Trade
and Poverty: The Doha Dilemma
Andrea Ewart
"International trade can play a major role in the promotion of economic development and the alleviation of poverty," reads the second paragraph of the Ministerial Declaration that launched the Doha Development Round of the World Trade Organization (WTO) in 2001. Accordingly, writes Tomer Broude in his article short-titled, "The Rule(s) of Trade and the Rhetos of Development," over the last few years, discussions on any one of the diverse aspects of the law and practice of the WTO often contain at least token reference to its "development dimension." In the 2005 Hong Kong Ministerial Declaration, for example, the central importance of the development dimension of the Doha Round was again emphasized. The result has been changed and raised expectations among poor countries that are slowing the progress of the Round and possibly even straining the fabric of the WTO itself.
First of all, the language used by poor and rich countries is often at odds in the trade negotiating arena. Sadly, for poor countries in sub-Saharan Africa, Asia, and the Caribbean, these exchanges are often informed by a colonial past and by current unequal relationships. The developed world says: You are underdeveloped because of corruption and the economic stranglehold by the state. You need transparency and liberalization. The developing world replies: We are underdeveloped because of the centuries of colonization and imperialism that robbed our countries and keep us poor today. When the WTO declared that it was launching a trade round that would help to address poverty, the developing world assumed that it was receiving a "round for free" that would help to address past inequities. In fact, this concept runs so counter to the WTO negotiating principle of reciprocity, which requires that concessions made to one WTO member be offered to all, that a "free round" was never a serious possibility. However, as this reality has become clearer developing countries once again feel cheated out of the promised benefits of WTO membership, making them less committed to progress in a Round that they believe is of questionable value to their development concerns.
This brings us to the dissonance in the WTO itself between its rules of trade and the very rhetoric of development. Broude discusses, among other discrepancies, the questionable value of the Generalized System of Preferences (GSP) programs, under which rich countries offer duty-free entry to developing country products on a unilateral basis, exempting developing countries from the negotiating principle of reciprocity. Aid for Trade, the Doha program being proposed for the poorest WTO members, expands on this approach by committing to provide duty-free and quota-free market access on a lasting basis, for all of their products.
However, Broude writes that these programs have a "highly indeterminate and controversial effect" in promoting development. Constantine Michalopoulos summarizes the position of two lines of inquiry that support this conclusion. One has suggested that, by not participating in the exchange of reciprocal reductions in trade barriers developing countries have missed the opportunity to negotiate for reductions in developed-country trade barriers on products of specific export interest to them. The other line of inquiry, notes Michalopoulos, believes that higher levels of protection and subsidization of exports are themselves counterproductive to development.
In fact, this author notes that even those countries that extend duty-free access on this unilateral basis have been known to question the value of such programs to their intended recipients. Furthermore, these are not truly unilateral programs as political and economic conditions are often placed on the ability of developing countries to access them. The most egregious is the U.S. Special 301 process which requires the Office of the U.S. Trade Representative (USTR) to identify and to impose sanctions on foreign countries that the USTR decides are denying adequate and effective intellectual property rights protection to U.S. companies and products. For developing countries the typical sanction is removal from or restricted access to the GSP program. In effect, then, one of the few programs intended to provide concrete benefits by rich WTO members to their poor counterparts is not only of questionable long-term value but is also used as a political rather than a developmental tool.
The dissonance within the WTO between its trade rules and poverty reduction goals is further heightened when one tries to determine the purpose of the Doha Development Round. Is it trade liberalization, or is it to address poverty, i.e. to induce development? There are those, primarily from the developed world, that try to answer this question by stating that the most viable trade tool toward development is trade liberalization. Removal by poor countries of barriers to the entry of goods and services, they argue, is the best vehicle for achieving poverty reduction and growth. A 2002 World Bank study found that tariff elimination, if implemented starting in 2004 according to the original timeline for the round, would have created developing country income gains of US $500 billion and lifted more than 300 million people out of poverty by 2015.
"Winners and Losers," a Carnegie Endowment study, projects a completely different reality. The study found that, under any plausible scenario for trade liberalization the result would be a modest one-time gain of US $40-60 billion. Gains for poor countries, the study continues, would come primarily from trade in manufactured goods. The winners of liberalization in agricultural trade, on the other hand, would be developed countries and a relatively small subset of developing countries. The biggest losers under any trade liberalization scenario, the study projects, would be the poorest countries, primarily from sub-Saharan Africa. This study dings sufficiently large holes into the "trade liberalization equals development" theory to bring us back to the question - what is the true purpose of the Doha Round? If the trade liberalization rules being proposed during the Round are of questionable value in addressing poverty, then the WTO will at some point be required to choose between using the Round to further trade liberalization or to address poverty.
This then, is the crux of the Doha dilemma. Can the WTO adequately address the development needs of its poor members without being prepared to change its rules? A trade liberalization mandate results in rules aimed at removing the barriers to the movement of goods and services, with programs for poor countries carved out as exceptions to the rules. A poverty-reduction focus, on the other hand, would be prepared to devise rules aimed at addressing the barriers that poor countries face when attempting to boost their actual exporting capacity. For example, technical, sanitary and phyto-sanitary (SPS), health, and safety requirements for entry into developed country markets create non-tariff barriers (NTBs) that can appear insurmountable. Yet, the SPS and Technical Barriers to Trade (TBT) agreements negotiated during the Uruguay Round are not open for re-negotiation during the Doha Round. Countries are being encouraged to submit requests and offers to address existing NTBs, but many of these issues are being shelved for discussion at the bilateral and regional levels. This removes one possible benefit from the round for poor countries and yet another incentive for them to participate effectively in the Round.
Thus, while the WTO remains the international forum with the most potential for addressing the trade needs of poor countries, as Broude notes there is a dissonance between its functional goals of trade liberalization and its aspirational rhetoric of development. Its rhetoric of development has ushered in a culture of expectation that applies significant pressure for change upon the functional and legal foundations of the WTO. That this rhetorical shift has largely been made in good faith and with good intentions, he concludes, will matter little when the Doha Round's results are being judged.
Andrea Ewart is a trade attorney leading a private practice Andrea M. Ewart, PC Customs & Trade Law/Consulting Services.
Sources:
Tomer Broude, "Essays on the World Trade Organization: The Rule(s) of Trade and the Rhetos of Development: Reflections on the Functional and Aspirational Legitimacy of the WTO," in Columbia Journal of Transnational Law, Vol. 45 (2007) pp. 221-261.
Constantine Michalopoulos, Developing Countries in the WTO, Palgrave Publishers (2001).
Sandra Polaski, "Winners and Losers: Impact of the Doha Round on Developing Countries," Carnegie Endowment for International Peace, (2006).
World Bank, Global Economic Prospects, (2002).