Growing along with the new trade order

Updated: Jan 26 2005, 05:30am hrs
The Uruguay Round of multilateral trade talks, concluded in 1994 after eight years of complex and contentious negotiations, resulted in the setting up of a new world trading system and the establishment of the World Trade Organisation (WTO). The WTO was quite different from its predecessor, General Agreement on Tariff and Trade (Gatt) as it brought agriculture and textiles and clothing sectors back into the fold of the international trading system. It also extended its rules to new areas including intellectual property rights and services besides setting up a formal dispute settlement mechanism.

Ten years on, the WTO remains a subject of heated debate, reflecting perhaps both the democratic nature of the organisation and the overarching reach of the issues covered by it. The WTO came about at a time of a changing world economic order. The qualitative change in the nature of cross-border transactions that took place in the 1990s, the increasing importance of the service sector and the global production and consumption chains that evolved, required a radically different approach to an international trading system.

Despite the criticism of the WTO not being pro-poor enough, it is important to note that the developing countries are much better off being part of the WTO than outside it. Their own endorsement of this fact is reflected in the WTOs large membership (with 128 members at its inception in 1995 now increased to 148). In an increasingly globalised world with movement of people and goods across national borders, the developing countries interest is better safeguarded by being a member of a rules- based international trading system with an effective dispute settlement mechanism rather than being exposed to all the risks associated with trading with large companies or countries on bilateral terms that might be highly unequal.

The increasing role played by the developing countries in the international trade negotiations since the 1990s has been welcome, as has the involvement of civil society in creating public awareness. While the call for trade justice is well justified and we bear the collective responsibility to ensure that our trade agreements dont undermine the interest of the less privileged in our society, the origins of the controversy around the agreements on intellectual property rights (TRIPS), agriculture and services lie in the stakes involved for all the member countries.

For countries like India, negotiations on agriculture are critical given livelihood concern for its large farming community. While the popular notion is that the developed countries have much to gain from these trade agreements, they can also be effective instruments for instituting mechanisms of global governance, an area of increasing relevance in both the developed and the developing countries. Through the Doha Development Agenda, the WTO can help push through imperative, development-friendly reforms such as the elimination of agricultural export subsidies; substantial reduction in trade-distorting domestic support; and substantial improvements in market access including the reduction of tariff peaks and tariff escalation.

The WTO can improve global rules for the conduct of trade, which are needed to complement development and poverty reduction strategies. It is heartening to note that the developing countries appreciate this and have started giving higher priority to participating fully and constructively in international trade negotiations. While the developed world needs to be sensitive to the concerns of the developing countries in taking on onerous commitments under the WTO, equally the developing countries need to take a positive and proactive approach, as we have witnessed in the last few years with countries, like Brazil and India.

The commitment of the international community to establish a development- friendly world trading system was reflected in the launch of the Doha Development Round in 2001. The Doha Round agenda helped address the specific concerns of the developing countries related to institutional and human capacity required to effectively negotiate and participate in the international trading system. Towards this end, various multilateral and bilateral donors like the World Bank, DFID, the EC, UNCTAD have been providing trade-related capacity building and technical assistance to the developing countries. DFID has committed 154 to trade-related assistance. DFID and other donors have also been working with member governments to integrate trade into country poverty reduction strategies to help work towards equitable gains for all.

The institution of the WTO, as one of the necessary manifestations of globalisation, may not be the ultimate catalyst of economic advancement or indeed a panacea for resolving world poverty. However, 10 years on, it has emerged as a more mature institution, cognisant of the needs of countries at different stages of development and sensitive to the need to provide a level playing field to help them realise the gains from globalisation.

The writer is Asia director, Department for International Development (DFID), London