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I. What is in this book
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This book brings together forty-five case studies from economies around the world,
each of which illustrates how governments, business and civil society
manage their country’s participation in the World Trade Organization.(1)
The case studies make a mosaic image of what
it takes, at the start of the twenty-first century, to manage the
integration of an economy into the global trading system and what the
rewards, or penalties, of integration can be for economies of all sizes,
including many of the world’s poorest and most resource-poor
economies.
They show, through ‘real world’ examples,
that joining the WTO and taking advantage of WTO membership is not
something to be left to government alone. It calls for the participation
of many different ‘stakeholders’ in an economy, including goods and
services producers, industry associations, consumer associations, civil
society groups and academic analysts.
They also show that people representing those
different national interests and institutions take most of the
significant decisions affecting an economy’s participation in the
global trading system. The WTO itself has only a secondary role; it
helps to define the context of a trade policy decision but doesn’t
compel the choice of one policy over another.
The case studies include success stories, some
stories of failure or frustration, one or two ‘disasters’ and some
stories that are open-ended because the final outcome is not yet known.
Each of the case studies speaks for itself.
The rest of this introduction provides some topical summaries of the
case studies and identifies some of the ideas that emerge from them. But
there are many more things in the cases themselves that we haven’t
covered here.
II. Playing the game
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Do you remember watching a sporting event for the first time? A game whose
rules you didn’t understand?
Confusing, wasn’t it? You could probably
guess the objective of the game by watching the scoreboard, but without
knowing the rules it can be very difficult to understand why the players
are doing what they do and who’s getting ahead in the game and who’s
falling behind.
Now, imagine that you are watching a game that
has about 150 players on the field and no scoreboard. Imagine, too, that
the rulebook for this game has twenty-eight thick chapters and thousands
of pages of footnotes and clarifications, so that there is some doubt
about whether even the players know all the rules. Watching each player
in this game is a stadium filled with millions of followers — a mixture
of supporters and critics — who are continually shouting encouragement
or instructions to the players while betting furiously on the outcome of
every play.
To make things even harder to follow, this
game doesn’t have a referee: the players have to manage the game for
themselves. And without a referee to blame whenever the play seems to go
against their team, some spectators have taken to abusing the staff at
the stadium.
The multilateral trading system is not a game,
of course; being a member of WTO isn’t much like play. But the trading
system managed in the WTO is a huge and frequently confusing enterprise
in which a large and complex set of rules governs the way that
governments — the main ‘players’ — interact.
As in some sports, the ‘spectators’
sitting just outside the field of play — billions of ordinary business
people and citizens — are an important part of the ‘game’. All the
gains and losses end up in their hands and, ultimately, for reasons that
we shall see in this book, the future of the game is also in their
hands. But most members of the public don’t understand the game very
well and some of them suspect that the rules, which have been agreed
among the players beforehand, are stacked against them.
This book is a sort of guide to the game, from
a spectator’s viewpoint or, to be more precise, from the viewpoint of
more than forty spectators.
There continues to be a considerable amount of
misunderstanding about the role of the World Trade Organization as an
institution. One still hears complaints about giving up sovereignty to
faceless bureaucrats on the shores of Lake Geneva. Most of this book
demonstrates just how much sovereign discretion economies participating
in the system wield. It really is true that the WTO is a member-driven
organization.
We hope that the cases in this book will help
dispel the mystery and encourage more people to take a more active role
in the ‘game’ in future. When you read the cases, you will probably
recognize many of the issues that they raise and the challenges faced by
the people at the centre of the story. Many of the stories told here for
the first time are repeated every day in economies around the world: you
can probably find very similar stories in the business press in your own
city.
The case studies
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This book is the result of a project that has
been jointly funded by the WTO and the Australian government’s
official aid agency, AusAID, to encourage better understanding of how
the multilateral trading system works. Our sponsors agreed to allow us
to seek case studies, predominantly written by observers and analysts in
developing countries, that would detail some aspect of the way in which
the stakeholders in a particular economy worked together to manage a
problem or to make the most of an opportunity related to WTO membership.
We contacted authors in about fifty economies,
many of them in academic institutions, and gave them a very short brief
that left the choice of subject matter and approach entirely up to them.
We did not ask for ‘success stories’ and we made it clear that the
analysis of the issues, including their assessment of the value or role
of the WTO, was a matter for their own judgement.
We have accepted for publication virtually all
the cases that reached a final draft within the time constraints we
placed on the authors. So, as much as possible, this is an ‘un-retouched’
snapshot of participation in the WTO seen — mostly — from around the
developing world about ten years after the organization was founded.
III. The big picture
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The cases in this book cover a wide range of commercial and government
activities.
A Bangladeshi rock band finds that a ‘Bollywood’ movie producer
has pirated one of its songs; band members use the provisions of the WTO
to regain their rights.
The tiny Pacific island economy of Vanuatu decides to suspend its
application for WTO membership when its inexperienced government
administrators fail to find a sympathetic hearing from existing WTO
members.
An ‘inside’ account of how India struggled to develop a
national consensus on the liberalization of its protected agriculture
sector.
The Kenyan government fights for the right, under the WTO
Agreements, to import AIDS drugs manufactured elsewhere under ‘compulsory
licences’ for use in Kenya. It finds that the issue of patent protection
under its own legislation is not straightforward and that the patent law
changes are not the biggest barrier to reducing the impact of the disease.
The tuna industry of Thailand fights to retain access to the
European Union (EU) market on comparable terms to its competitors, but
manages to avoid a costly formal dispute adjudication.
Chilean poultry exporters and government officials act urgently to
handle an animal health emergency that could have killed exports to the
vital European market, making effective use of international standards and
notification procedures established by the WTO.
An exporter of traditional herbal medicines from Nepal runs into
regulatory barriers he cannot understand or do much about until Nepal
joins the WTO and the Nepalese government creates a regulatory framework
that helps him to meet his customers’ expectations of good manufacturing
practice.
The Mexican government is backed into a corner, domestically, by
the powerful Peasants’ Union’s revolt against imports from the United
States under the North American Free Trade Agreement (NAFTA); the facts
show, however, that the agreement has opened up new horizons for Mexican
industry that could be extended by multilateral negotiation.
Nigerian industry is penalized by a system of import prohibitions
that have strong political support but are economically costly — why
Nigeria’s WTO obligations don’t offer a solution.
IV. Some themes
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Accession
The accession of developing economies to the WTO has proved to be a major
challenge to their government administration as well as to the content of
their trade policies. It’s a gruelling procedure requiring the
preparation of detailed memoranda on foreign trade policies and practices
and a convincing commitment to implement the WTO Agreements — without
access, in most cases, to the lengthy implementation delays that were
available to members of the WTO when the agreements were first negotiated.
They must also negotiate bilateral trade deals with their most important
trading partners, intended to ensure that they ‘pay’ for the rights
that they will acquire as WTO members. The process often involves years of
detailed examination by a working party and lengthy rounds of negotiation.
During this time it is not at all unusual for
domestic pressures on the government to mount, as business and civil
society — lacking experience with the WTO and fearful of the
consequences of market liberalization — demand more details about the
benefits of membership and often question the impact of the WTO rules on
the economy’s sovereignty.
Several cases in this collection provide new
perspectives from the inside on this difficult process.
Damedin Tsogtbaatar reveals how the objectives
of the business community and even of the government were shaped by Mongolia’
s historical experience before its accession bid. He shows how these
false expectations led to ill-prepared negotiations, less advantageous
accession terms than might have been achieved and subsequent
disenchantment with the WTO that had a lingering effect on Mongolian
trade policy.
Vanuatu, an island economy in the
Melanesian group, was also ill-prepared for its attempts to accede to
the WTO. It had few government and private-sector resources to support
its accession efforts and lacked the administrative resources to inform
its domestic stakeholders or adequately to prepare for the bilateral
negotiations. The government of Vanuatu (population 200, 000), like the
government of China (population more than 1 billion), had chosen to make
membership of the WTO an integral step in its objective of closer
integration with the global economy. But economic reforms stalled along
with the WTO bid, due in part to lack of adequate planning and national
consensus on the objectives. The account by Daniel Gay reveals an
unmistakeable bitterness in Vanuatu regarding the attitude of its major
trading partners towards its WTO bid and even the role of the WTO
secretariat.
In China the story of this historic
change in economic direction is still unfolding, but the impression
given by Gong Baihua of the Shanghai WTO Affairs Consultation Centre is
that business and government are much more confident of their ability to
control and to benefit from China’s integration with the global
economy.
Following the Vanuatu experience WTO members
changed their approach to the accession of least-developed economies to
reduce the administrative burdens on poor economies and to lower the bar
to their entry. Nepal — whose accession had been slowed by
political turmoil and security problems — was one of the first
beneficiaries of this new approach, being invited to join WTO at the
Cancún Ministerial meeting. P. R. Rajkarnikar tells the story of the
leadership of a regional non-governmental organization (NGO), SAWTEE, in
promoting consensus on membership during the final stages of the process
and of the influence that SAWTEE’ s views had on specific issues
relating to Nepal’s accession such as plant breeders’ rights.
Cambodia, too, was welcomed into the WTO
at the Cancún meeting at a time when the constitutional machinery for
ratifying the Agreement was not in place. Hach Sok and Samnang Chea
examine the degree to which the accession was negotiated with the
informed support of the business community and ask whether Cambodia,
whose trade depends heavily on the export of garments, is well prepared
for the future management of integration into global markets.
One of the most controversial aspects of
recent accessions has been the demand by existing members that new
members achieve still greater openness than is required by the current
agreements. This was certainly one of the problems faced by Vanuatu.
The liberalization of markets that follows
accession may also move the acceding economy to make consequential
changes to its policies in order to take full advantage of accession.
This is the case in Vietnam where, as Phan Van Sam and Vo Thanh
Thu point out, liberalization of the banking sector — although not
strictly required by the General Agreement on Trade in Services (GATS)
— is essential to ensure that Vietnamese firms can make the best of their
new opportunities for integration with global markets.
Disputes
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How do developing countries fare under the WTO
dispute settlement system? Does it work for or against their interests?
Are they able to afford the legal advice that they need in order to
bring a case? Are they able to achieve satisfactory resolution of their
problems when they do not have the economic power to ‘retaliate’ if
so authorized by the Dispute Settlement Body? Can they afford to fight
one case after another if necessary to protect their interests in a
global market?
Several case studies help to throw some light
on the answers to these questions. One of the first cases after the
creation of WTO involved a dramatic contrast in the economic size and
resources of the disputants. John Breckenridge tells the story of Costa
Rica’ s successful assertion of its rights under the Agreement on
Textiles and Clothing against US safeguard actions. The victory for
Costa Rica in this case — due, says the author, to better preparation as
well as the merits of its case — was a signal to other developing
countries that the system would work to protect the interests of all
members.
Pakistan, too, was successful in
challenging US textile safeguards in the late 1990s, as Turab Hussain
recounts. This case details some of the practical aspects of preparing a
case and the potentially ambiguous ‘victories’ that formal dispute
adjudication can bring. The government of Pakistan was party to a WTO
dispute for the first time. According to the author it was not well
equipped for the case and relied heavily on the specialist knowledge and
funding resources of the textile industry association and its members.
After persisting with the case before the Textile Monitoring Body and
eventually before a disputes panel and an appeal, Pakistan’s
objections to the three-year US safeguard quota were upheld. But it had
taken almost all of those same three years — and a lot of money — to win
the case. Pakistan’s victory was, in the view of the industry, mostly
one of principle.
Nilaratna Xuto contributes a case study from Thailand
in which close collaboration between government officials and industry
leaders challenged proposed changes in EU tariff preferences. The Thai
tuna case illustrates the operation of the conciliation procedures in
WTO disputes, using the good offices of the Director General of the WTO.
These provisions of the disputes mechanism do not capture headlines in
the same way as a panel adjudication, but they offer many advantages as
this case shows, including less contentious procedures, and
significantly lower costs.
It is important to remember that no WTO
dispute is supposed to be contentious$.$ Of course, there can be a lot
of heat generated between the disputants at the time. But the resolution
of disputes serves a positive purpose for all WTO members by helping to
smooth world trade and by clarifying how national trade regulations
should operate to give effect to the principles of the WTO Agreements.
The WTO disputes system helps to do this even
with regard to regional agreements, where disputes among the parties can
be even more bitter than those among WTO members at large. An
interesting instance of this is the story that Diana Tussie and
Valentina Delich tell about the challenge that Argentina raised
to Chilean variable levies imposed on imports of vegetable oils, after
it had tried unsuccessfully to resolve the matter in the context of the
Mercosur regional agreement.
Another surprising aspect of dispute
settlement is the confidence-building effect that a successful case can
have, affecting the attitude of government and stakeholders towards
global economic integration. Junsok Yang’s account of the case brought
by South Korea against US anti-dumping measures on colour
televisions confirms that preparation for a dispute that demands close
collaboration between officials and business people has a positive
impact on domestic trade policy-making. For South Korea the result was a
more confident participation in the WTO and a more positive view of the
benefits of ‘globalization’ of the economy.
The South Korean colour television dispute had
its origins in anti-dumping actions taken in the 1980s. Today,
anti-dumping actions continue to give rise to serious disputes, as we
can see from B. Battarcharyya’s very recent case study on the work
that the Indian shrimp exporting industry and the government of
India have undertaken to fight a dumping charge in the United States.
Whether this and related cases also targeting shrimp exports will be
subject to WTO challenge may be known by the time this book is
published. Bhattarcharyya’s account suggests, however, that in
addition to the financial considerations a decision to pursue a WTO
dispute should include an evaluation of the strategic interests of the
industry in a lengthy legal tussle.
There is a valuable lesson on this same point
in Jacqueline Krikorian’s story of Canada’ s unsuccessful
defence of its discriminatory implementation of tariff benefits
associated with its side of the US-Canada Auto Pact. She concludes that
it was a case fought for the wrong reasons in an attempt to defend a
policy whose original objectives had already been bypassed in the
marketplace. Friction with trading partners, uncertainty for the
automobile industry and a lot of expense might have been spared, in her
view, if the Canadian authorities had elected not to defend their
policies.
Standards and SPS
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We asked all the case study authors to tell
the story of a challenge or an opportunity faced by business in the
world trading system. The stories that they tell range over many forms
of trade barriers, but the most challenging seem to be those related to
standards for health or safety, including food safety. Import
regulations that fall under the provisions of the WTO’ s Agreement on
Technical Barriers to Trade (TBT) or the Agreement on Sanitary and Phyto-Sanitary
Measures (SPS) are multiplying around the world. They are typically
complex regulations, frequently implementing standards that create a
high hurdle for imports. Developing country exporters whose own
governments may not implement similar standards sometimes find it
difficult to understand what steps are required for compliance with
these standards, even when the standards themselves have international
sanction.
Bijendra Shakya’s story about the Gorkha
Ayurved company of Nepal illustrates all of these factors. The
principal of the company, which exports herbal medicines, had to find
out for himself about the meaning of the compliance requirements of his
customers and to find ways of certifying compliance ahead of government
moves to implement an appropriate regulatory structure.
Even legitimate SPS barriers can result in
total import prohibitions, so that the stakes can be very high for
developing country exporters with limited resources to manage compliance
with stringent food health requirements. Rina Oktaviani’s study of the
EU barriers faced by the Indonesian shrimp industry shows how
little room there is for manoeuvre in such cases and the critical
importance of good information flows between government and industry in
finding means, within the resources of the export industry, to meet the
market requirements.
Excellent information flow and a high priority
on transparency with authorities in export markets were keys to the
successful management of the health emergency in Chile’ s
poultry industry, as told by Claudia Orozco. The Chilean industry and
government officials on-site, as well as the Chilean representatives in
Brussels and in the OIE (International Office of Epizootics) were
immediately alert to the importance of informing all concerned about the
nature of the outbreak of avian flu. They handled the emergency
successfully because their openness maintained the confidence of the
European authorities, allowing them to win agreement to the
regionalization of the problem, reducing its commercial impact and
making a solution easier to implement.
The Colombian authorities were not so
forthcoming about a standards barrier that they imposed on the Malaysian
latex condom industry, according to Norma Mansor, Noor Hasniah Kasim and
Yong Sook Lu. This case suggests that it may be necessary to ‘read
between the lines’ to understand the commercial impact of an
apparently innocuous labelling requirement. It would have been possible
for government officials on either side to make a mistake had it not
been for the WTO standards notification system that alerted the
Malaysian firm to the potential problem with the Colombian labelling
requirement and provided a mechanism for an official Malaysian response.
In this case, as in many potential trade disputes that surface in the
WTO, it appears that the proposal was quietly withdrawn and the problem
went away.
The non-discriminatory application of SPS
barriers, such as those affecting imports of farmed shrimp into the EU,
means that they frequently affect a number of exporters at the same
time. Several Pacific Island Forum economies are potentially
affected by the EU’ s health ban on imports of traditional kava root
products. These economies have already banded together in their
participation in the WTO, establishing a joint representative office in
Geneva to save on funds and to make the best use of experienced
personnel. Chakriya Bowman describes in her case study how this
initiative will help Papua New Guinea, Samoa and Fiji
to work closely together to respond to the unique threat to their
multi-million dollar exports of kava-based products.
Industries seeking protection press
governments of both developed and developing countries to implement
standards or SPS barriers, because they can offer much higher levels of
protection than most tariffs. Isidro Morales-Moreno’s case study of Mexican
agricultural policies following the implementation of NAFTA describes
instances of the use of SPS barriers to reduce adjustment pressures on
Mexican farmers.
Intellectual property
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One of the most controversial aspects of the
1995 Agreement on Trade-Related Aspects of Intellectual Property Rights
(TRIPS) was the evidence that rights-holders of trade-related
intellectual property were mostly in industrialized countries and that
developing countries were mostly importers of trade-related intellectual
property. Critics said that the TRIPS Agreement was more advantageous to
the former than to the latter WTO members who, nonetheless, faced heavy
implementation obligations.
The cases set out in this book do not resolve
the controversy, but it is interesting that those we received that
relate to TRIPS show developing country export interest in intellectual
property and some success stories, as well as challenges on the import
side.
S. C. Srivastava has provided a detailed
account of the determined legal defences mounted by the Tea Board of India
to protect its registered geographical indication (GI) of ‘Darjeeling’
in France, Japan and Russia. Although the Tea Board’s objections to
the registration of marks that they considered infringed their rights
were not always successful — notably in France, where the Indian
registration was not given reciprocal rights according to Srivastava —
the case points to the heavy legal burden that the maintenance of a GI,
like the maintenance of any trademark, can impose.
Amir Muhammed and Wajid H. Pirzada have
compiled a case study related to recent negotiations between Pakistan
and the EU on European access barriers to Basmati rice, in which the
authoritative designation of rice as ‘Basmati’ may hold the key to
maintaining Pakistan’s access to the EU market. Unfortunately, as the
authors point out, the government of Pakistan has not yet implemented
its proposed legislation on the registration of such names.
Of course, copyright is unique among the major
intellectual property categories in not requiring any registration
process. One of the happiest outcomes for a developing country
intellectual property rights-holder is to be found in Abul Kalam Azad’s
case on the triumphant defence of their copyright by the well-known Bangladedshi
rock band, Miles. The band was able to obtain summary judgment in the
Indian courts against the piracy of their music by a Bollywood producer,
thanks to the rights established by the TRIPS Agreement.
Darker and more complex problems figure in Ben
Sihanya’s case study on the parallel importing and compulsory
licensing of patented AIDS drugs in Kenya. The case provides an
insider’s report on efforts to ensure a supply of effective, low-cost
drugs for the fight against AIDS in Africa, and examines the controversy
over the TRIPS Agreement’s restrictions on trade in compulsorily
licensed drugs. The Kenyan objective, according to Sihanya, was to
ensure that the patents served the interests of both rights-holders and
consumers. This balance was expressed in Kenyan law as well as in the
TRIPS Agreement. Part of the challenge in ‘reinterpreting’ the
provisions of the TRIPS Agreement was to maintain this balance of
interests when the compulsorily licensed drugs were made available for
export. But, in Sihanya’s view, the change to the TRIPS provisions did
not necessarily address the most significant barriers to effective
public health delivery to AIDS victims.
Services
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Although services form a rapidly growing part
of developing country trade and already provide a significant
contribution to a higher balance in their trade account, the level of
developing member commitments under GATS remains low. A developing
country with significantly higher service commitments than many others
is Argentina. As Roberto Bouzas and Hernán Soltz argue, this is
most likely to be the result of a coincidence in time between
multilateral liberalization efforts and domestic policy reform. In this
case the multilateral negotiations were seized upon as an opportunity to
push domestic reform.
Soledad Salvador and Paola Azar study the
efforts made in Uruguay to develop a new ‘institutional channel’
for public/private-sector co-ordination on GATS issues. The authors
believe that the dialogue suffered from a lack of commitment on both
sides, and from some institutional resistance and poor information flows
that fed existing suspicions — on the part of unions and civil society
organizations, for example — about the objectives and consequences of
services liberalization. They point to the need to evaluate objectively
the domestic impacts and opportunities of services market access.
Without such evaluation, the authors argue, the personal views of
negotiators and officials may assume more importance than agreed
national objectives in determining the GATS commitments eventually
subscribed.
J. P. Singh presents a case that contrasts the
superficially similar approaches to GATS negotiations of two small
Central American economies, Belize and Costa Rica. Noting
the low level of commitments offered by developing countries in the GATS
negotiations, he asks why economies with vibrant service sub-sectors and
in serious need of foreign investment or with sizable service export
surpluses make such low commitments.
The evidence that follows for the two countries confirms the essentially
bottom-up nature of GATS: both countries choose particular sectors for
commitment — at levels acceptable to domestic actors. Interestingly, they
also exhibit significant policy differences: Costa Rica was positioning
itself to take advantage of being a service-based export-led economy;
Belize remains ambivalent about the role of services in general and GATS
commitments in particular.
Linda Schmid has a services success story to tell about the experience of
telecommunications liberalization in the small Caribbean island economy of
Barbados, whose flavour can be represented by this cameo from her
account:
An itinerant gardener who makes his way to work and carries his tools with
him on his bicycle passed me while I was in a traffic jam. I needed help
with my garden, flagged him down, and asked if he might be available. I
reached for a pen and paper. He pulled out his cell phone, entered my
data, and that evening I had a phone message to schedule a garden site
visit. He was using his cell phone as a client database. Individuals with
minimal economic means are employing this lower cost technology to enhance
the way they work and communicate with others.
She notes, however, that creating regulatory institutions to oversee a
competitive market in telecommunications or other newly liberalized
services sectors such as banking, insurance or securities is a challenge
to WTO members with limited financial and human resources.
Malathy Knight-John and Chethana Ellepola
would, presumably, agree about the regulatory challenges. Their account
of the implementation of the provisions of the GATS Telecommunications
Reference Paper points to gains for Sri Lanka from the
liberalization of the telecoms market that followed GATS. But they also
identify wide gaps between the global expectations reflected in the
Reference Paper and Sri Lanka’s performance in the crucial area of
interconnection. The authors describe a complex political economy
created by a large number of small players and a small number of large
public switched telecommunication network operators who, in the absence
of an effective post-liberalization regulatory regime, have been able to
cartelize aspects of the market.
Advocacy and ‘democratic accountability’
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Where do WTO decisions come from? From the
member governments: there is no other source of decisions in the WTO.
Not even the recommendations of the disputes panels or the Appellate
Body become decisions of the WTO until the member governments say so.(2)
So, how do individual member governments
decide what to say on any particular issue? That question lies at the
heart of what might be called the ‘democratic accountability’ issue
for any intergovernmental organization like the WTO. Do the decisions of
the WTO have ‘democratic’ credentials in the sense that the member
governments’ policies and regulations are based on a democratic
mandate and on the processes that we expect in any democracy such as
public information, consultation with stakeholders and accountability to
citizens for the decisions taken?
The case studies in this book show that the
answer is, in general, ‘yes’. We see evidence in almost all cases
that governments are ready to inform and consult with
private-sector stakeholders when they are preparing for a WTO decision
or negotiation. Most governments seem to appreciate, too, that such
consultations are essential to ensure that government is well informed
about the consequences of its actions in the WTO.
There are, however, two different aspects to
this co-ordination with stakeholders: advocacy — which can be ‘lobbying’
for private benefit or something more public-spirited — and accountability,
which means, at a minimum, government responsiveness to the demands of
stakeholders and citizens.
In most of the cases in this book there is an
element of advocacy by producers that prompts governments to inform and
consult. Producers whose interests are at stake in a trade policy
measure are likely to lobby for government consideration and support
particularly where a foreign trade remedy measure is involved (Pakistan
— cotton, India — shrimp, Costa Rica — garments) or some other external
event threatens changes in market access terms (Thailand — tuna,
Malaysia — condoms, Chile — poultry). In most of these cases we see the
formation or expansion of producer coalitions designed to address a
specific, WTO-related trade challenge to trade in a particular product.
In several of these case studies the authors also suggest that the
experience gained by the coalition, and the links it develops with the
government in the course of the events recounted in the case, will
continue to provide a base for co-ordination in the future.
Jean-Marie Paugam, for example, tells the
story of the co-ordination of French negotiating positions,
particularly on agriculture, in the lead-up to the Cancún ministerial
meeting. Although France exercises its influence on the WTO agenda
through the European Community’s position, Paugam provides an analysis
of a very well-informed, experienced, sophisticated stakeholder
community whose inputs into both the French and Community’s
negotiating position is persistent, co-ordinated and effective. ‘Overall’,
Paugam notes, ‘in keeping with theoretical predictions, protected
producers are more likely to organize themselves efficiently when their
interests are concentrated and their consumers dispersed. In a context
of declining agricultural support, concentrated potential “losers”
proved very active.’
Two other case studies also use the
agricultural sector to analyze the challenges of including
non-governmental actors in the decision-making process. The study on Venezuela
by Rita Giacalone and Eduardo Porcarelli shows that the issue is not
simply whether both government and the private sector are serious about
engaging in dialogue. They refer to the need for ‘avoidance of
politicization’ in consultative processes and argue that ‘private-sector
associations should carefully tread the waters of domestic politics in
order to have the right to participate . . . ‘ Shishir Priyadarshi’s
study of decision-making on agriculture in India traces an open
and generally successful consultative process. But he also notes that
this inclusiveness and transparency may have pre-conditioned the
government’s stance and favoured a defensive posture.
Niel Joubert’s study of the development of
the anti-dumping regime in South Africa reveals that even where
consultative mechanisms are well established, they may simply serve to
bless decisions that have already been taken or positions that have been
defined in anticipation of negotiations with other countries. Joubert
notes that governments may well have to choose trade-offs that disregard
non-governmental stakeholder inputs, but this does not necessarily mean
that these were disregarded from the outset.
There seems to be a qualitative difference
between the lobbying of producers in the context of WTO negotiations —
where the potential responses of the government are constrained by the
need to reach reciprocal agreements with trading partners — and lobbying
where the government is not so constrained.
From Nigeria, for example, Ademola
Oyejide, Olawale Ogunkola and Abiodun Bankole bring us a case of an
import prohibition policy that seems to escape the constraints of the
General Agreement on Tariffs and Trade (GATT) rules because it falls
under a WTO exception. The authors argue that the policy has failed
despite a degree of popular support. Although its nominal purpose is to
secure the economy’s balance of payments, the latter is determined
primarily by developments in the world oil market; the import
prohibitions have relatively little impact. The real force behind the
use of this policy instrument, according to the authors, is the
protection of domestic producers, but there is little evidence that
protection has produced the desired result of a greater degree of import
replacement or higher export earnings.
Sometimes producers join in sector-wide or
even cross-sector advocacy that may include non-producer interests
(Philippines — co-ordination, Brazil — G20, India — agriculture, Kenya
— co-ordination, France — co-ordination). Here the need to accommodate
divergent interests is likely to defeat attempts at ‘lobbying’ on
behalf of product or sector objectives and to result in more strategic
‘advocacy’ by the private sector, taking account of economy-wide
goals.
Pedro da Motta Veiga brings us an example of
this broadly based policy advocacy in his insider’s account of Brazil’
s role in the formation of the G20 group of developing countries and the
interaction of Brazilian ministries and industry in those events. He
writes:
Brazil’s negotiations strategy was driven not only by the internal
dynamics of the agricultural negotiations in the WTO, but also by a
broader shift in the country’s foreign economic policies — especially in
its trade negotiations strategy — towards a view where the North-South
axis acquired a growing relevance. Brazil’s leadership in the setting of
the G20 is perhaps the best example, at the multilateral level, of the
country’s new ‘southern’ stance in trade negotiations.
In several cases, too, we see evidence of accountability:
that is, the willingness of governments to take responsibility for their
decisions or to share with stakeholder representatives responsibility
for decisions (India — agriculture, Chile — poultry, Thailand — tuna,
Brazil — G20, Barbados — telecommunications, Philippines — agriculture,
China — consultation).
Donah Sharon Baracol gives us an insight into
the Philippines formal consultation process on agriculture
negotiations: the Task Force on WTO Agriculture (Re)Negotiations (TF-WAR).
The Task Force was formed as a result of grass-roots demand for a review
of the Philippines negotiating approaches before the Seattle Ministerial
meeting, and it remains, according to Philippines officials, a principal
source of information for agricultural industry stakeholders as well as
of guidance for the government in formulating its position. The strength
of the consultation process and its broad base provides, according to
the author, a form of security for Philippines negotiators against the
pressures of third parties in the negotiations.
But consultation and co-ordination are
expensive: they use resources that are scarce in any economy — especially small and developing economies
— such as the time and
attention of government officials and private-sector representatives. We
also find several cases where the challenges described by the author are
due to consultation and accountability mechanisms that are
under-resourced and unco-ordinated (Uruguay — services, Kenya — co-ordination, Botswana
— co-ordination) or slow to start (Pakistan — textiles, Uganda — co-ordination, Malawi
— co-ordination).
Several African case studies contain examples
of co-ordination problems and failures due in part to the cost of
building appropriate institutions.
Walter Odhiambo, Paul Kamau and Dorothy
McCormick are critical of the consultative process in Kenya that
is managed through the National Committee for the WTO (NCWTO). The
membership of the national consultative body — responsible for
recommendations on all aspects of Kenya’s participation in WTO — was
based in part on its ‘enquiry point’/notification obligations under
the Uruguay Round agreements. The committee is large and hierarchically
structured, and has a heavy agenda of meetings. But without political
commitment, funding, legal status, decision-making powers or consistent
participation from the private sector it has provided limited inputs
into government decisions. For all its shortcomings, however, the
authors believe that it has had an impact on the dissemination of
information and on an increased private-sector awareness of the WTO in
Kenya.
Tonia Kandiero argues that stakeholders in Malawi
have reason to be disappointed with the organization of their
representation in the WTO, and suggests that changes are needed in the
co-ordination of technical assistance to Malawi to ensure that its need
for a better understanding of the WTO and more effective representation
can be met.
Nichodemus Rudaheranwa and Vernetta Barungi
Atingi-Ego from Uganda list six areas of investment needed to
support full participation in the WTO, and argue that developing
countries need to consider investments in trade negotiating capacity and
the resourcing of their stakeholder consultation mechanisms as a
development project, creating the institutions needed for trade-led
growth.
The case studies related to accession to the
WTO (see above) show that the process frequently leads to the creation
of organized coalitions.
An ‘agent of restraint’
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The authors of the Nigerian case study draw a lesson that may have wider
application:
Nigeria’s membership of the WTO provides it, in principle, with a strong
external trade policy surveillance mechanism. But the role of the WTO as
an ‘agent of restraint’ in favour of good trade policy is feasible
only to the extent that two important conditions are met. First, the
government whose behaviour is to be ‘restrained’ must be committed to
good trade policy and thus be willing to tie its own hand and use an
external treaty obligation to strengthen its hand against local vested
interests.
Governments are usually aware that to change a
trade measure such as a tariff, a quota or a subsidy means hurting
someone — possibly someone now relying on low-cost imports — who will
never forget the hurt. It also means helping someone else who will never
remember that the government did them a favour by raising a trade
barrier.
Thus many governments learn to be grateful
that the rules of the WTO limit what they could otherwise easily do:
lift rates of protection or give new subsidies. As a matter of fact, it
is rare that the WTO rules absolutely prohibit a government from taking
whatever action the latter deems necessary. But the role of the WTO as
an ‘agent of restraint’ in favour of good trade policy proves
valuable to governments around the world every day, because every day
governments are under pressure to raise a barrier — or simply to
maintain a barrier — to help some industry or other.
Take the case of the Philippines
customs valuation measures brought to us by Ramon L. Clarete. The case
provides a history of efforts by the Philippines government and Congress
to develop a transparent, effective means of valuing imports to ensure
that neither importers nor, potentially, customs officials could defraud
the government of its revenue from duties and that protection levels
would be maintained while the government met its obligation to base
collections on transaction values. Working within the restraints imposed
by the WTO Agreement on Customs Valuation enabled the Philippines
authorities to bypass pressure from interested lobbies and adopt a more
transparent system, with post-entry audits, that has lowered barriers to
trade and has increased customs revenue.
Two special regions
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We have taken special care in this book to
include cases from the smallest and most disadvantaged economies,
particularly the island economies of the Pacific such as Vanuatu, Papua
New Guinea and Fiji, and land-locked economies such as Botswana, Laos,
Mongolia, Nepal and Zambia.
We expected to find that these economies faced
specific problems and we hoped to find some useful ideas or perspectives
that would emerge from their common experience and help them — and
others — to find specific solutions in the future.
What we found was that these economies face
many of the same problems and opportunities as other economies, but have
fewer resources to manage them and face greater penalties if things go
wrong.
In Botswana, a land-locked economy of
southern Africa, the narrowness of the economy’s productive base and
its dependence on a very small number of export destinations has
resulted in informal and ad hoc trade policy-making, according to
Kennedy K. Mbekeani. He reports, however, that a lack of information
resources in the responsible agency — experienced personnel, analytical
capacity and relevant inputs from stakeholders — is the single biggest
challenge to the management of Botswana’s trade policy.
Botswana’s land-locked neighbour, Malawi,
has similar resource problems and similar failures of stakeholder
consultation according to Tonia Kandiero, who describes the complex of
supply-side constraints and policy shortcomings that have prevented
Malawi from taking full advantage of its WTO membership.
Small, resource-limited economies often face
difficulties in finding adequate resources to participate in
negotiations. Sanoussi Bilal and Stefan Szepesi ask whether Zambia
and Mauritius have been able to ‘economise’ on these
resources by using possible synergies between different negotiating fora
and multilateral negotiations. The issue was whether these two countries
were able to use their participation in regional negotiations under the
Southern African Development Community (SADC) and the Common Market for
Eastern and Southern Africa (COMESA) to facilitate participation in the
WTO. The answer was that little exists by way of direct impact, but that
there could be indirect synergies such as raising awareness, training,
making information available and capacity building. But the ability to
make use of these opportunities depends crucially on pre-existing
capacity, and this was clear from comparisons between Zambia and
Mauritius.
Buavanh Vilavong and his colleagues detail the
difficulties faced by the Laotian garment industry after the
garment quotas were eliminated in some of the largest export markets in
January 2005. They show how, in a small, land-locked economy that is
still on the road to WTO membership, the challenges of increasing
productivity while maintaining access to tariff preferences are linked,
creating some crucial hurdles for the industry.
Andrew Stoler paints a picture of the tough
choices facing Fiji with the erosion of sugar preferences in the
European market. Preference erosion is a widespread problem for
developing economies; Fiji has moderated it by securing the extension of
some regional preferences. But it appears that Fijians may be failing to
make the best of their options for growth due to failures of consensus
and co-ordination at a policy level.
Fiji’s approach to dealing with its many
problems compares poorly to what is happening in another small island
state, Mauritius, which, as Andrew Stoler explains, is wrestling
with many of the same kinds of issues. In Fiji, political tensions stand
in the way of successful co-operation between government and business.
In Mauritius, government and business have a long tradition of working
together for mutual benefit.
The government of Papua New Guinea (PNG),
like the governments of the other islands of the Pacific, faces a major
challenge sustaining its membership of the WTO. Despite having the
largest economy in this group, the burdens of membership weigh heavily
on PNG according to Chakriya Bowman. But, with the help of donors
including Australia and the EU and with the support of the WTO
Secretariat, the island economies of the Pacific Islands Forum have
found a unique response to this challenge to their administrative
resources: a Joint Representative Office in Geneva. Chakriya Bowman
describes a specific instance in which this joint representation has
helped the Pacific Islands Forum manage a standards-based threat to
their exports of kava to Europe.
V. Who’s in charge?
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What do these case studies tell us about the
role of the WTO in an economy’s trade policy?
There are probably as many answers to that
question in this book as there are cases: the role that the WTO plays is
subtly different in each account, depending on the history of the
economy or its economic or constitutional circumstances. But it is clear
in every case that WTO rules and WTO activities comprise only one factor
among many economic, administrative, social and even constitutional
factors that affect the way in which trade and related policies are
decided.
In several cases governments are struggling to
develop or to prosecute successful trade policies or to participate in
the WTO because they lack human, administrative or financial resources.
The challenge is particularly evident in the poorest economies such as
Malawi, Botswana and the island economy of Vanuatu. But the case studies
of Nigeria and Venezuela suggest that greater wealth does not
necessarily bring with it more successful trade policy administration.
Something else is needed.
Nor is the size of the economy necessarily an
indicator of whether it will enjoy success in the protection of its
rights or prosecution of its objectives in the WTO. We have case studies
from some of the largest economies (France, Brazil and India) that show
a sophisticated process of policy development based on contributions
from well-informed private-sector organizations and experienced trade
policy administrators. But we also have case studies — such as those
from Costa Rica, Pakistan and Thailand — that show how middle-sized and
even small economies with less experience in multilateral affairs can
achieve significant ‘wins’ in the WTO.
Cases from southern Africa and the Pacific
confirm that there is a ‘threshold’ level of the human and
administrative capacity and resources that are needed to implement WTO
agreements and to maintain an effective presence ‘at the table’ of
WTO negotiations. The Papua New Guinea case indicates that there may be
innovative ways to overcome some of these constraints, but this possible
‘exception’ only proves the rule.
Beyond that threshold, however, the case
studies in this book show over and over again that the key to the
successful management of participation in the WTO and the global trading
system is co-ordination: among government agencies (as we see in case
studies from India, Brazil and France), and between the government and
private sectors (as we see in case studies from the Philippines, India
(shrimp), Thailand, Mauritius, Costa Rica, Chile, Nepal (accession),
Pakistan (textiles) and Argentina (services)).
Cases revealing a high level of interaction,
information exchange and collaboration between business or civil society
institutions and government are all ‘success stories’. Cases where,
for a variety of reasons, this collaboration and information exchange
breaks down (Venezuela, and to a lesser extent Uruguay) or where it does
not get going (Kenya (co-ordination), Vanuatu) or where there is a
misalignment of priorities between government and the private sector
(Fiji, Canada (automobiles), Mongolia) tell a less happy story.
This common thread through the stories of
success on the one hand and failure or frustration on the other leads,
we think, to a conclusion about the role of the WTO that deserves
specific emphasis. Beyond the ‘threshold’ mentioned earlier, the
crucial factors in the success of an economy’s trade policy are home
grown. The WTO itself is not the prime determinant of whether an economy
achieves its objectives in the world trading system. The Agreements
constrain government actions in the regulation of trade, but none of
those constraints appears in any of these case studies as a hurdle for
governments or for businesses. On the contrary, where WTO members in the
stories told here directly invoke the rules (Pakistan (rice), Costa Rica
(textiles), South Korea (television)) or make use of the framework of
rules and obligations (Bangladesh (copyright), Chile (SPS)) the outcome
is positive for developing country business. Where the rules act to
constrain or direct government choices (Nigeria, Vietnam, Canada) the
constraints seem likely to lead to more opportunities for trade and
growth.
Decisions by the WTO determine the outcome in
a small number of the case studies we have collected; for example, in
some of the disputes case studies (Pakistan (textiles), Costa Rica
(textiles etc.)). But in most case studies, including some disputes that
were resolved without WTO adjudication (Thailand (tuna), Pakistan
(rice)), there is no direct intervention by the organization in the
events or trends described. The case studies tell us that the decisions
that matter to members most of the time are not made in Geneva. They are
decisions made by governments in direct contact with other members
within the framework of the WTO system, or they are decisions made
autonomously by governments about the allocation of resources within
their own economies.
Perhaps the question we should ask is not ‘who’s
in charge’ but ‘where does the responsibility lie’ for trade
policy and for achieving success in the global economy. The answer is
not — in either case — the WTO. The answer is the ‘stakeholders’
— in each member economy of the WTO, public and private sectors together.
Footnotes
1.- In this book we talk about participation of an
economy, rather than a country, in the WTO. That is because we are not
merely concerned with the way in which government actors have dealt with
issues and opportunities. In each of the case studies, it is important
to see how the government interacts with the local business community
and other civil society elements in what might be called an economy-wide
response. back to text
2.- Although it would be very unusual, not to say
difficult, for the member governments to reject a recommendation of a
panel (possibly as modified by the Appellate Body). back to text
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