Earth Trends by Martin Khor

Monday 12 Feb 2001


Each year the World Economic Forum holds an annual meeting in the Swiss resort of Davos, where the commercial and economic elite debate issues and make deals.  Unlike previous years, the meeting this year was sombre in mood, as the US economic slowdown and the protests against globalisation caused the participants to be much more cautious and even pessimistic about the state of the world.  MARTIN KHOR, who was at Davos, reports.


Some interesting discussions and trends arose at the Davos meeting of the World  Economic Forum held in the last week of January.

An underlying point of debate was what would happen to the United States  and the world economy this year.  The Federal Reserve chairman had just announced that the US economic growth was nearly at a zero per cent rate.  That certainly contributed to the sombre mood at Davos, which contrasted to the gung-ho nothing-can-go-wrong atmosphere of the previous year.

At a session on world economic prospects, the experts predicted a "bumpy" landing for the US economy.  This meant a slowdown but probably not recession (one expert said there was a one-third chance of recession).

The general worry was the Japanese economy which is expected to stagnate for some time.  Indeed, Japan became a kind of whipping-boy.  A high-level official of Goldman Sachs Asia even said that the only way to be optimistic about Japan is to read the charts upside down, which became one-of Davos's most quotable quotes, to the discomfort of the Japanese.

There was more optimism about Europe, but the region is not expected to grow fast enough to offset the negative developments in US and Japan.  Thus this year is expected by the forecasting gurus to see a global slowdown.  There was no agreement (nor even much discussion) on how long the world economic slowdown will last.

The usual upbeat assurance about the benefits of globalisation also vanished in Davos this year.  Instead the theme was "bridging the divides", the main divide being the unequal distribution of benefits from globalisation between developed and developing countries.

A main talking point was the protest that civil society groups launched against the World Economic Forum meeting.  Thousands of protesters had announced their aim of closing the meeting down.  But most were stopped from entering the town when the Swiss  authorities closed the trains, buses and the only road leading to Davos.

A few hundred protesters still managed to get there and staged a demonstration.

And some non-governmental groups held a parallel workshop called the Public Eye on Davos.  The quality of the discussion there was in fact often much better than what went on inside the official meeting.

The public protests also cast a shadow over the official event.  The organisers strove to show that they were not the great champions of unfettered globalisation for which they were being attacked.

The opening session heard criticisms about the global economic process from the leaders of Tanzania, India, Thailand and Brazil, who all complained about the unequal benefits from trade.

The Tanzania President spoke of power assymetry between North and South, where the North seeks to extract maximum benefits from the South, including in agriculture.

The South faces supply constraints that prevent it from reaping benefits, and previous agreements have not worked for the South.  He expressed fears that deregulation and liberalisation could kill fledging industries in developing countries.  Globalisation can only deliver if there is North-South cooperation.

The Indian Finance Minister also spoke of inequities of the system.  He highlighted the loss to India of the brain drain, resulting in 38% of doctors in the US being Indians, 36% of Nasa scientists and 38% of IMB employees.

The Brazil Agriculture Minister complained how protectionism in the North prevents Brazil from exporting agriculture products.  Thai deputy Prime Minister Dr Supachai blamed the mobility of funds for the Asian crisis and criticised the IMF policy that asked affected countries to raise interest rates and to slow demand.

He said the crisis would have been minor except that hedge funds magnified the crisis by attacking the currency when there was a loss of confidence.

There was quite a lot of focus on WTO issues at the Davos meeting.

I was invited to be a speaker at a panel session on trade and the World Trade Organisation.

At that session, Mr. Pascal Lamy, the European Commission's Trade Commissioner, pushed for a New Round that would include modernising WTO rules in investment and competition, demonstrate WTO and environment can coexist (and also health and safety), and put in the development dimension as well.

He indicated the EU was formulating a "new strategy" for launching a new Round.

The New Round was also pushed by Japan's deputy foreign minister and by the WTO's director-general Mike Moore, although the latter admitted that developing countries know they cannot take on new obligations.

I had been asked to speak on why developing countries seemed to be unhappy with the trade system.

In my presentation on behalf of the Third World Network, I argued that there was  disillusionment in the developing world with the North's non-implementation of their commitments.

This was due especially to the North's failure to liberalise their textiles and agriculture sectors and to provide special and differential treatment to developing countries.

The developing countries were also facing many problems arising from their having to meet their obligations in the various agreements such as agriculture and intellectual property rights.

The proposed new issues in a new Round (investment, competition, procurement, labour, environment etc) would increase their obligations, make the WTO more imbalanced, and load the trade system with non-trade issues, as well as diverting resources and energy from resolving the implementation issues.

Thus there should not be a new Round at least until implementation problems are solved and the WTO becomes a balanced and fair multilateral trade system.

The agenda of negotiations should be on rebalancing WTO and resolving implementation issues and not on new issues.

In another session, Dr Supachai (who will be the next WTO director-general) said that at the failed Seattle Ministerial meeting of the WTO in 1999, the programme of the developed countries for a new Round was too ambitious and many countries were not prepared to join a new Round.

The lesson was that we should wait a while, be patient as a new Round would not take place again if all parties are rigid in their positions.

There is need for a Round that must reflect the integration of the South into the system; it should not be liberalisation for itself, and development must be written into the WTO.

The Davos meeting was thus a platform in which different parties set out their position on globalisation and on trade issues.

The turbulence outside the meeting, with protests against globalisation, and the sombre mood inside where the organisers were striving to move the discussions towards how to make globalisation more fair, revealed that the tide of public opinion has moved away from euphoria to scepticism where globalisation concerned.