WTO: Serving The Wealthy, Not The Poor
Walden Bello
The WTO, say the US and its allies, is essential for the world’s poorest countries. In practice, it systematically undermines them.WHAT WE FILIPINOS SHOULD KNOW: Back in 1995, the Fidel Ramos government, with the enthusiastic support of then Senator Gloria Arroyo, was one of the first among the
Third World (poor countries) to sign into the
WTO in the Philippines. Obviously, most of our native
technocrats in the national government and private institutions that deal and partner with foreign businesses were all for it.
Remember that at the time even the EU member nations (except England) and Japan were hesitant and ambivalent about the WTO. Being more nationalistic and thus protective of their own subsidized agriculture and industries, these developed nations were content with the well-functioning General Trade and Tariff Agreement ( GATT) for liberalizing trade.
With the threat of a potentially stronger and unified EU, it was only the USA which was really pushing hard for the WTO. Everyone who knows reality economics are aware that America (as most other developed nations) still practice protectionism and yet preach and work against its practice by weak and poor countries like ours. We Filipinos have our enthusiastic native apologists of the WTO — they profit from it (WTO is the polite name and facilitator for bolstering
neoliberalism or neocolonialism as seen by those who seriously see the big picture.)
Of course, given our
damaged culture , colonial mentality and subservience to American policies by our national leadership in government and business, they unquestioningly followed the American line despite the warnings by other Asian leaders such as
Dr. Mahathir, then Prime Minister of Malaysia, who of course was/is detested by the American leadership.
We Filipinos, due to our
miseducation , seem to have an American residing inside our minds, thus we tend to think like we are Americans, love to mimic the Americans, decide like the Americans, i.e. what is good for America is good for the Philippines. Thus, we Filipinos and our homeland are in deep shit for so long and who knows until when (hopefully we will grow up and free ourselves from our "liberators." Some informed and decent Americans wish we would really grow up).
Fast forward today, 11 years since, thanks to this WTO Agreement, our homeland, our national economy, our patrimony, etc. and our native peoples have drastically and continually slid down the slippery slope of national misery,
hunger and
poverty for the already suffering native majority, a majority becoming enlarged due to a dwindling native middle class (not the foreign middle class of
Chinese, Koreans, Americans, etc.).
Since the drastic slide, our homeland is being converted into a paradise garden exclusively of and for the few native rich, and the growing number of foreigners , who live like kings in our homeland and who would really be nothing in their own homelands. So we have many of these Chinese who were either smuggled into until they became legalized thanks to the Marcos Dictatorship and thus able to bring in more of their relatives and friends, Americans -including ex-servicemen, now Koreans, etc. who find our homeland cheap, our native Malay people hospitable and naive and thus decide to stay.
Let me add that the growing presence of American citizens and businesses can be used as an excuse for US military intervention/invasion in the future. In fact, with the camouflage of "war against terrorism" (in lieu of the demised "Cold War"), the US troops through the unconstitutional Visiting Force Agreement (VFA) now in the homeland, mostly unknown whereabouts to the native majority may already be directly involved in fighting against Filipino rebels, such as the NPA and MILF.
Recent American history has demonstratively reinforced the American militarism in US government and foreign policies. And US troops have shown their desire to be in foreign lands because they enjoy so much amenities than if they were stationed in their own homeland (USA).
All these foreigners say they love our homeland not because they really care for the native Filipino. They do say they love our homeland because it easily make them rich, become more rich, and live rich. Which they can neither have nor be in their own homelands. The situation of the native Filipino today is worse than that of the Black or Negro people in the old cotton plantations in the Deep South or below the Mason-Dixon line of America of the 19th century and early 20th century. Then, at least the Black people were cared for, to some albeit meager degree, by their white masters.
Our native countrymen many of whom due to poverty are/become/kept ignorant and
naive , conditioned to feel inferior to foreigners and easily duped or manipulated. While at the same time looked down upon, with no voice in his own homeland, given the
callously uncaring and traitorous attitudes and behaviours of our so-called leaders in business and government.
"The chief business of America is business" - President Calvin Coolidge, 1925
"The glory of the United States is business" - Wendell L. Willkie, 1936
"There is no literate population in the world that is poor; there is no illiterate population that is anything but poor." – John Kenneth Galbraith (1908-2006)
"One of the major errors in the whole discussion of economic development has been the tendency to look at the United States or Canada and say that this has worked here, and therefore it must work in the poor countries." – John Kenneth Galbraith (1908-2006)
"Any country whose people conduct themselves well can count upon our hearty friendship. If a nation..keeps order and pays its obligations, it need fear no interference from the United States…The adherence of the Unted States to the Monroe Doctrine may force the United States..to the exercise of an international police power." – American President Theodore Roosevelt (opening of 58th Congress, 1903-1905)
""Upang maitindig natin ang bantayog ng ating lipunan, kailangang radikal nating baguhin hindi lamang ang ating mga institusyon kundi maging ang ating pag-iisip at pamumuhay. Kailangan ang rebolusyon, hindi lamang sa panlabas, kundi lalo na sa panloob!" –Apolinario Mabini, La Revolucion Filipina (1898)
"Nations, whose NATIONALISM is destroyed, are subject to ruin." - Colonel Muhammar Qaddafi, 1942-, Libyan Political and Military Leader
"As to the source of leadership, we Filipinos still look up and limit ourselves to the same socioeconomic-political elite, the same prominent dynasties, many of whom were of the collaborationist and mendicant variety. There is potentially good leadership, maybe still unknown, OUTSIDE the selfish, morally bankrupt and oftentimes subservient elite. When we have done away with our massive ignorance, we Filipinos can surely find and actively ensure that only individuals -with courage and strong nationalism- earn respect; thus who will successfully propel the people to fight, and finally win for the common good" – GADFLY(1947-present).
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Wto: Serving The Wealthy, Not The PoorWalden Bello
The WTO, say the US and its allies, is essential for the world’s poorest countries. In practice, it systematically undermines them.
The World Trade Organisation and its agreements do not serve the interests of developing countries; they serve those of the developed world, and the USA in particular.
It was US pressure that brought agriculture into the GATT-WTO system in 1995, for reasons that were articulated quite candidly by then US Agriculture Secretary John Block at the start of the Uruguay Round negotiations in 1986: "[The] idea that developing countries should feed themselves is an anachronism from a bygone era. They could better ensure their food security by relying on US agricultural products, which are available, in most cases at much lower cost."
It was the US that pushed to bring services under WTO coverage, with its assessment that in the new burgeoning area of international services, and particularly in financial services, its corporations had a lead that needed to be preserved. It was also the US that pushed to expand WTO jurisdiction to the so-called Trade-Related Investment Measures (TRIMs) and Trade-Related Intellectual Property Rights (TRIPs).
The first sought to eliminate barriers to the system of internal cross-border trade of product components among TNC (transnational corporations) subsidiaries that had been imposed by developing countries in order to develop their industries; the second to consolidate the US advantage in the cutting-edge knowledge-intensive industries.
And it was the US that forced the creation of the WTO’s formidable dispute-resolution and enforcement mechanism after being frustrated with what US trade officials considered weak GATT efforts to enforce rulings favourable to the US.
As Washington’s academic point man on trade, C Fred Bergsten, Head of the Institute of International Economics, told the US Senate, the strong WTO dispute settlement mechanism serves US interests because "we can now use the full weight of the international machinery to go after those trade barriers, reduce them, get them eliminated".
Similarly, it was not global necessity that gave birth to the WTO in 1995, it was the US’s assessment that the interests of its corporations were no longer served by a loose and flexible GATT but needed an all-powerful and wide-ranging WTO. From the free market paradigm that underpins it, to the rules and regulations set forth in the different agreements that make up the Uruguay Round, to its system of decision-making and accountability, the WTO is a blueprint for the global hegemony of Corporate America.
Is the WTO necessary for developing countries?
The necessity of the WTO is one of the biggest lies of our time, and its acceptance is due to the same propaganda principle practised by Joseph Goebbels: if you repeat a lie often enough, it will be taken as truth. The WTO is necessary only to the United States, not to the rest of the world.
When the Uruguay Round was being negotiated, there was considerable lack of enthusiasm for the process by the developing countries. Largely passive spectators, with a great number not even represented during the negotiations owing to resource constraints, the developing countries were dragged into unenthusiastic endorsement of the Marrakesh Accord of 1994 that sealed the Uruguay Round and established the WTO. True, there were some developing countries, most of them in the Cairns Group of developed and developing country agro-exporters, that actively promoted the WTO in the hope that they would gain greater market access to their exports, but they were a small minority.
To try to sell the WTO to the South, US propagandists evoked the fear that staying out of the WTO would result in a country’s isolation from world trade ("like North Korea") and stoked the promise that a "rules-based system" of world trade would protect the weak countries from unilateral acts by the big trading powers.
With their economies dominated by the IMF and the World Bank, with the structural adjustment programmes pushed by these agencies having as a central element radical trade liberalisation, and much weaker as a bloc owing to the debt crisis, most developing country delegations felt they had no choice but to sign on the dotted line.Over the next few years, however, these countries realised that they had signed away their right to employ a variety of critical trade measures for development purposes.
Loss of trade policy as a development tool
In signing on to GATT, Third World countries were committed to banning all quantitative restrictions on imports, reducing tariffs on many industrial imports, and promising not to raise tariffs on all other imports. In so doing, they have effectively given up the use of trade policy to pursue industrialisation objectives. The way that the NICs, or ‘newly industrialising countries’, made it to industrial status, via the policy of import substitution, is now effectively removed as a route to industrialisation.
The anti-industrialisation thrust of the GATT-WTO Accord is made even more manifest in the Agreement on Trade-Related Investment Measures (TRIMs) and the Agreement on Trade-Related Intellectual Property Rights (TRIPs). In their drive to industrialise, NICs like South Korea and Malaysia made use of many innovative mechanisms, such as trade-balancing requirements that tied the value of a foreign investor’s imports of raw materials and components to the value of his or her exports of the finished commodity, or ‘local content’ regulations which mandated that a certain percentage of the components that went into the making of a product was sourced locally.
These rules were successfully employed by the NICs to marry foreign investment to national industrialisation. They enabled the NICs to raise income from capital-intensive exports, develop support industries, and bring in technology, while still protecting local entrepreneurs’ preferential access to the domestic market. In Malaysia, for instance, the strategic use of local content policy enabled the Malaysians to build a ‘national car’, in co-operation with Mitsubishi, that has now achieved about 80 per cent local content and controls 70 per cent of the Malaysian market. Thanks to the TRIMs accord, these mechanisms are now illegal.
The restriction of technological diffusion
Like the TRIMs agreement, the TRIPs regime is seen as effectively opposed to the industrialisation and development efforts of Third World countries. This becomes clear from a survey of the economic history not only of the NICs but of almost all late-industrialising countries. A key factor in their industrial take-off was their relatively easy access to cutting-edge technology. The US industrialised, to a great extent by using but paying very little for British manufacturing innovations, as did the Germans. Japan industrialised by liberally borrowing US technological innovations, but barely compensating the Americans for this. And the Koreans industrialised by copying quite liberally and with little payment US and Japanese product and process technologies.
But what is ‘technological diffusion’ from the perspective of the late industrialiser is ‘piracy’ from that of the industrial leader. The TRIPs regime takes the side of the latter and makes the process of industrialisation by imitation much more difficult from hereon. It represents what UNCTAD (the United Nations Conference on Trade and Development) describes as " a premature strengthening of the intellectual property system… that favours monopolistically controlled innovation over broad-based diffusion".
The TRIPs regime provides a generalised minimum patent protection of 20 years; increases the duration of the protection for semi-conductors or computer chips; institutes draconian border regulations against products judged to be violating intellectual property rights; and places the burden of proof on the presumed violator of process patents.
The TRIPs accord is a victory for the US high-tech industry, which has long been lobbying for stronger controls over the diffusion of innovations. Innovation in the knowledge-intensive high-tech sector (electronic software and hardware, biotechnology, lasers, opto-electronics, liquid crystal technology, to name a few) has become the central determinant of economic power in our time. And when any company in the NICs and Third World wishes to innovate, say in chip design, software programming, or computer assembly, it necessarily has to integrate several patented designs and processes, most of them from US electronic hardware and software giants like Microsoft, Intel, and Texas Instruments. As the Koreans have bitterly learned, exorbitant multiple royalty payments to what has been called the American ‘high tech Mafia’ keeps one’s profit margins very low while reducing incentives for local innovation.
The likely outcome is for a Southern manufacturer simply to pay royalties for a technology rather than to innovate, thus perpetuating the technological dependence on Northern firms.
Weakening "special and differential treatment"
Owing to historical and structural considerations, developing countries need special consideration and special assistance in levelling the playing field for them to be able to participate equitably in world trade.
While GATT was not centrally concerned with development, it did recognise the "special and differential status" of the developing countries. Different sections of the evolving GATT code allowed countries to renegotiate tariff bindings in order to promote the establishment of certain industries; allowed developing countries to use tariffs for economic development and fiscal purposes; allowed them to use quantitative restrictions to promote infant industries; and conceded the principle of non-reciprocity by developing countries in trade negotiation. The 1979 Framework Agreement known as the Enabling Clause also provided a permanent legal basis for General System of Preferences (GSP) schemes that would provide preferential access to developing country exports.
A significant shift occurred in the Uruguay Round. GSP schemes were not bound, meaning tariffs could be raised against developing countries until they equalled the bound rates applied to imports for all sources. Indeed, during the negotiations, the threat to remove GSP was used as a form of bilateral pressure on developing countries". Special and Differential Treatment (SDT) was turned from a focus on a special right to protect and special rights of market access to "one of responding to special adjustment difficulties in developing countries stemming from the implementation of WTO decisions", as analyst John Whalley put it. Measures meant to address the structural inequality of the trading system gave way to measures, such as a lower rate of tariff reduction or a longer time frame for implementing decisions, which regarded the problem of developing countries as simply that of catching up in an essentially even playing field.
STD has been watered down in the WTO, and this is not surprising for the neoliberal agenda that underpins the WTO philosophy differs from the Keynesian assumptions of GATT: that there are no special rights, no special protections needed for development. The only route to development is one that involves radical trade (and investment) liberalisation.
Fate of Third World "special measures"
Perhaps the best indicators of the marginal consideration given to developing countries in the WTO is the fate of the measures that were supposed to respond to the special conditions of developing countries. There were three key agreements that promoters of the WTO claimed were specifically designed to meet the needs of the South:
* The Special Ministerial Agreement approved in Marrakesh in April 1994, which decreed that special compensatory measures would be taken to counteract the negative effects of trade liberalisation on the net food-importing developing countries;
* The Agreement on Textiles and Clothing, which mandated that the system of quotas on developing country exports of textiles and garments to the North would be dismantled over ten years;
* The Agreement on Agriculture (AOA), which, while ‘imperfect’, nevertheless was said to promise greater market access to developing country agricultural products and begin the process of bringing down the high levels of state support and subsidisation of EU and US agriculture, which was resulting in the dumping of massive quantities of grain on Third World markets.
The Special Ministerial Decision taken at Marrakesh to provide assistance to ‘Net Food Importing Countries’ to offset the reduction of subsidies that would make food imports more expensive for the ‘Net Food Importing Countries’ has never been implemented. Though world crude prices more than doubled in 1995/96, the World Bank and the IMF scotched the idea of any offsetting aid by arguing that "the price increase was not due to the Agreement on Agriculture, and besides there was never any agreement anyway on who would be responsible for providing the assistance".
A key feature of the Agreement on Textiles and Clothing, meanwhile, was supposed to be the lifting of quotas on imports restricted under the Multifiber Agreement (MFA) and similar schemes that had been used to contain penetration of developed country markets by cheap clothing and textile imports from the Third World. Developed countries retained, however, the right to choose which product lines to liberalise when, so that they first brought mainly unrestricted products into the WTO discipline and postponed dealing with restricted products till much later. Thus, in the first phase, all restricted products continued to be under quota, as only items where imports were not considering threatening — like felt hats or yarn of carded fine animal hair — were included in the developed countries’ notifications. Indeed, the notifications for the coverage of products for liberalisation on 1 January 1998, showed that "even at the second stage of implementation only a very small proportion" of restricted products would see their quotas lifted.
Given this trend, John Whalley notes that "the belief is now widely held in the developing world that in 2004, while the MFA may disappear, it may well be replaced by a series of other trade instruments; possibly substantial increases in antidumping duties".
When it comes to the Agreement on Agriculture, little gains in market access for developing country imports after five years into developed country markets have been accompanied by even higher levels of overall subsidisation for first world farming interests — through ingenious combinations of export subsidies, export credits, market support, and various kinds of direct income payments.
The figures speak for themselves: the level of overall subsidisation of agriculture in the OECD countries rose from $182 billion in 1995 when the WTO was created, to $280 billion in 1997 to $362 billion in 1998! Instead of the beginning of a New Deal, the AOA, in the words of a former Philippine Secretary of Trade, "has perpetuated the unevenness of a playing field which the multilateral trading system has been trying to correct. Moreover, this has placed the burden of adjustment on developing countries relative to countries who can afford to maintain high levels of domestic support and export subsidies."
The collapse of the agricultural negotiations in Seattle is the best example of how extremely difficult it is to reform the AOA. The European Union opposed till the bitter end language in an agreement that would commit it to "significant reduction" of its subsidies. But the US was not blameless. It resolutely opposed any effort to cut back on its forms of subsidies such as export credits, direct income for farmers, and "emergency" farm aid, as well as any mention of its practice of dumping products in developing country markets.
Oligarchic decision-making
While far more flexible than the WTO, the GATT was, of course, far from perfect, and one of the bad traits that the WTO took over from it was the system of decision-making. It responded to the same problem that faced the IMF and the World Bank’s developed country members: how to assure control at a time that the numbers gave the edge to the new countries of the South. In the Fund and the Bank, the weight of a country’s vote is determined by the size of its capital subscriptions, which gives rich countries effective control of the two organisations.
In the GATT, a one-country one-vote system was initially tried, but the big trading powers saw this as inimical to their interests. Thus, the last time a vote was taken in GATT was in 1959. The system that finally emerged was described by US economist Bergsten as one that "does not work by voting. It works by a consensus arrangement which, to tell the truth, is managed by four — the Quads: the United States, Japan, European Union, and Canada." He continued: "Those countries have to agree if any major steps are going to be made, that is true. But no votes."
Indeed, so undemocratic is the WTO that decisions are arrived at informally, via caucuses convoked in the corridors of the ministerials by the big trading powers. The formal plenary sessions, which in democracies are the central arena for decision-making, are reserved for speeches. The key agreements to come out of the first and second ministerials of the WTO in Singapore and Geneva were all decided in informal backroom sessions and simply presented to the full assembly as faits accompli. Consensus simply functioned to render non-transparent a process where smaller, weaker countries were pressured, browbeaten, or bullied to conform to the ‘consensus’ forged among major trading powers.
With surprising frankness, at a press conference in Seattle, US Trade Representative Charlene Barshefsky, who played the pivotal role in all three ministerials, described the dynamics and consequences of this system of decision-making: "The process, including even at Singapore as recently as three years ago, was a rather exclusionary one. All meetings were held between 20 and 30 key countries… And that meant 100 countries, 100, were never in the room… [T]his led to an extraordinarily bad feeling that they were left out of the process and that the results even at Singapore had been dictated to them by the 25 or 30 privileged countries who were in the room."
Then, after registering her frustration at the WTO delegates’ failing to arrive at consensus via supposedly broader ‘working groups’ set up for the Seattle ministerial, Barshefsky warned delegates: "…[I] have made very clear and I reiterated to all ministers today that, if we are unable to achieve that goal, I fully reserve the right to also use a more exclusive process to achieve a final outcome. There is no question about either my right as the chair to do it or my intention as the chair to do it…"
And she was serious about ramming through a declaration at the expense of non-representativeness, with India, one of the key developing country members of the WTO, being "routinely excluded from private talks organised by the United States in last ditch efforts to come up with a face-saving deal".
Even in damage-containment mode after the collapse of the Seattle Ministerial, no rich country representatives have declared any intention of pushing for a one-county/one-vote majority decision-making system or a voting system weighted by population size, which would be the only fair and legitimate methods in a democratic international organisation. The fact is that such mechanisms will never be adopted, for this would put the developing countries in a preponderant role in terms of decision-making.
It is clear that the WTO systematically protects the trade and economic advantages of the rich countries, particularly the United States. It is based on a paradigm that denigrates the right to take activist measures to achieve development on the part of less developed countries, and raises inequality into a principle of decision-making. It cannot possibly claim therefore to serve the interests of the poor of developing countries.
Dr Walden Bello is Executive Director of Focus on the Global South and Professor of Sociology and Public Administration at the University of the Philippines. He attended all three WTO Ministerials as an NGO delegate. He is the author of several works on the WTO including Iron Cage: The WTO, the Bretton Woods Institutions, and the Third World (Bangkok: Focus on the Global South, 1999).
The WTO: Key Facts
Name: World Trade Organisation0
Location: Geneva
Established: 1 January 1995
Created by: Uruguay Round negotiations (1986-94)
First thought of: Bretton Woods, 1944
Membership: 139 countries
Budget: [pound]53.36 million for 2000
Secretariat staff: 500
Director-General: Mike Moore (New Zealand)
Main functions:
* Administering WTO trade agreements: designed to remove barriers to trade and corporate profits worldwide
* Forum for trade negotiations (in secret): where key issues are effectively decided by the major industrialised powers
* Handling trade disputes (in secret): with legally binding powers to authorise the imposition of heavy financial and trade sanctions
Opinion
"Developed countries cannot, on the one hand, justify protecting and helping mature producers in their agricultural and high-technology sectors and, on the other, deny such possibilities to developing countries facing their own particular problems."
UNCTAD, 1999.
COPYRIGHT 2000 MIT Press JournalsCOPYRIGHT
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