By Aileen Kwa
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 mens 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.
Zimbabwes Minister of Industry and Commerce, Shamuyarira, at the 2nd WTO Ministerial Conference (WT/MIN(98)/ST/17).
Rules must be applied without fear or favour, but if they contain prescriptions that cannot be complied by all, or if the results benefit too few, then injustice will emerge…
We must be frank in our assessment of the outcome of the Uruguay Round. The developing countries were not able to ensure that the rules accommodated their realities…it was mainly the pre-occupations and problems of the advanced industrial economies that shaped the agreement. The sections dealing with developing countries and the least developed countries were not adequately thought through. Nor have they been fully implemented…
Fifty years ago, when the founders of the GATT evoked the link between trade, growth and a better life, few could have foreseen such poverty, homelessness and unemployment as the world now know. Few would have imagined that the exploitation of the worlds abundant resources and a prodigious growth in world trade would have seen the gap between rich and poor widening.
South Africas President, Nelson Mandela, at the 2nd WTO Ministerial Conference.
The voices of leaders from developing countries who gathered at the 2nd Ministerial Conference and 50th anniversary celebrations seemed to sing a different tune from leaders of the developed countries.
Many developing country representatives felt that the original objectives of the multilateral trading system set out 50 years ago had not been achieved. A rules-based system that would lead to the benefit of all, had in fact contributed to increased poverty and an ever widening gap between the rich and poor.
In contrast, Bill Clinton and the likes hailed the economic alliances and institutions created 50 years ago — the IMF, the World Bank, the GATT — as a platform for prosperity that has lasted to this day (Clinton WT/FIFTY/H/ST/8 18/5/98).
Director General of the WTO, Ruggiero, citing Clintons State of the Union address, stated with confidence, By expanding trade, we can advance the cause of freedom and democracy around the world (Welcoming remarks for President Clinton 18/5/98). And again, seeming to be quite oblivious of the realities of its developing country member states, Ruggiero said, in his opening statement of the 50th Anniversary celebrations, that the WTO is
based on principles whose value is timeless and universal; consensus, non-discrimination, the rule of law. The rules established on these principles are agreed among all the members and ratified by their parliaments. It is thus a profoundly democratic structure…
The different tunes really show up the extent to which the voices of developing countries go unheard or are sidelined in the WTO.
Little has changed for developing countries since the 1st Ministerial Conference in Singapore. At that conference, speech after speech by ministers of developing countries cited grievances of how the system was slanted to the interests of the developed countries. Again, at the 2nd Ministerial, the statements of developing countries circulated pointed to numerous areas where rules had been ingeniously circumvented and protectionist tendencies of developed countries legitimised.
Yes indeed, the issues brought up by developing countries at the 2nd Ministerial are those very same concerns highlighted at the previous Ministerial, a troubling testimony that for developing countries, there has been no progress, and in many cases, even regress.
For example, it was noted 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.
At the same time, new agreements serving the interests of developed countries — liberalisation in Telecoms, Information Technology, and Financial Services — had been completed expeditiously.
As Pakistans Minister of Commerce summed, The gains from trade liberalisation have been disappointingly asymmetrical. Areas of special interest to developing countries — Textiles, Agriculture, the Movement of Natural Persons — are being liberalised at a slower pace than other areas (WT/MIN/(98)ST/48).
What are the issues developing countries want addressed in the WTO?
US / EU Continue Protection 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 liberalisation 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.
The present reality, though, is quite different. Textile exports of developing countries have risen only 4.3 per cent over the past four years. On the other hand, textile exports of the countries maintaining the Multi-Fibre Arrangement (MFA) restraints — that is, mainly the US and EU — have risen by 9 per cent over the same period (WT/MIN/(98)ST/48).
Despite the Agreement on Textiles and Clothing coming into force in 1994, the US and EU have essentially liberalised on items that were of little export value to developing countries, or on products that were not protected in the first place. The quota restrictions on only 3 per cent of the restrained textiles and clothing exports will be removed in the first five years of implementation (WT/MIN(98)/ST/20).
If the present trend continues, about 20 per cent of items under the MFA restraints will be liberalised within the 10 year transition period, leaving 80 per cent of the textiles trade to be integrated into the GATT regime at the very end. Even then, developing countries are wondering if new ways would be introduced then, to circumvent the obligation to liberalise textiles trade.
A related concern is the abuse of transitional safeguards by the US. The Agreement on Textiles and Clothing stipulates that safeguards should be used sparingly. However, the US applied transitional safeguard measures 24 times to 14 countries in the first 6 months of the Agreement. This led to the freezing and in some cases, rolling-back of market access levels of some products.
The EU has used different tactics but towards similar ends. They have 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 these countries at the end of 1996 (WT/MIN(98)/ST/37). Indias Minister of Commerce called this a clear case of protectionism (which) needs to be deplored in the strongest terms (WT/MIN/(98)/ST/36).
In mid-1996, the US also introduced their 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. The Philippines representative did not mince his words, calling it a specious, if not outright ignoble move, which has adversely affected exporters who otherwise would have easily fulfilled the rule-of-thumb on substantial transformation (WT/MIN/(98)/ST/11).
OECD Countries Maintain High Subsidies in Agriculture
Many developing countries cited the OECDs 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 Rounds 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. Not surprisingly, the scaling back of tariffs have had little effect. These tariff levels are much higher than those which developing countries can maintain, since they did not historically protect agriculture. Countries which have been distorting markets in the past can therefore continue to maintain their subsidy regimes, whereas others are prohibited from using such measures in the future.
Under the Agreement, countries have also been asked to lower their domestic support on products (measured by the Aggregate Measure of Support). Supports that have been cut back, however, have largely been in the least sensitive sectors.
Above all, India states that the Agreement presupposes the supremacy of a trade-oriented food policy. It assumes that an open price based system which encourages countries to import agricultural products if they are produced cheaper elsewhere is the solution to food security. Several developing countries, and in particular, India, stressed the need for the WTO to recognise the importance of food self-sufficiency as fundamental to food security, since a country may not have the resources to buy agricultural products even if they were priced cheaply. Furthermore, agriculture is an important source of employment for millions in the rural sector. Policies that wipe out their source of livelihood have to be carefully examined.
Many developing countries also called for the Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least Developed and Net-Food Importing Developing Countries to be put to action. Even though it had been agreed to at the Uruguay Round, it remains to date, an ineffectual document.
Dispute Settlement System Beyond the Means of Many
The dispute settlement system is often lauded as one of the achievements of the multilateral trading system. Unfortunately, it has predominantly served the developed countries. Since its inception, not a single least-developing country (LDC) has found recourse in it. It simply costs too much money, and requires a high level of legal expertise, resources lower-income countries cannot afford. There have even been instances where foreign lawyers hired by smaller countries were pronounced unsuitable representatives as they were not nationalities of those countries.
Furthermore, as Pakistan points out, the ultimate recourse, trade retaliation, is not an effective option smaller economies can use.
TRIPS Legitimises Stolen Knowledge from Indigenous Communities
India also raised the issue of intellectual property rights. The TRIPS Agreement has made it possible for indigenous knowledge and biotechnology to be patented by foreign companies, without any flow back of benefits from the patentees to the rightful owners of that knowledge. The Agreement therefore, does not adequately protect the intellectual property rights of indigenous communities, and is in contradiction to the Convention on Biodiversity.
Anti-dumping Used as a Protectionist Measure
This was an issue raised by many developing countries. While liberalisation is preached, increasingly, developed countries are turning to anti-dumping measures to protect their markets. India noted that this is taking place despite the fact that the Anti-Dumping Agreement explicitly states that special regard must be given by developed country Members to the special situation of developing country Members in applying such measures, and that constructive remedies provided for by this Agreement shall be explored before applying anti-dumping duties where they would affect the essential interests of developing country Members. In practice, India said that they had faced situations where their products have been subjected to repeated anti-dumping actions, creating uncertainty, instability and unemployment (WT/MIN/(98)/ST/36).
Marginalisation of LDCs.
The LDCs made a heartfelt plea for help. Whilst they make up over 20 per cent of the worlds population, LDCs generated a mere 0.03 per cent share of the total US$6 trillion in global trade in 1997 (WT/MIN(98)/ST/60).
Also, despite Ruggieros suggestion of encouraging WTO members to give LDCs full market access for their products (the zero option), little political will has been shown by member countries to take this up. The US and Japan initially opposed the proposals put forth in 1996. At the High Level Meeting on Integrated Initiatives for Least Developed Countries in October 1997, the US held the position that market access is only one factor influencing competitiveness, obviously excusing itself for not making such a commitment.
According to UNCTAD and WTO research, certain products of interest to LDCs still face high tariffs and tariff escalations, such as beef, cigarettes, clothing, footwear and wood articles (INZET, 1998).
At the High Level Meeting, 19 countries (this includes the EU) made offers for improved market access, but none met the objective of bound duty-free access. All still allowed for exceptions.
Ruggieros suggestion is definitely a step forward, but the solution for LDCs must be more holistic. Free market access will provide LDCs with more options and avenues for growth. However, it also encourages an export-led model of growth, which may not be suitable for the overall economic health of the LDCs. Many LDCs recognise this and have articulated other needs, such as the alleviation of their debt, capacity building, technical assistance, but above all, a whole-hearted political commitment to address the needs of the marginalised within the system, and to treat LDCs as important members, not as second-class citizens.
Despite these issues developing countries brought up, the main item that stole the show this 2nd Ministerial was the Declaration on e-commerce.
As a first step to addressing the problems of inequity in the system, the WTO agenda must reflect the balance of interests of the developed and developing countries. Rules have to be applied in accordance to the needs and capacity of the member countries, so that the benefits accrue to all, and not in proportion of their share of international trade, as is currently the case.
That the system must change cannot be taken as an ideological discussion, or one for idealists. It could be that left unbridled, the system of unchecked capitalist forces, with no regard for the weak and poor could implode on itself, as a result of its own excesses. Indonesia, in the throes of economic and political crisis, warned at the WTO, that all the countries hit by the financial crisis in Asia, were yesterday, dynamic economic performers, pursuing open trade and investment policies.
There is an urgent need for all of us to have a deeper understanding of the relationship between trade and international financial and monetary stability…Trade…must contribute to minimize all the negative impacts (of globalisation) and to capitalize on its benefits to be shared equitably by all (Indonesian Minister of Trade and Industry WT/MIN(98)/ST/50).
And God help us that Fidel Castros parting statement at the Ministerial will not have to materialise, that the WTO should include as a new issue Global Economic Crisis: What to do?
*Aileen Kwa is a Research Associate with Focus on the Global South