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WTO MUST CORRECT IMBALANCES AGAINST SOUTH

At a recent Roundtable on the state of the world trading system, leading policy-makers from developing countries vented their frustration at how the World Trade Organisation had given few benefits, if any, to their countries. They called on the rich countries to open their markets and to make the WTO focus on the grievances of developing countries in its next Round. (Second article on the recent G77 Ministerial Meeting)

By Martin Khor


October 1999

The next stage of negotiations in the World Trade Organisation must focus on correcting the accumulated imbalances and injustices suffered by developing countries in the multilateral trading system in order to bring about more equity and credibility to the WTO.

This was one of the major themes in a Roundtable on the 'Multilateral trading system and development' at the G77 Ministerial Meeting held in Marrakech, Morocco on 14-16 September.

The discussions were marked by frankness and punctuated with expressions of frustration at the lack of influence and benefits of developing countries in the WTO and indignation for the double standards between how issues of interest to the North and South have been treated.

It was quite a remarkable demonstration of the disillusionment of some of the South's most senior trade officials and experts with the present state of affairs in the WTO.

The Roundtable chairperson, Thai deputy premier Supachai Panitchpakdi (who is scheduled to be WTO Director-General in 2002), started the ball rolling by enumerating 10 points of interest to developing countries where solutions and actions are needed.

'When we discuss the multilateral trade system (MTS) we are usually asked to serve the system,' he said. 'It is high time we made the system serve our development goals. I recommend that the system undergo some fundamental changes.'

The issues he listed that required action included the need to tackle unilateral actions by some countries; the distribution of benefits among countries arising from the WTO agreements; the need to enforce the special treatment provisions for developing countries; non-tariff barriers against goods from the South; review of the dispute settlement system; problems faced by countries wanting to join the WTO; the need to link trade and finance issues; and alternative ways of handling social issues rather than linking them to the WTO.

UNCTAD Secretary-General Rubens Ricupero said the next set of negotiations in the WTO should be on development. 'If we are sincere in this, to attain balance means we have to give development more than 50%. Balance is not 50-50 because previous Rounds addressed little development concerns and most imbalances in the system are due to those previous Rounds.

'For example, there are now pressures to get rid of developing countries' transition periods (which are granted to phase in the implementation of their obligations). After the Uruguay Round, many developing countries were pressured to give up transition periods due to bilateral pressure.'

Demonstrating the unfairness of this, Ricupero contrasted it with the long transition periods provided for products from developed countries. 'The longest transition periods are in agriculture and textiles,' he said. In agriculture a waiver was given to the US in the 1950s, to expire in 2003, amounting to a 50-year transition period.

A waiver was also given to the US on cotton textiles in the late 1950s which later became the multifibre arrangement (MFA), in which developed countries are allowed to impose quotas restricting textile and clothing goods from developing countries. 'By the time the MFA is dismantled, it would already have lasted 45 years,' said Ricupero.

He added there can be no denying the multilateral trading system is 'highly imbalanced and biased against developing countries. It is a matter of concrete evidence.'

For example, why is it developing countries cannot resort to subsidies for industrial goods whilst developed countries reserve for themselves the right to abuse agricultural subsidies?

'If the system is imbalanced, and has been unable to address development requirements in past Rounds, now is the time to do it, not on a 50-50 basis.' He agreed with Supachai that an 'early harvest' (quick decision at the WTO Seattle Conference) should be on matters for which the developing countries have been waiting 50 years. 'It is a late harvest for us and not an early harvest!' he said.

Another panellist, Singapore's Minister of State for Foreign Affairs Ow Chim Hock, said an open trade regime had many benefits such as expanding markets for developing countries, increasing FDI and improving local producers' productivity. Seattle was an opportune time to send a positive message to the market to keep the momentum for trade. If Seattle fails to provide for more liberalisation, then protectionism would set in.

South African deputy trade minister Ms L B Hendricks said the next Round must be a Development Round and must focus on development and narrowing income disparities. 'It is crucial that rules, not power, govern trade relations. Having rules in the WTO is a good start. But rules must be designed to achieve equitable objectives. Otherwise there is a danger it is run by power but under the thin guise of rules. We must not allow this.'

Brazil's Permanent Representative in Geneva, Amb. Adhemar Bahadian, asked what were the bargaining chips the South had in the next Round. Was it enough for the South to say we realise what we agreed in the past is not worthwhile and we ask for a few more years (to implement)? In agriculture, how can we make the EU dismantle subsidies detrimental to the South? Are we asking this only in the name of development or do we have a bargaining chip? 'What I worry is that we embark on a new Round in a weak position.'

The Cuba representative said the opening up of markets in our countries, if not accompanied by protecting certain sectors, would pose a risk for certain industries. 'Our economies have important industries that must be preserved and extreme openness will jeopardise our development.'

The Peru representative asked how realistic it was to expect a new round to incorporate development concerns. 'To date, we find there is no critical mass to enable us to feel that development would be a real factor in this Round.' He said the difference between North and South today is in their enterprises. Even if rules of the game are fair, we cannot gain from that if we do not have enterprises. 'Isn't it a risk to create great expectations that this Round will restore balance?'

Guyana Foreign Minister Clement Rohee said the popular perception of people is that there are no big expectations from Seattle. The small Caribbean economies were now facing great challenges due to the removal of preferences for bananas as their economies faced devastation. He urged the developing countries to have a common platform. 'Time is running out not only for the negotiations but the future of our countries.'

Singapore's Ow Chim Hock, in his final comment, said delegates should ask themselves if they are convinced of the benefits of an open trade system, and if they are convinced all countries are better off with the WTO. If the answer was yes, we should start a new trade Round.

Taking up this question, the Trade Minister of Bangladesh Ahmad Tofail quoted from the UN Secretary-General's message to the meeting, that some developing countries had reaped benefits from globalisation but many have suffered the downside. He said, 'We are not interested in a new Round.' Instead, we should assess how much has been fulfilled of the Uruguay Round, before thinking about another Round.

He said that liberalisation had benefited the industrial countries greatly but not the least developed countries. In Bangladesh, average tariffs had gone down significantly.

'Our domestic industries have suffered as a result. Now the business people are worried as we prepare for Seattle that the labour standards issue will be revived. And we are facing non-tariff barriers. We should move on assessment and we should be very cautious on a new Round.'

Ricupero in his conclusion said the system is far from perfect as there are many imbalances. 'It is fair to focus on redressing imbalances in the next effort instead of going ahead with velocity in areas where industrial countries benefit. Since the Uruguay Round, the areas of progress were in telecoms, information technology and financial services. They are sectors of interest to developed countries. The time has come to give priority to the interests of developing countries, in market access and flexibility about norms.

'There must be progress in market access for the South, in textiles, clothing, agriculture, tariff peaks and escalation. We are very far from getting rid of trade barriers in industrial countries.

'In relation to norms, developing countries need more flexibility in the choice of their development policies. Many policies used by developed countries in the past for centuries are either out of reach of developing countries due to their being prohibited in the past Round, or there is an attempt to outlaw these policies. We should not agree to decisions to further prohibit more policy choices.

'Development is a complex process. Countries like Singapore could benefit (from trade), others are still dependent on a few commodities. We can't expect all 150 countries to replicate Singapore. There must be different roads to development and therefore we need flexibility.'

In an earlier session, India's Foreign Affairs Secretary S T Devare said the last decade had shown that globalisation, unless it is managed well and is at the right pace, disrupts economic progress. The benefits of the trade system have been below expectations for developing countries. 'Moreover the WTO is fast enveloping countries in a framework which is being largely devised and influenced by the major developed countries.

'As a consequence the objectives enshrined both in GATT and the Marrakech Agreement establishing the WTO, of raising living standards, ensuring full employment and enhancing incomes, have not been achieved.

'Exports from developing countries continue to face tariff and non-tariff barriers. In textiles and clothing, quantitative restrictions and lack of any meaningful integration continue to constrain exports to major developed countries. Other exports have been neutralised through mechanisms like antidumping measures, sanitary and phyto-sanitary measures and technical barriers to trade. Special and differential treatment provisions have not been adhered to in spirit.

'We therefore believe that priority should be accorded for the redressal of implementation concerns instead of calling for negotiations on new issues.'

China's Permanent Representative in Geneva, Amb. Qiao Zonghuai, said a majority of developing countries have failed to reap their rightful benefits from globalisation and some were adversely affected or marginalised.

'The widening gap between rich and poor countries exposes severe drawbacks in the economic order. The free market economy is not the panacea. A few big countries should abstain from resorting to sanctions and other high-handed measures to break into developing countries' markets while implementing various kinds of new trade protection measures themselves.'

Pakistan's Permanent Representative in Geneva, Munir Akram, said present development strategies based on market forces are now being seriously questioned. While there are benefits, the costs of these strategies are too great and threaten to overwhelm the gains. Growth benefits too few, is too fragile and damages the environment, social relations and cultural values.

Munir said globalisation's benefits have bypassed most developing countries. Only 33 countries had 3% annual GNP (gross national product) per capita growth during 1980-96 and for 59 countries, GNP per capita declined. Income disparity between the richest and poorest 20% of the world's people has more than doubled in the last three decades. Around 1.6 billion people are economically worse off today than 15 years ago. Growth that has occurred is fragile as there is increasing frequency of financial crises, which reverses economic gains.

Munir said defenders of the status quo downplay these facts, asserting market forces themselves will remedy the inequities they cause and technological innovations will solve many problems. 'This is not a tenable position. The costs of current policies cannot be minimised. An undue reliance on market forces and technological fixes will not yield a more equitable economic order. We must acknowledge the economic system is unjust and unstable. We need to rethink current development strategies.' - Third World Network Features

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

1958/99

 


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