G77 assail globalisation and orthodox policies

by Martin Khor

Marrakech 15 Sept 99 -- The G77 Ministerial Meeting here picked up steam here today as Ministers and senior officials debated the problems of their countries' integration in the world market and voiced more particularly their disillusionment with the lack of benefits from the multilateral trading system (MTS) and its inherent inequities.

From the drift of the speeches and comments, one could sense the frustration of most developing-country leaders as they realised how the promises made about the wonders of liberalisation had turned sour.

This frustration was mixed with anxiety and doubts on how to proceed with the crucial negotiations ahead over the next two to three months in the build up towards the crucial WTO Ministerial Meeting in Seattle.

The debates of the G77 meeting on the second day took place at a morning plenary session where Ministers of several countries made their statements, and in an afternoon Roundtable on the Multilateral Trading System and Development.

The plenary heard a variety of views on the globalisation theme in general, with several Ministers focusing on the trade and finance systems. The Roundtable saw an interesting and frank review and assessment by many speakers on the current state of the WTO and the options for negotiations towards Seattle.

There was no doubt that although the G77 meeting is meant to prepare for the UNCTAD-X conference in Bangkok next February, the real concerns of most participants here are preoccupied by their real concerns over the WTO and the preparations for the WTO Ministerial in Seattle in November.

The highlights of the morning plenary debate, included an attack by the Bangladesh Trade Minister on a range of new issues being proposed by the North for the WTO Seattle Ministerial, a strong statement by the Indonesian Trade Minister that the recent economic crisis had shattered the confidence of developing countries -- that had benefitted from gloablization -- in the policies of the "Washington Consensus", and a rejection by the Egyptian Trade Minister of having the WTO taking on new issues.

Rahardi Ramelan, Indonesian Minister of Industry and Trade said the benefit of globalisation, liberalisation and integration was under continuous debate because, while a number of developing countries had benefitted, the majority remained excluded and marginalised.

"Even for those developing countries that had successfully integrated themselves into the global market and reaped benefits through accelerated development, the sudden and crippling reversals of some as a result of the recent economic crises had shattered their confidence in the approach to development called the Washington Consensus," he said.

Rahardi said liberalisation, privatisation and deregulation could stimulate growth. "But if in the process about 75% of the world's population are condemned to marginalisation, and many others are exposed to the unprecedented risk of having their hard won development totally crippled, the overall approach must be seriously flawed."

The recent crises had resulted less from traditional macroeconomic imbalances and more from the liberalisation process and the exposure of the private sector to phenomenal risk, said Rahardi and called for a new financial architecture to ensure developing countries are less susceptible to a crisis.

Rahardi said the rapid integration of developing countries into the global economy and their effort to meet their WTO obligations led them to many development challenges that were not balanced by opportunities. Near-elimination of industrial tariffs in the North had greatly reduced the role of trade preferences that had helped developing countries, whilst in agriculture many tariffs were still very high.

"Export products of developing countries have been subjected to frequent anti-dumping measures by major trading countries, causing trade disruption." Calling on developed countries to implement the special and differential treatment provisions to help developing countries, Rahardi said: "It is our firm view that the agenda of the Third Ministerial Meeting of the WTO should focus on problems around the full implementation of the Uruguay Round results, and not be diluted by non-trade related issues."

The Bangladesh Minister for Commerce and Industries, Tofail Ahmed, said globalisation is not an unmixed blessing as developing countries are beset by risks of marginalisation, economic insecurity and instability. The changes brought about by global economic integration had rendered weaker economies more vulnerable to economic exclusion and impoverishment.

Tofail added: "The benefits of enhanced trade volumes resulting from liberalisation have been unequally shared, with the lion's share of benefits accruing to developed countries. Developing countries, especially LDCs, have been marginalised in the process. The gravity of the risks of integration into the global capital markets has been demonstrated by the East Asian economic crisis."

To meet the challenge of integration, he said, developing countries need a fairer multilateral trading system that would ensure a more equal sharing of benefits. The negotiating framework of the WTO Third Ministerial would largely determine the extent developing countries could benefit from the system.

"A sharp North-South divide regarding the issues to be discussed at Seattle is already visible. The WTO is already committed to renegotiation of agriculture and services. However some developed members want the Seattle meeting to launch a new comprehensive round that would go beyond the built-in agenda."

Referring to the proposal on industrial tariffs, Tofail said: "Average industrial tariffs in industrialised countries are much lower than those in developing countries. Hence any further reduction in this area would require larger concessions by the developing countries compared to developed countries, with serious implications for customs revenue among other things."

He added that the attempt to bring labour standards on to the agenda was alarming as it had been agreed in Singapore the the issue should be kept out of the WTO.

"Some members are also proposing that WTO should frame rules on direct investment flows irrespective of our domestic regulations. This is tantamount to asking us to cede our sovereign power to accept or reject foreign capital."

"I would like to stress that the Seattle meeting should focus on implementation issues rather than embark on a consideration of new issues," he said. Non-implementation of Uruguay Round measures such as special and differential treatment and meaningful market access had prevented the flow of benefits expected from earlier liberalisation.

The agreements on agriculture, services and TRIPS contained provisions that were not in the best interests of developing countries. "I feel such imbalances against developing countries should be addressed at Seattle."

Problems of LDCs should also be addressed at Seattle. Products exported by LDCs should be granted duty and quota free access and be exempt from anti-dumping duties and safeguard actions.

Egypt's Trade Minister Ahmed Goueli said there should be openness and clarity in the preparations of the WTO Ministerial so that developing countries did not face any surprises in Seattle.

He stressed that implementation problems should have the priority and that a study be initiated on the impact of the Uruguay Round. The developed countries should implement the special and differential rights provisions and provide technical and financial assistance.

On the built-in agenda, Goueli said the agriculture negotiations should provide extra opportunities for developing country exports and also allow more flexibility for developing countries to serve food security needs and compensate net food importing countries.

On services, he said the implementation of the agreement was not to the benefit of developing countries as the developed countries pushed open sectors that were in their interests and did not show any interest to open up in sectors of interest to developing countries.

On the reviews agreed to, these should deal with the imbalances in various agreements, taking the development dimension into account, allowing for flexibility for developing countries in extending transition periods, especially in TRIPS and TRIMS.

As for the Singapore issues, "we have to await the results of the studies of the Working Groups before taking any decision for any negotiations." On so-called new issues, some (like labour standards) do not even have a place in the WTO, whilst Egypt also feared the environment would be used as a protectionist measure or that standards would be imposed that do not adapt to developing countries' capacity.

"In general, the WTO agenda is overburdened and the commitments of developing countries exceed their capacity. Therefore we firmly believe that there is no point in addressing any new issues, especially before getting to learn their full implications and impact on development."

The Cuban Vice Minister for Foreign Trade Hernandez Guillen said developing countries had been passive receivers and were dragged into liberalisation of finance, trade and investment. There were shortcomings and imbalances in the trade rules.

He added that globalisation engenders great dangers due to neo- liberal policies that removed the role of state regulation. This situation should be redressed, and developing countries must have a strategy on globalisation and bring about a balance of interests in the international debate.

India's (permanent) Secretary for Economic Relations in the Foreign Office, S.T. Devare said the last decade had shown that "globalisation, unless it is managed well and at the right pace, disrupts economic progress." Moreover the promises of globalisation and liberalisation have not always materialised. The financial crisis affected countries which seemed to have integrated best into the world economy.

"While we have reaped some benefits from the multilateral trading system, these have been below expectations and have not been commensurate with the concessions given and obligations undertaken by developing countries," he said. "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.

"In spite of liberalisation, exports from developing countries continue to face tariff and non-tariff barriers. In areas such as textiles and clothing, quantitative restrictions and lack of any meaningful integration continue to constrain exports to major developed countries. Even in areas where additional market access has been provided, this has 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 and continue to be in the form of best endeavour clauses.

"New negotiations are mandated in agriculture and services. In agriculture we need to work towards introducing greater equity and balance in the agreement, while ensuring that the concerns of pre-dominantly rural agrarian economies, such as food security and rural employment, are adequately addressed. Similarly in the services sector, negotiations must address the lack of effective liberalisation in Mode 4, i.e the movement of natural persons.

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

Morocco's Trade Minister Alami Tazi said that five years of implementation of the Marrakech agreement had shown that liberalisation did not benefit all developing countries. Many did not derive economic or social benefits. Certain countries, especially LDCs and African countries, have seen their social and economic situation deteriorate and their marginalisation had increased. The problems of development have never been so pressing. The next Round should focus on development.

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 even faced the danger of being adversely affected or marginalised.

"The widening gap between rich and poor countries in the wake of globalisation exposes severe drawbacks in the economic order. 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 country markets while implementing various kinds of new trade protection measures themselves.

"The disadvantages resulting from globalisation have made the establishment of a new international economic order ever more important and urgent. To build this order developing countries should unite to break the monopoly of a few developed countries over world economic affairs and obtain full right in international economic decision making, including formulating new trade rules."

Pakistan's permanent representative in Geneva, Amb. Munir Akram, said the adequacy of development strategies based on market forces, liberalisation and export-led growth was now being seriously questioned as cost-benefit analyses of prevailing growth strategies raised doubts about the justice and sustainability of these strategies.

While there were benefits, the costs of these strategies were too great and threatened 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 had bypassed most developing countries. Only 33 countries had 3 percent annual GNP per capita growth during 1980-96 and for 59 countries GNP per capita had declined. Income disparity between the richest and poorest 20% of the world's people had more than doubled in the last three decades. Around 1.6 billion people were economically worse off today than 15 years ago. The growth that had occurred was fragile as there was increasing frequency of financial crises which reversed economic gains.

Munir said defenders of the status quo down-played these facts, asserting market forces themselves would remedy the inequities they caused and technological innovations would 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."

"At a conceptual level, we need an economics that affirms equity and justice for individuals and nations. At a practical level, measures should be taken in four areas: in trade, the need to ensure a truly level playing field; in finance, the need for a strengthened and more stable financial order; in environment and social areas, improving social and environmental indicators; and in competitiveness, the developing countries' enterprises need to be able to compete with foreign enterprises." (SUNS4510)

Martin Khor is the Director of Third World Network. The above article first appeared in the South-North Development Monitor (SUNS).