WTO and Doha Round Negotiations

 

According to Hoekman, some member countries criticize the WTO Doha round because it is not strict enough in reducing, en masse, protectionism worldwide.[1] Yet, he argues, that trade liberalization was never the goal of multilateral trade negotiations.  Instead, the purpose of these trade rounds is the creation of binding and enforceable commitments that member states adhere to, mainly, the nullification of unilateral domestic protectionism.[2] The primary Doha round policy objectives is to outlaw export subsidies, the implementation of a binding mathematical formula reducing tariff rates, and opening up the service sectors to international companies.[3] On it’s face, the Doha rounds purpose is to liberalize trade.  For example, by requiring developed countries to vastly reduce the domestic support for their agricultural sector shows no other purpose than to liberalize trade. The mathematical formula for tariff reduction seeks to “To reduce or as appropriate eliminate tariffs.”[4] There are some exceptions for developing countries – none or smaller tariff reductions to a limited percentage of their “most sensitive sectors”, and special treatment for LDC’s, recently acceded members, and others.[5] The service sector negotiations, if implemented, would dramatically open access to markets in other countries.

Each piece of the Doha round is aimed at liberalizing trade, reducing protectionism, and opening market access.  Hoekman’s argument only provides a red herring in an attempt to placate member countries’ fear of free markets and its affects on their economy, or to argue that the WTO’s purpose is not all about trade liberalization.  It is clear from the GATT’s preamble that trade liberalization is its purpose and binding members “into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce”[6] is its method.  Neither trade liberalization nor practical trade bindings should be the basis for multilateral negations.  Instead, the focus should be on non-trade solutions to manifest global health, equality, and poverty reduction.  The policy bindings that Hoekman and others champion inherently increase inequality, decrease global health, and induce poverty.

The WTO hegemony enforces and replicates the neoliberal discourse alongside the championing of globalization as a means to obtain global prosperity.  This discourse, lead by the most developed countries (MDC’s), pushes an agenda to realize a free trade world.  However, this agenda served the MDC’s and newly developed countries, to the detriment of developing countries and least developed countries.  The WTO effectively reproduces inequality by implementing its agreements.  According to Ha-Joon Chong, the beneficiaries of this global trade order are the countries who have already developed their economies post-protectionism.[7] He argues, the champions of the WTO regime effectively used tariffs, quotas, and other protectionist measures to develop a strong domestic market before implementing laissez-faire economics.  By binding member States into trade practices that liberalize trade, the WTO inhibits the growth of infant industries in developing countries and improves the global market position of the developed countries.  A study from 1990 to 2002 of seventy-three countries concluded that, “In every region of the world except South Asia, the U.S., and the EU, unemployment rates increased…[with] global unemployment had reached a new high of 185.9 million…[and] 59 percent of the world’s people were living in countries with growing inequality, with only 5 percent in countries with declining inequality.”[8] The GATT’s goal of “raising standards of living, ensuring full employment and a large and steadily growing volume of real income”[9] is undermined by its own rules and regulations.  Trade liberalization isn’t working to reduce inequality.  The neoliberal entrenchment of world trade policy determines the global economic stage.  One possible way to diffuse the free market approach is to regionalize trade agreements that take into account the State’s unique issues “on the ground.”

Regional trade agreements may fill the divide between the unique circumstances of the countries whereby they can trade according to their interests.  According to Alter and Meunier, “[s]mall groups can be imbued with trust, which leads to a willingness to solve problems collectively and makes taking risks less costly. These factors facilitate innovation and also increase the value of reputation.”[10] Art. 24of the GATT  is an exception to the most favoured nation concept because it allows countries to lower or eliminate tariffs among their group to less than those charged in the rest of the world.[11] This  provides benefits not allowed if countries strictly followed the WTO provisions.  For example, the regional trade agreement could provide the assigned countries with greater bargaining power in the WTO negotiations.[12] Despite the benefits; however, the WTO exception is still obsessed with protectionism and ignores the inequality and unemployment that increases with each year.  The regional trade agreements still work within the WTO frame – ultimately reducing protectionist measures – thereby still reinforcing trade liberalization policies.

WTO exceptions that take into account particular member country issues may not be all effective.  For example, the WTO provides special and differential treatment (SDT) to developing countries and LDC’s to assist them in their process of trade liberalization.  The Enabling Clause, Art. 18, allows the member State to self-declare itself a developing country.  With this declaration, the member state can receive benefits from 125 SDT measures from other countries.  In other words, the clause allows other GATT countries to provide more favorable treatment than it does to other countries.[13] This includes: “improved market-access conditions for DCs; special considerations of developing countries’ interests in particular agreements; lower level of discipline commitments; transition periods for implementation.”[14] Upon first blush, SDT measures appear to sensitize the rather strict adherence to WTO policy, but what results from SDT measures is price erosion.  Price erosion causes the SDT receiving country’s market commodity prices to drop because of its preferential treatment.  According to a policy paper, “[f]rom the various sources measuring preference erosion, the cost is estimated in a range of 0,5 Billion US$ – for African LDCs – to 1,7 Billion US$ annually”[15] While the developing country is getting preferential treatment, the wage earners are losing money on the market.  This exception the binding policy is not a effective measure to alleviate poverty and reduce inequality.  Rather, it is a measure that reproduces it through externalities of price reduction.

Another exception that takes into account a member countries unique issues is the compulsory licensing option (Art. 31b) under Trade-Related Aspects of Intellectual Property (TRIPS).  The compulsory license allows member states to produce the required patented medicines, or have another member state produce them.  TRIPS was a take it or leave agreement and it undergirds the neoliberal discourse in intellectual property.  According to Reichman, the “research based pharmaceutical industry emerged as one of the biggest winners,”[16] and the agreement threatened the supply of affordable patented medicines to poor countries.[17] TRIPS restricts member countries into neoliberal/capitalist/western property policies/theories and only exempts the members for emergencies.  This is not a global health solution, but another method for capitalism entrenchment and the division of wealth.  Furthermore, the drug companies have lobbied successfully to reduce and taint the use of the compulsory license.  Despite ceaseless health emergencies, “compulsory licenses have not been issued on a widespread basis by African countries.”[18] Enforceable policy bindings, like TRIPS, not only restrict member countries into agreements that may not benefit them, but the exceptions themselves are not entirely effective.  This measure and Art. XX are the only exceptions for health and they are, by far, lacking in effectiveness and support.

Despite the goal of increasing the standard of living in the GATT preamble, the Uruguay round created an expansion of multilateral trade regulation, which, Wilkinson argues, “has been highly uneven, privileging the needs of capital, and to a much lesser degree land, over labour.”[19] The WTO does not worry itself with how products are produced, just that they are.  This incurs great cost to the environment and labor.  The WTO has no labor standards and they don’t intend to.[20] “In many countries of the South, the liberalization of foreign economic policies went along with increasing social inequalities and a massive expansion of the informal sector, where labour rights are generally violated”[21] The biggest issue with international labor standards is that they are not enforceable. WTO’s retreat from enforcing such standards implicates them in their creation, especially in export driven economies.  For example, “In 2007, factories that supplied more than a dozen corporations, including Wal-Mart, Disney and Dell, were accused of unfair labor practices, including using child labor, forcing employees to work 16-hour days on fast-moving assembly lines, and paying workers less than minimum wage. (Minimum wage in this part of China is about 55 cents an hour.)”[22] Multilateral agreements that focused on equality and actual increase in standards of living must include standard labor practices.  Focusing on tariff reduction and the liberalization of the services sector ignores the real issues in the world today – health, equality, and sustainability.

Globalization and the WTO have channeled capital flows into a world economy that affects the poorer nations and people in other negative ways.  For example, Pranab argues, “[t]rade liberalization, even when increasing the mean incomes of the poor, may heighten their vulnerability, particularly by increasing the variance of prices or income sources.”[23] Ricardo’s law of comparative advantage, “a country would export the product in which it had the greater advantage, or a comparative advantage, and import the commodity in which its advantage was less, or in which it had a comparative disadvantage,”[24] provides the frame to analyze the issue Pranab mentions above.  For example, Country A produces corn, a staple food crop, less efficiently than Country B, but Country A produces rubber more efficiently than Country B.  Thus, Country A decreases their production of corn so they can increase their rubber production for export, thereby importing cheaper corn.  Now, the price of corn in Country A fluctuates according to the world market price.  Country A is now dependent on corn imports for their food and if prices get too high, the poor citizens can no longer afford to eat.  The WTO provides no remedy for this issue.  This is another detrimental affect of trade liberalization and another reason to change the frame of multilateral negotiations.  If people’s livelihoods are interconnected in the globalized world, than crises in other countries can create a domino affect whereby LDC’s and developing countries bear the brunt of the crises.

Inequality between developed and lesser-developed countries (LDC’s) also manifests itself in the dispute resolution process.  For example, LCD’s do not have the legal resources or training to effectively argue and conclude their disputes.  The Appellate Body itself has instituted measures in the procedural process whereby developed countries obtain an advantage.  According to Smith, the Appellate Body “has broadened the access of third parties in appellate proceedings; opened the door to amicus curiae submissions by private individuals and organizations; and endorsed the representation of governments by private counsel.”[25] These procedural additions empower developed countries to use their advantage in legal matters to influence the appellate body’s decision. Only a handful of developing countries have brought a dispute before the Appellate Body.  The Appellate Body stated in UNITED STATES – FINAL ANTI-DUMPING MEASURES ON STAINLESS STEEL FROM MEXICO, “the DSU does not require WTO panels to follow adopted panel or Appellate Body reports, the Appellate Body de facto expects them to do so to the extent that the legal issues addressed are similar.”[26] Therefore, the precedential power of the Appellate rulings, which exclude almost all developing countries, applies to legally similar cases despite factual discrepancies.  In other words, the developed countries use the DSU to further their interests and effectively create binding law by circumventing the usual negotiation process.  The power of precedent also unduly influences LDC’s.  Smith concludes,  “the Appellate Body’s major decisions to date are likely to have mixed but on balance negative effects on developing countries in the WTO.”[27] The Appellate Body and Panel apply the binding agreement that requires non-protectionist measures.  They are an extension of the trade liberalization policy of the WTO.  So, by transforming the focus from trade to other effective measures to reduce poverty and inequality, we can relieve the Appellate body and Panel of their behind the scenes law making decisions.

The purpose of the analysis is to look at how the WTO affects developing countries either through the GATT’s binding measures or their exceptions.  As we can see, free trade, on a whole, increase inequality and unemployment.  The WTO exceptions are not effective in reducing the income gap or promoting health, but actually decrease the price of some goods and produce undefined benefits.  Multilateral agreements need to go beyond reducing protectionism and creating binding policy objectives.  They need to consider other possible solutions to alleviate suffering through whatever means possible.  I don’t have the answer yet, but as long as the focus is on global capital we ignore the millions who live in extreme poverty and suffer from neglected diseases.