NEW BATTLES BEGIN SOON IN THE WTO

Even as the financial crisis places a heavy burden on the affected developing countries, a new challenge is emerging at the World Trade Organisation. The developed nations are piling on the pressure to launch a new Round of trade negotiations during the WTO's Ministerial Meeting this December. They are now planning their strategy to get developing countries to agree to putting more issues, such as investment, competition, government procurement, environment and labour standards, onto the WTO system. This will put developing countries into deeper trouble. It is thus time for these countries to pay attention to the developments in WTO and resist the attempt to start a new Round.

By Martin Khor

The Asian financial crisis, which has now spread to Russia and Brazil, should have at least taught the world the lesson that there are great risks for developing countries when they are asked to liberalise their economies too fast, or to take part in "globalisation" in an indiscriminate way.

Opening the economy when a country is not yet prepared to withstand the shocks generated by the world economy, or when its local firms and farms are not ready to compete with international giant corporations, can cause disruption.

Yet before we can even digest the full lessons of how to manage the interface between the domestic and external economies, pressures are once again mounting to get developing countries to open up even more to the big companies of the industrial countries.

The extra pressures are coming in the World Trade Organisation, which will be holding its third Ministerial Meeting at the end of November in the United States.

The European Union, backed by Japan, Canada and other developed nations, have announced they want to launch a new "Round" of trade negotiations at this meeting.

In such a Round, several issues will be made the subject of negotiations for new multilateral Agreements that will be legally binding on WTO members.

For example, the Uruguay Round (1984-90) concluded with many new Agreements covering services, agriculture, intellectual property rights, investment measures and other issues. It also created the WTO to replace the old GATT (General Agreement on Tariffs and Trade).

The developing countries were generally against these new issues entering the trade system, as the Agreements legally oblige them to change their national policies and laws so as to open up their economies further to foreign goods, services and companies.

Since the farmers and local firms are generally small and lack the technology or marketing skills, they are unable to fairly compete with the big companies of the West or Japan.

There is a deep fear that when these Agreements are implemented (after a grace period of five years or so), the developing countries will face a lot of problems.

Cheaper goods or services may swamp the market, replacing what is locally made. Bigger foreign firms with the latest technology or with marketing outreach will increasingly take more market share away from the local sector.

This may well cause retrenchment and dislocation, especially in the less developed of the Third World countries. The least developed countries are understandably most worried.

Even before these problems arising from the Uruguay Round have been understood (let alone dealt with), the big companies are once again pushing their governments to open up yet more areas in the developing countries for them to enter.

The European Union therefore proposed launching a new round of negotiations, which it even conferred the glamorous term "the Millennium Round."

Although the US originally seemed cool to the idea (preferring to push issues it liked on a sector by sector basis), President Bill Clinton endorsed having a new Round in the WTO when he made his State of the Union address last month.

The developed countries thus seem united in pushing the WTO into this "new Round."

Developing countries should be very wary of what this means because a range of issues that will be to their disadvantage will be thrown into the preparations of this new Round.

The EU has already made it clear that it wants to pursue "new issues" such as international investment rules, competition policy and government procurement through this Round.

These three issues were put on the agenda of the first WTO Ministerial Conference in Singapore in 1996. Most developing countries were against having any negotiations for Agreements on these issues, but the pressure from the developed countries was so strong that they compromised and agreed to taking part in "working groups" to discuss the issues.

The developing countries, including Malaysia, made it clear that the working groups had the mandate only to discuss the topics in a sort of academic way, in what was called an "educative process". They had no mandate to start negotiations for Agreements.

The three working groups have now gone through two years of discussion, during which the developed countries made it clear they intend to "upgrade" the talks into negotiations.

Their plan now is to use the device of the Millennium Round to make the three issues (investment, competition, government procurement) the subject of talks for new Agreements.

But this is not the end of the story. Some of the rich nations also want other issues like "trade and environment" and "labour standards" to be part of the new proposed Round.

The governments of these countries want to placate the environmental groups and labour unions who have been protesting about the negative effects of free trade.

If the environment and labour standards are also thrown into the pot of the New Round, the influential civic groups may then be won over, or at least they may not campaign so hard against the proposed Round. Or so the establishment thinking goes.

The US meanwhile is very keen that the Uruguay Round issues of services, agriculture and intellectual property rights be revisited and revised so that its corporations will have yet more market openings or advantages.

New negotiations on these existing topics, which are already on the agenda in any case, will also likely be put on the agenda of the New Round.

However, it is far from certain that there will be a new Round. Many developing countries are against it. Their position is that the WTO should allow developing countries (who after all are the majority) the time and space to tackle the problems of implementation of the existing Agreements.

That is cause for enough headaches and economic dislocation. The present financial crisis and its bad impact on trade and growth has now magnified the problem.

How then can they cope with negotiations on yet more new issues, which are certain to cause another round of new and potentially disastrous problems or crises?

Whist this position obviously has merit, the developing countries are unfortunately not united. India, Malaysia, Egypt and many African and least developed countries have spoken out against a new Round.

But most Latin American and a few Asian countries have indicated they are for the European proposal.

Those countries that have thought through the problem and oppose negotiations on new issues should now get together and strengthen their position as the talks in the WTO hot up in the next few weeks.

The financial crisis should not deflect the attention of policy makers or the public from what is happening in the WTO. Otherwise, through pressure or by default we will be landed with a new Round that is not of our choosing and that will place more obstacles not only to the recovery process but to our development in the long term. - (February 1999)

(Martin Khor is the Director of Third World Network.)

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