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World Trade Organization (WTO)A critique

Priya Laxman Roll No. 290 B.A(H) Economics 3rd Year

Saloni Tandon Roll No. 20 B.A (H) Economics 3rd Year

S No.
1 Overview


Page Number

Functioning of the WTO


Prominent Issues


Other Issues


WTO and Democracy





WTO an Overview
The WTO's predecessor, the General Agreement on Tariffs and Trade (GATT), was established after World War II in the wake of other new multilateral institutions dedicated to international economic cooperation notably the Bretton Woods institutions known as the World Bank and the International Monetary Fund. A comparable international institution for trade, named the International Trade Organization was successfully negotiated. The ITO was to be a United Nations specialized agency and would address not only trade barriers but other issues indirectly related to trade, including employment, investment, restrictive business practices, and commodity agreements. But the ITO treaty was not approved by the U.S. and a few other signatories and never went into effect. In the absence of an international organization for trade, the GATT "transformed itself" into a de facto international organization over the years. The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the worlds trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business. It is a place where member governments go, to try to sort out the trade problems they face with each other. However, it is only the stated aim of the World Trade Organization (WTO) to promote free trade and stimulate economic growth. Behind the general stated functions of the WTO, there is a lot more that takes place that is not perceived easily.


Functioning of the WTO

The WTO establishes a framework for trade policies; it does not define or specify outcomes. It is concerned with setting the rules of the trade policy games. Five principles are of particular importance in understanding both the pre-1994 GATT and the WTO: 1) Non- Discrimination It has two major components: the most favoured nation (MFN) rule, and the national treatment policy. Both are embedded in the main WTO rules on goods, services, and intellectual property, but their precise scope and nature differ across these areas. The MFN rule requires that a WTO member must apply the same conditions on all trade with other WTO members, i.e. a WTO member has to grant the most favorable conditions under which it allows trade in a certain product type to all other WTO members. Grant someone a special favour and you have to do the same for all other WTO members. National treatment means that imported goods should be treated no less favorably than domestically produced goods (at least after the foreign goods have entered the market) and was introduced to tackle nontariff barriers to trade (e.g. technical standards, security standards et al. discriminating against imported goods). 2) Reciprocity It reflects both a desire to limit the scope of free-riding that may arise because of the MFN rule, and a desire to obtain better access to foreign markets. A related point is that for a nation to negotiate, it is necessary that the gain from doing so be greater than the gain available from unilateral liberalization; reciprocal concessions intend to ensure that such gains will materialise. 3) Binding and enforceable commitments The tariff commitments made by WTO members in a multilateral trade negotiation and on accession are enumerated in a schedule (list) of concessions. These schedules establish "ceiling bindings": a country can change its bindings, but only after negotiating with its trading partners, which could mean compensating them for loss of trade. If satisfaction is not obtained, the complaining country may invoke the WTO dispute settlement procedures.


4) Transparency The WTO members are required to publish their trade regulations, to maintain institutions allowing for the review of administrative decisions affecting trade, to respond to requests for information by other members, and to notify changes in trade policies to the WTO. These internal transparency requirements are supplemented and facilitated by periodic countryspecific reports (trade policy reviews) through the Trade Policy Review Mechanism (TPRM). The WTO system tries also to improve predictability and stability, discouraging the use of quotas and other measures used to set limits on quantities of imports. 5) Safety Valves Under specific circumstances, governments are able to restrict trade. There are three types of provisions in this direction: articles allowing for the use of trade measures to attain noneconomic objectives, articles aimed at ensuring "fair competition", and provisions permitting intervention in trade for economic reasons. Exceptions to the MFN principle also allow for preferential treatment of developing countries, regional free trade areas and customs unions.

Organisational Structure
The General Council has multiple bodies which oversee committees in different areas: 1. Council for Trade in Goods There are 11 committees under the jurisdiction of the Goods Council each with a specific task. All members of the WTO participate in the committees. The Textiles Monitoring Body is separate from the other committees but still under the jurisdiction of Goods Council. The body has its own chairman and only 10 members. The body also has several groups relating to textiles. 2. Council for Trade-Related Aspects of Intellectual Property Rights Information on intellectual property in the WTO, news and official records of the activities of the TRIPS Council, and details of the WTO's work with other international organizations in the field.


3. Council for Trade in Services Operates under the guidance of the General Council and is responsible for overseeing the functioning of the General Agreement on Trade in Services(GATS). It is open to all WTO members, and can create subsidiary bodies as required. 4. Trade Negotiations Committee Deals with the current trade talks round. The chair is WTO's director-general. The committee is currently tasked with the Doha Development Round. The Service Council has three subsidiary bodies: financial services, domestic regulations, GATS rules and specific commitments. The General council has several different committees, working groups, and working parties. There are committees on the following: Trade and Environment; Trade and Development (Subcommittee on Least-Developed Countries); Regional Trade Agreements; Balance of Payments Restrictions; and Budget, Finance and Administration. There are working parties on the following: Accession. There are working groups on the following: Trade, debt and finance; and Trade and technology transfer. The above are the stated functions of the WTO. However, there is a lot more to its functioning and a lot more that goes on behind the veil. The actions and methods of the World Trade Organization evoke strong antipathies. Among other things, the WTO is accused of widening the social gap between rich and poor it claims to be fixing.


WTO and Prominent Issues

Developing Countries
Critics contend that smaller countries in the WTO wield little influence, and despite the WTO aim of helping the developing countries, the politicians representing the most influential nations in the WTO focus on the commercial interests of profit-making companies rather than the interests of all. The WTO does not seem to manage the global economy impartially, but in its operation has a systematic bias toward rich countries and multinational corporations and harms smaller countries which have less negotiation power. Some examples of this bias are: 1. Rich countries are able to maintain high import duties and quotas in certain products, blocking imports from developing countries (e.g. clothing) 2. The increase in non-tariff barriers such as anti-dumping measures allowed against developing countries 3. The maintenance of high protection of agriculture in developed countries while developing ones are pressed to open their markets 4. Many developing countries do not have the capacity to follow the negotiations and participate actively in the Uruguay Round 5. The TRIPs agreement which limits developing countries from utilizing some technology that originates from abroad in their local systems (including medicines and agricultural products). Developing countries have not benefited from the WTO Agreements of the Uruguay Round and the credibility of the WTO trade system could be eroded. One of the major categories of 'problems of implementation of the Uruguay Round is the way the Northern countries have not lived up to the spirit of their commitments in implementing (or not implementing) their obligations agreed to in the various Agreements. The Doha Round negotiations have veered from their proclaimed direction oriented to a development-friendly outcome, towards a 'market access' direction in which developing countries are pressurized to open up their agricultural, industrial and services sectors. The Ministerial Declaration adopted at the start of the Doha Development Round of trade negotiations, on 14 November 2001, was a promising response to the anti-globalization riots of the 1990s. But the WTO membership has failed to deliver the promised pro-development changes. Finding "development" in the Doha Development Round today is like looking for a needle in a haystack.

The examples given below suggest how developing countries have been completely sidelined by the economic and political interests of global powers: 1. Cotton: The Fairtrade Foundation revealed last year how the $47bn in subsidies paid to rich-country producers in the past 10 years has created barriers for the 15 million cotton farmers across west Africa trying to trade their way out of poverty, and how 5 million of the world's poorest farming families have been forced out of business and into deeper poverty because of those subsidies. 2. Agricultural subsidies: Beyond cotton, WTO members have failed even to agree how to reduce the huge subsidies paid to rich world farmers, whose overproduction continues to threaten the livelihoods of developing world farmers. 3. Trade agreements: The WTO has also failed to clarify the deliberately ambiguous rules on concluding trade agreements that allow the poorest countries to be manipulated by the rich states. In Africa, in negotiations with the EU, countries have been forced to eliminate tariffs on up to 90% of their trade because no clear rules exist to protect them. 4. Special treatment: The rules for developing countries, called "special and differential treatment" rules, were meant to be reviewed to make them more precise, effective and operational. But the WTO has failed to work through the 88 proposals that would fill the legal vacuum. 5. Medicine: The poorest in developing countries are unable to access affordable medicine because members have failed to clarify ambiguities between the need for governments to protect public health on one hand and on the other to protect the intellectual property rights of pharmaceutical companies. 6. Legal costs: The WTO pledged to improve access to its expensive and complex legal system, but has failed. In 15 years of dispute settlement under the WTO, 400 cases have been initiated. No African country has acted as a complainant and only one least developed country has ever filed a claim. 7. Protectionist economic policies: One of the WTO's five core functions agreed at its inception in 1995 was to achieve more coherence in global economic policymaking. Yet the WTO failed to curb the speedy increase in the number of protectionist measures applied by G20 countries in response to the global economic crisis over the past two years despite G20 leaders' repeated affirmations of their "unwavering" commitment to resist all forms of protectionist measures. 8. Natural disaster: The WTO fails to alleviate suffering when it has the opportunity to do so. In the case of natural disaster, the membership will have taken almost two years to agree and implement temporary trade concessions for Pakistan, where severe flooding displaced 20 million people in 2010 and caused $10bn of damage. Those

measures, according to the International Centre for Trade and Sustainable Development, would have boosted Pakistan's exports to the EU by at least 100m this year. 9. Fair trade: 10 years after the start of the Doha Development Round, governments have failed to make trade fair. As long as small and poor countries remain without a voice, the role of campaigning organisations, such as Traidcraft and Fairtrade Foundation, which are working together to eliminate cotton subsidies, will remain critical.

Issues of labor and environment are also steadfastly ignored. Steve Charnovitz, former Director of the Global Environment and Trade Study (GETS), believes that the WTO should begin to address the link between trade and labor and environmental concerns. Also, in the absence of proper environmental regulation and resource management, increased trade might cause so much adverse damage that the gains from trade would be less than the environmental costs. Further, labor unions condemn the labor rights record of developing countries, arguing that to the extent the WTO succeeds at promoting globalization, then in equal measure do the environment and labor rights suffer. If environment and labor were to enter the WTO system, it would be conceptually difficult to argue why other social and cultural issues should also not enter. Rich-country lobbies seeking on imposing their unrelated agendas on trade agreements have now turned to agitating about trade issues with much energy understanding. The introduction of TRIPs into the WTO framework might overwhelm the organization's function. TRIPs resulted in reduced welfare for developing countries and the world as a whole. Intellectual property does not belong in the WTO, since protecting it is simply a matter of royalty collection. The WTO weakens the power of citizens to champion human and labor rights through the policies of their governments. Basic principles of the WTO, such as most-favored nation status (MFN) and blindness to production and processing methods (PPM), prohibit distinguishing among trading partners because of bad human or labor rights records. For example, a congressional study has confirmed that a proposed U.S. law banning the importation of products made with child labor would violate the General Agreement on Tariffs and Trade, the main WTO treaty. This is because child labor is a production method, not a physical property of the product. Already, U.S. federal courts have cited WTO challenges in striking down a "selectivepurchasing" law passed by Massachusetts that denied government contracts to companies doing business with the military government of Myanmar, a notorious human-rights violator. Europe and Japan had begun dispute-settlement proceedings against the law in the WTO,

which they dropped when the U.S. courts ruled the legislation unconstitutional. In 1998, the Maryland state legislature also narrowly defeated a similar law targeting the Nigerian dictatorship. The Clinton administration lobbied heavily against the legislation, focusing on potential challenges to it under the WTO. The elimination of such legal leverage weakens the power of citizens to defend human rights through the policies of their governments. For example, the widespread government sanctions against South Africa's apartheid system would probably have been illegal under the WTO.

However, when it comes to the environment, The WTO is an agreement for managing trade and not the environment or any other area of public policy. If it is to be given the task of realizing other international public policy objectives, such as protecting the environment, its capacity to meet is core function - raising prosperity through trade - will be undermined. It is true the word environment doesnt appear in the GATT. Sustainable development was added as one of the general objectives of the World Trade Organization when it was established in 1994. While environmentalism and ecology were not common terms in public policy until the nineteen seventies, governments had been acting for many years to conserve and protect natural resources. The first international institution for conservation, the World Conservation Union (IUCN) was established in 1948. The key difference between 1948 and today is that environmentalism enjoys a higher political priority in most countries and appreciation of its importance is wider in the community. There are several provisions in the WTO agreements dealing with environment. There is a reference to sustainable development as one of the general objectives to be served by the WTO in the Marrakech Agreement which established the WTO. There are provisions in the Agreement on Agriculture and the General Agreement on Trade in Services (GATS). However by far and away the most important provisions as far as environmental issues are concerned are Article XX of the GATT and the Agreements on Sanitary and Phytosanitary Measures and the Agreement on Technical Barriers to Trade. Article XX waives members of the obligation to apply fundamental commitments, particularly non-discrimination, in certain cases. They include protection of national security, protection of morals, preservation of national cultural heritage. Of particular importance is the right to waive the rules in order to protect human, animal, plant health and safety. It permits restrictions on trade to protect human, animal and plant life health and safety, matters not inconsistent with the objectives of the GATT. It also permits restrictions if they complement national programs for conservation of resources.

The capacity of governments to prevent the entry of such products into their national territory in this way enables governments to maintain the integrity of national environmental programs. Experience with use of Article XX of the GATT over many years revealed weaknesses in some provisions, particularly where the latitude to act was so wide that governments used the provisions to secure economic protection. Actions were taken to reduce the amount of discretion governments had to restrict trade. A complaint about the WTO provisions is that trade restrictions on how a product is produced or processed are not permitted. The WTO did not permit one member to restrict trade with another on the basis that they did not apply policies which the first party preferred. The environmental case is that if one method of processing causes environmental damage, then an importer should be able to express preference for the product processed in a way that does not cause environmental damage. WTO provisions generally do not allow trade to be restricted on those grounds. The TBT Agreement recognizes related processing technology as a relevant consideration for applying a mandatory technical standard to protect the environment. However this is a limited application and the extent of its meaning has not been tested. The general case for not making provision in the WTO for the right to restrict an import according to the environmental effect of the way in which it was processed or produced is that to do so assumes the WTO should include provisions to secure public policy objectives other than trade. There is a difference between allowing exceptions to protect national policies and creating provisions which enable governments to force other to adopt non-trade objectives. The purpose of the WTO is to enable countries to gain the benefits of an open trading system. If it is to be used as an instrument to achieve environmental purposes, the case in principle is made for it to be used to secure objectives in other areas of international public policy such as health, labor standards, postal services, human rights and air transport standards. If this were to happen, the WTO would cease to be effective in meeting its primary purpose, not just because it would be overloaded with policy objectives which have not intrinsic functional relationship to trade, but because giving members of the WTO the right to pick and choose specific areas in which they could insist on certain standards being met before trade was permitted would undermine the capacity of the WTO to allow members to exploit comparative advantage.

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Decision Making
The decision making in the WTO can be characterized as over-simplified, ineffective, unrepresentative and non-inclusive; more active participants, representing more diverse interests and objectives, have complicated WTO decision-making, and the process of "consensusbuilding" has broken down. They argue that the GATT decision making worked in the past because there were fewer countries actively engaged and there was no compulsion for all countries to adhere to the results. They have thus proposed the establishment of a small, informal steering committee (a "consultative board") that can be delegated responsibility for developing consensus on trade issues among the member countries. The Third World Network has called the WTO "the most non-transparent of international organisations", because the vast majority of developing countries have very little real say in the WTO system. The lack of transparency is often seen as a problem for democracy. Politicians can negotiate for regulations that would not be possible or accepted in a democratic process in their own nations. Some countries push for certain regulatory standards in international bodies and then bring those regulations home under the requirement of harmonization and the guise of multilateralism. This is often referred to as Policy Laundering. Throughout the postwar era, governments worked together in eight rounds of multilateral trade negotiations in the General Agreement on Tariffs and Trade (GATT) to produce concrete benefits for all participants. GATT agreements substantially opened industrial country markets (although high barriers remain in agriculture and apparel) and contributed importantly to economic growth in developing countries, particularly in Asia and Latin America. Countries came to the GATT to do business and largely left their political rhetoric to the talkathons of the United Nations and its agencies. The system worked by consensus: no votes on senseless resolutions; no decisions by majority rule. The consensus rule was not abused. Developed countries, particularly the United States and the European Community, drove the GATT agenda and negotiations but did not insist on full participation by all countries. In turn, developing countries did not block progress in trade talksboth because the accords posed few demands on them and because they made huge gains from the commitments of the developed countries extended to them on a most-favored nation basis. Moreover, as the weaker partners in the GATT, they benefited significantly from the wellfunctioning of the multilateral rules-based system. The WTO still operates by consensus, but the process of consensus-building has broken down. This problem emerged long before the WTO ministerial in Seattle; indeed, it was evident at the birth of the WTO itself. It has two main causes:

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WTO membership has greatly expanded, encompassing many developing countries that previously were outsiders or inactive players in trade negotiations. The GATT had 23 signatories when it came into effect in January 1948, and 84 signatories by the end of the Tokyo Round in 1979. More than 110 countries signed the Uruguay Round accords in Marrakesh in April 1994 (including several countries with observer status in the GATT). As of January 2000, the WTO has 135 members with an additional 31 in the process of accession. As a result of domestic economic reforms, including trade liberalization undertaken unilaterally and pursuant to GATT negotiations, developing countries now have a greater stake in the world trading system and a greater claim on participation in the WTO's decision-making process. WTO members can no longer free ride on negotiated agreements. Starting with the Uruguay Round accords, countries have had to participate in all of the negotiated agreements as part of a single undertaking. This requirement means that developing countries have to commit to substantially greater reforms of their trade barriers and trade practices than they did in the past. Consequently, they need to be better informed about issues under negotiation. In the Uruguay Round, many countries had to accept obligations developed without their participation, and which required the implementation and enforcement of regulatory policies that they have had great difficulty in fulfilling. More active participants, representing more diverse interests and objectives, have complicated WTO decision-making. China's prospective accession will amplify this problem by adding another politically powerful player that will demand a strong voice in the WTO. In addition, WTO decision-making has become more complicated as member countries face increasingly complex issues (for example, intellectual property rights) on the WTO negotiating agenda. The traditional Green Room process, in which a relatively small number of self-selected developed and developing countries get together to decide on divisive issues, excluded too many newly active players in WTO negotiations and thus had problems building consensus. In the course of preparations for the Seattle Ministerial, developing countries tabled about half of the proposals made for the WTO agenda. The Geneva decision-making machinery could not accommodate the diversity of views. The current system provides input into the decision-making process by a number of large developing countries but excludes representation of the interests of the majority of WTO members. Ironically, these largely developing countries are the ones being asked to undertake more substantial liberalization of their trade barriers and reform of their trade practices than their industrialized partners; they deserve more of a voice in the WTO's decisionmaking process.

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HOW TO MAKE WTO DECISION MAKING MORE INCLUSIVE AND MORE EFFICIENT The WTO needs to establish a small, informal steering committee (20 or so in number) that can be delegated responsibility for developing consensus on trade issues among the member countries. Such a group would not undercut existing WTO rights and obligations nor the rule of decision making by consensus; we are not advocating proportional or weighted voting. Each member would maintain the ultimate decision to accept or reject such pacts. Participation should be representative of the broader membership, and be based on clear, simple, and objective criteria: Absolute value of foreign trade (exports and imports of goods and services), ranked by country or common customs region. Global geographic representation, with at least two participants from all major regions.

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Other Issues
Financial Crisis: The Need for Regulation and Transparency The immediate problem is the credit crunch. Roughly 90 per cent of international trade is financed with a short-term credit. Trade finance is one of the most favored since it provides creditors with collateral that is boatload of cargo. Yet trade finance is being offered at 300 basis points about the LIBOR and even at this high price it has been very difficult for some developing countries to get trade finance. As we witness the financial crisis bleed into the real economy, the lack of such a safety harness in the global financial system is in my view glaringly apparent. What is clear is that the international financial system suffers from a lack of regulation, a lack of transparency, a lack of accountability. Trade in goods and services represents only about 2 per cent of international transactions, but it takes place in one of the most internationally-regulated environments ever created. No such regulations exist for international finance, and drawing them up will be considerably more difficult and complex than concluding the Doha round, itself a relatively complex series of negotiations. Farm Subsidies In the media, this July meeting [of the Doha Round] was portrayed as a failure but an agreement is now on the table for slashing trade-distorting domestic farm subsidies. We have known for some time that direct export subsidies will be eliminated in agriculture. Likewise in the rich countries duties will be eliminated on at least 97 per cent of exports from the poorest countries. The rules that were negotiated 15 years ago [in the Uruguay Round] do not fit the world of today. Rules, which permit rich countries to pour billions of dollars into agricultural programs which impoverish developing countries and farmers, are seen by many as inequitable. Many find it unjust to have a WTO tariff system where tariffs in rich countries are 3 or 4 times higher on exports from the poorest countries than they are on products from other rich countries.

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Global Imbalances and Immigration The harsh reality is that opening trade reshuffles economic and social fabrics, and that creates political hardship. In whichever condition, the moment some constituencies are better off, others are worse off, there begins a political problem. If you take the example of the U.S. and look at the huge trade deficit with China, people see this as a U.S.-China issue. Whereas, they dont realize that a large part of this huge trade deficit (bilateral) is offset by a Chinese deficit with many Asian countries who produce goods which then go to China which then go to the U.S. Making sure that goods and money flow freely is the right way to reduce the incentive to immigration. If trade or finance were to flow less than they flow today, then the constraint on people to move would probably be harder. Yet it is the monumental debt and deficit burdens in the U.S. that are at the root of the global financial crisis. The argument that the free flow of goods and capital will reduce the incentive to immigration applies only between two national economic structures that are qualitatively similar and whose intensive parameters are quantitatively similar. Under these conditions the free flow of goods and capital may tend to equalize conditions geographically between similar socio-economic frameworks. But between structurally very different economies, the free flow of goods and capital, but not people, introduces profound socio-economic distortions that impel distressed populations to migrate. Global policymakers need to understand not only the economics of aggregate growth, but the socio-economic impact of globalized flows on the distribution of income and on the welfare of human beings. Gats Issue Initiated in February 2000, far-reaching negotiations are taking place which aim to expand the WTOs General Agreement on Trade in Services (GATS) regime which could subordinate democratic governance in countries throughout the world to global trade rules. These GATS negotiations are taking place behind closed doors with little or no consultation of the sectors most affected by them. The existing GATS regime of the WTO, initially established in 1994, is already comprehensive and far reaching. The current rules seek to gradually phase-out all governmental "barriers" to international trade and commercial competition in the services sector. The GATS covers every service imaginable including public services in sectors that affect the environment, culture, drinking water, health care, education, social security, transportation services, postal delivery and a variety of municipal services. Its constraints apply to virtually all government measures affecting trade-in-services, from labor laws to consumer protection; including regu15 | P a g e

lations, guidelines, subsidies and grants, licensing standards and qualifications, limitations on access to markets, economic needs tests and local content provisions. For many countries in the South, this invasion of peoples basic rights is not new. Over the last several decades, the structural adjustment programs of the IMF and the World Bank have been used to force many governments in the South to dismantle their public services and allow foreign-based healthcare, education and water corporations to deliver services on a "for profit" basis. Under the proposed GATS rules, developing countries could experience a further dismantling of local service providers, restrictions on the development of domestic service providers, and the creation of new monopolies dominated by corporate service providers based in the North. By dramatically increasing market control by corporations and by threatening the future of public services, the GATS 2000 agenda could trigger a global assault on the commons and democracy both in the North and the South. Moreover, the binding enforcement mechanisms of the WTO will ensure that this agenda is not only implemented, but rendered irreversible. Corporate Patent Protectionism All intellectual property policies must allow governments to limit patent protection in order to protect public health and safety. This is especially essential in relation to life-saving medicines and life forms. The patenting of life-forms and their parts, including microorganisms, must be prohibited in all national and international regimes. Current intellectual property rules in trade pacts, such as the WTOs Trade Related Intellectual Property Rights (TRIPs) agreement, obstruct consumer access to essential medicines and other goods, lead to private appropriation of life forms and traditional knowledge, undermine biodiversity, and keep impoverished countries from increasing their levels of social and economic welfare. There is no basis for inclusion of such intellectual property claims in a trade agreement. At the Doha Ministerial, the WTO agreed to non-binding language stating that the TRIPS agreement should not prevent WTO members from taking measurers to protect the public health. Since the language was non-binding, the reality is unfortunately that the TRIPS agreement still makes it hard to make affordable medicines available to people. In addition, pharmaceutical companies are angling to weaken and destroy even this non-binding propublic health interpretation at the Cancun Ministerial. The patenting of life forms and their parts, and other intellectual property rights over biological resources must be prohibited in all national and international regimes. Genetic diversity is not a category of private property, and biopiracy or theft of traditional knowledge must be stopped.

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Agreement On Agriculture The Agreement on Agriculture (AoA) is fraudulent because the subsidies going to export oriented industrial farming have not been reduced (but instead have gone up), whereas the small farmers are suffering from import liberalization wiping out their livelihoods and incomes. To avoid further calamities to millions of small farmers, action must be taken immediately to drastically reduce or remove support for export-oriented agriculture and to reverse import liberalization. Measures taken to promote and protect genuine food sovereignty and security as well as to promote small farmers practicing sustainable agriculture must be exempted from international trade rules. The trading system must not undermine the livelihood of peasants, small farmers, artisanal fishers and indigenous peoples that support local economies. The basic human right to food can only be realized in a system where food sovereignty is guaranteed, meaning the right of peoples to define their own food and agricultural policies as well as the right to produce their basic foods in a manner respecting cultural and productive diversity. Investment Liberalization The WTO Trade Related Investment Measures (TRIMS) Agreement must be eliminated. All countries and especially third world countries must have the right to use policy options (such as local content policy) to increase the capacity of their own productive sectors, especially small and medium enterprises. One of the outcomes of the Doha ministerial was to open the door to possible negotiations on the so-called "New Issues" (investment, competition policy, procurement and trade facilitation) despite opposition from countries in the South. This will be one of the main points of controversy in Cancun, as the EU and Japan in particular continue to push for these negotiations. OWINFS opposes any attempts to start negotiations on investment rules, investment framework or an investment agreement of whatever kind in the WTO.

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WTO and Democracy

Democracy is thought of as simply being a system of government that includes popular elections. But this is not all. To demonstrate consider the example of a ten person committee that needs to elect a chairman where each person has one vote. Imagine that one of these ten had the power to threaten the others to vote in the way he/she wanted. Now even though the system would be structurally democratic many people would not consider it 'truly' democratic. This is because in general our notion of democratic includes not just the structural notion but also that people are free to exercise their rights and that the system leads to a tolerably fair outcome. The following three principles are the basis for an institution such as the WTO to be considered democratic: a. Universal membership and accession mechanisms. b. Participatory and effective decision-making c. A fair sharing of the benefits of the system Despite complaints about WTO's slowness admitting new members (China and others) WTO does have close to universal membership (144 member countries as of 30/01/2002) and open, fair accession mechanisms. The structure of the WTO is admirably democratic not only in voting methods but in having an open and reasonably fair rule system and dispute settlement procedure. However though the WTO is democratic in structural terms in practical terms it is less so. In general it does seem that the rich developed countries have power control disproportionate to their numbers. How much this is the fault of the WTO is a good question. Rich, powerful countries have almost invariably used their position to sustain and reinforce their position, often by exploiting the less powerful. The fact that this happens in the WTO is not necessarily the WTO's fault. Of course one could argue that the WTO allows a greater degree of power/exploitation etc to the rich countries than would otherwise be the case but this seems doubtful and in fact it seems plausible that WTO would provide an environment where less powerful countries are actually less vulnerable to exploitation. Thus overall the WTO does do a reasonable (though far from perfect) job of being democratic. However, where WTO really fails is the unfair implementation of WTO principles. In general two interpretations of fairness are there:
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a. 'Negative' fairness: Potential equal access for countries, equal status in trade disputes etc, i.e. no special treatment for anyone. b. 'Positive' fairness: Actual equality between countries in negotiations, treatment etc. 'Negative' fairness is more about the rules and 'Positive' fairness is more about what actually happens. For example while all countries are entitled to have a representative on the General Council of the WTO many poor countries cannot always afford adequate representation. Similarly while all countries in theory negotiate on the level in reality there is a large difference between a country that can afford a large team of negotiators and experts and a poor country that can afford only one person. In both these cases the WTO is 'negatively' fair but is not 'positively' fair. The WTO is strongly committed to creating a level playing field when it comes to free trade. WTO principles include 'Trade without Discrimination' and 'Promoting Fair Competition', and the WTO has rules to prevent unfair behaviour like dumping. If the WTO does explicitly favour any group it should only be poor and undeveloped countries that are being assisted. However there are several examples where the WTO fails to even be 'negatively' fair and in fact favours a particular group and often the better off, developed countries. For example: a. Agriculture - This is probably the most blatant violation of the WTO principles. WTO Agreement on Agriculture commits governments 'to improve market access and reduce trade-distorting subsidies in agriculture'. However a combination of pressure when the agreement was written and manipulation since mean that the world market in agricultural commodities is not fair at all but is actually heavily slanted in favour of the rich northern countries. In particular while many poorer countries have liberalized and removed subsidies (sometimes with disastrous consequences) the US and the EU have not. For example in 1995 OECD countries spent $182 billion subsidising agriculture and a OECD report in 2000 put US, EU and Japan subsidy rates at $20,000 a farmer. Finally it is worth remarking that the AoA was actually supposed to be slanted towards worse off countries and to benefit them considerably. World commodity prices were supposed to rise and the EU and US proportion of the world market was supposed to drop thus benefiting Southern producers. Neither of these outcomes has been achieved. b. Multi-Fiber Agreement (MFA) and the Agreement on Textiles and Clothing (ATC) - Pre-WTO and from 1974-1994 clothing quotas were negotiated bilaterally and governed by the MFA. As is clear from the word quota the world of trade in clothing and textiles was most definitely not one of free trade. Given that it is often developing countries that wish to export textiles they were often the losers from this
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arrangement. The ATC is a transitional agreement running from 1994 to 2004 and is supposed to govern a changeover period in which textiles and clothing are progressively incorporated into the GATT's framework. In doing so it perpetuates the protectionist legacy of the MFA. c. Politics and Trade - In theory, members of the WTO gain access to each other's markets on even terms. However, some critics argue that in practice, the WTO has become a way to force politics into trade causing long-term problems. One problem is apparent concessions the organization has made to its charters. The most striking example is the system of tariff brokering that takes place through an organization designed to reduce barriers to trade. The WTO rules allow a nation to protect certain industries if the removal of tariffs would have undesirable side effects, which include the loss of vital domestic industries. Food production is one of the most common, but steel production, auto production and many others can be added at the discretion of the nation. More worrisome is a push by developed nations to have labor effects job loss, reduced hours or wages added to the list of reasons for justified tariffs. So, while unwinding the tariff might hurt the workers in that industry, it could lessen the burden on everyone else. The WTO has gotten into the business of brokering tariff agreements. Anti-dumping measures and restrictive quotas are simply tariffs by another name, even though they are treated differently by the WTO. While the WTO can boast that the number of international tariffs has fallen since its inception, many reductions have been balanced by the introduction of these "stealth tariffs". Many critics of the WTO also contend that the organization has struggled with one of the basic goals it set for itself: transparency. Even in one of its main functions - settling disputes through negotiation - the WTO is infamously opaque when it comes to revealing how settlements were reached. Whether settling disputes or negotiating new trade relations, it's rarely clear which nations are in on the decision-making processes. The WTO has been attacked from both the left and right because of this reticence. Free market proponents attack the WTO on the grounds that it's an unnecessary entity. Rather than making complicated and heavily politicized agreements between nations on what they can and can't protect, free market thinking suggests that trade should be left to companies to work out on a deal-by-deal basis. They believe if the WTO were really designed to encourage trade, it would force member nations to drop all protective measures and allow true free trade, rather than facilitating tariff negotiations. In the end, the countries using the WTO to protect their own industries may only hurt themselves if it causes their own industries to become more inefficient without true
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international competition. According to economic theory, a lack of competition takes away the incentives to invest in new technology, keep costs under control and continually improve production because the domestic company will simply be able to inflate prices to just under the tariff-set price of foreign goods. In the meantime, the international competitors will only get leaner, hungrier and better at succeeding in spite of barriers. If this cycle continues, the international competitors could emerge as the stronger companies, and consumers may choose their products on the basis of quality, perhaps even paying a premium over domestic goods. While it's debatable whether the organization is useful economically, the WTO is very important politically.

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a. The Journal of Commerce Article

b. Reforming the WTO: Toward More Democratic Governance and Decision-Making Research paper by Saif Al-Islam Alqadhafi Gaddafi Foundation for Development

c. IISD website

d. Book - Developing Countries and the WTO: Policy Approaches by Gary P. Sampson and W. Bradnee Chambers

e. Living, labour, environmental standards and the WTO Staff paper by Tom Nankiwell

f. WTO and the Environment working paper by Alan Oxley

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