Initial euphoria over WTO gives way to reality

by Chakravarthi Raghavan

GENEVA: The initial euphoria over the establishment of the WTO and the impressive market access achieved by it has been replaced by the realities faced by developing countries in implementing the obligations and taking advantage of the rights, the UN Economic and Social Council (ECOSOC) was told on 7 July by UNCTAD Secretary-General Rubens Ricupero.

While significant barriers to the entry of products of export interest to developing countries remain in place, the ongoing multilateral market-access improvements are in areas of export interest primarily to the industrialized countries, raising concerns over the advancement of the legitimate trade and development objectives of developing countries within the WTO framework, he added.

Ricupero was speaking while introducing a joint report on market access prepared by the UNCTAD and WTO Secretariats that showed that significant trade barriers still impede exports of developing countries, and that many of their products face tariff peaks and tariff escalation in major trading countries.

The report attempts to do a "balancing act" by looking at the tariff and non-tariff barriers in the major Quad countries (Canada, the EC, Japan and the US), which account for nearly 61.3% (by value) of world imports of goods, and comparing them with those in South Korea, Malaysia, Brazil (WTO members) and China (which is not even a member). Korea and China account respectively for 2.8% and 2.6% of world imports, Malaysia for 1.4% and Brazil for 1.1%. In exports, the Quad account for 71.3% of exports, Korea for 2.5%, China for 2.9%, Malaysia for 1.5% and Brazil for 0.9%.

The rationale in picking the four "developing nations" and comparing their tariffs and so on with the Quad's is not clear - except perhaps to show that everyone is guilty of erecting barriers.

A similar balancing act is also found in the comparisons on resort to anti-dumping actions and safeguard measures - by comparing actions in the Quad with those in several developing countries.

The report brings out that exports of products of interest to developing countries face tariff peaks and/or tariff escalation in major industrial markets and these cover sectors such as vegetables and fish, food industry products, metals, wood products and furniture, textiles and clothing, footwear, leather and leather and rubber goods, automobiles and other transport equipment and electronics.

The establishment of the WTO and its multilateral trade agreements (MTAs), Ricupero told the ECOSOC earlier, had achieved impressive market access in goods and services, and, even more, have ensured security of access and a dispute settlement process.

Clarifications, improvements and monitoring of the MTAs to ensure efficient and effective operation were being undertaken by the WTO committees. The tremendous work load and often tight schedules confirm the belief of WTO members that a balanced, multilateral trade liberalization process is in the interest of all countries. The WTO serves as a forum for continuous negotiations among members to improve further conditions of market access.

It was not only developing countries that were facing difficulties in implementation, but many developed countries too had been unable to comply with their obligations.

Not satisfactory at all

Concerns over these difficulties had been underscored at the first and second Ministerial Conferences, and an evaluation has been mandated for the third Ministerial Conference next year, Ricupero told ECOSOC, adding: "While the implementation of the WTO agreements is on track ,we can probably agree that it is not proceeding at a pace and on a scale that is satisfactory to all WTO members. And, without full and faithful implementation, the credibility of the WTO itself may be at stake."

"Substantial scope therefore remains for further market- access improvement for agricultural and industrial products of export interest to developing countries," the UNCTAD head told ECOSOC.

"The presence of high tariffs and tariff escalation on products of export interest to low-income developing countries and Least Developed Countries (LDCs) in particular becomes even more dramatic against the background of ongoing multilateral market-access improvements in information technology products, basic telecommunication services and financial services sectors."

"These, it should be said, are sectors of export interest primarily to developed countries and a few newly industrializing developing countries. This has, to some extent, raised concerns among the developing countries over the advancement of their legitimate trade and development objectives within the WTO framework."

A small number of developing countries have succeeded in expanding dynamically their exports of manufactures with middle to high value-added and technological content - including office machines and telecommunications equipment, scientific and controlling equipment, chemicals, electrical machinery and apparatus.

In general, these dynamic sectors face relatively low tariff barriers in the Quad countries as a result of Uruguay Round concessions. The market-access improvements under the WTO have contributed to the expansion of the trade of major exporters of relatively sophisticated manufactures among developing countries.

However, this increased market penetration by developing countries has resulted in more intense demand from domestic producers in many countries for trade remedies in the form of contingency measures like anti-dumping actions. The most affected sectors include metals, plastics, textiles and clothing, footwear and headwear.

"Even when duties are ultimately not imposed or are refunded, the actions achieve their intended effect of deterring foreign suppliers from attempting to enter the market by creating uncertainty about market access."

Traditionally, some developed countries have been major users of such non-tariff measures, but some developing countries have also begun to use them with greater intensity, Ricupero added.

In services, the degree of market-access commitments under the General Agreement on Trade in Services (GATS) varies considerably among sectors, and in relation to particular modes of supply. But considerable scope remains for further liberalization in a range of service sectors. Progress had been made in negotiations on basic telecom and financial services. But developing country exports of services are hampered by restrictions on temporary movement of persons, particularly economic needs tests, as well as by non-recognition of professional qualifications.

The Uruguay Round had addressed some of the market-access concerns of the LDCs, with improvements mainly in the form of duty-free MFN treatment for tropical products. Many industrialized countries had also revised their Generalized System of Preferences (GSP) schemes to bring them in line with Uruguay Round results, to bring substantial benefits for LDCs - though some of their most important exports (including clothing, textiles, leather products, footwear, food and food industry products) continue to face barriers in major markets.

Full implementation of the Plan of Action for LDCs adopted at the Singapore Ministerial Conference was hence a high priority. But most important was to strengthen the supply capacity and competitiveness of these countries in order to maintain their current level of participation in world trade and enable them to exploit the new trading opportunities.

On the preparations for trade negotiations due to begin soon, Ricupero said developing countries need to participate actively and effectively in the ongoing process of implementation of WTO agreements and adequately prepare negotiating agendas to protect their trade and development interests in the forthcoming multilateral negotiating rounds. The developing countries should design a "positive agenda" to reflect their trade problems and propose concrete negotiating objectives.

UNCTAD, he said, is providing technical support to developing countries in this regard as a matter of priority. But developing countries and their companies need to continue efforts to expand supply capacity and competitiveness to take advantage of market-access improvements.

Global objective

A future multilateral trade initiative should not be simply "a collage" of national or group proposals, but should have a global objective.

While some have suggested a target such as global free trade by a certain date, "the challenges of globalization would seem to dictate a more comprehensive approach, a vision of a globalized world where all can enjoy the benefits even though all might not be able to compete in the short run."

"The current Asian financial crisis," he added, "has demonstrated clearly the lacunae that the international financial system have placed major strains on the international trading system, as the affected countries are having to trade their way out of their financial difficulties. The problems faced in obtaining trade negotiating mandates and the various forms of protests by those feeling themselves threatened by globalization suggest that trade liberalization initiatives should be accompanied by a package of support measures."

For many developing countries, sub-regional agreements that enable them to improve their efficiency and eventually compete in world markets should be encouraged.

"But market access must be effectively supported, through well-designed policies to increase competitiveness and supply capacity. Thus, investment policy to encourage transfer of technology and channelling of investment into priority areas, the reduction of debt burdens, and trade efficiency measures to streamline trade are vital and deserve the support of the international community." (Third World Economics No. 189, 16-31 July 1998)

Chakravarthi Raghavan is the Chief Editor of the South-North Development Monitor (SUNS) from which the above article first appeared.