WTO and the Doha Round: A developing country perspective
Occasional paper / Manoj Pant
THE DEVELOPED countries seem to want to declare the Uruguay round a success and start with a new round: the Millennium round at Doha.
While India has opposed this many other developing countries seem to be reconciled to a new round. Does it really matter? Can developing countries find some point of unity?
Why a new round? For the developed countries this is important as it allows them to gloss over the unfinished agenda of the 1994 round.
The MFA is scheduled to end by 2004 with tariff reductions on items periodically released from the quota. What are the achievements so far?
According to estimates of UNCTAD, in the post-Uruguay round period, US tariffs on more than half their textile imports still range from 15 to 40 per cent as compared to the average industrial tariff of around 3 per cent.
This is not a small issue as it was the expected gains from tariff reductions that led developing countries to accept the TRIPS agreement.
Most economists agree that TRIPS will reduce world welfare. It does seem inequitable that the developed countries have had more than 25 years for structural adjustment to textile trade (the MFA dates to 1974) yet the developing countries have to adjust to TRIPS in 10 years.
Similarly, in agriculture, despite agreements to cut the Aggregate Measure of Support (AMS), the green and blue box exemptions made continuation of export subsidies possible.
Thus, world prices of agricultural commodities have remained depressed after 1996. It has also been observed that the developed countries subsidise exports when world prices are low and reduce subsidies in periods of high prices, thus destabilising world prices.
Hence, very few benefits could accrue to developing countries via increased exports of agricultural commodities. Thus developed countries have actually conceded very little in trade negotiations to the developing countries.
In one sense, the Uruguay round is the first North-South round of trade negotiations. The first six rounds were entirely intra-North commitments.
In the Tokyo round the developing countries emerged as partners for the first time. Yet, the oil crisis gave them substantial bargaining power and they obtained significant concessions in the form of the Generalised Scheme of Preferences and non-reciprocity in MFN tariff reductions.
It is thus important for developing countries to realise that while they are negotiating for the first time, the developed countries have over 50 years of experience.
This experience extends to issues like the benefits of different kinds of tariff reductions (simple averages, weighted averages and commodity specific cuts).
In addition, developed countries are negotiating as major blocs (NAFTA, EU and the Cairns group) while developing countries have no common forum. What should be the developing countries focus in future talks?
For one, developing countries have very little domestic intellectual capital which they can use in trade negotiations. It is childish to expect bodies like the World Bank to finance studies with a developing country focus.
Thus, while a large number of studies look at the benefits of free flow of international capital, I have yet to see many which focus on the benefits of free flow of labour across boundaries.
Thus, developing countries must start with some home-grown studies possibly in their own universities.
Second, it is useful to focus on a few issues and negotiate from strength. It seems to me the primary objective of developing countries must be to prevent emergence of new issues in future rounds.
Three such issues are already indicated: the multilateral agreement of investment (MAI), the social clause and environmental issues.
In the case of MAI, the stand should be that in trade, movements of capital and labour should be treated identically.
The greatest problems are going to come on the issue of social clause (child labour) and environmental standards.
To this economic theory has an answer: since these are not trade issues they are better handled by domestic legislation. Attempting to solve these by trade related measures is only a second best solution.
Third, the developing countries were done in by the condition that the Uruguay round talks were an all or nothing offer (the `single undertaking' clause).
This must be fiercely resisted in any new round and issues like the social clause and environmental standards, if accepted in trade negotiations, must be relegated to second track negotiations.
In the final analysis, the success of developing countries' agenda will depend on their stock of home-grown knowledge. Further, in negotiations one must depend not only on one's own strengths but the weaknesses of the other parties.
The differences between the Cairns group and the US on the one hand and the EU on the other is well known. Let's learn to use it to our advantage.
(The author is professor of Economics, School of International Studies, JNU) -
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