Set WTO rules right first, says TWN forum at UNCTAD X

At a briefing session organised by the Third World Network at UNCTAD X, speakers and participants made it clear that, in their view, the World Trade Organisation could only recover its credibility after the debacle in Seattle if it redressed the inequities inflicted on the developing countries by the current global trading system.

by Cecilia Oh

THE grievances of developing countries and the inequities of the trade system have to be set right first if the World Trade Organisation is to get on the right track and recover from its present low level of credibility and legitimacy.

This message came out strongly at a briefing session on 'The World Trading System in a Post-Seattle Scenario' held at UNCTAD X and organised by the Third World Network on 14 February.

Speakers and participants pointed out the double standards and ironies of the current state of trade relations, and called for fundamental reforms.

Whilst the WTO prided itself as a rules-based system, it often did not follow its own rules and procedures, and this was most evident in the process before, at and after the Seattle Ministerial Conference, pointed out Chakravarthi Raghavan, chief editor of the South-North Development Monitor (SUNS).

And whilst they were always preaching that developing countries should unreservedly liberalise their imports of goods and services, the rich countries themselves were clinging on to outrageously high protection in agriculture and textiles, two areas where the developing countries had a comparative advantage, said Third World Network Director Martin Khor.

Participants at the session called for changes to the inequitable or damaging rules in several WTO agreements, as well as for true transparency and full participation of developing countries within the WTO. Meanwhile, the proposals for new issues put forward by the major countries should be put on hold.

Raghavan said though the WTO was supposed to be a rules-based system, it had been functioning 'rulelessly,' for example, by not following the rules of procedure at the recent Seattle Conference.

'Five years of (the workings) of the WTO has shown that the trading system is inequitable, with developing countries not benefitting. If a trade balance sheet were to be drawn up, it would show they have lost more than they gained,' he said. The system cannot survive unless it gains legitimacy, which can in turn come only when the developing-country members derive benefits from it.

Raghavan said the failure of the Seattle talks was due to differences among the major countries and between them and developing countries. Before and at Seattle, the developing countries had put forward their grievances and many proposals to redress the inequities of the system. But these proposals, described under the term 'implementation problems,' had not been seriously entertained by the developed countries, thus causing developing countries to feel frustrated.

Raghavan said what was urgently needed was to deal with the grievances of the past and correct the existing inequities through amendments of the rules or interpretative statements. 'But will those who have benefitted be prepared to give up a bit of their benefits, or will we continue to have two different parts of the world moving in opposite directions?' asked Raghavan, who added that this was the central question to resolve in the future of the trading system.

He said if there was truly to be an improvement in transparency, then the WTO should announce three months in advance what proposals or decisions are to be discussed. Minutes of all WTO meetings, including an attendance list, have to be kept and made public. And the WTO should stick by its rules that nothing should be discussed, decided or put forward from the Chair unless delegates have documents, and the proposal to be decided on, at least 24 hours in advance.

Raghavan added the previous situation of secrecy could no longer operate as citizens in every country were now asking their governments whether their economic and social rights were being given away, especially now that the WTO is dealing not only with cross-border trade issues but with issues affecting domestic policies as well.

'I believe in a rules-based system, but we need to have the right rules for the system to function fairly,' Raghavan added. He criticised the operations of the WTO dispute settlement system and the role of the WTO secretariat, which not only services the negotiations but also helps to write the rules of the system and guides the DSU (the WTO's Dispute Settlement Understanding) system itself.

'There is a need to set right the rules and the DSU system itself,' Raghavan said, adding that the secretariat of the DSU mechanism should be placed outside the WTO secretariat.

Development the primary goal

Khor said that the WTO was a deformed version of the multilateral trading system, which is required to promote balanced trade in the developing countries. He said that the operational principles of the WTO wrongly stress the need for liberalisation and removal of so-called 'trade distortions', which assumes that trade liberalisation is automatically beneficial to all parties and is the primary goal.

Instead, said Khor, the WTO should place the development of developing countries as its primary goal; trade liberalisation should be treated in a more realistic manner, only as a means - and only when appropriate - towards achieving development.

Khor said that many recent studies had shown there was no automatic link between trade liberalisation and economic growth. He gave some examples of conditions under which a country may not benefit but may instead suffer economic and social dislocation when it carries out liberalisation policies.

'This leads us to a new and commonsense paradigm that in some cases trade liberalisation leads to development, whilst in (other) cases, it could lead to trade deficits, heavier debts and prolonged recession.'

In the light of this, the rules of the WTO as well as proposals put before it should be reviewed to take into account whether these distort development rather than whether they distort free trade.

He said the Seattle talks collapsed because of differences in substance between the members and also due to the outrageously non-transparent and manipulative processes in which most developing countries were shut out of the critical negotiations held in small groups which had not received any mandate.

After Seattle, the problems raised by developing countries must be addressed first before any discussion of a new round of trade talks. These problems include the non-realisation of benefits promised to developing countries due to the continued tariff and non-tariff barriers placed by the rich countries on developing-country exports. Khor said that unless the rich countries open up their markets to the South in agriculture, textiles and some industrial products, the feeling of dissatisfaction and mistrust will continue.

Khor also listed several problems faced by developing countries from their having to implement their own obligations under the WTO agreements, such as the Trade-Related Aspects of Intellectual Property Rights (TRIPS), Trade-Related Investment Measures (TRIMs) and Agriculture Agreements. He said the developing countries had put forward many proposals to rectify the rules and their implementation. He called on the developed countries to take these proposals seriously before even thinking of pursuing new issues, such as investment, competition, government procurement, industrial tariffs and labour and environmental standards.

Regarding the process issue, Khor dismissed the oft-cited excuse justifying green room meetings, namely, that it is difficult to negotiate among more than 130 countries. He cited the many UN processes, including the recently concluded Biosafety Protocol and UNCTAD itself, as examples of how consensus can be achieved or decisions made in an open and transparent manner. 'Why should the WTO be an exception?' he asked.

Khor warned against the attempt by some developed countries to quickly resolve the issue of transparency (for example, through proposals such as setting up a UN Security Council-type arrangement or the establishment of an Eminent Persons Group) in order to open the door to a new round. Such moves would be insincere and contribute further to the atmosphere of mistrust as developing countries and their citizens would consider it another form of manipulation, he said.

Tetteh Hormeku, coordinator of the African Trade Network comprising over 40 African NGOs, said the constant preaching that developing countries should liberalise was misplaced as rapid liberalisation is not an appropriate policy in Africa in both agriculture and industry due to the reality of the situation, the structure of the economy and the effects of liberalisation.

The WTO policy on agriculture does not reflect the agricultural reality of Africa. He cited the case of a typical African country, where the labour force consists mostly of small subsistence farmers. These farmers are unable to take any advantage of export markets, which in any case are being blocked off by high tariff walls in rich countries. At the same time, they face the danger of being swamped by cheap food imports.

Meanwhile, said Hormeku, the industrial sector in a typical African country is characterised by a few TNCs coexisting with a majority of small and medium-sized enterprises, which need to be nurtured. In view of the TRIPS and TRIMs Agreements, the possibility of technology transfer and state support of local industry, required for development, is being undermined.

Hormeku also criticised the present nature and effect of technical assistance in relation to the WTO. Citing some examples, he said that such technical assistance did not really help developing countries to explore their own options for trade and development or the most appropriate way of implementing WTO obligations. Instead, it was aimed at getting them to implement the obligations without taking into account the negative effects or the need for changes.

'That does not work in our interest, and thus, it would be cynical to say that technical assistance is addressing the implementation problems. Instead, we should review the agreements to remove the negative aspects.' He added that for Africa, the post-Seattle priority is to resist the proposed new issues and to watch out for the attempts by rich countries to make use of the transparency issue as a bait to draw the developing countries into a new round.

Murray Gibbs from UNCTAD's trade division said that there were many conjunctural factors that led to the failure in Seattle. Now there is an urgent need to address the issue of participation of developing countries and civil society. He said that due to the single undertaking in the WTO, developing countries are no longer exempt from any agreement. Therefore, it is very difficult to justify why any country should be excluded from any negotiation.

Following the impasse after Seattle, there is also an opportunity for NGOs to provide alternative solutions. Many NGO papers on Seattle had proposed interesting solutions that were very important.

Gibbs said that UNCTAD's role will be to look at how trade can be a means to development. UNCTAD had been conducting expert meetings on issues such as health, tourism, air transport and electronic commerce. UNCTAD had also been focusing on proposals emerging in the WTO and provided information to developing countries. It is also thinking of organising public hearings on trade and development issues.

Rules not respected

Ambassador Mounir Zahran of Egypt said that there were lessons to be learnt from the Seattle failure. He said they were hearing slogans that the WTO is member-driven and rules-based. However, the rules were not respected by some major countries. If they did not respect the rules, then weaker partners cannot and, perhaps, should not.

Zahran added that while developed countries have been saying that developing countries have to faithfully implement the Uruguay Round agreements, they themselves have not implemented them. For example, they had not implemented special and differential treatment for developing countries. He said that there has also been a misuse of the rules of consensus. According to the rules, if consensus is not possible, then decisions in the WTO would be taken by vote. However, the major countries have refused to resort to a voting procedure and had prevented the enforcement of this rule. This had affected the WTO's credibility.

Zahran said that UNCTAD had played a useful role in helping develop a positive agenda for developing countries. However, the proposals by the developing countries in the WTO have not been accepted, as the developed countries do not seem to want to implement any of them.

'How can we then look at any new issues in the WTO, when we have yet to properly swallow the Uruguay Round?'

The Nigerian ambassador to the WTO said that developing countries had for far too long been bombarded by mainstream opinions and the world media on the benefits of the WTO. It was thus very refreshing to listen to such illuminating perspectives during this session. He added that many developing countries did not know what the WTO was, and the people especially also did not know what it was about. He suggested that the Third World Network reach out to NGOs to organise seminars to sensitise governments in developing countries.

A representative from the Caribbean Community commented that the green room process had not been representative and was in fact exclusive. When two ministers from the Caribbean tried to attend one of the meetings, they were told their names were not on the list and were refused entry. No one knew what the results were and how they would be used.

In response, Raghavan said that in some green room meetings a few developing countries with views contrary to those of the majors were invited to take part in negotiations where they were pressurised to agree. 'This is not negotiating, this is torture.'

He added that everything should be done to help the least developed countries (LDCs). However, if the EU or Japan is really serious about giving duty-free and quota-free status to LDCs, they should put this status in the WTO and bind it. It should also be done by Canada and the US. They did not need any new round for this. But some of the majors were resorting to 'trickery' by asking the more advanced developing countries to do likewise. These developing countries were already making a sacrifice by agreeing to the LDCs' having duty-free status with regard to the developed countries, thus competing with other developing-country goods subject to a higher duty. The rich countries were merely creating confusion by insisting that other developing countries also give duty-free status to LDCs. This led him to think that the major countries did not mean what they said.

Cecilia Oh is a researcher with Third World Network.