Nadia Shash

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I. Introduction

Prior to the advent of exploration, various states, tribes, and kingdoms had already adopted a practice of product exchange, known as the “barter” trade. As the age of exploration and colonialism begun, powerful European countries had gain control of the riches of their colonial domains. This paved the way for the triumph of mercantilism, a system based on the idea of “bullionism” or the accumulation of as much metal and other priced valuables. During the colonial era, European powers enjoyed a substantial dominance of the world’s wealth as they had direct access and control of the resources of their colonized lands. They also enjoyed the monopoly of various commodities, and a one-sided trade that further enhanced their dominance of political and economic authority. The Industrial Revolution paved the way for the gradual decline of mercantilism and the introduction of a short-lived free trade era. This was ushered by Great Britain’s move “to eradicate industrial regulations, colonial preferences, and protective tariffs” (Minyard, 1997). This era was abruptly replaced due to the events leading to the Depression of 1870’s, and the eventual World Wars. During the wartime period, world trade is at its lowest because of the monopoly of specific goods by individual countries to weaken the supply of others. Such hoarding was part of the military schemes of countries participating in the war. After World War II, various heads of states met in Bretton Woods to draft an economic plan that would ease the economic slump of the time. It paved the way for the creation of the International Monetary Fund and the World Bank in 1944, and subsequently, the General Agreement on Trade and Tariffs (GATT) in 1947. The GATT replaced the ITO, a short-lived international economic forum, which failed to materialize because of the non-inclusion of the United States, the only remaining economic power at that time. GATT was a “conduct of multilateral negotiations on a variety of international trade issues, including tariff and quota policy and other trade practices” (Woellert, 1995). The GATT rallied on tariff reduction from 40% during the 30’s to a stable 5% during the 80’s. However, it was more of a Western bloc amidst the membership of Japan and other minor economies. And because of its inability to meet the new demands of the age, for instance on, “non-border measures, trade and services, intellectual property rights, and trade-related investments”

(Minyard, 1997), it was replaced. During the signing of the Marrakesh Protocol to GATT 1994, the World Trade Organization was born.

II. The WTO

The World Trade Organization is a bloc of nations created for the integration and development of global trade. The significance and purpose of the organization are expressed in its principles and they are as follows:

1. Trade without discrimination

This operates through the “Most-Favored nation Treatment” adopted by the WTO. This inhibits discrimination between and against trading partners. An illustration of this is when a nation apply a grant or favor to another country, it should grant the same favor to all other WTO member states. This is expressed in: Article I of the GATT, Article II of the General Agreement on Trade and Services (GATS), and the

Article IV of the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). It also upholds the idea of “national treatment”, that provides for equal treatment of all local and foreign goods, including trademarks, and patents.

2. Freer trade through negotiations

To further enhance international trade, member countries should agree on decreasing customs duties or tariffs, as well as non-tariff barriers such as import bans or quotas. Issues such as red tape and foreign exchange rate policies are also included here. As a result of such negotiations, tariff rates on industrial goods are dropped to an average of 4%.

3. Predictability through binding and transparency

The alteration, increasing or decreasing, of tariff and non-tariff barriers should be adopted after proper introduction to all parties involved to achieve economic security on the part of individual nations, companies, and foreign investors. All member countries should be committed to bind themselves on all the provisions laid down by the organization to achieve transparence and boost international trading.

4. Promotion of fair trade and competition

In the promotion of fair trade and business opportunities for all member states, the WTO prohibits unjust practices such as exporting at extremely low cost in their attempt to gain a bigger market share and imposing unfair subsidies on some commodities. WTO imposes these measures to allow fair trade by sanctioning unfair trade of additional import charges, thus discouraging member states to adopt these practices.

5. Encourage development and economic reforms

Since ¾ of the WTO member nations are on the process of developing, the WTO commits itself in the assistance of developing members to achieve economic growth by providing them with special privileges, and treating them with more flexibility and at times leniency.

III. The Developing Countries in the WTO

Prior to the developed/developing classification, nations are differentiated as First World, Second World, and Third World. The Third World which are mostly classified today as the developing countries are those in the process of achieving economic growth. Developing countries have an annual per-capita income of $8900, low productivity rates, and low standards of living (literacy, health, etc.). They are further classified into: (1)

Low-income countries, GNP per capita of $725 including China, Laos, Cambodia, former

Soviet states, most African States; (2) Lower-middle income, GNP per capita of $725$2895 including the Philippines, Thailand, Belarus, Russia etc.; and (3) Upper-middle income, with GNP per capita of $2896-8955 including Argentina, Greece, Malaysia, Mexico etc. (http://www.biology-online.org/dictionary/developing_countries).

Lower to middle income countries are allowed to cast themselves as developing by the WTO. However, those in the lowest income strata are classified according to the Least-Developed countries of the United Nations.

All 137 member countries or roughly ¾ of the entire WTO states fall in the category of developing countries. With their size, and growing economic size, the WTO provides particular importance to them. Developing countries perceive the WTO as an instrument to boost their international trading, an important factor in their hopes for economic growth.

Developing countries enjoy equal treatments in the WTO, allowing them to participate in all activities of the forum regardless of their relatively small economic size. They also have preferential rights that are not given to developed countries to further assist them in their economic efforts.

Such preferential treatment includes technical assistance and training period given by the WTO Secretariat. A longer term of agreement implementation is also allowed for developing members. There are special provisions and specifications designed in the regulations of the organization that is beneficial to the status of developing members. Other benefits include debt assistance, technological transfers, and infrastructure investments. The following categories of such treatment are listed:

IV. Inter-Trade Laws of the WTO for Developing Countries

The primary rulings are expressed in the General Agreements on Tariffs and

Trade, General Agreement on Trade in Services, and the Trade-Related Aspects of Intellectual property Rights. There are also certain agreements and annexes that are geared for specific issues confronted by particular concerned parties or sectors. Lastly are the lists of commitments by particular countries with respect to permissions granted to foreign goods or services that will allow member countries to conduct trade with other members as long as it does not violate the “Most-Favored Nation Treatment” principle of the organization.

In a broader sense, we shall discuss the provisions in line with the WTO’s original draft of rulings, and it is as follows:

1. Favorable treatment aimed at increasing trade opportunities

1. Article 28 of GATT (1994) – WTO committed itself in “the reduction and elimination of boundaries to products of particular export interest to developing nations including tariff and non-tariff restrictions between such products in their primary and processed forms.”
2. 1979 Decision on Differential and More Favorable Treatment – WTO seeks to provide preferential tariff treatment to developing countries from developed members. It allows developing members to enter other regional arrangements aimed at eliminating tariff and trade barriers.
3. Article IV of GATS – It strengthens the domestic service capacity, efficiency and competitiveness of developing members by providing them with easy access to technology on a commercial basis. This measure is crafted for the liberalization of the developing members’ access to the market.

2. Provisions to safeguard the interests of developing members

a. Anti-Dumping Agreement – Special consideration must be given to developing countries in the application of anti-dumping measures if it would be detrimental to their interests.

        b.   Agreement on Subsidies and Countervailing Measures

• Agreement on Safeguards – Aimed that “safeguard measures shall not be applied against a product of a developing country if the product does not exceed 3% of the members’ share import.”
• TBT Agreement – In “the creation and implementation of technical regulations such as standards and conformity, the trade needs of developing countries must be considered.”
• SPS Agreement – In “drafting sanitary and phytosanitary measures, the interest of developing countries must be considered.”

3. Provisions allowing flexibility in the use of economic and commercial policy

1. Agreement on Agriculture – Provides exemption of some agricultural products from developing countries from support reduction commitments. It states that food products at subsidized prices should not be subjected to reduction commitments to achieve the food requirements of developing nations.
2. Article XVIII of the GATT – Allows the developing country to control the number of products to be imported to maintain its foreign exchange reserves in support of their measures of development.
3. Article XXXVI – “Non- reciprocity of trade negotiations among developed and developing countries.”
4. GATS – In transactions yielded for the procedure of liberalization, required flexibility for individual developing members should be applied.

4. Provisions allowing longer transitional periods to developing countries

1. Agreement on Agriculture – Developing countries are allowed to defer the implementation of the reduction commitments to 10 years, as against the 6 years for developed countries.
2. Agreement on Customs Valuation – Allows developing countries to defer the custom valuation commitments agreed during the TOKYO Round Agreement for 5 years.
3. TRIPS Agreement – Patent and copyrighted product agreements are deferred for 5 years among developing members.

V. Analysis and Conclusion: Effects of the WTO Laws to Developing Countries

The WTO clearly outlined measures to protect developing countries, constituting the biggest bulk of the member-nations, against probable and exploitation and discrimination of their more developed counterparts. The resolutions stated in the legislative arms of the institution are suited enough to the needs of the developing nations. For instance, the “Most-Favored Nation Treatment” is a good move as it prohibits granting special favors to a fortunate few. It also cradles “National Treatment” which seeks to attain equal footing of both foreign and locally produced goods and services. The primary goal of the organization is to promote a more dynamic trade relation amongst member nations, big or small, affluent or poor, developed or otherwise. To achieve this, WTO, through the provisions expressed in the GATT, moves to lower the barriers of free trade. The main culprits are the tariff and non-tariff barriers that decrease the propensity for countries to conduct lively trading concessions with their counterparts. The systematic and substantial decrease of customs duties and the abolition of some importation blockades, bans, or quota requirements, resulted to a more positive outlook on international trading as a whole. Also, the “Special and Differential treatment” availed by developing and least-developed nations are pivotal in their moves to eradicate poverty and raise the standards of living of their nations. As it provides them with more leniencies whenever they fail to meet their agreements and commitments to more developed members of the organization. The economic aids or grants which include the access to technology and foreign direct investments by the developed members to their developing counterparts are also worth noting. As the end effect of these technological and capital resources are beneficial to the reforms needed in the economic systems of developing nations. The aforementioned cases feature the ideal scenario that the provisions of the World Trade Organization wish to achieve. However, with regards to whether or not, the provisions laid down are properly executed and clearly adopted, reality tells otherwise.

With all the supposed special treatments and more favorable results for the developing and underdeveloped worlds, critics argue that the WTO failed to materialize its original vision of a more dynamic and healthy global trade. Imbalance of trade favoring the affluent developed countries is the actual and continuing trend of international trade. How can the bananas of the Philippines compete with the automobiles and electronics of the United States? The costs of agricultural products which are the main exports of most developing nations are very minimal compared to the high-end exports of developed nations. Moreover, the competition among WTO members drags the prices of the commodities, for instance the price Thai or Indian rice may be hampered by the cheaper price of rice produced in China. In this case, other nations would prefer to import Chinese rice and would kill the rice industry of Thailand and India. The promise of faster and cheaper technological and capital resources is but a promise that has yet to be realized. It’s a very rational hypothesis if we shall reflect on the actual state of the developing world, where technology is meager compared to those of developed nations.

The capitalist orientation of the WTO is also the subject of attack by the radical groups, both rightist and leftist. They associate capitalism with the exploitation of less developed countries. And reality adheres to their views. Developed countries grow richer while developing and underdeveloped nations remain enslaved by poverty that they somehow became accustomed to. For instance, when a foreign firm is given a concession on the mining industry of a developing nation, they can exploit the resources of that nation, in return of providing employment or a sum of money, which is very minimal compared to the revenues that the company would eventually earned. With regards to eradicating poverty endemic in developing nations, the WTO only worsen their plight. For instance, instead of allocating funds to the improvement of the services in developing nations, they rather pay for the ever-increasing interest of their external debts using their important and little foreign exchange reserves. This is associated with the WTO since IMF and WB are its wings. Overall, the WTO has more negative than positive effects to developing nations.

There are differences in the initial conditions of developed and developing nations. The Developed nations were not subjected to colonialism and had the technology during their industrialization, not to mention the monopoly of resources and market share of their colonies. WTO should realize this! So if it’s really sincere in improving the capacity of developing nations to advance in global trade, they should really implement the provisions provided in the GATT, GATS, and TRIPS. But even those are not enough. Technology should be made available to them at the same advantage that developed nations exploited and manipulated the resources and weaknesses of their formerly colonized lands and maintained territories. External debts should be abolished! Payments for external debts constitute a big bulk in the meager national budgets of developing nations. They could very well use the funds in improving technology and infrastructure, or improving public services, which could result to higher productivity and economic development. Thus, they could be competitive in international trade!

Works Cited:

Heaton, Herbert. “Mercantilism.”, Vol.15, Colliers Encyclopedia CD-ROM, 1996 ed.

Minyard, Allan. “The WTO: History, Structure, and Analysis.” 1997.

Woellert, Lorraine. “WTO Still Trying To Find Its Way.” The Washington Times, June 2, 1996, pp18.

http://www.biology-online.org/dictionary/developing_countries

http://www.wto.org/english/thewto_e/whatis_e/eol/e/wto01/wto1_18.

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