Does The World Trade Organization System Serve The Interest Of Developing Countries In This Essay?

Introduction to the World Trade Organization

World Trade Organization (WTO) is the organization which regulates the international trade. The official birth of WTO occurred on January 01^st 1995 through the Marrakesh Agreement which had been signed by 123 nations and which replaced GATT, i.e., the General Agreement on Tariffs and Trade. WTO continues to be the largest international economic organization across the globe. The WTO not only regulates the goods and services, but also the intellectual property between the nations as a proper framework is provided for dispute resolution and negotiating trade agreements as have been signed by the governments and ratified by the parliaments. Around two thirds of the 164 members of WTO are the developing nations and an active and crucial role is played by the WTO in their direction. As a result of such high number of developing nations, WTO works towards their benefit as they become a key part of the economy of the globe and are an important tool in the development efforts of WTO. The developing nations are formed of diverse group with different concerns and views, which make the WTO, deal with the needs of the developing nations in different manners. This is because the WTO agreements cover certain special provisions for the developing nations; a body being formed to focus on work in such areas, where specific topics are dealt with, for instance technology transfer, and trade and debt, and this committee is known as the Committee on Trade and Development; and the WTO secretariat providing the requisite technical assistance for the developing nations. Through the use of these measures, the WTO works towards the benefit of its more than three quarters of the members. There have been factions who support that the WTO only serves the interest of the developing nations and the provisions of the WTO are majorly focused on the developing nations and their interests. However, there have been factions who have stated that, even in doing so, the WTO has failed the developing nations. In the following parts, a discussion has been carried out in which the different initiatives adopted by the WTO towards the interests of the developing nations have been discussed. This is aimed at showing the different attempts made by the WTO and the manner in which these have failed in reaching their actual purpose.

When the WTO holds majority of members which are developing or least-developed nations, the role of this international body attains significance. The reason for taking the least-developed nations in this context is because these are the nations who are in the line of becoming developing nations. The subject of interests of the developing nations as is served by the WTO continues to be a matter of debate. However, even in such situation, the majority of developing nations accept that a number of benefits are attained by them through this system. All of the agreements of WTO cover special provisions for the developing nations, which include long periods for the implementation of commitments and agreements, adopting measures for increasing the opportunities of trade and supporting to assist in building the infrastructure for the work of WTO, for handling the disputes, and for the implementation of technical standards. The reasons for including provisions for developing nations stems from the needs of such nations which justify the acts which are not generally adopted in the agreements, for instance, providing subsidies. The negotiation, along with the other work which had been launched at the Doha Ministerial Conference back in 2001’s November includes a number of issues which the developing nations aim to chase. For promoting better communications, the WTO has established around 100 trade ministries, as well as, regional organizations in the developing and least developed nations, along with providing internet access and computers so that the officials of ministries can stay updated on the events in Geneva in the WTO by using online access to the immense database of WTO, particularly its official documents, along with the other material. Where the nations lack a permanent representative in Geneva, efforts are made in assisting such nations.

The WTO and Developing Nations

To deem WTO as an agency of aid is wrong as it simply plays a role in promoting the growth of developing nations. There is a widespread recognition at the present time that the WTO needs to provide both aid and trade to the developing nations. However, the agreements of the WTO cannot guarantee that here would be increase in the trade flow as they merely provide the opportunities. There are some nations, which are placed at a better position in comparison to the other nations as such better placed nations can grasp these opportunities easily in comparison to the nations which are not able to do the same. This is the reason why some nations require “Aid for Trade” in addition to the different tools where the aim of these is to enhance the capacity of the developing nations in participating in a more effective manner, within the marketplace of the world. The WTO continues to be a coordinating agency for the programme of Aid for Trade, as a result of which it brings in private sector, development agencies, donors, and recipient governments together n a regular manner. Through this dialogue, the WTO is able to highlight the things which are being provided, along with identifying the things which are required for encouraging the development of suitable designed projects. These efforts are to be responded by the receipts and donor nations. The donor nations have provided a commitment of a yearly average of $40 billion towards the trade related development programmes. And at the same time, the recipient nations had been successful in pinpointing the particular areas in which there is a need for aid and for mainstreaming of trade in their own development strategies.

Even though the WTO is purported as a democratic institution, it continues to be dominated by the leading industrialized nations, in addition to the corporations of such nations. The commercial trade, as a logic permeates the WTO. The goals of development were brought forward when the GATT had been formed initially; but this have since been set aside, or have been assumed in a manner which can be deemed as wrong as a natural result of the increased trade. The developing nations have very little power in the framework of WTO owing to different nations. Even though the developing nations form around 75% of the membership of the WTO, and their votes have the capacity of influencing the outcome and agenda of the trade negotiations in theory, these are rarely used by the developing nations towards their benefit or advantage. The majority of these developing nations and their economies are dependent upon the European Union, the United Nations, and Japan, or such other developed nations, in one way or the other, for aspects like security, aid, exports, imports and the like. Where there is any chance or an obstruction regarding their consensus at the WTO, the developed nations have the capacity of threatening the security and well being of the dissenting developed nations in an overall manner.

Initiatives for the Benefit of Developing Nations

The negotiations related to trade are based on the reciprocity or the “trade-offs” principle. This is because one nation gives the concession in a specific area, for instance by bringing down the tariffs in case of a particular product, and in exchange, the other nation agrees to a particular agreement. Such kind of bartering helps in gaining an advantage for the diversified and the large economies, as they are able to gain more, by giving more. The technical and human resource with the developing nations is very less and a number of such developing nations are not able to deal with 40-50 meetings which are held in Geneva on weekly basis. This is the reason why the developing nations do not engage in negotiations in as much number as is done by their developed counterpart nations. Another important point which has been discovered by the developing nations is that applying for the dispute settlement system is a very costly thing to do and this also needs a high level of expertise in field of law, which thee majority do not have. Along with this, the key base on which this system is operation, regarding a nation violating the free trade rules, fails to be suitable in the case of needs of developing nations, particularly for their growth.

The main goal of the WTO, the agreements’ implementation, along with the highly praised dispute settlement system of the WTO is aimed at serving the advancement of the developed nations’ interests which results in sidelining the ones drawn for the developing nations. The least developed nations still have to face tariff escalations, even when they are the marginalized strata in the system of WTO. Owing to the difference in the economic situations, the rules of the WTO which are meant to remove equality had resulted in bringing forth inequalities between the members of the WTO. In the words of Nelson Mandela, who commented upon the Uruguay Round, the developing nations could never make certain that the rules could accommodate their reality. He further stated that the agreement was merely shaped with the problems and preoccupations of the advanced industrial economies. Thus, in his views, the rules which were applied in a uniform manner were not fair necessarily due to the different situations of the members.

The WTO had pledged towards delivering the pro-development changes but from the time this pledge was taken, the developing nations have been sidelined in a complete manner by the global powers. The membership off WTO has failed in delivering on the promised upon pro-development amendments. To look for development in the Doha Development Round at the present time can be deemed as looking for a needle in the haystack. The developing nations, owing to the political and economic interests of the global powers, have been entirely sidelined. There are ten distinctive examples to show the manner in which the WTO has failed in serving to the developing nations. The first aspect in this is cotton, where the Fairtrade Foundation revealed in 2010 the manner in which $47 billion in subsidies were paid to the rich nation producers, during the last ten years, which has resulted in a barrier being formed for the fifteen million cotton farmers, who were present across the west Africa, and who were attempting to indulge in such trade to remove their poverty, in addition to the manner in which the five million of the poorest farmers across the glove had been forced out of business, further in more deep poverty, as a result of the subsidies.

Challenges Faced by Developing Nations

The next aspect on which the WTO failed for the developing nations is the agricultural subsidies, which are beyond cotton. There has been a failure in attaining agreement by the WTO members for reducing the high subsidies which are provided to the rich farmers of the developed nations, and the overproduction by them which continues to pose a threat over the livelihoods of the farmers of the developing nations. The trade agreements are the next aspect in this where the WTO proves to be a failure as they did not clarify the ambiguous rule which is deliberate one, on concluding the trade agreements which permit the poorest nations to be manipulated through rich states. With the negotiations with European Union, in Africa, the nations have been forced to eliminate the tariffs on around 90% of their trade as a result of the lack of clarity in rules which can protect them. There is also the issue of special and differential treatment for the developing nations, which were meant to be reviewed in other to deem them as ore effective, operation, and precise. However, there has been failure of the WTO in working through the righty eight proposals which could fill the lawful vacuum.

Medicine is the fifth base on which the WTO has failed the developing nations, particularly the poor in such nations, as they are not able to access the affordable medicines. This is because the members have failed in clarifying the vagueness admits the requirements for the governments in protecting the public health on one side, and the protection of the intellectual property rights for the pharmaceutical companies on the other aspect. When it comes to the legal costs, a pledge had been taken by the WTO for improving upon the access to the complex and the expensive legal systems. However, the WTO has failed in keeping this pledge. During the first fifteen years of the dispute settlement system in the WTO, around 400 cases have been started. In this, no African nation has acted on the position of a complainant and only one least developed nation has filed a claim ever. When the WTO was formed in 1995, one of its five core functions was meant to attain more coherence in the global economic policy making. Even then, there has been a failure on part of the WTO in curbing the racing rise in the number of protectionist measures which is applied by the G20 nations as a response to the global economic crisis which took place in the last two years, despite the repeated affirmations of the G20 leaders regarding their so called “unwavering” commitment towards resisting all sorts of protectionist measures.  

The Role of the WTO in Aid for Trade

There has also been a failure in the WTO, particularly in alleviating the sufferings when the WTO had clear opportunity of doing so. Where a case of natural disaster takes place, the membership takes around two years for agreeing upon and in implementing the temporary trade concessions in case of Pakistan, where in 2010, severe flooding had displaced 20 million resulting in a damage of $10 billion. As per the International Centre for Trade and Sustainable development, these measures could have boosted the exports of Pakistan by a minimum of €100m for the same year. In WTO, the majority of decisions are taken by consensus and to attain a consensus between such a high numbers of nations is almost impossible. However, this has highlighted another failure of WTO as the link between the political weight and market size is broken which would provide the poor and small nations a voice during the trade negotiations. Lastly, the failure has been in context of fair trade, where ten years since the Doha Development Round, the governments have failed in making trade as fair. So long as the poor and small nations are without voice, the roles of campaigning organizations like the Fairtrade Foundation and Traidcraft, remains critical as they work towards the elimination of the cotton subsidies. All this shows that there had been a failure on part of the WTO in living up to the promises which have been made in the last decade, revealing a wider systematic problem across the community of the world.

The WTO has faced a difficulty in setting a development agenda, and in delivering the aid packages to be provided to the poor nations at the Doha talks which took place during the 2011. This led to the argument that a democratic and serious debate on the powers and the purpose of WTO. The developed nations do not want to make way for the developing nations and usually the WTO are circumvented by starting bilateral talks for creating deals, which hampers the progress of the developing nations in a severe manner. The developed nations follow the free trade policies in a steadfast manner and also find it advantageous to ignore the social issues, to the likes of food security and climate change. There is thus a need for the WTO to view the trade as a means to attaining developmental, social and environmental goals, instead of deeming trade as goal itself, by demanding responsibility and accountability from the developed nations, in addition to increasing the consultations with the civil society.

Dominance of Industrialized Nations in Decision-making

The trade ministers have insisted that the WTO Doha negotiations are a crucial part towards the response to the global emergencies in employment, climate, food and economy. Yet there is an absence of the political will, which has resulted in the WTO being incapable of agreeing with the minimalistic packages for the least developed nations. In April 2010, it became clear that the WTO members were not able to manage an agreement on the full Doha deal. There have been steps taken in order to deal with the issue. For instance, the early harvest package was announced by Pascal Lammy, who was the director general back in May 2010, as comprise of the four measures which had the goal of benefitting the developing nations. As soon as this proposal was announced, majority of the developed nations started resisting it, especially USA, and demanded benefits towards their own economy for providing concessions to the developing nations. This is partly symptomatic of the obsession of developed nations, where they do not provide much to the developing nations like Brazil and India, and this obsession has resulted in the development agenda being overshadowed. This led to Lammy announcing that there was a failure in reaching an agreement with the limited set of measures.

The measures which had been offered included the duty free and quota free access to the developed nation markets, along with the improvements in the rules of origin and these were not close to addressing the matter of fundamental injustice in the global trading system. The developing nations are bullied into premature openings of their market, which undermines the local producers, while the developed nations continue to breach these very rules, which they claim to be following. For instance, in case of USA, instead of following by the ruling given in 2005 regarding the subsidies provided by it being against the rules of WTO, it now pays Brazil for not implementing the countervailing measures. This would be detailed later on. However, the early harvest would have been a symbolic gesture towards the goals of the Doha Development Round. There has been a lack in the commitment of Doha towards making trade work for the development purpose. There has been a complete failure in addressing the challenges which had been faced by the world years back and there has also been a failure in responding to the economic crisis across the goal, in addition towards responding to the geopolitical changes. The concerns have been constantly raised by the developing and the least developed nations with rising evidence on the overall losses, which includes major damage to the industrial sectors and the agricultural sectors. The constant failure on agreeing to the Doha has not acted as a hurdle for the developed nations, which are powerful and rich, seeking to shore up their personal economies, along with attempting to force the developing nations in the bilateral deals which are beyond the Doha plans. The horrific impact of the unregulated liberalization over the global food and financial systems can be seen easily. And yet, the apologists for the present “so-called” free trade system have continued to push for the fast and deep liberalization and for lauding the multilateral trading system as the response to the issues, which are wide ranging and include climate change, food security and human rights abuses.

An example which can shed some light over the institutional approach of the international trade, relates to the complaints put forward by Benin and Brazil against US. In 2002, the US brought forward the Farm Security and Rural Investment Act, through which the subsidies for the farmers were raised by 80%. Later that year, in September to be precise, a complaint was filed by Brazil against US where an argument was made on its subsidies policies being against the WTO agreements, along with being responsible for major price suppression and depression at the world wide level. Benin, in 2003, had signed as a third party as a major interest in his dispute. 77% of the exports in 2002 accounted for the cotton production. The same became a key moment as it was the very first WTO official complaint against the domestic subsidies of the developed nation, and for the very first time, an African nation became a member of the litigation of WTO. The ruling was given in favour of Brazil in March 2005 and US was given a time period for removing its subsidies. This is deemed as a proof of presence of powerful international tribunal system.

This example initiates a person to think regarding the WTO’s legal system which provides a proper means to the developing nations which a chance of challenging the trade practices of the trading partners in a successful manner, in addition to ensuring the fulfilment of the international obligations. Also, the WTO rules show an effective change in the global system of trade. The same is acute when compared to a situation which occurred during Uruguay Round, which ultimately led to the creation of the WTO. The proposition to include investment, services and intellectual property rights were resisted by the developing nations and even there were threats placed by the US to withdraw from the Round, along with cancelling its obligation to the members who refused to sign the final act. US, during that time, successfully used its powers in pressuring the developing nations for accepting the unfavourable conditions, whilst in the WTO, the relative influence for the member states has been equalized, or so is apparent at the very least.

Even though the dispute resolution through judicial process on the Dispute Settlement Body (DSB) of the WTO could be deemed as an equality guarantor for the developing nations, owing to the imbalance of knowledge and power, the same seems to be very unlikely. The western states have high lawful resources, which prove to be a disproportional benefit, which substitutes the negotiation power of the west with their legal power. Thus, the developing nations continue to be at a disadvantageous position in comparison to the developed western nations. Another barrier for the use of dispute settlement process by the developing nations continues to the high start-up costs for the use of trade litigations. Along with this, the absence of experience, along with the lack of human resources for effectively dealing with the complex issues which rise on daily basis, puts the developing nations in a compromised position.  Furthermore, as per the rules of the Dispute Settlement Body of WTO, where the defendant is deemed as guilty, the plaintiff could engage in retribution against their violators. A majority of developing nations face this issue as they have a very insignificant share in the international trade retributions which become unbearable owing to the resulting losses, which go beyond the possible gains, which is true for the case of power members or the developed nations who threaten reprisal.

On the basis of this discussion, it becomes very clear that WTO as a body serves the interests of the developing nations on paper and the real interest is served for the developed nations. Even when the WTO comes with different policies which are focused on benefitting the developing nations, or the least-developed nations which are in queue of becoming developing nations, they fail to prove beneficial to the developing nations. This is majorly due to the developed nations having the resources and tactics of manipulating these policies, where they are benefitted in the name of interests of the developing nations being forwarded. The WTO was formed for the purpose of brining forward the developing nations and in promoting trade, but it has failed in doing so. The focus on developing nations stems from members of WTO which is around 75% of the entire member population of the WTO being developing or least developed nations. However, even such high numbers are not able to tap the benefit of majority and the same is instead used by the developed nations to their benefit. Thus, even in catering to the needs of the developing nations, the WTO majorly caters to the benefit of the developed nations.

General Agreement on Tariffs and Trade

Books

Bown CP, Self-Enforcing Trade: Developing Countries and WTO Dispute Settlement (Brookings Institution Press 2010)

Hudec RE, Developing Countries in the GATT Legal System (Cambridge University Press 2010)

Shaffer GC, and Meléndez-Ortiz R, Dispute Settlement at the WTO: The Developing Country Experience (Cambridge University Press 2010)

Thomas C and Trachtman JP, Developing Countries in the WTO Legal System (Oxford University Press 2009)

Journals

Brewster R, ‘The Surprising Benefits to developing Countries of Linking International Trade and Intellectual Property’ (2011) Chicago Journal of Law 12(1)

Rena R, ‘Impact of WTO policies on developing countries: issues and perspectives’ (2012) Transnational Corporations Review (Canada), 4(3)

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