Legitimacy of WTO Hangs by a Thread

By Michelle Pressend · 1 Dec 2009

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Picture: Ed-meister
Picture: Ed-meister

I'm in Geneva, Switzerland and wrote this article on the eve of the 7th World Trade Organisation (WTO) Ministerial meeting taking place from 27 November to 2 December 2009 at the WTO's head quarters.

I've also just returned from a protest march against the WTO here in Geneva, attended by many people, including activists from many parts of the world. 

The march was, unfortunately, marred by a handful of violent protestors on the fringes of the main demonstration. They've been getting the lion's share of media attention. But to set the record straight, the majority of the 2,000-strong crowd participating in the protest march against the WTO was good-natured, well-organized and have legitimate concerns.

This WTO Ministerial meeting is different from previous ones. Ministers are coming together, not to negotiate, but to "take stock" of the WTO as the international trade organization governing multilateral trade rules. 

The main theme that the meeting is being conducted under is "WTO the Multilateral Trading System and the Current Global Economic Environment." The agenda will be examining the state of play of the Doha Round of negotiations and a way forward; the role of the WTO in protectionism stemming from the global financial and economic crisis and finally, there will be an important focus on the need for reform in the WTO.

Since its inception in 1995, the rules and negotiations of the WTO have been littered with controversy. Indeed, the very nature of WTO policies, based on trade liberalization and deregulation, are central to the current global economic crisis.

The WTO is one of the most powerful multilateral institutions in the world. Its trade rules are binding. Once governments' commit their countries to WTO agreements, they are bound to its rules at the national level. If countries wish to renege on their commitments because they may, for example, be in conflict with national development priorities, these countries must pay a compensation fee and/or face dispute settlement.

These rules are unbalanced and biased in favour of developed countries and their multinational companies. They have gained much under this global trading system. Moreover, they are seeking further market access in developing countries, not only for trade in goods, but also in services. Developed countries increasingly come up with new rules or concepts to commit developing countries to further opening up their markets.

They tend to ignore the fact that they have a competitive advantage built on years of support from subsidies, tariffs and other economic instruments. Basically, developed countries 'over produce' and since their markets have become saturated; are constantly seeking new avenues to extend these markets into developing countries.

Developing countries pay a heavy price through job losses, a decline in the manufacturing industries and productive sectors, as well as losing revenue to huge capital outflows.

Thus, the neoliberal policies of the WTO accelerate the process of premature de-industrialisation in developing countries and the extremely high inequality that many of these countries experience. 

But the WTO is at a turning point. There is increasing recognition that its policies come with a huge price tag for developing countries. 

Moreover, it is widely acknowledged that rich countries, which have been the rule-makers at the WTO, are also the rule-breakers. These governments continue to subsidize their agricultural sectors and were quick to bail out their banks during the financial crisis. 

The fear of protectionism is of major concern to the WTO machinery in terms of measures to address the economic crisis and some developing countries, including South Africa, are calling for an assessment of stimulus packages, as they may be contravening the General Agreement of Trade in Service (GATS) rules.

This assessment seeks to determine whether disciplined measures should be considered and is a tactical intervention, which could expose how the major powers are potentially contravening the very rules they were instrumental in creating.

But there are other challenges related to the nature of the GATS rules, including the ability of governments’ to regulate service policies.  Thus, the assessment of the stimulus packages and the extent to which trade in services are affected should be used as an opportunity for transformation, rather than an attempt to beat the major players at their own game. 

Many countries are also bent on a "speedy and successful conclusion of the Doha round."  This is despite the fact that Doha commitments, particularly tariffs cuts, will destroy developing countries' industrial sectors as well as prevent the development of industrial policy.

Some members will use this opportunity to call for commitments for liberalization in energy services to address climate change. But countries should desist any such discussion. Environmental goods and services should not have been in the WTO in the first place. The environmental goods and services sector (EGS) is notably amongst the most rapidly growing industries in the world and access to new markets is vital to developed countries. WTO disciplines in the energy sector could reduce the flexibility and ‘policy space’ needed by countries to make an effective transition from a dependence on fossil fuels to cleaner and more renewable energy sources.

Many countries are still looking at concluding Doha with short-term interests at stake. This, despite civil society groups waving a red flag about impending dangers.

"If completed on current terms, the Doha Round will aggravate the problems of our economies. It will also take away the very policy instruments needed (and being applied) to address the current crises and to prevent similar crises in the future," argued the Africa Trade Network, a network of African civil society organizations in their statement of positions and demands, at their preparatory meeting in Cape Town in the run up to the WTO meeting.

Finally, concerning the institutional reform of the WTO. This is a necessary discussion, particularly in terms of shifting the balance of power as well as producing greater transparency in decision-making processes.

It will be a missed opportunity if this meeting does not discuss a process for addressing the fundamental principles and rules that maintain the unbalanced nature and inequities of this institution, which privileges developed countries and their multinationals.  

The world needs a multilateral trading system, but one based on justice and equity. It should also be one which ensures that the interests of developing countries are met and that development policy space is guaranteed, especially the economic incentives needed to shift our economies in favour of the productive sectors. 

Pressend coordinates the Trade Strategy Group (TSG) at the Economic Justice Network and Global Network Africa at the Labour Research Services in Cape Town. She is also an independent socio-political analyst on global issues related to trade, environment and climate change.

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