Tue, Aug 12, 2003 page9

• Will trade talks fuel or retard development?

  • By Joseph Stiglitz
  • • 
    • 
    • 

  From Sept. 10 to 14, trade ministers from around the world will meet for the next stage of what is supposed to be the Development Round of trade talks. At their last meeting in Doha in November 2001, ministers recognized the inequities of the previous round of trade negotiations, the Uruguay round. This round was supposed to redress those imbalances.

  One would have thought that the developing countries would look forward to the meeting as a chance to achieve a fairer global trading system.

  Instead, many fear that what has happened in the past will happen again: secret negotiations, arm twisting, and the display of brute economic power by the US and Europe -- and by special interests in the advanced countries -- aimed at ensuring that the interests of the rich are protected.

  While some progress has been made in making the negotiations more open and transparent, efforts to go further have met with resistance, and for good reason: unbalanced processes help ensure unbalanced outcomes.

  Ironically, the WTO , where each country has one vote, might seem far more ``democratic'' than, say, the IMF, where a single country, the US, has a veto. Yet the realpolitik of economic power has ensured that the interests of the developed countries predominate.

  Here is a short checklist against which to assess whether the outcomes of Cancun represent a move towards a true development round.

  Agriculture: Most people in the developing world live in the rural sector, which is why free and fair trade in agriculture matters. It's not just a question of providing access, but of eliminating the subsidies that encourage production in rich countries and harm farmers in poor countries.

  Unwilling to make concessions

  The numbers are truly alarming: subsidies in advanced countries exceed the total income of sub-Saharan Africa; the average European subsidy per cow matches the US$2 per day poverty level on which billions of people barely subsist; America's US$4 billion cotton subsidies to 25,000 well-off farmers bring misery to 10 million African farmers and more than offset America's miserly foreign aid to some of the affected countries.

  Although both Europe and America accuse each other of unfair agricultural policies, neither side seems willing to make major concessions.

  Drugs and intellectual property: TRIPS, the intellectual property regime adopted in the last round of trade negotiations, deprived millions in the developing world of access to life-saving drugs. As a chorus of researchers has pointed out, the provisions, pushed by the pharmaceutical companies, were so unbalanced that they were bad for scientific progress.

  Here, there has been some progress -- but not enough. Provisions demanded by the US would have made it difficult for small countries, like Botswana, to gain affordable access. Developing countries also continue to worry about bio-piracy -- the patenting by Western firms of traditional foods and drugs.

  Textiles: The Uruguay round promised the elimination of quotas next year, enabling many developing countries to exploit another area of comparative advantage. But many developing countries worry that trade restrictions will remain, whether through ``safeguards'' to protect jobs or through high tariffs. Many also fear that the West will find some way to wiggle out of its commitments.

  A more balanced liberalization agenda: With services comprising an increasing share of production in developed countries, attention has shifted to liberalization of trade in services. A more balanced agenda would balance attempts to ease capital flows with efforts to facilitate the flow of labor, including unskilled labor.

  Competition: Everyone advocates ``fair competition.'' But discussions about competition and fair trade again demonstrate the intellectual poverty and inequity of trade negotiations. Anti-dumping laws are intended to ensure fair trade by preventing the sale of goods below cost.

  Within the developed countries, there has long been concern about such behavior -- so-called ``predation'' -- and well-defined standards have been developed. With globalization, it would be natural to extend such principles to the international arena, making it irrelevant whether a producer is domestic or foreign when judging whether he is engaged in an unfair trade practice.

  But it does make a difference whether a good is produced at home or abroad. Foreign producers are accused of ``unfair'' competition far more easily than domestic producers.

  Double standards

  Indeed, if the standards of domestic trade laws were applied internationally, perhaps a majority of firms within the US would be guilty of dumping. Yet the US Supreme Court has set standards so high for American firms to be found guilty of predation that few cases are successfully prosecuted domestically.

  The trade negotiators are not even discussing eliminating this double standard. So developing countries worry that efforts to introduce ``competition'' within trade negotiations will only make life even more difficult.

  They worry that efforts to promote domestic industries or provide preferential treatment to disadvantaged groups (the kind of affirmative action programs that have been so important, both in developed and less developed countries) will be labeled ``unfair'' to foreign firms, and thus be prohibited.

  There is a real danger that what was intended to remedy the imbalances of previous trade rounds will not only fail to do so, but may introduce new imbalances.

  Pushing countries to liberalize their capital markets and open them up to speculative capital flows is one example. At the very moment when the IMF has finally recognized that such liberalization may produce instability but not growth, the WTO is now pursuing it.

  Failure at Cancun would confirm the fears of those who resisted a new round of trade negotiations. Needless to say, it would also provide support for the anti-globalization protesters everywhere.

  Joseph Stiglitz is professor of economics and finance at Columbia University and was the 2001 Nobel laureate in economics. Previously, he was chairman of president Bill Clinton's Council of Economic Advisers and chief economist and senior vice president of the World Bank. Copyright: Project Syndicate
• Most Popular

  • 1

    Alcaraz struggles to 4th round in Paris

  • 2

    PSG crush Inter to win trophy

  • 3

    Control Yuan member quits over misuse of vehicle

  • 4

    Greek basketball finals suspended following scuffles

  • 5

    Taipei ranks 60 in ‘Global Cities Index,’ up five spots