Now that the fifth ministerial session of the World Trade Organisation that was originally intended to complete the unfinished business of the Doha Development Round has ended in a stalemate and that too by leaving a bad taste in the mouth following a rebuff to the industrialized countries by the poor African countries on Singapore issues, the question arises: What kind of future the WTO has in store?
By the time dust settles down, one thing is certain. The organization’s rules and procedures that came in the way of smooth adoption of an investment treaty — the West’s prestigious proposal — will have to go, either formally or by other means. For, the Singapore issues cannot be put on the back burner indefinitely. It is so because without putting them into effect the pace of globalization cannot be accelerated. They are too indispensable to global capital’s ultimate triumph.
The WTO bureaucrats at Geneva will now spend the next three months assessing the Cancun’s fallout and come up with the kind of structural reforms that can prevent another Cancun-style failure. In other words, the West appears determined to change the decision-making mechanism of the World Trade Organization in order to cut to size certain member states such as those from Africa which bulldozed the just-ended ministerial session.
At present, the WTO has 146 members — a figure that will rise to 148 when Nepal and Cambodia take their seats in a month. Decisions are taken by unanimity, which means that any deal can be voted down by just one state. Unlike the IMF where there is a veto — only one veto — exercised by the United States, the WTO practises democracy. At World Bank, voting is weighted according to initial contributions to the bank’s capital. Similarly, a member’s quota (which it pays in its own currency and which allows it to purchase currency for other transactions) determines both its voting power in the IMF and its access to funds.
The fact remains that the WTO faces a classic dilemma of trying to balance efficiency with democracy. Smaller countries fear that leaving the real decision-making to a core group leaves them out in the cold. But giving every member a say is a prescription to a series of deadlocks some of which can hardly be overcome. That is why Pascal Lamy, Europe’s trade commissioner, calls the WTO “a mediaeval structure” which is also an unintentional rebuff to the concept of democracy itself. In any case, Lamy wants the EU to review (and give up) its commitment to multilateral trade talks. He will soon table a proposal for a radical overhaul of the WTO. In fact, both the EU and US are of the opinion that the current WTO procedures are not capable of producing unanimous decisions quickly and that it is imperative to re-examine its structure.
This could lead either to an attempt by them to change the structures, or turn increasingly to bilateral and regional efforts. The EU would not concede that it was its own position on subsidies and tariffs that had become a great obstacle to progress, rather than a multilateralist approach or the decision-making process itself. So is the thinking of the president of the European Commission Romano Prodi who says the WTO, in its present shape, is unable to support the weight of the task it was entrusted with.
Lamy says the Cancun collapse should make the EU and the world think about two main issues. First, whether multilateralism should be maintained. Secondly, whether the current working method of the WTO should be kept as it is. One of Europe’s main concerns, according to Lamy, is the WTO’s consensus-driven approach. “I think it’s above dispute that the principle of the permanent sit-in of 146 trade ministers in order to take a number of very detailed decisions...is a theory that visibly does not work.” WTO officials are due to meet at a general council on December 15.
The case of how the TRIPs agreement was adopted and enforced is a handy incentive in the present circumstances for the developed states to bypass the majority opinion. It was not negotiated by GATT members. It was imposed by multinational corporations which used the US government to force it on other members. The basic framework for the TRIPs patent system was conceived and shaped in a joint statement presented to the GATT secretariat in June 1988 by the Intellectual Property Committee (IPC) of the US and industry associations of Japan and the Europe. The IPC is a coalition of thirteen major US corporations.
The rebuff that the West suffered at the hands of the small African states may not be easily forgotten. It came when Pascal Lamy pressed hard for a treaty on investment which in Oxfam’s words is nothing less than “emperor’s new clothes” — a revival of infamous Multilateral Agreement on Investment floated by OECD in 1998 and taken back hurriedly following widespread public protest — but the African states flatly rejected the move and refused to accept the last-minute concession.
Lamy had agreed to drop even the controversial issues of investment and competition from the talks altogether. But Africans insisted that the other two Singapore issues — trade facilitation and transparency in government contracts — be removed as well. “We have said we don’t want to negotiate on these issues”, one African minister remarked. But the climax came when Japan and South Korea said they were holding out for all the four issues, chairperson Derbez of Mexico suddenly pulled the plug.
This infuriated the western trade ministers. “ If he had not halted the talks, a deal could have been reached”, said the British minister. The Africans had, by then, walked out of the conference hall. This was, what George Monibot of the Guardian in a brilliant commentary stated, “a collective threat to the rich states as the developing countries, for the first time in some 20 years, were seen beginning to unite”.
Meanwhile, the US, the world’s largest economy, has openly stated to pursue now a unilateral approach, as it does in foreign policy. One effect of this approach will clearly be an intensified effort by the Bush administration to negotiate bilateral free-trade accords with individual countries and groups of countries, similar to the North American Free Trade Agreement. Robert Zoellick, the US Trade Representative, recently wrapped up such deals with Chile and Singapore, and he has launched talks with five Central American countries, Australia, Morocco, and several southern African countries.
Sen. Charles E. Grassley, chairman of the Senate Finance Committee who attended the Cancun meeting, has very crudely warned certain countries such as Colombia, El Salvador and Egypt that joined the Group of 22 developing countries in opposing the rich nations’ subsidy policies but were also in talks at the same time with the United States on separate free-trade pacts. He said “we will remember who our friends are” and asked these countries to forget if they expected to be rewarded with special access to the US market.
A major development at Cancun that may compel the developed countries to reform certain WTO procedures was the coalition of the Third World states which made a marked contribution to its outcome and shifted the balance of power away from the rich countries. It’s hard to exaggerate the importance of the new coalition that formed around Brazil, China and India. Pakistan also joined it. Other members are Argentina, Bolivia, Chile, Colombia, Costa Rica, Cuba, Ecuador, Egypt, El Salvador, Guatemala, Mexico, Paraguay, Peru, Philippines, South Africa, Thailand, Turkey and Venezuela. For the first time in any international organisation, the developing world managed to unite around a common position and that allowed it finally to assert itself successfully against the US and the EU.
George Monibot, in his commentary, says, “by treating the trade talks as if, in Thomas Hobbes’s words, they were ‘a war of every man against every man’, Lamy scuppered the negotiations, and very possibly destroyed the organisation as a result. If so, one result could be a trade regime, in which, as Hobbes observed, ‘force and fraud are ... the two cardinal virtues’. Relations between countries would then revert to the state of nature ... where the nasty and brutish behaviour of the powerful ensures that the lives of the poor remain short.”