Seattle and the smaller countries

Ulhas Joglekar ulhasj at SPAMbom4.vsnl.net.in
Sat Dec 18 08:21:16 MST 1999



Financial Daily
from THE HINDU group of publications on indiaserver.com
Tuesday, December 14, 1999

Seattle and the smaller countries
The Seattle world trade talks were marked not only by public protests from
NGOs and trade unions, but also by internal protests by many developing
country governments. C. P. Chandrasekhar and Jayati Ghosh discuss the
reasons for these protests by small countries in particular, and investigate
what the current world system has meant for smaller and least developed
countries so far.
MEDIA coverage of the breakdown in world trade talks at Seattle has tended
to concentrate on the protests by NGOs and their role in forcing the meeting
to close without conclusion. But there was another, possibly even more
significant, development at Seattle: the open protests by representatives of
many small developing countries, at the undemocratic manner in which the
meetings were being conducted, and the complete neglect of their own
interests.
The protests were remarkable for two reasons: first, the fairly strong
language used to express dissent, which is unusual in such
inter-governmental negotiations; and second, the sheer length of time they
took in coming at all. The strong reaction came about because, in Seattle,
even the usual niceties of multilateral negotiations were not observed, and
the smaller developing countries were openly treated with contempt or simply
ignored by the `main' negotiators.
Thus, most of the important negotiations took place in ``green room''
meetings where only a few countries were invited. Most developing-country
members of the WTO were not able to participate; only some like, say, India,
Brazil and Malaysia would typically be included. But even if a country was
invited to a meeting on a particular issue, it may not have been a
participant in meetings related to other issues. Many developing countries _
especially the smaller ones _ were not invited to any meeting on any issue
at all.
While this is contrary to both the spirit and the letter of the WTO, which
is supposed to run along the lines of the UN system with equal participation
of each member, it does faithfully reflect the unequal power structure and
modes of operation of the WTO so far. For nearly five years, and even before
as the Uruguay Round negotiations were in progress, the large bulk of
developing countries in the world were passive recipients of this process,
and tended to go along with it simply to avoid being left out of the process
entirely.
But this time, evidently, the overt inequality and display of power during
the negotiations by the more powerful was too much to tolerate. This is why,
on the penultimate day of the Seattle talks, there were two separate
statements from WTO members from the Latin American and Caribbean region,
and African members. These protested against the host country tactics and
utter lack of transparency in the processes at the Ministerial meeting and _
more importantly _ threatened to withhold consensus from any final outcome.
The GRULAC (Spanish acronym for Latin American and Caribbean group of
countries) Ministers' declaration expressed:
1) ``To the host country, our profound surprise and resulting anger at the
organisation and lack of concern for providing the high dignitaries and
delegates attending this Ministerial Conference with minimum conditions of
security, and for allowing in some cases, physical and verbal aggressions
against its distinguished guests.''
2) ``To the authorities of the Conference and the WTO Director-General's
office, our express disagreement with the way in which the negotiations are
being conducted at the Ministerial Conference, a way that shows a parallel
course of action between a discourse oriented to transparency and the
participation by the delegations, and a process of limited and reserved
participation by some members which intends to define the scope and extent
of the future negotiating round that all member-countries are to adopt. We
are particularly concerned over the stated intentions to produce a
ministerial text at any cost, including the modification of procedures
designed to secure participation and consensus.''
3) ``To all WTO members, their strong conviction that, as long as conditions
of transparency, openness and participation that allow for adequately
balanced results in respect of the interests of all members do not exist, we
will not join the consensus required to meet the objectives of this
Ministerial Conference.''
In a separate statement, the Trade Ministers of the member-states of the
Organisation of African Unity/African Economic Community (OAU/AEC) said very
similar things, including:
``We wish to express our disappointment and disagreement with the way in
which negotiations are being conducted at this Third WTO Ministerial
Conference. There is no transparency in the proceedings and African
countries are being marginalised and generally excluded on issues of vital
importance for our peoples and their future. We are particularly concerned
over the stated intentions to produce a ministerial text at any cost,
including at the cost of procedures designed to secure participation and
consensus. We reject the approach that is being employed and we must point
out that under the present circumstances, we will not be able to join the
consensus required to meet the objectives of the Ministerial Conference.''
These sharp statements were important, because they indicated that the
possibility of any kind of `success' in the negotiations was unlikely even
leaving aside the street protests by NGOs and other groups that garnered
most of the publicity. Of course the post-mortem on the Seattle talks will
continue for some time, as different reasons for the failure are put forward
by different groups. Some NGOs have seen this as a famous victory, and
certainly the public protests were what dominated the headlines and
television screens.
But this would not have been enough to scuttle negotiations which have been
planned for more than a year, if at least one of the major players _ the US
_ had not played along. The US administration behaved like one determined to
kill these particular talks, whether in the cavalier and arrogant manner in
which it handled the negotiations, or in the way in which Clinton used the
street protests to push an agenda _ linking trade sanctions with labour and
environmental standards _ which had already been rejected very clearly by
most WTO members.
In the process, the US also succeeded in sidelining the demands which had
been made by most developing countries for stocktaking and review of the
Uruguay Round agreements and of the mode of functioning of the WTO.
But ascribing the failure of the talks to the US stance alone would be too
simplistic. In any case, the street protests themselves were far more
wide-ranging than was projected by the US administration and the western
media _ they encompassed not just Northern labour and environment issues but
also deep concerns of developing country citizens on the negative effects of
the functioning of the GATT agreements and the WTO so far.
These ranged from the adverse effects of more open economies on employment,
work security and labour conditions, to greater exposure and vulnerability
to international capital flows and less bargaining power vis-a-vis large
multinational companies, to reduced possibilities for autonomous
industrialisation and theft and monopoly of knowledge through the TRIPS
agreement.
In fact, the really significant fact about Seattle may be that, after a very
long time, many developing countries actually came together to voice their
concern at these processes and displeasure at the manner in which decisions
were being forced upon them. The absence of even a semblance of unity among
developing countries has been an important reason why they have so far been
unable to push through even a minimal common agenda at the WTO. A more
active and united approach at least on some basic areas of concern would go
a long way towards a more democratic and less unfair agreement.
Thus it could be argued, as Martin Khor of Third World Network has
suggested, that ``the more basic cause of the Seattle debacle was the
untransparent and undemocratic nature of the WTO system, the blatant
manipulation of that system by the major powers, and the refusal of many
developing countries to continue to be on the receiving end.''
The seeds of what could therefore be seen as a kind of North-South battle
were sown in Geneva in the weeks before Seattle. A large number of
developing countries voiced their disillusionment that five years after the
WTO's creation they had not seen any benefits. Further, the poorer and
smaller countries face potentially enormous dislocation when they attempt to
implement their obligations arising from the WTO's many agreements.
In Geneva, such developing countries, including many of the least developed
countries (LDCs), had put forward dozens of proposals to resolve the
``problems of implementation'' of the WTO agreements, including changing
some of the rules. But most of their demands were summarily dismissed by the
major powers such as the US and EU. Instead, the latter pushed for their own
proposals to further empower the WTO through introducing new areas such as
investment, competition, government procurement, labour and environmental
standards.
The developing countries in general had been opposing these new issues which
they saw as either opening up their markets further to the rich nations' big
companies, or giving the rich nations new protectionist tools to block
imports from incipient industrialisers or semi-industrialised countries. The
road to Seattle was marked with some trepidation on their part that these
issues would be pushed through nonetheless, and indeed that danger still
remains once the work starts again in Geneva in January. But the degree of
disgust with the process which prompted the protest statements may still
work to give impetus to a common stand by many small developing countries.
LDCs' plight
In a way, the real surprise is that more vociferous protests from smaller
countries have not come sooner. The Uruguay Round negotiations resulted in
an agreement that had little or nothing to offer smaller developing
countries, and especially the LDCs. This was even officially acknowledged,
in the form of a special clause promising ``special and differential
treatment'' to LDCs and giving them some concessions in the matter of
opening up their own economies.
However, the practice turns out to have been even worse than the written
agreement. The LDCs in particular are caught in a cleft stick: if they stay
out of GATT and WTO membership, they would be forced into costly and
unbalanced bilateral negotiations which they cannot afford and in which they
would be severely disadvantaged. But inside the WTO, they find that none of
their legitimate concerns are met; that the process of implementation of the
various agreements is time-consuming, costly and leads to massive domestic
dislocation; that they may have to go in for expensive legal advice simply
to counteract allegations in disputes; and that in general the system makes
no real allowance for the very different contexts of small countries without
the financial and human resources to devote to the Geneva organisation.
In addition, some of the most well-publicised promises of the Uruguay Round
have failed to materialise; indeed, the reality has been completely
opposite. Even as the growth in value of world trade has decelerated and
even turned negative since 1995, the situation of smaller and less developed
countries has worsened within the overall deceleration. The inequalities of
the international trading system appear to have been strengthened, rather
than diminished.
There were supposed to be very large increases in the volumes and prices of
developing country exports. The WTO came into existence on January 1, 1995.
In the four years that followed, the average rate of export growth of
developing countries was actually lower than in the previous four-year
period. The prices of the principal exports of developing countries, which
were buoyant between 1993 and 1995, have since fallen very sharply. While
this is true of many important manufacturing exports of developing
countries, it is especially so for primary commodities, except for some food
and beverages which are dominantly exported by developed countries.
The annual rate of change of prices of non-oil primary commodities,
indicates that after 1995 the dominant tendency has been that of decline.
While this is bad news for all primary commodity exporters, it is
particularly bad for those who are dominantly dependent upon not just
primary exports in general, but on exports of a single commodity.
This is a typical feature of the LDCs, whose lack of development essentially
means that they have not been able to diversify their domestic production
structures, not just to manufactured goods, but even to other primary goods.
It renders them especially vulnerable to international market volatility.
The disconcerting fact is that such dependence has hardly changed over
nearly 20 years, the period when globalisation was supposed to transform
economies all over the world.
The export concentration ratios (defined as the share of only one item of
exports in total export value) have remained high and broadly stable since
1980 for all LDCs, after rising somewhat over the 1980s and coming down
slightly thereafter. Several countries very greatly depend on particular
primary commodity exports. What makes the situation even worse for many of
them is that, while such exports (of any single item) may dominate their own
export basket, they count for relatively little in terms of the
international supply, so that they are also unable to influence world prices
in a way beneficial to themselves.
The worst affected economies tend to be those in Sub-Saharan Africa, often
seen as the ``forgotten continent'' because the major powers no longer
really bother with the implications of their decisions on the conditions of
the people in that region. This is a region where per capita incomes have
been falling for more than three decades now, but the complete apathy which
greets such disclosures in WTO meetings, for example, is testimony to the
powerlessness of these countries despite their huge natural resources and
large populations as a group.
The past few years have been especially hard, as terms of trade have moved
against the African countries quite significantly. The movement of terms of
trade in 1997 and 1998, and the impact of this in terms of the GNP of these
countries have occurred in a context of a secular trend decline in terms of
trade for Africa for more than a decade.
All this also helps to explain why the share of all LDCs in world and
developing country output and exports has not only not increased but even
worsened in the 1990s, compared to the second half of the 1980s.
The Uruguay Round was supposed to increase dramatically the ability of
developing countries in general to export agricultural products, as well as
to increase world prices of such goods because of reduced Northern
subsidies. It is now well known that the fine print in the Agreement on
Agriculture has made it possible for the developed countries to continue
with very high rates of subsidisation for agriculture. But even the import
protection of their agricultural markets continues to be very high. The
incidence of high tariff peaks (that is, in excess of 12 per cent) is much
greater for agricultural products than for manufactured goods for all three
major developed country trade groups.
In fact, it is now accepted that the supposed decade of dynamic
globalisation has not really offered all that much in terms of greater
market access or even ability to import, for the whole group of all
developing countries. The rates of growth of export and import for all
developing countries as a group in the 1990s, even before the `Asian crisis'
years of 1997 and 1998 when world trade actually fell in value terms, were
well below the period of the 1970s which were supposedly characterised by
closed economies, stagflation and relatively high degrees of protectionism.
If, despite all this, many LDCs are still anxious to gain entry into the
WTO, it is because the fragility of their economic conditions makes them
long for some degree of multilateralism and basic ground rules. With all its
warts and secretive processes, the WTO is still a better option for most
such countries than overt bilateral control by a particular major power,
which is the state many of them otherwise find themselves in.
Since most of them are also highly indebted countries, they are typically
also firmly within the coils of IMF conditionalities which effectively
determine all their major economic and trade policies. Thus, many of them
have been unable to take advantage of special provisions made for them in
GATT, because the IMF, the World Bank or other creditors simply impose more
liberalisation and government withdrawal on them anyway.
In such a depressing context, the only hope for LDCs and for smaller
developing countries generally, is much greater unity and an emphasis on
concerted positions in international forums to press for their common
interests. If the Seattle episode makes for that realisation and helps to
provide more unity among these countries, then those four days may turn out
to have been very fruitful after all.

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