WORLD TRADE AGENDA HIJACKED BY VESTED INTERESTS

As the World Trade Organisation gears up the negotiations towards its November Ministerial Conference, a host of problems has arisen, as evidenced by the warnings given recently by leaders of international organisations and other experts. Two of free trade's most famous champions (the chief of the rich man's club, the OECD, and a former director-general of GATT) have expressed concern that the industrial countries' trade policies are being driven and hijacked by narrow commercial interests of big business. The economist Jagdish Bhagwati has complained that the WTO is being overloaded. Leaders of developing countries should heed the warning signs when even the champions of free trade get worried.

By Martin Khor

August 1999

One of the basic aims of the World Trade Organisation is to remove distortions to free trade. Ironically, however, the WTO itself and the multilateral trading system it represents is in danger of being distorted by narrow but powerful commercial and sectarian interests, with developing countries being the victims.

This theme was raised in various ways by distinguished members of the 'trade community', including present and past leaders of international organisations, trade diplomats, lawyers and experts, at a recent seminar on the new WTO Round, organised by Prof. Jagdish Bhagwati and sponsored by the Columbia University Law School in New York.

The seminar was remarkable for the proliferation of warnings, direct or subtle, that were made about the present direction of the WTO system by such prominent persons as former Director-General of GATT Arthur Dunkel, OECD Secretary-General Stanley Johnston, UNCTAD Secretary-General Rubens Ricupero, as well as Bhagwati himself, a leading free-trade advocate.

Many experts expressed worries about how the governments of the dominant trading countries are being overly influenced by the narrow commercial interests of their large corporations, which are now in the driving seat of defining trade policy.

They were also concerned about the reactions of civil society to this type of corporate-led globalisation. Labour unions, environmental groups and NGOs are seen as clamouring to get their social and environmental issues into the WTO system and its dispute settlement system, on the ground that if the companies can get their agenda in, so too should civil society.

Several participants feared that if most of the proposed new issues entered the WTO through the Seattle Ministerial Conference, the developing countries, which had little negotiating power, would be the victims and they would further question the benefits to them of the trading system.

At a luncheon talk, the chief of the OECD (the club of 29 rich countries), Stanley Johnston, warned about how narrow interests in industrialised countries are pushing developing countries to liberalise before they can adjust.

He said that in the industrialised countries, trade policies are being driven by narrow commercial interests, rather than national interests.

As a result, he added, developing countries are being pushed to open up their economies before they can adjust. 'The liberalisation of trade and investment must be on a sustainable basis, and this depends on the countries' capacity to absorb and reap the benefits of liberalisation.'

He urged that countries must 'rise above vested interests' in trade negotiations.

Johnston also said that the developing countries were worried that the new issues being proposed by the industrial countries would 'displace' the issues that the developing countries were raising about the problems of implementing their existing WTO commitments. The discussions on implementation problems may not go ahead as they should.

The OECD chief added that the integration of developing countries into the trade system should be the priority, and that therefore the developed countries should be worried about the effects of their policies on the developing countries. Calling for a 'Development Round', he said this would be in the englightened self-interest of the North.

Noting that trade and investment liberalisation was not enough, Johnston said complementary policies were needed in developing countries. To reap the full benefits, liberalisation must be accompanied by macroeconomic policies, capacity-building, good governance, improved skills and education.

He emphasised again that trade negotiators must take off the influence of vested interests if they are to act in the best interests, and that this is a critical point.

'Too much of sectors of society are being left behind,' he concluded. 'Public policy has a role to play to offset this. We don't want a world divided by ideology or poverty.'

In a dinner speech, Arthur Dunkel dwelt on a similar theme. The former GATT chief (who was director-general during much of the Uruguay Round trade talks that resulted in the WTO's birth) recounted how he had recently chaired an International Chamber of Commerce meeting on the view of business on the new Round.

He said he was struck that the views of the business leaders reflected the same views of their governments in trade negotiations.

This led him to question, 'Who is driving the process in trade policy - governments or the business community?' Dunkel said that whatever is the answer, that there is a collusion between government and business is the explanation behind the aggressive stance taken by NGOs against the WTO.

Dunkel added that these groups say they have no other ways to bring their views forward. They reflect the growing public fear that decisions in the WTO intrude into the lives of citizens, but that citizens have not found a way to influence the WTO.

Dunkel recalled that during the 1998 WTO Ministerial Conference in Geneva, he had listened to the local people's response to the NGO demonstrations against the Multilateral Agreement on Investment (MAI) and the WTO.

'To my surprise I found sympathy,' he said. 'For what? For the people who dare to challenge globalisation personified by the WTO which has become the scapegoat for each problem of our society.'

This, he said, testified to the failure of the political system to carry messages to reconcile the advantages and disadvantages of globalisation.

Dunkel also dwelt at length on the problems facing the more-than 30 countries negotiating entry into the WTO. He said that for all of them, this accession process is a challenge.

Asking what these countries see as happening in the WTO, Dunkel said that firstly they see resistance to a new Round since developing countries still have to digest their Uruguay Round obligations. Secondly, they see that a number of countries are pointing to the lack of benefits they are reaping from the implementation of the Uruguay Round.

At the same time, he said, they see developed countries making use of legal cover to cater to protectionist lobbies, for example in textiles and agriculture. 'What an irony!' remarked Dunkel.

Dunkel said the countries seeking accession are being asked to subscribe to the highest standards of the system across the board, otherwise they cannot enter the WTO.

'I wonder how prospective members will be able to get the consent of their constituencies for the concessions being asked from them,' he said, adding that WTO members should review their approach to acceding countries.

As for the Seattle Conference, Dunkel said the following should be the priorities: (a) a review of the procedures of the accession process to assure the universal character of the WTO is achieved; (b) emphasise issues that benefit developing countries; (c) examine steps to improve transparency of policies; (d) reverse the erosion regarding Uruguay Round commitments.

In his view, the proposals put in the WTO for the next Round showed that negotiators may fall into the trap of overloading the WTO since subjects not related to the system are being taken on board.

He recalled that an enormous amount of time had been spent on the modalities of the agriculture, services and TRIPs agreements, and suggested that future negotiations should start in these areas, as well as with tariff issues.

He said some issues of the Uruguay Round also need to be reviewed, such as the dispute settlement understanding and anti-dumping.

He warned that the WTO should not be overloaded, suggesting that members must distinguish between issues that were 'ripe for negotiations' (for example where the modalities had been worked out) and subjects that could come under further discussion.

These two leaders of international organisations were by no means the only ones alluding to the corporate hijacking of the North's trade policy-making.

Robert Litan, Vice President of the US-based Brookings Institution, and a former US Deputy Assistant Attorney-General, in a paper, said: 'I am mindful that trade negotiations are about more than just what makes good economic sense.

'Trade deals get made because they serve the interests of those who want them to get done.

'More specifically, although trade agreements are designed to promote the interests of consumers, they generally are negotiated on behalf of producer interests who want greater access to foreign markets.

'In the process of serving producer interests, trade negotiators incidentally happen to serve the interests of consumers, but consumer organisations typically are not represented during trade discussions.'

And Prof. Bhagwati himself was clearly agitated that overloading of the WTO system was taking place.

At an opening speech, he said that before the Uruguay Round talks, the main driving force had been to put new issues into the trade agenda so as to 'put the action back' into the GATT system.

'Now that there is so much action in Geneva (the WTO), the question is whether new issues should enter.

'At that time, we took the view we should load the system. Now we find the opposite, that the system is overloaded.'

The warnings of these 'free trade gurus' should be paid attention to, and even made use of, by leaders and diplomats of developing countries, which have much to lose, should the governments of the rich countries succeed in pushing their corporations' agenda to open further the markets of the developing world.

Leaders of developing countries cannot afford to stand by and watch, with resignation, as the trade machine of the North pushes away the rights of the small and poorer countries to develop their own economies.

They have to fight in the WTO in the next few weeks and months to limit the scope of the WTO and prevent more new issues from entering the system. - Third World Network Features

About the writer: Martin Khor is Director of the Third World Network.

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