For few years, some policy-makers, scholars and other stakeholders have voiced their disappointment with the World Trade Organization (WTO) and have proposed some ideas for reform this institution. The WTO has been accused to be to ineffective (slow to produce agreements) as well as to fail to produce results favorable in terms of sustainable development and of solving asymmetries in the international trading system between developed and developing countries.
Some authors pointed out that ineffectiveness derive from the institutional setting. However, as far as I know, scholars failed to propose feasible new ways of organizing the WTO institutional setting. In fact, there is some historical “path dependence” on its evolution as Wilkinson brilliantly shows (1).
Independently of potential improving on how the WTO institutionally works, it is more important to sort out how to go beyond the first issue with the WTO that I showed in the last post: conflicts among Members. There is number of divides among WTO Members: not only between developed and developing countries but also between "defensive" developing countries (that want to defend their agricultural and industrial sector) and "offensive" developing countries (that are competitive exporters and want that every country open up its market) or between “old” and “new world” (on geographical indications that want to protect food specialties). In order to succeed to find an agreement and bridge these divides, Members should change their approach and the founding principles of WTO.
The WTO is based on number of principles that normatively try to push the international trading system in the direction of always more free trade (as the Most Favorite Nation, the National Treatment, etc.). This is at least the dominant discourse. In fact, the reality is quite different because developed countries used the GATT/WTO since the 80s to eliminate developing countries trade barriers while maintaining and reinforcing the protection of their sensitive sectors (as agriculture) and introducing some additional protectionist measures to defend their interests (agricultural subsidies and the protection of intellectual property). However, the normative foundations of the WTO have a huge impact on the negotiation process, on what is feasible and on how Members can defend their interest and propose acceptable solutions.
These norms constrain Members to negotiate in a reciprocal mercantilist way. In fact, even if the goal of the Doha Round was to solve asymmetries between developed and developing countries, the path choosed is not that developed countries will eliminate measures that create these asymmetries by changing their policies and reduce the constraints for developing countries. The principle applied was the “less than full reciprocity”. This means that developing countries should negotiate and offer something in exchange of the (partial) elimination of the international trading system asymmetries. For these reasons, negotiations became (once again) very mercantilist. Developed countries ask for more concessions by developing countries. Developing countries try to maintain their policy space (crucial for their development process) and to obtain more concessions by developed countries. This means that if the developing countries want to obtain some gains in terms, for example, of market access, they will need to accept disciplines that will harmonize even more their policies and restrict their policy space.
This situation is a recipe for failure. In order to get out of this dead-end we need to rethink the principles on which the WTO is based. The starting point should be that trade is not a goal per se but a means to achieve sustainable development for all Members. In fact, this is the only norm that can reach a consensus among WTO Members. What is more, this norm is included in the introduction of the agreement that choose to create the WTO.
Few days ago, I show some elements that can improve the positive impact of the international trading system on development. I underlined that for developing countries is crucial to:
- Use the international trading system to increase incomes as well as to specialize in transformed and high value added products.
- Have the opportunity to use protectionist measures to protect and develop their industry and advanced service sector.
- Have the opportunity to use regional integration in order to increase the competitiveness of their production.
- Have enough policy space to innovate in policy and industry is crucial. Only this freedom will allow a country to find its development path by balancing: 1) temporary protection and incentives for some sectors and 2) market opening to increase their competiveness.
On the opposite, for developed countries, trade already contributes to their economic development. However, it can bring some risks in terms of environmental and social damages.
To find a middle ground to achieve a consensus between these two positions seem quite difficult. However, we need to precise the two developed countries issues and their importance. Regarding social issues caused by imports, we should remember that developed countries have enough resources to adjust and solve these problems (notably through a better education of workers). What is more, outsourcing is creating jobs in the North. The problem is to adapt workers’ skills. However, developing countries should respect some basic standards. Regarding environmental issues, the question is more complex. In fact, developing countries should make some efforts, at least to avoid most damageable practices. However, we should not forget the developed countries historical responsibility of pollution. This mean that rich countries should be more commited in solving environemental problems, carry most part of the costs, invest more in clean technologies R&D and contribute to transfer this technology on the South.
In conclusion, in order to improve the problem solving effectiveness of the WTO we need to think trade issues in terms of co-development. The international trading system should contribute to improve sustainable development in both developed and developing countries. To reach these objectives negotiators should remember this hierarchy of objectives in developing countries: economic, social and, finally environmental goals. For this reason, they should introduce the following hierarchical principles at the WTO:
- Give back policy space to developing countries. Renounce to constrain all countries to harmonize their policies beacause they are in very different situations that need very different policy tools.
- Developed countries policies should not arm developing countries or preclude them to follow a sustainable way of development. For this reason, for example, developed countries should eliminate all their agricultural subsidies.
- Developed countries should give more market access (particularly for transformed products) to developing countries. This is the best opportunity for developing countries to improve their economic and social development and lift people out of poverty.
- Improve social standards (that take in consideration the differences between developed and developing countries situations).
- Launch environmental standards and other measures to solve environmental issues. All countries are constrained to contribute. These measures can harm development priorities of poor countries. Costs are attributed considering a country development level and its historical responsibility in terms of pollution.
This package of measure should be implemented in its integrality and following this hierarchical order. Otherwise, it will harm developing countries fight against poverty or it will simply be impossible to reach a consensus.
All comments are welcomed.
Footnotes
(1) Wilkinson Rorden (2006), Crisis and the Governance of the Global Trade, New York, Routledge.
codevelopment economics free trade trade development reform global governance
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