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The G-15 and the WTO

Print edition : Aug 28, 1999 T+T-

There has been a singular lack of any concrete achievement at the Bangalore meeting.

THE meeting of the G-15 developing countries (which actually includes 17 countries from Asia, Africa and Latin America) that was held in Bangalore had a definite purpose. It was meant to work out a common strategy to present the interests of developing countries and force the agenda at the WTO Ministerial Meeting scheduled for November in Seattle, to consider more seriously their concerns.

Such an initiative is hardly new. Each of the previous WTO Ministerial Meetings has brought about such an attempt, and so far each of them has foundered in terms of achieving a common bargaining plank because of the remarkable ability of negotiators from industrial countries (especially the United States) to take advantage of differences amongst the developing countries.

But this time, it really looked for a while as if things could be different. The level of dissatisfaction of most developing countries with the functioning of the WTO and the skewed implementation of the Uruguay Round GATT accord has never been higher. W orld trade is on a major downslide: last year, world exports in volume terms increased by a paltry 3.5 per cent, while in terms of dollar values it actually fell, as international prices in all major categories of exports declined.

The tentative and fragile recovery in the crisis-ridden East Asian region is not occurring on the basis of renewed export growth to the industrial countries but rather because of Keynesian style revival measures based on increased government spending and a large dose of Japanese aid through the Miyazawa Initiative. Indeed, exports from this region remain subdued and continue to face a range of barriers in the developed countries. Similarly, exports from most other developing countries have recently been at their lowest levels of the past decade.

Internationally, exports from developing countries remain constrained by large and growing problems of market access, despite the many declarations in the various Uruguay Round agreements. The most important sectors, such as textiles and garments and lea ther goods, suffer from continued protectionist policies in the North, while others like consumer electronics and office equipment face genuine problems of market saturation in the industrial world.

Meanwhile, developing countries which had opened up their markets in the hope of a quid pro quo in other sectors have found their expectations belied. Their ability to undertake domestic technological change is being severely curtailed by the TRIP S (Trade Related Intellectual Property Rights) agreement. Many of them have been forced to make major concessions in terms of opening up their financial and other services sectors. The groups of major food exporters (the Cairns Group) is agitated that th e much promised liberalisation of trade and reduction of subsidies in Northern agriculture has yet to occur.

All this has made conditions particularly propitious for a genuine gathering of developing countries that could hope to evolve a common front for bargaining at the WTO. To add to this, the WTO itself seems particularly vulnerable at the moment. Not only has its authority been drastically undermined by the U.S. wilfully choosing to do whatever it wants in terms of unilateral trade actions, but it has been powerless to prevent an unseemly trade war between the U.S. and the European Union on even as trivia l an issue as bananas. Most important, its manner of functioning has been such that even most developing country negotiators are convinced that it is being run as a rich man's club, where no more than lip-service is paid to the crucial interests of the m ajority of the developing countries.

And now, there is more than a whiff of scandal around the hosts of the November meeting in the city of Seattle, Washington. The members of the organising committee - co-chaired by such illustrious representatives of contemporary capitalism as Bill Gates of Microsoft and Phil Condit of Boeing - have been discovered with their hands in the till. They stand accused of offering large multinational companies access to the many government officials who will be present during the trade deliberations, in return for sponsorship money. The committee apparently hoped to raise as much as $9 million from this "innovative" scheme alone, along with other forms of sponsorship.

Private sponsorship of public and multilateral meetings is not new, especially in the U.S. where virtually everything is seen in terms of buying and selling. But this latest and most blatant instance of what would anywhere else be called corruption and l ack of "governance", is likely to inflict further damage on the WTO's already battered reputation.

Even within the developed countries, more and more citizens have begun to realise that the supposed defender of free trade rules, that is the WTO, is disproportionately influenced by international corporations with very specific interests, rather than by the representatives of citizens in the member countries. This type of exercise not only confirms such a link, but even puts up price tags for the favours being offered to big business.

IN this background, it was to be expected that the Bangalore meeting would offer a major opportunity to the G-15 to seize upon the general sense of dissatisfaction and work out a joint approach and strategy that would force the important issues of common concern back on to the trade negotiating table. But somehow, despite the circumstances, this did not happen. Instead, the meeting in Bangalore remained at the level of general complaint and platitude, and did not work out any specific bargaining points, much less a cohesive strategy.

A major reason for this failure must lie with the hosts of that meeting, the current Indian government. Commerce Minister Ramakrishna Hegde did indeed make a rambling speech in which he made the usual noises about the unequal manner of implementation of the GATT accord. Thus, he is reported to have said that "trade negotiations cannot continue to be an exercise in which we yield market access, even as access obtained by us is thwarted and undermined." He also dubbed the attempt to introduce into the WTO non-trade related issues, such as social clauses or clauses on governance, as "thinly disguised efforts to impede the free flow of trade" by erecting new barriers against products from developing countries.

But in terms of achieving some degree of coherence towards a common negotiating strategy, the Commerce Minister contributed effectively nothing. Indeed, his preference for generalities also meant that the entire meeting did very little in terms of planni ng concrete action, and became a harmless exercise in letting off steam that would certainly not cause any sleepless nights among developed country negotiators.

WHY should this have been the case? Some of the reason may lie in the actual agenda of the government, as opposed to its declared agenda on this particular occasion. The actions of the Commerce Ministry over the past 15 months have been remarkable for t he way in which they have systematically furthered the interests of large multinational capital over those of domestic producers and workers.

Thus, the very sweeping import liberalisation - including in consumer goods - that has occurred so rapidly in the short tenure of this government, has taken place during a period of domestic industrial recession, and has allowed multinational penetratio n in a wide range of production activity, much of which has adversely affected small producers in particular. The measures supposedly designed to promote exports have created not a level playing field but a highly sloping one, in which domestic small ent repreneurs are practically being forced to fight gravity.

How much of this is inadvertent, and how much deliberate, can of course become a subject of fierce debate. But the effective implications of this strategy are less open to question, Thus, to take only one example, cuts in import duty on edible oils, in t he context of the very low international prices that are currently reigning, have most certainly had a negative impact on the viability of the domestic edible oils industry. Similarly, the failure to increase the import duty on sugar at least to the leve ls common in almost every other country has meant that the domestic sugar industry is not only facing low prices but is being forced to hold large stocks while cheap sugar is being dumped from abroad.

But these decisions have simultaneously benefited some. These of course include traders who are making money at the expense of producers, but also consumers, among whom are large multinational companies, including Nestle, Levers, Coca-Cola and Pepsi, who are now large buyers of oil and sugar and are probably waiting to take over the domestic downstream industry once sickness drives them out of business. Such examples proliferate across the manufacturing sectors.

Of course, the Commerce Minister cannot be held solely responsible for what has been a remarkable feature of this government in general: the mouthing of "swadeshi" or nationalist slogans while simultaneously doing more than any government before it to pr omote the interests of foreign capital and to ignore the legitimate economic demands of the Indian citizenry. Given this overall tendency, the singular lack of any concrete achievement at the G-15 meting should come as no surprise.