This story
was taken from Bulatlat, the Philippines's alternative weekly
newsmagazine (www.bulatlat.com, www.bulatlat.net, www.bulatlat.org).
Vol. V, No. 17, June 5-11, 2005
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. © 2004 Bulatlat
■
Alipato Publications Permission is granted to reprint or redistribute this article, provided its author/s and Bulatlat are properly credited and notified.
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 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.
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
countries.
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
happened.
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 countries.
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 greed.
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
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