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Coping with WTO needs new institutions in South countries

As the subjects addressed in WTO negotiations normally span
wide-ranging and conflicting interests in the domestic
economy, the present narrow institutional set-up in
developing countries may be ill-equipped to effectively
advance these countries' interests in the WTO. Hence, an
independent commission is needed to undertake detailed
examination of the issues at hand and reconcile the opposing
concerns in the country's interests.


by Bhagirath Lal Das



NEW DELHI: Major "trade" negotiations in some important areas
are set to be launched in the WTO at the end of 1999, and the
preparatory process for these is most likely to start in the
last quarter of 1998.
The process of these negotiations and their results will
have an important impact on the developing countries, and hence
they need to prepare for it effectively. As in the past,
inadequate preparations are most likely to involve grave risks
for them.

Ineffective participation


Experience has shown that developing countries have generally
not been effective in the WTO, either in pursuing their own
proposals or in defending themselves against the proposals of
others. They have been succumbing to pressures from the major
developed countries and making concessions in the WTO
negotiations, without asking for commensurate concessions from
them. If this trend continues, the developing countries will
lose a great deal in the 1999 process. It is necessary to take
corrective steps right now.
There may be several reasons why developing countries are
facing this adverse situation in the WTO; but one major reason
is that the decision-making process in their countries has not
kept up with the fast changes in the nature and environment of
the negotiations.
There have been two major changes in the nature of these
negotiations.
First, they have become much more complex. The subjects
dealt with have deeper and wider implications for the economy
of a nation. And very often, they involve harmonization of
various clashing domestic interests.
Second, the role of developing countries has undergone a
basic change. Earlier, they were negotiating for getting
concessions; now the negotiations are more about getting
concessions from them. Such negotiations are naturally much
more difficult: one has to find a balance between minimum
concessions from one's side and the maximum satisfaction of the
demanders.
The environment in which these negotiations are now taking
place has also changed significantly. In the 1960s and 1970s,
the developed countries had a perception of the role of
developing countries as partners in economic progress and
growth. The problems of developing countries received
sympathetic and serious consideration on the basis of
enlightened self-interest. But since the mid-1980s, the
developed countries have been proceeding with a new confidence
in their capacity to solve their economic problems by proper
coordination of their own macroeconomic policies. In this
respect, the role of the developing countries is seen as very
much diminished.
As a result, the problems of the developing countries do not
receive the attention which they received earlier. They are at
best seen as minor irritants to be dealt with, as issues at the
fringe and not at the centre stage. The enlightened interest of
the developed countries has been replaced by apathy and lack of
concern. In this new environment, the developing countries
naturally have to push very hard to direct the focus towards
their problems and issues of interest to themselves.
All this calls for an effective and strong decision-making
process in the developing countries. The interests of the
country in respect of specific issues have to be identified in
a rational and firm way, and this will lead to a stronger will
to pursue them in any forum. In this process, differing
interests among various wings of government and among different
interest groups in industry and trade as also between the
sectoral interest and the economy as a whole, need to be
harmonized, so that the real national interest in respect of
any particular issue can be identified.

Differing interests


For example, at present, generally the subject of
international trade, particularly WTO negotiations, is being
handled in developing countries in some specific ministries
such as, for example, the ministry of commerce or international
relations or external affairs. But the complexity of the
subjects now having to be addressed makes it difficult for any
one ministry to handle them.
Often, the implications and even the coverage of the
subjects are spread over the jurisdiction of several ministries
and they may have differing interests.
On a question of liberalizing the import of a product, the
ministry in charge of the use of the product may favour it,
whereas the ministry in charge of its production may have an
opposite interest - as liberalized imports may have an adverse
effect on the domestic industry. Likewise, different sections
of trade and industry may have differing, and often clashing,
interests on almost every subject relating to the WTO. In the
instance cited above, the producer industry of the product
whose imports are to be liberalized will be adversely affected,
but the user industries or consumers will benefit.
Taking another example, that of liberalization of the import
of financial services, the domestic providers of the financial
services may apprehend an adverse effect on themselves, whereas
the industry and trade sectors may welcome it, as it will widen
their choice of obtaining such services.
Then we have the new subjects, like investment and
competition policy, that are knocking at the doors of the WTO.
The impact of multilateral rules on these may be different on
different parts of the domestic economy.
If foreign investors are given totally free entry into a
country, they would naturally like to invest in sectors and
areas where they can get quick and high profits with minimum
inconvenience. This may prompt the proliferation of consumer
industries, like fast-food chains, in or around big cities.
This may please the rich consumers who will have varieties of
foreign food to partake of. It may also please the local
government, because economic activities in the area will be
enhanced. But it may have an adverse impact on the economy of
the country as a whole, since there will be outflow of foreign
exchange through the repatriation of profits, without any
commensurate inflow of foreign exchange through such
activities.
Similarly, if the proposals regarding high competition
standards are made applicable, consumers and big firms may gain
as the former will have the opportunity to get things of better
quality at lower prices and the latter will have a smaller
number of competitors. But the smaller firms may stand to lose
as they may find it difficult to compete with big firms.
In this manner, perhaps there is hardly any subject covered
by the WTO which does not involve a clash of interests in the
domestic economy. This requires a comprehensive examination of
the issues so that the various interests involved are properly
weighed, and a balanced position is worked out in the best
interest of the country as a whole. Then there may also be the
need for weighing between the short-term and long-term
interests of the domestic economy.

New institutional setup


A comprehensive and detailed examination of the issues has to
be undertaken, based on economic and social considerations,
keeping in view the differing interests and linkages with
different aspects of the economy as also with the overall
macroeconomic factors. All this needs serious analytical work
based on available and researched information and also wide
consultation with different wings of government and the various
interest groups and economic operators involved. In several
important cases, there may be a need for wide dissemination of
information and consultation with different sections of the
intelligentsia and the public in general.
These tasks are too enormous and complex to be handled by
the normal machinery of any particular ministry in any
government. They will be much beyond its scope and professional
competence.
There is a need, therefore, for a new form of institution in
each country to handle these issues and provide input into the
decision-making process. One such institution may be in the
form of a commission comprising one to three members who should
be persons of experience, integrity, objectivity and courage,
and in whom the government machinery, trade and industry and
also the public in general would have confidence. This
commission should take up specific issues, examine various
aspects, hold wide consultations with relevant persons and
interest groups and give its own final recommendation which
should form an important input into the consideration of the
issues at the decision-making level of the government, for
example, the minister, the council of ministers, the cabinet
committee, and so on.
In its functioning, the commission should be independent of
any specific ministry and it should, in fact, be located
outside any specific ministry, though it could be serviced by
the apparatus of a particular ministry. It should have enough
funds and resources for conducting a deep examination of the
issues, either in-house or in specific institutions and
universities, for holding wide consultations with the relevant
persons and interest groups and for wide public contact through
the media.
The subjects of examination may be selected in advance,
maybe a set of subjects in a particular year, depending on the
assessment of the need, supplemented by ad hoc selection of
subjects on a short-term basis, if there is an urgent need for
the commission to deliberate on some new issues immediately. An
appropriate mechanism could be worked out for the selection of
subjects. It could be done by the ministry handling the subject
as also by the commission itself. During ongoing important
negotiations, there may be a need for a continuing examination
of the relevant issues that need the approval of the
government.
The commission should not be a substitute for the present
decision-making body or for the normal machinery which advises
the decision-making body at present, and is also responsible
for the implementation of government decisions. The
commission's role will be to provide independent, objective and
substantial input into the decision-making process. By the very
nature of its composition and functioning, it should carry
weight with the decision-making authority and should be
depended upon for the quality and objectivity of its advice. It
will substantially relieve the current machinery which advises
the government on policy formulation.
Rational and practical ways can be evolved to ensure smooth
interaction between the commission and the current normal
machinery, and to remove any potential friction in order to
ensure that the two work in full harmony. The current normal
machinery should have the responsibility of placing the
recommendations of the commission before the decision-making
body. It will likely hardly have anything substantial to add to
the recommendations. Its own information and other inputs would
have been provided to the commission earlier at the time of
examination of the issues, and the commission would have taken
all this into account.
In matters relating to the negotiations, there will also be
a need for proper coordination with the negotiating machinery
of the government. The commission would need the input of the
negotiators to know the lines of other parties in the
negotiations, so as to assess the country's room for manoeuvre.
Further, during the process of the negotiations, depending on
their progress, there would be a need to work out fallback
positions. Here, the negotiating machinery and the commission
have to remain in close touch so that the line of the country
in the negotiations evolves depending on the need. Appropriate
methods for the coordination between the commission and the
negotiating machinery will have to be worked out. The contact
between the two could be either direct or through the current
normal machinery.
The major benefits expected to flow from the new
institutional system in terms of a systematic and comprehensive
examination of the issues from the angle of the interest of the
economy as a whole have been explained above. Besides, there
may be some important strategic benefits as well. A decision
taken after such elaborate examination with full transparency
and participation of the interest groups and analysts will have
a solid foundation from the national angle. Within the country,
it will generate full confidence among the various interest
groups, economic operators and the public in general, in the
policy decisions of the government. And, of course, its
projection and championing outside the country will be strong
and convincing. Those responsible for the task will feel fully
confident of their stand from the national angle. Besides, this
process of decision-making will naturally be a safeguard
against any softening or weakening of the resolve of the
negotiating personnel.
The commission-type of institution may also be relevant and
useful to developing countries in some other areas. For
example, similar special features exist in the areas of
industrial policies and even macroeconomic policies, and a
commission in each of these areas may be able to provide
substantial input into the decision-making process.
(Third World Economics No. 193, 16-30 September 1998)

(Mr. Bhagirath Lal Das is a former Ambassador and Permanent
Representative of India to the GATT, and subsequently was
Director of International Trade Programmes at UNCTAD. As a
member of the Indian Administrative Service, before retirement
as a Secretary to the Government of India, Mr. Das has had wide
experience of trade negotiations and of administrative and
decision-making processes. He is also the author of An
Introduction to the WTO Agreements and The WTO Agreements:
Deficiencies,Imbalances and Required Changes. The above was
contributed by him to the SUNS.)

 


 


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