DEVELOPING COUNTRIES IN THE WTO REGIME

 

By Prof. Dr. KHAWAJA AMJAD SAEED
FCMA FCA
Email:
icmalhr@brain.net.pk
Dec 10 - 16 , 2001

The world is facing various challenges. Globalization is the reality, Cross border activities in all walks of life are expanding. The hope is that 21st century will usher in an era of greater prosperity and new outlook for the world. WTO regime is steadily expanding. However, even in the developed world, there is growing unrest.

Table: 1

PROTESTS AGAINST GLOBALIZATION

YEAR VENUE OF PROTEST REMARKS

1999 December

Seatle, USA

40,000 rallied against the WTO.

2000 February

Davos, Switzerland

At the World Economic Forum, a McDonald's was trashed.

April

Washington DC, USA

A blockage delayed talks at the World Bank and IMF.

September

Prague, Europe

A clash involving 12,000 at the World Bank
- IMF annual meeting.

September

Melbourne, Australia

Activists barricaded delegates to WEF Conference.

December

Nice, Europe

Disruption of a European Union Summit.

2001 January

Davos - Zurich, Switzerland

The WEF was locked down, Zurich got trashed instead.

April

Quebec City, Canada

At the Summit of the Americas, tear gas and water cannons were used.

June

Barcelona, Spain

World Bank cancelled Conference; activists held their own.

June

Gothenburg, Sweden

40,000 held a peaceful march. A core of masked anarchists wielding cobblestones created bloody mayhem at the EU Summit in the Swedish dry port.

July

Genoa, Italy

15,000 police poured onto the streets - armed with tear gas and water cannons. One was killed.

Member Governing Council, International Federation of Accountants (IFAC) [1997 - 2000] President, South Asian Federation of Accountants (SAFA) [1997] President, Institute of Cost and Management Accountants of Pakistan (ICMAP) [1997- 2000] Dean: Executive Programs, The Punjab College of Business Administration (PCBA), Lahore.

Source: Excerpted from Time, July 23, 2001, pp 25-28.

This article looks at the following aspects:

Part  Focus

A

From GATT to WTO

B

WTO: A brief profile

C

The Debate

D

Implications of Founding WTO

E

India: Farmer assured safeguards in post QR regime

These aspects are now briefly reviewed below.

PART A: FROM GATT TO WTO

The GATT preamble (1947) states that "trade and economic endeavor should be conducted with a view to raising standard of living, ensuring full employment and a large and steadily growing volume of real income".

Unfortunately the above objectives do not seem to be shared in developing countries.

Historically, GATT enforced phased - in tariff reductions on worldwide basis.

Uruguay Round ended in 1994. The trade negotiations ended with focus on non-agricultural goods.

The Marrakesh Agreement established WTO which replaced GAAT in 1995. The WTO is a much more powerful institution due to its institutional foundation and its dispute settlement system. Its agenda now includes agriculture, services (financial, telecommunications, information technology, etc.), intellectual property rights, electronic commerce and possibly in the next round investment, government procurement and competitive policy.

The WTO has 141 members with another 31 in the process of accession. Out of above figure, 98 (70%) Countries are developing Countries. Included in this are 27 nations categorised as the least developed countries (LDCs).

One of the popular yardstick of the measure of success of the WTO is the volume of World Trade. In the first four years of WTO, volume of World Trade was up by 25%. However, despite the population of LDCs being 20% of the World's population, a mere 0.03% of trade flows were generated by it. This shows that the LDCs are not benefiting from the WTO regime.

Based on data available in the World Development Report 2000-2001, the following table shows that seventeen countries had 72% share of the global exports:

Table: 2

EXPORTS OF TOP 17 COUNTRIES: 1998

Country

US $

% Billion

% of Global Exports

1. United States

934

19

14

2. Germany

623

13

9

3. Japan

437

9

6

4. France

387

8

6

5. United Kingdom

373

8

6

6. Italy

310

6

5

7. Canada

248

5

4

8. Netherlands

225

5

4

9. Hong Kong

209

4

3

10. China

208

4

3

11. Belgium

192

4

3

12. Spain

161

3

2

13. Korea, Rep.

157

3

2

14. Mexico

130

3

2

15. Singapore

129

3

2

16. Switzerland

120

2

2

17. Sweden

103

2

1

.

4,946

100

72

Global Exports 1998

6,767

. .
Source: Extracted from: World Development Report 2000-2001 New York: Oxford University Press, August 2000, pp 302-303, Table 15.

However, the Director General of WTO appears to be hopeful of contribution of WTO as is apparent from excerpts of his speech:

"The WTO seems to be copping the abuse for the failures of every other institution in the world and for everything that goes wrong".

(Mike Moore, DG WTO, The Financial Times, October 11, 1999)

"Every WTO member government supports open trade because it leads to higher living standards for working families, which in turn leads to a cleaner environment".

(Mike Moore, DG WTO, The Toronto Star, October 12,1999)

PART B: WTO: A BRIEF PROFILE

WTO was created by Uruguay Round negotiation (1986-94) and was established on January 01, 1995. Its headquarters is located in Geneva, Switzerland. As on May 31, 2001 its membership was 141 with a budget of 127 million Swiss francs for 2000. Its functions include administering WTO trade agreements, forum for trade negotiations, handling trade disputes, monitoring national trade policies, technical assistance and training for developing countries and cooperation with other international organizations.

The expected hope is a more prosperous, peaceful and accountable economic world. By lowering trade barriers, the WTO's system also breaks down other barriers between people and nations.

The WTO's purpose is to broaden and enforce global free trade. Global free trade gives multinational corporations vast powers to enforce their will against democratic countries. This perceptive or realistic fear needs to be punctured through developing a sound cooperation between developed world and developing countries.

PART C: THE DEBATE

Whether developing countries are now better integrated in the global economy or into the so-called 'economic mainstream' will remain open for debate until there is an effective implementation of the WTO agreements.

The ten benefits of the WTO Trading System are listed below:

1. The system helps promote peace.
2. Disputes are handled constructively.
3. Rules make life easier for all.
4. Freer trade cuts the cost of living.
5. It provides more choice of products and qualities.
6. Trade raises income.
7. Trade stimulates economic growth.
8. The basic principles make life more efficient.
9. Governments are shielded from lobbying.
10. The system encourages good government.

It is generally believed that there are ten reasons to oppose WTO. These are summed up below:

1. The WTO only serves the interests of multi-national corporations.
2. The WTO is a stacked court.
3. The WTO tramples over labour and human rights.
4. The WTO is destroying the environment
5. The WTO is killing people.
6. The US adoption of the WTO was undemocratic.
7. The WTO undermines local development and penalizes poor countries.
8. The WTO is increasing inequality.
9. The WTO undermines national sovereignty.
10. The tide is turning against free trade and the WTO.

The WTO has released ten common misunderstandings about the WTO on the internet People have different views of the pros and cons of the WTO's 'multilateral' trading system. It is claimed that it serves as a forum for countries to thrash out their differences on trade issues. The above misunderstandings are listed below:

1. The WTO dictates policy.
2. The WTO is for free trade at any cost.
3. Commercial interests take priority over development.
4. Commercial interests take priority over the environment.
5. Commercial interests take priority over health and safety.
6. The WTO destroys jobs and worsens poverty.
7. Small Countries are powerless in the WTO.
8. The WTO is the tool of powerful lobbies.
9. Weaker Countries are forced to join the WTO.
10. The WTO is undemocratic

The WTO has attempted to provide answers to the above so that perception about the WTO becomes clear.

The World Bank has also been conducting their research on the impact of the WTO on developing countries. With good hope of the WTO Director General, developing countries strongly expect to see goods delivered in a fair manner to ensure accomplishing goals for which the WTO was set up.

PART D: IMPLICATIONS OF FOUNDING THE WTO

Five years of founding of the WTO have identified the following implications for developing Countries:

Table: 3

IMPLICATIONS OF FOUNDING WTO

1.

Agreement on Trade-Related Investment Measures (TRIM)

High tech transnationals like Microsoft and Intel have acquired right to monopolize innovation in the knowledge intensive industries and provided bio- technology firms like Novartis and Monsanto the go-signal to revitalize the fruits of eons of creative interaction between human communities and nature such as seeds, plants and animal life.

2.

Agreement on Agriculture (AOA)

Developing countries have agreed to open up their markets while allowing the big agricultural super powers to consolidate their system of subsidized agricultural production.

3.

Legal System

It enshrined the priority of free trade above every other good, above the environment, justice, equity and community.

*Available on internet See selected bibliography.

PART-E: FARMERS ASSURED SAFEGUARDS ON POST QR* REGIME

Inaugurating a Conference on impact of WTO on Indian agriculture and marketing cooperatives, the agriculture minister of India assured the farm sector of effective safeguards to counter the challenges from dismantling the quantitative restrictions from April 2001 under WTO and asserted that it would protect farmers interests in case of sudden upsurge in imports.

CONCLUDING COMMENTS

It is high time that developing countries rise to the occasion of understanding and accepting new forces of competitive world and restructure their economies to adjust to new competitive realities. This will enable them to weed out wastages and stay competitive, despite no equality of level playing field.

However, developed world must also adopt a fair outlook to ensure that developing countries stay as productive partners in socio-economic development aspects.

The WTO and other global and national institutions must undertake research to visualize implications of the WTO regime to ensure social peace and tranquility.