Developing Economies and Newly Globalized Trade: New Rules to Fleece the South Kunibert Raffer

Neoliberal ideology forms the political backbone and background of present changes in economic and social systems. Trade policies in particular are often used to preach the advantages of globalisation. This Chapter shows that the new trade regime is heavily biased, tilting trade relations further against small countries and the South, and in particular not in line with neoclassical trade theory, although the WTO pretends to be based on it. From the start it has been  biased against the South. Furthermore, the WTO offers itself publicly and officially as a means to outsmart unwilling Parliaments and democracy everywhere in favour of neoliberalism, which it sees itself as “perhaps” its “most important feature”.

After an introductory section, which underlines the point that the WTO is a system biased against smaller and developing countries by quoting official WTO sources, it is shown that the WTO system  cannot be justified by and based on orthodox trade theory. Inter alia two Swedish economists are quoted to support this conclusion. Then the effects of the Uruguay and so-called “Development” Rounds on the South are discussed. Finally dispute settlement, which was initially presented as a chocolate on the tray to Southern and smaller countries, purportedly introducing the Rule of Law into trade relations, is analysed.

The Uruguay Round is critically evaluated. Inter alia it is shown that apart from fair dispute resolution, another “promise” was not kept. To get net-food importers to sign the Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least Developed and Net Food-Importing Developing Countries recognised substantial negative effects. Promised relief did not materialize in,spite of Article 16 of the Agreement on Agriculture.

The much touted “Development Round” turned out not to have had much development effects if any, serving Northern interests instead, even though the WTO’s Director General, Pascal Lamy, had declared in a speech at ECOSOC in 2007 that “ today a number of the current substantive rules of the WTO do perpetuate some bias against developing countries” and that a “fundamental aspect of the Doha Development Agenda is therefore to redress the remaining imbalances in the multilateral trading system and to provide developing countries with improved market opportunities”. According to Lamy this bias is so strong that “economic decolonialization” still remains to be completed “more than 50 years” after “political decolonization”. The very opposite happened during this Round..

Rather than being a rules-based system upholding the Rule of Law, and protecting the contractual rights of Southern or smaller countries in general (as any agreement should) WTO rules are a pseudo-legal club to beat weaker countries with, even though bigger Southern  Countries, such as India or China, are not always defenceless. Larger countries can choose whether to comply with dispute settlement findings or not. This Chapter gives many examples. In extreme cases – the paper provides one example exclusively quoting WTO sources, not be subject to accusations of “distorting” facts – members can tell the WTO that the “WTO panel process would not lead to a resolution of the dispute, instead it would pose serious risks for the new organization”, Obviously, the WTO chose to go on existing. In the case against a G7-member started by a Southern country a panel stated after a G7 country had refused to comply with WTO-rules that “a party’s refusal to collaborate has the potential to undermine the functioning of the dispute settlement system” but ruled in the G7 country’s favour all the same, deriding the Southern country, thus adding insult to injury.

It has often ben argued that the WTO’s legal framework would put an end to bilateral, GATT violating measures such as the US Super 301 – an obvious conclusion after all and an “argument” used as an incentive to get countries to sign at Marrakesh. Nevertheless, the WTO meanwhile accepts Super 301 as ”not inconsistent with US obligations under the WTO.”

By this logic boozing oneself into oblivion is not inconsistent with membership in a club of teetotallers. The Appellate Body also saw a necessity “for the maintenance of the delicate and carefully negotiated balance … between the shared, but sometimes competing, interests of promoting international trade and of protecting the life and health of human beings.”

Unfortunately it did not specify how many more dead people would delicately balance one more unit of exports or imports. As the Understanding on dispute settlement itself stipulates, members should consider  whether an action is fruitful. The aim of WTO-arbitration as stipulated is not securing member’s rights but a “positive” solution. Suing certain members is obviously not fruitful, thus strictly speaking a violation of the Understanding.

Recent attempts to change the dispute resolution mechanism even more away from equal treatment before the law, bode ill for weaker members. Apparently, the WTO was a well laid trap. Now that the South is caught in it, its purpose has been perfectly fulfilled.

The Chapter concludes that evaluating the WTO as a “rule-based” system protecting the contractual rights of all – including Southern or smaller – countries, shows a gloomy picture. One cannot but second Pascal Lamy, even though justified criticism could or even should be more severe. Reforms are most urgently called for. It a system at odds with orthodox trade theory and fairness successfully launched by the North to tilt trade further against the South.

This paper was published in:

Nezameddin Faghih (ed) Globalization and Development – Economic and Socio-Cultural Perspectives from Emerging Markets at Springer International Publishing. The full paper, where all quotes cited above, can be downloaded is available at: https://link.springer.com/chapter/10.1007/978-3-030-14370-1_4