TRADE: Big Nations Take a Leap Forward, Poor Run in One Place

By IPS Correspondents Reprint | | Print |

Analysis - Johanna Son

SINGAPORE, Dec 15 1996 (IPS) - To many industrialised nations, the just- ended inaugural meeting of the World Trade Organisation (WTO) was a great leap forward for global trade as the world heads into the 21st century.

But many developing countries, which make up some 80 per cent of the 128-member WTO, came away with many mixed feelings.

Though they scored a few victories — most notably in opposing any use of labour standards as a protectionist tool — the WTO meeting boosted suspicions that economic might shapes much of the agenda and political will in the global trade body.

Indeed, the momentum of the Singapore talks was driven heavily by ‘new issues’ that industrialised countries had set their sights on.

In the end, the WTO ministers’ declaration agreed to create two ‘working groups’ to study ties between trade and investment, competition policy and transparency in government contracts — though it also states developing nations’ view that this will not necessarily lead to formal negotiations on global rules.

A declaration on freeing up tariffs in information technology (IT), with the year 2000 as a target, was hammered out by the United States, the European Union (EU), Japan and Canada, or the Quadrilateral group of countries.

The U.S. and EU initiators of the accord, used the IT deal as a major gauge of the meeting’s success.

In the process, far less discussions were held on issues that developing countries brought to Singapore — market access in textiles and agriculture and aid to least developed countries (LDCs).

For the future, this signals a continuation of the trend toward setting more and more global rules to cover a growing list of areas that until recently had been within the power of national governments to manage.

The process of extending ‘trade-related’ matters took off at the 1994 Uruguay Round accord, which included not just trade in merchandise, but areas never before covered by multilateral rules: textiles, services, agriculture, intellectual property.

The WTO is also eyeing global rules in telecommunications by February 1997, financial services by December next year, and more negotiations on intellectual property rights to start in 1998.

As the multilateral trading system nears its 50th year in 1997, WTO director general Renato Ruggiero said such developments show: “We have every reason to celebrate the multilateral trading system, which has been one of the major success stories of the post-World War II era.”

Indeed, WTO officials say the rules-based system “benefits smaller countries the most”. But the rules do not necessarily make for a level playing field — even at the Singapore meeting.

Pradeeb Mehta of Consumers International, said: “The rich would like to be richer, so they grab as much as they can grab. Smaller countries grab a few yards here and there, but that does not mean much.”

“The real purpose of the ministerial meeting was not really achieved,” said Walden Bello of the Bangkok-based Focus on the Global South.

Instead of reviewing how economies are coping with Uruguay Round commitments, “the issues of implementation were totally lost because 98 per cent of the time was spent on the issues that were on the agenda of the Quad countries”.

In Singapore, developing countries sought more attention on problems with implementing the two-year old world trade rules, before going into new areas, adding that forcing this may well endanger the fragile consensus reached at the Uruguay Round.

Pakistan’s Commerce Minister Muhammad Zubair Khan urged rich countries to realise that “given growing concerns regarding the social costs of globalisation, the difficulties of developing countries in fulfilling even existing commitments, it would be prudent to proceed at a calculated and realistic pace”.

Still, Ruggiero sees getting trade into new areas as the WTO’s “ambitious future programme of work”, saying “this part of the process is most attractive to the industrialised countries”.

And it shows.

Hard-nosed economic interests drove the United States and the EU to push the information technology accord in Singapore, and to seek a study into links between investment or competition policy to ease commerce for its companies.

For example, EU negotiators haggled with Washington and played it off against Asia to get into the information technology pact products the EU has large trade deficits on. Some 24 nations are said to be backing the accord, mostly industrialised ones and fast- developing Asian countries in semiconductor manufacturing.

“It is ironic that those aspects of the Uruguay agreement of most benefit to industrial countries have been implemented with some force, whereas those of potential benefit to developing countries have not been effectively implemented or addressed at this meeting,” the British-based development agency Oxfam noted.

For instance, while Japan and Indonesia proposed to include a probe into anti-dumping as part of a WTO study on competition policy, Washington objected.

South Africa warned against widening the North-South divide if the WTO becomes preoccupied for the most part with the concerns of those countries in the trading mainstream.

Alec Erwin, South African minister of trade and industry, noted that the United States, Canada, the EU, Japan, China, Hong Kong, Taiwan, South Korea, Malaysia, Singapore and Thailand among them accounted for 80 per cent of exports and imports in 1995.

“The question that arises out of this quantitative domination of trade by relatively few countries is whether there is a risk of the WTO becoming a de facto select group of trading countries once again,” he said.

Unlike the speed with the IT deal was reached, little headway was made in the area of rich countries’ foot-dragging on the textile and agriculture agreements.

The two issues are crucial to poorer countries, which had signed the Uruguay Round accord in Marrakesh, Morocco, with promises that it would lift barriers to their textile exports to rich markets and remove fat subsidies given by industrialised economies to agricultural exports.

The Multi-Fibre Agreement (MFA) sets a 10-year phase-out of textile quotas by 2005. But exporters led by Pakistan and India protested developed countries’ move to delay till the final phase any ‘commercially meaningful’ changes in quotas, which they say violates the spirit of the accord.

In July, the United States changed its rules of origin for importing textiles, disrupting production in exporting nations. Said Pakistan’s commerce minister Muhammad Zubair Khan: “Today, two years after Marrakesh, textiles trade is more restricted instead of being more liberalised.”

The WTO has been called undemocratic and not transparent. But Singapore ambassador-at-large Tommy Koh said the “most influential” delegations from each region were asked to draft the ministers’ declaration as “it is impossible to do drafting work with 128 countries”.

Dutch envoy to the WTO, Evelien Herkfens, added that often, “If the Quad or the United States and EU have a deal, that’s it. There’s no transparency about the setting of rules and this is very detrimental to the smaller countries.”

The WTO’s 29 least-developed country members may be among the biggest losers. WTO ministers endorsed a ‘plan of action’ to help them comply with new trade rules and participate in the WTO, but it only lists options for action and no targets or commitments.

No consensus was reached on the WTO call for rich nations to give zero-tariff access to LDC exports, a subject to be discussed against a special WTO meeting next year on LDCs in Geneva.

On rich nations’ view that the information technology pact is the key prize at the WTO meeting, Bello said: “It may be a crowning achievement for the United and European Union, but not for WTO.

“They have gotten that deal, but at what cost? They could have made Singapore a time when many of the festering resentment of the developing countries were addressed, but what has happened is these resentments have worsened.”