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A decade of WTO

Print edition : Dec 02, 2005 T+T-

WTO AT TEN: Looking Back to Look Beyond - Volume I: Development through Trade & Volume II: Issues at Stake edited by Bibek Debroy and Mohammed Saquib; Konark Publishers, 2005; Volume I, pages 334, Rs.550; Volume II, pages 418, Rs.650.

THE World Trade Organisation (WTO) completed 10 years in January 2005 and is getting ready for its sixth Ministerial Conference in Hong Kong in December. The two volumes mentioned above evaluate its progress during the first decade and assess the issues to be discussed in Hong Kong and beyond.

But first a brief account of the founding of the WTO and its essential mandate. Towards the end of the Second World War when the victory of the Allies appeared certain, the United States and the United Kingdom convened a meeting of government representatives (which included India) at Bretton Woods, U.S., in 1944. Three possible international organisations were discussed, the International Monetary Fund (IMF), the International Bank for Reconstruction and Development (IBRD, which subsequently has come to be known as the World Bank) and the International Trade Organisation (ITO). Of the three the first two took shape, but the ITO was abandoned because the U.S. was not willing to open up its trade policies. In its place a legal structure called General Agreement on Tariffs and Trade (GATT) was set up. The mandate of GATT was to remove, as far as possible, the variety of tariffs and non-tariff barriers (NTBs) that countries had resorted to during the inter-War protectionist era and "to secure a predictable international trading environment in which industrial and commercial entities had the confidence to invest, create jobs and to trade".

GATT conducted its negotiations in several "rounds" with 23 countries participating in the first "Geneva Round" in 1947, but moving on to the prolonged (1986 - 1994) "Uruguay Round" in which 123 countries took part. This last round of GATT not only was long, but became more inclusive. As against the discussions on tariffs and NTBs, the Uruguay Round brought in agriculture, services, textiles and garments, trade-related intellectual property rights (TRIPS) and trade-related investment measures (TRIMS) to form the agenda for further negotiations. The agenda had, indeed, become elaborate. Along with the continuation of the discussion on dispute settlements initiated in the previous round, it became clear that GATT would have to yield place to a more thoroughly designed organisation. Thus was formed the WTO in 1995. There were apprehensions to begin with, but after a decade the WTO has become a unique international entity with a membership of about 150 countries (including China) and some 30 more countries (Russia among them) waiting to be admitted as members.

Multilateralisation of trade without discrimination is the objective of the WTO, and negotiation is its modus operandi. Its uniqueness lies in the fact that all its members have equal rights (no veto powers unlike in the United Nations) and there is an independent global juridical system to arbitrate disputes that arise. In this sense, as one of the contributors to the volumes notes, it is a major inter-governmental institution, and perhaps also has "the most civilised set of global rules ever devised". But the claim that it has been "a startling success" is a gross exaggeration as will become evident soon.

The two volumes look back and look forward. But since negotiations are the principal feature of the WTO, and the authors pay special attention to technicalities (on issues such as intellectual property rights), the text is likely to be useful to specialists and those dealing with the negotiations. But since international trade has been growing rapidly and trade has a significant bearing on day-to-day domestic activities such as agriculture and services, and, going a step further, trade-related aspects include the environment and even human rights, the WTO's activities impact the lives of ordinary citizens as well. Viewed from that angle, the essays in the two volumes, authored by those directly involved with the WTO and scholars specialising in it, both from India and elsewhere, are informative for the general reader also.

That the WTO is not a distant international agency dealing only with technical problems was demonstrated in Seattle in 1999, when its Ministerial Meeting was disrupted by protesters drawn from many parts of the world. The legitimacy of the actions of the protesters can be, and has been, questioned, but what they did brought to the attention of the world one of the crucial issues that the WTO has wrestled with ever since it was established - indeed, even before that. As was noted earlier, the Uruguay Round had enlarged the agenda of trade negotiations. The developed countries were eager to bring in trade-related issues, especially intellectual property rights, but were reluctant to include agriculture because of the protection they (the U.S. and the European community) were providing their agriculture. The developing countries, on the other hand, wanted such protection removed, but were opposed to the inclusion of the broad category of trade-related matters. The developed countries were protecting their textile industry also, but like agriculture, the textile industry too was crucial for millions of workers in developing countries. Because both sides stuck to their respective positions stubbornly, the only way to move forward was to bring into the agenda agriculture and textiles as well as trade-related matters. Four years after the WTO was formed, developed countries had not done anything much to open up trade in agriculture and textiles, but were forcefully taking advantage of the provisions about trade-related issues. And so, agitated people from different parts of the world felt that their only option was to take to the streets in Seattle.

Subsequent events have shown that the Seattle demonstrations had a bearing on the WTO. The 2001 Ministerial Conference at Doha (the Ministerial Conferences take place once in two years), held a couple of months after "9/11" in the U.S., recognised some of the grim realities of the real world and launched what has come to be known as "the Doha Development Agenda" (DDA). Those interested in the major changes that the DDA brought about to the WTO should go through pages 26 to 38 of Volume I. A few passages are worth quoting: "We strongly reaffirm our commitment to the objective of sustainable development... "; "We agree that special and differential treatment for developing countries shall be an integral part of all negotiations... so as to be operationally effective and to enable developing countries to effectively take account of their development needs, including food security and rural development"; "We recognise that under WTO rules no country should be prevented from taking measures for the protection of human, animal or plant life for health, or of the environment at the level it considers appropriate... ."

If the Doha Declaration was something of a "startling success" for the WTO, the 2003 Ministerial Meeting at Cancun showed that it was short-lived. The Doha agenda was to be fully implemented by the Ministerial Meeting of 2005, but by the mid term, in 2003, virtually nothing had been done. Hence, there was no Ministerial Declaration in Cancun, and it looked as though there was a virtual collapse, although quasi-official draft minutes were circulated for consideration by members. Commenting on it, another author in the volumes says, "The round has collapsed and the WTO is crippled, seemingly incapable of making any concrete decisions. All signs are that political attention has shifted decisively to bilateral and regional trade negotiations" (Volume I, page 169). In view of this, he goes on to say, "Hence the WTO is at best the second instance of trade policy" (Volume I, page 190).

Some salvaging has been done subsequently, which has come to be known as "the July Package", decisions made at the WTO general council of end July 2004. A major part of the agreement reached is that the subsidy that the European Union gives to agriculture and the variety of export subsidies that now prevail in the U.S. will be terminated within a time frame to be decided. Some of the conditions that the developed countries were insisting on relating to trade-related investments have also been dropped.

These are matters on which India has special interest. Of late, India, along with a few other developing countries (primarily Argentina and Brazil), has been taking a leading role in the WTO negotiations. An area where India's position has undergone a major change is about trade in services. During the Uruguay Round India had vehemently opposed the inclusion of services in trade negotiations. But now India takes a positive interest in the General Agreement on Trade in Services (GATS). This change is because of the role that services have come to play in the Indian economic growth in general and Indian exports in particular. In the five years ending 2004, India showed the highest annual average growth rate in the export of services, 23 per cent compared to 3.7 per cent for world export of services (Volume II, pages 25-26). Software services exports play the major part in this performance, moving up from a mere $754 million in 1995-96 to $8.6 billion in 2003-04 (Volume II, page 29). Not surprisingly, India now takes a keen interest in trade in services, with special reference to the movement of natural persons across national boundaries.

At the same time, developed countries, mainly the U.S., once the global champion of free trade, have started expressing concern over job losses resulting from "outsourcing". Protectionist arguments are being voiced in many parts of the developed world.

The mood, on the eve of the Hong Kong Ministerial Conference, thus, is not particularly reassuring. Many crucial issues need to be discussed and, if possible, resolved. Apart from the longstanding matters relating to agriculture and textiles, there are problems connected with industrial tariffs and the complex agenda pertaining to intellectual property rights. Those who wish to see the negotiations succeed, like practically all authors in the two volumes, are convinced that non-discriminatory multilateral trade that the WTO tries to promote is by far the best, even for poor countries. Yes, if that will happen. But the movement towards that state of affairs has been slow and painful. The Pakistani scholar whose essay deals with the WTO's impact on his country, for instance, says: "Just as much as trade globalisation is advantageous, it has a large number of disadvantages too which are going to be felt differentially by countries" (Volume II, page 355). He goes on to show how the liberalisation of trade in textiles has adversely affected Pakistan because of intense competition from India and China.

Even developed countries face problems of opening up and try in different ways to protect their domestic interests. A recent publication of the U.N., World Economic Situation and Prospects, 2005, points out that even after the developed countries have notionally agreed to eliminate agricultural subsidies, under the concept of "sensitive products" they are able to maintain a high level of tariff protection on specific products. Similarly, developed countries claim credit for opening up the textile trade, but trade in many textile and clothing items of particular interest to them still remain restricted. Matters unrelated to trade, such as child labour, are also brought in to restrict trade from developing countries.

The fact is that although the WTO is theoretically an organisation of equals in terms of economic power and negotiating strategies, some are more equal than others. The success of the Ministerial Conference in Hong Kong will depend on whether they are enlightened enough to let others become almost equals.