second, in the area of textiles, the US
and the EU still continue protection policies in textiles and clothing. Repeatedly,
developing countries brought up the issue of the developed countries’ continual
protectionist policies in the textiles and clothing sector. This is an important area for
developing countries as they have a clear comparative advantage in this sector. When
calculations have been made predicting the outcome of the Uruguay Round, the
liberalization of this sector has always been cited as the area developing countries could
benefit most from. Some even estimated that the earnings of textile exporting countries
could increase by over US$300 billion.
However, the present reality is quite
different. Textile exports of developing countries have risen only 4.3 per cent over the
past four years. Whereas, textile exports of the countries maintaining
the Multi-Fiber Arrangement restraints
(mainly the US and EU) have risen by 9 per cent over the same period. Despite the
Agreement on Textiles and Clothing coming into force in 1994, the US and EU have
essentially liberalized on items that were of little export value to developing countries,
or on products that were not protected in the first place.
In its efforts to maintain its
protectionist policy towards textiles, the EU has resorted to the repeated use of
anti-dumping actions. In 1995-1996, 147 anti-dumping actions were initiated and nearly 600
definite anti-dumping duties were in force in emerging economy countries at the end of
1996
In mid-1996, the US also introduced its
own Rules of Origin. In doing so, it has changed the conditions of competition in certain
sectors of the textile and clothing industry and, in effect, has added to the restrictions
against the products of the low-cost textile exporting countries. Despite these issues
developing countries brought up, the main item that stole the show this Second Ministerial
was the Declaration on e-commerce, a clear signal that the needs and demands of the
emerging economies are obstructed by that of the developed nations.
Three, the last hindrance to full
integration of the emerging economies into the decision-making process is simply ignorance
and the aversion to attempt compromise.
Often among equal trading
partners, negotiators achieve (attempt) compromise by seeking information, holding
consultations on a bilateral basis and, if necessary, making visits to the countries
concerned. For instance, In the Tokyo Round EU negotiators recognized that one of the
reasons why no progress was being made in the negotiations was their insufficient
understanding of the US and the Canadian valuation systems. They, therefore proceeded on a
four-week study tour to Washington and Ottawa to get first-hand information on how the
valuation systems of these two countries worked, which helped them in drafting a
compromise proposal that was to provide a basis for the Agreement that was ultimately
negotiated.
However, the resources and time
spent for this purpose are the result of cost-benefit calculations. Negotiators would be
more willing to seek such information, if necessary through consultations and visits, from
countries which are in strong bargaining positions and without whose full support it would
be difficult to reach compromise solutions. Unfortunately, these economically and
politically stronger nations are more reluctant to make similar concessions to emerging
economies which have weaker bargaining positions and are on the periphery in the
negotiating process.
In conclusion, the WTO is the
very epitome of economic liberalism in that its policies and objectives attempt (and to a
degree) achieved a greater share of economic and development affluence. However, rules
must be applied without fear or favor, but if they contain prescriptions that cannot be
complied by all, or if the results benefit too few, then injustice will emerge. The
injustice which has been a central theme in this entire paper reflects the realities of
the nature of politics; procurement of national interests even at the expense of others'.
It is not only the duty of the WTO, but also that of emerging economies to persist and
demand for equality in the system, in hope and prospect that this objective can one day be
attained.
* note:
numerous statistics and arguments within this paper were acquired from external sources,
for more detailed explanation into
the topic, please visit the URLs below
BIBLIOGRAPHY
Comprehensive and
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http://www.wto.org/wto/develop/action_plan.htm
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rich-poor gap
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WTO May Ministerial
Conference: A Time for Celebration or Mourning?
http://www.focusweb.org/focus/pd/apec/fot/fot24.htm |
