9:41 AM Aug 15, 1996
NEW ISSUES AND CHALLENGES FOR SOUTH COUNTRIES
Bhagirath Lal Das* New Delhi Aug 14 (TWN) -- Nearly three years after the conclusion of the Uruguay Round, and in preparations for the first Ministerial Meeting of the newly established World Trade Organization, developing countries are facing some major challenges. One of the main objectives of the proponents of the Uruguay Round was to obtain concessions and commitments from developing countries. And developing countries did make massive concessions and significant commitments in the Marrakesh Agreement. As a result, the Uruguay Round ended with highly unbalanced agreements, from the point of view of developing countries. But this is no reflection on their negotiators. In the course of the negotiations, all important developing countries were under tremendous pressure from major developed countries; and they were tackled one by one. The South countries were not able to utilize their collective strength on any issue -- whereas on most issues, some major developed countries were united in pressurising them. It was expected that after this major negotiation, there would be some respite for the developing countries. But it was not to be. The 'laundry list' of Marrakesh -- issues raised by one or another minister at Marrakesh, and merely mentioned in the concluding statement of the chairman of that meeting, but with no consensus on taking up any of them -- was not followed up uniformly across the board. Some subjects have been pursued selectively, while others have been ignored. In particular subjects of interest to developing countries were not taken up with vigour and enthusiasm. Developing countries themselves could not keep up the pressure. They were not able to provide adequate back-up through supportive intellectual exercise and tabling of concrete proposals. And going beyond the 'laundry list', new subjects have been added, with the result that now we have environment, social clause, competition policy, corruption and investment. All this has caused a lot of confusion in developing countries. The implementation of the Uruguay Round is still in a preliminary stage, and involves commitments with serious and far-reaching implications. These are yet to be fully understood and evaluated. In fact, the world trading system has not yet recovered from the shock of this major event. But already, the developed countries have started pushing hard on new proposals which have serious implications, are of doubtful utility and have the potential of damage to developing countries. This process has diverted attention from the main issues of interest to developing countries. A lot of resources are being employed just to prepare to respond to these proposals. The natural question is what is behind all these. The answer is both simple and complicated. Major industrialized countries have already got for themselves all the space in the super hi-tech industries and services. They are desperately trying to hold on to the traditional industries in which they are fast loosing competitiveness. They are not able to adjust to competition from outside. And their skewed internal policies are causing unemployment for which the blame is easily assigned to imports from the developing countries. The new proposals are aimed at resolving these problems. The strategy of major industrialised countries is to raise the level of the playing field so high that developing countries are not even able to climb on to it, leave aside play in it. And they also intend to bring all these subjects into the folds of the integrated dispute settlement process of the WTO so that implementation can be assured through the threat of action on the import of goods. A brief examination of the new issues would indicate that the fears of developing countries are rational and justified. For environmental protection the proposal is to allow countries to restrict imports as a means of implementation of multilateral agreements on environment. The fear is that such an automatic discretion may be misused by countries to protect their industries against imports. Already there is provision in GATT 1994, under Article XX, to take trade restrictive actions for protection of environment. There is no reason why, in the name of environment, countries should need any more authority. The existing safeguards against arbitrary use of the provision is that the necessity and reasonableness of the action is subject to multilateral scrutiny in the WTO. Any wider subjective discretion may result in misuse. Similar is the apprehension about the labour standards. The proposal is to enforce labour standards through the machinery of WTO, which in real sense means that imports may be restricted if a country is considered to deviate from these standards. The adherence to labour standards is no doubt a laudable objective, but linking it to trade sanctions is not reasonable at all. It should be best left to the ILO to handle it. A tenuous link is sought to be identified between trade and labour standards by arguing that non-adherence to certain minimum standards gives a country unfair advantage in competitiveness. But such links can be extended further. If low wage and lower levels of facilities for labour are an unfair advantage and trade distortive, low cost of capital, easy availability of technology and highly developed infrastructure in industrialised countries are causes of much more unfair advantage and are more trade distortive, In respect of the proposals relating to competition policy, any action against anti-competitive behaviour is welcome. But the fear is that the main intention of the proponents is to check the growth of firms in developing countries and prevent them from developing into competing multinationals. On investment, the proposals need a little more elaborate consideration in view of the latest initiatives of some major industrialized countries and the dangers inherent in these proposals. The proposal is to allow the foreign investors full freedom to invest in a country, and thus curtail the role of the host country in choosing the appropriate sectors for investment and in ensuring checks on harmful outflow of foreign exchange. The main concerns of the host countries are higher production, development and absorption of technology, development of infrastructure and the survival of domestic investors. These are being totally ignored in the proposals which seek to take care of only the interests of the investors. The proponents of the proposals use various arguments to persuade the developing countries. One argument is that we may just start 'the education process' by examining the subject in WTO; and another is that during negotiations various types of interests will be taken into account. The process of GATT/WTO does not inspire confidence in these arguments. The persistent experience so far, whether in the Tokyo Round or Uruguay Round, has been totally different. Nothing has happened over these two years to change this perception. Hence this trap must be avoided. Further, the international community has recently decided to examine the subject in UNCTAD. There is no reason to duplicate the examination by considering it simultaneously in WTO. When these new proposals are so untimely and unreasonable, and in fact harmful, why should these be entertained at all? One motive may be to avoid annoying the powerful industrialised countries. But there is no limit to their demands. In 1982, they demanded the inclusion of services in GATT. In 1986 again they pushed for services, and in addition for investment and intellectual property. And now in 1996 we have all these further new subjects being championed. At this rate in 1998 we may have yet other new subjects, like harmonization of taxes etc. There will perhaps be no end. Hence the process has to be stopped at some stage, and developing countries have to say 'no' at some stage. Another reason for agreeing to the new proposals could be the fear of threat of retaliatory action from major industrialized countries, if they become unhappy. But no action can be taken in WTO, as the Dispute Settlement Process of the WTO has definite pre-requirements, and a country, however powerful, cannot take actions against another country, howsoever weak, for not agreeing to negotiate on new issues. Action in areas outside the WTO is also very doubtful; very often it is merely a threat, in particular, there is no likelihood of action regarding aid, as it involves varieties of considerations, and it is unlikely to be affected by a country not joining new negotiations. This raises the question of what strategy developing countries should adopt in not allowing new issues to enter the WTO. There is no likelihood of any major industrialized country pressing for voting, as it will have serious implications for the future. And precisely for this reason they have been consistently preferring decisions in the GATT/WTO by consensus. And in the WTO, even one country can formally stop consensus. This may be difficult politically. But it is practicable, and certainly it will be very effective, if some countries, even five to ten, explicitly oppose the proposals. If five to ten countries strongly and openly want to stop the entry of new subjects in WTO, it can certainly be stopped. What is needed is their making clear and open statements in formal and informal meetings. It has to be kept in mind that the GATT/WTO negotiations are not polite exercises of the 19th century diplomacy; these are straightforward, and hard hitting. Developing countries will also have to guard against disinformation, as it is an effective tool adopted by adverse interest groups. Sometimes even malicious campaigns are launched against individuals and countries taking tough stands. All this has to be countered and neutralised. The best way is to have constant exchange of information among interested developing countries. Open conversations, frequent meetings and telephonic contacts between capitals will be helpful. Similarly, contact between the capital and its Geneva negotiators is important, as attempts are often made by adverse interest groups to create misunderstandings between them. The real key lies in deciding whether a particular proposal is beneficial, neutral or harmful; and if it is found harmful, it must be opposed. Fears of isolation and reprisals are often illusory. And if five to ten countries are fully consolidated in their views and presentation of such views, such fears will vanish altogether. Considering past GATT experience, it is almost certain to be effective. At the same time, there must be a strengthening of capacities in developing countries in order to enhance analytical capability. Interaction among various interest groups within countries, and among countries, has also to be increased. Joint efforts of some interested developing countries in this regard will be useful. Developing countries have to recognise their own potential as important actors in the international economic scene in the world. Some of them have had impressive economic growth, some have rich natural resources, some have vast wealth of technically trained personnel, and all of them together provide enormous market and prospects for future growth of market. What is needed is a full realisation of these potentials, synergic combinations of these positive factors and a new confidence about their role in the international economy. (The author was a former Indian Representative to the GATT, and was subsequently Director of the Manufactures and Trade Programs Division of UNCTAD. This article was specially written for SUNS)