It
is reasonably obvious to all concerned that the WTO,
and indeed the multilateral trade negotiation process
which underlay it, is in severe difficulty if not
crisis. A significant proportion - possibly the majority
- of its members are unhappy over the lack of delivery
of the promises of the Uruguay Round and the manner
in which the organisation itself is functioning.
Developing countries in particular feel that they
have been short-changed, forced into trade liberalisation
patterns that have had de-industrialising effects
and created agrarian crises, even as the promised
benefits of increased market access in agricultural
commodities and textiles have been denied them. The
spirit of the Agreement on Agriculture and the Agreement
on Textiles and clothing has been breached not only
in the small print of these agreements but in their
implementation as well. Developing country governments
also feel increasingly hemmed in and their citizens
feel exploited, by the range of new rules that affect
non-trade policies within the country, including those
relating to intellectual property.
Meanwhile, even developed countries are less than
enthusiastic about the multilateral process, which
makes complete domination difficult and does not allow
for even more aggressive opening up of markets of
other countries. The Unites States in particular has
for some time treated WTO rules and decisions with
a degree of contempt when these do not suit its government,
even while it had used it as an instrument of pushing
for trade liberalisation in its favour. Both the US
and the EU are also voting with their hands, so to
speak: signing a plethora of bilateral and regional
trade agreements outside the scope of the WTO, such
that such deals now cover more than 70 per cent of
world trade.
What is even more compromising to the early proponents
of the Uruguay Round is that the most massive trade
liberalisation the world economy has ever experienced
has been accompanied by no commensurate increase in
trade flows. Chart 1 indicates the annual rate of
change in world trade in volume terms as well as in
nominal (US dollar) values. It is immediately evident
that in the period after the signing of the Uruguay
Round agreement and the formation of the WTO (that
is, 1995 onwards) world trade experienced no greater
trend of growth and possibly even greater volatility,
compared to the previous decade.
In addition, the functioning of the WTO itself has
come in for severe criticism. Two of the Ministerial
Meetings - at Seattle and then at Cancun - failed
to come to any agreement at least partly because of
developing country members’ disgust at the heavy handed
manner in which the secretariat sought to impose its
will (largely reflecting US-EU positions), influence
the discussions and avoid democratic decision-making.
The infamous ''Green Room'' discussions of WTO negotiations,
in which small groups of developing countries have
been ''persuaded'' or forced to accept decisions they
had initially opposed, have been exposed by Aileen
Kwa and others. Even the Dispute Settlement procedures
have become another hurdle especially for small developing
countries who find them extremely expensive, cumbersome
and unduly prolonged.
Clearly there is much to reform in both the process
of negotiations and in the functioning of the WTO.
In this context, it is not surprising, and it is certainly
desirable, that the WTO itself instituted a special
commission to look into these matters, focus on institutional
issues, and provide recommendations to reform the
way the organisation works and how decisions are made.
This represented a tremendous opportunity to address
some of the most glaring problems and try to reform
the WTO in ways that would give it at least a minimal
degree of legitimacy among the people of the world.
Sadly, however, this opportunity has been squandered.
The report of the Commission thus set up (''The Future
of the WTO'', Geneva: WTO, 2005) is no more than a
rather weak justification and defence not only of
the entire set of principles on which the trade negotiations
have been based, but also of the clearly problematic
workings of the WTO. There is not even an attempt
at cosmetic repair; rather, the existing unsatisfactory
system, warts and all, is held up as a model to be
further pushed.
This may be related to the composition of the Commission,
which is headed by Peter Sutherland, the first Director-General
of the WTO and presently Chairman of two major international
conglomerates of finance and industry: Goldman Sachs
International and British Petroleum. It also includes
among its eight members the most vociferous advocate
of free trade, the Indian economist Jagdish Bhagwati.
At any rate, the Report disappoints because it treats
all the concerns and criticisms of the functioning
of the WTO merely as so many debating points, without
any serious attempt to evaluate the genuine need for
reform. Therefore, the proposals it provides are so
lacking in imagination that they simply advocate doing
more of the same, and more aggressively than before.
Where the functioning of the WTO and the negotiation
process have been undemocratic and non-transparent,
it actually suggests formalising these features rather
than changing them.
The basic assumptions of the Commission are clearly
laid out in the opening chapters. It is an axiom for
the Commission that trade does inspire growth and
growth will combat poverty. This is accepted so uncritically
that the evidence on recent deindustrialisation and
associated lack of employment in developing countries
is simply not considered: all this is simply blamed
upon technological progress.
Within this, the WTO is seen as a force only to the
good. ''The WTO provides a level playing field with
a credible referee dealing even-handedly with the
players''. (page 15) What would subsistence peasants
in Central America, whose cultivation has been rendered
unviable by cheap imports of highly subsidised maize
sold by giant US corporations, make of this? Or the
millions of small producers across the world whose
livelihood has been wiped out by import competition
driven by large companies?
Similarly, ''the WTO constrains the powerful'' (page
18). No doubt that is why the share of MNCs in global
trade has increased dramatically over the past decade,
and concentration in all major spheres of economic
activity has accelerated greatly. In any case, any
shortcomings are not because of the WTO system but
because individual member countries are unable to
avail of the manifold benefits: ''The WTO is about
providing opportunities - it does not provide guarantees
nor does it provide all the conditions for participation
in the global economy.'' So if people are suffering
as a result of trade liberalisation and increased
patent-based monopolies, it is their own fault.
In any case, the Commission clearly feels that enough
time and energy has already been spent on dealing
with all the carping from the world’s poor and on
weaker member countries. ''The time and effort that
has been expended in recent years in the WTO and associated
agencies in addressing the needs and handicaps of
the world’s smallest and poorest countries in the
trading system is remarkable, by any standards.'' (page
17)
Another concern of member countries, that WTO rules
are increasingly interfering in domestic economies
and constraining the policy autonomy of governments,
is given short shrift. According to the Commission,
''in the context of the WTO, the complaint over sovereignty
is a red herring'' (page 29) and is in any case misplaced
because governments can now apparently ''reclaim control
at the multilateral level''. (page 34). Which governments
can really do so, and how, are questions that are
conveniently left unanswered.
With such a framework, the conclusions and recommendations
of the Commission, alarming as they are, come as no
real surprise. The Report condemns preferential trade
agreements (PTAs) - except, naturally, the European
Union and NAFTA, which are supposed to be all right
because they apparently encourage a more positive
attitude to multilateralism! The PTAs of developing
countries, by contrast, such as Mercosur, are seen
as undesirable because they only involve trade diversion
and are somehow different from the NAFTA and EU in
becoming stumbling blocks to the multilateral process.
Special and Differential Treatment for developing
countries in WTO comes in for even sharper criticism.
The Report argues that this has been based on two
assumptions: first, that demands for reciprocal concessions
from developing countries are inappropriate because
of the different effects of trade liberalisation;
and second, that in any case the markets of developing
countries are so small as to be insignificant and
so concession do not really matter. The Report argues
that neither of these assumptions is valid, since
developing country markets have grown and because
it sees a strong case for the benefits of trade liberalisation
in all cases.
In consequence, the Commission finds too many ''fault
lines'' in S&DT. While the Report does not go so
far as to suggest the complete removal of S&DT,
it does suggest that ''these mechanisms require further
study and research'' (page 24). Even the Generalised
System of Preferences for developing country exports
(GSP), which have played such a role in encouraging
some basic industrialisation in developing countries,
are dismissed as having had little positive effect.
The combination of preferential trade agreements,
S&DT and GSP is seen to have created a ''spaghetti
bowl'' of discriminatory preferences that is clearly
anathema to the simplicity beloved of the Commission.
So they advocate reducing all most-favoured nation
tariffs to zero, which would clearly eliminate the
spaghetti bowl problem! Note that quite apart from
anything else, this approach is extremely unfair to
developing countries where tariffs remain the dominant
form of protection, unlike developed countries where
non-tariff barriers now dominate. Given the havoc
already created in the production systems of the South
through the trade liberalisation experienced so far,
this proposal is breath-taking in its ignorance of
reality.
Some of the most important recommendations relate
to the functioning of the WTO and the entire process
of trade negotiation, about which there has been much
valid criticism. Clearly, the Commission is unhappy
with even the veneer of democracy that is currently
maintained in the WTO. The consensus approach is obviously
preferred over voting (which would give developing
country member a majority), but the problem with consensus
building is that ''the majority’s will can be blocked
by even one country''.
In fact, the Report ends up advocating instead the
plurilateralist approach which was already suggested
by the EU and has already been rejected by developing
countries. Here it has been renamed ''variable geometry
approach'', but it still involves ''opt-in'' and ''opt-out''
possibilities such that some members may choose to
take on more obligations.
Also, the Commission is clearly impatient with the
slow progress of negotiations, and wants to speed
them up by increasing the strong arm tactics already
availed of by the large member countries and the WTO
secretariat. The Report argues that ''Green Room'' meetings
with limited access are both appropriate and necessary,
notwithstanding their undemocratic nature.
It also argues that the ''member-driven'' nature of
the WTO has involved a reduction in the role of the
Secretariat, and instead proposes a much-enhanced
role for this body. It should be noted that the Secretariat
is an appointed body with no accountability, and its
activities in the past have indicated a clear bias
towards the positions of the large developed countries.
Despite this (or perhaps because of this?) the Report
advocates a leading role for the Secretariat at Ministerial
Meetings. Instead of allowing for election of Chairs
and facilitators of meetings, the Commission wants
these to be pre-announced by the Secretariat, and
argues that these appointments ''should not become
part of a further bargaining process.''
The remarkable thing about the Report is that it calls
for an intensification of all the processes and procedures
in the WTO that have been identified by developing
country members as part of the problem. The continuation
and even acceleration of indiscriminate trade liberalisation
without concern for its impact on employment and economic
activity, no controls on unilateralism by the strong
members especially the US, no protection from the
monopolies created by the workings of the TRIPS agreement
- all form part of the recommendations of the Commission.
And in addition, it calls for formalising the unequal
and undemocratic manner of functioning of the WTO.
Despite its claims to be an independent Commission,
this is clearly a report by and for the WTO Secretariat.
Rather than increasing its international credibility,
it is likely to diminish it further.
January 24, 2005.
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