The WTO impasse and the possible roads ahead - a development perspective

SOUTHNEWS

No. 17, 1 November 2012

SOUTHNEWS is a service of the South Centre to provide information and news on topical issues from a South perspective. Visit the South Centre’s website: www.southcentre.org.

The WTO impasse and the possible roads ahead - a development perspective

At a lively session held as part of the WTO’s Public Forum, Ambassadors of developing countries and other experts presented their views on the impasse in the WTO’s Doha negotiations, the “new trade narrative” promoted by major developed countries, and the need for an alternative narrative that reflects reality, from the perspective of developing countries.

There have been innumerable calls, including by political leaders, for the successful conclusion of the WTO’s stalled Doha negotiations. But the prospects of this happening are now bleak.  A debate is growing on the WTO’s future role.

The impasse at the WTO, the differences between Member States, the narratives on what has gone wrong, and the way forward were discussed at a session that was part of the WTO’s three-day annual Public Forum held on 24-26 September at the WTO headquarters in Geneva.

The session, on "Doha and the Multilateral Trade System: From Impasse to Development?", was organised by the Our World is Not for Sale (OWINFS) network, the International Trade Union Confederation, the Third World Network, and the South Centre, on 26 September.

The speakers were Ambassador Jayant Dasgupta of India, Ambassador Angélica Navarro of Bolivia, Ambassador Faizel Ismail of South Africa, Andrew Cornford of the Observatoire de la Finance, and Deborah James of the Centre for Economic and Policy Research, US.

The session was moderated by Martin Khor, Executive Director of the South Centre. Kicking off the session, Khor said that the background to this session was to look at what the future holds for the WTO and in particular, in relation to the development dimension and the interests of the developing countries.

He provided a comprehensive round-up of the negotiations from the Uruguay Round to the current Doha Round.  The impasse in the Doha talks, launched in 2001, has been due to a fundamental conflict since the birth of the WTO in 1995.

He said that the theme of review and reform of the WTO to make it more development-friendly versus the theme of ‘let's push ahead into new issues and expand the power of the WTO' has been part of an underlying conflict of views on the WTO’s role since its formation.

The developing countries felt at the end of the Uruguay Round (which led to the WTO’s formation) that the WTO rules were unfairly tilted in favour of the developed countries and they wanted to review and reform them to make the WTO more development-friendly as well as to get the developed countries to cut their heavy protection in agriculture.

However the developed countries which had succeeded in bringing non-trade issues like intellectual property and services into the trading system were not interested in the proposed reform. They wanted to push the WTO into taking on even more treaties and rules on new issues such as investment, competition and government procurement, as well as to continue opening the markets in developing countries while protecting their own agricultural sector.

Although the Doha Round was supposed to promote the developing countries’ interests, most development aspects had been eliminated or marginalised in the past decade, while developed countries keep insisting on opening the markets of developing countries especially in industrial products and services, while allowing themselves to continue their protection in agriculture.

In recent years, the United States made increasingly extreme demands that could not be accepted to key developing countries, resulting in the present deadlock.

Khor concluded that the WTO is now at a crossroads, as to whether it should focus on the unfinished agriculture and development issues, or ignore these and instead create new rules on yet more new issues that would make the system even more imbalanced.

India’s Ambassador to the WTO, Jayant Dasgupta, said that the developed countries were now aggressively pushing new rules in trade facilitation which would result mainly in facilitating more imports into rather than exports for developing countries. That would also be costly and the promised funding is not forthcoming. 

The developed countries were also pushing for other new ways to open up developing countries’ industrial markets through a second Information Technology Agreement and tariff elimination of what is termed environmental goods, with a wide definition of both, thus involving many sectors and goods.

And after that, we can expect more pressures to negotiate new issues in the agenda for a new round, he said.  At the same time, the developed countries will not accept cuts in their agricultural subsidies nor in providing greater market access, thus their proposals would lead to even more unfair balance.

Dasgupta stressed that the WTO really faces a crisis of reconciling the different demands and ambitions of countries which have up to $80,000 per capita income and those with as low as $500 per capita income.

"How do we reconcile these? How do we reconcile the development needs, the aspirations, the pressing need of providing employment? ... We need to look at trade not only from the mercantilist angle of more profits…We need to look at it from the prism of social justice," he said.

Ambassador Angelica Navarro of Bolivia advocated a fair, balanced multilateralism where everyone has a say on an equal footing, but unfortunately the reality today is different.

We started this century with a mirage, the idea of development and re-balancing the trade system at the centre of the WTO.  Finally, there was to be a new negotiating round for which the developing countries were promised a series of illusions. But now we realise that those promises were nothing more than a means to ensure greater opening of our markets, she said.

In her view, the impasse is due to the lack of a political will to ensure the multilateral trade system is adjusted in favour of the poorest. Trade agreements must not impose conditions that have adverse effects on human rights and the environment, and must not bring an end to the values of our societies.

More than ten years later, she said, "we realised that those chimerical promises were nothing more than a means to ensure greater opening of our markets.”    The market opening was the idea, and we were to accept multinational corporations and companies from the most powerful of the world's countries.

"However, masks have fallen and we are now facing what many call an impasse in these negotiations," she added. "We would prefer to call the current situation the lack of a political will to ensure the multilateral trade system is adjusted in favour of the poorest."

This situation is due to some wanting “development” to be development in name only, where "lip service" is paid to development now and again, but nothing is actually done about it.

As to the main issues for the twenty-first century, Amb. Navarro said that in Bolivia’s view, they are "first of all, development, secondly, development, thirdly, development."

In the twenty-first century, "we cannot have a development round based on free trade exclusively. It must promote trade that contributes to balance among countries and regions and Mother Nature…Trade agreements must not impose conditions that have adverse effects on human rights and the environment, and must not bring an end to the values of our societies.” The Doha Development Round should be a way of beginning to introduce some balance into the system, and we therefore must ensure that development is covered by it. If properly determined, it can help countries move forward.

Ambassador Faizel Ismail of South Africa gave a critique of the concept of Global Value Chains that was being advocated in the WTO by those who want to promote further trade liberalisation in developing countries.

He pointed to three agendas in this area. The first is being used by TNCs, which argue that this is good for development and growth. The debate has been about the movement of capital across the world and how does this advance the development of particular countries, as well as how does it help countries to move up the value chain and what share of value added they get. This has been debated, and UNCTAD has produced a number of reports on the need to diversify, upgrade and increase the share that poorest countries have on the value added.

The second way in which the idea of GVCs is being used is reflected in the politics today. There is a backlash by people around the world who feel that they are losing from the spread of globalisation and the expansion of TNCs. Interestingly, a massive backlash is taking place today in the North - in the United States and Europe - where people are saying that their jobs are being pushed out, and they are talking about re-shoring and in-sourcing, and bringing back jobs, rolling back globalisation and "putting the genie back in the bottle."

The third way the concept is being used is an ideological one, he added, and much of that permeates the corridors of the WTO where people who are concerned about the lack of support for liberalisation are trying to revive support for it.  Many proponents of GVCs are arguing that the logic of globalisation and GVCs suggest that the most efficient way to improve your chances of participating, of gaining from globalisation is to reduce barriers and participate in these GVCs. They use this argument to gain support for liberalisation and pushing their issues to be adopted and break the impasse.

“I think this argument is flawed... and does not offer us a way out of the current crisis," said Ambassador Faizel. This narrative of GVCs does not add anything really new to the debate. It really talks about more of the same, trade liberalisation. "It's a wrong analysis of reality because it talks of the market as if it's a self-regulating machine. It doesn't provide a correct policy response to the current crisis we have of globalisation, in the WTO the crisis of Doha, and the crisis of multilateralism.”

He also criticised the advocacy by major developed countries and others to take the plurilateral route which will marginalise even more many of the developing countries, particularly the smaller countries, from the system, because the whole idea is based on “starting with a few countries and then imposing the will of the few on the rest."

"This is not a correct principle for multilateralism," the South African envoy stressed. “Therefore, we need a discourse, a new dialogue about how we would want to rebuild this multilateral system which was constructed ... by a few people in the interest of the few. How do we construct this in a way which serves the interests of all.”

On the way forward, he said that there is need to begin a different dialogue. One of the key principles to base the system on is fair trade, equal opportunities, and levelling the playing field. The second principle should be about capacity-building. Many countries don't have the capacity to produce and export, and they need to be assisted. Thirdly, the rules should be fair and allow everyone to act in ways that promote their development. It should not close off opportunities for development and policy space. It should be inclusive and allow for the participation of countries.

Finance analyst Andrew Cornford addressed the GATS rules relating to finance in light of the global financial crisis. While the GATS rules and commitments were being negotiated in the 1990s, the overwhelming presumption of policy makers in advanced countries was that there would be enormous benefits from the liberalising cross-border financial transactions and removing restrictions on the presence of foreign banks.

As a result, the GATS rules were geared to limiting countries' regulations which impeded trade in financial services, and not towards the right to regulate or procedures for safeguard actions.

Since the early 1990s, the international banking landscape has undergone far-reaching changes with important implications for regulation, especially in the light of the financial crisis.  Moreover, the large destabilising capital flows has led to further rethinking concerning the role of capital controls as a protective measure. The bail-outs of large banks in the West have implications for policy towards the granting by countries of market access to foreign banks that have benefited from such support.

So far, negotiations and other work on banking services in the WTO have seemed little affected by the need for fundamental rethinking in the light of the financial crisis, despite initiatives currently being developed in other international institutions.

However there have been concerns raised about the GATS assumptions on finance by various organisations and by developing country delegations.  For example, Ecuador submitted a proposal that the WTO should review developments in the global financial crisis, the implications for a safe regulatory framework and an assurance for WTO Member States that they can use policy tools to prevent intensification of the crisis. Ecuador's main concern is systemic, that member countries should have the capacity to safeguard the stability of their financial systems on the basis of a clear, agreed understanding of WTO regulations.

Deborah James of CEPR, referring to WTO Director-General Pascal Lamy's WTO panel on defining the future of trade, said "we have seen this show before", referring to the 1980s when the then Director-General Arthur Dunkel convened the Leutwiler panel to write a report that ultimately led to the Uruguay Round that "gave us the WTO and the very big asymmetries that we have all been living with for the last 15 years. So, we don't want to see that happen again.”  She believed the panel is part of a strategy to move forward a new trade narrative, talking about the global value chains and the need for trade facilitation and the plurilateral services agreement as the lubricant for those global value chains.

She stressed it is important to have alternative voices representing the people who are going to be affected by the negotiations, and not just the big businesses who are concerned about how they can make more money out of changing WTO rules, but people who are looking at fixing the existing WTO rules.

This article is based significantly on extracts from an article written by Kanaga Raja, Editor of the South-North Development Monitor (SUNS), which was published in the SUNS on 29 Sept. 2012.

This article was published in the South Bulletin (26 October 2012).

(See other articles in this issue of South Bulletin for details of some of the speeches reported above by clicking here).