Surviving the Growing Disconnect Between Trade and Development

15 February 2018

With the failure of the Eleventh Ministerial Conference to produce any substantial results, the WTO has reached an impasse. From an African perspective and fired with a constructive spirit, this article explores potential leads for moving forwards.


In the absence of results from the last WTO ministerial, held in Buenos Aires in December 2017, the organisation once again finds itself with its back to the wall. Based on the ideas put forward to try to find a breakthrough, some analysts are trying to put the onus for taking initiatives on developing countries, insinuating that the weakest have the greatest need for a multilateral trading system (MTS).[1] This system was, however, set up in 1947, when they were numerically in a minority and commercially marginal. The WTO system that succeeded the GATT has rather worsened the existing asymmetries, despite the launching of the Doha Round – also known as the Doha Development Agenda (DDA) – in order to try to reduce the imbalances brought about by the Uruguay Round. In this effort, the promises of the developed countries have never really materialised. Since 2013, the latter have become less cooperative, including on subjects which only benefit the less developed countries (LDCs). Today, instead of development, industrialised countries are suggesting new subjects that favour their economies, such as investment, competition, deregulation in services, and e-commerce. In all likelihood, this approach is designed to preserve, if not prioritise, the interests of a Western world in full competition with Asia's trading powers. How can we remain constructive in a context where wealth accumulation and power maximisation rationales end up endangering the rules that structure a MTS which benefits everyone?

In this article, instead of dwelling on the reasons for this failure, the idea is to explore – from a technical point of view and an African perspective – ideas that could lead to a breakthrough, while preserving the interests of all the members of the WTO. After an overview of members' positions, which sheds light on the main barriers to successful negotiations, propositions applying as much to the processes as to the substance will be analysed, taking into account inclusion, efficiency, and legal requirements.
 

An overview of the barriers and differences between members

Many factors help explain the current deadlock in the Doha Round negotiations. These obstacles are cyclical, structural, or even systemic. Some come from the normal negotiating tactics of countries, while other constitute real barriers. Nevertheless, whatever they are, it is always up to the members to decide just what constitutes a red line for them. Based on the declared interests, the members' positions and demands fall into three groups.

The first group – a minority – is composed of members united around the “anything but the DDA.” They find it difficult to recognise the central role of the WTO in the multilateral trading system. They consider that this organisation is not the reference in world trade and that the system that it embodies is only one among others. This opinion is questioned by factual information, in the sense that this system is the only one to claim to cover more than 98 percent of world trade and the only one to have a universal vocation. Its members are equally in agreement about its imperfections as about the fact that it still remains the least bad. The second group – also a minority albeit still larger than the first – believes that there is “not only the DDA." According to the views of these members, the Doha Round is not enough to lead to an agreement. Among them are the champions of the “new issues.”[2] Then there is the third group. It covers the majority of members and is made up of countries that claim “the DDA above all” The members of this group are seeking more development and hold quite explicit positions concerning what the term trade should cover in the WTO context. By way of example, they consider that regulation should not be treated as being part of trade rules.

From a technical point of view, the members' apparently irreconcilable positions are only a facade. They are merely envelopes that hide the actors' tactics. The problem would seem to be elsewhere. In 2012 already, Pascal Lamy claimed that “the growing influence of the emerging economies has displaced the balance of power.”[3] It is thus the interests and stakes of power that are behind the deadlock. Development is at the heart of the DDA. Poorly defined to start with, this concept has ended up being exploited. For Marc Abélès' team of anthropologists, development is the pretext used by industrialised countries to attract developing countries to the negotiating table.[4] Without better market access, which is the real issue of the Doha Round for developed countries, the DDA lacks interest, unless it includes new subjects.

For developing countries on the other hand, development is synonymous with less than full reciprocity, policy space, special and differential treatment, aid for trade, and technical assistance. In truth, the choice of subjects and the way they are handled determine the extent of the gains and the distributive dimension of the negotiations. On 13 November 2000 in Libreville, Mike Moore – at the time Director-General of the WTO – declared that “trade liberalisation in agriculture alone would be worth more than three times all the ODA put together.” Pushing development to the margins by insisting passionately on including new subjects is not merely a tactical game but a strategy for controlling gains. As per Gérard Kébadjian's analysis, “international economical phenomena are predetermined by power relationships on an international scale, relationships that are governed by nation states and the main private operators, and that are crystallised in the international economy's institutions.”[5]

Insofar as gains are concerned, it is not possible to arrive at a balancing point, and even less to reach the target of reducing the imbalances caused by the Uruguay Round and previous rounds without a legal and commercial assessment. In this respect, developed countries are taking an uncompromising view of the liberalisation of emerging economies.[6] They consider that it would be easier to find a balance in the negotiations if emerging countries would open up their markets a little further.

To win their case, members cling to arguments that best protect their interests. Some insist on the importance of maintaining the relevance of the WTO in the twenty-first century, pushing the need to comply with the system's rules into the background, while others call for them to be followed. The latter cling to the effectiveness and the validity of the DDA. Generally, developing countries ask for more development through trade while developed countries call for more trade openness. This tension has existed since the birth of the GATT. The positions of the parties and the stakes being known, it would be desirable to concentrate on the processes as a priority.
 

Guaranteeing the credibility of the system and building trust between members

The underlying atmosphere of suspicion destroys any chance of furthering the WTO negotiations. To re-establish trust, members could explore several leads, some of which were mentioned during the preparations for the organisation's eleventh ministerial.

Choosing clarity and compliance with the rules

Members are focused on their individual interests and are playing a fool's game with counterproductive effects. Even before negotiations had started for the Buenos Aires ministerial, the WTO Secretariat had changed the name of the Trade in Services Division to the Trade in Services and Investment Division, and that of the Division for Intellectual Property and Government Procurement to the Intellectual Property, Government Procurement and Competition Division. Although this is within the mandate of the Director-General, developing countries have linked these changes with the forced entry of new subjects into the DDA negotiations. This approach only encourages mistrust rather than building trust. The controversy caused by these changes has added to the suspicion fuelled by the creation of a framework of negotiations running parallel to the competent body (the Trade Negotiations Committee), which has only succeeded in clouding the situation even further. To rebuild trust, the existing rules need to be used to create new rules.

Choosing realism and discussing the end of the DDA

Members avoid talking about the end of the Doha Round. However, deciding to end the DDA would reflect the acceptation by all members of a moment of truth, which would constitute progress in the current context. The current reality should be recognised. Nevertheless, even if the DDA cannot be concluded, it should at least be audited and assessed. In this respect, it should be noted that certain pertinent provisions exist. Paragraphs 45 to 49 of the Doha Ministerial Declaration provide the elements that should guide the ending of the eponymous round. To end it, members should ensure the global balance of the negotiations. Thus, the round's assessment or audit would be a prerequisite.

Organising a debate at the WTO on development

According to several developed countries, the traditional approach to development based on special and differential treatment is destined to failure. They believe that the evolution of the situation of the various developing countries (emerging economies, non-emerging economies, LDCs and small vulnerable economies) justifies a debate on the effects of free trade and its role in their development. It is entirely logical that they would therefore insist on the need for new discussions on development. Even though some developing countries have moved from “policy takers” to “policy makers”, it should be noted that no developing country fulfils all the criteria to be considered a developed country, and that trade performance on its own is not enough. Additionally, with members not having needed to even define the concept of development to arrive at an agreement on trade facilitation, they should not need it to carry out an assessment of the DDA, which should not be particularly complex.

Defining what the term trade covers in the context of the WTO

A productive discussion on development could help clarify members' positions in the negotiations on new questions such as e-commerce, competition, or investment facilitation. However, members should also provide a clearer definition of what the term trade covers in the context of the WTO. Developed countries have not stopped “pushing the frontier,” even going so far as to want to control the way trade measures are designed at the domestic level. For example, the proposal JOB/SERV/272/Rev.4 put forward relating to trade in services no longer only relates to trade. In this set of “behind-the-border” measures, legal and even institutional adjustments are expected from members. The co-authors seem to intend to control the mechanism of internal regulation and not only trade. If this is not the case, then how should we interpret the fact that the proposed discipline would authorise economic operators to send explanation requests to governments? By defining just what the term trade covers at the WTO, members can easily determine the link between trade and development. They could also trim down the long list of new subjects. If the WTO is in charge of trade, it is less so when it comes to factors that determine trade and should not therefore become a "catch-all" organisation.
 

By way of conclusion

All in all, the paralysis of the WTO remains regrettable. In this time of plural transition – as much in terms of production methods as in the choice of economic models – returning to the negotiating table would likely be the way to go. The WTO can legitimately follow the objective of globalisation by supporting the conditions of efficiency and stability of markets. In doing this however, redefining a better profit split between states and multinational companies would be necessary to preserve social stability. These future negotiations should endeavour to rediscover the initial aims of the DDA and clarify the globalisation-development relationship through a “compromise combining the recognised advantages of globalisation with the protection of national interests.”[7] If the WTO is a reference point in trade matters, it would be a mistake to grant it a certain omnipotence. It is probably this asymptotic line that is taking a long time to establish.
 

Author: Paul Batibonak, First Secretary at the Permanent Mission of Cameroon in Geneva and Coordinator of the Centre for Research in Diplomatic, International and Strategic Studies.


[1] Ideas Centre, « CM-11 : aller de l’avant pour les Pays en voie de développement » (Going forward for developing countries), Newsletter dated 21 December 2017.

[2]It refers mostly to investment, competition, electronic trade (in a new approach) and micro, small and medium-sized enterprises (MSMEs).

[3] Speech made in Melbourne (Australia) on 26 November 2012 during the Richard Snape Lecture, while he was the Director-General of the WTO.

[4] Abélès, Marc (Dir.), Des anthropologues à l’OMC. Scènes de la gouvernance mondiale, Paris, CNRS Editions, 2011.

[5]Kébabdjian, Gérard, Les théories de l'économie politique internationale, Paris, Le Seuil, « Points »,1999, p.8.

[6] Abbas, Mehdi, « Libre-échange et développement. Les Suds dans le système commercial multilatéral », Revue internationale et stratégique, vol. 4, n°108, 2017.

[7]Speech by the Cameroonian leader, President Paul Biya, in response to a speech from the dean of the diplomatic corps in Yaoundé on 4 January 2018.

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