|
THE
WORLD TRADE ORGANIZATION (WTO) is a multilateral body
that elicits fear, anger, and exasperation throughout the South.
This, despite the oft-repeated claim by WTO apologists that by
providing a set of rules and dispute settlement mechanisms for
global trade, the organization protects the weaker and poorer
countries from unilateralist actions by the stronger ones. This
Southern view stems from a strong sense that the WTO is essentially
an institution that is deeply biased against the development of
the South.
Emergence of the Southern Agenda
Raul Prebisch, an Argentine economist
won a global following for his theory centered on the worsening
terms of trade between industrialized and non-industrialized countries.
Prebisch’s theory of “bloodless but inexorable exploitation,”
served as the inspiration for Third World organizations, formations,
and programs, including the Non-Aligned Movement, Group of 77,
Organization of Petroleum Exporting Countries (OPEC), and the
New International Economic Order (NIEO). It was also central to
the establishment of the UN Conference on Trade and Development
(UNCTAD) in 1964, which became, over the next decade. the principal
vehicle used by the Third World countries in their effort to restructure
the world economy.
With Prebisch as its first Secretary
General, UNCTAD advanced a global reform strategy with three main
prongs. The first was commodity price stabilization through the
negotiation of price floors below which commodity prices would
not be allowed to fall. The second was a scheme of preferential
tariffs, or allowing Third World exports of manufactures, in the
name of development, to enter First World markets at lower tariff
rates than those applied to exports from other industrialized
countries. The third was an expansion and acceleration of foreign
assistance, which, in UNCTAD’s view, was not charity but
“compensation, a rebate to the Third World for the years
of declining commodity purchasing power.” UNCTAD also sought
to gain legitimacy for the Southern countries’ use of protectionist
trade policy as a mechanism for industrialization and demanded
accelerated transfer of technology to the South.
Dismantling the UN Development System
When the Reagan administration came
to power in 1981, it was riding on what it considered a mandate
not only to roll back communism but also to discipline the Third
World. What unfolded was a two-pronged strategy aimed, on the
one hand, at dismantling the system of “state-assisted capitalism”
that was seen as the domestic base for Southern national capitalist
elites and, on the other, drastically weakening the United Nations
system as a forum and instrument for the South’s economic
agenda.
The instruments chosen for rolling
back the South were the World Bank and the IMF. “Structural
adjustment” referred to a new lending approach that was intended
to push a program of “reform” that would cut across
the whole economy or a whole sector of the economy.
By the late 1980s, with over 70
Third World countries submitting to IMF and World Bank programs,
stabilization, structural adjustment, and shock therapy managed
from distant Washington became the common condition of the South.
While structural adjustment was justified as necessary to create
the conditions that would enable Third World countries to repay
their debts to Northern banks, there was a more strategic objective,
and that was to dismantle the system of state-assisted capitalism
that served as the domestic base for the national capitalist elites.
By the end of the Reagan-Bush era
in 1992, the South had been transformed: from Argentina to Ghana,
state participation in the economy had been drastically curtailed;
government enterprises were passing into private hands in the
name of efficiency; protectionist barriers to Northern imports
were being radically reduced; and, through export-first policies,
the internal economy was more tightly integrated into the North-dominated
capitalist world markets.
But the focus of the Northern counteroffensive
was the defanging, if not dismantling of UNCTAD. At the watershed
meeting of UNCTAD VIII, in Cartagena in 1992, the North opposed
all linkages of UNCTAD with the Uruguay Round of the General Agreement
on Tariffs and Trade (GATT) and managed to erode UNCTAD’s
negotiation functions, thus calling its existence into question.
UNCTAD’s main function would now be limited to “analysis,
consensus building on some trade-related issues, and technical
assistance.”
 |
Wielding
the power of the purse, the United States, whose contribution
funds some 20-25% of the UN budget, moved to silence NIEO
rhetoric in all the key UN institutions dealing with the North-South
divide: the Economic and Social Council (ECOSOC), the United
Nations Development Program, and the General Assembly. US
pressure resulted as well in the effective dismantling of
the UN Center on Transnational Corporations, whose high quality
work in tracking the activities of the TNCs in the South,
had earned the ire of the TNCs. |
The
World Trade Organization: Sealing the Defeat of the South
UNCTAD continues to survive, but
it has been rendered impotent by the WTO, which came into being
with the Marrakesh Accord in 1994, which put in force the agreements
concluded during the eight-year Uruguay Round of the GATT. The
WTO was 46 years late in coming, though it had initially been
regarded by liberals in the US and Britain as the third pillar
of the Bretton Woods system, doing for trade what the IMF did
for finance and the World Bank for economic reconstruction.
Indeed, the WTO, with its enshrinement
of the principle of free trade as the organizing principle of
the global trading system, represents the defeat of everything
that the South fought for in UNCTAD: getting fair prices for their
commodities via commodity price agreements; the institutionalization
of trade preferences for Southern goods owing to their underdeveloped
status; preferential treatment for local investors; the use of
trade policy as a legitimate instrument for industrialization;
and more concerted technology transfer to the South.
Instead, the WTO institutionalizes
free trade, the most favored nation principle, and national treatment
as the pillars of the new world trading order. National treatment,
which is institutionalized in the General Agreement on Trade in
Services (GATS) of the Uruguay Round, is perhaps the most revolutionary
of these principles and the most threatening to the South for
it gives foreign service providers, from telecommunications companies
to lawyers to educational agencies, the same rights and privileges
as their domestic counterparts.
The WTO and Industrialization in the South
In signing on to GATT, Third World countries
have agreed to ban all quantitative restrictions on imports, reduce
tariffs on many industrial imports, and promise not to raise tariffs
on all other imports. In so doing, they have effectively given
up the use of trade policy to pursue industrialization objectives.
The anti-industrialization thrust
of the GATT-WTO Accord is even more manifest in the Agreement
on Trade-Related Investment Measures (TRIMs) and the Agreement
on Trade-Related Intellectual Property Rights (TRIPs). Thanks
to TRIMs, the way that the NICs made it to industrial status,
via the policy of import substitution is now effectively removed
as a route to industrialization.
Like the TRIMs agreement, the TRIPs
regime is seen as effectively opposed to the industrialization
efforts of Third World countries. This becomes clear from a survey
of the economic history not only of the NICs but of almost all
late-industrializing countries. A key factor in their industrial
take-off was their relatively easy access to cutting-edge technology:
The US industrialized, to a great extent by using but paying very
little for British manufacturing innovations, as did the Germans.
Japan industrialized by liberally borrowing US technological innovations,
but barely compensating the Americans for this. And the Koreans
industrialized by copying quite liberally and with little payment
US and Japanese product and process technologies.
But what is “technological
diffusion” from the perspective of the late industrializer
is “piracy” from that of the industrial leader. Thus,
TRIPs enables the technological leader, in this case the United
States, to greatly influence the pace of technological and industrial
development in rival industrialized countries, the NICs, and the
Third World.
|
So
the story continues: subsidized Northern producers that
make a mockery of global free trade in agriculture fight
for developing country markets, squeezing the non-subsidized
farmers in the latter.
|
The Agreement on Agriculture
The TRIPs accord is an example to the
South of the double standards in the GATT-WTO. While it pushes
free trade on the South in some of its subsidiary agreements,
it actually promotes monopoly for the North in others. This is
true as well of the Agreement on Agriculture (AOA).
Prior to the Uruguay Round,
agriculture was de facto outside GATT discipline, mainly because
the US had sought in the 1950s a waiver from Article XI of GATT,
which prohibited quantitative restrictions on imports. With the
US threatening to leave the GATT unless it was allowed to maintain
protective mechanisms for sugar, dairy products, and other agricultural
commodities, the US was given a “non-time-limited waiver”
on agricultural products. This led to the GATT’s lax enforcement
of Article XI on other agricultural producers for fear of being
accused of having double standards. The US and the other agricultural
powers not only ignored Article XI but they also exploited Article
XVI, which exempted agricultural products from the GATT’s
ban on subsidies.
One effect of these moves was the
transformation of the EU from net food importer into net food
exporter in the 1970s. With domestic prices set above world prices
and no controls on production, European farmers expanded production.
The mounting surpluses could only be disposed of through exports,
sparking competition with the previously dominant subsidized US
farmers for third-country markets. The competition between the
agricultural superpowers turned fierce, but it was not so much
their subsidized farmers that suffered. The victims were largely
farmers in the South, such as the small-scale cattle growers of
West Africa and South Africa, who were driven to ruin by low-priced
EU exports of subsidized beef.
 With
state subsidies mounting to support the bitter competition for
third country markets, the EU and US realized that continuing
along the same path could only lead to a no-win situation for
both. This mutual realization of the need for rules in the struggle
for third country markets is what led the EU and US to press for
inclusion of agriculture in the Uruguay Round. Rather than seriously
promoting a mechanism to advance free trade, the two superpowers
resorted to the rhetoric of free trade to regulate a condition
of monopolistic competition, with each seeking advantage at the
margins.
The exemption of direct income payments
to farmers from GATT discipline was a major blow to the hopes
of many countries that the Agriculture Agreement would be a mechanism
for freer international trade. Such payments were excluded on
the specious grounds that they were ‘decoupled from production’
and thus ‘non-trade distorting.’
But the truth is that direct payments
to European and US farmers are not decoupled from production,
and without them agriculture would scarcely remain profitable.
Deficiency payments for instance, make up between one-fifth and
one-third of US farm incomes. Over 40% of the total value of production
in OECD countries is accounted for by different forms of producer
subsidies.
In contrast to this massive subsidization
in the OECD countries, farmers in many developing countries have
not only had little financial support from the government. Where
some subsidization exists, this often does not reach the 10% of
the value of production allowed by the AOA. Yet it is the farmers
of the South that will be forced to bear the burden of adjustment
to the new agricultural regime since their lack of subsidies is
paralleled by their clear commitments to give greater market access
to Northern farming interests, whose runaway subsidization continues
to push them to create mountains of commodities seeking export
outlets.
Undoubtedly, AOA does offer some
concessions to the South via the lifting of quotas and some reduction
in tariffs on developing country exports of commercial crops.
But these are concessions that benefit mainly organized lobbies
of cash-crop exporters and processors, such as Malaysian palm-oil
plantations, big cocoa and coffee planters in Africa and Asia,
and big sugar interests in the Caribbean. The vast majority of
unorganized small farmers specializing in corn, rice, and other
food crops are hurt by this trade off, for the quid pro quo is
the liberalization of their markets for staples and other basic
foods.
|
Multilateral
structures entrench the power of the Northern superpowers
under the guise of creating a set of global rules for all.
Though the threat of unilateral action by the powerful is
ever present, on balance a global system where there are
either no or ineffective multilateral structures works to
the benefit of the South.
|
Oligarchic Decision-making
There are other inequalities structured
into the WTO system. The system of decisionmaking is among the
most blatant. While pro-WTO propaganda has projected “a one
nation/one vote” organization, where the United States has
exactly one vote, like Rwanda or Haiti, in fact, it is undemocratic
and run by an oligarchy of countries, much like the World Bank
and the IMF. But, as it did at the Bank and the IMF, the North
evolved other mechanisms of control. While at the Bank and the
Fund, the prime mechanism of control is the size of rich countries’
capital subscriptions, which gives them enormous voting power
vis-a-vis the mass of developing countries, at the WTO, Northern
domination is achieved via what is euphemistically referred to
as “consensus.”
This process was described in the
following manner before the U.S. Congress by an influential WTO
advocate: after noting that there had not been a vote taken in
GATT since 1959, economist C. Fred Bergsten underlined that the
WTO “does not work by voting. It works by a consensus arrangement
which, to tell the truth, is managed by the Quads: the United
States, Japan, European Union, and Canada.” He added: “Those
countries have to agree if any major steps are going to be made.”
The way the consensus rule assures
the hegemony of the North was displayed in the selection of the
successor to Renato Ruggiero as Director General. The US-led bloc
that supported New Zealander Mike Moore refused a head count,
as proposed by backers of Thailand’s Supachai, on grounds
that this would violate the WTO’s consensus tradition.
Indeed, so undemocratic is the WTO
that decisions are arrived at informally, via caucuses convoked
in the corridors of the ministerials by the big trading powers.
The formal sessions are reserved for speeches. The key agreements
of the first and second ministerials of the WTO – the decision
to liberalize information technology trade taken Singapore in
1996 and the agreement to liberalize trade in electronic commerce
arrived at in Geneva in 1998 – were taken in informal back-room
sessions and simply presented to the full assembly as a fait accompli.
Strategy for Change
It is against this dismal background
that we now move to the question of reform. Change means not wasting
time trying to enlarge areas of reform within the World Bank,
IMF, and WTO. They are, to borrow a metaphor from Max Weber, an
iron cage of three overlapping bureaucracies and mandates where
Southern aspirations and interests are structurally constrained.
Beyond this, however, the project
of making the UN agencies the pillars of an alternative global
order is not going to result in success for a long, long time.
What then should Southern movements for global reform focus their
energies on? The main thrust is to overload the system, to make
it non-functional by constantly pushing demands that cannot be
met by the system.
The success of a strategy of overloading
the system depends greatly on creating global political alliances,
including coalitions with anti-globalization social and political
forces in the North. For example, a global NGO campaign on OECD
governments prevented the adoption of the Multilateral Agreement
on Investment.
Where structures are hopeless, the
next best solution is to have non-functioning structures or no
operative structures at all. It was, for instance, during a period
where no bodies supervised aid and development – the World
War II era and immediate post-war era – that the countries
of Latin America were able to successfully engage in import substitution
to build up industrial structures. During the 1960s-80s, the NICs
of East and Southeast Asia were able to marry domestic protectionism
to mercantilism to move from underdevelopment to industrial status
in one generation.
Of course, the ideologues of the
North will shout that this is tantamount to “anarchy.”
But then it has always been the powerful that have stoked this
fear. For the principal objective of most multilateral or international
arrangements in history has never been to assure law and order
to protect the weak. These structures have been pushed by the
strong mainly to reduce the tremendous cost of policing the system
to ensure that the less powerful do not cease to respect the rules
set by the more powerful or break away completely.
In short, a fluid international
system, where there are multiple zones of ambiguity that the less
powerful can exploit in order to protect their interests, may
be the only realistic alternative to the current global multilateral
order that would weaken the hold of the North. The main beneficiaries
of clearly articulated structures are always the powerful and
the rich. The fewer structures and the less clear the rules, the
better for the South..
Walden Bello
is co-director of Focus on the Global South. Fax: (66-2) 255-9976,
Email: w.bello@focusweb.org
|
