In Davos in late January, several powerful governments and their allies announced their intention to launch new negotiations on e-commerce. Unusually, the intention is to launch the plurilateral negotiations in the World Trade Organization (WTO), an ostensibly multilateral organization, setting problematic precedents for the future of multilateral negotiations.

Chakravarthi Raghavan

Any resulting WTO agreement, especially one to make e-commerce tax- and tariff-free, will require amendments to its existing goods agreements, the General Agreement on Trade in Services (GATS) and the Trade-Related Intellectual Property Rights (TRIPS) agreements. If it is not an unconditional agreement in the WTO, it will violate WTO ‘most favoured nation’ (MFN) principles.

This will be worse than the old, and ostensibly extinct ‘Green Room’ processes — of a few major powers negotiating among themselves, and then imposing their deal on the rest of the membership. Thus, the proposed e-commerce rules may be ‘WTO illegal’ — unless legitimized by the amendment processes and procedures in Article X of the WTO treaty.

Any effort to ‘smuggle’ it into the WTO, e.g., by including it in Annex IV to the WTO treaty (Plurilateral Trade Agreements), will need, after requisite notice, a consensus decision at Ministerial Conference (Art X:9 of treaty) . It may still be illegal since the subjects are already covered by agreements in Annexes 1A, 1B and 1C of the WTO treaty.

Consolidating power of the giants
Powerful technology transnational corporations (TNCs) are trying to rewrite international rules to advance their business interests by: gaining access to new foreign markets, securing free access to others’ data, accelerating deregulation, casualizing labour markets, and minimizing tax liabilities.

Jomo Kwame Sundaram

While digital technology and trade, including electronic or e-commerce, can accelerate development and create jobs, if appropriate policies and arrangements are in place, e-commerce rhetoric exaggerates opportunities for developing country, especially small and medium enterprises. Instead, the negotiations are intended to diminish the right of national authorities to require ‘local presence’, a prerequisite for the consumer and public to sue a supplier.

The e-commerce proposals are expected to strengthen the dominant TNCs, enabling them to further dominate digital trade as the reform proposals are likely to strengthen their discretionary powers while limiting public oversight over corporate behaviour in the digital economy.

Developing countries must be vigilant
If digital commerce grows without developing countries first increasing value captured from production — by improving productive capacities in developing countries, closing the digital divide by improving infrastructure and interconnectivity, and protecting privacy and data — they will have to open their economies even more to foreign imports.

Further digital liberalization without needed investments to improve productive capacities, will destroy some jobs, casualize others, squeeze existing enterprises and limit future development. Such threats, due to accelerated digital liberalization, will increase if the fast-changing digital economic space is shaped by new regulations influenced by TNCs.

Diverting business through e-commerce platforms will not only reduce domestic market shares, as existing digital trade is currently dominated by a few TNCs from the United States and China, but also reduce sales tax revenue which governments increasingly rely upon with the earlier shift from direct to indirect taxation.

Developing countries must quickly organize themselves to advance their own agenda for developmental digitization. Meanwhile, concerned civil society organizations and others are proposing new approaches to issues such as data governance, anti-trust regulation, smaller enterprises, jobs, taxation, consumer protection, and trade facilitation.

New approach needed
A development-focused and jobs-enhancing digitization strategy is needed instead. Effective national policies require sufficient policy space, stakeholder participation and regional consultation, but the initiative seeks to limit that space. Developing countries should have the policy space to drive their developmental digitization agendas. Development partners, especially donors, should support, not drive this agenda.

Developmental digitization will require investment in countries’ technical, legal and economic infrastructure, and policies to: bridge the digital divide; develop domestic digital platforms, businesses and capacities to use data in the public interest; strategically promote national enterprises, e.g., through national data use frameworks; ensure digitization conducive to full employment policies; advance the public interest, consumer protection, healthy competition and sustainable development.

Pro-active measures needed
Following decades of economic liberalization and growing inequality, and the increasing clout of digital platforms, international institutions should support developmental digitization for national progress, rather than digital liberalization. Developing country governments must be vigilant about such e-commerce negotiations, and instead undertake pro-active measures such as:

Data governance infrastructure: Developing countries must be vigilant of the dangers of digital colonialism and the digital divide. Most people do not properly value data, while governments too easily allow data transfers to big data corporations without adequate protection for their citizens. TNC rights to free data flows should be challenged.

Enterprise competition: Developing countries still need to promote national enterprises, including through pro-active policies. International rules have enabled wealth transfers from the global South to TNCs holding well protected patents. National systems of innovation can only succeed if intellectual property monopolies are weakened. Strengthening property rights enhances TNC powers at the expense of developing country enterprises.

Employment: Developmental digitization must create decent jobs and livelihoods. Labour’s share of value created has declining in favour of capital, which has influenced rule-making to its advantage.

Taxation: The new e-commerce proposals seek to ban not only appropriate taxation, but also national presence requirements where they operate to avoid taxes at the expense of competitors paying taxes in compliance with the law. Tax rules allowing digital TNCs to reduce taxable income or shift profits to low-tax jurisdictions should be addressed.

Consumer protection: Strong policies for consumer protection are needed as the proposals would put privacy and data protection at risk. Besides citizens’ rights to privacy, consumers must have rights to data protection and against TNC and other abuse of human rights.

Competition: Digital platforms must be better regulated at both national and international level. Policies are needed to weaken digital economic monopolies and to support citizens, consumers and workers in relating to major digital TNCs.

Trade facilitation: Recent trade facilitation in developing countries, largely funded by donors, has focused on facilitating imports, rather than supply side constraints. Recent support for digital liberalization similarly encourages developing countries to import more instead of developing needed new infrastructure to close digital divides.

Urgent measures needed
‘E-commerce’ has become the new front for further economic liberalization and extension of property rights by removing tariffs (on IT products), liberalizing imports of various services, stronger IP protection, ending technology transfer requirements, and liberalizing government procurement.

Developing countries must instead develop their own developmental digitization agendas, let alone simply copy, or worse, promote e-commerce rules developed by TNCs to open markets, secure data, as well as constrain regulatory and developmental governments.

Chakravarthi Raghavan, Editor-emeritus of South-North Development Monitor SUNS, is based in Geneva and has been monitoring and reporting on the WTO and its predecessor GATT since 1978; he is author of several books on trade issues.
Jomo Kwame Sundaram is Senior Adviser with the Khazanah Research Institute. He was an economics professor and United Nations Assistant Secretary General for Economic Development.

By Chakravarthi Raghavan
GENEVA, Jul 22 2014 (IPS)

The world of today is considerably different from the one at the end of the Second World War; there are no more any colonies, though there are still some ‘dependent’ territories.

In the 1950s and 1960s, as the decolonisation process unfolded, in most of the newly independent countries leaders emerged who had simply fought against foreign rule, without much thought on their post-independence economic and social objectives and policies.

Some naively thought that with political independence and power, economic well-being would be automatic.

Chakravarthi Raghavan

By the late 1950s, the former colonies, and those early leaders within them who yearned for better conditions for their peoples, realised that something more than political independence was needed, and began looking at the international economic environment, organisations and institutions.

In the immediate post-war years, the focus of efforts to fashion new international economic institutions (arising out of U.S.-U.K. wartime commercial policy agreements) was on international moves for reconstruction and development in war-ravaged Europe.

As a result, in the sectors of money and finance, the Bretton Woods institutions [the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD) or World Bank], were established – even ahead of agreeing on the United Nations Charter and its principle of sovereign equality of states (one nation, one vote in U.N. bodies) – on the basis of the ‘one-dollar one-vote’ principle.“Within the Bretton Woods institutions, there was no direct focus on promoting ‘development’ of the former colonies; what little happened was at best a side-effect of the lending policies of these institutions and the few crumbs that fell off the table here and there, often to further Cold War interests”

In pursuing their wartime commercial policy agreements, the United Kingdom and the United States submitted proposals in 1946 to the U.N. Economic and Social Council (ECOSOC) for the establishment of an international trade body, an International Trade Organization (ITO).

ECOSOC convened the U.N. Conference on Trade and Employment to consider the proposals; the Preparatory Committee for the Conference drafted a Charter for the trade body, and it was discussed and approved in 1948 at a U.N. conference in Havana.

Pending ratification of the Havana Charter, the commercial policy chapter of the planned international trade body was fashioned into the General Agreement on Tariffs and Trade (GATT) and brought into being through the protocol of provisional application, as a multilateral executive agreement to govern trade relations, i.e., governments agreeing to implement their commitments to reduce trade barriers and resume pre-war trading relations through executive actions subject to their domestic laws.

At Havana, during the negotiations on the Charter, Brazil and India had expressed their dissatisfaction, but had reluctantly agreed to the outcome and the provisional GATT.

The U.S. Senate, as a result of corporate lobbying, was however unwilling to allow the United States to be subject to the disciplines of the Havana Charter and did not consent to an ITO Charter; the result was that the provisional GATT remained provisional for 47 years, until the Marrakesh Treaty which brought the World Trade Organization (WTO) into being in 1995.

Within the Bretton Woods institutions, there was no direct focus on promoting “development” of the former colonies; what little happened was at best a side-effect of the lending policies of these institutions and the few crumbs that fell off the table here and there, often to further Cold War interests.

From about the early 1950s, to the extent that it provided any reconstruction and development loans to the developing world, the IBRD acted in the interests of the United States, its largest single shareholder, and favoured the private sector.

For example, early Indian efforts to obtain IBRD loans for the public sector to set up core industries like steel, which needed large infusions of equity capital that the Indian private sector was in no position to provide, were turned down, based purely on the ideological dogma of private-vs-public-enterprise.

It was only much later that a separate window, the International Development Association (IDA), was created at the World Bank to provide soft loans (with low interest and long repayment periods) to low-income countries.

But the IDA did not function as professed and did not provide loans to set up industries or promote development in poorer countries; in actual practice it acted to advance the interests of the developed countries in the Third World.

IDA loans came with conditionalities to promote structural adjustment programmes, such as unilateral trade liberalisation, resulting in deindustrialisation of the poorer African countries. Even worse, IDA loans came with additional conditionalities to cater to the fads and fashions of the day and the concerns of Northern, in particular Washington-based, civil society.

The IDA “donor countries” dominated its governance and used their clout there to sway IDA lending – initially, the IDA obtained funds from the United States and other developed countries, and there were two or three substantial replenishments thereafter.

Subsequently, the funds from loan repayments and the profits of the World Bank (earned by lending at market rates to developing countries) were used to fund IDA, with small new contributions from the “donors” at every replenishment.

Though developing countries borrowing from the IBRD at market rates thus turned out to be the funders of the IDA, they had no voice in IDA governance, and the developed countries, with very little new money, have maintained control over the IDA and IBRD policies, to promote their own policies and the interests of their corporations in developing countries.

On the trade front, in successive rounds of negotiations at the GATT, the group of major developed countries (the United States, Canada, Europe, and later Japan) negotiated among themselves the exchange of tariff concessions, but paid little attention to the developing countries and their requests for tariff reduction in areas of export interest to them.

The only crumbs that fell their way were the result of the multilateralisation of the bilateral concessions exchanged in the rounds, through the application of the “Most Favoured Nation” (MFN) principle. From the Dillon Round on (through the Kennedy and Tokyo Rounds), each saw new discriminatory arrangements against the Third World and its exports.

In the Uruguay Round (1986-94), culminating in the Marrakesh Treaty, the developing countries undertook onerous advance commitments in goods trade, and in new areas such as ‘services’ trade and in intellectual property protection, on the promise of commitment of developed countries to undertake a major reform of their subsidised trade in agriculture and other areas of export interest to developing countries.

These remain in the area of promises while, after the 2013 December  Bali Ministerial Conference, the United States, Europe and the WTO leadership are attempting to put aside as ‘out of date’, all past commitments, while pursuing the ‘trade facilitation’ agreement, involving no concessions from them, but resulting in the equivalent of a 10 percent tariff cut by developing countries.

In much of Africa, this will complete the “deindustrialisation process” and ensure that the Third World will remain “hewers of wood and drawers of water”.  (END/IPS COLUMNIST SERVICE)

* This text is based on Chakravarthi Raghavan’s recently published book, ‘The THIRD WORLD in the Third Millennium CE’.

Excerpt:

Gamani Corea, 87, world-renowned Sri Lankan economist, Secretary-General of the UN Conference on Trade and Development (1974-1984), and former chairman of the Board of the South Centre, passed away after a brief illness in Colombo on Sunday, a day before his 88th birthday.

This writer came to know Corea well from about 1978. At that time, when UNCTAD was at the centre of various negotiations, with long group meetings and negotiating sessions running into the early hours of the morning, Corea would be at his desk in the secretariat or in the lounge around the meeting room, and spent time with the writer, not only discussing UNCTAD matters, but also touching on his own life and background, and discussing a range of wider issues of international political economy.

Early on, he took on hand the task of guiding this writer in some detailed reading of economics literature – classical, neo-classical and development economics, and trade, money and finance -, an almost one-to-one economics course (without having to do term papers!)

Corea was closely associated with and encouraged the founding and publication in 1980 of the Special United Nations Service – SUNS (subsequently South-North Development Monitor – SUNS).

Deshamanya Gamani Corea (‘Deshamanya’ was the title, one of the highest civilian honours of the country, conferred on him by the Sri Lanka government), as he himself narrated to this writer, was born into a well-renowned and affluent political family of Sri Lanka (his mother’s brother, Sir John Kotlewala, was a Prime Minister of Ceylon), while his grandfather, Victor Corea, was a freedom fighter.

Gamani once told this writer, who came to know him closely in Geneva from 1978, that he was an only child and the family on his mother’s side was so affluent that no one in the family thought of guiding him into any particular educational discipline or a professional career, and was thought too shy and reserved for political life.

However, by himself, he began taking an interest in the national politics of Ceylon (but not to plunge into politics), and was very much influenced by the national movement under Gandhi and Nehru in neighbouring Colonial India.

“I would get hold as a young man of every writing of Jawaharlal Nehru and read him avidly,” he once said to the writer in 1979 (at a time ironically when India was going through a phase of denigration of Nehru by his successors).

“It gave me a perspective and impelled me to take interest in politics and development, that carried over into my post-university career in the Central Bank, and then United Nations and the development aspects there,” Corea said to the writer, explaining his journey from being a conservative economist and central banker, to the UN Committee on Development Planning, involvement in the panel of experts preparing for UNCTAD-I under Raul Prebisch, and the work of UNCTAD itself where during the Prebisch era, he chaired a commodity conference on cocoa.

After an educational career in Colombo and then Oxford and Cambridge (1945-52) for a doctorate, he came back to Colombo to enter government service in the economic departments of planning, as research director in the Central Bank, and in the government as Secretary of the Department of Planning, Governor of the Central Bank, and then in diplomatic service, as Ceylon’s ambassador to the EEC in Brussels, and several UN positions, including as member of the UN Committee on Development Planning.

He was appointed in 1973 as Secretary-General of UNCTAD for an initial three-year term, when the second S-G, Manuel Perez-Guerrero, resigned to become a Minister in Venezuela.

Corea assumed the post in April 1974, and was reappointed thrice, his last term ending in December 1984. He continued in the post at the request of then UN Secretary-General Javier Perez de Cuellar, and then was told (indirectly) that he would not be continued (the writer was with him at his house, when the call came from the S-G’s office in New York to give him the information, but not by the S-G himself, but by one of his senior staff).

The OECD countries were by then dead set against Corea for his role in giving intellectual support for the Group of 77 efforts at restructuring the world economy and international economic system (monetary, finance and trade) for a more equitable and just order. He relinquished his post at the end of February 1985.

Prebisch, as head of UNCTAD, shaped international economic thinking in development economics and raised awareness within the UN system of the problems of development in the newly independent ex-colonies, and the special needs and problems of developing countries for development, the need for special treatment and assistance for development, such as official development aid, generalized schemes of preferences and the like.

And Corea carried forward the Prebisch outlook, providing intellectual weight and economic arguments to the secretariat documents and proposals, and with calls for restructuring the global economy and international economic relations and governance, and addressing problems of development and money, finance and trade in an interdependent manner.

He had an inner conviction and strength, a visionary and developmentalist, despite his affluent personal background, and within UNCTAD developed several programmes to help development, and remained firm in his view that UNCTAD should remain a part of the UN, an organ of the UN General Assembly devoted to Trade and Development.

While not confrontational or using harsh language, he stood up throughout his tenure to pressures and bullying tactics of the United States or European Communities and their attempts to influence senior staff appointments by planting their own men.

He also stood up to the IMF and World Bank, whose leadership attempted sometimes, as an observer at UNCTAD Board meetings, to scoff at UNCTAD views, and any alternative thinking differing from IMF/World Bank ideology and rulebook.

After retirement from UNCTAD, Corea continued in international public life, specially in the economic arena of his country, and was a member of the South Commission. He became chairman of the Board of the South Centre, assuming the post about three years after Julius Nyerere died. After the Commission wound up and the South Centre was set up in 1991, he played an important role in its work. He was trusted by South Centre Chair Nyerere, and Corea acted as the final authority and filter approving policies, documents and publications of the Centre.

According to then officials of the Centre, he was consulted on a daily basis, both while he was in Geneva (a lot of the time) and when he was in Colombo, and was one of the key persons to help put the Centre on its feet. He resigned his chairmanship after a mild stroke which impacted on his writing abilities.

Living almost in seclusion in Colombo from late 1990s, caught up in legal tangles created by some relatives with an eye on his property, he found himself physically unable to travel, and mentally and socially isolated, for a while even prevented from meeting any visitors and friends.

As he had indicated to several of his friends (including the writer) while he was in Geneva at the South Centre, in Colombo, he had created a foundation to which he willed his properties, a testament he had executed when in full possession of his abilities, a disposition that would now need to be sorted out in Colombo.

As an important member of the Centre, he participated at some of the civil society meetings in the preparations and run-up to the 1992 Earth Summit in Rio (where he was present as a member of the Sri Lanka delegation).

At the time of the 1991 second preparatory committee meeting in Geneva for UNCED, it was fashionable for officials of the secretariat, including the Secretary-General of that Conference, Mr. Maurice Strong, to advise developing countries not to adopt or follow a consumerist Northern style of development.

Speaking at the civil society meeting at that time, Corea scoffed at such efforts of the North to constrain the development of the South to maintain the North’s own consumption and life-styles.

He told the NGO forum and the Group of 77, that if such an effort is made, and even if governments of the South accept at Rio such instruments to curb their development, “long before global warming, the world will be engulfed in global disorder” — an assessment that perhaps leaders of the North and South negotiating climate change issues this month in Poland might usefully bear in mind.

Corea was also present at Rio, as a member of the Sri Lanka delegation. At the end of that Rio Earth Summit, and its Declaration and the Agenda 21, in an interview with Thalif Deen for the Conference newspaper Terra Viva, he famously summed up the outcome as: “We negotiated the size of the zero.”

(* Chakravarthi Raghavan, Editor Emeritus, contributed this personal tribute to Gamani Corea)

Trade diplomats and trade officials face several uncertainties in 2012. Many of these have their source in the continuing serious global financial crisis and its deadening hand on the real economy. This, and the reality of the major role played by corporate finance capital in the electoral process of countries, ensures nothing will be done, at least not this year, to tackle the root causes of the financial crisis, with criminal fraudulence at its heart.

In terms of the World Trade Organisation (WTO), the major developed countries entered into binding commitments at the Marrakesh conference in April 1994, for reforms to their highly protected agricultural sector that would eliminate heavy subsidies, as well as in other areas of trade. Placing their trust in the solemn treaty commitments of the major developed economies, and their good faith implementation (a basic principle of public international law), the developing countries paid a high price in advance by accepting various restrictions on their own trade in goods, in trade-related aspects of intellectual property rights (TRIPS), and trade in services too. However, the developed countries have by now repeatedly reneged on their promises and commitments.

At least in retrospect, it is clear that the big players, even when signing the Marrakesh treaty, had no intention of carrying out their own obligations.

In November 2001, taking opportunistic advantage of the terrorist attacks in New York and Washington, Pascal Lamy as EU Trade Commissioner, with the help of then-U.S. Trade Representative Robert Zoellick, had forced on the developing countries the Doha Round of Trade Negotiations –with an agenda more complex than that of the Uruguay Round (1986-1994). Soon after, Lamy appeared before the European Parliament, in a formal session followed by informal discussions, and reportedly told the MEPs that he had gained for Europe 10 years to enable them to adjust agricultural policy and shift subsidies.

As WTO Director-General, Lamy has continued on this path, though he was somewhat checkmated in Hong Kong when, at Argentina’s insistence, a kind of parallelism was established between the agricultural and non-agricultural Market Access talks. However, in the various Lamy-led efforts since 2005 to conclude the Doha Round, the mandate is presented as talks for the major emerging economies –China, India, Indonesia, South Africa, etc.– to provide market access for the U.S.

With the Doha Round at an impasse, some developed countries are promoting the view that the impasse shows that trade negotiations involving the entire membership is no longer manageable, and hence there must be negotiations among the few resulting in plurilateral agreements, such as the ITA (Information Technology Agreement) model which countries accounting for 90 percent of production and trade have participated in and joined, with others given Most-Favoured-Nation treatment. A more recent idea being floated is that if major developing countries will not participate in the plurilaterals and provide market access to the U.S.-EU service industries, the major developed countries (the U.S., the EU, Canada, Japan, Switzerland, Australia etc), will enter into a services free trade agreement.

The major developed countries claiming to account for 60 percent of global services trade, the bulk of it under financial services, have already liberalised this sector. They gain something only if the major developing economies can also be roped in and persuaded not only to liberalise the services trade but also to forget about the agricultural chapter of the Doha talks and its single undertaking. Major developing countries have however refused to fall into this trap.

Now in its eleventh year, not only have the cheerleaders of the Doha Round all walked away, some publicly and others quietly, but some of them are also advocating winding up Doha as a failure or putting it in cold storage somewhere and taking on new agendas. But there are no takers among the developing countries who are no longer amenable to being pushed around.

In this situation, in December 2011 Lamy has floated his idea of a multi-stakeholder panel.

According to Paul Rayment, former chief economist of the United Nations Economic Commission for Europe, there is a common thread running through such ideas as stakeholder groups, focus groups, plurilaterals, etc. One puts together a carefully chosen group of “the great, the wise, the virtuous” (according to one’s preferred definition of what is great, wise and virtuous). Such a group is then asked to consider a problem and to produce what it knows will be the preferred solution, and then outsiders are challenged to go along with the result or be condemned as “reactionaries, obstructionists, protectionists, or whatever the fashionable adjective might be.” This, Rayment suggests, “is the snowball approach, rather than the (Fred Bergsten-Jagdish Bhagwati) bicycle theory approach to trade policy –get the momentum going and eventually the outsiders will feel they cannot afford to stay outside the group. Group dynamics or simple dynamic economies of scale!”

After the failure at of the Cancun Conference in 2003, Ram Manohar Reddy wrote in ‘The Hindu’ newspaper: “The question now is not if the Doha round can be saved; it is instead, does the WTO have a future in its present form? It does not. The only way the WTO can contribute to ‘a rules-based multilateral trading system’, as it did until the mid-1990s, is if the all-powerful role in which it was cast in the mid-1990s is taken away from the organisation. That would mean a more narrowly defined remit for the WTO, which does not interfere in domestic policy. That may go against the dictates of globalisation, which sees no area of domestic policy as outside the influence of global economic forces. It may even seem impossible because a WTO with its powers shrunk would not be in the interests of the U.S. and the EU, both of whom in the late 1980s saw the organisation as a vehicle to further their economic interests across borders. But do the members of the WTO have any choice other than to change the direction of the organisation?”

If Lamy does set up his panel, it would do well to consider and adopt this sane advice. But if Lamy is bent upon repeating history, he might read what Karl Marx, who followed and expanded on Hegel’s dialectics, wrote in the 18th Brumaire of Louis Bonaparte: “Hegel says somewhere that all great events and personalities in world history reappear in one fashion or another. He forgot to add: the first time as tragedy, the second as farce.”

(END/COPYRIGHT IPS)

(*) Chakravarthi Raghavan is Editor Emeritus of the SUNS (South-North Development Monitor) and an expert on the WT