Impact of WTO on developing countries

• Asif Maqbool
• Muhammad Rasheed

About two thirds of the WTO’s around 150 members are developing countries. They play an increasingly important and active role in the WTO because of their numbers, because they are becoming more important in the global economy, and because they increasingly look to trade as a vital tool in their development efforts. Developing countries are a highly diverse group often with very different views and concerns. The WTO deals with the special needs of developing countries in three ways:

•   The WTO agreements contain special provisions on developing countries

•   the Committee on Trade and Development is the main body focusing on work in this area in the WTO, with some others dealing with specific topics such as trade and debt, and technology transfer

•   The WTO Secretariat provides technical assistance (mainly training of various kinds) for developing countries.

1)  Problems faced by developing/LDCs countries

1. The agenda of the WTO, the implementation of its agreements, and the much-praised dispute settlement system all serve to advance the interests of developed countries, side lining those of the developing countries.
2. The least developed countries (LDCs) are marginalized in the world trade system, and their products continue to face tariff escalations.
3. Rules uniformly applied to WTO members have brought about inequalities because each member has different economic circumstances.

One of the commonly used yardsticks to measure the success of the WTO is the volume of world trade. The results seem excellent in this respect, with world trade up 25% in the last four years. But the benefits of increased trade are not widely shared. For example, the LDCs represent 20% of the world’s population, but they generate a mere 0.03% of the trade flows.

Although purportedly a democratic institution, the WTO is dominated by the leading industrialized countries and by the corporations of these countries. The logic of commercial trade pervades the WTO. The development goals articulated when GATT was first formed have been put aside—or are wrongly assumed to be the natural consequence of increased trade. Developing countries have little power within the WTO framework for the following reasons:

1. Although developing countries make up three-fourths of WTO membership and by their vote can in theory influence the agenda and outcome of trade negotiations, they have never used this to their advantage. Most developing country economies are in one way or another dependent on the U.S., the EU, or Japan in terms of imports, exports, aid, security, etc. Any obstruction of a consensus at the WTO might threaten the overall well-being and security of dissenting developing nations.
2. Trade negotiations are based on the principle of reciprocity or "trade-offs." That is, one country gives a concession in an area, such as the lowering of tariffs for a certain product, in return for another country acceding to a certain agreement. This type of bartering benefits the large and diversified economies, because they can get more by giving more. For the most part, negotiations and trade-offs take place among the developed countries and some of the richer or larger developing countries.
3. Developing countries have fewer human and technical resources. Many cannot cope with the 40-50 meetings held in Geneva each week. Hence they often enter negotiations less prepared than their developed country counterparts.

2) Concerns of Developing countries

 Among the WTO members, developing countries represent considerable strength. In coming days, they are expected to play even more important role in developing consensus at global front. 

  Generally speaking, the delivery of WTO technical assistance is designed to assist developing and least-developed countries and low income countries in transition to adjust to WTO rules and disciplines, it implement obligations and exercise the rights of membership, and above all it include drawing on the benefits and advantages of an open, rules based multilateral trading system. However, WTO’s advantage to developing countries seems to be restricted to official documents, which has no practical usefulness as such, it is mainly because some of the WTO agreements ignore developing countries interest.

 There are certain key issues that need to be addressed properly to protect the developing states from other giants waiting to rule the weak nations by taking the cover of WTO implementation. Moreover there are also a number of WTO obligations serving as a cover for strong alliances. Following are some of the key concerns curtailing the efforts of developing countries.

 3) Concerns against Agreement on Agriculture

Agriculture is identified as one of the key issue for developing countries under the WTO Agreements on Agriculture (AOA). This agreement focuses on four areas of reform: Market Access, Domestic Support, Export Competition and Sanitary/Phytosanitary Issue. Under the agreement, members committed themselves to reduce import tariffs, export – promoting subsidies and total aggregate support to agricultural producers. The agreement takes into account the particular needs and conditions developing countries face and therefore, allows them a more gradual course of liberalization.

 Besides presenting a favourable picture for developing countries, it has raised serious implications against developing nations. As a matter of fact Agriculture accounts for a large share of developing country’s GDP and employment ratio, while the corresponding figure for developed countries are minimal in comparison. Thus the opening up of developed countries market to agricultural products for developing states is necessary but the tariff barriers that developed industrial countries have kept under the Agreement on Agriculture have made it particularly difficult for developing countries products to reach developed nation markets. As a result, many least developing countries and developing nations are left without the foreign exchange, which they need to purchase food imports in order to feed their populations.

4) Concerns against the SPS and TBT

 The Sanitary and Phytosanitary Agreement permits countries to take measures to protect public health within their borders so long as they do so in the least trade restrictive way possible. This agreement commits members to base these measures on internationally established guidelines and risk assessment procedures.

On the other hand, the technical barriers to Trade Agreement attempts to extricate the trade facilitating aspects of standards from their trade distorting potential by obligating countries to ensure that technical regulations and product standards do not unnecessarily restrict international trade.

These agreements have raised many concerns among developing nations because of the fact that until recently standards setting has been the realm of rich and technologically advanced nations. Now the industrialized counterparts compel developing countries to adhere to standards in a more appropriate manner through implementing SPS and TBT Agreement, which as a result is expected to create discretion among developed and developing nations in standard setting. For example, a few African countries have argued that European food import standards have severely reduced their exports of food and agricultural products.

In the aftermath of liberalization undertaken during the Uruguay Round, many nations have replaced protectionist tariffs with less obvious but equally restrictive non-tariff barriers including the use and enforcement of stringent technical standards.