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Africa: Third World Network, 2
Africa: Third World Network, 2
Date distributed (ymd): 000202
Document reposted by APIC
+++++++++++++++++++++Document Profile+++++++++++++++++++++
Region: Continent-Wide
Issue Areas: +economy/development+
Summary Contents:
This posting and the previous one contain in two parts a
presentation by the Third World Network at the World Economic
Forum in Davos, Switzerland. For more information and
background analysis from the Third World Network, see the
Third World Network web site (http://www.twnside.org.sg). For
earlier statements by Third World Network Africa, enter "Third
World Network" into the search box at the Africa Policy web
site (http://www.africapolicy.org/search.htm).
+++++++++++++++++end profile++++++++++++++++++++++++++++++
Rethinking Liberalisation and Reshaping the WTO
Presentation by Martin Khor (Director, Third World Network),
at the World Economic Forum, Davos, 28 Jan 2000
(continued from part 1)
Problems Caused by Some Agreements
Agriculture Agreement
The Agriculture Agreement could have severe negative effects
on many Third World countries. Most of them (excepting the
least developed countries) will have to reduce domestic
subsidies to farmers and remove non-tariff controls on
agricultural products, converting these to tariffs and then
progressively reducing these tariffs. This will impose global
competition on the domestic farm sector. Farmers unable to
compete with cheaper imports may not survive. Hundreds of
millions of small Third World farmers could be affected. There
is also a category of developing countries which are net food
importers; as subsidies for food production are progressively
reduced in the developed countries, the prices of their
exports may increase; the net food importers may thus face
rising food import bills.
A recent FAO study of the experience of 16 developing
countries in implementing the Uruguay Round agriculture
agreement concluded that, "A common reported concern was with
a general trend towards the concentration of farms. In the
virtual absence of safety nets, the process also marginalised
small producers and added to unemployment and poverty.
Similarly most studies pointed to continued problems of
adjustment. As an example, the rice and sugar sectors in
Senegal were facing difficulties in coping with import
competition despite the substantive devaluation in 1994." (FAO
Paper, Experience with the implementation of the Uruguay Round
agreement on agriculture, synthesis of country case studies,
Sept 1999, prepared by FAO's Commodities and Trade Division).
Many developing countries during the preperations for Seattle
have proposed to amend the Agriculture Agreement to take into
account their problems of implementation. In most developing
countries, small farmers form a large part of population.
Their livelihoods and products (especially food) are the main
basis of Third World economies. These livelihoods could be
threatened by agricultural liberalisation under the
agriculture agreement. Local food production could also be
threatened by cheaper imports. Developing countries would then
become more dependent on imports for their food supplies, thus
eroding national food security.
To deal with these two serious problems, many developing
countries (including India, Indonesia, Egypt, Sri Lanka,
Uganda, Zimbabwe, El Salvador etc) have proposed that
developing countries be given flexibility in implementing
their obligations on the grounds of the need for food
security, defence of rural livelihoods and poverty
alleviation. They proposed that that in developing countries,
food produced for domestic consumption and the products of
small farmers shall be exempted from the Agriculture
Agreement's disciplines on import liberalisation, domestic
support and subsidies.
The TRIMS (Trade Related Investment Measures) Agreement
In the TRIMS Agreement, "investment measures" such as local
content (obliging foreign firms to use at least a specified
minimal amount of local inputs) will be prohibited for most
developing countries from Jan. 2000. This would prevent them
from maintaining policies they have had to promote the local
firms, to enable greater linkages to the domestic economy, and
to protect the balance of payments. Developing countries need
these policies because of the low level of development of the
local sector, which would not be able to withstand free
competition at this stage. Thus, by implementing TRIMS,
developing countries will lose some important policy options
to pursue their industrialisation.
In the review of the TRIMS Agreement, which is scheduled to
begin in 1999, the problems of implementation for developing
countries should be highlighted. Tle prohibition of "local
content" requirement (i.e. that firms or projects make use of
a certain minimum amount of local materials) will seriously
hinder the efforts of developing countries to promote local
industry, save on foreign exchange, and upgrade local
technological capacity. There is also a prohibition on
investment measures that limit the import of inputs by firms
to a certain percentage of their exports. Such measures had
been introduced to protect the country's balance of payments.
The prohibition of these two investment measures will make the
attainment of development goals much more difficult.
The TRIMS Agreement should be amended to allow developing
countries the right to have "local content" policy and to
limit the import of inputs to a certain percentage of a firm's
exports.
Several developing countries (including Brazil, India,
Indonesia, Malaysia, Pakistan, Uganda, Egypt) have been
demanding in the pre-Seattle negotiations in the WTO in Geneva
that TRIMS be amended to provide developing countries the
flexibility to continue using such investment measures to meet
their development goals.
TRIPS (Trade-Related Intellectual Property Rights) Agreement
The South's collective loss was most acutely felt in the
agreement on TRIPS (Trade Related Intellectual Property
Rights) through which countries are obliged to introduce IPR
legislation with standards of protection that are similar to
Northern countries. This will hinder Southern countries'
indigenous technological development. It should be noted that
the present industrial countries did not have patent or IPR
laws, or laws as strict as will now be imposed through TRIPS,
during their industrialising period, and this enabled them to
incorporate technology design originating from abroad in their
local systems.
The agreement will also give rise to increasing technical
payments such as royalties and license fees to TNCs owning
most of the world's patents.
The new IPR regime will also have significant impact on
raising the prices of many products. By restricting
competition, the IPR rules will enable some companies to jack
up prices of their products far beyond costs and thus earn
rents in terms of monopoly revenues and profits. This is
clearly seen in the case of computer software.
Also, most Third World countries have in the past exempted
agriculture, medicines and other essential products and
processes from their national patent laws, but with the
passage of TRIPS, everything is subject to IPRs unless
explicitly exempted. The prices of medicines are expected to
shoot up in many countries, and foreign drug sales will
increase rapidly at the expense of local products.
The TRIPS agreement also opens the door to the patenting of
lifeforms such as microorganisms and modified genetic
materials, thus providing the boost in incentives so much
desired by the biotechnology industry. Many environmentalists
are concerned that this will be detrimental to the global
environment as the present lack of controls and accountability
in biotechnology research and application will likely
accelerate biodiversity loss and could threaten natural
ecosystems.
For plant varieties, TRIPS does permit countries the option to
either introduce patents or an alternative "effective" sui
generis system of intellectual property protection. This has
to be implemented by Jan. 2000. Many farmers' groups
(especially in India, where huge farmers' demonstrations and
rallies have been held against GATT/WTO) and environmentalists
are concerned that in the end Third World farmers will be
disallowed the traditional practice of saving seed for the
next season's planting (if the seed used is under the
intellectual protection of a company) but forced to purchase
the seeds from companies.
Given these many problems, the TRIPS agreement should be
amended to take into account development, social and
environmental concerns. Meanwhile, the grace period before
implementation should be extended. Many developing countries
have made formal proposals before and at Seattle that a review
of TRIPS along these lines be made and that there should be an
extension of the implementation dateline. So far the US and EU
have turned down these requests, insisting that the laws
already created cannot be changed.
Recently there have been calls from some eminent economists
and from some NGOs to take the TRIPS Agreement out of WTO
altogether. TRIPS is a protectionist device, and should have
no place in an organisation that is supposed to be committed
to liberalisation. Moreover IPRs is not a trade issue. By
locating it in the trade system, the road is open to overload
the WTO with more and more non-trade issues.
Conclusion
These are only a few examples of how developing countries are
facing immense problems now and especially in future. They are
unable to absorb the changes they are required to make to
their economic and social policies. Thus many of the countries
are correctly arguing that they need time to digest the
Uruguay Round, that some of the rules that are unfair and that
generate serious problems should be reviewed, and that until
these are satisfactorily resolved there should not be fresh
demands on them to liberalise further, especially through new
issues such as investment and government procurement.
Given the serious problems faced by developing countries in
implementing their Uruguay Round commitments (and in the
developed countries not properly implementing their
commitments), there should be a review of many of the
Agreements with a view to amending them. In fact many of the
Agreements themselves mandate that reviews be carried out four
or five years after their coming into force.
The next three to five years of the WTO's activities should
focus on the review process, so that the opportunity to
rectify the defects of the Agreements can be taken. This
review process would in itself be a massive task, involving
analyses of the weaknesses of the various Agreements,
assessments of how they have affected or will affect
developing countries, proposals to amend the Agreements, and
negotiations on these proposals.
V: Why the Wto Should Not Take on New Issues
A major reason for the failure at Seattle was the reluctance
and refusal of many developing countries for allowing the WTO
to be given the mandate to take on more new issues for
negotiating new agreements, which had been proposed by some of
the developed countries. Saying no to the proposed new issues
makes much sense.
If the WTO is to improve its already poor credibility, it
should focus in the next few years on reviewing problems of
implementing the Agreements and make the necessary changes in
the agreements. These will be enormous tasks. They will not be
properly carried out if there is a proliferation of new issues
in a new Round. The extremely limited human, technical and
financial resources of developing countries and their
diplomats and policy makers would be diverted away from the
review process to defending their interests in the
negotiations on new issues. The limited time of the WTO would
also be mainly engaged in the new issues.
There will be little time for examining, reviewing and
improving the existing agreements, and the problems arising
from their implementation will increase through time and
accumulate, and manifest themselves in social and economic
dislocation and political instability in many countries.
If this is not enough, most of the proposed new issues would
also have the most serious consequences for the South's future
development. Issues such as investment rules, competition
policy and government procurement do not belong in the WTO
(which is supposed to be a trade organisation) in the first
place. They are sought to be placed there by the developed
countries to take advantage of the enforcement capability (the
dispute settlement system) of the WTO, so that disciplines can
be effectively put on developing countries to open their
economies to the goods, services and companies of the
developed countries. Other issues relate to labour, social and
environment standards. These too should not enter the WTO as
issues to be negotiated into new agreements. If they do so,
then these issues are likely to be made use of by developed
countries as protectionist devices against the products and
services of developing countries.
Should the developed countries continue to push and pressure
for these new issues, then the WTO will continue to be split,
and moreover other pressing issues such as the problems
resulting from the existing Agreements would not be tackled.
Developing countries should therefore not accept and developed
countries should refrain from the injection of these new areas
into the WTO.
VI: Conclusions
The multilateral trade system faces a crisis and a crossroads.
To resolve the crisis of identity and credibility, the
following should be considered:
1. Review the record of liberalisation and take a more
realistic approach. This requires a slowdown or stop to
pressures being put on developing countries for further
liberalisation. After all, if the developed countries continue
after so many years to maintain such high protection in
agriculture, textiles and some industrial products (and argue
that they need more toime to adjust), they have no basis to
insist that developing countries must continuously liberalise
in services or industrial products on the supposed ground that
such liberalisation is automatically good for them.
Reassert the objective of the trade system as primarily the
development of developing countries which form the majority of
the membership. Liberalisation or "free trade" should not be
the operational aim. The goal should be development. Therefore
there should be a shift of emphasis away from removing what is
considered "trade distorting", to instead removing the
obstacles to development, or to review and rectify policies or
practices that are "development distorting." The goal and
dimension of development must be primary in WTO rules and
assessment of proposals or measures. The "special and
differential treatment" principle should be greatly
strengthened operationally, far beyond its present weak state.
The problems of implementation of the Uruguay Round
agreements should be given the top priority at the WTO. There
is a danger that after the Seattle failure, these problems
will again be sidelined as the focus is given to the problem
of participation and transparency. It must be recognised that
the main cause of the Seattle failure was the disillusionment
of many developing countries with the inequities of the rules
and the negative effects these would have on their economies
and societies. To restore credibility to the trading system in
the eyes of developing countries, the following should be
done:
(a) Developed countries should take measures to greatly
increase market access for developing countries' products,
such as in agriculture, textiles and industrial products
(where there are now high tariffs); moreover they should stop
taking protectionist measures such as anti-dumping measures;
(b) In the many areas where developing countries face problems
in implementing their obligations (such as in TRIMS, TRIPS,
agriculture), a review and change of the existing rules should
be done on an urgent basis. For a start, the sets of proposals
put forward by developing countries during the preparations
for Seattle (many of which are contained in the draft
Ministerial text of 19 Oct and more are contained in the
compilation of proposals) should be treated with urgency by
the WTO General Council. A mechanism should be set up to
consider these proposals and to rectify the problems
(including through amending the agreements) as soon as
possible;
(c) In the meanwhile, where the transition period for
developing countries has expired (for example, in TRIPS and
TRIMS), an extension should be given at least until the review
process is completed. There should also be a moratorium on
bringing dispute cases against developing countries on issues
where the reviews are taking place.
4. Serious consideration should also be given to trimming the
WTO so that it can carry out its tasks of regulating trade
relations for the benefit especially of developing countries.
In areas where it has accumulated a mandate that is
inappropriate, steps should be considered to hive off these
aspects. For example, it should be seriously discussed whether
the TRIPS agreement should remain within the WTO.
5. There should not be pressures to introduce new issues such
as investment, competition, procurement, labour and
environmental standards as these would overload the system
further and lead to tremendous systemic stress and great
tensions and divisions in the organisation.
6. The system and culture of decision making in the WTO must
undergo serious reform. This cannot be done in a rush but has
to be considered carefully, in a process in which all Members
have full participation rights. The exclusive Green Room
meetings (which do not have the mandate of the full
Membership, and which are not officially announced, nor are
the results of the meetings made generally known) should be
discontinued. Manipulative methods (such as at Seattle where
chairpersons of groups declared there was a consensus view
when there was none, or when points made by some members are
ignored) should stop. At meetings where issues are discussed
and drafts are made and negotiated, there should be
transparency and participation, where each Member is given the
right to be present and to make proposals. Even if some system
of group representation is considered, all Members should be
allowed to be present at meetings and have participation
rights. The Secretariat should also be impartial and seen to
be impartial. Whatever results from the reform process, if
there is one, the system should reflect the fact that the
majority of Members are now from developing countries which
have as much stake or more in a truly fair and balanced
multilateral system as the developed countries, and therefore
the system must be able to provide the developing countries
with the means with which to voice their interests and
exercise their rights.
This material is being reposted for wider distribution by the
Africa Policy Information Center (APIC). APIC's primary
objective is to widen international policy debates around
African issues, by concentrating on providing accessible
policy-relevant information and analysis usable by a wide
range of groups and individuals.
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