A report that riled the WTO, caused ‘lost sleep’ for UNDP chief

Geneva, 31 Jan (Chakravarthi Raghavan) - “I’ve lost sleep over what we said about the WTO in this report,” UNDP Administrator Mallach Brown, is reported by IPS (see separate story from New York) as having said at a function in New York on 30 January, for the launch of a UNDP report, ‘Making Global Trade Work for People,” (in relation to the WTO declining an invitation to participate at the event).

According to Third World diplomats in Geneva and New York, the WTO had also written to the UN Secretary-General complaining about the UNDP report and initiative.

The report, whose lead author is Mr. Kamal Malhotra of the UNDP, and in whose drawing up there have been extensive consultations and inputs with trade and development experts, academics, civil society groups, and regional consultations, is published in the name of the UNDP as well as the Rockefeller Foundation and the Rockefeller Brothers Fund, the Heinrich Boll Foundation and the Wallace Global Fund. All these foundations, helped finance the exercise, and associated themselves with the initiative.

In fact, a reading of the report shows that it is not advocating any ‘revolutionary’ views or reflect the views of a growing numbers of civil society groups and critics, around the world, who view the WTO as unreformable. IN fact the report, and its critique, are rather mild, particularly in the light of the one-year experience of the work programme and negotiations which shows that ‘Development’ part of the agenda disappeared in the Doha sands.

The report raises issues, and highlight facts, which the WTO perhaps will find it hard to discuss in the open where some of its arguments can be challenged and shown to be based on no empirical evidence. That it required an initiative of the UNDP in its ‘advocacy’ role, and the involvement of outside foundations to bring these issues up for debate, is also unfortunately a commentary on the way the economic sectors of the UN system have been fighting shy of discussing these questions - a failure both of the secretariats as well as of the intergovernmental machinery and the member-governments.

The outcome of year-long negotiations (and missed deadlines) on implementation issues, S&D questions and implementation of para 6 of the very modest Doha Declaration on TRIPS and Public Health, stalled by the US and Japan and EC in the interest of big PhRMA, show that the reports of the positive view of the Doha outcome on these are so misplaced. The 7-year old WTO, as an institution, and the 55-year-old multilateral trading system, suffers from sclerosis and needs major surgery.

The report merely refers to and cites many of the critical studies and analysis from serious development political economists who have examined in the light of empirical evidence the dogmatic ideological views and claims about the WTO’s success and its ‘agenda’ after the Doha ministerial meeting, and have called for reassessment and reform of the WTO.

The report also underscores the growing literature and view among economists (excepting the dogmatists) that there is need for changes and reversal of course of such existing agreements as TRIPS and TRIMS, and the unwisdom of pushing ahead with negotiations to write WTO rules on investment, competition, government procurement and trade facilitation ( socalled ‘Singapore issues’).

Perhaps the real problem is that the WTO and such institutions and their policies cannot stand the test of public scrutiny and debate, and hence those promoting it and leading it, fight shy of such debates even internally (preferring the socalled informal consensus-building process of concentric circle of consultations) and try to promote and advance their ideological agendas by ignoring the growing literature about lack of empirical evidence about the benefits. And such an approach becomes more difficult when UN institutions and blue-ribbon US foundations are associated with such efforts as behind the UNDP report. In fact trade diplomats at the WTO, in particular those from the Third World, (and their policy-makers in capitals), as well parliamentarians and business sectors and academics would do well to read the report itself.

As the overview of the report puts it, “A key message of this book is that an evaluation of the multilateral trade regime should be based on whether it maximises possibilities for human development - especially for developing countries. To achieve this goal, the regime needs to shift its focus from promoting liberalization and market access to fostering development.”

A close study of empirical literature finds no compelling evidence that trade liberalization is systematically associated with higher growth. Multilateral trade rules need to seek peaceful co-existence among national practices, not harmonization, a point that has “obvious implications for the governance of global trade, not least because of the need to permit asymmetric rules that favour the weakest members.”

The report adds: “Today, global governance of trade is generating inequitable outcomes. Though not surprising in a world of unequal players, this set up makes it difficult for developing countries, especially the poorest and weakest, to formulate policies that promote human development. Thus, policy-makers in both developing and industrial countries, face an urgent challenge: to ensure that the multilateral trade regime allows people to fully benefit from the potential contributions that trade can make to human development.”

A human development perspective implies that the “importance of achieving certain outcomes outweighs the need for one-size-fits-all rules... Required are minimum, universally agreed rules that can be applied in a country-specific manner and tailored to different development circumstances.” Instead of focussing on harmonizing trade rules, the WTO should be concerned with managing the interaction between different national institutions and rules. All members must accept a minimum set of multilateral trade rules through which each country has same rights, “while its obligations are a function of its stage of development.”

On intellectual property (IP) and the WTO TRIPS regime, the report says that “the main beneficiaries” of IP are largely the TNCs. Citing some of the studies (including the report UK government appointed Commission on Intellectual Property rights), the report says: “It is difficult, therefore to justify the imposition of an across-the-board, one size fit all approach to IP protection.  Ultimately, the impact of TRIPS must be measured by whether it allows poor countries to close the technology (and therefore income) gap or helps widen it or by whether it helps poor people and national development.”

On public health, the report finds that the costs of drugs increase for the poor and the poor countries, and calls for interpretation of Articles 30 and 31 of the TRIPS to permit generic production.

The report also draws attention to the regional and bilateral IP agreements (the TRIPS plus accords) that it says has many troubling implications for human development.

TRIPS is the most controversial of the WTO agreements, says the report, and suggests that “an alternative to TRIPS, either within or outside the ambit of the WTO, ought to be debated at the highest level.” In the interim, TRIPS must be made more “development friendly” through key changes in the design of the agreement and its interpretation and implementation.

Among the ideas for alternative models, it calls for:

·        an intellectual property ladder, where more stringent laws apply to countries at higher levels of income and technology use, and countries progress from one level of protection to another with improvements in their human development index/millennium development goal indicators;

·        A TRIPS-minus model that significantly reduces the lengths of protection and scope of coverage and increases national decision-making authority on standards and coverage of protection, while maintaining a minimalist agenda at international level;

·        an IPR regime with specific opt-out clauses for certain kinds of property rights and specific industries; and

·        separate IP regime for collective and individual rights.

The TRIMs agreement, the report says, “may not be in the best interests of developing countries and human development.” It should thus be reassessed, with a view to “rolling back its prohibition on the use of instruments that enhanced the development prospects of today’s industrial and newly industrialized countries.” In addition, TRIMs and GATS provisions on performance requirements should be made consistent. GATS allows them, while TRIMs prohibits many.

If a rollback is not possible, it will be necessary to rethink the parameters of TRIMs through application of S&D exemption for local content requirements. There may also be value in rethinking TRIMs to focus on trade-related investment measures with direct and negative implications for trade, as opposed to current outright prohibition of such measures. And bringing other investment measures under multilateral disciplines should be approached with caution, keeping in mind the experience with TRIMs so far.

The report in addition argues that a multilateral investment agreement at the WTO (as promoted through the Singapore issues) would limit policy space. A WTO framework would be unlikely to provide the policy autonomy and flexibility that developing countries need. A focus on pre-establishment phase will not increase FDI, the report says. Moreover, in negotiations on any multilateral investment agreement, industrial countries will seek to reduce the choice of development instruments available to developing countries, such as performance requirements, and would limit the ability of governments to control and direct domestic investment for development purposes, including by reducing flexibility provided by bilateral investment treaties.

The report also casts doubts on the view that the smallest and weakest countries would benefit from a multilateral agreement, rather than bilateral, and says that this would be a valid argument “only if it can be guaranteed that the multilateral agreement will be more flexible and increase the development policy autonomy.” The analysis shows that this is unlikely and a WTO agreement will considerably limit the policy autonomy of developing countries.

The view that the multilateral agreement will reduce the transaction costs of negotiating a bilateral agreement is also questionable, says the report and suggests that a multilateral agreement may in fact increase them for developing countries. The report also says that policy makers in developing countries would find it difficult to justify the opportunity costs of diverting scarce human and other resources to negotiating and administering new issues as investment, because of their “questionable development value” and the arguably more pressing domestic and poverty reduction priorities.

On competition policy, and looking at the pros and cons of a WTO agreement, the report says that while developing countries need domestic competition policy, and international cooperation to deal with anti-competitive practices of TNCs, “a uniform competition policy in the WTO seems unlikely to be able to do this.”

“There is also an important reason why such cooperation should be independent of and outside the WTO framework,” the report says. “International competition policy involves a broader range of issues than those related to international trade. Among these are regulatory and social objectives very different from the WTO’s efforts to promote free trade through market access.”

On transparency in government procurement, it underlines that very much depends on how ‘transparency’ is defined. Benefits of transparency will come only if its scope of an agreement is restricted to availability of information on rules and procedures rather than extended to harmonization or overhauling of procurement practices.”

But if transparency is defined very broadly it could encroach on domestic policy space and lead to higher administrative and logistical costs.” The extension of a government procurement agreement into market access issues has “more ambiguous implications for development,” it adds.

On trade facilitation too, the report brings out that the implementation of trade facilitation by developing countries could lead to high opportunity costs, and these could be undertaken only at the expense of development policies with more direct human development benefits.

While trade facilitation could play an important role in streamlining administration and increasing transparency, the report suggests that it would be best if this issue remains in the World Customs Organization, where it has historically been, and not brought into the WTO. – SUNS5275

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