Click Here!

Search Asia Times

Advanced Search

Global Economy

WTO fault Lines
Doha Development Agenda. A Global View. T K Bhaumik (ed)

Reviewed by Chanakya Sen

The dismal failure of the World Trade Organization's (WTO) Cancun ministerial in September 2003 is a manifestation of the fault lines in the entrails of the multilateral trading system. This expansively edited book features contributions from trade scholars and practitioners and covers the whole shebang of WTO deadlocks and polarizations that exploded in Cancun. "There is a crisis. One can solve a crisis only when it is recognized." (p xxxii)

The Doha Development Round - initiated at the fourth WTO Ministerial in Doha, Qatar in 2001 - is now almost certain to miss the January 2005 deadline for the "Single Undertaking" concept, thus putting paid to hopes of ambitious trade liberalization to revive the world economy and lift millions out of poverty. Doha is the first multilateral trading round explicitly dubbed as the "development round", an affirmation that no other form of international economic cooperation can offer developing countries the gains that free trade can generate. However, against the tide of development fanfare, countries in the Organization for Economic Cooperation and Development have backtracked on special and differential treatment (SPD) as well as implementation concerns. Whether the global North is committed enough to convert platitudes into reality is the anxiety of the majority of WTO members. In industrialist Rahul Bajaj's words, the "Marrakesh spirit and basic principles behind the establishment of WTO seem to have been forgotten". (p 44)

Indian Commerce Minister Arun Jaitley's essay in the book calls for adequate windows of exception for economies highly dependent on agriculture and for speeding up the progress of the Uruguay Round implementation - the largest trade negotiation ever - while questioning the peak and escalation tariffs of developed countries. "Where market access suits you, you go ahead with the sword. Yet, when a country from the developing world has the ability to penetrate your market you hold up the shield and block access." (p 10)

But European Union Trade Commissioner Pascal Lamy counters that SPD is "creating second-class WTO citizens with diminished WTO obligations but also diminished WTO rights". (p 15) An EU business representative proposes "graduation" to determine which countries should benefit from SPD and for how long, instead of blanket amnesties and waivers that reduced developing economies to bystanders in the General Agreement on Tariffs and Trade era.

Cairns Group chairman Mark Vaile assails domestic support in agriculture, saying it is trade-distorting, and calls for its progressive elimination as "a moral obligation of the developing world". (p 21) He also cautions against the EU's cumbersome idea of protecting geographical indications, which, if extended beyond wines and spirits, entails costly registration systems for developing countries. Economist Jagdish Bhagwati, meanwhile, has lambasted legally complex, costly and rigid standards as "backdoor intrusionism" to realize the protectionist aims of developed states. By the reckoning of many, standard harmonization is the most insidious force inside the WTO.

New Zealand's trade minister, Jim Sutton, makes the significant point that border protection and subsidization in textiles, footwear and agriculture are also present in developing country markets, attenuating South-South trade. Forty-five percent of developing country trade flows are South-South and 70 percent of the tariffs paid by developing countries are to other developing countries. It is essential for developing countries to liberalize trade among themselves, he says.

Razeen Sally, professor at the London School of Economics, gives a heuristic account in which he laments the Gadarene rush to regional trading agreements since the debacle of Seattle in 1999. The WTO is "in serious danger of becoming marginalized by spider webs of discriminatory trading arrangements". (p 58) Creeping legalism in the organization opens vistas for judicial activism powered by rich member states able to afford armies of high-fee boffins, he states, adding that if developed countries do not live up to their commitments to phase out bilateral quotas on textiles and clothing by the 2005 deadline, more storms will brew. EU enlargement and the decision to expand the scope of textile quota restrictions from May 2004 is a retrogressive step, stated Sally. Tariffs on main textile and clothing products remain at 12 percent in the EU and 25 percent in the US.

Niggardly technical assistance from developed country coffers and disguised restrictions on trade through the EU's environment trump card are other trouble spots addressed in the Doha Development Agenda. There is currently no obligation to part with a particular amount for helping poor countries to implement WTO agreements. Mandatory "eco-labels" based on a life-cycle approach could erode the competitive advantage of developing countries. Trade retaliatory "environmental imperialism" sets dangerous precedents.

Academic William Antholis remarks on the irony that the workers and farmers most in need of assistance globally are not industrialized labor unions, Japanese rice farmers or French organic farmers on the streets of Seattle, but rather textile workers and subsistence farmers in developing nations. "Industrialized nations use their activist groups as a green screen for protectionist tendencies". (p 156) Developing countries perceive many western non-governmental organizations as fronts for business interests from the industrial north. The WTO must beware of protectionists seeking to disguise special interest agendas in the cloak of public values, says Antholis.

Loopholes in the Agreement on Agriculture (AOA) and its lopsided implementation are touched on by Amir Ullah Khan. Japan, the EU and the US have cut down low tariffs more than high tariffs. Steeper reductions of high rates by the developed world are vital. Under the AOA, export subsidy commitments are problematically viewed at aggregated levels, allowing developed countries flexibility to maintain and even increase subsidies at finer levels of disaggregation.

Bioethicist Vandana Shiva considers the conflict between the TRIPS (trade-related aspects of intellectual property rights) agreement and the Convention on Biological Diversity. Western-style patent systems sap the centuries-old practice of sharing biological heritage to reap equitable benefits. TRIPS also does not impose any obligations on the owners of patents to undertake technology transfer in the country granting them the rights.

Consultant Julian Arkell calls for specific commitments under the General Agreement on Trade in Services (GATS) by advanced countries to help strengthen the domestic services of developing countries through access to technology and distribution channels. Ministries of immigration and labor in the North are undermining GATS Mode 4 on the movement of natural persons through the arbitrary protection of borders and discriminatory exclusion. Quad countries have given no indication of wanting to address temporary entry for semi-skilled and unskilled workers. Until now, GATS has recorded a 0 percent unrestricted commitment in Mode 4. The few horizontal commitments are biased towards movement of executives, managers and intra-corporate transferees.

Economist Nagesh Kumar vets the contentious "Singapore Issue" of trade and investment and the proposed Multilateral Framework on Investment (MFI). "A one-size-fits-all approach to FDI [foreign direct investment] policy that is sought to be evolved through the MFI in WTO cannot serve the interests of countries at different levels of development." (p 396) Only the rights of investors are being protected in the MFI, without concomitant obligations and responsibilities to host country interests. Developing countries should never forfeit litheness to impose performance requirements on foreign investors in tune with public policy objectives.

Lobbyist Peter Wilmott studies the more benign Singapore issue of trade facilitation, which rationalizes that the processes and spreading of best practices to mitigate border bottlenecks can accrue benefits in a very large measure to developing countries. The incremental gain of smoothening procedures at the entry and exit points of goods is going to be proportionately less for industrialized economies, says Wilmott. Unlike other WTO topics, trade facilitation is a win-win experience rather than one of trade-offs and concessions. It reduces invisible costs and is in the interest of the overall growth of international trade.

Maurice Schiff of the World Bank takes up the Doha mandate of examining the trade options of small developing economies. South-South Regional Integration Agreements (RIAs) tend to benefit larger and more developed members relative to smaller and poorer members, a phenomenon labelled as "dynamic divergence". North-South RIAs are likely to be superior to South-South RIAs, but only if small economies don't put all their eggs in one basket and liberalize trade with the rest of the world while being locked into Free Trade Areas with the EU or the US. Further integration into the multilateral trading system and unilateral trade liberalization are the optimal solutions for small economies to survive the big bad world of preferential trading agreements, says Schiff.

Readers searching for detailed exegeses on the various stumbling problems confronting the WTO should get a copy of this volume, whose overriding concern is to make the Doha Development Round a success. As one contributor, Fred Smith of the US Enterprise Institute, avers, "Collapse at Cancun may be the best outcome if it leads to a revitalized and more politically effective free trade strategy." (p 194) If some of the outstanding fissures raised in this book are addressed conscientiously, the WTO and the global economy, which are on life support devices at present, can get up and start walking hale and hearty again.

Doha Development Agenda. A Global View. T K Bhaumik(ed), Penguin Books India, New Delhi, 2003. ISBN: 0-67-004999-9. Price US$19.80, 496 pages.

(Copyright 2004 Asia Times Online Ltd. All rights reserved. Please contact for information on our sales and syndication policies.)
Mar 31, 2004

Fashionable trade agreements all the rage in Asia (Mar 4, '04)

Free trade seen as anti-poverty key (Feb 25, '04)

Cancun: A good idea at the time (Nov 12, '03)



Click Here!
No material from Asia Times Online may be republished in any form without written permission.
Copyright 2003, Asia Times Online, 4305 Far East Finance Centre, 16 Harcourt Rd, Central, Hong Kong