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TRADE AND SUSTAINABLE DEVELOPMENT

Main Points of Presentation by Martin Khor, Third World Network at CSD-8, 27 April 2000


The failure of the WTO Seattle Ministerial meeting has two major points of significance.  First, it signifies that there is something wrong with the multilateral trading system.  Second, it offers the opportunity to correct it.

From a sustainable development perspective, there are linkages between trade and development, trade and environment, and the issue of equity and justice common to both.  The principle of common but differentiated responsibility, worked out through the UNCED process, is critical: that rich and poor nations and people cannot be treated in the same way due to their differing capacities; that the rich have to bear the brunt of the burden and cost of adjustment and the duty to assist the poor, and that the poor have the right to be treated specially and differentially.  This principle must be at the centre of the multilateral trade system as well.

On Trade and Development, the following are now made even clearer by the WTO process before, at and after Seattle.

1.   The Uruguay Round agreements on the whole and in each one of them are imbalanced, inequitable and contain flaws, some of them serious.  Many developing countries were not fully aware of what they signed.  Many years later, they realise the imbalances and are demanding changes to rectify the problems.

2.   Given the problems of implementation that have arrived and are now looming even bigger in the future, developing countries want these implementation issues to be resolved and the imbalances in the rules to be corrected.  They are thus generally against the pressures of the developed countries to further introduce more new issues in the WTO as this would further tilt the system into greater imbalance against the South.

3.   Developing countries are facing problems of implementation of two types.  Firstly, the North has not implemented some of its major commitments to the South, resulting in the South not obtaining the promised benefits of the Uruguay Round.  For example, the implementation of the textiles agreement has been distorted, and developing countries have yet to gain.  Protection in agriculture remains very high in the North.  The special and differential treatment provisions are weak and are not operationalised.  Net-food-importing countries have yet to see any measures in their favour.

4.   Secondly, the South itself faces (and is already starting to experience) major problems from having to fulfil its own obligations in the many WTO agreements.  Many of these obligations hinder their development opportunities and prevent them from implementing policies needed for development.  For example, the Agriculture Agreement is imbalanced, allowing rich nations that have gigantic subsidies and super-high tariffs, (some up to 200 or over 300 per cent) to maintain most of this protection, while many poor nations that have low subsidies and tariffs are unable to raise them but instead have to reduce or remove them.  Developing countries are in the ironic and unjust position of having to cancel quantitative restrictions and reduce their agriculture tariffs and subsidies, opening themselves up and becoming defenceless to the onslaught of cheap subsidised food imports, with their small farmers threatened with loss of livelihood.  There are already reports about farmers in many countries facing problems and ruin from cheaper imports.  We are facing a potentially catastrophic situation involving hundreds of millions, or even billions of farmers in the South.  The solution here is for the North to very rapidly reduce and eliminate its high export subsidies, cut out unjustifiable domestic support, and meaningfully reduce its tariffs; and for the developing countries to be allowed to have special and differential treatment so that exemption can be given to them from the obligations of import liberalisation and of domestic subsidy given to the food products of developing countries for domestic consumption, and the products of their small farmers.  This special treatment for the South is on the grounds of food security, the predominantly agrarian nature of developing economies and the need to eradicate poverty in developing countries.

5.   Another implementation problem arises from the TRIPS Agreement which is imbalanced for big corporations and against consumers generally and against small producers especially in the South.  TRIPS is about protectionism for the strong and prevents technology transfer to the weak, it facilitates monopoly and prevents competition, it hinders development as well as the environment (preventing the transfer of environmentally sound technology).  Worse, Article 27.3b facilitates patenting of biological materials, and the phenomenon of biopiracy in which Southern-based and indigenous-based knowledge is appropriated by Northern-based big corporations which then create hurdles for the knowledge to be used even by the original knowledge holders and developers.  This has adverse consequences for development, environment and justice.  What is required here is that the review of Article 27.3b clarify that all living organisms and biological materials cannot be patented and that national laws conform to this principle.  Moreover, NGOs worldwide and some prominent economists have called for the removal of TRIPS from the WTO as an agreement that is not about trade and moreover that is protectionist and not about liberalisation, and thus has no place in a trade organisation.

6.   There are other agreements and procedures in the WTO that require review and changes, including the TRIMs agreement, the services agreement, the subsidies agreement, anti-dumping, and the dispute settlement system.  Moreover the decision-making system needs an overhaul, as was made so crystal clear at Seattle where manipulative methods that excluded developing countries from the key negotiations were used in the unsuccessful attempt to bulldoze through a new Round.  The principle must be upheld in future WTO processes, that all Members have the right to be present and to participate equitably in all proceedings, negotiations and decisions of the WTO.  Any reform attempt that sidesteps this principle will be doomed to fail.  Moreover, reform of the WTO system must also include the secretariat which at present is biased in terms of staffing, leadership and also on content in favour of the major trading countries.

7.   Until the reform of the rules and laws and the reform of the system and process are satisfactorily completed, there should not be continued attempts by the rich Members to further overload the faulty infrastructure of the WTO with more issues, such as an investment agreement, competition policy, government procurement, a biotech working group, labour standards, and environment standards.  There is the justifiable fear that given the imbalanced rules and processes, new issues injected into the system will yield greater imbalances and injustices and further distort the WTO away from being a fair and beneficial multilateral trading system.  Therefore, the rich Members of the WTO should refrain themselves from further attempting to overload the system with issues that ultimately will further distort the system against the development interests of the South and against the environmental interests of the world.

8.   Moreover we need, during this period of pause in the WTO, to rethink the correct approach towards trade liberalisation.  A one-size-fits-all approach clearly does not work here as it does not work in other aspects of liberalisation, such as finance.  Numerous recent studies have shown that there is no automatic correlation between rapid trade liberalisation and good performance in trade and growth.  The trade deficits of developing countries on the whole have increased considerably in the past two decades, to which rapid import liberalisation has contributed.  Many countries that are unable to increase their exports (due to various factors such as falling commodity prices, supply constraints and protection in the North) and yet have liberalised their import regime (under structural adjustment or WTO or unilaterally) could see their local industries close down, their farms threatened, and yet these are not offset by higher exports; they face higher trade deficits and higher debt in the future.  Therefore, the trade system and rules and the principle and pressure of more and more liberalisation for all countries, irrespective of their differing conditions, have to be revised.  What has to be reduced or removed is not distortions to free trade, but distortions and obstacles to sustainable development.

9.   On the issue of trade and environment, there are legitimate concerns that unbridled free markets and trade can and have contributed to unsustainable patterns of production and consumption.  Trade has to change, but in a fair way on the basis of common but differentiated responsibility.  In other words, in any process of adjustment of trade and economy to a more sustainable pattern of production and consumption worldwide, the North should bear most of the costs of adjustment and assist the South.  Deviation from this most basic of all Rio Summit principles would lead to an erosion and breakdown of the spirit and products of the Rio Summit, such as Agenda 21. Attempts to use the trade system to shift the burden to the poorer nations will also erode and possibly break the trade system itself.  In this context, the issue of environmental standards in trade should be handled with extreme care.  On one hand, there should not be attempts to misuse the trade system or the name of the trade system to hinder national or international policies that legitimately seek environmental and safety measures.  On the other hand, concepts should not be introduced into the trade system that are likely to be misused to further trade protectionism by the strong against the weak and that go against the principle of common but differentiated responsibility.  There are also legitimate issues of trade and environment, such as how the TRIPS agreement and IPRs in general constrain or hinder the goal of environment protection and the attainment of sustainable development.  This issue must be seriously addressed at the CSD and the WTO.

10. The CSD can play a useful role in the trade policy process, as it is the guardian of the inter-relation between environment and development, the rich concept of sustainable development and the principle of common but differentiated responsibility.  The CSD should be an alternative forum in which the many concepts and issues relating to trade, development and environment can be brought up and discussed, and with its deliberations fed back to the WTO and other forums. The CSD should thus increase its capacity to contribute meaningfully towards this process and in the context mentioned above.

 


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