No attempt to address the asymmetries

At the beginning of the year, the WTO Secretariat issued a report of the Consultative Group headed by Peter Sutherland set up to address the long-term institutional challenges faced by the organisation to mark the completion of its 10 years.

A quick reading of the report suggests that this opportunity to address the challenges has been grossly missed.

To begin with, the report defends globalisation and trade liberalisation arguing that ?countries that have chosen to make trade a pillar of economic growth have grown more strongly? than those ?which have chosen a reliance on domestic markets behind protective walls.? It goes on to say that ?trade promotes growth? and ?growth reduces poverty.? However, these propositions have been contested by a number of economists like Dani Rodrik. The Report tends to overlook these. It is commonsense that while an export-oriented development strategy, as pursued by East Asian countries, can contribute to growth, the contribution of import liberalisation is not clear.

Indiscriminate trade liberalisation, as the case of African countries suggests, may in fact lead to deindustrialisation and further marginalisation of poorer economies in the international division of labour. The share of African countries in global exports declined from 6% to just 2.1% over 1980-2002 following trade liberalisation. In contrast, east and southeast Asian countries managed to increase their share in global exports from 8% to 20% over the same period. Latin America?s share also declined marginally. Clearly, only calibrated and managed policy that seeks to aggressively promote export-orientation, as pursued by East Asian countries, may produce favourable outcomes rather than one that only passively liberalises imports.

The experience of trade liberalisation over the ?90s, as documented by the World Trade and Development Report 2003 of RIS, is not encouraging. The developing countries as a group, with the exception of China, have not been able to increase their share in world trade. The terms of trade of developing countries have deteriorated. As a result, growth in a large number of countries in the ?90s has been slower than in the ?80s and inequalities have grown.

The Sutherland report voices a concern about the growing trend of erosion of non-discrimination through proliferation of RTAs to the extent that the most-favoured nation principle has become a ?least-favoured nation? (LFN) principle. However, rather than finding fault with the developed countries in EU and Nafta for undermining the MFN principle by pursuing regionalism while preaching the virtues of multilateralism to others, it lauds their role as ?spurs to more hesitant development of multilateral system.?

aPredictably, it asks the countries that have remained faithful adherents of multilateralism by not practicing regionalism so far, such as Asian countries, to exercise restraint on building RTAs. This is unreasonable. The pursuit of regionalism by EU and Nafta has distorted global patterns of trade and investment in favour of countries practicing regionalism. Now that Asian countries are embarking on their own schemes of regional cooperation to level the playing field, they are asked to exercise restraint! A reasonable recommendation would be to ask EU and Nafta to abandon regionalism and multilateralisation of regional preferences. Asian countries need not pay heed to the motivated campaign against RTAs that is being built up by the same powers that have used it vigorously!

That the Group wants an increased role of WTO?s DG and the secretariat is not surprising given that it was set up by the DG. However, it says nothing on the crucial need of broadbasing the secretariat that is currently dominated by a handful of developed countries.

Far more important, the Group lauds the consensus approach to decision-making and claims that developing countries are getting themselves heard. However, it fails to point out the flawed approach to decision-making that gives disproportionate powers to the quad countries viz. the US, EU, Canada and Japan. This asymmetry is reflected in the process of preparation of draft ministerial texts that take on board only the proposals made by the quad countries.

It was best highlighted by the Cancun Ministerial where developing countries led by Brazil, India and others had formed a G-20 on agriculture and submitted a proposal in Geneva countering the US-EU proposal. However, the draft ministerial text (Derbez Text) only included the US-EU proposals?in most part on agriculture ?and completely ignored the alternative proposals by G-20. Similarly, the submission of the G-16, led by Malaysia and supported by 90 developing countries, firmly opposed a negotiating mandate on Singapore Issues but was completely ignored by the Derbez Text.

Therefore, the decision-making pro-cess in WTO needs reforms for long-term sustainability. A more democratic system of decision-making based on secret voting and majorities would make it more participatory. All negotiating texts and drafts should be introduced in open-ended meetings and chairpersons? drafts should be representative of all interventions.

Thus, the Sutherland panel seems to have missed a valuable opportunity to put on the table an agenda for reform of the world trading system and make it more equitable, participatory, development-oriented, and hence sustainable.

The writer is director-general, Research and Information System for Developing Countries (RIS). These are his personal views