WTO at 10: A Decade of Burden for Poor Countries

A decade of unhampered entry of goods and investments to Third World markets has reaped profits for the transnational corporations of rich countries. Through all these, poor countries were left to bite the dust.

By John Paul Andaquig
IBON Features / June 2, 2005


The World Trade Organization (WTO), the largest and most influential trade body, is gearing up for the 6th Ministerial Conference in Hong Kong, China this December. Already, negotiations are accelerating, with member-countries preparing for the July General Council many see as pivotal to the success of the Hong Kong Ministerial.

For the U.S. and the European Union, the WTO is in crisis. Out of the five previous ministerial conferences, two have failed including the most recent one in Cancun, Mexico in 2003. The US and EU quickly blamed poor countries for stalling these trade talks.

This finger-pointing in reality masks the growing apprehension of the U.S. and EU as they have failed to forge further trade commitments from poor countries, in terms of increased market access in agriculture, industrial trade and services among others.

And this is because poor countries have stood up against unfair and undemocratic trade rules within the WTO. They continue to challenge the maneuverings of the U.S., EU and other industrialized countries, which use the so-called principles of “free market” and “globalization” to force open Third World markets while protecting their own.

As WTO negotiations tread its way toward Hong Kong, it is important to look back at what the WTO has achieved in the past ten years and why poor countries are calling for a halt in new negotiations.

From GATT to WTO

The establishment of the WTO in 1995 marked the conclusion of the Uruguay Round of negotiations of the General Agreement on Tariffs and Trade (GATT).

The GATT is the post-war multilateral agreement that provides a framework for the conduct of international trade. Its main thrust is to liberalize trade; meaning, tariffs and other restrictions to the
entry of exported goods into an importing country must be reduced and removed.

The GATT went through several rounds of negotiations, the most ambitious of which is the Uruguay Round, launched in Punta del Este in 1986 and concluded in mid-1994 in Marrakesh, Morocco.

In the Uruguay Round, industrialized countries insisted on expanding the principle of “free trade” not only on traditional goods but also in the area of services and investment measures. At the same time, the Uruguay Round highlighted the protectionist stance of industrialized countries when they imposed the rules on intellectual property.

The Uruguay Round brought forth key GATT-WTO Agreements: Agreement on Agriculture (AoA), General Agreement on Trade in Services (GATS), Agreement on Trade-related Intellectual Property Rights (TRIPS), Agreement on Trade-related Investment Measures, and the Agreement on Textiles and Clothing.

Developed countries led by the U.S. made sure that GATT maintained, if not intensified, the post-war trading system where poor countries are only suppliers of raw materials and cheap labor, while providing as ready markets for the manufactured goods of rich countries.

Instead of being able to develop their own agriculture and industrial sectors, poor countries are forced to follow rules dictated by rich countries and forced to compete against their highly subsidized sectors.

Thus, what the GATT-WTO facilitated was the opening up of Third World markets, accelerating the absorption of resources from poor countries to rich countries, while ensuring continued profit for the growing transnational corporations of rich countries. Through all these, poor countries are left to bite the dust.

Unfair and undemocratic

The WTO agreements provide trade rules that have failed to respond to the needs of poor member-countries. It has conveniently ignored the fact that majority of its members have levels of development way behind the few richer members, that applying “free trade” rules would be harmful to these countries since they have yet to strengthen their own economies.

In the AoA for instance, member-countries are required to remove tariff and non-tariff barriers on almost all products save for a few items sensitive to the local populace ­items that would still be liberalized only later. At the same time, Third World governments are prevented from giving domestic and export subsidies to their farmers.

In contrast, rich countries continue to provide subsidies to their farmers, resulting in highly subsidized agricultural goods that enter the markets of Third World countries at cheaper prices than local goods. Not surprisingly, the results have been disastrous for poor countries, many of which are dependent on agriculture for subsistence and livelihood. Cheap imports have flooded local markets even since. Import dumping and smuggling worsened under the WTO, displacing millions of subsistence farmers.

In one study estimate, developing countries lose over $40 billion of net agricultural exports and $24 billion in agricultural and agro-industrial income because of subsidies and protectionism of industrialized countries.

But the reality of this impact went unheard within WTO negotiations. Worst, the WTO has proven to be an undemocratic exercise, as poor countries are usually left out in crucial negotiations through such mechanisms as the “Green Room” ­closed-door meetings among selected groups of trade ministers usually coming from rich countries. Decisions taken inside the Green Room meetings are presented to the whole body, not for rebuttal but for immediate approval. This was evident during the Cancun ministerial where several trade ministers from Third World countries reported being “arm-twisted” by representatives from richer countries into conceding their position against new negotiations.

Impact on RP

The Philippines is one of the original member-countries of the WTO. It has dutifully followed trade liberalization measures based on claims that GATT implementation in the country would not only expand trade but also increase government revenues through tariffication, as well as public expenditure on agricultural research, irrigation and market infrastructure.

Share This Post