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by FR. FELIX RAJ, SJ, DIRECTOR |  « back

Trading System Must Be Friendly To Developing Nations

Asia is steeped in a sense of the sacred. We sense a cosmic worldview in the holistic approach to life with rich cultural diversity expressed in art, architecture, music, and the rich classical and folk traditions. But modern media, IT and globalisation-liberalisation forces are posing a threat to the much-desired Asian unity. The glaring reality of the vast multitude of poor, the varied deprivation and dehumanization, rampant corruption and injustice and the inevitable exclusion of the displaced, untouchables, women, indigenous and migrant communities confront Asia. The exploitation of our eco-systems further aggravates the plight of the poor.

In this context, global unity and, in particular, Asian unity must come above the forces of commerce and trade. As Supachai Panitchpakadi, the first Asian Director-General of WTO has said, “For the noble hearted, the whole world is one family”. Asian countries, with their human, natural and financial resources, fast developing communication media and IT, rich cultural diversity and heritage, have the potential to emerge as global leaders in trade, commerce and investment. They need to play an effective role in WTO matters. Asia has to lot to offer to the global system.

Major steps

The World Trade Organization deals with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible. Essentially, it is a place where member governments try to sort out the trade problems they face with each other. It is an organisation for liberalizing trade. It operates a system of the trade rules.

The bulk of the WTO’s current work comes from the 1986-94 negotiations called the Uruguay Round and earlier negotiations under the General Agreement on Tariffs and Trade. The Uruguay Round with 123 member countries took major steps towards correcting some serious weaknesses in the international trade rules, though some of them were taken reluctantly. But steps like incorporations of agriculture within the international rules have not been fully implemented in economies like USA, EU and Japan.

Five years later, the Seattle Meeting in 1999 collapsed since developing countries refused to accept a process from which they had been excluded. It was all “take and no give” by developed countries. There were many differences in the perspectives of developing and industrialized nations on the current reality of free trade and how it affected them. There had been a shift in the balance of power. The developing countries concluded that they could not only negotiate, they could block negotiations.

At Doha, Qatar, in 2001, there further evidence of the ability of developing countries to influence trade outcomes. While the broad support for the successful anti-subsidy position in agriculture seemed a developing country achievement, the developing countries were a visible part of the alliance.

A clearer victory in agriculture and other areas was forthcoming. The meeting accepted that special and differential treatment (allowing different policies by developing countries and requiring different policies towards them) would be “an integral part” of any final settlement, potentially better than the Uruguay Round, which had offered only minor adjustments to policy and non-obligatory concessions.

Doha also extended the time for least developed countries to comply with subsidy and intellectual property rules. These issues were accepted at Doha in spite of initial strong opposition by developed countries, indicating that developed countries thought they were a necessary part of any bargain. The Doha Round is widely acknowledged as a “development round” that promises to place development at the heart of trade negotiations and focus on issues on direct interest to developing countries.


Deep divisions

WTO negotiations at Cancun, Mexico in 2003 also collapsed amid deep divisions between the USA, EU and Japan on one side and the Group of 23 led by India, Brazil, South Africa and China, on the other. The two sides, already at odds on agricultural issues, deadlocked over proposals for WTO rules on investment, competition, trade facilitation and transparency in government procurement.

The split between developed and developing countries in not new. It was one of the factors that led to the failure of the Seattle talks. However, a potent new force challenging the USA and EU has emerged inside the WTO. The G-23 represents 85 per cent of the world’s farmers and more than half the global population.

It is a fact that rich countries protect their own trading interests - to reduce agricultural subsidies and open up vast new markets. They bully the poor countries and their concerns are often marginalised. Agreements are often discarded and the developing countries sidelined. The third world countries are concerned about the effects of liberalisation and globalisation on trade, on the environment, on jobs, on cultural and social issues, which are important.

The WTO member countries met again at the end of July 2004 in Geneva to discuss more development and trade issues. They tried to restart the talks. After days of closed-door negotiations, a package of framework agreements was reached. The rich countries have delivered a deeply unbalanced text as a “take or leave it” option. This has put developing countries in the unfair position of having to accept a bad deal or reject and get blamed by the USA and EU for failure.

As observed by Oxfam, small wins were achieved by developing countries in the form of stronger language on agricultural export subsidies and export credits and the dropping of three out of the four so-called “Singapore Issues” but overall the final text of the framework remained disappointing and did little to advance the round of talks, said Oxfam. Apparent concessions by the USA on cotton were not legally binding and would not guarantee an end of the harmful regime.

According to Professor Walden Belo, a long time critic, the developing countries have waited nearly 10 years for the trade superpowers that dominate the WTO to show sensitivity to their efforts to change global trade from being an instrument of their domination to serving as a mechanism to advance their economic development. For this patience, they have been rewarded with a succession of anti-development negotiating frameworks and texts culminating in the July Framework.


Vital tool

About two-thirds of the WTO’s around 148 members are developing countries. They can play an increasingly important and active role in the WTO because of their numbers, because they are becoming more important in the global economy, and because they increasingly look to trade as a vital tool in their development efforts. Developing countries are a highly diverse group often with very different views and concerns. The WTO’s new rules for global trade present both opportunities and challenges to Asian developing countries.

Trade must contribute to poverty reduction. Pro-poor trade measures have a direct impact on poverty reduction while pro-growth measures have indirect effects. Since trade liberalisation policies in developing countries may adversely affect the poor in the short run, a cautious approach in necessary so that existing socio-economic and institutional structures respond in a pro-poor manner to the structural adjustments from trade liberalisation.

Deeper regional integration is necessary. It requires various kinds of regional cooperation arrangements, areas and methods of cooperation, institutional arrangements to facilitate cooperation like Asia Development Bank, Central Asia Regional Economic Cooperation, Asia Pacific Economic Cooperation, South Asian Association for Regional Cooperation, bilateral and regional trade arrangements, relationship of these to WTO etc. Institutions like ADB can play a significant role in training and preparing the Asian developing members to understand and actively participate in the WTO negotiations.

Since WTO’s decisions and actions have far reaching effects on the lives of billions of people and the environment upon which they depend, it should make the multilateral trading system more open and friendly to developing countries. Its operations and decision-making procedures have to be more transparent, participatory and democratic.

Published in the Statesman on December 7, 2004




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