Word has it that the world as we knew it will no V V longer be the same after the terrible 11 September attacks in the US. On the economic front, the impact is going to be severe. Even before the terrorist attacks, the global economic scenario was looking gloomy. Taiwan, Malaysia, Thailand, Singapore and Hong Kong were all suffering from an economic slowdown. Japan was in stagnation. Europe faced a worse-than-anticipated GDP growth in the 12 countries that share the Euro. Latin America, plagued with its own financial problems, was finding the prospects of recovery remote, and looked to the US for a bailout. But economic data released in the week preceding 11 September already pointed to a slowdown in the US economy.
The 11 September events have sharply increased uncertainty about the American economy and thus, about the global economy. As Asia Week put it, distance offered no buffer when the World Trade Centre was struck; the attack at the heart of the world’s financial centre and the blow aimed at the US would be felt just as sharply by every country that participates in the global economy.
All indications suggest that the US economy is rattled and that recession is unavoidable. What is a matter of debate is how deep the recession will be and for how long it will last. Consumer spending has touched an all-time low because of fears of more terrorist attacks in shopping malls, airports and public places. Securities, transport, tourism and retail have been the first to feel the shock. The aviation industry has already announced cut-backs and requested financial support from the government to face up to the drop in travel and the demands of security. The effects are now being felt across the globe and across all sectors of international industry. The world is moving towards recession. Given this situation, the Fourth WTO Ministerial Conference that is to take place in Doha in the first half of November promises to disadvantage the poorer countries further. Is there an alternative course possible?
Uruguay to Seattle
Many argue, and not without cause, that the historic transition from GATT to WTO in 1994, following the Uruguay Round negotiations, was the single most 24 important development for the global economic system in the 20th Century. Prior to WTO, we had GATT (The General Agreement on Tariffs and Trade), which was essentially what the name suggested, that is, an agreement among trading nations. It operated through a secretariat in Geneva and while its successes were indeed remarkable, they were perhaps more so because it was nothing more than an agreement. It did not enjoy the status or the organisational standing and influence of other bodies, such as the International Monetary Fund and the World Bank. The transition from GATT to WTO also signified a transformation from agreement to an organisation. With one single and dramatic move on 1 January 1995, the WTO was placed on the same legal and organisational and influential standing as the Fund and the Bank. Indeed, the emergence of the WTO, unlike the GATT, lent a new meaning to the words “economic globalisation” because it has come to be seen as being synonymous with the integration of national economies into the global economy, or the Multilateral Trading System. Almost every country is a member of the WTO and those that are not, barring a few exceptions, are in the process of joining.
Barely six years into its existence, however, the WTO has generated mixed responses. Critical questions are being asked about the style of the WTO’s functioning and whether the distribution of gains from market liberalisation has been fair. Many have begun to argue that the WTO is at a crossroads and that the future of the organisation may well depend on the outcome of the Fourth WTO Ministerial Conference in Doha. Why is this happening?
It is useful to consider some of the criticisms, which tend to be sweeping and wide-ranging. At one level, there is growing scepticism about the claim that integration into a global economic order through trade liberalisation per se will result in greater economic prosperity and enhanced human welfare. Indeed, there is credible evidence that poorer countries will be further marginalised. In other words, trade liberalisation will only succeed in concentrating wealth in the hands of the already rich and result in an accompanying increase of poverty in the majority of the world’s population, coupled with unsustainable patterns of production and consumption. The 1999 Human Development Report of the UNDP emphatically cautions against the unequal and inequitable spread of the opportunities and rewards of globalisation, as it would result in concentrating power and wealth in a select group of people, nations and corporations, marginalising the others.
The sudden proliferation of anti-globalisation views bears mention. Writings, speeches, publications and public demonstrations not only berate globalisation but also seem to imply that there is some kind of sinister ‘hidden agenda’ or conspiracy that is being hatched by the richer countries against their poorer counterparts. Disruption of meetings and conferences on trade liberalisation are no longer unexpected by the host governments or the delegations that attend such meetings. Seattle started the trend, which was replicated in different cities, such as Bangkok, Davos, Buenos Aires, Quebec City, Genoa and elsewhere, with varying degrees of success. Die-hard anti-globalisation pundits with a “Well, what did you expect?” attitude argue that they had all along pointed out that free trade could never be fair trade since the WTO was essentially a power-based system.
Indeed, the legitimate concerns surrounding the enormous asymmetries in the economic situation of the rich and poor countries needs to be recognised. Economist Amartya Sen suggests that doubts about the global economic order, which extend far beyond the organised protests at Davos or Seattle, have to be viewed in the light of the dual presence of abject misery and unprecedented prosperity in the world. The central issue, to put it differently, is inequality and the growing perception that the distribution of gains through trade liberalisation is tilted against the poorer countries, which are, in fact, receiving the short end of the stick.
At another level, it is being argued that the organisation is not working to everyone’s benefit and that it functions more like an exclusive club for the richer countries in which the poor countries are treated not as equal members but as hangers-on in the fringes. Such a perception is based largely on a somewhat late realisation by the developing countries that they were ‘done in’ at the Uruguay Round negotiations and the sense of isolation and alienation that they felt in Seattle at the Third WTO Ministerial Conference.
Even many developed countries’ representatives agree today that the developing countries were made to concede far more than they received at the Uruguay Round negotiations. The reasons are fairly straight forward and unfortunate: developed country delegations were much better prepared than the developing countries with regard to where their interests lay and what concessions they were willing to make. There exists considerable variation in the level of understanding of the different WTO instruments. The fact was that most developing country delegations were inadequately prepared a t the time of the Uruguay Round negotiations, which turned out to be “GATTastrophic” for the developing and least developed countries. Indeed, the two fundamental and interrelated problems that the poorer countries face with regard to WTO nego-tiations are purely logistical.
Firstly, not II of the developing and least developed member countries of the WTO have embassies in Geneva. This is, quite simply, because they cannot afford to locate a mission and to staff it adequately. A recent study prepared by John Weekes for the Commonwealth Secretariat pointed to as many as 36 WTO members, and observers not being able to maintain permanent diplomatic presence in Geneva. Given the high cost of living in Geneva, it is understandable why many LDC delegations are not able to maintain full-fledged missions there.
In addition, very few of these countries that do have embassies in Geneva have diplomatic personnel exclusively engaged in WTO-related work. Thanks to the large number of international organisations situated in Geneva, such as, ILO, WHO, WIPO, WMO, etc., considerable burden is imposed on the diplomats who are required to shuttle from one meeting to another on subjects as wide-ranging and complex as human rights to the Agreement on Agriculture. This naturally results in the all-important trade issues not receiving the attention that they merit.
Secondly, many developing and least developed countries are still in the process of understanding the implications of the various WTO agreements. The highly technical and legalistic language of the agreements is such that many diplomats say, and not in jest, that after years of trying to understand the WTO agreements, they discover that they have actually misunderstood them! Regrettably, in many of these countries, no debate or consultation with the different ‘stake-holders’ took place primarily because expertise to conduct informed discussions was lacking. As a net result, it is only much later that they realised that the implementation of the agreements imposed considerable costs and sacrifices on the part of poor countries. As per World Bank estimates, the average cost to each developing country to implement just three of the Uruguay Round agreements is US $150 million. The serious domestic political impact of not protecting interests cannot be ignored.
The lack of preparation by the developing world compares very poorly with the sort of preparation undertaken by richer countries. Delegations from the US, the EU or Japan or any of the developed countries to the WTO conferences or even at their WTO missions in Geneva, are considerably larger than those from the poorer countries and, furthermore, include specialists and lawyers, allowing for a detailed and thorough evaluation of every clause, comma and amendment. In short, these negotiators are fully au fait with where their interests lie and how these can be ensured and protected. As one delegate pointed out only half in jest, “Developed country delegations have lawyer who specialise in bananas and those who specialise in plantains; developing country delegations rarely, if ever, know the difference between the two!”
Seattle and system credibility
A combination of the financial and substantive factors referenced above has resulted in severely constraining the participation of the developing countries and LDCs in the WTO conferences thus far. The fact is, the full import and implications of the WTO agreements were never realistically assessed nor appreciated by them. It is true, however, that at the time of the November 1999 Seattle Conference and its build-up in Geneva, the developing countries took a far more activist role than earlier. The process of consultations among like-minded countries was intensified and while there was no common developing country position at the Seattle conference, there was general consensus among the developing countries that the Uruguay Round agreements had imposed significant obligations on the South without providing them either sufficient rights or effective access to the markets in the North. Accordingly, they called for a renegotiation of these agreements. While this pro-active stance and better preparation augurs well for the developing countries in future negotiations, much more needs to be done in the area of capacity building to fully appreciate the import of the negotiating process and the fine print of the agreements. Criticising the developing countries for failing to promote, protect and project their interests and concerns is therefore not an entirely fair criticism.
There was unanimous disappointment at the manner in which the Seattle Conference was conducted, which constitutes another reason why there is a disenchantment with the WTO. Indeed, even after two years, post-mortems of the Seattle Conference continue to yield harsh and critical results, having to do with the manner in which the developing countries were subjected to threats and arm-twisting by the developed countries. It is no exaggeration to say that Seattle severely eroded the credibility of the WTO, ruthlessly driving home as it did the point that the global trading system was far from global. Developing country delegations were left expressing their “disappointment and disagreement” and “anger” at the lack of transparency in the proceedings and their continued marginalisation and exclusion from issues of vital importance to them. They saw Seattle as a betrayal of trust and of good faith, splitting the global system once again on North-South lines.
“Integration”, which is the basic objective of the global trading system, by its very definition refers to a process of co-opting everyone and everything into a larger space that is inclusive and not exclusive. Yet, Seattle succeeded in doing exactly the opposite because the poorer countries were made to feel isolated, alienated and marginalised. They were relegated to the fringes of discussions and the negotiations through facetious arguments-in some absurd instances, having to do with the lack of chairs. Very tellingly, the Seattle Conference, especially in the manner it was conducted, seemed to be making the point that free trade, and not fair trade, was the end objective for the developed countries and the big business lobbies influencing their delegations. This meant opening up the markets in the developing countries through a time-bound schedule, while at that same time, their own markets remained protected through a variety of tariff and non-tariff measures. There were also doubts raised with regard to the role of the WTO Secretariat and, in particular, the. role of the Director General, Mike Moore, as both were’ increasingly being perceived to be partisan and representative of the interests and concerns of the richer countries alone. Indeed, Mike Moore is on record as saying that he makes no secret of his conviction that a new “round” is necessary, a position taken by the developed countries.
A sense of deep disenchantment, uneasiness, suspicion and even fear has begun to characterise the developing country perceptions of the so called “opportunities” that the global trading system was expected to offer. Some have even begun to believe when referring to the “opportunities and challenges of WTO”, that the opportunities are for the developed countries while the developing countries face the challenges.
All eyes are now on the forthcoming Doha Conference, slated to begin on 9 November 2001. Has there been any dramatic change in the situation since Seattle? Most analysts would say that, by and large, status quo persists in terms of positions that the developed and developing countries are going to adopt. The South insists that the imbalances of the Uruguay Round Agreements need to be corrected up-front, and draws attention to a series of commitments made which have so far remained only on paper, such as the development dimension and the Special and Differential provisions. The North insists that any corrections can only be done rough a new round of negotiations. In Doha, the developed countries can be expected to make every effort to expand the trade agenda through the introduction of ‘new issues’. In this, they will deploy all the tools they can muster, from cajoling to threats and arm-twisting. The US has already threatened isolation for those who do not agree to play ball. There would also be attempts to wean away some LOCs from taking a hard stance by offering sops. Marginal concessions, if any, will be made. In the end, they hope to open developing country markets further.
It would appear, therefore, that Doha is drifting towards a Seattle-revisited scenario. It promises to be acrimonious and bitter, even though there may not be the same bands of demonstrators on the streets. Clear battle lines have been drawn and there does not appear to be a common meeting ground. One fact that cannot and should not be ignored is that the faith of the developing countries in the WTO has been severely eroded. Rather than protecting their interests, the WTO is. seen .to be active as a spokesman and apologist for big business and the big economies. If Doha, therefore, become a re-enactment of Seattle, with the developing countries again being made to feel isolated and marginalised, it will raise serious doubts and misgivings about the credibility of the WTO as an institution and its future. Thus, it would strengthen the hands of all those who are opposed to globalisation and the WTO. This augurs ill for the WTO and for a rule-based global trading regime that all countries are committed to strengthen.
Add to this the new dimension of the 11 September attacks’. With. global recession setting in, developing countries will be pressurised into making more concessions and, indeed, into agreeing to the expansion of the trade agenda as part of their contribution to nursing the global economy back to health. This would also mean that there is no guarantee under the present scenario of preoccupation by the North that the demands of the developing countries would be addressed.
Can anything be done, and if so, what? To consider the different possibilities, the first could be a repeat performance of Seattle. By and large, this would be a zero-sum game where both sides stick to their positions and the talks collapse. The status quo would prevail, with neither side satisfied. This could precipitate serious rethinking about the WTO and where it is going and thus, the search for an alternative to the WTO.
The second scenario is the so-called ‘give-and-take’ approach: the trade negotiations are expanded and a new round agreed to, and simultaneously, the developed countries agree to take a fresh look at how to redress some of the concerns of the developing countries. While this is the option that the developed countries and the director general of the WTO would be striving for at Doha, there are serious problems with such an approach because developing countries would be extremely cautious in trying to ensure that they do not once again end up giving much more than they receive. Having realised that they lost out at the Uruguay Round because of poor preparation, governments would be in no position to tell their people that they repeated the same mistake at Doha. As a result, negotiations and bargaining would once again be acrimonious and highly guarded. At that stage, the discussion and negotiation process could become less than transparent. The developed countries would not hesitate to twist arms. The developing countries, already distressed at the manner in which the WTO decision-making process is operating, would refuse to cooperate and the talks would collapse.
There is, however, a third and viable option for Doha. This rests on a genuine desire to strengthen a rule-based multilateral trading regime and the WTO by specifically addressing developing country concerns and in particular, their loss of confidence and trust in the global trading regime and the manner in which it is functioning at present. In other words, using the Doha Conference to unambiguously endorse the need to correct the anomalies and the deficiencies in the current system and to win back the trust and confidence of the developing countries. This would mean that the inclusion of new issues through a new round of trade negotiations would be put on hold for the time being. It would also mean that a mechanism is decided upon to list out and address, within an agreed and reasonable timeframe, the concerns of the developing and least developed countries in the first instance. In other words, Doha would be a confidence-building measure.
The business interests and lobbies in developed countries, particularly the US and the EU, will be tempted to reject such a proposal outright, but they may want to reconsider. For one, the proposal would salvage an organisation, which has haemorrhaged horribly, and has all but lost its legitimacy. Doha could see the beginning of a search by the developing countries for an alternative to the WTO. Once the faith of the developing and the Least Developed Countries is won over the WTO would be strengthened, giving a fillip to trade liberalisation and to a rule-based multilateral trading regime. This would be good for business in the long run and good for the global economy.
But winning back trust is not going to be easy, since it would mean recognising the inequality which lies at the centre of the present system and enquiring as to why the distribution of gains has not been fair. It would also mean that the “development dimension” needs to be placed at the core of the global trading regime. Developing countries need to be treated as equal partners and the WTO Secretariat itself needs to function neutrally and transparently, with greater global representation at middle and senior levels from developing and Least Developed Countries than it has at present. This would encourage the poorer countries to feel that they are part of the system and that they have much to gain by participating in it fully.
In other words, the Doha Conference needs to address what ails the health of the global economy and to specifically take stock of the likely economic impact of the current developments. Whether the global community and WTO, in particular, will have the courage to take such a step remains to be seen. Either way, the Director General will have made history: either by burying the WTO at Doha or by giving it new and. invigorated life.
It’s your call, Mr. Moore. Do you have the courage to take the road less travelled by? Or will it be business as-usual?
(The views expressed in the article are the writer’s own and do not necessarily reflect those of the SAARC Secretariat or the individual member governments of the SAARC.)