Development and the WTO: Two Separate Undertakings
By Liem Giok In | October 12, 2006
"The recent proposals of some major developed countries have attempted to sow division among developing countries, re-interpret the framework and trajectory of the negotiations and, in a self-serving manner, narrow, limit and—ultimately—undermine the developmental objectives of the Doha Development Agenda. It is thus timely to reclaim the developmental objectives and trajectory of the negotiations."
—From "Reclaiming Development in the WTO Doha Development Round," submitted by Argentina, Brazil, India, Indonesia, Namibia, Pakistan, the Philippines, South Africa and Venezuela to the WTO Committee on Trade and Development, 1 December 2005
What we need to consider
The WTO embarked upon the Doha Round of negotiations in 2001. It was to address the specific needs of the developing countries who make up about two thirds of the total membership of 149 countries. This Development Round has now been declared a failure and prospects for developing countries are not good—regional and bilateral agreements loom over them. Conditions to their disadvantage that could have been averted when together they stood strong, may well be imposed through regional separation. (1)
Developing economies need access to world markets in order to build their self-empowered economies. This viewpoint is equally shared by developed and developing members of the WTO. There is no argument about that. But one could debate whether the ‘single undertaking’ axiom, accepted practice in the WTO, is a wise one. This principle requires that all must be agreed to in one negotiation round, or there shall be no agreement at all. However, it appears that the amalgamation of the strong economies’ agenda and the developing economies’ agenda necessarily leads to a disadvantage of the latter.
I therefore propose a two-track approach to multilateral trade negotiations: one with a clear development agenda and another one for the market-expansion agenda of strong economies. The evil is not in the latter as such, as many critics say, but in not making the distinction between two kinds of economic interest, each with its own dynamic.
A tentative outline of a negotiation track for development
Below follows an outline of three levels of negotiations with a clear view of the specific interests of developing economies. By distinguishing three groups of trade we allow for increasing levels of development: from very low, where aid is needed, to middle and high, where market forces can be let in gradually. Let’s call such a negotiation track, humorously, the OWT: Organized World Trade.
1. Trade = Aid
In the first group of trade (for example, cotton for some African countries) the developing countries must negotiate for guaranteed quotas of trade that can be exported to the world-market at guaranteed prices. This requires an intermediate body that receives these volumes of trade and distributes them to importing countries. This may imply the subsidizing of price levels, and international financial resources may have to be allocated for that. This may also involve the management of stocks to even out varying production volumes over the years. This group of trade is exempt from the element of competition; it is purely trade as aid. Reciprocity is no part of this negotiation round.
In return for the aid, developing countries must commit themselves to put in place structures that ensure that trade is fair. The gains of this aid instrument should accrue to the producers/farmers. Profits must be reinvested in the local/domestic economy. Capital-building should be broadly shared and not be concentrated in the hands of only a few. Product diversification and value-added manufacturing must be stimulated by economic policy.
An important effect must be noted of the creation of this first group and the principle of ‘no reciprocity’. Group 1 will largely concern agricultural products (such as sugar and cotton) where the domestic subsidies of, mainly, the USA and the EU have already driven millions of farmers in developing countries out of business. Assigning developing countries guaranteed volumes of production and market outlets at guaranteed prices will make them immune to these policies. In other words, the international contentions about rich countries’ agricultural subsidies will disappear. Subsidies that sustain overproduction of agricultural goods and livestock with methods that often are environmentally unsustainable and ignore animal welfare now become a democratic matter of a nation’s taxpayers only. (2) Clearly, a heavy burden will be lifted from international trade negotiations in this way.
2. Access only, no Reciprocity
In the second group of trade (for example: clothing), developing countries must negotiate for direct preferential access to importing countries, e.g. lower or zero tariffs or special quotas. Reciprocity is still a no-go. This is the trade group of ‘assisted competition’.
However, especially in this group, one should be aware of opportunities to trade with regional partners who are at equal levels of economic and technological development. It may be preferable to invest more effort here. If, in order to meet quality requirements for export to developed countries, one first has to import advanced technology from developed countries, one may wonder how such industry is going to connect with and stimulate domestic and local economic activity. There is a danger here of creating a thin layer of globalized production and trade that may boost statistical figures of GDP, but not the economic lives of people.
3. Join again the WTO
Over time, developing countries may establish sectors of industry and trade in which they are capable of competing fully in world markets with the developed countries. For trade in this group, one can join again the WTO track—it is the group of ‘full competition’.
The sectors considered in this group should, however, not be vital in the fight against poverty. In those cases caution is still warranted. The ‘good’ of liberalization must be weighed against the need for protection.
By this layered approach to trade negotiations, developing countries can claim their own space, as well as incorporate a transition to the trade negotiation space of developed economies.
Developing countries: unite!
Now, who must start this new track of OWT? It is the developing countries themselves. Considering the economic needs of their people, responsible governing elites must formulate their demands. There are hurdles to overcome, and the opposition of rich countries is the least of them. Developing countries must find common ground. They must overcome their differences and unite. Governments of developing countries may say they are too weak to stand up to the pressures exerted by major economic powers. But no, they are not weak! Their power lies in the life of the millions of people they represent! If only they would truly set up the structures of a new trade that benefits the broader masses and not just a thin layer of their elites, then their demands will stand and cannot be overruled by any global power. If instead they only play the card of GDP growth, then this becomes the trap. (3) Countries that have grown more than they will claim to be the experts and take the lead.
Yes, there are internal hindrances still to overcome for such a change of policy: bureaucratic inadequacy and weak governance. But integration into the world economy will not help to decrease such scourges. Only focus on the needs of one’s own people will.