The World Trade Organization and Economic Development
Michael Sutton, Ph.D.１
WTO Center Tokyo
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Introduction One of the most important economic challenges this century is replicating the material prosperity of post-industrial societies in societies that are either industrializing or languishing in political and economic strife. Despite the best intentions, income redistribution, foreign aid, or acts of financial generosity will not be sufficient.２ The path to material prosperity is through ‘economic development’, that is industrialization, a societal catharsis that transforms more than the production of goods and services. This paper critically analyses the relationship between economic development and the world trading system centered on the World Trade Organization (WTO). The paper argues that the concept of ‘development’ is questionable, the role of the WTO is generally misunderstood, and institutionally the world trading system is far more pragmatic than the critics of globalization are prepared to admit. Unlike post-industrial societies like Great Britain, the United States, of Australia, the ‘developing’ world is industrializing to varying degrees in a global political economy informed by detailed international rules and principles covering trade and human rights. For trade, the principle expression of these rules is found in the World Trade Organization (WTO), established in 1995, but preceded by the General Agreement on Tariffs and Trade (GATT) negotiated in 1948. For human rights, the principles are set forth in the 1948 United Nations Universal Declaration of Human Rights. Both treaties were written following the second scouring of the earth by human conflict. The UN Declaration therefore spoke of a world where the ‘freedom from fear and want’ could coexist alongside ‘the dignity and worth of the human person’. Article 25 stated ‘Everyone has the right to a standard of living adequate for the health and well-being of himself and his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control’. This statement linked prosperity and human dignity. However, the realization of Article 25 in the lives of hundreds of millions in the world today remains a dream rather than a reality. Globalization and the World Trading System Since the late 1940s, there has been an uneven pattern of economic
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development. In East Asia Japan emerged as an economic giant, a major exporter of manufactured products and patron of overseas development assistance, especially to the Asian region. This ‘miracle’ or model of development was soon replicated throughout East Asia in Korea, Taiwan, Singapore and Hong Kong, and more recently China. The rise of Europe from the ashes of world war was a second ‘miracle’ of the post-war era. The Europeans were able to establish a customs union, then common market and now economic and political union. Development in South America has however been uneven and in Africa, many countries have yet to attain the rudimentary political stability to facilitate sustainable economic infrastructure. As the new millennium dawned, the United Nations reaffirmed its commitment to a ‘more peaceful, prosperous and just world’ with the so-called ‘Millennium Declaration’, stating ‘the central challenge we face today is to ensure that globalization becomes a positive force for all (of) the world’s people’ (UN, 2000). Globalization, according to the UN has made the world more interconnected and interdependent. The world is more interconnected due to global communications and transportation and more interdependent due to the growth of international trade, investment and finance. The Declaration argued that a fundamental human right was ‘the right to development’ and poverty was a ‘dehumanizing’ force. Ironically, post-industrial societies also have dehumanizing elements. Japan for example struggles is to maintain elements of ‘traditional culture’ that has not been replaced by post-war materialism. The post-war additions to the ‘developed’ world in East Asia are beginning to realize that prosperity does not meet every spiritual and communal need. Focusing on poverty, the Declaration urged developed countries to assist with policies such as financial or debt relief, tariff free access for exports from Least Developed Countries.３ The Declaration however recognized that such policies could not exist by themselves and emphasized the vital importance of ‘good governance’ within countries and ‘good governance at the international level and on transparency in the financial, monetary and trading systems’ (UN, 2000). Bubbling under the surface of these carefully chosen words is one of the basic tensions in the world trading system today. On one hand, the pressure for special treatment for developing countries (an argument for rights) and on the other hand, pressure for greater transparency and participation in international trade negotiations (an argument for obligations). While there are many multilateral agencies in the world today covering a range of issues: poverty reduction (World Bank, Asian Development Bank) banking and finance (International Monetary Fund) labor (International Labor Organization) health (World Health Organization) and trade (United Nations Conference on Trade and
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Development, World Trade Organization, Organization for Economic Cooperation and Development), they are all part of the global political economy. Of course, institutional style, reputation and influence, funding, and decision-making may be different. However, it should be no surprise that the United Nations is ‘committed to an open, equitable, rule-based, predictable and non-discriminatory multilateral trading and financial system’. Multilateral agencies are all affected by the challenges of economic and social transformations. ４ This open, rule based, non-discriminatory trading system centered on the World Trade Organization (WTO) is not writing the future of developing countries, nor is it responsible for economic development. The WTO is part of the international system, supported by the major economic powers of the US, EU and Japan and to a lesser extent major developing countries. The ‘globalization’ process is the way in which these agencies and transnational corporations are increasingly engaging with many aspects of human interaction – from production of commodities to human rights. The WTO is one agency designated to assist the transition to and management of policies for economic prosperity. Its mandate, if it can be said to have one, is the preservation and extension of economic freedom (or flexibilities) that underpin post-war definitions of post-industrial civilization. The former WTO Director General Mike Moore for example viewed the benefits of open trade as ‘the premise of the essential righteousness of universal reciprocity, which has a deeply moral basis” (Moore, 2003: 4). ５ The concept of reciprocity is embodied in fairness and pragmatism. Cooperation can build trust and understanding, but states are irresistibly drawn to a trade-off between the perceived national ‘good’ and the global ‘common good’. Reciprocity can also be viewed as securing a maximum advantage for minimum concession６. These views are not necessarily inconsistent. Securing ‘common interest’ while withholding ‘concessions’ is not a contradiction. It is in line with the dictum that countries ‘give’ in order to ‘get’. All countries have some sacrifices they are and not able to make, and defend such areas with terms like health, morality, safety, strategic interest, and so on. The underpinning of the WTO – the concern for balance between rights and obligations in the management of trade and economic policy is the base tension in the international system７. The enthusiastic pursuit of free trade and the reluctant resistance to liberalization is accommodated within this framework of reciprocal advantage. On one hand are ‘rights’ - the scope of national activities consistent with participation in a cooperative framework and on the other hand – obligations – the scope of commitments necessary for sustaining the cooperative framework. This balance between rights and obligations is the key struggle in the
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world trading system. It doesn’t end, nor reach a climax – it simply is a key dynamic in international trade relations. The WTO is the most recent institutional expression of postwar deliberations on trade policy. The much earlier but defunct proposal of the International Trade Organization (ITO) embodied in the so-called Havana Charter contained a broader focus including investment, employment, development and trade. Due to the failure of the ITO, the General Agreement on Tariffs and Trade (GATT) acted as the international institution that wasn’t, and so members were called contracting parties to the GATT. The GATT oversaw the reduction of tariffs in industrial products among industrial countries and unsuccessful attempts to extend liberalization to agriculture. The US effectively eschewed interest in agriculture a move in sympathy with European countries and later Japan. Negotiations were bilateral and considered products separately. Historically the GATT was a strange arrangement – a body of ‘rules’ for the pragmatic cooperation of nation-states or ‘contracting parties’ to selectively act on certain trade policies. Its selectivity was until the end of the Uruguay Round, a major criticism of its purpose in the world trading system full of contradictions and inconsistencies. The rise of the European Economic Community in the 1950s and the threat of ‘fortress Europe’ demanded an alternative modality and ‘across the board’ tariff cuts were introduced. By the Tokyo Round in the 1970s, industrialized countries became interested in selectively reducing non-tariff barriers. By this time, industrializing countries had secured preferential trade treatment and were also pressing along with agricultural exporters for a serious treatment of agriculture. Despite a failed GATT Ministerial meeting in 1982, the Uruguay Round began in 1986 and agricultural exporters from developing countries in the ‘Cairns Group’ (started by Australia) were joined by the US. The agenda of trade had expanded to include agriculture and services. Overarching the new agreements were limited revisions to the original GATT was a new institution called the World Trade Organization (WTO). Partly due to the Single Undertaking - a principle for negotiation that means nothing is agreed until all is agreed – industrialized and industrializing countries agreed to a legally binding and far reaching global trade treaty, with a new dispute settlement mechanism. The WTO retained the basic philosophical structure, but contracting parties became members and the dispute body introduced interpretation of trade law as an alternative to bilateral trade conflict. Throughout the history of the GATT/WTO the essential balance was to be
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between rights and obligations, to pursue fair trade in a legal framework. Defining and disputing the rights and obligations as well as their relationship in law and practice constitute the core of the controversies in the world trading system today. The WTO operates on the basis of consensus, the rules are transparent, the commitments undertaken are binding legally and in the case of perceived illegality, any member may submit a complaint to the WTO dispute settlement mechanism. The conclusion of the Uruguay Round in 1994 and the establishment of the World Trade Organization (WTO) were heralded as a triumph for international cooperation, ８ not only because of the new dispute settlement procedure,９ but for the inclusion of agriculture and services as international agreements, long a concern for developing countries. However, within four years, the WTO emerged as the focal point for conflict concerning the relationship between rights and responsibilities in the process of economic development.１０ Riots were not new – there were riots in Europe during the Uruguay Round due to the inclusion of agriculture but the riots in Seattle in 1999 suggested a new dynamic. However, as the Doha Round continues to progress, many critics do not understand the world trading system and misunderstand the difficulties of development. For many in post-industrial societies, the world is changing too fast and it is easy to find a ‘scapegoat’ to blame for all societal ills. １１ Economic Transformation That prosperous nations have so many social problems is ironic. From the US to Europe to Japan and East Asia there is the emergence of elements of a global common culture in fashion and attitudes, shaped by monetary preferences, a culture of convenience and major entertainment. These societies are basking in their abundance and wealth and are beginning to appreciate the results of the past in terms of environmental degradation. However, despite western hedonism, there is a growing awareness of emptiness and futility of materialism.１２ As one author wrote ‘there is a tendency for people to believe that they need more money than they have no matter how wealthy they happen to be” (Hamilton, 2002: 42). The Japanese economist/poet Tsujii Takashi remarked poignantly that post-war Japanese economic development ‘brought out in some people a shallow frivolity and egotism propelling them merrily through life, and in others, earnest dedication to hard work, revealing the folly and pathos- and in another sense, the endearing appeal – of being human” (Tsujii, 2005: 16). Economic development does not lead to the solution of all societal ills. Most post-industrial ‘developed’ societies continue to grapple with enormous social problems including
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domestic violence, drug addition, poverty and mental illness. １３ In Japan for example, 32, 325 people committed suicide in 2004, while in 2002, it was estimated that 711,000 people suffered from depression.１４It is strange therefore, that many western-based non-governmental organizations have the view that the world’s economic problems can be resolve simply and quickly.１５ The reality exposes the myth of ‘development’. At the core of this global transformation is the dynamic of competition – competition among individuals, groups, societies, companies and economies. To retain competitive advantage, societies must change more trade more adjust more and work harder. This competitive spirit has blurred many issues such as the environment and labor. The line between the promotion of WTO environmental and labor laws and protection by other means is thin.１６ In 1996 due to pressure from the US and other developed countries, India, Brazil and Indonesia were among many developing countries insisting that labor be addressed within the International Labor Organization (ILO) rather than the WTO. The Indonesian position was WTO labor laws were ‘creating a new form of protection’ (Indonesia, 1996) and Brazil’s position was WTO labor standards could become a ‘scapegoat to deal with the problem of structural unemployment in the developed countries’ (Brazil, 1996). WTO environmental laws, India viewed as having the ‘potential to open the floodgates of protectionism’ (India, 1999) and with labor are ‘trojan horses of protectionism’ (India, 2001). Brazil was more forthright when it pointed out ‘Protectionism in developed countries is on the rise. Now and then, peoples genuine concerns and good faith are used as a disguise. Environment and labor standards – which the international community has created specific rules for, and entrusted specialized agencies with – are two of such new issues being brought to the trade agenda in a way that leaves much room for suspicion” (Brazil, 1999). Selectively using the morality of environment and labor issues to damage the competitive position of developing countries rather than a genuine concern for these issues is a negative aspect of this competitive process. Countries that have substantially polluted their own national environments (jump-starting climate change and ozone depletion) lecturing less-developed countries on the evils of industrialization while enjoying its fruits is hardly a viable moral basis upon which to strengthen international relations. This necessity for competition injects profound pressure on societal expectations. For the Japanese born between 1910 to the early 1930s, “economic growth was a shared goal for this generation, which held in common the experience of the war and had seared in their memories the wartime and postwar privations’ (Nakamura, 1995:
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201). The liberalization of trade opens access to foreign imports and instills competitiveness on industries, but in and of itself does not foster the creation of an industrialized society with middle class, purchasing power and prosperity. １７ Industrialization has negative consequences for parts of the natural environment. This is history. In Japan, “it was only after rapid economic growth had afforded people some security in their lives, however, that serious attention began to be focused on its attendant ills” (Nakamura, 1995: 202) for example, ‘a growing awareness of environmental pollution as yet another evil produced by growth’ (Nakamura, 1995: 119). Developing countries are well aware of the problems of degradation flowing from industrialization. However, being concerned about a pursuit of well-being to the point where a population has reached ‘some security in their lives’ is also vital. Attaining national and sustainable economic prosperity is miraculous enough without imposed legal ‘limits to growth’ from the WTO. There are provisions in the original GATT (Article 20) which permits the non-discriminatory policies to protect human, animal, plant life, health or ‘conservation of exhaustible natural resources’. This rule also exists in among others, the General Agreement on Trade in Services (Article 14), the Technical Barriers to Trade Agreement (Preamble) and Trade Related Intellectual Property (Article 27). Forcing developing countries to adopt ‘environmentally friendly’ technology and policies is nothing short of ‘environmental imperialism’ and is hypocritical considering post-industrial societies continue to rely upon oil for their respective economies. The ‘development’ problem is also reflected in the WTO Preamble. The phrases are couched in economic terms such as “field of trade and economic endeavor”, and “raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand and expanding the production of and trade in goods and services”. This paragraph comes directly from the original General Agreement on Tariffs and Trade (GATT) Preamble. These phrases capture the post-war recognition of the importance of rising above the miseries associating war-time destruction and realizing economic prosperity. However, the original GATT Preamble states “developing the full use of the resources of the world” embodying in a sense an exploitative perspective of unrestrained natural resource development. The 1995 WTO Preamble states that “allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment”. In this phrase, sustainable development is tied to the phrase ‘optimal use of the world’s resources’. Pragmatically, the phrase is qualified when the following is inserted –
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sustainable development must be pursued ‘in a manner consistent with their (developing countries) respective needs and concerns at different levels of economic development’. In addition, ‘there is need for positive efforts to ensure that developing countries, and especially the least developed among them, secure a share in the growth in international trade commensurate with the needs of their economic development”. True to the balance of rights and obligations as well as pragmatic reality, the Preamble expresses in a nutshell the present tension in the world economy. The competitive process and problems in post-industrial societies challenges the conventional wisdom. Most members of the WTO are what are termed developing countries or least developed countries. The former communist countries are called transition economies. The concept of ‘developed’ is doubly unfortunate because it is patronizing to those countries that are not ‘developed’, but it also fails to account for the sense of institutional dissatisfaction among the ‘developed’ countries, notably reflected in their interest in pressing for closer economic integration. For example, while developed, the Western European nations pursued major societal and political change since the 1950s leading to the formation of the European Union in the early 1990s. While developed, many countries have undertaken significant liberalization and deregulation since the 1990s. Gone are the terms ‘welfare state’ and ‘full employment’ and Keynesian economics, replaced by terms like ‘small government’, the ‘free market’ and consumer choice. The term transition to describe the shift from a communist system of production to capitalism cannot fully describe the changes required and the consequences of those changes in the countries concerns. Finally, the term least developed is not a very promising or optimistic term for countries that are in serious economic and political strife.１８ The term industrialization is more appropriate to describe the societal and economic transformations involved because it locates the process of economic transformation for example Newly Industrializing Countries to describe Taiwan, South Korea, Singapore and Hong Kong or Post-industrial society to describe European countries, North America, Australia, New Zealand and others. The developed world has also been an industrialized world – Japan, Korea, the US, Canada, Australia, EU to name the most obvious examples have undergone to varying degrees, industrial revolutions. Countries that wish to shun industrialization must be content to be banana republics or tourist resorts.１９ As one scholar has remarked “manufacturing mattersmore than tourism and more than the finance sector. Not all sectors are equal. Manufacturing is at the heart of productivity change” (Jones, 2005). Industrializing countries seem to share this sentiment. Since the early 1980s, exports from developing
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countries in manufactured products have increased dramatically. One recent report indicated that even with China and India are excluded, there are ‘broader changes in the composition of developing country exports” (World Bank, 2004: 66). The growth in exports is not only textiles and clothing, simple manufactured goods, iron and steel products, but also automobiles and high technology products (World Bank, 2004: 66-7). The role of the State in Development In order to ‘develop’ countries have included a variety of policies, including trade and industry policies such as assisting certain industries (Okimoto, 1989, xiii; Hoekman and Kostecki, 1997: 9). In Japan, ‘chemical and heavy industrialization was the prime mover behind growth’ (1995: 120 italics added), both sectors receiving state assistance. From the mid 1950s till the early 1970s, Japanese industry policy concerned in part the ‘strengthening of ‘modern’ high productivity sectors, and enhancing ‘industrial competitiveness’ of Japan’s industries in the world market’ (Komiya, 1992: 3). The state has played an important role in the industrialization of Japan (Johnson, 1982) Taiwan (Wade, 1990), Korea (Amsden, 1989) and China. Not surprisingly, the GATT permits a wide range of government interventions in the market including anti-dumping (Article 6), countervailing duties (Article 6), infant industry protection (Article 18), national security (Article 21) and exceptions for health and the environment (Article 20) and provision of agricultural subsidies. Post-industrial societies also have industry policies. The industry policy of post-industrial societies is the opening of markets for many sectors, industries and products, while for various reasons, judiciously and pragmatically protecting, nurturing and sustaining other sectors and products. For example, in 2001, the World Bank’s report ‘Global Economic Prospects and the Developing Countries’ noted that “Import restrictions and subsidies in industrial countries limit the growth of developing countries’ exports by supporting less efficient production in industrial countries. Export subsidies to industrial country producers further limit the expansion of developing country exports to third markets. Moreover, these policies make it difficult for developing countries to diversify into products for which world demand is high or increasing, and in line with their evolving competitive advantage” (World Bank, 2001: 17). Despite the rhetorical flourish of US President George W. Bush to abolish all agricultural subsidies if the EU followed reciprocally, the apparatus is most likely to remain in place. ２０ No nation-state will engage in across-the-board comprehensive trade liberalization. If post-industrial societies are able and willing to protect important
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sectors under WTO law, then the complete liberalization of trade in industrializing countries is not required. Post-industrial societies like the US have reserved the right to protect society from the perceived excesses of globalization. This protection in post-industrial countries suggests that the world trading system does not enshrine ‘free trade’.２１ For post-industrial societies, the liberalization of trade and investment are vital elements in industrial transformation. However, the state is responsible for more than efficient allocation of resources, such as health care, social and rural stability, environmental sensibilities and food security – all requiring pragmatic tradeoffs. In addition, the rise in international cooperation is accompanied by the rise in regulations and the role of the state in economic management - accompanying the rise in globalization is also the amazing complexity and number of trade agreements and regulations. ２２ Rather than a threat to developing countries, or a ‘rigged’ ２３ system, it reflects the political and economic realities of development. This is the path that East Asia, China and India are likely to emulate. Given the rise of economies like China and India, it seems obvious to state that certain members possess, by virtue of their market size and economic strength greater bargaining power than small countries. Beyond some general common interests, there is by no means a common strategic convergence on all trade issues, and speculation of a ‘common agenda’ for globalization between the EU, Japan and the US is difficult to discern. On the contrary, many of the major controversies in the WTO concern disputes among the major players and between the major players and some of the medium-sized powers such as Australia and Canada. For example the EU is further ahead than most post-industrial societies on economic integration. The EU has already dealt with internal tariff and non-tariff barriers in the past and is now concerned with issues such as product standards, the environment and competition policy. The US and Japan are following, with Australia, Canada and other post-industrial societies close behind. With a few exceptions of course, the EU is concerned with issues that barely touch many developing countries due to their underdeveloped economic infrastructure. It is also difficult to prove that there is a conspiracy to enshrine and legalize unfair advantages in favor of developed countries２４. Deciding when and how much a ‘free ride’ ought to be given to developing countries is as much a question of fairness as it is competitive advantage. Since the major players are themselves vulnerable economically to the trends of production costs across the globe, it is not surprising that post-industrial countries, under democratic political systems need to be responsive to the views of their respective citizenry. Many for example in post-industrial societies are
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opposed to supporting debt relief to governments whose leaders support and encourage gross human rights violations (Downer, 2005). A WTO that waits for world-wide development will not sustain the interest of post-industrial societies. Why should the US, EU and Japan wait for the least developed economies to ‘catch up’? This is a valid question. After all, the US wrote the original GATT and the EU, Japan and US underpinned the creation of the WTO. If industrializing countries are so opposed to the WTO (as we are often led to believe) why don’t they leave the organization? They would still benefit from the variety of UN institutions that cover trade and investment. Least Developed Countries in the WTO are also exempt from most obligations despite in many cases an abysmal human rights record. If industrializing countries left the WTO they would however lose their rights of unconditional MFN, significant access to foreign markets in post-industrial societies and no legal recourse in the face of trade hostilities since they would forfeit access to the WTO dispute settlement mechanism. Despite the growing consensus that the export of manufactured goods is important, these countries might continue to trade among themselves and form stronger regional groupings. It might well be the case that foreign investment might continue to be forthcoming, but most of the treaties would be bilateral, and inconsistent. Post-industrial countries would be under no obligation not to raise discriminatory tariffs. There would also be great pressure in post-industrial societies to increase barriers to goods from industrializing countries due to their high tariffs. However, the notion developing countries are eager to desert the WTO seems to have little merit. The need for consensus is vital. As they are industrializing, more and more such countries need the WTO as a forum for trade negotiations (World Bank, 2004: 78). Throughout the Doha Round, there has been relatively consistent support for agriculture, industrials and services. While Brazil, India, Indonesia and China are among the strongest defenders of special treatment for developing countries, none of these countries are prepared to leave the WTO because they have significant interests in negotiating on agriculture, industrials and services (China, 2003, Brazil, 2003, Indonesia, 2003, India, 2003). The so-called North/South divide is said to have been the reason for the collapse of Cancun in 2003 when the European and Japanese push for investment and competition rules in the new trade round was rejected by developing countries. This is a myth – Japan, the EU, South Korea and Taiwan supported the so-called ‘Singapore Issues’ but Australia, Canada, New Zealand and the US did not. The fact that the
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Singapore Issues were rejected is a sign of institutional strength. The WTO operates on the basis of consensus and the agenda of the trade round was revised. Critics view the WTO as a ‘stick’ of the developed countries to discipline developing countries on trade liberalization but they also want to view it as a mechanism that can be used to promote economic development. This is a contradiction. If the WTO has been captured by the EU-Japan-US alliance, then the 2004 revision of the trade round agenda is inexplicable. Critics should read the language. Cancun was a clash on agriculture – part of the post-Uruguay Round agenda, an agenda not opposed by any industrializing country. China, in its first WTO address insisted agriculture was in a ‘stalemate’ and was ‘the core’ of the Round (China, 2003). Indonesia regarded agriculture as of ‘fundamental importance’ arguing for liberalization but also to protect ‘certain strategic or special products’ (Indonesia, 2003). India spoke of ‘policy space to deal with sensitive (agricultural) products’ arguing that reduction of agricultural subsidies was a precondition for further Indian cuts in agricultural protection (India, 2003). Brazil contended that the source of most discrimination in trade and the most significant to reduce poverty was in the agricultural sector (Brazil, 2003). The ‘new’ enemy Cancun was not so much of victory for developing countries as it was for pragmatism. That the WTO either disadvantages industrializing countries or structurally (through its legal system) contributes to world poverty is a truism among those who presume to speak for the industrializing world. This informal coalition against international trade, have been able to master electronic communications to ‘outgun’ the combined public relations of the World Bank, IMF and WTO. This informal coalition surgically divorces economics from politics in their pronouncements eschewing complexity for simplicity and shrouding arguments in obfuscation and jargon, excusing individuals and elites that sponsor genocide and political or religious oppression. This divorce permits a simple redefinition of economic justice that is consciously at best and deceitfully at worst manipulating the moral sensibilities of the middle classes in post-industrialized countries. Curiously, despite the debacle of Rwanda, Somalia and the continuing genocide in the Sudan, the United Nations is largely exempt from the criticism of the coalition against international trade. The target of the ‘Seattle Protests’ in 1999 and more recently the violence in Scotland for the G8 summit have been directed at institutions that do not have responsibility for human rights issues. Many of these protestors resort to violence only
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when the ‘hip pocket’ is threatened and violent, enthusiastic, worldwide demonstrations against human rights abuses have not been forthcoming. The coalition against trade is more visibly indignant over low wages for South American farmers than they are for summary executions and torture in some of the dark corners of the world. The UN windows in Geneva remain unbroken whereas world leaders shudder at the thought of gathering together for any kind of international summit to discuss economic issues. The WTO has lost considerable credibility due to this civil society critique. The reality of international trade belies this critique as reflected in the historical accounts of the Uruguay Round (see Croome, 1995, Preeg, 1998). While there are examples of institutional attempts to tackle misperceptions２５ the paradox is that the institutions that form part of the fabric underpinning western prosperity are subject to fierce criticism from many of the beneficiaries. In addition, the publications of the WTO be it the World Trade Review, the Secretariat Working Papers, or the official documents are often highly technical and completely inaccessible shrouded in ‘WTO-speak’. The benefits of participation in the world trading system are entirely pragmatic.. First at a philosophical level, there are reasons for international cooperation in a system of nation- states. Cooperation is in part driven by a collective responsibility to build global prosperity, especially given the importance of trade through production of commodities for international exchange. The interdependence through trade, investment and finance also contributes to building peaceful relations in the world. Transparency (clarity in rules and expectations for cooperation and the responsibilities of membership) is a crucial administrative basis for trust and understanding. Beyond these reasons there are also guiding principles for cooperation. Cooperation in the WTO is on the basis of key principles – fairness, reciprocity and non-discrimination, doused with a good deal of pragmatism with the decisions based on consensus. Consensus for example is recognized by some opponents of the WTO as its Achilles Heel. The NGO Focus on the Global South for example argued that the only strategy it would employ in 2005 would be its 2003 policy of ‘derailment’ of the 2005 Ministerial Meeting. The paper argued ‘derailment involves zeroing in on the key points of vulnerability of the WTO: its consensus system of decision making. Concretely, it means working to prevent consensus from emerging in any of the key negotiating areas” (Focus on the Global South, 2005). However, this strategy is disingenuous and deceitful because if the WTO is such a bulwark against the poor, why are its decisions based on consensus? It is also important to evaluate the proposed alternatives according to the key principles of the world trading system. The most recent is the Make Poverty History
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(2005) ‘expose’ on world trade bereft of any semblance of substance it alleges that the WTO, IMF and World Bank are ‘banning poor countries from supporting vulnerable farmers and industries” and “forcing poor countries to open up their markets to foreign imports” (2005). The quaint solution is “change the rules so they work for poor countries. Re-write them in favor of the poorest countries so they can develop, build their own industries, grow stronger and one day compete as equals” (2005). It might be asked – how much of a free ride should post-industrial societies give to other countries?２６ It is also curious that Make Poverty History did not condemn explicitly the Common Agricultural Policy of the EU which is the heart of European subsidies to agriculture. Ironically many of ‘Make Poverty History’ are actors and musicians – does this mean that they wish to turn a blind-eye to the pirating of their copyright around the world? The US-based ‘Public Citizen’s’ 400 page treatise against the WTO, NAFTA et al. (printed in Canada) by Lori Wallach (2004: 289-91) proposes among other things a cessation of the trade dispute mechanism, cessation of the services negotiations, the public airing of all WTO documents, and democratic decision making. The more important question is why doesn’t Wallach believe in the existing principles of the WTO – fairness, reciprocity and non-discrimination? After all, treating citizens equally under the law – regardless of gender, religion etc is a basic tenet of post-industrial societies – why is an extension of this principle to the economy unacceptable? The appeal of Wallach’s book is that it reads like Dan Brown’s bestseller, especially with titles like ‘The Secret History of the WTO’ (2004: 3) hinting at a massive conspiracy designed to deceive millions of people in post-industrial societies, overthrow democracy and the American way of life. The Achilles Heel of Wallach’s book is in the details and proof for the key allegations, some of which are wrong２７. Wallach’s book is titled ‘Who’s Trade Organization’ whereas a better title might be ‘which trade organization?’. Two examples will suffice. In the book, the concept of most-favored-nation (MFN) is assumed as a negative policy (China and Japan would of course dispute this) but at one point is the claim that the MFN principle is ‘a significant threat to human rights and to existing human rights treaties’ because ‘governments are not allowed to take into account a country’s human rights practices in awarding public contracts for government purchases’ (2004: 235). The book points to the Agreement on Government Procurement as proof. The Government Procurement Agreement, unlike most WTO agreements is not compulsory. However, according to Wallach, Articles 8b and 13b are proof of this alleged human rights connection. ２８ It is seriously difficult to see how the connection could be made. Elsewhere it is claimed
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that ‘WTO rules forbid treating countries differently because of their human rights or labor records…under the Most-Favored-Nation rule, one WTO country cannot treat other WTO countries differently, regardless of their labor or human rights records’ (Wallach, 2004: 220). MFN does not concern human rights or labor standards – only trade in goods, services, agriculture and WTO laws. ２９ The second example relates to multi-functionality in agriculture, one of the key agricultural issues since 1998, and related to the issues of non-trade concerns in agriculture, stemming from Article 20 of the Agreement in Agriculture. The basic thrust of these concepts is to expand the list of possible exceptions to liberalization to include various justifications such as in a more comprehensive manner - preservation of the environment, rural development, food security and cultural heritage. This is accomplished through the tying of certain trade policies (notably tariffs) with these non-trade concerns. ３０ The only comment on non-trade concerns in Wallach’s book is that it was an EU addition to the 2001 Doha Declaration (Wallach, 2004: 215), a statement which was erroneous – support for non-trade concerns in agriculture include Japan, the EU, Norway, Croatia, Argentina, Poland, Mauritius, and Switzerland – one WTO proposal was a joint statement from 38 countries. ３１ Ignoring the history of non-trade concerns and the sizable food security debate, Wallach argues that the ‘Development Box’ proposal ‘would have meant a significant departure and an overture to poor countries by protecting their rights to prioritize food security and development needs” (Wallach, 2004: 215). This again is incorrect, because all countries are interested in food security. Furthermore, the ‘right’ to food security has not been established and refers to the non-trade concern debate which Wallach claims comes exclusively from the EU. However, the ‘development box’ proposal was couched in terms of Article 20 to take non-trade concerns such as food security into account, and several of the countries in this proposal have a poor human rights record, such as Haiti, Uganda and Zimbabwe. ３２ There was no conspiracy concerning the demise of the so-called ‘Development Box’, considering that many developing countries were against the proposal and it ignores the substantial debate in the WTO on special and differential treatment. The proposal on landlocked economies, the 38 country proposal on non-trade concerns and the Cairns Group proposals were much more realistic than the ‘Development Box’ wish list. As the Swiss delegation noted special and differential treatment ‘provisions are not a panacea….it would not be realistic to expect special and differential treatment…to be the main instrument to overcome deeply rooted structural problems” (Switzerland, 2002).
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WTO responsibilities for economic development The anti-WTO view has led to the apparent truism that the WTO forces developing countries to liberalize tariff barriers while the US, EU and Japan retains agricultural subsidies. These subsidies are said (erroneously) to be the key to prosperity in the developing world. This truism sits uncomfortably with the pragmatic reality of the accommodation of developing countries in the WTO. No country is forced to liberalize in the WTO and no country is denied the opportunity to employ various forms of industrial policy. While countries like India, China The accommodation of industrializing countries was to involve exemption from reciprocal liberalization commitments. Industrializing countries in the GATT pressed for special treatment including exemption from reciprocity in the late 1950s (Tussie, 1986: 29). In 1964, GATT decided that developing countries would not be required to make commitments if they contradicted or undermined development, finance or trade policies (Long, 1985: 14). In 1971, UNCTAD negotiated the General System of Preferences (GSP) on behalf of developing countries. It was a system where developed countries would unilaterally permit the import of selected products at zero tariffs up to a certain quota, after which the ordinary tariff would apply (Winham, 1986: 144). In 1979, a new GATT law was negotiated as part of the Tokyo Round where Contracting Parties could “accord differential and more favorable treatment to developing countries, without according such treatment to other contracting parties”. In the agreement ‘Developed contracting parties shall not therefore seek, neither shall less-developed contracting parties be required to make, concessions that are inconsistent with the latter’s development, financial and trade needs’ (quoted in Winham, 1986: 280). This rule was applied in the Uruguay Round (Preeg, 1998: 245).By the time of the Doha Development Round launch in 2001, there were 145 provisions relating to special and differential treatment of developing countries in the WTO agreements, with 107 adopted as part of the Uruguay Round and 22 applying to least developed countries (WTO, 2000: 3). There were 30 provisions for flexibility in the WTO agreements, such as exemptions from rule application, exemption from commitments or less than usual level of commitment (WTO, 2000: 5). It is unlikely that the special and differential treatment provisions will be removed from the WTO. While the Doha Round is to review the special and differential treatment provisions, to improve clarity and use, the 1st August Doha Framework in 2004 reaffirmed that such provisions are ‘an integral part of the WTO Agreements’ (WTO, 2004: 2). The WTO General Council argued that in agriculture
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and industrials, “special attention shall be given to the specific trade and development related needs and concerns of developing countries, …including relating to food security, rural development, livelihood, preferences, commodities and net food imports, as well as prior unilateral liberalization” (WTO, 2004: 2-3). Industrializing countries have considerable flexibility as to how to manage national industry policy. They are permitted to adjust their tariff regime with considerable flexibility without making such changes legal in the WTO. This quite remarkable reality is due to the fact that is generally a difference between the bound or legal tariff rate and the applied or everyday tariff rate. The bound tariff rate, if increased, can be subject to legal proceedings under the WTO dispute settlement procedures. The applied tariff rate can be changed without notifying the WTO, nor incurring any legal implications, except for possible political pressure from affected parties. ３３ Most countries have a bound tariff regime that is generally higher than tariffs applied day-to-day. For example the current post Uruguay Round average round bound tariff rate (for the US, Canada and Japan) is lower than the 1996 MFN applied average tariff rate. However, for other members in the Asia Pacific Economic Cooperation (APEC) group (who are members of WTO) have a post-Uruguay Round bound average higher than their 1996 MFN average tariff rate (OECD, 1999: 54). There are advantages to maintaining a difference between bound and applied tariff rates. The difference in tariff levels permits an increase in the applied rate if the circumstance demands and can be used as a bargaining chip in future trade negotiations (Sampson, 1997: 175). Depending on the tariff line (the products protected) the Member has a ‘free hand’ meaning that applied tariffs are not related in substance to negotiations in the WTO on tariff levels. In the Doha Development Round, industrializing countries could make tariff liberalization commitments that do not affect daily tariff rates. While bindings contribute clarity in the WTO (Raby, 1997: 48) the bypassing of WTO timetables is the target for many developing countries. One of the most important achievements of the Uruguay Round with respect to tariffs was the commitment by developing countries to bind a greater percentage of their tariff lines (OECD, 1999: 17; Raby, 1997: 48; Ricupero, 1998: 25). For developing countries, 21% of industrial product tariffs and 18% of agricultural products were bound before the Uruguay Round. As a result of the Uruguay Round, the respective percentages are 73% and 100% (OECD, 1999: 17). The newly bound tariff rates were “ceiling rates”, i.e. above the applied rates (Finger and Winters, 1998: 370). Some East Asian countries have bound rates higher than applied rates for the possible purpose of seeking negotiation credit in post-Uruguay Round negotiations (Sampson, 1997: 175).
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In addition, Malaysia, Mexico Philippines and Thailand made commitments as part of the tropical products negotiation concluded in1989 (Fennell, Ross, and Thomsen, 1993: 573). The US, New Zealand and Mexico have approximately 100% bound tariffs. Canada and Japan are at 98%. Australia, Indonesia and Korea are at least 90%. The Philippines is 63% Malaysia 70% and Thailand 73% (OECD, 1999: 17). For post-industrial countries intent on opening markets for exporters this loophole in WTO legal statutes suggests that even as a result of the Doha Development Round market access will not be forthcoming for the immediate future. This reality may account for the recent proliferation of bilateral agreements with ASEAN countries from the Asia Pacific post-industrial societies. In terms of market access, a trade agreement will produce more concrete results than any WTO negotiation. There is pressure for change of the special treatment of industrializing countries in the world trading system. The strong economic growth in East Asia weakened this dynamic for special treatment, reflected in more substantial Uruguay Round commitments by developing countries (Preeg, 1998: 188). Developing countries were strong supporters of the Single Undertaking concept so as to prevent issues of interest to them being dropped from the negotiating table (Ricupero, 1998: 16; Kostecki and Hoekman, 1997: 240-1). Many developing countries participated in the 1996 information technology agreement and most are members of one or more free trade agreements. Southeast Asia despite the free trade agreements requested special and differential treatment for developing countries in agricultural liberalization (ASEAN, 2000). GATT/WTO Members are also able to include unilateral commitments under certain conditions as ‘credit’ in WTO negotiations reinforcing industry policy. This fluidity in what constitutes a reciprocal commitment was adopted by both Japan and Australia. For example, in the Tokyo Round Australia submitted commitments already implemented unilaterally and negotiated the binding of legal tariffs in the GATT based on these commitments (Snape, 1984: 22). Uruguay Round liberalization in industrials was almost entirely unilateral (McMullan, 1995). In the Tokyo Round Japan also cut tariffs before the final agreement (Koyima and Itoh, 1988: 204) with the applied rates less than the bound tariff rates agreed upon (Matsushita, 1984: 100-1). The rules for the Uruguay Round ‘negotiating credit’ were to increase bound tariffs, tariff reduction by one third, and the base rate for tariff reduction would be the bound tariff rates and if not bound, the 1986 applied rates would be the base rate (Sampson, 1997: 161). On the 6th March 2003, the Special Session of the Council for Trade in Services agreed on modalities for the treatment of unilateral service liberalization which WTO members had undertaken since the conclusion of the Uruguay
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Round (WTO, 2003). The legal basis for such credit is provided by Article 19:3 of the General Agreement on Trade in Services and paragraph 15 of the Doha Declaration (WTO, 2003). These instruments show that the WTO does not ‘force’ developing countries to liberalize, but provides various institutional and procedural flexibilities to manage the process of industrialization. Conclusion In conclusion, the world trading system manages the balance between the pursuit of national advantage on one hand and concessions requisite for participation in a cooperative arrangement involving competitive nation-states. These states are at different levels of ‘development’, some post-industrial, some industrializing and others languishing. This world includes on one hand the horrors of human rights violations and economic suffering, and on the other, the travails of post-industrial prosperity including management of high cost production and the mental strains of development. Therefore, it is not surprising that the world trading system has evolved to in some way take account of certain pragmatic necessities and accommodations. This is reflected in the special and differential treatment provisions, the ‘negotiation credit’ policy and the various statutes in the WTO to permit management of trade flows to benefit national industries. The aim was and never is about free trade. It concerns in some deep sense the struggle for prosperity as outlined by the UN and the original GATT Preamble in the late 1940s. Post-industrial societies grapple with the same issues as developing countries, yet from a different perspective but still in the same global political economy and thus the concept of ‘development’ is never full resolved. The Doha Round and the posturing of countries as well as the accusations of its critics are reminders of the importance to regularly ask questions about the role of obligations and rights to development in the world trading system. In a trade round, what obligations do developing countries have? How far should post-industrial societies forfeit national industrial policies? What role should environmental or human rights have in the world trading system? Are they questions of morality or questions of competitiveness? Whatever the answers, they are probably as complex as the issue of development itself. To recognise the pragmatic realities of the world trading system and the complexities of economic development is a good starting point for the future discourse on the WTO.
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List of References American Obesity Association http://www.obesity.org/subs/fastfacts/obesity_US.shtml ASEAN, (2000) Implementation of Special and Differential Treatment Provisions in WTO Agreements and Decisions, Note by Secretariat, Committee on Trade and Development, WT/COMDT/W/77, 25 October, 2000 Amsden, Alice, (1989) Asia’s Next Giant: South Korea and Late Industrialization, Oxford University Press Assembly of African Union, (2005) Decisions, Declarations and Resolution, Assembly of the African Union, Fifth Ordinary Session, 4-5 July 2005, Sirte Libya BBC, (2005) “G8: Will it meet expectations?” http://newsvote.bbc.co.uk Brazil, (2003) Ministerial Statement to Cancun Conference, 10-14 September, WT/MIN(03)/ST/28 Brazil, (1999) Ministerial Statement to WTO Ministerial, 30 November-3 December, WT/MIN(99)/ST/5 Brazil, (1996) Ministerial Statement to the Singapore WTO Conference, 9-13 December, WT/MIN(96)/ST/8 China, (2003) Ministerial Statement to the Cancun Ministerial Conference, 10-14 September, WT/MIN(03)/ST/12 Croome, John, (1998) Reshaping the World Trading System, Kluwer Law International Dam, Kenneth, W., (1970) The GATT: Law and International Economic Organisation, University of Chicago Press Dell, Edmund, (1986) “Of Free Trade and Reciprocity”, The World Economy, June 1986, Volume 9 Number 2 Downer, Alexander, (2005) “Sing a Song of Free Trade to end poverty”, The Australian, July 8 Focus on the Global South, (2005) The End of an Illusion: WTO Reform, Global Civil Society and the Road to Hong Kong, March 31, < http://www.focusweb.org/main/html> Fennell, William A., Ross, Julie Chasen and Thomsen, Kevin J., (1993) “Tropical Products”, in Terence P. Stewart, (ed.) The GATT Uruguay Round: A Negotiating History 1986-1992, Deventer, Kluwer Law and Taxation Publishers Finger, J. Michael, and Winters, L. Alan, (1998) “What Can the WTO Do for Developing Countries”, in Anne O. Krueger, (ed.) The WTO as an International Organisation, Chicago: University of Chicago Press Greenpeace, (2003) “US, EU Sink WTO Meeting in Cancun”, September 14,
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Hamilton, Clive, (2002) “Real and Imagined Hardship in Australia”, Journal of Australian Political Economy, No. 52 ISO, (2005) ISO in Brief: International Standards for a Sustainable World India, (2003) Ministerial Statement, Cancun, 10-14 September, WT/MIN(03)/ST/7 India, (1999) Ministerial Statement, Seattle 30 November-3 December, WT/MIN(99)/ST/16 India, (1996) Ministerial Statement, Singapore 9-13 December, WT/MIN(96)/ST/27 Indonesia, (2003) Ministerial Statement, Cancun, 10-14 September, WT/MIN(03)/ST/24 Indonesia, (1996) Ministerial Statement, Singapore 9-13 December, WT/MIN(99)/ST/22 Ingrams, Elizabeth, (2005) “Depression”, Japan Times, July 10; “suicides top 30,000 for seventh year” Johnson, Chalmers (1982) MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925-1975, Stanford University Press Jones, Evan, (2005) “Auto component sector in strife”, June 25, Alert and Alarmed, http://www.alertandalarmed.blogspot.com Komiya, Ryutaro (1992) Three Stages of Japan’s Industry Policy after World War II, Discussion Paper, #92 DF 13, Ministry of International Trade and Industry Komiya, Ryutaro and Itoh, Motoshige, (1988) Japan’s International Trade and Trade Policy, 1955-1984, in The Political Economy of Japan Vol. 3, edited by Kozo Yamamura and Yasukichi Yasuba, Stanford University Press Kostecki and Hoekman, (1997) The Political Economy of the World Trading System, Oxford University Press Long, Oliver, (1985) Law and Its Limitations on the GATT Multilateral Trade System, Martinus Nijhoff Publishers Higham MA Make Poverty History, (2005) Trade Justice, Drop the Debt More and Better Aid, Make Poverty History, (2005) Trade Justice: Robbed, ripped off and ruined, Matsushita, M., (1984), “The Implementation of the Tokyo Round in Japan”, in John H. Jackson, J.V. Louis, and M. Matsushita, (eds.) Implementing the Tokyo Round, National Constitutions and International Economic Rules, Anne Arbor and the University of Michigan Press McMullan, Robert, (1995e) Question Without Notice Before the Senate, Senate Hansard, 8 March 1995, p. 1533 Accessed 2.2.02
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Moore, Mike (2003) A World Without Walls: freedom, development, free trade and global governance, Cambridge University Press Nakamura, Takafusa (1995) The Postwar Japanese Economy: Its Development and Structure: 1937-1994, University of Tokyo Press OECD, (2001) Multi-functionality OECD, (1999) Post-Uruguay Round Tariff Regimes: Achievements and Outlooks Okimoto, Daniel I. (1989) Between MITI and the Market: Japanese Industrial Policy for High Technology, Stanford University Press Oxfam, (2005) “Rigged Rules and Double Standards: trade, globalization and the fight against poverty”, report, Preeg, E. H. (1998a) Traders in a Brave New World: The Uruguay Round and the Future of the World Trading System, Chicago and London: University of Chicago Press Raby, Geoff, (1997) “The new world trade order and OECD”, in David Robertson, (ed.) East Asian trade after the Uruguay Round, Cambridge University Press Ricupero, Rubens, (1998) “Integration of Developing Countries into the Multilateral Trading System”, in Jagdish Bhagwati and Mathais Hirsch, (eds.) The Uruguay Round and Beyond: Essays in Honour of Arthur Dunkel, University of Michigan Press Sampson, Gary, P., (1997) “What the Uruguay Round means for East Asia”, in David Robertson, (ed.) East Asian trade after the Uruguay Round, Cambridge University Press Snape, Richard H., (1984) “Australia’s Relations with GATT”, The Economic Record, March, The Economic Society of Australia Switzerland, (2002) Special Session on Special and Differential Treatment, 13 September, TN/CTD/W/14 The Australian, (2005) Editorial: Farm Aid is free trade, July 5 The Australian, July 5, 2005, End Farm Subsidies says Bush Tsujii, Takashi, (2005) “Literature in a Time of Transformation”, Japanese Book News, 44 Summer Tussie, Diana, (1986) The Less Developed Countries and the World Trading System: A Challenge to the GATT, New York: St Martins Press United States State Department, (2004) “Country Reports on Human Rights Practices”, United Nations (2000) Millennium Declaration United Nations (1948) Universal Declaration on Human Rights Wade, Robert (1990) Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization, University of Princeton Press Wallach, Lori, (2004) Whose Trade Organization? A comprehensive guide to the WTO, The New Press
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Winham, G. R., (1986), International Trade and the Tokyo Round Negotiation, Princeton University Press World Bank, (2004) Global Economic Prospects: Realizing the Development Promise of the Doha Agenda. World Bank, (2001a) Global Economic Prospects and the Developing Countries World Bank, (2001b) The HIPC Initiative: Background and Progress Through December2001http://www.worldbank.org/hipc/progress-to-date/May99v3/may99v3.htm WTO, (no date) Ten Misunderstandings About the WTO WTO (no date) Ten Benefits of the World Trading System WTO, (2004) Doha Work Program, Decision Adopted by the General Council on August 1, 2004, WT/L/579, 2 August 2004 WTO, (2003) Special Session for the Council on Services, 6th March WTO, (2000a) Implementation of Special and Differential Treatment Provisions in WTO Agreements and Decisions, Note by Secretariat, Committee on Trade and Development, WT/COMDT/W/77, 25 October, 2000 WTO, (2000b), Note on Non-trade concerns, 9 November 2000, Committee on Agriculture, Special Session, G/AG/NG/W/36/Rev. 1. WTO, (2000c), Special and Differential Treatment and a Development Box, 23 June 2000, proposal by Cuba, Dominican Republic, Honduras, Pakistan, Haiti, Nicaragua, Kenya, Uganda, Zimbabwe, Sri Lanka and El Salvador, G/AG/NG/W/13 １
Assistant Professor, International Economics, College of International Relations, Ritsumeikan University, Kyoto and Research Fellow at Aoyama Gakuin’s WTO Research Center. Email
[email protected] ２ All these measures have limits. The Heavily Indebted Poor Countries (HIPC) program established by the World Bank and IMF in 1996, aims ostensibly to enable countries to effectively manage resource allocation without the burden of debt repayment. However, ‘conflict related’ and ‘governance’ problems preclude participation in the scheme (World Bank, 2001). The 2004 US State Department’s country reports on human rights recorded that Burkino-Faso, Cameroon, Chad, Ethiopia, Guinea, Mozambique, Mauritania, Rwanda, Tanzania, Uganda, had a ‘poor’ record on human rights in 2004 (US State Department, 2004). All of these countries are participants in HIPC. Burkino Faso, Chad, Cameroon, Guinea, Mozambique, Mauritania, Tanzania and Uganda are Least Developed Countries members of the WTO meaning they are exempted from reciprocity and most forms of commitments. It is an overly idealistic appraisal that the elimination of debt and a ‘free ride’ on protectionism will inevitably lead to the self-less commitment of national elites to a pursuit of ‘national common interest’. Indeed, Japan and Germany have argued that debt abolition may encourage future lending that will also not be paid back (BBC, 2005). ３ The Millennium Declaration also recognized the unique problems of so-called ‘landlocked countries’, countries that are surrounded entirely by other countries, such as Mongolia. ４ For example Greenpeace (2003) proposed the creation of an ‘alternative trade system’ 24
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or the pursuit of trade-related activities to occur ‘in a neutral forum, preferably the UN, which is better suited to address social well being, environmental protection and economic development in a balanced way’ (Greenpeace, 2003). Given that Japan supplies 20% of the UN budget, yet is excluded from Permanent Membership of the Security Council suggests otherwise. ５ The term world trading system is employed as it reflects the growing reality of the membership of the World Trade Organization (WTO), now including China the post-communist nations and most developing countries. Other terms express the same sentiment, but considering the title of the World Bank, despite the existence of many other banks (e.g. Citibank) the title world trading system is not presumptuous. ６ In this view of reciprocity, a legal commitment is viewed as a ‘concession’ and efforts are made to ensure that concessions do not interfere with the continuation of protectionist trade policies. ７ The author is well aware of the views that the WTO promotes ‘the destruction of ecosystems and human well being’ (Greenpeace, 2003), or that the WTO is ‘an iron cage that traps developing countries’ (Focus on the Global South, 2005), or that the world trading system is ‘indefensible and unsustainable’ (Oxfam, 2005). One of the benefits of post-industrial societies (unlike many developing countries) is the freedom of expression on a range of subjects. However, while many view the post-war conventional wisdom on economics and ‘free trade’ as unacceptable to their point of view, it is indefensible and unsustainable to question the moral commitment of ‘free trade’ economists to a world free of poverty and suffering. ８ As of February 2005, the WTO has 148 members. ９ To date, 330 disputes have been brought to the WTO since 1995. １０ The world trading system does not cover areas of international policy coordination not covered by the WTO, such as most international investments, competition policy, human rights and environmental policy. １１ Ironically, Wallach views the WTO as a threat to the United States, whereas other critics of the WTO are adamant that the WTO is controlled by countries like the US. １２ One survey in Australia in 2002 found that 62 % of Australians believed that they were unable to purchase everything they really needed (Hamilton, 2002: 44). １３ For example, 127 million Americans are overweight, 60 million are obese and 9 million severely obese (American Obesity Association, 2005). １４ Ingrams, Elizabeth, (2005) “Depression”, Japan Times, July 10; “suicides top 30,000 for seventh year”, Japan Times, June 3, 2005 １５ At the Fifth WTO Ministerial in 1995, approximately 1,000 non-governmental organizations were eligible to attend, many of them national industry associations. None of these organizations are democratically elected by the citizens of their respective countries, whereas the governments of many WTO members are. １６ Furthermore, the International Labor Organization (ILO), is chief among international bodies committed to promoting global labor standards １７ Nakamura (1995) Wade (1990) and Johnson (1982) provide a good introduction to the issues. １８ A perusal of the 2005 Assembly of the African Union lists the long list of economic, social and political problems facing Africa, and the ‘resolve’ to reach a ‘conflict-free Africa by 2010’ does not engender hope considering the Assembly recognizes the 25
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importance of an African Stand-by Force (ASF)Decisions, Declarations and Resolution, Assembly of the African Union, Fifth Ordinary Session, 4-5 July 2005, Sirte Libya. １９ There is nothing inherently wrong with living in a banana republic, tourist resort or oil-based economy. ２０ The Australian, July 5, 2005, End Farm Subsidies says Bush ２１ The phrase free trade is absent from both the Preamble of the GATT and the WTO. Secretariat publications are also careful to avoid use of the term. Common alternatives are ‘open trade’ or ‘freer trade’. ２２ The GATT was a single trade agreement in 1948. The WTO contains 13 agreements. The International Standards Organization (ISO) responsible for writing international technical standards has 3000 technical groups and draws from the expertise of 50, 000 experts worldwide (ISO, 2005). ２３ See for example Oxfam (2005). ２４ For example one CAIT statement was “the rules of international trade are stacked in favor of the most powerful countries…poverty eradication, human rights and environmental protection come a poor second to the goal of ‘eliminating trade barriers’ (Make Poverty History, 2005). ２５ The WTO Secretariat recently wrote two publications seeking to dispel concerns about the agenda of the WTO titled ‘Ten Misunderstandings About the WTO” and “Ten Benefits of the World Trading System”. ２６ In addition, why stop at agriculture? Why not tackle textiles, clothing and footwear – as one Australian Editorial noted “Developing nations will not prosper until developed ones remove tariffs on labor intensive goods such as clothing and footwear. That truth drives a wedge straight down the middle of the ‘anti-globalization’ movement, which regards the manufacturing activity of the developing world as ‘slave labor’ and is fervently cheered on by powerful Western trade unions” (The Australian, 2005). ２７ Some in the CAIT are also very shrewd, such as the attaching the demand to eliminate export subsidies as part of the 2005 Make Poverty History campaign – a decision that the US, Japan and most of the WTO have long supported and not surprisingly was endorsed once again at the 2005 G 8 summit. The Make Poverty History group is also misleading. As Australian Foreign Minister Downer remarked “poverty is not isolated to Africa. The Asia Pacific region is home to two thirds of the worlds poor: more than 700 million. Yet this region receives only 22 percent of global aid” (Downer, 2005). ２８ Article 8 b. remarks ‘any conditions for participation in tendering procedures shall be limited to those which are essential to ensure the firm's capability to fulfill the contract in question”. ２９ If a country’s human rights record ought to be taken into account in trade policy, this list would include many developing countries. ３０ The work on multi-functionality is voluminous. A good starting point is OECD (2001). ３１ Note on Non-trade concerns, 9 November 2000, Committee on Agriculture, Special Session, G/AG/NG/W/36/Rev. 1. ３２ Special and Differential Treatment and a Development Box, 23 June 2000, proposal by Cuba, Dominican Republic, Honduras, Pakistan, Haiti, Nicaragua, Kenya, Uganda,
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Zimbabwe, Sri Lanka and El Salvador, G/AG/NG/W/13 ３３ Bindings in the GATT were “maximum and not minimum rates” (Dam, 1970: 31-2), bound rates, not applied rates and contracting parties could (and can in the WTO) reduce tariffs below the bound rate but not above it (Dam, 1970: 31).
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