PAGE INTER UNIVERSITY CONTEST

 

IMPACT OF WTO ON DEVELOPING COUNTRIES

 
WTO must make genuine efforts to improve its credibility particularly in the eyes of the third world countries
 

By BEENISH MUMTAZ PIRACHA, 
MBA, Institute of Business Administration (IBA)

Sep 12 - 18, 2005

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(PAGE will be publishing selected articles contributed by the students from different universities on weekly basis)

World Trade Organization, abbreviated as, WTO has 148 countries as its members. The primary aim of WTO is to formulate, evaluate and implement various "rules of trade" in order to bring down ́international trade barriers. Having developing economies as well as developed countries as its active members, WTO has now become a cause of friction between the underdeveloped and the developed world; two parts of the world that have markedly different economic interests and needs. Since the richer players of the organization enjoy stronger bargaining position, the impact of WTO on developing countries has largely been quite adverse. This essay will show the negative impact of WTO on developing countries in the light of Agreement on Agriculture (AOA) and Trade Related Intellectual Property Rights (TRIPs) agreement. Moreover, some practical suggestions will be presented as possible solutions for the problem under consideration.

WTO's Agreement on Agriculture has landed the agriculture sector of the developing countries in hard waters by forcing these less-privileged nations to decrease domestic subsidies to their local farmers thereby driving thousands of small farmers out of farming business, as these poor farmers cannot afford to compete globally. Since small farmers that form a large portion of the population are incapable of competing with cheaper imports, local food production of the third world countries like Pakistan, Indonesia, Malaysia, India, Sri Lanka, Egypt, Uganda, Zimbabwe (and so on and so forth) tend to suffer heavily. This is because, the farmers of these countries are compelled to depend on imports from developed nations thereby finally giving in to the monopolistic powers of the richer members of the World Trade Organization. As explained by Filipino economist Walden Bello, "the vast majority of unorganized small farmers specializing in corn, rice, and other food crops are hurt by the trade-off, for the quid pro quo is precisely the liberalization of their markets for staples and other basic foods". Moreover, extensively researched studies have indicated adjustment problems that are being faced by the third world countries. For instance, "the rice and sugar sectors in Senegal were facing difficulties in coping with import competition despite the substantive devaluation in 1994," according to a research study by FAO. Additionally, the "net food importers" in the developing countries will further feel the economic burden due to the increase in import bills. This is because, with the substantial decrease in food production subsidies in the developed world, the related export prices will rise thereby augmenting the burden on the third world economies.

Rules, as put forth in Trade Related Intellectual Property Rights (TRIPs) also show negative trends in the economies of the developing nations while paving way for issues like 'biopiracy', augmented product prices, restricted access to technology and the like. Biopiracy can be defined as gaining patents on plant varieties, lifeforms, medicines, agricultural material and so on that has been in use by other people and countries. As observed, in most of the cases, it has been the giant-sized, transnational corporations with strong monopoly powers that have managed to buy patents thereby demanding royalty payments or licence fees against the use of technology, microorganisms, medical and agricultural material needed for respective local production processes. Consequently, the prices for technological use, medicines, lifeforms ecetra have alarmingly increased for the developing countries thereby making medicine and many other necessary human needs unaffordable.

However, since WTO is simply an internationally recognized, membership-oriented organization, the developing nations must not conveniently blame the "system" or its richer players (read developed nations). Instead, Pakistan and other developing countries should make sincere and timely efforts to comprehend the functioning rules of this organization in order to benefit from its membership. One way of making well-informed choices and decisions regarding the WTO agreements is through conducting systematic and impartial empirical research, based on the findings of which, the developing countries can find themselves a way to be successful members of WTO. Thus, by taking a proactive approach, the developing nations can reduce the negative impact of those WTO agreements that have resulted in further stifling the dwindling economies of the poor member nations. Furthermore, the "capacity building" activities must be made effective with the aid of increased awareness among the concerned authorities about the effects of WTO and the related trade issues. Moreover, the third world countries must remain bonded to each other and should fight as one unifying force in order to make them heard in WTO meetings thereby collectively safeguarding their national interests. The unexpected fiasco of WTO in Seattle proves the point above.

On the other hand, the developed nations like EU members and U.S. should try to cooperate with less economically sound members of WTO by stop misusing their strong bargaining position, with the help of which, they have been persistently "fighting to preserve inequitable rules on finance and trade". Instead, the rich members of the WTO should ethically face the heightened competition from the under-developed world by ameliorating their output productivity. In addition to the above, it is high time that WTO must make genuine efforts to improve its credibility particularly in the eyes of the third world countries that have suffered a great deal in the name of "liberalization". Policies, decisions and practices at the WTO must, therefore, be critically evaluated so as to facilitate the development of the developing countries.

Summing up, the developed nations, as members of the World Trade Organization must cooperate with the underdeveloped countries and assist the third world economies in their struggle to reduce poverty and increase employment while stabilizing their economic situation.