Why the global protests and the feeling of unease against the WTO? These are not unfounded. The WTO has its plus points and its drawbacks. To improve upon what has already been a tremendous leap forward in global trade, we need to understand the intricacies involved.
If we are able to comprehend both sides of the argument, we will find a course of action to solve the maladies believed to be caused by the WTO. The disagreements do not arise from the global trade but the resultant effects of globalization and the very rules of the body governing world trade.
Globalization is a foregone conclusion. Its ills must be regulated and benefits availed. So, leaving globalization and its spillover costs aside, the exact nature of the opposition must be analyzed.
The opposition to the WTO is centred around the following main points:
WTO is too powerful; it can compel sovereign states to change their laws if it feels that the laws do not comply with the agreements made. It is run by the rich for the rich; it does not give significant weight to the problems of the developing countries, in practice, if not in theory. It is indifferent to the negative fallout of free trade; its commercial interests take priority over everything— from child labour to workers’ rights and environment to health. It lacks democratic accountability. Its trade dispute hearings are closed to the public and the media, while free trade presupposes open debates and transparency.
To govern the international trade, WTO was set up in 1995. The WTO has clauses to protect the environment, but they contain no ‘minimum standards’ to protect the environment, labour rights, social programmes or cultural diversity. What makes it so powerful is that it can intervene in the everyday administration, of any member country, and force it to change its laws if the WTO feels that they are detrimental to free trade and are against WTO agreements.
The member states themselves have given both legislative and judicial authority to WTO to challenge laws, policies and programs of countries which do not conform to its rules. Once a case is decided, in secret by a panel, world wide conformity is required. The country affected, must bring its laws in conformity with the decision or face retaliation in the form of sanctions.
Pascal Lamy, the ex-European Trade Commissioner, before his departure, called for environment and social organizations, such as the World Health Organization and the International Labour Organization to be brought at par with the WTO. If this step is not taken then the generally held belief is that, there is little point in having treaties to protect anything other than free trade.
The anti-WTO demonstrators see that the world is beginning to look a lot like France, a few years before the French Revolution. The 500 richest people on Earth now own $1.54 trillion, more than the entire annual GDP of the African Continent, even more than the combined annual income of the poorest half of the globe.
In the Guantanomo Bay and the Abu-Ghraib jails we see the Bastille of our time, where the rich and powerful keep men and women confined, tortured, abused and dehumanized without charge or trial. If the principles of justice and fair play are not observed in the process of globalization, revolutions may erupt world-wide.
The ‘Doha Round’ of trade talks held in November 2001 was meant to work towards a system of trade rules that were fairer to developing nations. But its subsequent meeting in Cancun failed, agriculture being the lifeblood of developing and least developed nations was the stumbling block.
The poor countries accused the developing nations of protecting their farmers through subsidies, usually funded by tax payers via governments or trade associations, and then dumping their goods on poor countries at knock down prices, undermining local farmers.
The subsidies made the farmers of developed nations more competitive and led to inefficient resource allocation. On the other hand, while trying to import their good to developed nations, poor countries had to face an unfair competition, due to subsidies, which goes against the very concept of comparative advantage, the foundation stone of the WTO. A new alliance of developing nations arose and refused to agree to the proposed agreement and rose to the occasion high above what was expected.
Instead of slashing the $330 billion subsidies lavished on their farmers, as promised during the meeting in Doha, the rich countries have ramped up their support of the sector. US alone has increased its support by $ 175 billion over 10 years and European Union’s Common Agricultural Policy, which swallows up nearly half of its budget, was maintained – any real cuts being put off until 2013.
Services, is one of the fastest growing sector of the world. It accounts for about 60 per cent of global output, 30 per cent of global employment and 20 per cent of global trade. For developing countries, this is one of the most important sectors, due to abundance of population and shortage of jobs. By comparative advantage, the abundance of cheap labour can help poor countries to specialize in trade in services. With the free flow of goods, developed countries – are required to recognize the need for free, cross border, mobility of labour.
Despite the recent agreement of August 2004, recognizing the need of free trade in services, the emphasis on free trade in goods is quite prominent while cross border mobility of labour is a distant dream.
Sectors favouring developed countries that is in which they have comparative advantage, such as manufactured goods, are a priority while sectors like agriculture and services are out of focus. Without balanced liberalization can the developing countries really benefit from WTO? Unless simultaneous liberalization of cross border mobility of labour with free trade in goods is ensured, the poor countries will face more widespread unemployment and penury.
Current international trade rules are keeping millions of people in poverty. This situation is maintained by man- made rules that favour the rich over the poor. These rules are agreed between countries at WTO meetings. Every member country is entitled to representation. But the situation is not as it appears or is led to be believed. For example the US has 250 permanent representatives lobbying their case and negotiating, while Bangladesh has only one.
The official business of the WTO takes place in Geneva and so do the equally important unofficial contacts. But as the WTO itself states, “Only about one third of thirty or so least developed countries in the WTO have permanent offices in Geneva, and they cover UN activities as well as the WTO.” Every country can influence what can happen at the WTO but rich and powerful countries have stronger, more professional lobbies with greater leeway, to negotiate. This may seem unfair but the world is unfair unless you have temerity to make it just.
A case in study is Nigeria who has threatened to default on its $33 billion overseas debt, unless it is helped. It is mind boggling how these so- called development loans chain the poor to the debtors block.
As aptly put by Farouk Lawan, the chairman of the finance committee in Nigeria’s House of Representatives said, “It is inconsiderable that Nigeria has paid $3.5 billion in debt service over the past two years but our debt burden has risen by $3.9 billion – without any new borrowing. We cannot continue. “ We must repudiate this debt.”
World trade might have helped countries specialize and increase the efficiency of resource allocation but what about the poor countries in Africa whose level of poverty has risen because they are weak in trade. The WTO scenario seems to be a dog eat dog situation, whoever gets ahead of the line wins and whoever is left behind is left to perish. Is that what humanity has come down to? Are these rules, these iron chains representative of the evolution of human thought?
Unless we are able to make health and environmental organizations stand on equal footing with the WTO, we will keep hurtling towards a catastrophe. Japan is considered to be a major force in the destruction of the world’s forests and the greatest contributor to global deforestation. It has just two per cent of the world’s population but its wood product market is second only to the US.
While due to the recent pressure, the Japanese government is willing to find ways to reduce its timber imports, it is nearly impossible to do so, due to restrictions imposed by WTO and its trading partners. As Charles Barnes of the Engineered Wood Association put it, “They can’t have it both ways. If they want the US or Canada or any other country around the world to buy their electronic products or their cars or whatever it has to be a two-way street.”
Last but not the least is the WTO’s dispute settlement procedure, described as “medieval” by Mr Pascal Lamy, ex- EU Trade Commissioner. The settlement procedure depends heavily upon trade sanctions, which first of all isn’t the best way to promote trade. Secondly, it depends on the fact that if rich countries like the US is awarded and applies sanctions on a poor nation like Pakistan then we might be in a predicament. But on the other hand if Pakistan is awarded and applies trade sanctions against America, it will not only be laughable but in the end we will be the loser.
These are genuine problems but if we tackle them with a genuine will to resolve them, then developing nations must combine and get their right, as in a democracy majority is always right.
The recent development in agriculture is an exemplary breakthrough and a welcome reprieve for poor countries. The breakthrough was reached after five days of negotiation in Geneva last year. The deal approved by all 147 members, will cut farm subsidies, in return developing countries will have to open their markets to manufactured goods, which most of them already are in the process of doing.
It was a success for the new system of “Multilateralism” (different countries and regions with common goals gathering together to pool their resources and votes to get their rights). These trade blocks will decide the future of world trade. But surprisingly, most of the poor countries are not a part of any block, and have not had the insight to make one of their own. The dissention between the poor is their greatest weakness. The road is diverging in the yellow wood we just have to take the right path.