6

WTO and Globalisation

The global economy has been going through far-reaching

changes particularly after the mid-1980's. The unification of
Germany, disintegration of UsS.R, adoption of market
mechanism by Easterm European nations and success of liberal
and integrated policies of Western European nations have led
the world to move towards Globalisation of economy especially
during the 1990s. This movement is also the result of the
initiatives of the developed countries like the U.S.A. and Japan,
and international institutions, namely, International Monetary
Fund, World Bank and the GATT and its successor, the World
Trade Organisation.
In the Post-war period, particularly since the 1950s, we have
been continually talking about inter-dependence. This
phenomenon has acquired the nomenclature of globalisation.
The fact that we can now talk about a global market means that
the process has reached the point where people are more
Conscious of trade and investment on the global SCale. ve
aeveloping countries, including India, are opening up to tne
Sal market. The foremost question today is how should the
WT
d to isthemade
emerging scenario of the global economy.
Here n
H an attempt to examine various facets of globalisa-
process related to thé World Trade Organisation as Well a
O
examine the implications for the
developing worid
 Functions, Tasks
and Challeno.
WTO: Smucture,
74
IDEA BEHIND GLOBALISATION

Globalisation can b e defined as the expansion oe

activities across political boundari s

economic
of
integration and
economi
the nations. It econe
iers ec
efers
and growing to a
process of increasing
nomic
inter-dependence between countries in the world
et
eco
economy. It associated not only with an
is
increasing ross
border movement of goods, services, capital,
technolog cross-
mation and people but also with an organisation of infor
infor.
activities which straddles national boundaries.
Globalisation may also mean a very substantial mos
in the direction of private enterprise and a market-ori ement
system, with substantial reduction in the role of the Gov
ment
in economic affairs. It means the disbandment of the nint
system.
The process of globalisation also means free movement of
people entrepreneurs, professionals, and workers-across
national frontiers. In fact it is not a mere economic and finar
inancial
phenomenon. It has wide political and cultural ramifications. But
cultural integration has proved to be far more difficult to achieve
than economic and financial integration. For globalisation to be
complete economically, there has to be something of a World
Government. It must, in the final result in one govem-
analysis,
ment, one law, one currency, etc. Of course, this stage is very far
away so far as the world in general is concerned, but in regard to
Europe this has a substantial reality. The European Union (EU)
has made very good progress in achieving economic integration
and is moving towards a single currency and a single centa
bank for the entire Union.
There ere, broadly speaking, two approaches to globallis
tioni) Positive, and (ii) Normative. The former descrbes
globalisation as a process of increasing integration into the w
economy: the characteristics of this process is by no
uniform. According to the
latter, globalisation is prescriDeasa
strategy of development based on rapid integratic
world economy.

WTO: A LEADING ROLE PLAYER

Ected

The WTO has a leading role to play in the inter

 WTO and Globalisation
75
LAThere is a clear and individibly relationship between the
w o r l a

between the
dynamic of technological progress in our time, and the
of ralization in the world dynamic
economy the WTO's future
d a is key to keeping this trend on track. There is also a clear
agen
between eeper economicmanecnnological
and technological inteorati
integration,
the global rules need to
and
and
interdependence-
rules, which only the multilateral trading esystempendence
can provide.
The following are some ot the ways in which the WTO is
the path ahead:
charting

1. Managing the Technology Frontier

First, there is the progress that has been made in liberalizing
new sectors of the world economy-helping to widen and
denend the flow of technology and information around the
world. In October 1997, the WTO reached agreements to
liberalize global telecommunications services and information
technology products, the trade coverage of which is the
equivalent of global trade in agriculture, autos and textiles
combined. Taken together, it has in effect concluded a new
it has taken an
Round by another name. But more important,
the technological trade of the
important step towards bringing
rules-based system, with an enforcement
next century inside a
This is the unique contribution of the WTO
to a more
capacity.
predictable economic evolution.
in
"technology frontier" is advancing continuously
But the
turn generating n e w pressures for
the trading system to keep
of a
The US President Clinton has called for the negotiation
pace.
an important step
free trade zone on the internet. This represents
for the 21st
in WTO's efforts to debate the trade agenda
trend towards free
century-and to expand upon the globalbecause the Internet
just
rade in information. Nevertheless,frontier where business
can be
a bright and beneficial new
Ters electronic connections,
we
across a seamless global web of
une have no legitimate concerns
uld not think that governments Governments cannot simpiy
na responsibilities in relation to it.most important policy 1Ssues
cate in Among the
this area.
electronic commerce are
8 o v e r n m e n t s in relation to policy, tax
intellectual
privacy questions, the protection of
and for public policy reasons.
But
a cac
Cy, regulation
legitimate intervention an
w l h a v e to be drawn between
 76 WTO: Structure, Functions, Tasks and Challenges

distortions motivated by protectionism.

In the WTO's immediate priority 1s a successful
in December 1997 to the global financial services
Financial liberalization and the creation of a
conclss
strong
conclusion
negotiatior
trong and stable
global financial system are really two sides of the sam
c
Liberalization invites investment, which means greater aco.n
capital, to know-how, and to an interactive global fina
network Commitments to liberalize financial servio
rvices under financia
GATS will not in any way compromise the abi the
bility of TO
members to pursue sound macro-economic and reguiat
policies. the contrary, commitments to
On
adoption of sound macro-economic and regulatory policies-th
liberalise requirelatory
the
sine qua non of a healthy financial sector. -the
There is another point to bear in mind as we begin to
defino
a liberalizing agenda for the next
century. While recognising tha
great potential for borderless trade, we must not forget the man
areas of international trade where borders all too
are
real--i
agriculture, textiles, or industrial goods-and the
many
countries which depend on more open trade in these sectors for
their economic well-being.
Unless we can move forward in a way which address
lone
established concerms as well as new ones, developing countries
as well as developed, we risk a fragmentation of the
global
economy, and a further widening the gap between countries
"plugged-in" to globalization and those left on the margins.

2. Integrating Emerging Markets-Opportunities and

Challenges
The second key element in the WTO's agenda is expanding
the membership. The borderless economy is not just deepening
our relations-it is
broadening them as well. With intensifying
ties to fast-emerging countries in Asia, Latin America and now
Africa come enormous
opportunities, but also enormous
challenges of integration, adjustment, and stability. Your con
ference document rightly argues that the future of China,
India, or Mercosur will hinge on "maintaining economic ana
growth
political stability and continuing the reform process."
3. Helping those on the Margins of the Global Economy
There is another important dimension to universality. Ine
 WTO and Globalisation 77

ensure that everyone is included in

the new information
need to
driven economy-no only to prevent the poorest from becom-
more
marginalizec but also to help all of us to benefit from
ing
ing
opportunities which technological and economic integration
the
nresents.
resents. Today s shift from industrial production to knowledge
Today's.
P r e s

production requires never-and far more sophisticated-skills

than last century's
han migrati from the farm to the shop floor. So
overnments also need to find new approaches to the develop-
ment challenge which extend beyond investments in industry

andinfrastructure, to investments in people.

GLOBALISATION IN WTO REGIME

Globalisation interpreted as a programme seeking to

various countries into the global economy is inevitable
integrate
an interdependent world. All the nations and
in an increasingly
in
peoples closely knit together. No country can develop
are
and integrating it with
isolation. Opening up a nation's economy
outward-oriented.
the rest of the world makes the economy
the central point in
Integration of the world economy is
direction of world trade. The
connection with the changing
came into existence on
World Trade Organisation (WTO),
the GATT, is having a membership
of
January 1, 1995, replacing cent of the world trade in
132 countries which represents 91 per
is the keynote for the
goods and services. Active participation
should remove constraints
WTO; hence the member countries
No member
which put hindrances in the integration process.
Globalisation, as the
of
should play a neutral role in the process
fast.
very strycture of the world economy changing will not allow a
is
In a globalised world, the WTO discipline
controls to deal with
country to make use of tariff or quantitative
balance of payments. If capital markets are also integrated,
s
ne ability to make an aggressive use of exchange rate or even

reduced. We are then left

nonetary policy will also be greatly
But here two in a world where
Only the use of fiscal policy. mobile, the
and skilled labour are internationally
capital stabilisation programmne
adjust tax rates part as of a of the
wi
wil be forexpenditure part
considerably reduced. As
budget, frequent adjustments are difficult even
nment
e r normal circumstances. In anv case, successful GloDansd
 78 WTO: Structure, Functions, Tasks and Challenges

tion requires large scale investment in the modernisation

of infrastructure of energy, transport and con nd
expansion
cations. While in the longer-run the private sectotcan s
some of this burden in the short to medium-term ther share
alternative to lays scale public sector investnent.
there is no
In the fast changing world economic scenario, there ha.
been a rising ratio of world trade to the world output since 1 has
This trend is the centerpiece of evidence on the peace of
integration and growing inter-dependence among nations. Thi
global
phenomenon has been widely analysed in the WTO report H
"International Trade: Trend and Statistics" (1995).
itled
The report examines the changing relationship ween
world trade growth and output to
and seeks drawsome condu
sions with respect to the nature of global economic integration
tion,
or "globalisation."
Over the period from 1950 (when the process of trade
liberalisation through the early GATT Round got underway) to
1994, the volume of world merchandise trade increased at an
annual rate of slightly more than 6 per cent and world output by
close to 4 per cent. Thus, during those 45 years world merchan-
dise trade multiplied 14 times and output 5, time. However,
the excess of trade growth over output growth varied; from an
in the period 1974-84 to
average of a mere half percentage point
most recent 10 years. In fact,
nearly 3/2 percentage points in the much higher still
the excess during the years since 1990 has been
but it is not yet clear whether or not this represents a permanent
shift to a faster rate of increase in the world's trade to output

ratio.
Having analyzed these trends from regional
and product
points or view, the Secretariat comments that:
"...the rising ratio and global integration more generaily
in
are being driven interaction of changes
by the
liberalization of trade
government policies (especially the
and capital flows), by technological innovations that reduce
evolving
communications and transport costs, and by both
which
corporate and individual investor strategies
drive and are facilitated by the first two developments.
detail
The report considers each of these elements in some ae
 WTO and Globalisation 79

asks two fundamental questions. Aswhy anyone

to
and then
hould care about the pace of globalisation, the Secretariat
observes that
observes that the benefits from innovation, new product
development and specialisation in production are wide ranging.
those developing and transition economies which
In particular
in globalization by opening up their own
have participated
markets have enjoyed faster economic growth. For the OECD
qountries, there is evidence that the deepening of trade linkages
moderate cyclical economic downturns.
has helped
To the question "Will globalisation continue?", the report
observes that
two factors-technological change and the
firms and individual investors impart a
evolving strategies of
natural momentum to global integration. It is government
nolicies which can speed-up, slow down or even
reverse

the role of non-

DrOgress an global integration. In this context, "most-favoured-
discrimination-in particular, through the
examined.
nation" (MFN) clause-is
multiplicity of bilateral trade
MFN was the centrepiece of a
in Europe in the second halí of the 19th
agreements reached
marked by very low tariffs and rapidly
century, a period
1920s and the 1930s saw efforts
increasing trade. In contrast, the
international trade conferences
to restore liberal trade through
commercial treaties based on MFN.
rather than legally-binding
contributed to the Great Depression
The failure of these efforts
confrontation in 1939.
and provided some of the roots of military
established what
It was only after the War that negotiations
of rules and
became the GATT, a multilateral contract consisting
MFN treatment.
disciplines and based firmly (Article 1) on bulwark against a
The GATT system has been a post-war
Secretariat considers
return to the trade chaos of the 1930s. The
international
that, in the 1990s, a disintegration of the globalized
is almost unthinkable. In
economy on the scale of the 1930s a loss of
contrast, today "the threat that would be posed by the
redibility of the multilateral rules" (now represented by
into
WTO) would be "a fracturing of the global economy
nward-looking and potentially antagonistic trading blocks."
such an
The report suggests two safeguards against
eventuality
that free-trade
the examination of new ways to ensure
 80 WTO: Structure, Functions, Tasks and Challenges

areas and customs unions remain outward-

and complement rather than compete with
multilateral trading system; and
lookintheg
progress in
dealing, atto thethemultilateral
further
level, ith new
issues tied directly of evolution
global economy. These include telecommunicati
financial services, environment, competition and
investment policies among others.

The report concludes:

"Progress in dealing with these and other issues at the

multilateral level will have a significant impact on the
future pace of global integration, both directly and through
its impact on the credibility of the multilateral system in
influencing the broad spectrum of national trade policies."

Increasingly, an open trading system is also playing a

crucial part in widening and deepening the flow of technology
and information around the world-a process which iscentralto
the enabling environment we need to create WTO agreements
liberalizing global telecommunications services and information
technology products are about much more than trade. They are
about building the new infrastructure of the information age-in
the same way that the expansion of railways and shipping in the
nineteenth century provided the infrastructure for the industrial
age. Equal access to this knowledge infrastructure will deter
mine equal access to the technological and information tools of
the futurewhich will in tum define the potential for growth
and modernization in the developing world.
Like telecommunications or information
technologies,
financial services cannot be viewed through the outdated
paradigm of importers versus exporters. North versus South.
Whatever the country and its level of development, sustained
growthin a competitive world economy now depends on access
to a solid financial system and access to investment. In fact,
there
is a close relationship between the flows of trade
global
global investment. Investment provides much needed capital, it
anu
is
a pipeline for transfers of technology and managerial skills,
and it can provide access to global production and distribution
 WTO and Globalisation 81

systen which in turn open up export opportunities. In this

process, the steps taken by the WTO for liberalizing financial
pro
services are commendable.

Developing countries have a growing interest in liberalizing

their financial sector and deregulating their investment regimes
in order to build the kind of competitive financial infrastructure
thev need for future growth. At the same time, developed
nomies hav
economies have a clear interest in an agreement which will open
the fastest growing markets to one of their fastest growing
industries. And all sides in this negotiation have an interest in
building a strong global financial system to support a strong
global economy. A rules-based, multilateral playing field for
financial services and investment-rather than a cat's cradle of
discriminatory bilateral or regional deals-will go a long way
towards creating the enabling environment we are discussing

today.
Besides, there is a significant way the multilateral system
environment. As the world becomes
contributes to the enabling
more inter-connected economically, all countriesbut especially
more and more need a
the weakest and most vulnerable -will
and
"fair, equitable, regime" of rules to manage their
transparent
interdependence. This in turm calls for a full involvement by
economies in drawing up and using
developing and transition and
rules, not limiting their focus exceptions
to
the multilateral
special provisions.
has been characterised by
The process of globalisation nations in the
and political, between
inequalities, both economic the advanced countries
world. It will not reproduce or replicate or
as it did not reproduce
of today's world everywhere, just
a century
earlier. It was
replicate Great Britain everywhere
development then. It is found to
associated with an uneven
countries
now, not only between
uneven development
produce
but also within countries. unsatisfactory
live in a world which is
It is clear that we where,
respects. It is a world
ven unacceptable--in many
Human Development
to the latest United Nations still live
aCcording world's people ive
still less
Report, over a quarter of the developing incomes of
billionlive on
About a fifth-1.3
POverty. population
of the global
than$ aday, and over fifty per cent statistic
hhas les than income. These
five per cent of global
 82 WTO: Structure, Functions, Tasks and
Challenges
reinforce what our eyes and ears already teltell
part of an ever more integrated global ec us-that
economy, thethough
are

between rich and poor is still intolerably great. distan

we
But there is another reality which
should not he
ance
by these sombre statistics-a realityof real .

Worldwide growth and living standaro are progress and bscured

rapidly than at any point in the last thirty rapidly
rising more hope,
welcome the fact that even this year's UN years. We
World FconeCan
Social Survey notes that the circle of
economic
spread to most parts of the world averaging overgrowth
and
3 per has
worldwide. Of the 95 countries it covers,
increase per capita output in 1996, only 11 failedcentto
And the UN's Human
compared with 24 in 1995
Development Report reminds us that
poverty has been reduced more in the last fifty years that
last 500. It talks about the potential tor than in tho
eradicating
poverty in the early part of the next century-an utopian notion global
even a few decades
ago, but a real possibility today. In the same
vein, the OECD now
predicts that per capita income in the
developing world could rise by a remarkable 270 per cent
by the
year 2020, and in the developed world by 80
per cent.
Alreadyat
developing countries account for a quarter of world trade;
current rates of growth, they could account for half of world
trade by the year 2020.
Globalisation will not solve the very real problems of distri
bution we face-not will it, on its own, feed and clothe our
children, or educate and empower their parents. What globali-
zation provides is the most powerful engine for growth the
world has yet seen-an essential basis for building the shared
global society that is now within our reach. Global economic and
sOcial development on a sustainable basis requires "solid rates of
economic expansion"-expansion which cannot be achieved it
the material of globalization is compromised. A new global
raw
"enabling environment" can only be built on the foundation 0
an open and
integrated global economy.
Hence, there is a need for positive efforts designed
ensure that developing countries, and especially the least
ter
developed among them, secure a share in the growth ot inte
ic
national trade commensurate with the needs of their econo
development. In addition to retaining the provisions that
cerned developing countries in GATT 1947, the new agreenne
 WTO and Globalisation 83

erally contain provisions for developing countries and least

developing countries, often consisting of longer transition
eriods for the full
riods for
tull implementation of some obligations and
various exenmptions
arious e xem from obligations particularly for the latter
TOup of
group of countries. Als0, in some instances, the exports of
developing countries benefit from a better treatment with
spect to measures taken by other WTO Members. Technical
assistance is
assistance is to be provided to developing countries to assist
them in assuming their obligations and more effectively realising
the multilateral trading system.
the benefits of
Less developed countries are singled out in the Final Act as
requiring special attention. This is reflected in the agreements
through a number of provisions which provide the most
as well as
favourable treatment for this group in terms of rights
In addition, the Decision on Measures
own level of obligations.
nations make provision for
in Favour of Least-Developed
technical assistance "in
measures of special assistance, including
and diversification of their pro
the development, strengthening
those of services, as well as
duction and export bases including benefits
to enable them to maximise the
in trade promotion,
markets." As part of its functions the
from liberalise access to
(a subsidiary body of the
Committee on Trade and Development
review the special provisions
General Council) will periodically General
least developed nations and report to the
in favour of
action.
Council of the WTO for appropriate
Contribution of the WTO
to
Declaration on the
The
Economic Policy-making
Greater Coherence in Global
Achieving the relationship between
identifies the need for strengthening Fund (IMF)
the International Monetary
the activities of the WTO, in
coherence
and the World Bank as a way of ensuring greater
global economic policy-making in the
far more active players
are now
Developing countries 1994 developing
the Between 1980 and
Tuncioning of system. cent of the
120
than ten per
involved in less two years
cOuntries were GATT. But in the last
the old the
0sputes examined by about half of
have initiated
developing
countries active and
E And the
consultations or panels. twelve
requests for WTO the last
countries o v e r and
Crucial participation of developing telecommunications
services

months in negotiations on
of their
engagement
f information technology are clear
evidence
 WTO: Structure, Functions, Tasks and Challenoes
84

and commitment to a system which belongs to the

to anyone. th as
The multilateral trading system initiated by the
thus, itself a key element in fostering an enabling
wTO s
for globalisation. It helps countries at all levels of deonme
ironment
vels of development
relate to the basic fact of globalisation within a framo
opens opportunities and provides the neworlrigthathat
security of agreed
and obligations.

REFERENCES

Nayyar, D. Globalisation: The Past in our Present,

Presidential Ada.
to 78th Annual Conference, IEA, Chandigarh, 1995. ddress
Global Trade: 'WTO's Assessment of Recent Trends, The
Times of ndi
Bombay, November 30, 1995. India,
WTO: 'International Trade Trends and Statistics', 1995.
Business Standard, Calcutta, July 16, 1996.
Seventyninth Annual Conference, Volume of the Indian
Association, Gwalior, 1996, pp. 1-201. Economimi
Southern Economist, Bangalore, Vol. 36, No. 3,
WTO Focus, Newsletter (Various Issues).
June 1, 1997, pp. 1-18.