The GATT/WTO

1
The GATT/WTO Development

• How has the development agenda been pursued in
  the GATT/WTO?
• By Robin Deutsch

2
Development the GATT

• 11 of the original 23 contractors to GATT were
  developing states, but only one Article (XVIII)
  dealt with these countries
• Originally allowed 2 special provisions for
  developing states
• 1. Less pressure on implementation of tariff
  concessions
• 2. The use of quantitative restrictions to help
  with the balance of payments

3
Initiatives by GATT

• In the 1950s the Committee III on Trade Measures
  was established to initiate a programme for trade
  expansion by reducing trade barriers of developed
  countries vs. developing countries. Was not well
  implemented by developed states.
• In 1964 GATT announced a waiver from most
  favoured nation clause with respect to tariffs
  and other preferences favouring trade of
  developing countries. Called the Generalised
  System of Preferences, but mostly rhetorical

4
The Tokyo Round (1973-9)

• Created special differential treatment for
  developing states
• Allowed developing states to be part of GATT
  without reciprocity on tariff concessions through
  Enabling Clause
• However, industries such as textiles, where
  developing states have comparative advantage,
  left out of agreement
• Some claim that developing states agreed to make
  themselves permanently inferior by agreeing to
  this

5
The 1979 Enabling Clauses

• Art 18-A allows developing countries to
  renegotiate tariff bindings in order to promote
  the establishment of particular industry.
• 18-B allows developing countries to impose
  balance of payments restrictions
• 18-C allows developing countries to apply
  quantitative import restrictions for infant
  industries.
• Art 28 recognises that developing countries need
  tariffs for economic development

6
The Uruguay Round (UR)

• The Uruguay Round established the WTO
• 4/5 of WTO members are developing countries, 52
  developing nations were founding WTO members
• The WTO says that The trading system should be
  more beneficial for less developed countries by
  giving them more time to adjust, greater
  flexibility, and special priveledges.
• Uruguay round introduced liberalization plans for
  agriculture and textiles, which affect developing
  countries most
• Some preferential treatment through Generalized
  System of Preferences (GSP) was made binding by
  the Uruguay round, had not been secured before

7
The WTOs Official Agenda

• Development policies based on an open,
  competitive market
• The WTO encourages developing countries to
  abandon protection for infant manufacturing
  industries (industries that need to be protected
  to survive)
• The WTO wants developing countries to liberalise
  and this reform will be met with reciprocity,
  i.e. liberalisation from others.
• WTO aims to reduce subsidies.
• The WTO offers guidance and support for
  governments resisting protectionist pressures.
• But Harald Kreid notes Let me say that the WTO
  is not a development organization and we do not
  want to transform it into one.

8
Preferential Treatment under WTO

• Developing countries may need longer to implement
  UR and thus are given more time to adapt to TRIPS
  (Trade-related and Intellectual Property Rights).
  Also allowed subsidies for some areas longer than
  developed states
• Whalley (1990) argues that since the UR
  developing countries not so interested in
  preferential treatment anymore, want to preserve
  what is and not create new protections
• Baghwati (2001) believes we are still harvesting
  the consequences and advantages of the Uruguay
  round which have not yet been fully implemented.

9
Criticism of WTO Development

• Chimni (2004) claims that By prescribing uniform
  global standards the WTO(compels) sovereign
  states to adopt the same laws irrespective of
  their stage of development by changing
  international economic law.
• In agriculture, Intellectual Property Rights and
  regulation of foreign investment and services,
  sovereign power has gone from people and
  governments of developing world to the WTO
• Srinivasan (1999) says that Sub-Saharan Africa
  may actually lose from Uruguay Round because
  other countries had already liberalised before
  the UR and thus only they stand to win from
  Sub-Saharan Africa doing the same
• He believes that financial services, for example,
  are not strong enough to resist market-pressure
  yet

10
Seattle

• Wilkinson (2002) claims that Seattle agreement
  failed not least for development issue disputes,
  regarding technical and financial assistance and
  capacity building.
• Developing countries wanted to speak about
  development, industrial countries about further
  trade liberalisation.
• WTO channelled much of its energy in the wake of
  Seattle into addressing the marginalisation many
  developing countries felt and nurturing support
  for the launch of a new round.

11
The Doha Round I

• Ministers agreed to adopt around 50 decisions
  clarifying the obligations of developing
  countries in WTO. But those issues which were not
  settled would be settled in future under a Work
  Programme of the WTO
• Doha brought some new non-trade issues into WTO,
  like Environment Labour Standards, which could
  be a problem for developing nations
• Economist writes The Doha round was to be an
  ambitious effort to make globalisation more
  inclusive and help the world's poor, particularly
  by slashing barriers and subsidies in farming,
  the rich-world's most molly-coddled industry.

12
Evaluating Doha

• Bello (2002) Doha a set-back from developing
  countries, who had wanted focus on outstanding
  issues of implementation of Uruguay round. 104
  outstanding accoding to Group of 77. Merely
  outlined a future process of dealing with this.
• Francois (2005) liberalization by developing
  nations is critical to the 'development' part of
  the Doha Development AgendaThis is regrettably
  downplayed in the current negotiations by all
  WTO-partners. The emphasis instead is on
  exemptions for developing countries.

13
The Doha Problem

• Bello (2002) claims Doha represented a new low
  point for intimidation, threats, bribary and
  non-transparency. E.g. USA threatened Haiti
  Dominican Rep about preferential trade agreements
• Chimni (2004) Third world countries are under
  pressure to liberalize, without fully knowing the
  consequences of doing so

14
Possible consequences of Doha

• The negotiations seem to have failed
• Bhagwati (2001) Developing countries, which had
  seen the GATT as a multilateral institution that
  in trade matters would defend the weak against
  the strong, now see the new WTO as turning.into
  an assault on the weak on trade-unrelated
  matters
• Economist Doha added a fiction all of its own
  with the idea of a development round, seen as a
  clever way of giving grubby trade some moral
  appeal. But both tricks have now backfired, by
  persuading rich-country participants that, rather
  than boosting their own economies, they were
  sacrificing their national interests to those of
  foreigners.

15
Final Points

• Average tariffs on industrial products gone down
  from 40 to 4 since GATT and WTO (Grieco
  Ikenberry 2003)
• Despite being good in theory, there are double
  standards as there are still many tariffs in
  areas which would help developing countries, like
  technology and agriculture and the developed
  states set the agenda
• It is an ideological question if one believes
  that development through free trade is possible