people, the WTO appears remote and mysterious, powerful and unaccountable. They see it as
serving only to enforce a set of rules for trade which seem to conflict with central
concerns of society such as jobs and incomes, economic development, the environment,
health and safety, and national sovereignty.
more sympathetic. They recognize the WTO as just the latest embodiment of a cooperative
international effort, now half a century old, that has contributed much to economic growth
around the world. But they still worry about some of its new features, most notably the
impact of its binding dispute settlement procedures on the needs of poor
developing-country producers, fearful consumers or endangered species.
concerns are genuine and proper. Many are based on misunderstandings; some not. All demand
and deserve a response now. And they require, for the future, a much more vigorous and
sustained effort, by member governments and by the WTO itself, to establish and maintain
dialogue with civil society.
initial and necessarily brief responses to some of the concerns most often expressed
The WTO is
unrepresentative and undemocratic, and undermines the sovereignty of governments
This is a
most serious accusation. And it is wrong.
The WTO, and
all its associated agreements and rules, is simply the expression of the will of its
- The agreements
result from negotiations among the member governments. The whole WTO package was endorsed
barely five years ago, in April 1994, as the result of the seven-year Uruguay Round of
negotiations. Every member country has formally accepted the package after following its
own ratification procedures, which generally involve a vote of approval by its parliament
or other legislative authority.
- The great
majority of WTO members are democracies. Their governments act by consent of their
- Decisions are
generally taken by consensus. No new obligation can be placed on a member without its
consent, and individual members have the power to stop changes.
- The WTO
Secretariat provides administrative and technical support to members. It has no
international agreement affects sovereignty, but also represents an exercise of
sovereignty: an acceptance of commitments in exchange for a similar acceptance of
commitments from the other signatories. This is just as true, for instance, of the
agreement on the Law of the Sea as it is of the WTO. For small countries in particular,
the rule of law established for international trade by the WTO actually strengthens their
sovereignty, because it protects their independence from bilateral bullying.
- Each member
has the right of recourse to an agreed dispute settlement mechanism to settle differences
over whether other commitments are being respected. Final rulings on disputes, if the
governments concerned fail to settle them among themselves, rest with the Dispute
Settlement Body, on which all members are represented.
- In the final
analysis, any member can withdraw from the WTO on six months notice. None of the
present 135 members has even threatened to do so.
- The fact that
over 30 more countries are lined up to join the WTO does not suggest that they
view membership as a risk to their sovereignty.
None of these
points is meant to argue that improvements could not be made. A real problem, for
instance, is that some of the smaller developing countries do not have the trained
officials and financial resources to participate fully in the WTOs work, and may
therefore accept an agreement without fully understanding its significance.
governments fail to consult sufficiently with civil society, or shroud WTO processes in
unjustified secrecy, important considerations may be overlooked, decisions may not be
understood by the public, and suspicions may be aroused that special interests have
influenced the outcome. These issues, and others like them, will be discussed in Seattle.
The WTO is concerned
only with free trade
central thrust of the WTO, as of its predecessor the GATT, is to encourage the removal of
barriers to trade, and of other trade-distorting measures, so that goods and services can
move more freely among member countries.
Over the past
50 years, as discussed in earlier pages, freer trade has proved itself a powerful
means of creating better jobs, and of promoting economic growth and development. Countries
that have opened themselves to trade have been able to play to their economic strengths:
to specialize, use their comparative advantages, and so generate growth and higher
incomes, which in turn has helped to solve economic and social problems. The growth record
of countries which have preferred higher trade barriers and comparative self-sufficiency
has been nowhere near as good.
contributes to making the world a safer place, by reducing poverty and creating shared
interests in the stability of international relations.
But there is
more to the WTO than a blind pursuit of free trade, and there is nothing automatic (or
easy) about the process:
- The member
countries themselves decide how far they want to go in removing trade barriers and
distortions. Each country fixes its negotiating position in the light of its own
priorities, as established by its own national processes of consultation and legislation.
In the course of negotiations, these positions are usually adjusted, as perceptions change
of what protection is needed for domestic interests, and what gains may be obtained from
But at the end of the negotiation, the final decision to accept further liberalization or
not rests with each individual member. Governments are not forced into freer trade: this
is why liberalization of world trade has lagged in sensitive sectors such as agriculture,
textiles and clothing.
- The WTO itself
is a negotiating forum. It offers rules, agreed on the basis of long experience, about how
negotiations should be conducted. Only the member governments, however, can decide on
whether to negotiate or not, on the form that negotiations should take, and on how far
trade liberalization should go.
experience also means that agreements reached provide time for barriers to be reduced
gradually, allowing adjustment by domestic producers. Longer adjustment times are usually
given for developing countries, and especially the least-developed countries, as well as
other special provisions to take account of their situation.
exceptions are provided for on health, safety, national security and a range of other
public policy grounds.
- Other WTO
rules prevent unfair trade. Members can impose special import duties to offset damage done
to domestic producers by imports that are unfairly subsidized or dumped.
Safeguard rules allow temporary restrictions, even if trade is fair, if a domestic
industry needs more time to adjust.
And standing exceptions mean that all members keep the right, for instance, to regulate or
prevent imports or exports of weapons, narcotics, and products of prison labour, or to
maintain measures need to protect human, animal or plant life.
- The thrust
towards freer trade is not the only key principle of the WTO system. Others include
non-discrimination (treating other members equally) and making sure conditions for trade
are stable, predictable and transparent.
WTO rules and
liberalization destroy jobs, depress wages and ignore workers rights
and workers rights are central human issues, long recognized as deserving
international attention: the International Labour Organization (ILO) was founded a
generation earlier than the multilateral trading system. Concern about these matters is
natural and proper. Trade and labour developments do influence one another. But their
relationship is complex.
Trade can be
a powerful force for supporting growth, and through growth for creating jobs and reducing
poverty. Countries whose trading partners open up their markets gain through higher
exports: workers in export industries tend to receive higher pay and enjoy greater
security. The greatest gains, however, go to the country that lowers its own barriers,
since this removes distortions, lowers costs and widens choice, allowing it to use its own
resources more efficiently.
producers and their workers previously shielded from foreign competition face new
challenges when trade barriers are lowered. Some producers compete successfully by
becoming more efficient, by specializing, or by shifting to production of new kinds of
goods or services. Others dont. Some displaced workers adapt quickly, finding new
employment, perhaps by moving elsewhere or retraining. Again, others dont.
countries are much better at making necessary adjustments than others. This is partly
because they have more effective adjustment policies: better social safety nets, better
educational facilities, including for retraining, and other policies that make it easier
for workers to move to jobs, or for job opportunities to be created where the displaced
workers are. Trade, by boosting the economy as a whole, creates resources that can be used
to help adjustments happen more quickly. And as living standards rise, people demand a
cleaner environment and more resources are available for education and health.
allow time for adjustment to trade liberalization. Tariff cuts and other changes agreed on
in negotiations are phased in gradually. Standing rules permit temporary safeguard and
other contingency action against imports that are particularly damaging. Liberalization
under the WTO, it should also be remembered, is the result of negotiations. Countries can
and do refuse to open some parts of their markets if they feel that this would require
unacceptably difficult adjustments. Countries can also renegotiate commitments if they are
considered contrary to the national interest.
accounts anyway for only a fraction of the adjustment needed in any dynamic economy.
Technological advances, shifts in consumer demand, and competition from other domestic
producers exert the greatest pressures for change. Adjustment, in the employment market as
elsewhere, is a natural consequence of economic progress.
comparisons of wage rates in rich and poor countries can be very misleading. What counts,
in competition, is productivity in relation to costs: the output of goods and services in
relation to the resources needed to produce them. Low wages alone are only one factor:
others, in which the richer countries are generally far ahead, are workers skills
(and ill-treated labour is generally particularly unproductive), the production equipment
at workers disposal, managerial experience, and supporting infrastructure such as
telecommunications, banking services, reliable power supplies, roads and ports.
a wide range of studies, imports from low-wage countries account for only
1020 per cent of wage changes in developed countries. Of the rest, much results
from skill-based technological change a shift to technologies that
require labour with higher levels of skill. Even that 1020 per cent explained
by imports from low-wage countries, however, can be a tempting argument for protectionism.
But protection tends to raise costs, and encourage inefficiency. The OECD calculated the
likely effects on US wages of imposing a 30 per cent duty on imports into the United
States from developing countries. Working through the expected consequences, it found that
the duty would actually reduce unskilled wages by 1 per cent and skilled wages
by 5 per cent.
developed countries, at the urging of trade unions, periodically suggest that the WTO
should consider labour issues. Developing countries have been strongly opposed, fearing
that these concerns are put forward only as a cloak for protectionism. At the WTOs
Singapore meeting in 1996, ministers reconciled their differences through a statement
which expressed commitment to core labour standards, affirmed their support for the ILO as
the responsible international body, stated the belief that trade and trade liberalization
helped in promoting these standards, and agreed that the comparative advantage of
countries must in no way be put into question. They endorsed collaboration between the WTO
and ILO Secretariats, but did not support any WTO work on labour standards. Some
governments want to go further at Seattle, and this issue will be discussed.
In 1998, the
ILOs member governments (who are largely also members of the WTO) adopted a
declaration which endorsed the basic principles of freedom of association, the right to
collective bargaining, elimination of forced labour, effective abolition of child labour,
and elimination of discrimination in hiring and employment practices. This year, they
agreed further to prohibit the worst forms of child labour, while recognizing that child
labour is largely a function of poverty and that sustained growth is the key to
eliminating its exploitative and harmful forms. According to a recent World Bank study,
less than 5 per cent of child workers in the developing world are engaged in
Does the WTO put
trade ahead of economic development, and ignore other problems of developing countries?
economic development are not alternative objectives. Trade fosters growth and development.
Developing countries with open trade policies have consistently grown faster than closed
economies. The great majority of WTO members more than three quarters are
developing countries. They are members by their own choice, and full participants in all
the organizations work and decisions.
In the early
years of the multilateral system, not many developing countries were GATT members. Those
who were made few commitments to open their markets to imports. Most put their faith in
policies of import substitution, hoping this would encourage the growth of their own
production capacity, and stayed largely on the sidelines in trade negotiations up to the
end of the 1970s.
with the consequences, and the example provided by a few countries which adopted more
liberal and market-oriented policies and enjoyed much faster growth, led to a sea-change
in the trade policies of many developing countries in the 1980s. They reduced trade
barriers, joined fully in the Uruguay Round negotiations, and accepted all the results.
Many have achieved considerable trade success.
A third of
the worlds largest trading countries are now developing countries. Developing
countries share in world trade has risen from a fifth to more than a quarter in just
12 years, and their share of trade in manufactures has doubled, to 20 per cent.
are directly in line with the WTOs own objectives. The Preamble to the Marrakesh
Agreement singles out the aim of ensuring that developing countries, and especially
the least developed among them, secure a share in the growth in international trade
commensurate with the needs of their economic development.
developing countries have been increasingly reflected in the trade rules, and in the
course of negotiations. Special rules were added to the GATT in 1964 which gave
priority to their trade needs, and stated that developed countries would not expect
reciprocity from them for trade concessions made to them.
agreements added the principle of special and differential treatment for developing
countries, and authorized trade preferences for and among them.
agreements generally give developing countries more time than developed countries to bring
their policies into line with the new rules. Several agreements, notably those on
agriculture and subsidies, require less liberalization by them than of developed
countries. Obligations of least-developed countries are much fewer and smaller than those
of other countries. Developing countries insistence on their needs in the Uruguay
Round led to major gains, such as the agreements on agriculture, and on phasing out
restrictions on trade in textiles and clothing.
countries are a major force in WTO work. The leverage given them by the WTO rule of
consensus has allowed them to press successfully for recognition of their concerns, and
also to block proposals which they believe inconsistent with their interests.
dispute settlement rules, they have fought back successfully against policy decisions by
developed countries that discriminate against them, whether on textiles, bananas or
through environmental measures.
issues, some make common cause with developed countries: the influential Cairns Group of
agricultural exporters is made up almost equally of developed and developing countries.
This does not
mean that developing countries are satisfied with the present situation. As shown by their
proposals for the WTOs future work programme, many share concerns that tend to set
them at odds with developed members. These include:
- belief that
better implementation of existing WTO agreements, including faster removal of textiles
restrictions, longer transition timetables for developing countries and greater technical
assistance, should have priority over negotiation on new issues
- desire to
change or ease some WTO rules which they believe give inadequate weight to their situation
at continuing barriers to their exports, particularly against processed products based on
their own natural resources
- concern at the
practical burdens involved in taking part in WTO work for the small delegations of
developing countries, and at the cost of dispute cases
problems of the least-developed countries (see the previous chapter of this booklet)
like all other members, each developing country seeks through the WTO to reach national
objectives that reflect its own particular economic and trade strengths and weaknesses. By
no means all issues split members along North/South lines. In several areas, including
that of agriculture mentioned above, groups of developed and developing countries make
of one dispute is often cited as evidence that WTO rules go against the interests of
developing countries. This is the banana case, in which the United States successfully
complained that its trade interests were damaged by the way in which the European Union
gave preferential access to the EU banana market to imports from Caribbean and other
countries linked with it by the Lomé Convention.
and difficult case cannot be explained in a few words, but two points need to be stressed.
complaint was not brought only by the United States, but also by four developing country
exporters in Latin America whose banana exports were adversely affected by the EUs
dispute ruling concerned the way in which import restrictions and domestic regulations
were applied. Neither the dispute judgement nor the complainants have questioned the
European Unions right, granted to it by the GATT in 1994 and the WTO in 1996,
to give tariff preferences to its Lomé associates.
developing-country economic problems such as debt burdens, the decline in flows of
official development aid, and unstable commodity prices, fall outside the responsibility
of the WTO, but are obviously relevant to their trade concerns.
between trade and other economic policies are recognized in the WTO agreement, which
requires the WTO to work with the IMF and World Bank to achieve greater coherence in
global economic policymaking. This cooperation, which also brings in UNCTAD and other
agencies, particularly in efforts to help the least-developed countries, is expanding
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