Date: Tue, 18 Jan 2000 21:31:57 -0600 (EST) From: "alert at stratfor.com" <alert at stratfor.com> To: redalert at stratfor.com Subject: World Trade Organization
STRATFOR.COM's Global Intelligence Update - 19 January 2000
By The Internet's Most Intelligent Source of International News & Analysis http://www.stratfor.com/ __________________________________________
Know the every move of your competitors -- even before they do. Stratfor Intelligence Services http://www.stratfor.com/services/ __________________________________________
WHAT'S GOING ON IN YOUR WORLD
U.S. Raises Concern of Possible Coup in Indonesia http://www.stratfor.com/asia/commentary/m0001190034.htm
CIA Report Aimed at Moscow, Not Washington http://www.stratfor.com/MEAF/commentary/m0001190055.htm
Putin Risks Career with Tactical Change http://www.stratfor.com/CIS/commentary/c0001190220.htm __________________________________________
STRATFOR.COM Global Intelligence Update 19 January 2000
Third World Nations, Economic Integration and the WTO
Summary
A high-ranking World Trade Organization (WTO) official reportedly said the WTO is set to pass a resolution that would require foreign industrial investors to first use raw materials found in the host country. WTO officials, however, denied the report. The resolution in question is another attempt by underdeveloped nations to influence the WTO's agenda in their favor, which may lead to the developed world's withdrawal of WTO support.
Analysis
The World Trade Organization's (WTO) General Council Chairman Ali Mchumo reportedly said that the WTO will pass a resolution requiring foreign industrial investors to use up to 60 percent of host countries' raw materials, reported the Xinhua News Agency Jan. 18. This move would limit trade and be a reversal of WTO policy. In effect, the resolution proposes using the WTO - an international organization committed to free trade - to restrict free trade.
A WTO official in Geneva, however, denied that the resolution was being considered. The official said that if Mchumo, who is also the Tanzanian ambassador to the United Nations, made such a comment, he did so unofficially. The chairman's comments were intended to illustrate the growing sentiment among the WTO's Third World members that the organization's purpose must change.
Mchumo's proposal exemplifies a trend by underdeveloped nations, like China and India, hoping to alter the WTO's direction. Interestingly, China's state news agency Xinhua reported Mchumo's comments. Both China and India have criticized the WTO for neglecting developing nations' interests, hindering their integration into the global economy. [http://www.stratfor.com/SERVICES/giu2000/011100.ASP] Within the WTO, developing and developed nations conflict over trade issues, including preferential market treatment, market integration, regional trading blocs, labor exploitation and infrastructure development.
The underdeveloped nations want to influence the WTO's policies to favor their economic situations. They are trying to transform an organization dominated by developed economies - devoted to open markets and free trade - into an organization designed to protect and build their underdeveloped economies. The main purpose of the proposed resolution would be to force investors in poor countries to invest in those countries' resources and, by extension, their infrastructure.
A major factor limiting most Third World countries' economies is the lack of adequate infrastructure. To meet the proposed requirement that foreign investors utilize up to 60 percent of a host nation's raw materials, adequate infrastructure, such as roads, mines and processing plants, will need to be constructed. This burden would fall on the foreign investors, involving major investment with little immediate return.
Conventional economic wisdom dictates that infrastructure development fuels economic growth and enhances a country's capability to compete internationally. While this may be true, foreign investors accustomed to paying sweatshop wages for cheap labor are unlikely to underwrite such far-reaching Third World development as proposed by Mchumo.
Another effort by Third World nations to bolster their economic position in the global economy involves the current negotiating over the Lome Accord. Originally signed in 1975 and up for renewal this month, the accord is a comprehensive commodity agreement between the European Union (EU) and its 71 African, Caribbean and Pacific (ACP) former colonies. The accord will give these Third World countries preferential access to European markets, allowing them duty-free export of primary products to the European markets.
The Lome Accord endeavors to help underdeveloped nations achieve global economic integration. The problem is that the accord cannot ultimately achieve this goal. The tenuous agreement reached in December proposes a development aid package of $13.7 billion. The ACP calls this insufficient for infrastructure development. Another point of contention between the EU and the ACP has been the eight- year preparatory period allowed for ACP countries to begin the integration.
The underdeveloped nations' ultimate goal may be to change the WTO's agenda, turning it into an organization to manage the international economy, not just trade. And, the coming Lome market integration plan may be the impetus for Mchumo's WTO resolution.
Underdeveloped countries, pushed toward global market integration, are rightly fearful of their inability to compete. More Third World nations are aligning against the West over economics. Mchumo's resolution could help developing nations. But more likely, it would hurt them by pushing developed nations away from the WTO. It could also embroil the organization in an endless squabble over free trade versus managed economic interaction.
(c) 2000, Stratfor, Inc. http://www.stratfor.com/
__________________________________________________
SUBSCRIBE to FREE, DAILY GLOBAL INTELLIGENCE UPDATES by clicking on http://www.stratfor.com/services/giu/subscribe.asp
UNSUBSCRIBE FROM THE GLOBAL INTELLIGENCE UPDATES (GIU) http://www.stratfor.com/services/giu/subscribe.asp
or send your name, title, organization, address, phone number, and e-mail to alert at stratfor.com ___________________________________________________
STRATFOR.COM 504 Lavaca, Suite 1100 Austin, TX 78701 Phone: 512-583-5000 Fax: 512-583-5025 Internet: http://www.stratfor.com/ Email: info at stratfor.com ___________________________________________________
----- Backwarded