WTO at 10: A Decade of Burden for Poor
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
Posted by Bulatlat
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
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
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
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
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,
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
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
In the first five years, the Philippines was nowhere near the projected
economic gains from WTO. In agriculture, not only did production dipped
but the trade balance worsened.
By 1997, the agricultural sector registered US$764 million in trade
deficit, from a high of US$585 million in 1991, when the GATT-UR was still
in negotiation. For several crops such as palay and corn, and even
livestock, the government has become dependent on importation to augment
production shortages. But in reality, importation grew under the WTO and
worsened the manipulation of traders and landlords in several sectors.
More imporantly, liberalization also worsened age-old problems of
landlessness, high productivity, low technology and productivity.
Liberalization also failed in creating half a million of jobs in
agriculture as projected. Since 1994, fewer jobs are being added, while in
1997, the sector lost 191,000 jobs. In 2000, about two million rural farm
workers lost their jobs.
Local industries meanwhile are faring even worse. Unable to expand
production as a result of undue foreign competition, many companies lost
market shares and incurred substantial losses, forcing them to downsize
and even close shop. Everyday from 2000 to 2003, at least eight local
establishments either closed down or retrench workers, translating to 196
workers displaced daily.
Poor countries fight back
The Philippine experience is shared by many Third World
countries in Asia, Africa and Latin
America. The harmful impact of WTO agreements have led various sectoral
groups and people's organizations to launch a wide spectrum of campaigns
from calls to democratize WTO proceedings to more radical approaches
urging poor countries to opt out of the WTO.
In 1999, Third World countries called for a review of the GATT-UR
agreements but rich countries wanted to expand negotiations in these
agreements and opened up new ones in the Singapore issues (investment,
government procurement, trade facilitation and competition policy).
At the Seattle Ministerial in November 1999, rich countries insisted on
another comprehensive round of negotiations similar to the Uruguay Round.
But talks broke down, as a result in large part of people's protests.
More than 50,000 people from around the world poured into the streets of
Seattle to campaign against WTO policies. From union workers and
environmentalists, to students and even religious groups, citizens formed
street blockades despite physical assaults by police forces.
The people's resistance showed in Seattle successfully delayed the
drafting of expanded agreements that would have further burdened the
economies of poor countries.
By the 2001 Ministerial in Doha,
the EU dubbed the negotiations as the "Development Round" in an attempt to
romanticize proceedings as rich countries continue to aggressively push
their corporate agenda of expanding trade to whatever sector is left in
Third World markets.
Through Green Room meetings and other maneuvers, rich countries were able
to force a draft decision on the implementation of the four
Singapore issues set to be achieved by
the Fifth Ministerial in Cancun.
After Doha, the undemocratic maneuvers within the WTO continued. For
instance, the practice of committee chairs to write and submit texts
"under their own responsibility" became widespread.
By September 2003 at the Cancun Ministerial, poor countries decided to
form alliances and seriously challenge the manipulation being done by
their powerful counterparts.
While Cancun was supposed to be the venue for the acceleration of
negotiations for the four Singapore issues, it became the battleground for
the issue of agricultural subsidies of the US and EU to their farmers
despite the disastrous impact it has dealt on the livelihoods of
small-scale farmers in Third World
Two alliances were formed. The Group of 21 (G21) underdeveloped countries
led by Brazil and India pushed for
agricultural trade reforms, demanding drastic cuts in developed countries'
farm subsidies and trade barriers.
The Group of 23 led by Indonesia meanwhile called for crop exemption in
areas vital to food security and rural livelihood, and also demanded the
use of a special safeguard mechanism against import surges of cheap crops.
The Philippines was a member of both groups.
In response, the U.S.
asked poor countries to give something in return while the EU pushed for
the Singapore issues. By the time
the agriculture text was circulated to member-countries, not a single line
echoed the major concerns of poor countries. The contentious position of
poor countries with regards agricultural trade counter-attacked the
aggressive refusal of the U.S. and EU to drop their subsidies. Eventually,
trade negotiations broke down as no consensus was formed, since draft
declarations in the first place were not consulted to all members and
instead were written by committee chairs.
The battle rages on
Poor countries however suffered a major setback last year. Despite their
protests, a Framework on Modalities was accepted at the July 2004 General
Council. The Framework did not contain clear commitments from the U.S. and
EU on reducing their domestic supports, but insists poor countries to
agree on formulas for tariff reduction, a framework for Non-Agricultural
Market Access and the inclusion of at least one of the Singapore issues.
The endorsement has set in motion the completion of agreements under the
Doha agenda to be accomplished this year in Hong Kong,
as if Seattle and Cancun never
Believing they have won the agriculture battle, rich countries are now
gearing up on expanding trade under GATS and opening negotiations for NAMA,
as well as the Singapore issues.
Implementing a fully-expanded GATS and NAMA are seen by poor countries as
a double whammy that would bury the final nail on their attempts to retain
the few protected sectors in their small economies and their chances of
being industrialized themselves.
The problem with GATS is that liberalizing the services sector such as
banking and finance, and transportation and communication, would only give
substantial and clear benefits to industrialized countries which have
relatively advanced service sectors. Poor countries however are relying on
negotiations on subsidy, safeguards and government procurement in order
for the GATS to have any use to them. Otherwise, their weak service
sectors would be destroyed by bigger foreign competition.
Nevertheless, the biggest impact of GATS would come once it encompasses
basic services such as public utilities. Privatization of water and power
utilities in the Philippines has proven detrimental to consumers in terms
of increased service rates. Fundamentally, government's responsibility of
ensuring basic services to its people would be severely compromised once
these are fully under corporate control.
The NAMA on the other hand essentially would weaken local industries as it
seeks elimination of import tariffs on almost all industrial products. The
NAMA is expected to hasten the entry of cheaper industrial imports and
provide undue foreign competition to small, struggling industries in poor
The NAMA in itself is contradictory under the concept of fair trade.
Reducing tariffs on industrial imports defeats the purpose of an
industrialization program, wherein countries need to protect certain
products and allow access for other products to develop their industrial
base. What free trade advocates refer to as "competition" needed by local
industries to improve their production is meaningless when the playing
field is uneven from the start. Even Texas steel millers in the U.S. have
complained against EU steel exports causing job losses in their factories.
Thus, the following months leading to the Hong Kong Ministerial would
probably be the most contentious period yet both for rich and poor
countries. While rich countries are trying to ram negotiations away from
public scrutiny, poor countries are given another chance to forge their
position and continue to fight for policies that would genuinely make
global trade responsive to national needs instead of catering to corporate
The Hong Kong Ministerial is an important venue for citizens and various
people's groups to renew their militant stance against unfair trade. This
year, like the past ten years, they have relentlessly raised public
awareness against the WTO and its disastrous effects on the economies and
livelihood of Third World countries. With a report by Somayyah Abdullah
/ IBON Features / Posted by Bulatlat
IBON Features is a media service of IBON Foundation, an independent
economic policy and research institution. When reprinting this feature,
please credit IBON Features and give the byline when applicable.
PRINTER-FRIENDLY VERSION ■
© 2004 Bulatlat
Permission is granted to reprint or redistribute this article, provided
its author/s and Bulatlat are properly credited and notified.