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Is the World Trade Organization bad for development?

Date
Time (GMT +00) 13:00 14:15

Speakers:
Barry Coates,
World Development Movement
Sheila Page, Overseas Development Institute
Chair:
Charlotte Denny, The Guardian

Barry Coates emphasised that trade could play an important part in development and that trade should be governed by the rule of law, not the rule of power: thus he was not in principle against trade, or against a democratic and rules-based organisation of the kind the WTO claimed to be. However, he did question a core proposition of current development thinking, that trade liberalisation would necessarily lead to growth and poverty reduction. Furthermore, he argued that the trade regime, as it was actually implemented by the WTO, was leading to an increasingly unequal world.

On trade liberalisation and development, the evidence was mixed at best. Some of the most successful countries (in China and East Asia) had not liberalised in order to develop, and had protected industry until it was ready to compete. Indeed, OECD countries had followed the same path. Some countries which had liberalised (e.g. in sub-Saharan Africa) had been very unsuccessful. When developing countries did want to liberalise, the playing field was not level. They faced both tariffs on exports four times as high as those of developed countries, and a world trading system in which a third of world trade was within multinational enterprises. The evidence was that liberalisation often did not reduce poverty. It was not a panacea.

Did the current rules-based system help? Barry Coates thought not. It had insisted on the regulation of governments, in pursuit of free trade, but had failed to regulate companies. The result had been the growing commodification of public goods, and a drive to extend private business into public service provision in developing countries. The General Agreement of Trade in Services (GATS) was an example of companies being given higher priority than the poor. It was important to remember that without government action, unregulated markets rewarded the rich and powerful.

Barry Coates concluded by insisting that trade liberalisation was not an end in itself. The WTO should be addressing issues such as poverty reduction and sustainable development. The current model for the trade system was wrong, not the rules. There was a real question about whether the WTO was reformable.

Sheila Page agreed that it was easy to over-sell the contribution of trade to development, and that it had often been over-sold. Trade permitted but did not cause development. By the same token, it was easy to over-sell the importance of the WTO: it was part of the trade system, but was not, for example, the cause of the Common Agricultural Policy. It would be wrong to assume that all tariffs would fall to zero if the WTO were abolished.

Sheila Page examined five common criticisms of the WTO:

  • First, critics argued that multi-lateral trade agreements made poor countries worse off. This was wrong. The evidence was that trade liberalisation could help bring about development.

  • Second, it was argued that the WTO prevented countries from following the same protectionist route that had been followed by developed countries. This was wrong. Under WTO rules, least developed countries had great freedom. Current tariffs were well below bound levels. Actually, it was the international financial institutions (IFIs) that had influenced countries not to exercise their rights under WTO rules.

  • Third, it was argued that GATS forced countries to liberalise services. This was wrong. GATS was an opt-in agreement, country by country and service by service. There was no equivalent of the Cairns Group in agriculture, arguing for across-the-board liberalisation.

  • Fourth, critics suggested that the WTO imposed unsuitably high standards on developing countries, for example on intellectual property. These could be inappropriate for a country's level of development, and costly to implement. There was something to be said for this argument. However, it also needed to be remembered that countries had received some concessions in return for this - the negotiations had to be judged as a whole.

  • Finally, critics argued that the dispute settlement procedure was against the interests of developing countries. This was the weakest case of all. Many developing countries had taken cases against the EU and the US to the WTO and won, and seen the decisions enforced: Ecuador and Bangladesh were examples. India and South Africa had also made good use of the procedures.

Sheila Page ended by arguing that poor countries were keeping up with the regulations and using them; and that they were participating more effectively than before in negotiations. This greater level of participation itself presented new problems: the process was much harder to manage. (her talk was based on the ODI study of Developing Country Participation in International negotiations and on her lecture ' Trade and development: the perspective of a very poor country ' given to the Observatory of Globalisation in October 2001)

A number of points were raised in the discussion:

  • The evidence regarding the overall impact of liberalisation was discussed. The point was made that lack of success in SSA could not be explained by the degree of liberalisation. The issues were more complex. On the other hand, there were obviously winners and losers from liberalisation. Small farmers were cited as potential losers (as had been discussed in the previous ODI meetings series on rural development.).

  • There was sympathy for the idea that poverty reduction should be the over-arching goal, but caution was also expressed about over-loading the WTO. There were many issues that required a wider multilateral framework (e.g. labour rights). The problem was that progress was uneven across the system.

  • Finally, there was some disagreement about whether or not it mattered that corporate interests were reflected in WTO negotiations. Some argued that this was a bad thing, subverting the focus on poverty (it was reported, for example, that the TRIPs agreement had originally been framed by TNCs). Others argued that it was important that all interests should be represented: the job of the negotiators was to hold the ring.

Simon Maxwell / Diana Evans
November 2001

Description

During this event they discussed the link between trade and development.