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From GATT to WTO

Author(s): S. R. Sen
Source: Economic and Political Weekly, Vol. 29, No. 43 (Oct. 22, 1994), pp. 2802-2804
Published by: Economic and Political Weekly
Stable URL: http://www.jstor.org/stable/4401936
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PERSPECTIVES
should no longer be contined onily to tarilf
From GATT to WTO andtradeingoodsbutshouldblealsoextende(d
to services. inivestment and intiellectual
S I? Sen propertyrights and that thlrecshould be a
WT() (WorklTradeOrganiisatin) toovwersee
I I;i1\V evelopinig conllflries, which were not satisfied with the Tokyo all these four. Wheni tlih_var-iOusallrgumelnts
against such a frcmOricd
for and;l CATT (or
Rilid oJ/GATT,hladhoped thai thlrouigh thleUruguayRoundc anendmenis WTO) was placeL Oilthle tale and sonic
theXniighlthe able to control thlerogue elephant,the US, willi its arbitr(ry) compromise seemed possible. the then
Arlicle 301 oJ its TriadeAct. But now it appears thlatiflste(Id
(lctions undit1er directorgeneral ot'GAT'l)unkcl put f'orwar-d
(4 coniending witli one roguteelephant they will have to contend witli a a dralt documenitof his own. known as
Dunkelproposals.With somemoditications.
numberof grasping octopusesin the shape of the tranisnational these proposals were accepted hy atllthe
corporaitions(TNCs). members of thlcGATT in Decemberh1993
at the official level and in Mar-ch1994 at
IN 1944. nearthe etndof World War II. thle opposedby the US andsomeotherimportant the ministerial level. Bult about a-w doien
Brettoni Woodls Conft'eence ma(le recom- countiies (called the G-7: GIioup countries.includfing
tdevclope(d thlcLiS aindlIatil. whilC
mcndatiolnsto set up tilree interilational of 7 devcloped countries). At the outset signing the I)raft Agrecmcentput in the
oirganisations:(i) IMF (InternationalMon- several (levelopedlcountries specially the res'ervation that tlie' would lnotr-illfVit tilitil
ctlrvyFundl)to deal witlhbalance ol'payments Scandinavian countries wcrc vcr'y theirrespective: legislaturesaJ)pprovcdit. The
problems. (ii) World Banik (International svmpathietic to G-77. But some ol hlie WTo and its ancillariy aglccincits. c ,
Bankfr Reconstruction ain I)evelopment) extremistpositionstkckiby theG-77 pre.ssed( ievisc(l GA1T (rcgardinLgtaln11s an1d tr-ade
to deal withitheproblemisof reconstruetion by some inexpericicd leadlersof newly ahout goods inc luding ag,ricultural
ind(Iecvelopincnt.aindi countries made these liberal commodities). GATS (regarding services),
(iii) ITO(Internation- idepen(lepnent
al Trade Oreganisation) to deal with piroh- developed countries to sidlewitlhG-7. TRIMS (regarding inve.stm1ent)and TRIPS
lcms of intcirnationaltradle.The first two Nevertheless. the pressureof G-77 nmade (regarding intellectua-l1 prope-ty rights) ancl
wcre sct up)in 1945 but there were serious theUNCTAI) gain in statureanidatonc time a provision for cross rctaliation hetwccn
controversiessahoutthe third.Thereforethe it appeare(das it it mightreplace the CATT. sectors f'or violation of the prescribed
UiS.UK a;nd( a few other countries set up in But the US strongly supportedthe GATT conditionalities are scheduledlto comc into
1947 an interim organisation about trade and(it conitiniucito be powerful. However. effect on .anuary 1, 1995 with agracepciiid
nalmedGATT (General1Agreementon Tariff' sustailinedpressure of' G-77 maide GATT of one year f (!r the least lcvcloppedcotici\it s
andTrade).In(liawas a foundermembcrof progressively more liberal and ilheTokyo Jn theory tlhis vill happen evenl it somec
all the threc. A few year.slater, the Havana Roundof the GATT gave a very important counitr-ics iniclu(dinig thle US whiichi lhad
Conferencerecommendedthe setting up of concess-ion to the developing countries, registered their reservatioi (lo nrotratlfy by
ITO with the supportof the US administra- namely, GSTP (GeneralScheme for Trade that (late. But the US is such an important
tion. But the US Congress refuse(dto ratify Preferences). country and a super power both politically
it. Thcrefore, the ITO could not be s-etup But neithle 0-77 nor 0-7 were content anIieconomincallythat if it dloes not ratity,
and the GATT was continued. All the thlree with this. Both lstarted pressing for further the WTO may hc still born now aiswas the
organisationsC were donminate'dby the US. ameniment of the GATT. ITO four deca(les earlier.The US adminis-
The GATT, in particular. was biased in tration is iying hardlto mobil ise support for
favour of the developed countries and was URITGUANYRoITNI) the WTO in the US Congrelss but therc is
calledlinformally as the "richmen isclub". some diff iculty because mIalny of the
The Uruguay Rounid of discussions with Congressmen d1o not waint to give up Article
UNCTAI) this purposcwas startedin 1986. The G-77 301 in the US Trade Act andlthesovereignty
maintainiedits united pressure for a few of the US Congiress in trade maitte:rs.
It is
The developing countries strongly years but the US exploited the differences expected that the US Congress will (lecidle
protested against the bias of the GA1T betweendifferentsection. of G-77 countries, one way or the other by l)ccember 1994.
favourinig the developedl countries and oil producing.newly
Cg. exporters.importers, InIndlia.ainotherimportantcountrv.there
demandeedthat an ITO be set up. The UN countries.etc, to breakup the
ind(ustrialisetd is strong objcction to WTo in its present
appointeda committee in 1963 to consider unity of G-77. In this it used cleverly the form.The governmentis campaigninigvery
how best this could be done bec.ausethe US Super and Special Article 301 of US Trade hardfor mobilising support in parliamelnt.
Congress was still likely to veto any new Act and various. (liplomatic, financial and Althoughl it hals requisite supportl in the ILok
proposal for ITO. Thils UN Committee other pressures.Till 1989. the core Group Sabha, it has problems in thleRajyaSabiha.
recommendedas a possible alternativc(as of C-77 led by India and Brazil was The basic issue in Inidiais the samc as in
suggested by the pr-esentwriter, who was a functioning quite effectively but in 1989 the US, namely. the soveireiginpower ol the
member) a via media. UNCTAD (United India accepted unilaterally somp of the parliament (or the Congress). Many of the
NatioinsConferenceon TradeandDevelop- proposals of the US. The result was that IndianMPs feel that the Tokyo Roundwas
ment), to be set up as a part of the UN India was isolated and the erstwhile better for the developing countries andithe
Secretariatto a'voidbeing subjectto veto by supporters of India made their own Uruguay Round was a great surrender to the
US Congress. The UJNCTAI)was set up in compromises with the US. developed countriies. The conditionalities
1964 on the basis of this alternative.Durinlg The emergence of US as the single super that the new GATT-94 (tiat is WTO) will
the negotiations for setting up UNCTAD. power after the hreak up of USSR greatly impose upoin lndia's policies icgar.Iding
the developing countries establislhe(ean increasedlits clout. With prompting and agricultureandlintellectual propeirtyrighlts
G-77 (Groupof 77 developing
organiisatioin. strong support from TNCs (tranisnational in particular and the novel provision of cross-
countries), which was later joined by most corporations).whichgot speciallyinterested retaliatioin betwecn quitc unreclatectsectors
ot the developiingcountries.This G-77 was at this juncture. US pressed that GATT like goodls.services. investmentandipatent

280)2 Economic and Political Weekly October 22, 1994


rights wre (ldangerous traps for lhe WTOpresentedin the diagramneedscareful usefulness. But in practice tlis will onlyl
dleveloping countr-ics. It will only help consideration. enable a ,small group ol pol tic jians.
of the developed
strengthen the po-,)sition It is a good thing that unlike IMF andi bureaucrats and TN('s to controt.l thc
countrics and(ithicirTNCs and retard the WorldBanik,the WTOkwill havconecouintry, develo)ping coutriL1iCesthl-rOghltlheSe tll-Cr
dlesir:ed development of most of the on US and(iotther organi sit ions.
onc vote. But if it depend(is
,developing coutitries. This will bring neo- G-7 countries for bulk of its finanice.that
colonialism thlroughithe backdoor. advantage would he lost. TRANSNHALhCO)N 1ONS
OKAI')RAt
Thle GuJial Committee of Rajya Sabha In practice, WT(Ois likely to he a very
Ihaidg)one v\ery carefully into the various powcrlul body. In co-operation With thc Tiis iew systCe isals likely
lkclvto strenigtlhcn
in tle D)unkelreportwhlicih IMF andlWorl(dBank witlhtheir weighted veI-y considerably
pi.)posals madeitlc the lhllids of the
was the basiso f the new WT() agrecment. voting, it would virtually conitrol all the Transnational Co)rporations or TNCs. It
There arc niany validl points in that report smaller countries. It is likely t) rqCuirc a should niot hb forgot ten that these TNCs
but since India did not press these points much larger bureaucracy thalnthc others ha' wvorked very hard to co(-lnver't the Tokyo
befOcrethe D)ecember 15. 1993 dateline, it which. combined withithe ahrea, ldv owcj
eul Ri mIdllGATT to the Uruguay Round WTO.
was later (lifflicult to do anythilng in tie bureaucracies in IMF and Wt lid Bank Unltil recently the power of tic TNCs was
dominated by the pr-incipalproviders ot being moderaiited( to some extentiby the bigger
According to an1interpretation recently finance. will virtually rulethclcwrld in dlevelopinig counitriles, somneol the aigclices
givei by the GATTsecretariat. all thi present ecllomic matterrs. Thler ar-c alr;eady ol the UNO like the UNCTAI). U'NI)P
imemnbers of GCATT-1947 (as amcnded by the expanding the rolc ol'
prolx)osals for fur'tlhcir UNII)DO FAo, etc. antd prcssure 4 anti-
Tokyo) Rt)tiid) lhave threc alternatives to the WTO to thic splhcres ol labour anid hegcmtnony NGOs (nn1-0gverneliliclntil
choo.Se fro1111: environmenit. In tleory. this may have somie organisations). But in lfutur- the big
(i) withdlraw frromGAIT- 1947 once they
jil tc WT(). or Si' IKt' *'I'IR Of.' WTO
aGATT- 1947 member-witiout
(iii mmciin;li1i
Ministerial Conferenlce
being a WT() mcmber, ori
(iii) remCinat GATT-1947 member and (Eveiy 2 years)
ailso)join the WTO.
In vicw ol th e concerns expressed by the Settlement GHI-N1,--RAL-CM1TNCIL Trade Policy
of Disputes Review
Gujral Coioniitlee ahboutWT( regarding
aigriculturallcomnmodities. TRIPS, TRIMS.
c -oss r-etliationi, etc. tlherema.y be a casc for Committee on
India to opt for alternative (iii) for a trial Tradeanti (C'(OUN(CIL (C)UNCI 'riR j)s
period of. say, two years. If the WT()
D)evelopmnent O)R FOR CO' NCI I S
functions to its satisf action. it may thler-eaf'ter
SERVICES (; l)S (inlelprOp)
Committee ol,v
opt 0ralternative (i). If-not. it miaythier-ealfter of
Baklance
opt fOralternative (ii). But it can (10 so only P~aymnent
If it ciain persuaiAdea ftairinumber o)f oth(er-
importantcountieicsto (lo tihcsane. ( )therwise
Comimitteeon
it vill be vciy counterplro(luctiv: for India
Buddget o* cimilttees .-ct ulpto administerthe various arraneemients
to stay out of WT() in isolation.
However, eveni it linldiafinds it niecessary
to opt foralterilnative (i). it should try to The W() will:
mnobilise the supptort of at least two-thirds - Facilitateimplemiienitationiand operationolf all the agreementsand legal instruments.negotiated
(and if po!issible, of three-lourth.s) of all in connl1ection with the Uruguay Round
- Provide a lbruni lor all negotiatioIIs
icmember countries to guiardagainist TNCs or
- Admtiinisterthe t TnderstandingoII Rules anidProceduresGoverning theSettlement of l)isputes
a tfcw Veiny powerful cotintrieicsusing the and thleTrade lPolicv Review Mechanism
WT() to darmagc the vital development - Co-operatewith the IMF andIBRI) with aview to clhieve greatercoherence in globadecononmic
policies and(i programmes of the und(ter- policy-mlaking.
developed co(unitriiesand the poorer section.sThe Preamble
of thcir population. The agreement establishing a WT( reiteratesthe objectives of GATT:
For thi.s it will be also necessary that not Raiisingstandardof living and incomes, ensuring full employment, expanding productioniand
trade, optimal use of world's resources, at the satne time extending the objectives to Services
only G-77 acts more unitedly thainlin 1990- and making themii more precise.
93 but also secur.es supporitfro()mnthe mnore Ihumr d(ucesthe idea of Sustainablel)evelopment in relationto the optimiial
use of world's resources,
liheral dvcclo)ped countrics. Thereforc it ainothe need to protect and preserve the environmenitin ai manner consistent with the various
would hc pru(lent for C-77 ct)untries to levels of national econiomilcdevelopnieit.
move monrediplomai ltically thlanithey did atRecognises the iieed for positive efforts desiginedto ensure that developing couuntries, especially
the least developed ones, secure a better share of growth in internationaftrade.
the time otl Ih UNCTAI) conferenice of
Decision-Making
1964. TIheWT1) will cotitinue the decision miakingpractice followed under the (GAl1'.
The issues of agriculturc aind intellectual Decision by Consensus which is deeemedto exist if no member formiallyobjects.
propertyriglhishave alrea(ly been discussed Recourse to voting, where atdecision caninotbe reached by consensus,, is now institutionalised,
threadbare in India. Tlhrec arc both pluses whereas earlier it was exceptional.
and(mintuses.. The latter can be minimised 1)6cision ontinuesto betaken by a majorityof the votes cast on the basis of one country,one vote.
In catse (l i,orpjretationof provisions of the agreemientsaiid waiver of a memiber'sobligations
only through such action. the mia,kjonityrequiredis three-tourthsot the members, unlike the ealrliertwo-thir-dsot the votes
calst represciting at least half of the members utider the GATT. 'Ihe igrantitig of waivers will
WTO he miiorestrictly controlled.
Aniy miemiiber of WIO may submit a proposal to amend the provision.sof the Agreemnemits to
But one very imlporltantmaitcr that his not the MinisterialConferenceand the GeneralC(ouncil.Thiequorumrequiredto implemenitchaniges
will depetid oni thenlal<ture of thleamendimienits.
been1 givenlltue atentlliont so0 far is theC Amiiendmiienits relating to general principles such as MFN treatment miiust be approved by adl
compo3sitionand fI unlctionlinlgof thecWT(). mnemibers.
Inl thlis context the infor-mationl about the For all o)theratniendmiienits oinly attwo-thirds majority is reqluired.

Economic and Political Weekly October 22, 1994 2803


bureaucracy of the WT() in close colltabo- developed couuntries,no such consideration said in the previous paragraph about
ration with its counterpart in the IMF in should be expected from TNCs forthe simple financing and staffing should receive high
particular is likely to he much more powerful reason that the bureatucratsof TNCs will be prlorlty.
than the preseint GA1T bureaucracy in less subject to democratic pressure. Thc Special attentionshould be paid to ensure
pushing narrfowtrade and finiancial policies possibility of the TNCs anclgiant national that the TNCs do not make the WTO a tool
at the possible expense of the broader social coirpor-atioInsaIct(inrtogether shouldi sit not for achieving their narrow objectives. To
considerations. he unider-estimat-ed. In a scentirio of minimise the growthof oligopoly. which is
Thelobbyingpowerol theTN('s inGeneva unpredictable powerpolay.the bureaucrats of a real danger, not only from TNCs but also
and Washington. DCXwith the WTO and WTO and IMFwill also hlve VLitelt .sitnilficant from giant national corporations.the anti-
LMFbureaucracicswill he much reaterthan roles to play. If thicy haveonlynliriToW tralde monopolyandrestrictivepracticeslawshould
that of the developing countrics. es-pecially and financial considerations in view. they be made really effective, compulsory
the smaller ones amonigtlhemn. These latter may tilt towards the giaint corporations. If licensing of patents should be enforced,
are likely toifind soon tilat tlihyare in a vise they have bro.ader social considerations in suppressionoflpatentsshouldbe prohibited.
as it were of thlese bureaucracies withI little. view, thiey mav till towvards the peOple of royalty for use of patents should be
freedom to pursue Lhcirowni socwialpolicies the deveioping countries and their govern- controlled, unetiical lobbying with local
for tie uplift oldlie po'r people anidbackward niients. Amnong the important intermational politiciansandbureaucrats shouldbeguarded
regions. The policies formulated aindpushed bureaucracies. th:atof the WT() is likely to against and reasonable transparency in
by the top echelon of the WT() bureaucracy have the greatestclout evcntually. How tlhat operations shbouldbe ensured.
may turn out to be in practice so many bureauci acy slhould be constituted and re- Most TNCs trv to present themselves as
Procrustean beds benefiting only tho.se cLuiteclneeds therefo(reur1 geinitcon.iderati on MNCs. But any TNC which has majorityof
countries who fit tiecm andi(idainaging all ofall coniccrned leaders of public opinion, shareholding, directors and controlling
others w ho do not. pairliamenmts and goverlnments. execulives froml oinly onc country should not
Manyvdeveloping countries. whliclhwerce be called an MNC. Merely having factories,
notcoLolcnttw ith thicTokyo RowundofG' Al'l TAvSK tsmRGA1TT m;anageriallstaff anidcollaborators in more
had hoped tlht through the Uruguay Round than one countrv does not convert a TNC
ametidncidts tlhey imiightbe able to control It is now very imfiportantthaltG-77 should into ai MNC. 11 that wer- so. East India
tiherogue elephaniat,the US. withi its arbitrary, unite once agalin. avoid tlhecx tremism that Cornpany.UnittedFruitConpany,1)eBeers,
actions undler Article 301 of its TradecAct. it hald followed in 196.4 and Inohilise the Coca Cola, etc, would all hiav quailified to
But tow it appears thla insteadb (of lconteilnidiling support oft he liberal dev1loped ountrieS be calledelMNCs.
with one rogue elephiani-tthey will lave to like the Scandinvians and tryvto ensure that TNCs go to a developing countirytnotfrom
coliten(dwith a numnerof grasping octopusies the WTO. it.s conmiittes fandhuicaucraLV developnmient butforeconomic
considslerations.i
in tiec shape ot TNCs. This is a prospect funcionnot as toxls )!1,NCs but as promoters advantages aIndL power l or their key
which deserves mucih mo-ireseriou. *attentioln ol'sstuc policies of tradc and.l d&vclopi-iitcii. They caanno doubt bringlarge
burcaucrats,.
thianiit has dlone so far, especLially fromtlhc asNwoul re;dlyhe,ll;}1p the emacllipation
ol'tl*tlie calpitall res,ources, valuatble techniiclalkniow-
point ot view ol( how thils danger cain be; p(x)rer sect ions: of thie wvorldlsdl)u!at ion. how andemploymentopportunitiesfor local
miniimised. It is important from this standpollit to peoplc and also hel p mnlodLeniise
theiroutlokx.
Witi the neiw T RIPS. TRIMS. GATS atnd ensure taiat (ij the WT() is not unlkduly But the price thathas to he paid forall these
GATTYconditionalities. the cloutof theTNC.s deL)pledentonl a fewr'ichl countries forl its nieedsalso to be takeniinto considerationby
is likely to increase enormously. Sma.iller finance, and (ii) its ctnimittee memnbersand the (levelopinigcountries in particular.This
developing countries in particular will officers are selected on the basis of theil is not mere Swadeshi andlSwara. Potential
become a plaything of the rNCs. A few progressive dlevelopmcent outlook and advantages and disadvantages should be
biggerdeveloping counntrieslike Chinla.India. competence and not merely their expertise carefullyweighed. Itmayhe foolish to avoid
Brazil. etc, with large lhome market large in the fields(itf trade and financc. For the all such risks. But it woulde he wise to take
protected base for production for export te former. it would be use'lul to prescribe that only carieully calculated risks.
thlneighlin)uillg regioni.sm1iay get a .somncwlhat thc WT)O should not accept fromi anyvone But thcic should nol be also thoughtless
better dea1lfrm the TNCs.. But thaitwould ountry more than i SPei ceint contribution bias againstTNC.s.Thsc.e daysgiailintnationlal
also dlepeniduiponthe strenigthland integrity towards its total1 administrative expenses. corporation.iolten pose some of the(langers
of' tlheir governments, their caipaicitNiyto (In tact a timeichas bomec wlhcin at similar with TNCs to a much
usually a.s.soc(cialed
mobilise thle suppoIrt of' otlhcercon'cernlic(d ceilinsg shiouldi be provided fkorIMF and Theil-politicalclout, oligopoly
larger-extenit.
governments. implement firmly ititi- World Bank also.) As regards the latter, power and m.alplracticesalrc otten much
mont)poly atin restic'tive pIractices c.i iliI aLws WT() siioul recruit its senior officers 1rom greater thanithose of TNC.s. On the other
and promote compenlition betwein TNC.s developninct ilgencies like thie UNCTAI), hainid,the TNC.s. especially if they come
from (lillerent countries as weIl as eiant UNID)O, FA0. etc.t aind( development- fronmseverIai1countries.'. provide very hiealthy
nationial corporatioIs. orientedA experts- frorr, goverinmelntsiand competition andi help promote el'ficietncy
But it may well be a losing i)attlc it the universities who halve proved their com- tand economic dcxcelopment. Thc position
niationatloligar-clis I;fallprey to the loaves an1id mitment and compOtence to dvelCopM; :nt. would, however, be ve-ry diffetreintin
fishes dang,led by these corporations. No single country should lhave an uindtilv diflferentlv situaiteddevelopinigcountries.
In f'act the wav tlhat the US succeeded in l'aige shliareof the senior posts. TNCs ustuall prefer t(o set up factories
breaking ,up l the ol th.e -77 in the A numh beriofcoaimmntators havetrecently in countrics wlihich have comparative
ticniy
course of 0tIieUruguay Round negotiations pointed out the undesirable features of the advanta,e in terms of niatural resources,
indicates tlIt this inmaybe a real dancer to) WTO. TIRIPS. TRIMS, etc. fronmthe disciplined andchecaplabourforce,cntrepot
coniteni withi. A few o lthe morc important standlpoint of the developing countrics. IF
facilities or large dlomestic inarket and
TNCs working together may prove even the G-77 had been united and alert, sonic
political stability. The PatcificAsian eoun-
mnorepowerl'ul in dividing the developing of thiesecould have been obviated. Buitat
tries offer mioc of these unlike many otlher
countries.in the WT( ) tlil the US I)epartment this latc stage. it would not be wvisefor any
G-77 counitries. It is important thXatLhe
of Trade wI mnthe old GATT. importantdeveloping country to stay out.
G-77 countries(with thelhelpol UNCTAD)
In tfiuturewh;.itevcr hielpful gzestures-and Insteadthey.shouldall jointheWTO.restore
should commi.ssioSRn carelul studies of the
the unity and eftfctivene.ss of G-77 andlact various falctoars mnent ioned above in
e:xpect froI8 1 hiv in cosidelrationl
lumamliit arm1 conlcertedly to minlimi.seso)me of the.se formulaltingtheir policiesvto)wardlsTNCs;
peop kle d government:lts of thec decfic;iencies.
otwthe 1c1'c In thi.scontext, what ha.sbeen andthie role of the WTO.

2g04 Econiomic and Political Weekly October 22, 1994