MANAGING THE CHALLENGES OF WTO PARTICIPATION: CASE STUDIES
45 case studies from economies around the world, each of which illustrates how governments, business and civil society manage their country’s participation in the World Trade Organization.
Opinions expressed in the case studies and any errors or omissions therein are the responsibility of their authors and not of the editors of this volume or of the institutions with which they are affiliated. The authors of the case studies wish to disassociate the institutions with which they are associated from opinions expressed in the case studies and from any errors or omission therein.
> I. What is in this book
> II. Playing the game
> The case studies
> III. The big picture
> IV. Some themes
> Standards and SPS
> Intellectual property
> Advocacy and ‘democratic accountability’
> An ‘agent of restraint’
> Two special regions
> V. Who’s in charge?
I. What is in this book
This book brings together forty-five case studies from economies around the world, each of which illustrates how governments, business and civil society manage their country’s participation in the World Trade Organization.(1)
The case studies make a mosaic image of what it takes, at the start of the twenty-first century, to manage the integration of an economy into the global trading system and what the rewards, or penalties, of integration can be for economies of all sizes, including many of the world’s poorest and most resource-poor economies.
They show, through ‘real world’ examples, that joining the WTO and taking advantage of WTO membership is not something to be left to government alone. It calls for the participation of many different ‘stakeholders’ in an economy, including goods and services producers, industry associations, consumer associations, civil society groups and academic analysts.
They also show that people representing those different national interests and institutions take most of the significant decisions affecting an economy’s participation in the global trading system. The WTO itself has only a secondary role; it helps to define the context of a trade policy decision but doesn’t compel the choice of one policy over another.
The case studies include success stories, some stories of failure or frustration, one or two ‘disasters’ and some stories that are open-ended because the final outcome is not yet known.
Each of the case studies speaks for itself. The rest of this introduction provides some topical summaries of the case studies and identifies some of the ideas that emerge from them. But there are many more things in the cases themselves that we haven’t covered here.
II. Playing the game
Do you remember watching a sporting event for the first time? A game whose rules you didn’t understand?
Confusing, wasn’t it? You could probably guess the objective of the game by watching the scoreboard, but without knowing the rules it can be very difficult to understand why the players are doing what they do and who’s getting ahead in the game and who’s falling behind.
Now, imagine that you are watching a game that has about 150 players on the field and no scoreboard. Imagine, too, that the rulebook for this game has twenty-eight thick chapters and thousands of pages of footnotes and clarifications, so that there is some doubt about whether even the players know all the rules. Watching each player in this game is a stadium filled with millions of followers — a mixture of supporters and critics — who are continually shouting encouragement or instructions to the players while betting furiously on the outcome of every play.
To make things even harder to follow, this game doesn’t have a referee: the players have to manage the game for themselves. And without a referee to blame whenever the play seems to go against their team, some spectators have taken to abusing the staff at the stadium.
The multilateral trading system is not a game, of course; being a member of WTO isn’t much like play. But the trading system managed in the WTO is a huge and frequently confusing enterprise in which a large and complex set of rules governs the way that governments — the main ‘players’ — interact.
As in some sports, the ‘spectators’ sitting just outside the field of play — billions of ordinary business people and citizens — are an important part of the ‘game’. All the gains and losses end up in their hands and, ultimately, for reasons that we shall see in this book, the future of the game is also in their hands. But most members of the public don’t understand the game very well and some of them suspect that the rules, which have been agreed among the players beforehand, are stacked against them.
This book is a sort of guide to the game, from a spectator’s viewpoint or, to be more precise, from the viewpoint of more than forty spectators.
There continues to be a considerable amount of misunderstanding about the role of the World Trade Organization as an institution. One still hears complaints about giving up sovereignty to faceless bureaucrats on the shores of Lake Geneva. Most of this book demonstrates just how much sovereign discretion economies participating in the system wield. It really is true that the WTO is a member-driven organization.
We hope that the cases in this book will help dispel the mystery and encourage more people to take a more active role in the ‘game’ in future. When you read the cases, you will probably recognize many of the issues that they raise and the challenges faced by the people at the centre of the story. Many of the stories told here for the first time are repeated every day in economies around the world: you can probably find very similar stories in the business press in your own city.
The case studies back to top
This book is the result of a project that has been jointly funded by the WTO and the Australian government’s official aid agency, AusAID, to encourage better understanding of how the multilateral trading system works. Our sponsors agreed to allow us to seek case studies, predominantly written by observers and analysts in developing countries, that would detail some aspect of the way in which the stakeholders in a particular economy worked together to manage a problem or to make the most of an opportunity related to WTO membership.
We contacted authors in about fifty economies, many of them in academic institutions, and gave them a very short brief that left the choice of subject matter and approach entirely up to them. We did not ask for ‘success stories’ and we made it clear that the analysis of the issues, including their assessment of the value or role of the WTO, was a matter for their own judgement.
We have accepted for publication virtually all the cases that reached a final draft within the time constraints we placed on the authors. So, as much as possible, this is an ‘un-retouched’ snapshot of participation in the WTO seen — mostly — from around the developing world about ten years after the organization was founded.
III. The big picture
The cases in this book cover a wide range of commercial and government activities.
A Bangladeshi rock band finds that a ‘Bollywood’ movie producer has pirated one of its songs; band members use the provisions of the WTO to regain their rights.
The tiny Pacific island economy of Vanuatu decides to suspend its application for WTO membership when its inexperienced government administrators fail to find a sympathetic hearing from existing WTO members.
An ‘inside’ account of how India struggled to develop a national consensus on the liberalization of its protected agriculture sector.
The Kenyan government fights for the right, under the WTO Agreements, to import AIDS drugs manufactured elsewhere under ‘compulsory licences’ for use in Kenya. It finds that the issue of patent protection under its own legislation is not straightforward and that the patent law changes are not the biggest barrier to reducing the impact of the disease.
The tuna industry of Thailand fights to retain access to the European Union (EU) market on comparable terms to its competitors, but manages to avoid a costly formal dispute adjudication.
Chilean poultry exporters and government officials act urgently to handle an animal health emergency that could have killed exports to the vital European market, making effective use of international standards and notification procedures established by the WTO.
An exporter of traditional herbal medicines from Nepal runs into regulatory barriers he cannot understand or do much about until Nepal joins the WTO and the Nepalese government creates a regulatory framework that helps him to meet his customers’ expectations of good manufacturing practice.
The Mexican government is backed into a corner, domestically, by the powerful Peasants’ Union’s revolt against imports from the United States under the North American Free Trade Agreement (NAFTA); the facts show, however, that the agreement has opened up new horizons for Mexican industry that could be extended by multilateral negotiation.
Nigerian industry is penalized by a system of import prohibitions that have strong political support but are economically costly — why Nigeria’s WTO obligations don’t offer a solution.
IV. Some themes
The accession of developing economies to the WTO has proved to be a major challenge to their government administration as well as to the content of their trade policies. It’s a gruelling procedure requiring the preparation of detailed memoranda on foreign trade policies and practices and a convincing commitment to implement the WTO Agreements — without access, in most cases, to the lengthy implementation delays that were available to members of the WTO when the agreements were first negotiated. They must also negotiate bilateral trade deals with their most important trading partners, intended to ensure that they ‘pay’ for the rights that they will acquire as WTO members. The process often involves years of detailed examination by a working party and lengthy rounds of negotiation.
During this time it is not at all unusual for domestic pressures on the government to mount, as business and civil society — lacking experience with the WTO and fearful of the consequences of market liberalization — demand more details about the benefits of membership and often question the impact of the WTO rules on the economy’s sovereignty.
Several cases in this collection provide new perspectives from the inside on this difficult process.
Damedin Tsogtbaatar reveals how the objectives of the business community and even of the government were shaped by Mongolia’ s historical experience before its accession bid. He shows how these false expectations led to ill-prepared negotiations, less advantageous accession terms than might have been achieved and subsequent disenchantment with the WTO that had a lingering effect on Mongolian trade policy.
Vanuatu, an island economy in the Melanesian group, was also ill-prepared for its attempts to accede to the WTO. It had few government and private-sector resources to support its accession efforts and lacked the administrative resources to inform its domestic stakeholders or adequately to prepare for the bilateral negotiations. The government of Vanuatu (population 200, 000), like the government of China (population more than 1 billion), had chosen to make membership of the WTO an integral step in its objective of closer integration with the global economy. But economic reforms stalled along with the WTO bid, due in part to lack of adequate planning and national consensus on the objectives. The account by Daniel Gay reveals an unmistakeable bitterness in Vanuatu regarding the attitude of its major trading partners towards its WTO bid and even the role of the WTO secretariat.
In China the story of this historic change in economic direction is still unfolding, but the impression given by Gong Baihua of the Shanghai WTO Affairs Consultation Centre is that business and government are much more confident of their ability to control and to benefit from China’s integration with the global economy.
Following the Vanuatu experience WTO members changed their approach to the accession of least-developed economies to reduce the administrative burdens on poor economies and to lower the bar to their entry. Nepal — whose accession had been slowed by political turmoil and security problems — was one of the first beneficiaries of this new approach, being invited to join WTO at the Cancún Ministerial meeting. P. R. Rajkarnikar tells the story of the leadership of a regional non-governmental organization (NGO), SAWTEE, in promoting consensus on membership during the final stages of the process and of the influence that SAWTEE’ s views had on specific issues relating to Nepal’s accession such as plant breeders’ rights.
Cambodia, too, was welcomed into the WTO at the Cancún meeting at a time when the constitutional machinery for ratifying the Agreement was not in place. Hach Sok and Samnang Chea examine the degree to which the accession was negotiated with the informed support of the business community and ask whether Cambodia, whose trade depends heavily on the export of garments, is well prepared for the future management of integration into global markets.
One of the most controversial aspects of recent accessions has been the demand by existing members that new members achieve still greater openness than is required by the current agreements. This was certainly one of the problems faced by Vanuatu.
The liberalization of markets that follows accession may also move the acceding economy to make consequential changes to its policies in order to take full advantage of accession. This is the case in Vietnam where, as Phan Van Sam and Vo Thanh Thu point out, liberalization of the banking sector — although not strictly required by the General Agreement on Trade in Services (GATS) — is essential to ensure that Vietnamese firms can make the best of their new opportunities for integration with global markets.
Disputes back to top
How do developing countries fare under the WTO dispute settlement system? Does it work for or against their interests? Are they able to afford the legal advice that they need in order to bring a case? Are they able to achieve satisfactory resolution of their problems when they do not have the economic power to ‘retaliate’ if so authorized by the Dispute Settlement Body? Can they afford to fight one case after another if necessary to protect their interests in a global market?
Several case studies help to throw some light on the answers to these questions. One of the first cases after the creation of WTO involved a dramatic contrast in the economic size and resources of the disputants. John Breckenridge tells the story of Costa Rica’ s successful assertion of its rights under the Agreement on Textiles and Clothing against US safeguard actions. The victory for Costa Rica in this case — due, says the author, to better preparation as well as the merits of its case — was a signal to other developing countries that the system would work to protect the interests of all members.
Pakistan, too, was successful in challenging US textile safeguards in the late 1990s, as Turab Hussain recounts. This case details some of the practical aspects of preparing a case and the potentially ambiguous ‘victories’ that formal dispute adjudication can bring. The government of Pakistan was party to a WTO dispute for the first time. According to the author it was not well equipped for the case and relied heavily on the specialist knowledge and funding resources of the textile industry association and its members. After persisting with the case before the Textile Monitoring Body and eventually before a disputes panel and an appeal, Pakistan’s objections to the three-year US safeguard quota were upheld. But it had taken almost all of those same three years — and a lot of money — to win the case. Pakistan’s victory was, in the view of the industry, mostly one of principle.
Nilaratna Xuto contributes a case study from Thailand in which close collaboration between government officials and industry leaders challenged proposed changes in EU tariff preferences. The Thai tuna case illustrates the operation of the conciliation procedures in WTO disputes, using the good offices of the Director General of the WTO. These provisions of the disputes mechanism do not capture headlines in the same way as a panel adjudication, but they offer many advantages as this case shows, including less contentious procedures, and significantly lower costs.
It is important to remember that no WTO dispute is supposed to be contentious$.$ Of course, there can be a lot of heat generated between the disputants at the time. But the resolution of disputes serves a positive purpose for all WTO members by helping to smooth world trade and by clarifying how national trade regulations should operate to give effect to the principles of the WTO Agreements.
The WTO disputes system helps to do this even with regard to regional agreements, where disputes among the parties can be even more bitter than those among WTO members at large. An interesting instance of this is the story that Diana Tussie and Valentina Delich tell about the challenge that Argentina raised to Chilean variable levies imposed on imports of vegetable oils, after it had tried unsuccessfully to resolve the matter in the context of the Mercosur regional agreement.
Another surprising aspect of dispute settlement is the confidence-building effect that a successful case can have, affecting the attitude of government and stakeholders towards global economic integration. Junsok Yang’s account of the case brought by South Korea against US anti-dumping measures on colour televisions confirms that preparation for a dispute that demands close collaboration between officials and business people has a positive impact on domestic trade policy-making. For South Korea the result was a more confident participation in the WTO and a more positive view of the benefits of ‘globalization’ of the economy.
The South Korean colour television dispute had its origins in anti-dumping actions taken in the 1980s. Today, anti-dumping actions continue to give rise to serious disputes, as we can see from B. Battarcharyya’s very recent case study on the work that the Indian shrimp exporting industry and the government of India have undertaken to fight a dumping charge in the United States. Whether this and related cases also targeting shrimp exports will be subject to WTO challenge may be known by the time this book is published. Bhattarcharyya’s account suggests, however, that in addition to the financial considerations a decision to pursue a WTO dispute should include an evaluation of the strategic interests of the industry in a lengthy legal tussle.
There is a valuable lesson on this same point in Jacqueline Krikorian’s story of Canada’ s unsuccessful defence of its discriminatory implementation of tariff benefits associated with its side of the US-Canada Auto Pact. She concludes that it was a case fought for the wrong reasons in an attempt to defend a policy whose original objectives had already been bypassed in the marketplace. Friction with trading partners, uncertainty for the automobile industry and a lot of expense might have been spared, in her view, if the Canadian authorities had elected not to defend their policies.
Standards and SPS back to top
We asked all the case study authors to tell the story of a challenge or an opportunity faced by business in the world trading system. The stories that they tell range over many forms of trade barriers, but the most challenging seem to be those related to standards for health or safety, including food safety. Import regulations that fall under the provisions of the WTO’ s Agreement on Technical Barriers to Trade (TBT) or the Agreement on Sanitary and Phyto-Sanitary Measures (SPS) are multiplying around the world. They are typically complex regulations, frequently implementing standards that create a high hurdle for imports. Developing country exporters whose own governments may not implement similar standards sometimes find it difficult to understand what steps are required for compliance with these standards, even when the standards themselves have international sanction.
Bijendra Shakya’s story about the Gorkha Ayurved company of Nepal illustrates all of these factors. The principal of the company, which exports herbal medicines, had to find out for himself about the meaning of the compliance requirements of his customers and to find ways of certifying compliance ahead of government moves to implement an appropriate regulatory structure.
Even legitimate SPS barriers can result in total import prohibitions, so that the stakes can be very high for developing country exporters with limited resources to manage compliance with stringent food health requirements. Rina Oktaviani’s study of the EU barriers faced by the Indonesian shrimp industry shows how little room there is for manoeuvre in such cases and the critical importance of good information flows between government and industry in finding means, within the resources of the export industry, to meet the market requirements.
Excellent information flow and a high priority on transparency with authorities in export markets were keys to the successful management of the health emergency in Chile’ s poultry industry, as told by Claudia Orozco. The Chilean industry and government officials on-site, as well as the Chilean representatives in Brussels and in the OIE (International Office of Epizootics) were immediately alert to the importance of informing all concerned about the nature of the outbreak of avian flu. They handled the emergency successfully because their openness maintained the confidence of the European authorities, allowing them to win agreement to the regionalization of the problem, reducing its commercial impact and making a solution easier to implement.
The Colombian authorities were not so forthcoming about a standards barrier that they imposed on the Malaysian latex condom industry, according to Norma Mansor, Noor Hasniah Kasim and Yong Sook Lu. This case suggests that it may be necessary to ‘read between the lines’ to understand the commercial impact of an apparently innocuous labelling requirement. It would have been possible for government officials on either side to make a mistake had it not been for the WTO standards notification system that alerted the Malaysian firm to the potential problem with the Colombian labelling requirement and provided a mechanism for an official Malaysian response. In this case, as in many potential trade disputes that surface in the WTO, it appears that the proposal was quietly withdrawn and the problem went away.
The non-discriminatory application of SPS barriers, such as those affecting imports of farmed shrimp into the EU, means that they frequently affect a number of exporters at the same time. Several Pacific Island Forum economies are potentially affected by the EU’ s health ban on imports of traditional kava root products. These economies have already banded together in their participation in the WTO, establishing a joint representative office in Geneva to save on funds and to make the best use of experienced personnel. Chakriya Bowman describes in her case study how this initiative will help Papua New Guinea, Samoa and Fiji to work closely together to respond to the unique threat to their multi-million dollar exports of kava-based products.
Industries seeking protection press governments of both developed and developing countries to implement standards or SPS barriers, because they can offer much higher levels of protection than most tariffs. Isidro Morales-Moreno’s case study of Mexican agricultural policies following the implementation of NAFTA describes instances of the use of SPS barriers to reduce adjustment pressures on Mexican farmers.
Intellectual property back to top
One of the most controversial aspects of the 1995 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) was the evidence that rights-holders of trade-related intellectual property were mostly in industrialized countries and that developing countries were mostly importers of trade-related intellectual property. Critics said that the TRIPS Agreement was more advantageous to the former than to the latter WTO members who, nonetheless, faced heavy implementation obligations.
The cases set out in this book do not resolve the controversy, but it is interesting that those we received that relate to TRIPS show developing country export interest in intellectual property and some success stories, as well as challenges on the import side.
S. C. Srivastava has provided a detailed account of the determined legal defences mounted by the Tea Board of India to protect its registered geographical indication (GI) of ‘Darjeeling’ in France, Japan and Russia. Although the Tea Board’s objections to the registration of marks that they considered infringed their rights were not always successful — notably in France, where the Indian registration was not given reciprocal rights according to Srivastava — the case points to the heavy legal burden that the maintenance of a GI, like the maintenance of any trademark, can impose.
Amir Muhammed and Wajid H. Pirzada have compiled a case study related to recent negotiations between Pakistan and the EU on European access barriers to Basmati rice, in which the authoritative designation of rice as ‘Basmati’ may hold the key to maintaining Pakistan’s access to the EU market. Unfortunately, as the authors point out, the government of Pakistan has not yet implemented its proposed legislation on the registration of such names.
Of course, copyright is unique among the major intellectual property categories in not requiring any registration process. One of the happiest outcomes for a developing country intellectual property rights-holder is to be found in Abul Kalam Azad’s case on the triumphant defence of their copyright by the well-known Bangladedshi rock band, Miles. The band was able to obtain summary judgment in the Indian courts against the piracy of their music by a Bollywood producer, thanks to the rights established by the TRIPS Agreement.
Darker and more complex problems figure in Ben Sihanya’s case study on the parallel importing and compulsory licensing of patented AIDS drugs in Kenya. The case provides an insider’s report on efforts to ensure a supply of effective, low-cost drugs for the fight against AIDS in Africa, and examines the controversy over the TRIPS Agreement’s restrictions on trade in compulsorily licensed drugs. The Kenyan objective, according to Sihanya, was to ensure that the patents served the interests of both rights-holders and consumers. This balance was expressed in Kenyan law as well as in the TRIPS Agreement. Part of the challenge in ‘reinterpreting’ the provisions of the TRIPS Agreement was to maintain this balance of interests when the compulsorily licensed drugs were made available for export. But, in Sihanya’s view, the change to the TRIPS provisions did not necessarily address the most significant barriers to effective public health delivery to AIDS victims.
Services back to top
Although services form a rapidly growing part of developing country trade and already provide a significant contribution to a higher balance in their trade account, the level of developing member commitments under GATS remains low. A developing country with significantly higher service commitments than many others is Argentina. As Roberto Bouzas and Hernán Soltz argue, this is most likely to be the result of a coincidence in time between multilateral liberalization efforts and domestic policy reform. In this case the multilateral negotiations were seized upon as an opportunity to push domestic reform.
Soledad Salvador and Paola Azar study the efforts made in Uruguay to develop a new ‘institutional channel’ for public/private-sector co-ordination on GATS issues. The authors believe that the dialogue suffered from a lack of commitment on both sides, and from some institutional resistance and poor information flows that fed existing suspicions — on the part of unions and civil society organizations, for example — about the objectives and consequences of services liberalization. They point to the need to evaluate objectively the domestic impacts and opportunities of services market access. Without such evaluation, the authors argue, the personal views of negotiators and officials may assume more importance than agreed national objectives in determining the GATS commitments eventually subscribed.
J. P. Singh presents a case that contrasts the superficially similar approaches to GATS negotiations of two small Central American economies, Belize and Costa Rica. Noting the low level of commitments offered by developing countries in the GATS negotiations, he asks why economies with vibrant service sub-sectors and in serious need of foreign investment or with sizable service export surpluses make such low commitments.
The evidence that follows for the two countries confirms the essentially bottom-up nature of GATS: both countries choose particular sectors for commitment — at levels acceptable to domestic actors. Interestingly, they also exhibit significant policy differences: Costa Rica was positioning itself to take advantage of being a service-based export-led economy; Belize remains ambivalent about the role of services in general and GATS commitments in particular.
Linda Schmid has a services success story to tell about the experience of telecommunications liberalization in the small Caribbean island economy of Barbados, whose flavour can be represented by this cameo from her account:
An itinerant gardener who makes his way to work and carries his tools with him on his bicycle passed me while I was in a traffic jam. I needed help with my garden, flagged him down, and asked if he might be available. I reached for a pen and paper. He pulled out his cell phone, entered my data, and that evening I had a phone message to schedule a garden site visit. He was using his cell phone as a client database. Individuals with minimal economic means are employing this lower cost technology to enhance the way they work and communicate with others.
She notes, however, that creating regulatory institutions to oversee a competitive market in telecommunications or other newly liberalized services sectors such as banking, insurance or securities is a challenge to WTO members with limited financial and human resources.
Malathy Knight-John and Chethana Ellepola would, presumably, agree about the regulatory challenges. Their account of the implementation of the provisions of the GATS Telecommunications Reference Paper points to gains for Sri Lanka from the liberalization of the telecoms market that followed GATS. But they also identify wide gaps between the global expectations reflected in the Reference Paper and Sri Lanka’s performance in the crucial area of interconnection. The authors describe a complex political economy created by a large number of small players and a small number of large public switched telecommunication network operators who, in the absence of an effective post-liberalization regulatory regime, have been able to cartelize aspects of the market.
Advocacy and ‘democratic accountability’ back to top
Where do WTO decisions come from? From the member governments: there is no other source of decisions in the WTO. Not even the recommendations of the disputes panels or the Appellate Body become decisions of the WTO until the member governments say so.(2)
So, how do individual member governments decide what to say on any particular issue? That question lies at the heart of what might be called the ‘democratic accountability’ issue for any intergovernmental organization like the WTO. Do the decisions of the WTO have ‘democratic’ credentials in the sense that the member governments’ policies and regulations are based on a democratic mandate and on the processes that we expect in any democracy such as public information, consultation with stakeholders and accountability to citizens for the decisions taken?
The case studies in this book show that the answer is, in general, ‘yes’. We see evidence in almost all cases that governments are ready to inform and consult with private-sector stakeholders when they are preparing for a WTO decision or negotiation. Most governments seem to appreciate, too, that such consultations are essential to ensure that government is well informed about the consequences of its actions in the WTO.
There are, however, two different aspects to this co-ordination with stakeholders: advocacy — which can be ‘lobbying’ for private benefit or something more public-spirited — and accountability, which means, at a minimum, government responsiveness to the demands of stakeholders and citizens.
In most of the cases in this book there is an element of advocacy by producers that prompts governments to inform and consult. Producers whose interests are at stake in a trade policy measure are likely to lobby for government consideration and support particularly where a foreign trade remedy measure is involved (Pakistan — cotton, India — shrimp, Costa Rica — garments) or some other external event threatens changes in market access terms (Thailand — tuna, Malaysia — condoms, Chile — poultry). In most of these cases we see the formation or expansion of producer coalitions designed to address a specific, WTO-related trade challenge to trade in a particular product. In several of these case studies the authors also suggest that the experience gained by the coalition, and the links it develops with the government in the course of the events recounted in the case, will continue to provide a base for co-ordination in the future.
Jean-Marie Paugam, for example, tells the story of the co-ordination of French negotiating positions, particularly on agriculture, in the lead-up to the Cancún ministerial meeting. Although France exercises its influence on the WTO agenda through the European Community’s position, Paugam provides an analysis of a very well-informed, experienced, sophisticated stakeholder community whose inputs into both the French and Community’s negotiating position is persistent, co-ordinated and effective. ‘Overall’, Paugam notes, ‘in keeping with theoretical predictions, protected producers are more likely to organize themselves efficiently when their interests are concentrated and their consumers dispersed. In a context of declining agricultural support, concentrated potential “losers” proved very active.’
Two other case studies also use the agricultural sector to analyze the challenges of including non-governmental actors in the decision-making process. The study on Venezuela by Rita Giacalone and Eduardo Porcarelli shows that the issue is not simply whether both government and the private sector are serious about engaging in dialogue. They refer to the need for ‘avoidance of politicization’ in consultative processes and argue that ‘private-sector associations should carefully tread the waters of domestic politics in order to have the right to participate . . . ‘ Shishir Priyadarshi’s study of decision-making on agriculture in India traces an open and generally successful consultative process. But he also notes that this inclusiveness and transparency may have pre-conditioned the government’s stance and favoured a defensive posture.
Niel Joubert’s study of the development of the anti-dumping regime in South Africa reveals that even where consultative mechanisms are well established, they may simply serve to bless decisions that have already been taken or positions that have been defined in anticipation of negotiations with other countries. Joubert notes that governments may well have to choose trade-offs that disregard non-governmental stakeholder inputs, but this does not necessarily mean that these were disregarded from the outset.
There seems to be a qualitative difference between the lobbying of producers in the context of WTO negotiations — where the potential responses of the government are constrained by the need to reach reciprocal agreements with trading partners — and lobbying where the government is not so constrained.
From Nigeria, for example, Ademola Oyejide, Olawale Ogunkola and Abiodun Bankole bring us a case of an import prohibition policy that seems to escape the constraints of the General Agreement on Tariffs and Trade (GATT) rules because it falls under a WTO exception. The authors argue that the policy has failed despite a degree of popular support. Although its nominal purpose is to secure the economy’s balance of payments, the latter is determined primarily by developments in the world oil market; the import prohibitions have relatively little impact. The real force behind the use of this policy instrument, according to the authors, is the protection of domestic producers, but there is little evidence that protection has produced the desired result of a greater degree of import replacement or higher export earnings.
Sometimes producers join in sector-wide or even cross-sector advocacy that may include non-producer interests (Philippines — co-ordination, Brazil — G20, India — agriculture, Kenya — co-ordination, France — co-ordination). Here the need to accommodate divergent interests is likely to defeat attempts at ‘lobbying’ on behalf of product or sector objectives and to result in more strategic ‘advocacy’ by the private sector, taking account of economy-wide goals.
Pedro da Motta Veiga brings us an example of this broadly based policy advocacy in his insider’s account of Brazil’ s role in the formation of the G20 group of developing countries and the interaction of Brazilian ministries and industry in those events. He writes:
Brazil’s negotiations strategy was driven not only by the internal dynamics of the agricultural negotiations in the WTO, but also by a broader shift in the country’s foreign economic policies — especially in its trade negotiations strategy — towards a view where the North-South axis acquired a growing relevance. Brazil’s leadership in the setting of the G20 is perhaps the best example, at the multilateral level, of the country’s new ‘southern’ stance in trade negotiations.
In several cases, too, we see evidence of accountability: that is, the willingness of governments to take responsibility for their decisions or to share with stakeholder representatives responsibility for decisions (India — agriculture, Chile — poultry, Thailand — tuna, Brazil — G20, Barbados — telecommunications, Philippines — agriculture, China — consultation).
Donah Sharon Baracol gives us an insight into the Philippines formal consultation process on agriculture negotiations: the Task Force on WTO Agriculture (Re)Negotiations (TF-WAR). The Task Force was formed as a result of grass-roots demand for a review of the Philippines negotiating approaches before the Seattle Ministerial meeting, and it remains, according to Philippines officials, a principal source of information for agricultural industry stakeholders as well as of guidance for the government in formulating its position. The strength of the consultation process and its broad base provides, according to the author, a form of security for Philippines negotiators against the pressures of third parties in the negotiations.
But consultation and co-ordination are expensive: they use resources that are scarce in any economy — especially small and developing economies — such as the time and attention of government officials and private-sector representatives. We also find several cases where the challenges described by the author are due to consultation and accountability mechanisms that are under-resourced and unco-ordinated (Uruguay — services, Kenya — co-ordination, Botswana — co-ordination) or slow to start (Pakistan — textiles, Uganda — co-ordination, Malawi — co-ordination).
Several African case studies contain examples of co-ordination problems and failures due in part to the cost of building appropriate institutions.
Walter Odhiambo, Paul Kamau and Dorothy McCormick are critical of the consultative process in Kenya that is managed through the National Committee for the WTO (NCWTO). The membership of the national consultative body — responsible for recommendations on all aspects of Kenya’s participation in WTO — was based in part on its ‘enquiry point’/notification obligations under the Uruguay Round agreements. The committee is large and hierarchically structured, and has a heavy agenda of meetings. But without political commitment, funding, legal status, decision-making powers or consistent participation from the private sector it has provided limited inputs into government decisions. For all its shortcomings, however, the authors believe that it has had an impact on the dissemination of information and on an increased private-sector awareness of the WTO in Kenya.
Tonia Kandiero argues that stakeholders in Malawi have reason to be disappointed with the organization of their representation in the WTO, and suggests that changes are needed in the co-ordination of technical assistance to Malawi to ensure that its need for a better understanding of the WTO and more effective representation can be met.
Nichodemus Rudaheranwa and Vernetta Barungi Atingi-Ego from Uganda list six areas of investment needed to support full participation in the WTO, and argue that developing countries need to consider investments in trade negotiating capacity and the resourcing of their stakeholder consultation mechanisms as a development project, creating the institutions needed for trade-led growth.
The case studies related to accession to the WTO (see above) show that the process frequently leads to the creation of organized coalitions.
An ‘agent of restraint’ back to top
The authors of the Nigerian case study draw a lesson that may have wider application:
Nigeria’s membership of the WTO provides it, in principle, with a strong external trade policy surveillance mechanism. But the role of the WTO as an ‘agent of restraint’ in favour of good trade policy is feasible only to the extent that two important conditions are met. First, the government whose behaviour is to be ‘restrained’ must be committed to good trade policy and thus be willing to tie its own hand and use an external treaty obligation to strengthen its hand against local vested interests.
Governments are usually aware that to change a trade measure such as a tariff, a quota or a subsidy means hurting someone — possibly someone now relying on low-cost imports — who will never forget the hurt. It also means helping someone else who will never remember that the government did them a favour by raising a trade barrier.
Thus many governments learn to be grateful that the rules of the WTO limit what they could otherwise easily do: lift rates of protection or give new subsidies. As a matter of fact, it is rare that the WTO rules absolutely prohibit a government from taking whatever action the latter deems necessary. But the role of the WTO as an ‘agent of restraint’ in favour of good trade policy proves valuable to governments around the world every day, because every day governments are under pressure to raise a barrier — or simply to maintain a barrier — to help some industry or other.
Take the case of the Philippines customs valuation measures brought to us by Ramon L. Clarete. The case provides a history of efforts by the Philippines government and Congress to develop a transparent, effective means of valuing imports to ensure that neither importers nor, potentially, customs officials could defraud the government of its revenue from duties and that protection levels would be maintained while the government met its obligation to base collections on transaction values. Working within the restraints imposed by the WTO Agreement on Customs Valuation enabled the Philippines authorities to bypass pressure from interested lobbies and adopt a more transparent system, with post-entry audits, that has lowered barriers to trade and has increased customs revenue.
Two special regions back to top
We have taken special care in this book to include cases from the smallest and most disadvantaged economies, particularly the island economies of the Pacific such as Vanuatu, Papua New Guinea and Fiji, and land-locked economies such as Botswana, Laos, Mongolia, Nepal and Zambia.
We expected to find that these economies faced specific problems and we hoped to find some useful ideas or perspectives that would emerge from their common experience and help them — and others — to find specific solutions in the future.
What we found was that these economies face many of the same problems and opportunities as other economies, but have fewer resources to manage them and face greater penalties if things go wrong.
In Botswana, a land-locked economy of southern Africa, the narrowness of the economy’s productive base and its dependence on a very small number of export destinations has resulted in informal and ad hoc trade policy-making, according to Kennedy K. Mbekeani. He reports, however, that a lack of information resources in the responsible agency — experienced personnel, analytical capacity and relevant inputs from stakeholders — is the single biggest challenge to the management of Botswana’s trade policy.
Botswana’s land-locked neighbour, Malawi, has similar resource problems and similar failures of stakeholder consultation according to Tonia Kandiero, who describes the complex of supply-side constraints and policy shortcomings that have prevented Malawi from taking full advantage of its WTO membership.
Small, resource-limited economies often face difficulties in finding adequate resources to participate in negotiations. Sanoussi Bilal and Stefan Szepesi ask whether Zambia and Mauritius have been able to ‘economise’ on these resources by using possible synergies between different negotiating fora and multilateral negotiations. The issue was whether these two countries were able to use their participation in regional negotiations under the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA) to facilitate participation in the WTO. The answer was that little exists by way of direct impact, but that there could be indirect synergies such as raising awareness, training, making information available and capacity building. But the ability to make use of these opportunities depends crucially on pre-existing capacity, and this was clear from comparisons between Zambia and Mauritius.
Buavanh Vilavong and his colleagues detail the difficulties faced by the Laotian garment industry after the garment quotas were eliminated in some of the largest export markets in January 2005. They show how, in a small, land-locked economy that is still on the road to WTO membership, the challenges of increasing productivity while maintaining access to tariff preferences are linked, creating some crucial hurdles for the industry.
Andrew Stoler paints a picture of the tough choices facing Fiji with the erosion of sugar preferences in the European market. Preference erosion is a widespread problem for developing economies; Fiji has moderated it by securing the extension of some regional preferences. But it appears that Fijians may be failing to make the best of their options for growth due to failures of consensus and co-ordination at a policy level.
Fiji’s approach to dealing with its many problems compares poorly to what is happening in another small island state, Mauritius, which, as Andrew Stoler explains, is wrestling with many of the same kinds of issues. In Fiji, political tensions stand in the way of successful co-operation between government and business. In Mauritius, government and business have a long tradition of working together for mutual benefit.
The government of Papua New Guinea (PNG), like the governments of the other islands of the Pacific, faces a major challenge sustaining its membership of the WTO. Despite having the largest economy in this group, the burdens of membership weigh heavily on PNG according to Chakriya Bowman. But, with the help of donors including Australia and the EU and with the support of the WTO Secretariat, the island economies of the Pacific Islands Forum have found a unique response to this challenge to their administrative resources: a Joint Representative Office in Geneva. Chakriya Bowman describes a specific instance in which this joint representation has helped the Pacific Islands Forum manage a standards-based threat to their exports of kava to Europe.
V. Who’s in charge?
What do these case studies tell us about the role of the WTO in an economy’s trade policy?
There are probably as many answers to that question in this book as there are cases: the role that the WTO plays is subtly different in each account, depending on the history of the economy or its economic or constitutional circumstances. But it is clear in every case that WTO rules and WTO activities comprise only one factor among many economic, administrative, social and even constitutional factors that affect the way in which trade and related policies are decided.
In several cases governments are struggling to develop or to prosecute successful trade policies or to participate in the WTO because they lack human, administrative or financial resources. The challenge is particularly evident in the poorest economies such as Malawi, Botswana and the island economy of Vanuatu. But the case studies of Nigeria and Venezuela suggest that greater wealth does not necessarily bring with it more successful trade policy administration. Something else is needed.
Nor is the size of the economy necessarily an indicator of whether it will enjoy success in the protection of its rights or prosecution of its objectives in the WTO. We have case studies from some of the largest economies (France, Brazil and India) that show a sophisticated process of policy development based on contributions from well-informed private-sector organizations and experienced trade policy administrators. But we also have case studies — such as those from Costa Rica, Pakistan and Thailand — that show how middle-sized and even small economies with less experience in multilateral affairs can achieve significant ‘wins’ in the WTO.
Cases from southern Africa and the Pacific confirm that there is a ‘threshold’ level of the human and administrative capacity and resources that are needed to implement WTO agreements and to maintain an effective presence ‘at the table’ of WTO negotiations. The Papua New Guinea case indicates that there may be innovative ways to overcome some of these constraints, but this possible ‘exception’ only proves the rule.
Beyond that threshold, however, the case studies in this book show over and over again that the key to the successful management of participation in the WTO and the global trading system is co-ordination: among government agencies (as we see in case studies from India, Brazil and France), and between the government and private sectors (as we see in case studies from the Philippines, India (shrimp), Thailand, Mauritius, Costa Rica, Chile, Nepal (accession), Pakistan (textiles) and Argentina (services)).
Cases revealing a high level of interaction, information exchange and collaboration between business or civil society institutions and government are all ‘success stories’. Cases where, for a variety of reasons, this collaboration and information exchange breaks down (Venezuela, and to a lesser extent Uruguay) or where it does not get going (Kenya (co-ordination), Vanuatu) or where there is a misalignment of priorities between government and the private sector (Fiji, Canada (automobiles), Mongolia) tell a less happy story.
This common thread through the stories of success on the one hand and failure or frustration on the other leads, we think, to a conclusion about the role of the WTO that deserves specific emphasis. Beyond the ‘threshold’ mentioned earlier, the crucial factors in the success of an economy’s trade policy are home grown. The WTO itself is not the prime determinant of whether an economy achieves its objectives in the world trading system. The Agreements constrain government actions in the regulation of trade, but none of those constraints appears in any of these case studies as a hurdle for governments or for businesses. On the contrary, where WTO members in the stories told here directly invoke the rules (Pakistan (rice), Costa Rica (textiles), South Korea (television)) or make use of the framework of rules and obligations (Bangladesh (copyright), Chile (SPS)) the outcome is positive for developing country business. Where the rules act to constrain or direct government choices (Nigeria, Vietnam, Canada) the constraints seem likely to lead to more opportunities for trade and growth.
Decisions by the WTO determine the outcome in a small number of the case studies we have collected; for example, in some of the disputes case studies (Pakistan (textiles), Costa Rica (textiles etc.)). But in most case studies, including some disputes that were resolved without WTO adjudication (Thailand (tuna), Pakistan (rice)), there is no direct intervention by the organization in the events or trends described. The case studies tell us that the decisions that matter to members most of the time are not made in Geneva. They are decisions made by governments in direct contact with other members within the framework of the WTO system, or they are decisions made autonomously by governments about the allocation of resources within their own economies.
Perhaps the question we should ask is not ‘who’s in charge’ but ‘where does the responsibility lie’ for trade policy and for achieving success in the global economy. The answer is not — in either case — the WTO. The answer is the ‘stakeholders’ — in each member economy of the WTO, public and private sectors together.
1.- In this book we talk about participation of an
economy, rather than a country, in the WTO. That is because we are not
merely concerned with the way in which government actors have dealt with
issues and opportunities. In each of the case studies, it is important
to see how the government interacts with the local business community
and other civil society elements in what might be called an economy-wide
response. back to text
2.- Although it would be very unusual, not to say difficult, for the member governments to reject a recommendation of a panel (possibly as modified by the Appellate Body). back to text