WTO at the cross-roads: Part - II

In the last post I wrote about the genesis of WTO and international trading regime. Here I essentially continue from where I left, raising issue and bringing to fore the controversies which have stalled the progressive liberalization of international trade, which has been the hallmark of this institution.


It starts with agriculture (which incidentally has also been the first objective of international trade) and ranges from services to Intellectual property et. al. The seeds to these were sown in the Uruguay Round itself. The Agreement on Agriculture was the outcome of a compromise. A comprise effectuated between the North and the South wherein concessions were given by both the sides in order to conceive an international institution promoting free and fair trade. While the North agreed to open up its (1) services sector (technically known as 'Market Access') and also did up with the licensing and quota policy on (2) textiles, the South compromised on (1) Intellectual property and (2) agriculture.

All WTO agreements on these four sectors, owing to the compromise, were incomplete and transitionally existent. They provided for a progressive liberalization, which would result into binding obligations for the WTO Members in a manner which was considered to be liberalization of international trade. It was agreed that the Members would generally and without being affected by prejudicing national interests (sic) think rationally and thus allow the free flow of international trade and thus permeate into effect the economic notion of competitive advantage, which predicted welfare for all.

However the fallout were different. The governments of these Member states, who committed to these agreements were already under immense criticism from their national rival political parties for having bound their country in the hands of an hitherto unknown institution. Further, the developing countries had a fair cry of immediate necessity whereunder they were required to act quick in order to provide for their citizens whereas such philanthropic gesture was not forthcoming with such promptness. Then there was the NGO factor, which cried foul the entire institution as an instrument in the hands of the developed few to extract what remained in the developing. The very first cases very these developing countries were dragged to the binding dispute settlement mechanism of the WTO coincided with such allegation of abuse and violation of trust. For example see; (1) India-Patents (2) Argentina-Patents (3) Pakistan-Pharmaceuticals (4) Brazil-Aircrafts, just to name a few.

This, inter alia, led to developing countries to unite and strive for the rights they were legitimately entitled to under the agreements but were denied. The developed countries continuously kept pressing for increase in market access in the developing countries (ever wondered why India and other countries are continuously raising the FDI limits in various sectors and that to at such a frequent pace?) (and also the raising standards for intellectual property rights) while they did not simultaneously dilute the barriers to agricultural imports from these developing countries, which incidentally was the only prominent tradeable commodity for them.

Intense international pressure led the WTO to dedicate the Doha round (for more please read the last post) to development. However this was never felt sufficient for the members representing the developing countries had been used to lip-service and wanted some significant works now. The EC cited its own internal problems (such as the 'Common Agricultural Policy' or CAP, and the development of the internal markets) while the US argued that the developing countries had still not done enough to expect concessions. Then there was the Cairns group, which was totally opposed to the developing countries getting a strong-hold in agricultural trade. Thus arose a complicated tussle, which no one was willing to find a solution for.

The Members kept postponing the deadlines, but could not arrive at any agreement, being unwilling to budge from their position and avoiding giving concessions. The issue thus lingered around. One who moved first and sought to break-the-ice, would have been considered the weaker link and would have been compelled to provide more concessions. Thus the negotiations were stalled.

Thus stands the WTO today, all being unsure of its fate. Whether the institution would survive the onslaught of time and developmental needs of more than half the world population remains to be a proposition requiring the test of time. However one thing is sure; WTO being the first international institution with a binding nature of obligations, it is quiet possible, with the stalling which it has faced, that future international commitments move back to the original position and keep the international law making more of a voluntary and optional type rather than conceiving a binding institution.

WTO at the cross-roads: Part - I

2007: what a year!!! marks 60 years of the General Agreement on Tariffs and Trade, (or GATT) a landmark international agreement, with no predecessor and leading to an institution of its own. I thought what better to describe the landscape of international trading regime on this occasion. No doubt wikipedia had a huge content list on this topic and an awful lot of scholarly and political writing has gone into being behind it, but the fact remains that this arena has witnessed much that any description of it would in all terms be subjective and cannot remain apolitical. So here I go, giving my account of WTO. Starting from the start, coming of the present and the future in store.

The history of international trade can be traced back to the start of human civilization itself. Not that there were nations at that time but the first civilizations were generally settled across river beds and kept shifting. As times passed, they began to settle at a place and as they grew, came the principle of division of labour and specialization. And then the trade started; across cultures, across people, across places. The medieval era was marked by fixed international trading routes and the history of Constantinople tells it all.

But in the modern times, the prominence of the event is marked by the Great Depression, that followed the First World War. Facing economic crisis, trading nations being to impose heightened tariffs (or 'Customs duties') on goods coming into their territorial borders from other countries. The United States, infamously, levied duty to the tune of even 1000 percent on some goods. What followed was an international tug-o-war between nations, competing each other on imposing higher tariffs.

This led to wishful thinking of a rule-based regime in international trading systems. The problem was sought to be addressed at the Bretton Woods Conference, which led to the culmination of three international institutions; International Monetary Fund (IMF), International Bank for Reconstruction and Development (or World Bank); and the International Trade Organization (ITO). While the IMF and the World Bank survived the political onslaught and fierce criticism of the third-world countries, the ITO died a political death. President Henry Truman of the United States did not keep his commitments at the Conference and did not submit the ITO Charter (also called the 'Havana Charter') for ratification before the US Congress. Thus ITO could never materialize.

But what survived for the interim measure; the GATT. It was considered to be a stop-gap arrangement for meeting impelling necessities till the time ITO became operational. But since ITO could not come into being, GATT provided the international players an arena to experimental playground to bring out rules for a free-trade regime. And the outcome was various negotiating rounds, with the last one being in Uruguay in 1986, which lasted till 1994. As a result of this eight year intense negotiations was the WTO, as we know today, providing an unprecedented binding regime of commitments in international scenario. There was a huge hue-and-cry of loss of sovereignty by the national governments by accessing to the WTO but this new-yet-old institution survived the political onslaught for the time being.

However the troubles were far from being over. While the second Ministerial Conference went on to promulgate new rules for international trade, the third one in Seattle was a disaster. A huge clout of NGOs continuously interrupted the Conference and did not allow the Ministers to transact much in terms of political making. This led to giving these NGOs as a observer-status in WTO, a move which the policy makers will regret for ever, but was a necessary-evil at that point of time.

The huge scouting by these NGOs and the formation of various developing countries blocks forced the next Ministerial (at Doha) to rewrite the entire agenda as a development-based one. Initiated in 2001, it was planned to be over by 2003 (i.e. by Cancun Ministerial) but issued spilled over. Things could not be packed even by 2005 (i.e. till the Hong Kong Ministerial), despite an in-principle agreement being reached in August 2004.

And here we stand, in 2007, with the institution facing a crisis and dilemma as to the future course of action. The EC has its own internal issues to tackle and thus has never been able to contribute much for the growth of international trading. The United States is fascinated with its own internal revenue collections and thus carries a short-sighted agenda for the international trading community. The majority of agriculture based developed countries (called the 'Cairns group') is busy stock-taking its own policies. The developing countries (now 'G110'), led by India and Brazil, form an alliance of their own and are pursuing vigorously for their own interests. The WTO Secretariat, led to Pascal Lamy is wondering how to set the agenda, being crunched into the issues of agriculture and services, stands baffled.

What is at stake is not only the institution but national faiths in an international trading regime. I cannot predict the outcome of this tussle between the north and the south but one thing is for sure; the solution does not seem imminent.