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Chapter 5

Proposals for Improving the Global Trading System

Some proposals for improving the current system of global trade are presented in this chapter according to the following broad categories:

* Improving the basic structure of the WTO system

* Problems of implementation of the WTO agreements

* The dispute settlement system

* Trade and environment

* The treatment of some proposed new issues and a new round

* Transparency and participation in the WTO

* Trade issues and problems that are outside the purview of the WTO

* Regional trade arrangements among developing countries

PROPOSALS FOR IMPROVING THE BASIC STRUCTURE

Given the inadequacy of the structure based on reciprocity, structural improvements are needed to redress the problem of overall imbalance as well as to compensate for developing country handicaps in the WTO system (Das 2001b). Differential and more favourable treatment for developing countries should not be considered as a concession, but rather as a way of redressing imbalances inherent in the system. Thus, while developing countries may formulate specific proposals on this subject, they should not be treated as seekers of favours, nor called upon to make special concessions in order to get differential and more favourable treatment in any area. Such treatment should not be seen as a burden by developed countries, but as a way to expand their opportunities in developing countries.

It should be formally accepted that developing countries will undertake comparatively lesser levels of obligations than developed countries. Differential and more favourable treatment to developing countries should extend to levels of obligation, rather than be limited to a longer time frame for implementation, as is usually the case at present. It is vital to undertake an overall review of how to enhance and strengthen the provisions on special and differential treatment in the various agreements, and to create provisions where they are needed but absent. Regarding obligations of developed countries to provide benefits to developing countries, these should as far as possible be made into binding commitments, rather than remaining 'best-endeavour' clauses. (ibid).

Developing countries should not be called upon to give up or refrain from adopting policies and measures to support technological development and upgrading as well as diversification of their production and exports.  There should be a formal and enforceable waiver in this regard rather than merely a 'best-endeavour' provision.

Developed countries should establish specific and concrete arrangements for encouraging imports of products of developing countries. Towards this end, they should: a) earmark a specified portion of purchases for government use to be obtained from developing countries, and b) build up an incentive system for the purchase of developing country products by their firms. Incentives may be fiscal or other types of measures.

As discussed above, industries in developed countries put intense pressure on their governments for protection when they are unable to compete with products from developing countries. There should be a systemic arrangement for reducing the incidence of such pressures. One way is to prescribe that a developed country will take positive structural adjustment measures in sectors where it has repeatedly taken actions under safeguard, countervailing duty and anti-dumping provisions.

PROPOSALS RELATING TO SPECIFIC ISSUES

As described in Chapters 3 and 4, there are imbalances in several WTO agreements as well as problems arising from their implementation.  There are also problems in the way some trade measures and concepts (such as tariffs and national treatment) have been applied.  The following proposals address some of these imbalances and problems. 

Tariffs

To pursue effective development strategies, developing countries have to modulate and fine-tune their trade policy instruments so as to support and encourage the growth of specific sectors, the choice of which will vary with time depending on the need. As part of this dynamic process, developing countries need flexibility in the matter of raising and reducing tariffs. The current procedure of raising tariffs beyond the bound level is very cumbersome and should be made smoother and easier (Das 2001b).

As part of the development process, industries need to be set up, and need protection, not perpetually, but for a limited initial period. A country may currently be exporting raw commodities or raw materials, and the duties it applies on the imports of processed products (particularly luxury goods) are essentially for revenue-raising purposes. When it wants to diversify and encourage investments for that purpose, to bring about further processing and exporting of value-added, it has to raise tariffs to give some initial protection. At present, in terms of GATT (Art. XVIII: C), those wanting to take this route have to 'negotiate' and 'compensate.' This is not only cumbersome, but could be economically costly. Developing countries that see far enough ahead, keep high bound tariffs, and apply tariffs at a much lower level, so that they can increase them as needed at a future point. If there were systemic assurance that countries could raise tariffs (under appropriate multilateral surveillance) for a limited period to promote infant industries to get established and become operational, it would be to the benefit of all.

Moreover, there should be a change in the current method of balancing gains and losses in such tariff negotiations. The offer from the developing-country side should not be evaluated merely in terms of current trade; rather, it should be evaluated mainly in terms of future potential and prospects for developed countries, when the developing country would have grown and its market would have enlarged.

National Treatment, TRIMs

With the input of fast-developing technology and strategic mergers and acquisitions, the production and supply of goods and services in developed countries has increasingly been gaining strength. The goods and services of developing countries are being further handicapped through competition in the domestic market. This may have dangerous implications in future. Developing countries should not make themselves more and more dependent on foreign supply of goods and services. The classical concept that a country should focus its economic efforts only on sectors and activities in which it has an advantage may not be realistic as a large number of developing countries may really not have substantial and practical advantage in any area, at least in the short term. Therefore, there is a need for developing countries to adopt policies and measures to support and encourage the domestic production of goods and services. (ibid).

The rule relating to national treatment in GATS does accommodate this concern. It is important that it is not diluted or ignored in operation.

The relevant rules in GATT, for example, provisions relating to national treatment and TRIMS, need to be suitably modified to enable developing countries to support domestic production and supply. In particular, developing countries should be allowed to apply the domestic-content requirement to their industries. (See section on TRIMs below.)

Subsidies

Subsidies in developing countries, in both industry and agriculture, should be recognized as an instrument of development, rather than as measures distorting trade. The rules should clearly say this; and they should contain enabling provisions for developing countries to use subsidies for technological development, upgrading of production and diversification of production and trade. Such subsidies should be exempt from imposition of countervailing duty and other types of counter-action.

Standards

On the issue of standards, both in industry and in agriculture, there is the basic problem of the evolution of new standards adversely affecting the market access of developing countries. There is a need to ensure that developing countries fully participate in the formulation of standards. One way is to assist them in their participation. Simultaneously, there is also a need to ensure that new standards are not formulated without the participation of developing countries. The relevant rules should clearly say that new standards in the areas of industry and agriculture will be set only if a minimum number of developing countries have been able to participate in the process.

Balance-of-Payments Provisions

The discussion in Chapter 3 indicated the need for improvement in the rules concerning the balance of payments. Rules should specify that the existence of a BOP problem will be determined on the basis of  foreign exchange reserves and flows excluding those that may be temporary and unstable. Further, a developing country's foreign-exchange-reserve requirement should be assessed on the basis of future development programmes, rather than on the basis of past trends.

There is also a need for a systemic improvement. Rules should explicitly lay down that the existence of a BOP problem in a developing country will be determined by the General Council after taking into account the recommendation of the BOP Committee. The analysis and observation in the report of the IMF should be used as an input in this process, and not as a determining factor.

Current rules are designed for relief during a temporary problem in the balance of payments. However, for most developing countries, the problem in this area is structural, making it desirable to supplement current rules to provide relief in case of a structural problem. 

PROPOSALS ON IMPLEMENTATION OF COMMITMENTS BY DEVELOPED COUNTRIES

As discussed in Chapters 3 and 4, developed countries have failed to fully implement their commitments or obligations with regard to improving market access for developing country products. Inequities and imbalances in agriculture and textiles are especially pronounced, requiring special attention. Tariff peaks and escalation in industrial products and the protectionist use of non-tariff measures should also be addressed.

Agriculture

The high subsidies and protection prevailing in agriculture in developed countries should be effectively reduced.  The tariff peaks in agriculture in developed countries should be brought down substantially.  Domestic subsidies in these countries should also be drastically reduced, including categories not covered by the AMS.  Similarly, export subsidies in developed countries should be rapidly reduced and eliminated. At the same time, as discussed in more detail below, developing countries should be allowed greater flexibility than at present.

Textiles

The suggestion for positive structural adjustment mentioned above is especially applicable to the textiles sector, which has been under protection and pressures for protection in developed countries for more than three decades. The rules should provide for concrete positive structural adjustment measures in developed countries, and implementation should be monitored by an appropriate body of the WTO.

Regarding more effective implementation of liberalization commitments, the ITCB has made concrete proposals.  At least 50 per cent of imports of products that were under specific quota limits should be liberalized by the start of the next stage of implementation on 1 January 2002, by which time 70 per cent of the transitional period of the Agreement on Textiles and Clothing would have elapsed.  Also, the provisions of growth-on-growth should be applied so as to contribute to meaningful increases in access possibilities in developing countries (Hong Kong, China 2000: 3). The ATC should be fully implemented progressively in spirit and fact, and not merely in law.

Assurances in deed as well as in word should be given by developed countries that they intend to honour their commitments at the end of the phasing-out period.  Technically, this period is to end on midnight of 31 December 2004. Any quota restrictions after that date will be illegal. But given the way in which the United States and European Communities are undertaking the phasing-out, there are legitimate grounds for fears that most of the restrictions will remain until that date, and that rather than suddenly disappearing at that time, there is likely to instead be an attempt by the major countries to find a way to depart from the WTO obligations.  One possibility is that the major countries would use the argument of lower environmental and labour standards in the textiles industry of developing countries as grounds for further protection.  Any such move by developed countries would result in greater disillusionment by developing countries in the multilateral trade system, and therefore should not be attempted.

Tariff Peaks and Escalation in Industrial Products

The tariff peaks and escalation in the industrial sector in developed countries on products that are of export interest to developing countries should also be brought down, to enable developing countries to expand their manufactured exports and to contribute to the upgrading of developing countries' efforts to make better use of their raw materials and natural resources through processing and manufacturing.  Developing countries should not be pressured to reduce their industrial tariffs in exchange.

Non-tariff Protectionist Measures

The various types of unjustified restrictive trade measures in developed countries, and the increasing resort to them, should be regularly monitored. Measures should be taken to curb the use of non-tariff measures for protectionist purposes, including amendments to current agreements.  For example, regarding anti-dumping, a provision could be adopted that once an investigation has been completed for a product, a new investigation into the same product should not be initiated until a suitable period has elapsed. 

PROPOSALS ON IMPLEMENTATION PROBLEMS FACED BY DEVELOPING COUNTRIES

As discussed in Chapters 3 and 4, there are imbalances in several specific WTO agreements and many developing countries face problems in implementing their obligations under these agreements.  The following proposals address some of these issues. 

General Review of Developing Countries' Implementation Problems

While many developing countries did not adequately understand the implications when they signed on to the Uruguay Round agreements, their understanding has since grown as they face the problems of implementation.  It was not the intention, when the WTO was set up, to have a multilateral trading system that negatively impacts the majority of its members. Thus, it is necessary to undertake a review of the WTO rules and their implementation so that changes can be made as needed to prevent negative consequences.  

In an exercise to 'rebalance' the WTO system, a good starting point would be those proposals put forward by developing countries in paragraphs 21 and 22 of the draft Seattle Ministerial Text of 19 October 1999.  These cover changes to the rules on anti-dumping, subsidies, safeguards, sanitary and phytosanitary measures, technical barriers to trade, textiles, TRIMs, TRIPS, Article VII of GATT 1994, rules of origin, BOP provision of GATT 1994, agriculture, services and special and differential treatment. One of the most important of the general proposals made is that all provisions on special and differential treatment (for developing countries) be converted into concrete commitments, especially to address supply-side constraints faced by developing countries.  Preferential treatment by developed countries in favour of developing countries shall be implemented in a generalized, non-discriminatory and non-reciprocal manner.

Useful reference can also be made to proposals put forward from the development perspective on trade by experts such as Bhagirath Lal Das in his books, Some Suggestions for Improvements in the WTO Agreements (1999) and The WTO Agreements: Deficiencies, Imbalances and Required Changes (1998a), and in the UNCTAD publication, Positive Agenda and Future Trade Negotiations (2000a).

The Agriculture Agreement

Many developing countries have made proposals that the Agriculture Agreement should be amended to allow greater flexibility to take into account their problems on implementation, especially the effects on rural livelihoods, food security and incomes of the poor.  In line with these concerns, the following measures could be taken:

* A decision that food production in the developing countries for domestic consumption, as well as the products of small farmers and household farmers in developing countries, will be excluded from the disciplines of the Agriculture Agreement on market access and domestic subsidy. Negotiations should take place to determine the method of implementing the decision.

* A decision that the special safeguard mechanism can be utilized by developing countries, whether or not they have taken to tariffication.

* An agreement to effectively and directly assist net food-importing developing countries. The mechanisms and method should be finalized.

Services and GATS

Despite a lack of data and assessment with regard to trade in services, qualitative analysis shows there is a relative lack of benefits to developing countries and potential problems if they are to liberalize further in this area.  In the present round of services negotiations, the imbalances in benefits and costs should be addressed as matters of first priority.

Before the developing countries undertake any more commitments, the issue of the lack of data needs to be addressed and agreement reached for data collection and collation at national and international levels in all four modes of supply.  In the meanwhile, developing countries need to undertake some national data estimations on services, for example by using options theory (Raghavan 2000f). While this is being done, they should not be expected to undertake further obligations for liberalization in services.

Developing countries should also select the services sectors and transactions that are of export interest to them. Negotiations should aim at liberalization in these sectors/transactions by developed countries.

Articles IV and XIX.2 of GATS have special provisions for developing countries, but these have not been put into practice.  Instead of being given special consideration, developing countries have in fact been targeted for obtaining more concessions, as in financial services.  There is need for serious and sincere implementation of the special provisions.  To this end, GATS should have a specific provision for monitoring the implementation of these commitments (Das 1998b).

Developed countries should take concrete steps to encourage the import of services from developing countries. Examples of such steps are: providing incentives to their domestic firms for importing services from the developing countries, and reserving a portion of their import of services for government use for imports from developing countries.

Concrete measures and time frames should be agreed for liberalizing the movement of labour from developing countries to developed countries.  At present, even the limited commitments on supply of services through 'movement of natural persons' have been practically nullified in industrialized countries due to immigration and visa restrictions and laws, 'needs' tests and the like. This imbalance should be addressed, perhaps by providing for the possibility of an outside adjudication process over such visa restrictions (except in cases involving 'national security', where decision-making authority should be vested with high-level government authorities) on the temporary movement of persons for the delivery of services.

The drawing up of a temporary-safeguards provision in GATS is important and useful to enable developing countries to take measures to safeguard against negative effects of liberalization on domestic firms.  However, an effective and beneficial provision requires that the issue of the lack of data be resolved; a country seeking recourse to safeguards would likely require appropriate data, as it may be asked to demonstrate that injury to its domestic sector is in fact caused by increased imports or access granted to foreign suppliers.  Also, the issue of the types of safeguard measures that can be practically taken should be considered.  There is a need for technical studies on these issues.

The architecture and provisions of GATS that enable flexibility for developing countries in the pace of liberalization and the choice of sectors and modes to liberalize should be preserved.  Approaches, measures or rules should not be introduced that would reduce their choices and options, or that would put pressure on them to liberalize more rapidly than they are prepared to.  

In the discussions on rule-making and the development of new rules, including those on domestic regulation and government procurement, great care must be taken to ensure that the flexibility and options for governments to make their own domestic regulations and policies are not adversely affected.  Proposals must be assessed especially on their potential social, economic and developmental effects on developing countries.    

Public concerns that the GATS rules and framework cover basic services (such as water, health, education and social welfare) and may involve some types of activities that are provided by the government and public sector, should be addressed.  The nature and scope of exception for services provided by the government should be clarified and an assessment made on the implications of whether (and to what extent) countries can have adequate flexibility in making national policies for basic services. The effects of this on social development (including access of the public, especially for poor people, to basic services) should be taken fully into account in decisions on changes to and future directions relating to GATS.

 Intellectual Property and the TRIPS Agreement

As the imbalances and problems generated by TRIPS become more obvious, there have been increased requests from developing countries in the WTO to address the implementation problems, and mounting public demand worldwide for a reassessment of the nature and effects of TRIPS on the public interest in several areas as well as overall. 

Since many developing countries are facing difficulties in implementing the TRIPS Agreement at the national level, the transition period for developing countries should be extended until a review of the agreement (which is mandated) is carried out and appropriate changes are made to the agreement.

In implementing TRIPS through national legislation, developing countries should be allowed to fully make use of the flexibility to choose among different options, without being subject to undue and inappropriate influence. The various options should be explained to developing countries, along with the advantages and disadvantages of each.  Within the scope and space enabled by the provisions of TRIPS, developing countries should build the capacity for choosing the options that in their informed opinion are least damaging and that best protect national and public interests (Third World Network 1998; Correa 1998).

Pressures should not be applied on developing countries to give up the use of options available to them under TRIPS.  For example, pressure had been applied on some countries not to exercise their right to resort to compulsory licensing or parallel imports in the case of medicines to treat AIDS patients. Moreover, undue influence should not be applied on developing countries either through bilateral means or regional arrangements or through the process of accession to the WTO, to get them to agree to implement IPR standards even higher than those in TRIPS.

The mandated review of Article 27.3(b) of TRIPS should resolve the artificial distinctions made between certain organisms and biological processes which are allowed exclusion from patentability and other organisms and processes which are not allowed exclusion.  This may be resolved through following the proposal of the Africa Group in the WTO, that the review should clarify that all living organisms and their parts, and all living processes, cannot be patentable. This clarification can be done through a suitable amendment to Article 27.3(b).

Since plant varieties are part of living organisms, the exclusion from patentability should also apply to them.  Countries can however devise a suitable system of reward or incentive for plant breeders, if they so desire, but this should not be compulsory and should be left to each country to decide; such a system should however not compromise the rights and practices of local communities.  Countries may also be encouraged to institute policies and legislation that protect and promote traditional knowledge and the rights of local communities to their resources and their knowledge.

The transition period for implementing Article 27.3(b) should be extended to five years after the review is completed.

There should be a Ministerial Declaration that nothing in the TRIPS Agreement prevents members from taking public health measures, including making medicines accessible and affordable to the public, especially the poor.  The Declaration should also spell out how developing countries can enjoy full flexibility in adopting compulsory licensing and parallel import measures as a means to enabling access to vitally needed medicines.

In relation to medicines needed for serious and life-threatening ailments, countries should be allowed the flexibility to exclude these from patentability.  Further, consideration should be given to a broader provision enabling countries to exempt pharmaceutical drugs in general and the drug industrial sector from process and product patents.

Consideration should also be given for exemption or relaxation of the terms of patent protection for environmentally sound technology.

The transfer-of-technology provisions and objectives of TRIPS (including Articles 7, 8 and 66.2) should be made legally obligatory and operationalized.  Developed countries and their enterprises should be obliged to put into effect the process of transfer and dissemination of technology to developing countries.

Developing countries should also be given flexibility to exempt (or have a longer transition period for) certain products and sectors from IPR protection, on grounds of public welfare and the need to meet development objectives.

Finally, WTO members should consider the issue, now being raised by some leading trade economists, of the appropriate location of the TRIPS Agreement and, in that context, review whether the WTO is the appropriate institution.  Intellectual property is not a trade issue. Moreover, high IPR standards constitute a form of protection that prevents or constrains the international transfer of technology, and through conferring monopoly privileges, they restrain competition and promote anti-competitive behaviour.  It is thus an aberration that TRIPS is located in an organization that is supposed to promote trade liberalization and conditions of market competition. In a letter to the Financial Times (20 February 2001), trade economist Jagdish Bhagwati argued that intellectual property protection does not belong in the WTO, and declared support for an NGO statement 'asking for the IP leg of the WTO to be sawn off.'  Arguing that the WTO must be about mutually gainful trade, whereas intellectual property protection is a tax on poor countries' use of knowledge, constituting an unrequited transfer to the rich producing countries, he remarked: 'We were turning the WTO, thanks to powerful lobbies, into a royalty-collection agency, by pretending, through continuous propaganda that our media bought into, that somehow the question was "trade-related."'

The TRIMs Agreement

Due consideration should be given to countries that have difficulties in implementing the TRIMs Agreement.  The problems of developing countries should be addressed together, and not on a case-by-case basis, so that a systemic solution can be implemented. The transition period for developing countries should be extended for a period that is in consonance with their development needs.  Developing countries should also have another opportunity to notify existing TRIMs, which they can then maintain till the end of the new transition period. 

In the review of the TRIMs Agreement, there should not be attempts to include more items on the illustrative list of prohibited investment measures, or to extend the mandate of the agreement to cover investment rules per se.  Instead, provisions should be included in the agreement to provide developing countries the flexibility needed to implement development policies, thus recognizing their need to use investment measures to meet social, economic and development objectives. In line with this, the agreement could be amended to exempt developing countries from the disciplines on domestic-content requirement and on trade balancing (limiting the import of inputs to a certain percentage of the value of exports).

PROPOSALS TO IMPROVE THE DISPUTE SETTLEMENT SYSTEM

The discussion in Chapter 3 pointed out that the structure and operation of the dispute settlement system hinder developing countries from benefitting fully from it. In addition,  systemic deficiencies in the system have given rise to serious problems.  There is thus a need for substantial improvement.

Since the ultimate means of enforcement is retaliation and a developing country may not find it a practical step, there should be a mechanism in the rules to provide for joint action by all the members against an erring developed country, if a developing country is the complainant and the situation has reached the point where retaliation against a developed country is to be applied.

As discussed above, the process of bringing an issue to the dispute settlement system and then pursuing it in the panel and appeal processes is very costly. Even if a developing country obtains relief, it is only prospective; and the country would have already suffered a huge loss. It is necessary to provide rules for relief to developing countries for the cost incurred and loss suffered. Therefore, in cases where a developing country faces a developed country in a dispute, either as a complainant or as a defendant, and if its position has been held to be correct, the rule should provide for financial compensation for the cost involved in preparing for the dispute and pursuing it. Besides, if a developing country is a complainant and its complaint has been upheld and if the erring side is a developed country, the relief to be provided by the latter should be retrospective with effect from the time the action in dispute was initially taken.

Countries should be clearly and explicitly prohibited from having legislation that permits unilateral action in the area of trade covered by the WTO. Nor should countries be allowed to threaten such retaliation or publish a large list of products to be hit whose value is several times that of the actual trade damage claimed. Both these actions have been used to exert pressure on countries.

Chapter 3 also pointed out systemic problems relating to the structure and operational aspects of the dispute settlement system and the need for genuine independence of the panels and Appellate Body.  To rectify these, the Dispute Settlement Understanding and the dispute settlement system need systemic changes. Following are some suggestions (Raghavan 2001h):

* Institutionally, organically and structurally, there should be a separation between the WTO secretariat and the work of servicing panels and the Appellate Body, which can be carried out by an independent bureaucracy separate from the WTO secretariat.

* The WTO secretariat, which services the negotiations in the trade body (and which in the process also often promotes particular outcomes), should not be allowed to maintain a behind-the-scenes role in providing briefs and notes to dispute panels that deal with the interpretation or assessment of nullification and impairments of rights and obligations.  If it is to have a role, this should be played in the open, before the panel, in the presence of both parties to the dispute.

* Appellate Body members should get legal guidance from the pleadings and arguments of the parties about the law, not from the secretariat.  If the Appellate Body members require some help, each of them should be authorized to recruit a few legal interns for fixed, non-renewable terms to assist them in their work.

* The practice in the Appellate Body where members who have heard a case consult other members before finalizing their judgement, is not legal nor sanctioned by the Dispute Settlement Understanding, and such practice should not be allowed to recur or be maintained.  That the 'judges' who did not hear a case can still influence its outcome violates all principles of judicial norms.

* Rulings should be binding on the parties by the present negative-consensus method, but cannot be made a precedent nor become an authoritative interpretation to be applied in future, unless the interpretation is adopted and approved in a separate process by the General Council through a positive consensus.  This can prevent expansion of the WTO's remit as is now taking place.   Otherwise, by providing authoritative interpretations and creating these precedents, the Appellate Body is really adding to the bundle of rights and obligations in an international treaty system, where this should in fact come about only by changes or interpretations negotiated and agreed to by the membership.

Besides these, the General Council should give an instruction that the panels and Appellate Body should not undertake substantive interpretations. In particular, when a conflict between two agreements is noticed, the panel/AB should refer the matter to the General Council for an authoritative interpretation rather than itself determining which provision is more binding.

PROPOSALS ON THE TREATMENT OF TRADE AND ENVIRONMENT ISSUES

Discussions within the WTO on the environmental effects of WTO rules can be beneficial, provided the environment is viewed within the context of sustainable development and the critical component of development is given adequate weight.  The Committee on Trade and Environment should orientate its work to the more complex but appropriate concept and principles of sustainable development. 

There should be no move to initiate an 'environmental agreement' in the WTO that involves linkages between environmental standards and trade measures or trade sanctions (e.g., through concepts such as processes and production methods and eco-dumping).  

Environmental standards and environment issues should not be used by WTO members for protectionist purposes.  On the other hand, countries should not make use of 'free trade' principles or invoke the name of 'WTO rules' to counter attempts by others to forge international agreements that deal with genuine environmental problems.

Discussions on the proper clarification of the relationship between multilateral environment agreements and the WTO should proceed on the basis that the WTO should not be an obstacle to measures in MEAs that are agreed to on genuinely environmental grounds. Environment issues should be negotiated in the context of MEAs.

Discussions should proceed in the WTO on a priority basis on the effects of the TRIPS Agreement on the environment, and appropriate measures taken to clarify or amend the agreement. The issue of how domestically prohibited goods should be treated in the WTO in order to satisfy environmental objectives should also be given high priority.   

PROPOSED NEW ISSUES

As discussed in Chapter 4, it would not be appropriate, at least at this stage of the WTO's development, to launch a 'comprehensive round' of trade negotiations that includes proposed new issues such as investment, competition, and government procurement.  Developed countries should not pressure developing countries to accept these issues for negotiations.  The WTO secretariat should remain neutral and not take sides with members advocating new issues as there are many other members that are not prepared to accept them.

The WTO should focus its attention on the already full programme of resolving implementation problems facing developing countries, on the ongoing services and agriculture negotiations, and on the mandated reviews, as well as its other routine work in the committees, working groups, trade policy reviews, and dispute settlement system.  If they were to start, then negotiations on new issues would occupy a large part of the time and resources of WTO members, thus taking away the time and resources required for the above-mentioned programme.

The next phase of the WTO's development should be focused on correcting the present imbalances, resolving problems of implementation facing developing countries, opening the markets of developed countries for products from developing countries and establishing democratic decision-making processes, in order to bring the multilateral trading system in line with the needs and interests of developing countries, which comprise the majority of the members. It would be unfair for developed countries to argue that the demands of developing countries can be met only through a new round in which they are asked to give even more and heavier concessions, as this would be asking the weak and poor to 'pay twice' without their having any confidence that they would get anything concrete in return.

Developing countries should build their capacity to understand and analyse the proposals for new issues and how these will affect their development. Organizations such as the Group of 77 (G77) and regional organizations of developing countries should give the highest priority to planning meetings, workshops and coordinating sessions where they can build the capacity of member countries to monitor and study the issues, exchange views and positions, and take an active part in the negotiating process individually, as regional groupings, and if possible, as a whole.

TRANSPARENCY AND PARTICIPATION IN THE WTO

Financial assistance should be provided to countries that are unable to afford to maintain a mission in Geneva, so that they can adequately participate in the activities of the WTO. Developing countries also need assistance to increase their capacity, especially human resource capacity, in their capitals to deal with WTO and trade policy issues.

Developing countries need to develop more effective ways of sharing information among themselves, and to collaborate on analysis and formulating joint positions, wherever possible, in order to increase their negotiating capacity and strength. Financial assistance should be provided for organizations of developing countries to facilitate capacity- building in this respect.

Measures should be taken in the WTO itself to remove decision-making procedures and practices that are non-transparent, non-inclusive and undemocratic, especially in the preparations for, and during, Ministerial Conferences. The so-called Green Room process of selective participation should not continue. The system and culture of decision-making in the WTO should also be reformed. The reform process should be conducted in a manner whereby all members can fully participate and should aim at a result whereby WTO meetings are run on the basis of full transparency and participation, where each member is given the right to be present and to make proposals. Even if some system of group representation is considered, all members should be allowed to be present at meetings and have participation rights.

The WTO secretariat should also be impartial and be seen to be impartial. In particular it should not be seen to be taking sides with the more powerful countries at the expense of the interests of developing countries.  The system should reflect the fact that the majority of members are now developing countries, which have as great (or greater) a stake in a fair and balanced multilateral system as do developed countries, and therefore provide developing countries with adequate means as well as procedures to enable them to voice their interests and exercise their rights.

ISSUES CURRENTLY NOT COVERED BY THE WTO

There are some crucial aspects of trade not covered by the WTO that nevertheless constitute vital components of the global trading system.  The following proposals deal with some of these issues. 

Lack of Supply Capacity in Most Developing Countries

Several international and regional agencies already have programmes to assist developing countries to improve their productive and trade capacity, including the international Trade Centre  (ITC), UNCTAD, the UN Industrial Development Organization (UNIDO) and the multilateral and regional development banks. However, given the continuing weaknesses and deficiencies of many developing countries, these efforts are insufficient.  It would be useful for developing countries, perhaps through the G77, to identify and assess the impact of programmes being conducted by the various agencies. A study can also be done on the elements for a successful export strategy and export-supply capacity-building programme for developing countries, taking into account the recent experiences of developing countries; on the present weaknesses; and on how to overcome the obstacles.

Decline in Commodity Prices and Terms of Trade of Developing Countries

Falling commodity prices and other problems associated with commodity exports have been the major trade concern for many developing countries, especially the poorer among them, requiring the issue to be revitalized. Institutions and groups of developing countries should give priority to advocating for it to be given serious attention, and enlist the help of UNCTAD and other agencies.  The trend decline in commodity prices and in the South's terms of trade should be addressed through an international conference or convention, or other institutional mechanism. It is imperative that the huge income losses incurred by poor countries be stemmed.

The UN secretariat should resume compiling and publishing data and analyses on an annual basis on the terms of trade between commodities and manufactures, and the effects of movements in the terms of trade on the incomes of different categories and regions of developing countries, as well as the effects on the net international transfer of resources from and to developing countries.

UNCTAD and the Common Fund for Commodities should review the experience of commodity agreements and look into the possibility or desirability of reviving such agreements. One possibility is to initiate a new round of commodity agreements aimed at rationalizing the supply of raw materials (to take into account the need to reduce depletion of non-renewable natural resources) while ensuring fair and sufficiently high prices (to reflect ecological and social values of the resources).

Although international cooperation is the preferred method of improving the commodity situation, and attempts should be made to revive it, this may not be feasible at present. In the absence of joint producer-consumer cooperation, producers of export commodities could take their own initiative to rationalize their global supply so as to better match global demand.

UNCTAD, UNIDO and other agencies could be approached to assist commodity-producing developing countries to improve their capacity for increasing the value of their commodities by going up the value chain through processing and manufacturing as well as marketing.  At the same time, developing countries should press developed countries to reduce tariff escalation and allow better market access for processed and commodity-based manufactured products, and thus help commodity producers reap better benefits from the trading system.

REGIONAL TRADE ARRANGEMENTS AMONG DEVELOPING COUNTRIES

While this paper has dealt with issues relating to the multilateral trade system, it should be recognized that regional trade arrangements are also a significant part of the system of international trade.

Developing countries have been making use of regional or South-South trade arrangements among themselves as a means of trade promotion.  If designed well, these arrangements can play a useful complementary role to the multilateral system.  When a developing country opens up for trade with other developing countries in a region, or to developing countries in other regions, it may find the arrangements more balanced and mutually beneficial, as these countries are relatively at the same stage of development (as compared to the developed countries). Therefore, if a developing country gives preferential concessions to other developing countries, it may determine that its domestic firms are in a better position to compete with the imports from those countries; and similarly its exports, when granted preferential concessions, may be in a better position to succeed in the other developing countries.

The pursuit of regional trade arrangements between developing countries could thus be beneficial as a complement to their participation in the multilateral trade system.

 

 


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