Chair:

David Batt.

Speakers:

Richard Manning, Director of Resources DFID

Sheila Page, ODI

Why developing countries need the international system
Sheila Page, ODI

The questions we are asking in this series are:

• What do developing countries need to achieve?
• How can they respond to what others are asking of them?
• What assistance, either through reforming institutions, to make them more effective and responsive, or though aid would help?

We are emphasising participation by developing countries in government to government negotiations: there is a separate set of questions, to which we may wish to return, and will in our research, on how to ensure that systems are in place to ensure representation of all interests within countries. International institutions and systems must see that both questions are answered to ensure their continued legitimacy.

Developing countries want to participate now becausethey want results from the international system.

Exportsare important for development: whether as a second step after import substitution or as a first step. For access to markets, countries must negotiate. Imports can be liberalised unilaterally: any gains from this are not gains from global institutions. The Uruguay Round was the first time developing countries participated actively in GATT negotiations, asking for some specific points (on agriculture and textiles and clothing), but not so much for general liberalisation (given preferences) as binding commitments to rules from trading partners.

The environmentis important: their climates are being altered, and the availability of resources to them to follow same development paths as their predecessors is in question. Some interests are more regional, such as conflict, but here also there is global concern.

This is not entirely new: developing countries have been members of GATT from 1947 (China, South Africa, Zimbabwe, Brazil). They participated in CITES, law of sea, and of course in the UN. On a narrower level, agreements on rivers, even rules of engagement, date back hundreds of years.

But the difference is that now they cannot avoid participating, not only because their own interests are more important, because of the increase in global flows, but because others want commitments or actions from them. They will not be permitted to exclude themselves.

One dramatic shift is in Lomé, from the ACP countries accepting preferences to being asked by the EU for reciprocity. This follows on demands for the more advanced developing countries to offer liberalisation in the Uruguay Round. There are similar trends in environmental agreements, where they are now asked to take on obligations. Even aid is becoming more negotiated: with countries expected to work with donors to set goals and coordinate programmes, sector wide approaches. And, less acceptably, they are blamed for conflict, low labour conditions, etc.

Developing countries have also seen theconsequences of failure. In the Uruguay Round, it is now widely accepted that, except for a few countries, notably in agriculture in the Cairns group and the textiles and clothing group, they did not gain because they did not identify objectives and participate actively. And not gaining means that they lost, at least relatively, and sometimes absolutely. ‘Preference erosion’ is the clearest example.

Globalisation means both increased interdependence and increased regulation.

Interdependence: the increased share of the traditional flows: of trade in output, investment, migration (at least among developing countries), patents and other intellectual property, communications. But there are also new contacts: services are now clearly not ‘non-traded’: not only do we see large expansion in international tourism, business services, etc., but cheaper transport and better communications make areas like health and education fully international. And finally there is the growing awareness that many natural resources are common property, sea, air, fish...

Regulation: the response to this interdependence is increased demand for a predictable, orderly environment, whether for economic activities or environmental, social, ...all aspects of community. This leads to interest in common rules, or common standards: we see this happening first in federal countries and regions (a very obvious example is that the 1992 initiative of the EU preceded the inclusion of services and regulation of patents and copyright at a world level in the Uruguay Round). It is important to emphasise that ‘globalisation’ is therefore not simply increased openness to international flows or reduced discrimination between national and ‘foreign’, but an active adjustment of both markets and rules to a changed international system.

It is not, therefore, an easy process: for the new areas it is more difficult than for the old: first, there is no traditional acceptance of what types of international regulations are needed or acceptable (as there is for tariffs or exchange controls) and no experience to help understand how regulations will work; second these new areas are ‘sensitive’ internally, and often highly regulated. This is true of most services, for example, health or banking services: often this is the reason that these areas were closed in the past. So introducing an international regime is regulating not just the intersection of markets (as it is for goods) but the intersection of regulatory regimes (and you are dealing with pressure groups and lobbyists within the government, which may be even worse than with private industry)

There is an important difference between the global level and what is seen in the EU or in countries: unlike the multilateral regime, these were not formed only for ‘practical’ reasons, to create an orderly environment. They have historical links and overriding political reasons for existence. This gives them great strength, as there will always be a presumption that a solution to disagreements over rules ‘must’ be found, because common interests are more important. In contrast, globalisation cannot rely on an assumption of permanence: if an agreement is not of use to all (if necessary, of course, there can be a balance of agreements), it will not emerge or it will not last, so consensus, or at least consent, and continuing acceptance, are necessary. Regulations must be clear (because there are no common traditions) and each must be fair (because they cannot rely on an assumption of common interests)

Developing countries are trying to improve their participation when the system is becoming more complex. Not only is each negotiation difficult, but there are more negotiations and discussions happening, both formally and informally. When David Batt spoke here two years ago, one of his slides was a month in the life of the WTO, showing all the demands placed on a developing country by one institution. But (as our agenda for this series of meetings demonstrates) a month in the life of a developing country’s international relations would have to include:

• on trade, the same type of agenda in the WTO (where services and agriculture negotiations have started, as will be covered in our meeting with David Harrison on 27 April). But in addition, many countries are engaged in regional negotiations (SADC, EAC, MERCOSUR, ASEAN), or (often and) bilaterally (South Africa-EU, but also South Africa-Malawi, MERCOSUR-EU, EU-Mexico). And they cannot ignore potential agreements by others which might affect them: other SAC were interested in South Africa-EU. There are also informal negotiations, of the type which may lead to adoption of the proposals for special treatment for least developed or other categories of countries (Chris Stevens and Robert Read will discuss this on 11 May). With no formal method to participate in these, developing countries face the more difficult task of choosing how to influence them from outside.

• on foreign investment, negotiations and regulations are at present mainly being dealt with bilaterally with countries negotiating a network of bilateral treaties, but they must also watch to see whether a Multilateral Agreement on Investment is revived, and there are proposals for including investment in a WTO round (John Humphrey and Jake Werksmann will speak on this on 18 May)

• and international financial architecture: discussed within the IMF/World Bank, but also informally (Peter Kenen , Benu Schneider, 3 May)

• on humanitarian assistance (Mark Bowden and Joanna Macrae, 31 May)

• and there are the debates in various fora on the relationship between the globalisation and the development agendas, and globalisation and poverty, which may have an important impact on aid (Alan Winters, HB Solignac Lecomte 24 May).

And many more: biological diversity, air or sea transport, regulations of use of radio frequencies, safety in food...

No country, developed or developing, can hope to cover all possible negotiations completely. What we are hoping to do in this series, leading up to the final meeting with David Batt, Peter Tulloch, and Ngaire Woods, on 8 June, and in a long-term programme of research on participation by developing countries in international institutions, is to identify some of the most important, starting with Richard Manning’s presentation today, ask what are the developing country interests, and examine what changes in the international regime could make participation by developing countries easier and more effective.

The International Agenda and Developing country Interests
Richard Manning, DFID

Richard Manning spoke about the negotiations affecting developing countries over the next year, presenting a calendar for the major international institutions.

Discussion

What does globalisation mean for developing countries and does it necessarily imply global governance? There are possibilities of extending regulation, but a ‘big bang’ approach is unlikely to be successful. Why are developing countries excluded, because of lack of capacity or lack of access to negotiations? The discussion should be extended to refugees, asylum seekers, migration; major commodities like oil; the linkages between trade and investment. How can the international institutions deal with these? Perhaps there is a role for extending the scope of international rules, for example to meet the problem of international cartels or to set minimum standards for treatment of migration. Analytic models cannot be a complete guide to policy, but perhaps they can clarify the issues, and identify what we do not know. We should consider how international institutions can be democratised How should international organisations reach decisions: requiring consensus may be necessary for the final product, but discussions by everyone of everything cannot work. Various possible ‘constituencies’ were identified: groups like those used in the World Bank and IMF; regions; division by interest, varying according to the topic of negotiation...This is likely to need to be discussed at each of the special topic meetings.

Can we identify priorities? Agricultural reform, and more generally removing distortions imposed by developed countries on the international system: not only the Common Agricultural Policy but tariff peaks, rules of origin, and high tariffs by developing countries on developing country exports; standardising international procedures, whether for disbursing and allocating aid or trade preferences. Perhaps agreement could be reached among donors to accept common auditing procedures or recognise those of others.

What weapons does the international system need to monitor, enforce, regulate, or more fundamentally, is it possible to have a system which is purely regulatory, without financial resources to tax winners and compensate losers? Current review mechanisms which could be improved or copied in other areas are the WTO Trade Policy Reviews (an organisation reviewing matters within its competence) and the OECD peer reviews (countries reviewing each others performance). Monitoring by NGOs, for example the reviews of aid, are another possibility, but few have the capacity for world-wide coverage. We need to look at other international actors, such as multinational companies.

Simon Maxwell (ODI Director) thanked DFID, Barclays, and RioTinto.