Various WTO Agreements: Issues of Concern

1) Textiles and Clothing

This area is of crucial interest to developing countries. At the time of the Uruguay Round, liberalisation of this sector was cited as the area developing countries would benefit most from. Some even estimated that the earnings of textile exporting countries would increase by over US$300 billion.

The US and EU are the main parties that have to liberalise in this sector. In the first 2 years of liberalisation, no progress has been made even though they were supposed to liberalise by 16%. They are required to open up by 17% in the second phase, which started in Jan. 1 1998. It is expected, however, that the EU will liberalise only 3.6% of imports and the US 1.3%.

So instead of the developing countries increasing their exports in this area compared to the developed countries, the reverse is true. Textile exports in developing countries have risen only 4.3 per cent over the past 4 years, while exports from developed countries have risen by 9 per cent in the same period.

What developed countries have done is that they have abided by their technical commitments they have liberalised but have included in their liberalisation, those products which were not in the first place protected.

If this present trend continues, only about 20 per cent of items under the textile and clothing agreement would be liberalised in the 10 year transition period, leaving 80 per cent to be integrated right at the very end.

2) Anti-Dumping

Over the last 15-20 years, anti-dumping has been used by the developed countries as an important instrument of protectionism. Developed countries have persistently initiated investigations regarding the same products exported by developing countries. In doing so, they have demanded information that is difficult and expensive for developing countries to furnish. Furthermore, when a case is taken against a developing country, even if the developing country is found not to be in the wrong, the country pays heavily since it suffers the sudden loss of a market. Albeit this is only for a few weeks while a challenge is considered, it can be devastating for fragile industries, or for countries that are heavily dependent on a few export products.

It is also difficult for most developing countries to take on the developed countries in this area. Firstly, they need to prove that the other party has caused significant injury. Detailed and highly technical information need to be collected to prove this injury. Similar to the dispute settlement system, the process is very costly.

3) The Agreement on Subsidies

Most types of subsidies applied in developed countries such as those relating to research and development, adaptation of environmental standards etc, have been non-actionable, whereas, the subsidies normally used by developing countries for their industrial development and export development have not been given this treatment.

Similar to the anti-dumping agreement, to lodge a case requires highly technical information and costly legal expertise. These processes should really be simplified and there should be adequate legal and advisory services available in the WTO to ensure that developing countries are able to use the system.

4) Trade Related Investment Measures (TRIMS)

In this area, the agreement specifically prohibits enforcing domestic content requirement, as that is contrary to the obligations of the national treatment principle. However, this is vital for developing countries as it encourages:

a) the use of domestic raw materials, hence saving scarce foreign exchange

b) the creation of additional domestic employment

c) the growth of general domestic economic activity

5) Agriculture

The Agreement on Agriculture has really been about selective deregualation of agricultural products, so that the large exporting countries, particularly the EU and US are still able to maintain their high levels of subsidies while the developing countries are prohibited from increasing their minimal levels of subisidies or from introducing new ones. The Agreement works out to favour the corporate agribussinesses of the developed countries. It is gradually sqeezing and pricing out the small-holder famers in developing countries from agricultural production because of the continued high levels of subsidies provided by developed country

governments in conjunction with the forced lowering of tariff barriers in developing countries. The OECD, for example, provided subsidies to the tune of US$280 billion in 1997 alone.

The consequences are detrimental to the food security of developing countries, since local production to support local food needs are severely at risk and many low-income countries and people will not have sufficient financial resources to purchase even the basic foods they require. Developing countries in turn are being strongly advised by the international financial institutions to venture into the export markets - in cash crops, luxury fruit and vegetables, cut flowers etc. This type of crop conversation especially to luxury items has met with tremendous problems. It has led to many farmers being left with large debts since it requires large capital outlay.

6) Intellectual Property

TRIPS introduced sweeping and overwhelming opening of the patenting of life forms that brought the world in line with US-style patenting system. This system has allowed corporations to patent the natural biological resources of many communities and countries. No compensation is paid to the indigenous population which may have nurtured these species for a long time.

Because of the action of NGOs such as Third World Network at the time of the Uruguay Round, Article 27.3 (b) was included into TRIPS to allow local communities to use their own systems of protecting their seeds, plant varieties etc. But this sui generis article is now being reviewed and local systems of intellectual property rights protection are seriously being threatened. The US government, this year, is working to get local control eliminated.

7) Services

The motive for including services into the GATT and now WTO is so that the businesses of the developed countries can have legal permission to take over the service sectors in developing countries - insurance, movies, shipping, banking, airlines, telecommunications etc. The opening up of our service sectors will deprive developing countries economies the opportunity to naturally evolve and gain strength in these areas. It will deprive developing countries of the right to diversify and strengthen their economies.

Following the Uruguay round, the following issues under the services sector were on the tables for discussion. These included the movement of natural persons, financial services, maritime transport services, basic telecommunications etc.

The area of greatest interest to the developing countries - the movement of natural persons as a means of providing services concluded in July 1995, but with insignificant results for developing countries. However, negotiations on financial services and basic telecommunications have since been concluded.

Developing countries do not stand to gain from these agreements. They have no export interest in financial or telecommunications services. However, they have been pressurised into making concessions in these areas, by allowing the entry of these services into their countries.

8) Electronic Commerce

The Declaration prohibits Members from imposing an entry tax on commercial transactions conducted across borders by electronic means. For the moment, it does not affect developing countries since most developing countries do not conduct their trade through electronic means. However, it is likely that this is an area will be expanding and in time, it will be a commonly

used mode of trade especially by developed countries. By that time, developing countries would be deprived the right to collect taxes and increase their much needed government revenues.

9) Government Procurement

Most governments give preference to buying from local suppliers. In fact, using tax dollars to purchase goods and services from local companies is, in most countries, a key governmental policy tool aimed at strengthening the local economy or industry.

As much as 40-50% of GNP (if we factor in schools and services) come from government procurement. Bringing government procurement into the WTO means forcing governments to abandon the practice of buying from local sources. It means allowing much greater penetration of developed countrys corporations into our economies. Governments will have to allow equal treatment of domestic and international companies for providing the government goods and services. It means giving up control and the ability to nurture and strengthen local enterprises.

The flip side of the coin: developing country companies will not be poised, on the contrary, to enter the developed countries and provide the required supplies for government procurement contracts there.

10) Forestry

This is the newest issue that may be added to the WTO. There was an attempt at the last APEC meeting to push for near total liberalisation of the forestry sector. Japan resisted and the issue is likely to be shifted to the WTO. Apparently, negotiations in the area have already commenced. The countries pushing for it, especially the US, want it completed by December 1999.

11) Investment

As a result of strong citizen activism, the MAI negotiations were stopped from being passed in the OECD. But the MAI was then moved to the WTO. The MAI is about corporations being given national treatment - that is, they must be treated the same way local companies are treated. This will be highly detrimental to the economies of the developing countries, which would be literally taken over by developed countries corporations.

In Singapore, many developing countries were strongly against the inclusion of investment into the WTO. However, India, which was a lead opposition country buckled under and agreed to the setting up of a study-group on investment. It would be interesting to find out what went on behind the scenes before India changed her position.

12) Dispute settlement system

The dispute settlement system has been acclaimed as one of the most significant achievements of the Uruguay Round. However, since 1995, it has been used mainly by the developed countries. There have been about 150 cases since 1995. The US alone is responsible for initiating about 50 cases and all the developing countries, together, have initiated about 40.

And while developing countries have won some of these cases, the fact remains that the system is weighted heavily against developing countries. One of the main reasons being that the procedure is very costly. Developing countries do not usually have the legal expertise to handle the cases on their own and would have to incur heavy expenses in hiring legal expertise from abroad. They therefore need to weigh whether it is wise to even take the matter to the dispute settlement process.

As mentioned earlier, the other area working against developing countries is that if the country in the wrong does not take the necessary corrective measures, countries have the right to take retaliatory measures equivalent to the losses which the country has suffered. For small developing countries, this bottom line of retaliation, is impractical, politically and economically.