WTO: Understanding the Development Angle [Trade and Development Background Briefings]

WTO: Understanding the Development Angle [Trade and Development Background Briefings]

Series of 10 short background papers, each on a different aspect of the WTO agenda and describing how developing countries may be affected by different outcomes, and what preparations they need to make to participate effectively. Developing countries have joined the WTO in large numbers, in the expectation that its objectives of rule-based liberal trade will foster development. They will influence, and be affected by, the flurry of new negotiations scheduled for the turn of the millennium.|Briefings papers are:

  • Developing Countries and Multilateralism: sets the scene and examines the issues to be addressed by a Development Round: how developing countries may be affected by different outcomes, and what preparations they need to make to participate effectively
  • Regional Trade Agreements: Regional Trade Agreements (RTAs) are fashionable. Many developing countries are, or are likely to become, involved in negotiating such arrangements. But do they advance or retard multilateralist and developmental objectives? Neither economic nor political analysis can supply a definitive answer, partly because of the great variety of "free" trade agreements, but they can identify the key questions to be asked of any proposal. Agreements that liberalise a high proportion of participants' trade, extend the boundaries of trade policy in ways that are compatible with multilateral accords, and ease barriers vis-á-vis non-members are generally to be preferred to those that do not. The EU's recent and proposed agreements do not score highly on these criteria
  • Agricultural trade:The Uruguay Round began a process of reinforcing rules and liberalising trade in temperate agricultural goods. Developing countries in aggregate are likely to benefit eventually, but much work still has to be done and some states and socio-economic groups may face significant adjustment problems. They need to engage in the next Round of multilateral negotiations to press for the changes that would be most advantageous for them, and to adopt appropriate agricultural strategies. Development policy can assist them to play a strong, positive role, while ensuring that adjustment problems are recognised and dealt with and that the new agreement helps them exploit their comparative advantage.
  • Trade protection in the textile and clothing industries: The textile and clothing trade is of major importance for developing countries, including the poorest, and it will undergo substantial change over the next decade. The comprehensive system of protectionism, with the quantitative restrictions of the Multi-Fibre Arrangement (MFA) at its heart, is being dismantled. There are projected changes for all exporters: South Asia should gain, and there are potential losers in Africa and (more speculatively) the Mediterranean and Eastern Europe. While the direct impact on poverty is unpredictable, depending partly on government policy, the indirect impact is likely to be positive. But these effects are conditional on the promised liberalisation being implemented fully and not being offset by new forms of protection. This is not certain
  • International competition policy: How far do global markets need global competition rules? The question is under review both in the WTO and in other fora, such as the OECD. Developing countries want to see tougher rules applied to multinational corporations (MNCs) and less anti-dumping, but not to be forced into adopting specific WTO-defined rules. One suggestion is that the first step should be "co-operative unilateralism" with voluntary co-operation between agencies, based on an idea suggested for APEC. Developing countries must try to ensure that their concerns are addressed in the discussions, which should encompass disciplining globally dominant firms or groups as well as ensuring market access for industrial exporters
  • Intellectual property rights: The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) is the most comprehensive international agreement on intellectual property rights (IPRs), supplementing the basic World Intellectual Property Organisation (WIPO) Conventions with substantive obligations within WTO disciplines. The new regime, which offers both benefits and costs, presents a major task of implementation for which developing countries may well need help
  • Trade in Services: Services trade and investment are increasingly important for developing countries. The General Agreement on Trade in Services (GATS) set benchmarks and a framework for future liberalisation. So far the GATS process has not achieved significant additional liberalisation. For developing countries its main benefits stem from the constraint on backsliding from previous liberalisation and the encouragement to foreign investment of a more stable policy environment. But they would gain from further liberalisation of their domestic markets. And the GATS Review scheduled for 2000 could provide an effective lever for this.
  • Trade and Environmental Standards: During the next WTO Round there will be strong calls explicitly to integrate environmental issues into the trade agenda. This would clarify recent disputes on the use of trade sanctions for environmental protection and address potential conflicts between Multilateral Environmental Agreements and WTO rules, issues currently under discussion within the WTO's Committee on Trade and Environment. Some countries may resist such moves if they feel they impinge on their sovereignty or risk creating new hurdles for their exports
  • International Investment Treaties and Developing Countries: Negotiations at the World Trade Organization (WTO) increasingly affect cross-border investment, as many current trade issues have an investment dimension. In consequence, the European Commission has included investment in its proposed list of agenda items for a comprehensive "Millennium Round". One-third of all foreign direct investment is now hosted by developing economies, and it is here that the lack of consistent international rules constitutes a significant element of business risk. The interest of these countries in the regulation of investment to ensure sustainable development and their need to access international capital markets without having to lower standards mean that agreed multilateral rules would be to their advantage
  • Towards a development round:There have been calls for the various issue-specific WTO negotiations scheduled to begin over the next couple of years to be broadened into a Millennium or Development Round. The agenda for the Round is yet to be decided, but it could include issues beyond those discussed in Briefings 1-9. This Briefing "fills in the gaps" with analysis of the expanding remit of trade policy, the role of the Dispute Settlement Understanding (DSU), the future of preferences, and the challenge of measuring the impact of trade policy on development and the relief of poverty. It is important that developing countries play an active role in all the negotiations that are launched in Geneva, since they will be affected by the outcome. But many are ill-placed to transform their numerical strength within the WTO into an effective presence. Their continued commitment to the system may depend upon their overcoming these difficulties, partly with external assistance.

  1. How good is this research?

    Assessing the quality of research can be a tricky business. This blog from our editor offers some tools and tips.