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.