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WTO: need for a proactive Southern Agenda
Dr Abid Qaiyum Suleri in Geneva
The lack of agreement on common goals for trade liberalisation has resulted in a deadlock. To move forward, one needs to be free from all biases--for or against--to explore the options and look into the issues, which have emerged with the new trading regime .
The Marrakesh Agreement of 1994 established the WTO; it gave a set of goals, which were to be met through trade liberalisation. It says that trade liberalisation should "allow for the optimal use of the Earth's resources in accordance with the objective of sustainable development" and "seek to protect the environment, and recognise the special needs of developing countries". However, since its inception WTO has been the centre of debate.
Anyone following this debate would realise that much of it is being conducted with "set minds". Opponents claim that WTO dictates policies and is for free trade at any cost. In WTO system, commercial interests take priority over development, environment, health and safety issues. WTO destroys jobs and increases poverty. Small countries are powerless in the WTO. It is an undemocratic tool of powerful lobbies, which exploit the weaker countries.
Proponents of a free trading system, on the other hand, declare WTO a panacea for every ill. They claim that it is the only forum where countries can thrash out their differences on trade issues. Their argument is that WTO is a member-driven organisation and does not dictate its policies. They also argue that WTO promotes non-discrimination and transparency, which in turn can play an important role in generating economic growth, especially in the developing countries.
Who is right? The answer depends on what is expected from economic liberalisation and free trade. One side thinks that economic growth should be a means towards achieving sustainable social, environmental and human development. Whereas, the other side thinks that trade liberalisation and economic growth, in itself is a means and goal. The lack of agreement on common goals for trade liberalisation has resulted in a deadlock. To move forward, one needs to be free from all biases--for or against--to explore the options and look into the issues, which have emerged with the new trading regime.
Nothing is perfect, and certainly not WTO. In theory, it says that multilateral trading system should be without any discrimination; should be freer (with barriers coming down through negotiations); should be predictable; more competitive and more beneficial for less developed countries. However, in practice we find that benefits of WTO-led trade liberalisation tend to accrue to the more developed and richer nations and there is no apparent relief for the less developed countries.
To discuss these issues, Swiss Chapter of Friedrich Ebert Stiftung (FES) recently arranged a dialogue at the WTO headquarters in Geneva with specialists from policy institutes in developing countries. This was a first of its kind initiative and the representatives of developed world to WTO were invited to respond to the concerns of participants from developing countries. Among others Neil McMillan (minister and deputy permanent representative of British Government to UN and WTO), and David P Shark (deputy chief of US mission to WTO) also attended the three-day event.
Although having contrary viewpoints on trade liberalisation of agricultural products, both of them had two points in common and those were, "If the developing countries are not gaining the promised benefits from WTO system, it is their weakness"; and second, "Demand of Bretton Woods institutions (IMF, and the World Bank) for a rapid trade liberalisation in developing countries has nothing to do with WTO".
But why do Bretton Woods institutions (BWIs) have to interfere with WTO affairs? Who are the main actors behind these institutions? And is there any way that developing countries would be able to get benefit of trade liberalisation, which they have to adopt to fulfil the loan covenants with BWIs? In these circumstances what strategy should developing countries such as Pakistan--which is neither considered a major importer, nor a major exporter (whose total share in world export is 0.1%, with an over all ranking of 64 and 68 among the world's exporting and importing countries, respectively)--follow? These questions need to be answered if one wants the developing countries to proactively engage in the process of trade liberalisation.
First, is WTO really important enough for countries like Pakistan to remain its member? There can be more than one opinion on it. However, one needs to think of the alternatives if developing countries opt out from WTO. In the absence of WTO, they would have to rely either on bilateral or on regional trade agreements; without any set of defined rules for international trade. Small countries, although not getting much out of WTO, may become even weaker without the WTO. Theoretically, the reasons lie in the WTO's key principles, such as non-discrimination and transparency. By joining the WTO, a small country is automatically entitled to the benefits that all WTO members grant to each other.
WTO is a tool to negotiate rules of trade. These rules are devised by Member States, and those who are actively involved in this process have more chances to mould those rules in their favour. In recent years, developing countries have become considerably more active in WTO negotiations, submitting an unprecedented number of proposals in the agriculture talks, and working actively on the ministerial declarations and decisions issued in Doha in November 2001. They are giving a tough time to EU and US in trade negotiations and are more aware of their rights now. Another reason why developing countries should join WTO is that in this system everyone has to follow the same rules (which are agreed upon after negotiations).
However in practice, things are not as simple and one observes that powerful nations have devised their ways out and do not seem to follow the same rules. For instance, the provision of "peace clause" (Article 13 of the Agreement on Agriculture), which prevents export subsidies together with exemption from domestic support reductions being challenged until 2003. Only after 2003 would the member countries be able to challenge the export subsidies and domestic reduction commitments in the dispute settlement body (DSB).
In the WTO's dispute settlement procedure, developing countries have successfully challenged some actions taken by the developed countries. To date 273 disputes have been brought to the DSB. In the year 2002, so far 17 disputes were brought against the US, six against EC, two against Australia, and one against Uruguay, Japan, Turkey, and Peru each. Out of these 29 cases, 13 were brought forward by developing countries, ie, Philippines (2), Brazil (5), Argentina (2), Chile (2), and India (2). Without the WTO, these countries would have been powerless to act against their more powerful partners. China, which joined WTO last November, is already showing its muscles by bringing dispute against the US on import of certain steel products. Could it do so, had it not joined the WTO? Finally, by joining the WTO small countries can also increase their bargaining power by forming alliances with other countries with common interests.
Developing countries should not only join WTO, but they should also have their own agenda (Southern Agenda) on trade and sustainable development. Unfortunately, such an agenda or common vision for developing countries, which comprises the majority of the membership of the WTO, does not exist. Developed nations, on the other hand, have their own "trade and sustainable development agenda". They want their own brand of "sustainable development" in the world. Although their approach to economic liberalisation does not respond to a broadly supported set of economic, social, and environmental goals, yet lack of a Southern Agenda in WTO creates a potential space for developed nations to impose their agenda on the South. But they cannot do it without the help of the BWIs.
The WTO is run by its member governments. Unlike the UN, where some of the members may exercise their right to veto, and may halt the process of decision-making; and unlike the BWIs, where Boards of Directors enjoy the delegated powers to take decisions; all major decisions in WTO are taken by the membership as a whole, either by ministers (who meet at least once every two years) or by officials (who meet regularly in Geneva). Decisions are normally taken by consensus. It means that every country has a voice, and every country has to be convinced before it joins a consensus. To arrive at a consensus and to convince the reluctant countries, the powerful countries use all means, and that is where the role of BWIs starts.
Let us see who are the main actors behind IMF, and the World Bank. The World Bank consists of five institutions, which were established to lend money and fund projects in needy countries to alleviate poverty. It has more than 180 members. The Bank's five largest shareholders--France, Germany, Japan, UK, and USA (which along with Italy and Canada have 45% of the voting power)--each appoint an executive director. The remaining 175 member countries are represented by 19 executive directors. Bank President is always from the US and US by virtue of its shares can veto any policy.
The structure of IMF is also similar to the World Bank. It has 182 members. Eight executive directors represent individual countries: China, France, Germany, Japan, Russia, Saudi Arabia, UK, and USA. The remaining 16 executive directors represent groupings of the other 174 countries. IMF Chairman is always from EC. The same story stands true for Asian Development Bank (ADB)--which was not established in Bretton Woods and hence not included in BWIs--has 19 non-Asian shareholders. Japan and USA are its largest shareholders with 15.89% shares each and thus can influence any policy decision within ADB.
Coming back to WTO, the richest nations to run ADB, IMF, and the World Bank know "how to convince the weaker countries for arriving to a consensus". The claim that WTO has nothing to do with the policies of the BWIs may be theoretically correct but USA and EC are misusing their voting power in the BWIs (and in ADB too) to impose their own agendas on developing countries. The worst example of this phenomenon can be seen in case of Pakistan, which emerged as a champion of the Development Box for developing countries in Agreement of Agriculture at Doha. Developed nations did not resist much against the idea of the Development Box at Doha. However, one month later they were able to "convince" Pakistan for taking a U-turn from its Development Box demand through ADB, which signed a loan agreement with Pakistan for Agricultural Structural Reforms. Under this loan agreement, Pakistan committed to abolish support price mechanism, abort agricultural subsidies, and close down various agricultural supply institutes with a downsizing in many others. Apparently, this loan agreement had nothing to do with trade negotiations in WTO, but it shows how IFIs can help in reaching at a "consensus" in WTO.
Compared to IFIs, WTO seems very harmless as members can influence the WTO process if they want to. When WTO rules impose disciplines on countries' policies the members themselves (under agreed procedures which they negotiated) do the enforcement. Sometimes enforcement includes the threat of trade sanctions. But those sanctions are imposed by member countries and not by the organisation. This is quite different from IFIs, which can, for example, withhold credit from a country. This differentiates WTO from ADB, IMF, and the World Bank. So who should receive the crunch from opponents of a free trading system: WTO or the countries formulating the policies of IFIs?
Harvard University economist Dani Rodrik, in his book The New Global Economy And Developing Countries argues that developing nations must participate in the world economy on their own terms, not the terms "dictated" by global markets and multinational institutions. Rodrik has suggested that developing countries should not take a defensive position while joining the world economy; rather, they must be proactive in defining the agenda of their choice.
But is it possible for these countries to act upon Rodrik's advice? They don't have enough shares/votes in IFIs to define the agenda of their choice. The only (trade related) forum where they are in majority (and would not be vetoed) is WTO and that is where they should come up with a pro-active Southern Agenda.
Developing countries need to balance activism on WTO with research and should formulate their positions based on thorough research. Once their own agenda is set and research-based positions are taken, it would be easy for them to focus on commonalities and establish alliances and networks.
Developing countries in the form of alliances can proactively face the Northern Agenda by accepting whatever is in their favour and rejecting that, which is not in their national interests. These are some daring steps but may prove as effective measures to weaken the WTO-IFI nexus.
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