MacroScan (Printable Version) - World Trade : Who Matters at Seattle

It took eight years, between 1986 and 1994, for GATT member countries to arrive at a world trade agreement through the negotiations which began at Punta del Este, Uruguay. Even in April 1994 the negotiations were by no means complete, as reflected in the pre-decided, post-round negotiations on telecommunications, information technology and financial services. It was also reflected in the Uruguay Round decision to go in for a review and renegotiation of the agreements relating to the contentious areas of agriculture and services in the year 2000. The Seattle ministerial meet scheduled for end November was significant because it was meant to arrive at an agenda for these continuing negotiations.

In the run up to Seattle, however, different sections of the developed, industrial bloc have, for quite different reasons and with significantly different agendas, mooted the idea of a more comprehensive Millenium round. Revising the 'review and renegotiation' timetable into a full-fledged new round does have important implications. To start with, it implies that the fundamental thrust of the next set of negotiations should be further liberalisation in chosen areas, with no review and roll back of past agreements. Secondly, it signals to the world that what is at stake are not marginal adjustments around Uruguay Round benchmarks, but significant advances in the direction of further liberalisation. Third, it opens the door to the introduction of new areas of negotiation such as trade and environment linkages, trade and social clause linkages and finally a multilateral agreement on investment.

For the developing countries, the answer to the question as to whether we need a new round just now depends on an assessment of the first of these implications. Its been only five years since the Uruguay round treaty and the new implementation framework centred around the WTO has been in place. And during those years there is little indication that the wholly unequal world trading order has changed significantly.

As Chart 1 shows, the annual average rate of growth of developing country exports has fallen by a percentage point between the four year pre-UR period (1991-94) and the period 1995-98, whereas it has risen significantly for the developed countries. If we consider two groups consisting of the OECD and non-OECD countries, the share of the latter has actually improved slightly, indicating that it is some of the more dynamic of the developing countries (which have joined the OECD) that have lost out in the years after the Uruguay Round.

Finally Chart 3 indicates that while, the prices of manufactured exports from the OECD countries have fluctuated around a stable level during 1991-98, the prices of the principal exports of most developing countries, viz., agricultural raw materials and minerals, ores and metals, which appeared to be buoyant between 1993 and 1995, have since registered a sharp fall. The only commodity group for which prices have risen and stayed high is food and beverages, in whose case a significant part of the surpluses are with the developed countries. Not surprisingly, current account deficits have tended to widen in the case of many developing countries.

It must be noted that this relatively poorer trading performance of the developing countries is not because they are not "rule-savvy" and have not exploited the loopholes available within the UR framework to erect new non-tariff barriers to imports. One such barrier would be the device of resorting to import restrictions in the name of dumping. In recent times, both the number of cases and countries resorting to such actions have increased substantially. In the name of market disruption or distress caused by imports, whether valid or not, countries have increasingly invoked anti-dumping relief rather than resorted to safeguard action under article XIX of GATT. Interestingly, it was the developing country group which substantially upped its use of anti-dumping initiatives. As Chart 10 shows, while the number of anti-dumping initiations have fallen from 678 to 394 in the case of the developed countries, it in fact rose from 353 to 509 in the case of the developing countries between 1991-94 and 1995-98. The failure, despite this effort, to realise the promise of a significantly improved position for developing countries in the world market after the Uruguay Round can be traced to the structurally inadequate gains achieved by developing countries in the form of improved market access.

As Charts 4 and 6 and 5 and 7 respectively show, the concessions received by developing countries in terms of the share of imports over which tariff concessions apply and the depth of the tariff cut they benefited from was lower than that which applied to the developed countries. That is, starting from a position of subordination, developing countries appeared to have offered more in the nature of concessions with regard to market access than the developed countries did. But even this picture is partial, in as much as it does not capture the commodity composition of the areas in which the concessions were offered by the two sides. In fact, the evidence is now overwhelming that both across and within product groups, the developing countries began to give virtually immediately after the Uruguay round negotiations were complete, but they are yet to begin to receive much by way of benefits in areas which matter to them from an export point of view.

Nothing epitomises this more than the agreement relating to textiles. From the point of view of the developing countries, the most visible and "multilaterally" accepted non-tariff barrier arrangement prior to the Uruguay Round was the Multi-Fibre Arrangement. That arrangement was the end-result of a series of negotiated agreements starting in the 1960s, all of which sought to provide the developed countries with the time needed to restructure their industries so that competitive textile exports from lower-cost developing countries do not "disrupt" their markets. Despite three decades of agreement on that principle and periodic revisions of the deadline for ending import restrictions, textiles still were by the late-1980s not permitted free entry in developed-country markets. The case for an immediate end to such restrictions, under a new multilateral trade regime was therefore strong. However, though the Uruguay Round agreement on textiles and clothing provided for the phasing out of restraints stemming from the Multi-fibre Arrangement, it once again delayed the process of liberalisation. The process was designed to occur in four stages over a ten-year period and is heavily "back-loaded", in the sense that most of the liberalisation occurs during the last stages. The four stages defined involve the following:

In the first stage, beginning on the date on which the Uruguay Round became effective, each signatory nation was required to remove quotas only on products that account for 16 per cent of its total volume of imports of four categories of textiles and clothing in 1990 (tops and yarns, fabrics, made-up textiles products and clothing);
In the second stage, beginning three years and one month after the agreement came into force, quotas were to be removed on a further 17 per cent of the total volume of 1990 imports; In the third stage, which begins four years later, quotas are to be removed on products that account for not less than 18 per cent of the total volume of 1990 imports;
Finally, after 10 years and one month, all other quota restrictions are to be eliminated.

This prolonged and back-loaded agreement in a labour-intensive area in which the developed countries had agreed to open up markets more than three decades back, points both to the relative positions of power of developed and developing countries in the Uruguay Round negotiations as well as to the extent of commitment of the latter to offer greater market access as a quid pro quo for the rapid liberalisation of trade and investment rules in the developing countries. What is more revealing is the evidence on the progress on this front. With two stages of the phase out process being complete, 33 per cent of imports by volume of four categories of textiles and clothing are ostensibly outside any quota regime.

However, out of the quotas under MFA notified by the US, EU and Canada (Chart 8), after the completion of the second stage of implementation of the MFA phase out, only 1, 7 and 14 per cent respectively (Chart 9) have been withdrawn. Much of the phase out thus far covered commodities which were not even in consideration. Further, most of these are textile products which do not dominate the developing countries' export basket. Above all, as Charts 11 and 12 indicate, the extent of tariff concessions, both in terms of tariff reduction and the share of the relevant imports subject to cuts, provided by the developing countries have been higher than that provided by the developed in industrial products in general and in the textile area in particular. That is, five years after the completion of the Round and at a time when talk is already on with regard to initiating a new round, developing-country, market-access "gains" in an area most crucial to them have been minimal.

The implication of this is obvious enough. Even in an area as basic as market access, what is called for now is a review of the Uruguay Round aimed at redressing the inequalities it carried through in its fine print rather than an extension of the Round either in the form of more intensive liberalisation or in the form of extending the multilateral framework into new areas. However, neither the outcome of the Uruguay Round nor the current discussion is influenced by the interests of the developing countries. The perception that the Marrakech agreement of 1994 constituted a qualitative advance sprang from many sources. To start with, it created a formal international institutional framework in the form of the World Trade Organisation, to oversee the implementation of the terms of the agreement. This was expected to correct the inadequacy that there was no formal institutional framework governing world trade, especially because the agreement included clauses aimed at strengthening dispute settlement mechanisms and disciplinary norms regarding the use of safeguard measures like anti-dumping and countervailing duties which can be used to sidestep uncomfortable trade liberalisation policies.

Secondly, the Uruguay Round went beyond intensifying past efforts at reducing the barriers to trade, by extending GATT disciplines to a range of "sensitive" commodities, like agricultural goods, textiles and apparel, which had hitherto not been subject to the same discipline that applied to the trade in most manufactures. Finally, the Uruguay Round touched on a range of new issues such as trade in services, trade-related intellectual property measures (TRIPs) and trade-related investment measures (TRIMs). Of these "advances" it is the second set in which the results have been particularly disappointing. The virtual standstill in textiles has already been referred to. And in agriculture, even a commentator like trade economist T.N. Srinivasan, who shares the free-trading bent of the WTO, argues that: "Other than bringing agricultural trade under the discipline of GATT rules, there is very little liberalisation. (And even in agricultural trade coming under GATT rules, there are some exceptions. Whereas the subsidisation of exports of manufactures is ruled out, agricultural export subsidies are merely to be reduced but not eliminated, let alone outlawed.) ... Although the reduction of export subsidies and domestic support measures will be of benefit to developing-country exporters, the possible rise in world prices of foodgrains with the reduction in subsidised exports from developed countries will hurt food-importing developing countries ... on balance, agricultural liberalisation is likely to be a washout from the perspective of developing countries." (Developing Countries and the Multilateral Trading System: From the GATT to the Uruguay Round and the Future, Colarado: Westview Press, 1998).

The third area of expected advance has indeed proved to be an area of substantial loss from the point of view of the developing countries, inasmuch as it constrains their efforts at enhancing and widening that competitive advantage, where the limitations are more severe. This impact is principally mediated through the agreement on Trade Related Intellectual Property Rights (TRIPs), which defines those rights and the mechanisms for enforcing them and for dispute settlement by WTO. That agreement has required members to introduce legislation which provides a sovereign guarantee that the patent rights of corporations, wherever acquired and whether relating to products or processes, would be protected. Such patent protection for products and processes is to apply for a period of 20 years in almost all fields of technology. Patent protection for products is especially significant in the chemical and drugs and pharmaceuticals industries, where many developing countries had found alternative processes to replicate products once standardised. But they are proving particularly controversial in areas involving traditional knowledge and life forms. The TRIPs agreement also limits efforts to replicate industrial designs, such as the lay-out designs of integrated circuits. Given the "technological gap" between the developed and developing countries and the concentration of both existing patents and R&D expenditure in the latter, this would be a major constraint on the export competitiveness of domestic firms. This factor, along with the agreement on Trade Related Investment Measures (TRIMs), which forecloses governmental efforts to force a degree of indigenisation and domestic linkage on international producers being provided freer access to developing country markets, substantially increases the dependence of developing countries on foreign firms as the medium to win and sustain their foothold in international markets.

Overall, there are five aspects which call for attention when examining the gains to developing countries from the implementation of the Uruguay Round proposals: first, gains from increased access to foreign markets have been small and partly neutralised by greater international competition in domestic markets; second, tariff benefits have been outweighed by non-tariff barriers in areas where developing countries have obvious competitive advantages, as is true of labour-intensive sectors where wage costs are an important part of total costs; third, in areas like textiles where developing countries already have a strong international presence, the full benefits of the Round are yet come and would come slowly; fourth, the dependence on transnational firm strategies and the costs and the extent of industrial restructuring would be higher in the wake of the TRIPs agreement, necessitating special strategies in the more-developed developing countries to enhance their technological capabilities based on greater R&D efforts; finally, developing countries would be increasingly hard put to follow conventional "mercantilist" policies like the provision of export subsidies.

In the event, this discussion and the recent trade experience of developing countries suggests that expectations that the new world trading arrangement will in itself bring substantial static and dynamic gains to the developing countries were grossly exaggerated. The developed countries arrived at a compromise in which the US and EU retained protection of their agriculture as well as sensitive labour-intensive sectors, while winning for themselves greater access into developing country markets for telecommunications, information technology and financial and other services. This has in practice only perpetrated the inequality characterising the world trading system.

Despite this experience, the developed countries have chosen to push for a new round of trade negotiations at Seattle. Most developing countries are sceptical about the motivations of the developed countries. The scepticism stems in part from the unwillingness of the developed countries to agree to a review of the fall-out of the Uruguay Round before proceeding further down the road of selectively opening up trade. But more crucially it is also related to the two issues which are expected to dominate the discussions: first, the linkage between trade and environmental concerns; and second, the proposal to incorporate a social clause in the trade agreement. The testimony of Ambassador Richard Fisher, Deputy United States Trade Representative, to the Trade Subcommittee of the Senate Committee on Finance on July 14, 1999 is revealing. Elaborating on the Clinton Administration's trade agenda, which will have at its centre a new accelerated negotiating Round for the 21st century, he included among the initiatives to be taken up by the US the following:

Addressing the intersection between trade and environmental policies. Trade and environmental policy need to be mutually supportive. As trade promotes growth domestically and overseas, we must at the same time ensure clean air, clean water and protection of our natural resources, as well as effective approaches to broader questions like conservation of biodiversity.
Addressing the intersection between trade and labour. Again, as in our domestic economy, growth can and should be accompanied by safer workplaces and respect for core labour standards. There is room for the WTO to collaborate with the International Labour Organisation on some of these issues. As the President has announced, the Administration is requesting $35 million in FY 2000 for a new multilateral program in the ILO to provide technical assistance for international labour rights initiatives, such as eliminating exploitive child labour, and for our own Department of Labour to help our trading partners strengthen labour law enforcement. These and other such efforts should be a focus of renewed co-operation with the ILO.

To quote free-trade enthusiast T. N. Srinivasan once again: "the most serious external threat to developing countries in the post-Uruguay Round world trading order is from the attempts to link their market access to performance in non-trade related areas such as protection of the environment and labour standards. The pernicious notion that a country with lower environmental and labour standards, when it exports its products to another with higher standards, is engaged in eco-dumping and is in unfair competition has gained ground... diversity in labour and environmental standards (at least as far as purely domestic environmental insults are concerned) is legitimate, No country should be coerced to set those standards at levels that are not sustainable given its stage of development. There is also the danger that the movement in the developed countries genuinely concerned about environmental degradation and interested in the improvement of labour standards in poor countries will be captured by those who wish to use it for their own crass protectionist purposes. It is clear that if the developed countries are not willing to compensate poor countries for raising their standards beyond what they could sustain on their own but coerce them through denial of access to their own markets, the liberalisation of market access in the post-UR world will have no meaning for poor countries." These and the arguments delineated earlier, provide strong reasons to struggle for an agenda of "standstill, review and roll-back". But as in the case of the Uruguay Round the interests of the developing countries are unlikely to influence the decision whether negotiations should begin or what should be their agenda.



Themes > Features	02.11.1999


World Trade : Who Matters at Seattle

It took eight years, between 1986 and 1994, for GATT member countries to arrive at a world trade agreement through the negotiations which began at Punta del Este, Uruguay. Even in April 1994 the negotiations were by no means complete, as reflected in the pre-decided, post-round negotiations on telecommunications, information technology and financial services. It was also reflected in the Uruguay Round decision to go in for a review and renegotiation of the agreements relating to the contentious areas of agriculture and services in the year 2000. The Seattle ministerial meet scheduled for end November was significant because it was meant to arrive at an agenda for these continuing negotiations. In the run up to Seattle, however, different sections of the developed, industrial bloc have, for quite different reasons and with significantly different agendas, mooted the idea of a more comprehensive Millenium round. Revising the 'review and renegotiation' timetable into a full-fledged new round does have important implications. To start with, it implies that the fundamental thrust of the next set of negotiations should be further liberalisation in chosen areas, with no review and roll back of past agreements. Secondly, it signals to the world that what is at stake are not marginal adjustments around Uruguay Round benchmarks, but significant advances in the direction of further liberalisation. Third, it opens the door to the introduction of new areas of negotiation such as trade and environment linkages, trade and social clause linkages and finally a multilateral agreement on investment. For the developing countries, the answer to the question as to whether we need a new round just now depends on an assessment of the first of these implications. Its been only five years since the Uruguay round treaty and the new implementation framework centred around the WTO has been in place. And during those years there is little indication that the wholly unequal world trading order has changed significantly. As Chart 1 shows, the annual average rate of growth of developing country exports has fallen by a percentage point between the four year pre-UR period (1991-94) and the period 1995-98, whereas it has risen significantly for the developed countries. If we consider two groups consisting of the OECD and non-OECD countries, the share of the latter has actually improved slightly, indicating that it is some of the more dynamic of the developing countries (which have joined the OECD) that have lost out in the years after the Uruguay Round. Finally Chart 3 indicates that while, the prices of manufactured exports from the OECD countries have fluctuated around a stable level during 1991-98, the prices of the principal exports of most developing countries, viz., agricultural raw materials and minerals, ores and metals, which appeared to be buoyant between 1993 and 1995, have since registered a sharp fall. The only commodity group for which prices have risen and stayed high is food and beverages, in whose case a significant part of the surpluses are with the developed countries. Not surprisingly, current account deficits have tended to widen in the case of many developing countries. It must be noted that this relatively poorer trading performance of the developing countries is not because they are not "rule-savvy" and have not exploited the loopholes available within the UR framework to erect new non-tariff barriers to imports. One such barrier would be the device of resorting to import restrictions in the name of dumping. In recent times, both the number of cases and countries resorting to such actions have increased substantially. In the name of market disruption or distress caused by imports, whether valid or not, countries have increasingly invoked anti-dumping relief rather than resorted to safeguard action under article XIX of GATT. Interestingly, it was the developing country group which substantially upped its use of anti-dumping initiatives. As Chart 10 shows, while the number of anti-dumping initiations have fallen from 678 to 394 in the case of the developed countries, it in fact rose from 353 to 509 in the case of the developing countries between 1991-94 and 1995-98. The failure, despite this effort, to realise the promise of a significantly improved position for developing countries in the world market after the Uruguay Round can be traced to the structurally inadequate gains achieved by developing countries in the form of improved market access. As Charts 4 and 6 and 5 and 7 respectively show, the concessions received by developing countries in terms of the share of imports over which tariff concessions apply and the depth of the tariff cut they benefited from was lower than that which applied to the developed countries. That is, starting from a position of subordination, developing countries appeared to have offered more in the nature of concessions with regard to market access than the developed countries did. But even this picture is partial, in as much as it does not capture the commodity composition of the areas in which the concessions were offered by the two sides. In fact, the evidence is now overwhelming that both across and within product groups, the developing countries began to give virtually immediately after the Uruguay round negotiations were complete, but they are yet to begin to receive much by way of benefits in areas which matter to them from an export point of view. Nothing epitomises this more than the agreement relating to textiles. From the point of view of the developing countries, the most visible and "multilaterally" accepted non-tariff barrier arrangement prior to the Uruguay Round was the Multi-Fibre Arrangement. That arrangement was the end-result of a series of negotiated agreements starting in the 1960s, all of which sought to provide the developed countries with the time needed to restructure their industries so that competitive textile exports from lower-cost developing countries do not "disrupt" their markets. Despite three decades of agreement on that principle and periodic revisions of the deadline for ending import restrictions, textiles still were by the late-1980s not permitted free entry in developed-country markets. The case for an immediate end to such restrictions, under a new multilateral trade regime was therefore strong. However, though the Uruguay Round agreement on textiles and clothing provided for the phasing out of restraints stemming from the Multi-fibre Arrangement, it once again delayed the process of liberalisation. The process was designed to occur in four stages over a ten-year period and is heavily "back-loaded", in the sense that most of the liberalisation occurs during the last stages. The four stages defined involve the following: In the first stage, beginning on the date on which the Uruguay Round became effective, each signatory nation was required to remove quotas only on products that account for 16 per cent of its total volume of imports of four categories of textiles and clothing in 1990 (tops and yarns, fabrics, made-up textiles products and clothing); In the second stage, beginning three years and one month after the agreement came into force, quotas were to be removed on a further 17 per cent of the total volume of 1990 imports; In the third stage, which begins four years later, quotas are to be removed on products that account for not less than 18 per cent of the total volume of 1990 imports; Finally, after 10 years and one month, all other quota restrictions are to be eliminated. This prolonged and back-loaded agreement in a labour-intensive area in which the developed countries had agreed to open up markets more than three decades back, points both to the relative positions of power of developed and developing countries in the Uruguay Round negotiations as well as to the extent of commitment of the latter to offer greater market access as a quid pro quo for the rapid liberalisation of trade and investment rules in the developing countries. What is more revealing is the evidence on the progress on this front. With two stages of the phase out process being complete, 33 per cent of imports by volume of four categories of textiles and clothing are ostensibly outside any quota regime. However, out of the quotas under MFA notified by the US, EU and Canada (Chart 8), after the completion of the second stage of implementation of the MFA phase out, only 1, 7 and 14 per cent respectively (Chart 9) have been withdrawn. Much of the phase out thus far covered commodities which were not even in consideration. Further, most of these are textile products which do not dominate the developing countries' export basket. Above all, as Charts 11 and 12 indicate, the extent of tariff concessions, both in terms of tariff reduction and the share of the relevant imports subject to cuts, provided by the developing countries have been higher than that provided by the developed in industrial products in general and in the textile area in particular. That is, five years after the completion of the Round and at a time when talk is already on with regard to initiating a new round, developing-country, market-access "gains" in an area most crucial to them have been minimal. The implication of this is obvious enough. Even in an area as basic as market access, what is called for now is a review of the Uruguay Round aimed at redressing the inequalities it carried through in its fine print rather than an extension of the Round either in the form of more intensive liberalisation or in the form of extending the multilateral framework into new areas. However, neither the outcome of the Uruguay Round nor the current discussion is influenced by the interests of the developing countries. The perception that the Marrakech agreement of 1994 constituted a qualitative advance sprang from many sources. To start with, it created a formal international institutional framework in the form of the World Trade Organisation, to oversee the implementation of the terms of the agreement. This was expected to correct the inadequacy that there was no formal institutional framework governing world trade, especially because the agreement included clauses aimed at strengthening dispute settlement mechanisms and disciplinary norms regarding the use of safeguard measures like anti-dumping and countervailing duties which can be used to sidestep uncomfortable trade liberalisation policies. Secondly, the Uruguay Round went beyond intensifying past efforts at reducing the barriers to trade, by extending GATT disciplines to a range of "sensitive" commodities, like agricultural goods, textiles and apparel, which had hitherto not been subject to the same discipline that applied to the trade in most manufactures. Finally, the Uruguay Round touched on a range of new issues such as trade in services, trade-related intellectual property measures (TRIPs) and trade-related investment measures (TRIMs). Of these "advances" it is the second set in which the results have been particularly disappointing. The virtual standstill in textiles has already been referred to. And in agriculture, even a commentator like trade economist T.N. Srinivasan, who shares the free-trading bent of the WTO, argues that: "Other than bringing agricultural trade under the discipline of GATT rules, there is very little liberalisation. (And even in agricultural trade coming under GATT rules, there are some exceptions. Whereas the subsidisation of exports of manufactures is ruled out, agricultural export subsidies are merely to be reduced but not eliminated, let alone outlawed.) ... Although the reduction of export subsidies and domestic support measures will be of benefit to developing-country exporters, the possible rise in world prices of foodgrains with the reduction in subsidised exports from developed countries will hurt food-importing developing countries ... on balance, agricultural liberalisation is likely to be a washout from the perspective of developing countries." (Developing Countries and the Multilateral Trading System: From the GATT to the Uruguay Round and the Future, Colarado: Westview Press, 1998). The third area of expected advance has indeed proved to be an area of substantial loss from the point of view of the developing countries, inasmuch as it constrains their efforts at enhancing and widening that competitive advantage, where the limitations are more severe. This impact is principally mediated through the agreement on Trade Related Intellectual Property Rights (TRIPs), which defines those rights and the mechanisms for enforcing them and for dispute settlement by WTO. That agreement has required members to introduce legislation which provides a sovereign guarantee that the patent rights of corporations, wherever acquired and whether relating to products or processes, would be protected. Such patent protection for products and processes is to apply for a period of 20 years in almost all fields of technology. Patent protection for products is especially significant in the chemical and drugs and pharmaceuticals industries, where many developing countries had found alternative processes to replicate products once standardised. But they are proving particularly controversial in areas involving traditional knowledge and life forms. The TRIPs agreement also limits efforts to replicate industrial designs, such as the lay-out designs of integrated circuits. Given the "technological gap" between the developed and developing countries and the concentration of both existing patents and R&D expenditure in the latter, this would be a major constraint on the export competitiveness of domestic firms. This factor, along with the agreement on Trade Related Investment Measures (TRIMs), which forecloses governmental efforts to force a degree of indigenisation and domestic linkage on international producers being provided freer access to developing country markets, substantially increases the dependence of developing countries on foreign firms as the medium to win and sustain their foothold in international markets. Overall, there are five aspects which call for attention when examining the gains to developing countries from the implementation of the Uruguay Round proposals: first, gains from increased access to foreign markets have been small and partly neutralised by greater international competition in domestic markets; second, tariff benefits have been outweighed by non-tariff barriers in areas where developing countries have obvious competitive advantages, as is true of labour-intensive sectors where wage costs are an important part of total costs; third, in areas like textiles where developing countries already have a strong international presence, the full benefits of the Round are yet come and would come slowly; fourth, the dependence on transnational firm strategies and the costs and the extent of industrial restructuring would be higher in the wake of the TRIPs agreement, necessitating special strategies in the more-developed developing countries to enhance their technological capabilities based on greater R&D efforts; finally, developing countries would be increasingly hard put to follow conventional "mercantilist" policies like the provision of export subsidies. In the event, this discussion and the recent trade experience of developing countries suggests that expectations that the new world trading arrangement will in itself bring substantial static and dynamic gains to the developing countries were grossly exaggerated. The developed countries arrived at a compromise in which the US and EU retained protection of their agriculture as well as sensitive labour-intensive sectors, while winning for themselves greater access into developing country markets for telecommunications, information technology and financial and other services. This has in practice only perpetrated the inequality characterising the world trading system. Despite this experience, the developed countries have chosen to push for a new round of trade negotiations at Seattle. Most developing countries are sceptical about the motivations of the developed countries. The scepticism stems in part from the unwillingness of the developed countries to agree to a review of the fall-out of the Uruguay Round before proceeding further down the road of selectively opening up trade. But more crucially it is also related to the two issues which are expected to dominate the discussions: first, the linkage between trade and environmental concerns; and second, the proposal to incorporate a social clause in the trade agreement. The testimony of Ambassador Richard Fisher, Deputy United States Trade Representative, to the Trade Subcommittee of the Senate Committee on Finance on July 14, 1999 is revealing. Elaborating on the Clinton Administration's trade agenda, which will have at its centre a new accelerated negotiating Round for the 21st century, he included among the initiatives to be taken up by the US the following: Addressing the intersection between trade and environmental policies. Trade and environmental policy need to be mutually supportive. As trade promotes growth domestically and overseas, we must at the same time ensure clean air, clean water and protection of our natural resources, as well as effective approaches to broader questions like conservation of biodiversity. Addressing the intersection between trade and labour. Again, as in our domestic economy, growth can and should be accompanied by safer workplaces and respect for core labour standards. There is room for the WTO to collaborate with the International Labour Organisation on some of these issues. As the President has announced, the Administration is requesting $35 million in FY 2000 for a new multilateral program in the ILO to provide technical assistance for international labour rights initiatives, such as eliminating exploitive child labour, and for our own Department of Labour to help our trading partners strengthen labour law enforcement. These and other such efforts should be a focus of renewed co-operation with the ILO. To quote free-trade enthusiast T. N. Srinivasan once again: "the most serious external threat to developing countries in the post-Uruguay Round world trading order is from the attempts to link their market access to performance in non-trade related areas such as protection of the environment and labour standards. The pernicious notion that a country with lower environmental and labour standards, when it exports its products to another with higher standards, is engaged in eco-dumping and is in unfair competition has gained ground... diversity in labour and environmental standards (at least as far as purely domestic environmental insults are concerned) is legitimate, No country should be coerced to set those standards at levels that are not sustainable given its stage of development. There is also the danger that the movement in the developed countries genuinely concerned about environmental degradation and interested in the improvement of labour standards in poor countries will be captured by those who wish to use it for their own crass protectionist purposes. It is clear that if the developed countries are not willing to compensate poor countries for raising their standards beyond what they could sustain on their own but coerce them through denial of access to their own markets, the liberalisation of market access in the post-UR world will have no meaning for poor countries." These and the arguments delineated earlier, provide strong reasons to struggle for an agenda of "standstill, review and roll-back". But as in the case of the Uruguay Round the interests of the developing countries are unlikely to influence the decision whether negotiations should begin or what should be their agenda.



© MACROSCAN 1999