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Rules or Engagement?

Part II: Engagement with Developing Countries. This is Part 2 of a 2-part analysis of the upcoming WTO 8^th Ministerial Conference in December 2011.

Alisa DiCaprio

In this second of two articles, I continue my exploration of the implications of the negotiation process of the Doha Round of the WTO for trade governance.  Last month, I suggested there were two signals generated by this process. The first is that trade governance is now divided between the WTO which administers existing rules, and FTAs which create new rules.

The second signal is that the reliance on Special and Differential Treatment (SDT) to engage developing countries has allowed the creation of a governance structure that is inappropriate for many of its participants. Specifically, by adding SDT components, developed countries have been able to achieve consensus about rules that may not be suited to the development needs of many members, but which will eventually require implementation by all members.

Whittling away at the Doha Agenda

The extent to which SDT has become the default strategy for both developed and developing countries is illustrated by the progression  of topics in the Doha Round negotiations (Figure 1).

The original 2001 Doha Development Agenda included 21 negotiating topics. Of those, eight were of specific interest to developing countries (such as technical cooperation and trade facilitation). And three of the developing country topics included items of specific interest to Least Developed Countries (LDCs).

By May 2011, all topics that did not have a specific developing country focus were removed (except for environment). A month later, the only topics still being discussed were SDT issues directed at LDCs (such as duty free and quota free access and a services waiver).

The dynamics that resulted in SDT for LDCs being the only issue able to achieve broad agreement reflect the changing role of developing countries in trade governance. The ability of developing countries to maintain momentum on the issues of greatest interest to themselves underscores the increased bargaining power of both developing countries and the LDCs. The willingness of developing countries to drop all topics except for SDT indicates that the GATT dynamic—where developing countries were willing to accept new rules in return for SDT on the application of those rules—does not apply in the Doha Round. But the fact that even an LDC package that no WTO member opposes is not expected to pass a consensus vote (as the United States and other developed countries are refusing to agree without something in return) reminds us of the limits of LDC influence.

The dangers of relying on SDT

It is clear that SDT remains at the core of developing countries’ and, in particular, LDC’s negotiating objectives in the Doha Round. And there exists a general consensus around the idea that the uniform application of WTO rules is not appropriate for all members.

However, SDT was intended to be applied in a way that allowed developing countries to catch up to existing rules, not as a tool to push forward new rules. The use of SDT as a bargaining chip in return for trade rules that are not appropriate for all WTO members has generated two wider problems.

The first comes from the fact that existing WTO rules are baseline regulations which are then replicated in other trade arrangements where compliance may not be optional. When regional and bilateral trade agreements are designed, their text is generally informed by the WTO Agreements. For example, in the USA-Chile Free Trade Agreement, there is a chapter on Intellectual Property that builds on the WTO ‘standard’ intellectual property rules. But these bilateral agreements are not required to apply SDT, thus effectively holding the developing country or LDC partner to a set of standards they are not expected to meet multilaterally.

The second problem is that there are no clear benchmarks for SDT graduation. Developing countries and LDCs face a host of different types of vulnerabilities that need to be dealt with before they are equipped to fully apply their international obligations. SDT is not (intended to be) permanent and so there is some point at which developing countries and LDCs will be expected to follow rules that they were largely not involved in creating. But at what point will existing trade rules become appropriate for developing countries to follow?

A recent proposal from the European Commission (EC) to reform the EU Generalized System of Preferences (GSP) illustrates the weakness of the assumption that rules will somehow become appropriate at a fixed point. In order to focus preferences more fully on ‘those countries in need’ the EC has proposed to remove beneficiary status eligibility for high and upper-middle income developing countries. This assumes that once a country is rich, it has also become economically stable and volatility and vulnerability have been vanquished. This does not match reality.

Countercurrents

But the outcome is not all gloom and doom for developing countries. There are some important countercurrents in the WTO that, if cultivated, can move the governance system in a pro-development direction.

The first is leadership by the emerging economies. While countries like India and Brazil have actively participated in negotiations since the GATT era, the delegitimization of the Green Room process in 1999 and the increasing activity of other developing countries gives them a critical leverage point that did not exist in the past.

The second is the rise of LDC engagement. Both representation and participation in WTO activities has increased rapidly. At the 2005 Hong Kong Ministerial, almost 85 per cent of LDC WTO members submitted an official statement. This is reinforced by the consolidation of an annual LDC Ministers meeting where members work towards consolidating their positions on topics of common interest.

The Doha Round from its beginnings exhibited a tension between the goal of creating new rules to govern trade and the goal of further engaging developing countries that required exemption from these rules. The negotiation process indicates that this will not be resolved in the upcoming Ministerial Conference. But by acknowledging the signals coming from the process of negotiations, members may be able to move forward after December by seeking solutions that meet the needs of all members.

Alisa DiCaprio is a Research Fellow at UNU-WIDER.

WIDER Angle newsletter
November 2011
ISSN 1238-9544

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