(This article originally appeared in the Bangkok Post, March 27, 2001)
The recent World Trade Organisation (WTO) meeting in Chiang Mai that evoked widespread protest underlines the desperation that now grips what is probably the world’s most unpopular organization.
Initially, the seminar had a low profile. This was not surprising. For while trade and environment was the formal agenda of the meeting, the informal agenda was a very controversial one: to pressure government officials to commit themselves to launching a new round during the Fourth WTO Ministerial in Qatar in November.
This is typical WTO modus operandi: use every key inter-governmental meeting to get governments into line behind a new trade round. The WTO did this at the APEC Summit in Bandar Seri Bagawan last November. They tried to do this again, unsuccessfully, at an African leaders’ meeting several weeks ago.
Even as the WTO is twisting the arms of Asian governments behind a new round, it is also attempting to gain support for a new round from Asian civil society. The WTO knows that even if the governments commit to a new round in Chiang Mai, civil society opposition in their countries could still push them off the bandwagon. Thus a trade and environment seminar for civil society organizations, also held in Chiang Mai and fronted for the WTO by the Geneva-based International Center for Trade and Sustainable Development (ICTSD), was held immediately after the inter-governmental meeting.
Why a New Trade Round is Bad for the South
Most developing countries are opposed to a new trade round. The reasons are obvious. They have not yet absorbed the demands on them by the Uruguay Round. Many countries, for instance, have still not changed their domestic legislation to make them WTO-consistent. They are bitter that many of them, in fact, lost rather than gained from the Uruguay Round. The United Nations Development Program estimates that under the WTO regime, in the period 1995 to 2004, the 48 least developed countries will actually be worse off by $600 million a year, with sub-Saharan Africa actually worse off by $1.2 billion! UNDP also says that 70 per cent of the gains of the Uruguay Round will go to developed countries, with most of the remainder going to a relatively few large export-oriented developing countries.
WTO Director General Mike Moore and UK Development Minister Clare Short have tried to sell a new round as a "Development Round." But the reality is that main agenda for liberalization has more to do with opening up their economies to greater penetration by northern transnational corporations. The so-called "New Issues" that the developed countries want to make the centerpiece of negotiations are investment policy, competition policy, government procurement policy, labor standards, and environmental standards. The object of the first three is to give TNC’s "national treatment," that is, to strike down preferential treatment given to local producers and contractors. As for labor and environmental clauses in WTO agreements, developing countries fear that their intent is simply to serve as barriers to the entry of developing country imports while many southern NGOs regard them as giving the WTO tremendous power in areas where it does not have competence.
A new round is like a Pandora’s box. Once you open it, all sorts of issues detrimental to the interests of peoples and countries may emerge. The United States may even use it to push for a revision of the Agreement on Sanitary and Phytosanitary Standards along lines that would support its concept of "sound science" as a methodology in order to force other economies to accept genetically modified organisms (GMOs).
What WTO Members Should be Doing
Instead of engaging in a new round of trade liberalization, the majority of members of the WTO should spend the next few years repairing the Uruguay Round so that it does less harm to the interests of developing countries. In other words, they should work to significantly dilute the impact of a bad agreement, as part of a strategy to ultimately reduce the power of the WTO.
Here there are a number of priority areas:
1. The Trade Related Intellectual Property Rights should be revised so as to ban the patenting of all life forms including microorganisms and to strengthen intellectual property systems-the so-called sui generis systems-that protect the knowledge of local and indigenous communities from biopiracy. The priority of public health concerns over intellectual property rights should also be established-a move that will, among other things, enable HIV-positive people to buy life-prolonging patented drugs as low prices.
2. The Agreement on Agriculture (AOA) should be radically amended to eliminate tariff peaks and tariff escalation against Southern agricultural exports, end the massive subsidies for developed country farming interests, do away with the different forms of direct income support for developed country farming interests, institute a food security exception to market access rules, and recognize the principle of "Special and Differential Treatment" for developing countries that would allow them greater latitude in their interpretation and implementation of AOA rules. The strategic goal of this process should be to effectively remove agriculture, which is a way of life, from the WTO straitjacket.
3. The Agreement on Trade-Related Investment Measures (TRIMs) must be revised to drop the ban on local-content policies. Trade policy has traditionally been a mechanism used by developing countries to industrialize. The ban on local-content policies, which specify that a determined amount of a product be sourced locally instead of being imported, practically eliminates this positive use of trade policy for development.
4. The Special Ministerial Decision approved at Marrakesh in 1994 to provide assistance to Net Food Importing Developing Countries (NFIDs) still has to go into effect in spite of the fact that the AOA has raised the prices of food imports by these countries. It should be implemented immediately.
5. The WTO must force the developed countries to live up to the commitments they made to lift import barriers under the Agreement on Textiles and Clothing. Seven years into the WTO, the US, EU, and other developed countries have scarcely lifted their quotas against Third World imports. For all intents and purposes, the restrictive Multifiber Agreements (MFA) remain in place.
6. Last but not least, the WTO decision-making structure must be overhauled. The so-called "Green Room/Consensus process" has ensured that a few countries dominate decision-making in the WTO. Even Charlene Barshefsky, the US Trade Representative during the 1999 Seattle Summit, acknowledged that the WTO was undemocratic: "The process…was a rather exclusionary one. All meetings were held between 20 and 30 key countries…And that meant 100 countries, 100, were never in the room…[T]his led to an extraordinarily bad feeling that they were left out of the process and that the results…had been dictated to them by the 25 or 30 privileged countries in the room."
After the developing countries rebelled against this exclusionary decision-making process in Seattle, Stephen Byers, the UK Minister of Trade and Industry, commented: "The WTO will not be able to continue in its present form. There has to be fundamental and radical change in order for it to meet the needs and aspirations of all 134 of its members."
Yet scarcely three months after Seattle, during UNCTAD X in Bangkok in February 2000, Mike Moore said that the Green Room/Consensus process was "non-negotiable."
Decision-making is a fundamental issue. The developing countries and international civil society cannot agree to a new trade round unless the fundamental inequity in decision-making is banished from the WTO.
Is Free Trade Obsolete?
When the WTO came into being in 1995, free trade was seen as a panacea, a cure for poverty, inequality, and almost everything else. The Washington Consensus that formed the intellectual pillar of free trade and structural adjustment seemed to carry all before it. Today, the situation is radically different. The alleged benefits of free trade and free markets are challenged everywhere. For instance, an authoritative UNCTAD study covering 124 countries showed that during a period of greater global trade liberalization from 1965 to 1990, the income share of the richest 20 per cent of the world’s population rose from 69 to 83 per cent of total global income. As for the so-called positive relationship between free trade and growth, the emerging consensus is laid out by Harvard Professor Dani Rodrik:
"Do lower trade barriers spur greater economic progress? The available studies reveal no systematic relationship between a country’s average level of tariff and non-tariff barriers and its subsequent economic growth. If anything, the evidence for the 1990’s indicates a positive relationship between import tariffs and economic growth. The only clear pattern is that countries dismantle their trade restrictions as they grow richer. This finding explains why today’s rich countries, with few exceptions, embarked on modern economic growth behind protective barriers but now display low trade barriers."
In the face of such evidence, C. Fred Bergsten, the head of Washington’s Institute of International Economics (IIE), a noted partisan of free trade and the WTO, now says that there "has to be an honest recognition and admission that there [free market globalization] has costs and losers," [that] "globalization does increase income and social disparities within countries" and "does leave some countries and groups behind."
What the developing world needs is not a new round but a moratorium on trade liberalization.