10 Common Misunderstanding about WTO
by: Aprilia Gayatri | Total views: 104 | Word Count: 2975 | View PDF | Print View
10 Common Misunderstanding about WTO
Is it a
dictatorial tool of the rich and powerful? Does it destroy jobs? Does it ignore
the concerns of health, the environment and development?
Emphatically no. Criticisms of the WTO
are often based on fundamental misunderstandings of the way the WTO works.
The debate will probably never end. People have different views of the pros and
cons of the WTO’s “multilateral” trading system. Indeed, one of the most
important reasons for having the system is to serve as a forum for countries to
thrash out their differences on trade issues. Individuals can participate, not
directly, but through their governments.
However, it is important for the debate to be based on a proper understanding
of how the system works. This booklet attempts to clear up 10 common
misunderstandings.
The 10 misunderstandings
1. The WTO dictates policy
2. The WTO is for free trade at any
cost
3. Commercial interests take
priority over development …
4. … and over the environment
5. … and over health and safety
6. The WTO destroys jobs, worsens
poverty
7. Small countries are powerless in
the WTO
8. The WTO is the tool of powerful
lobbies
9. Weaker countries are forced to
join the WTO
10. The WTO is undemocratic
1. The
WTO does NOT tell governments what to do
The WTO does not tell
governments how to conduct their trade policies. Rather, it’s a “member-driven”
organization.
The WTO is
member-driven
That means:
- the rules of the WTO system are agreements
resulting from negotiations among member governments, - the rules are ratified by members’
parliaments, and - decisions taken in the WTO are virtually all
made by consensus among all members.
In other words,
decisions taken in the WTO are negotiated, accountable and democratic.
The only
occasion when a WTO body can have a direct impact on a government’s policies is
when a dispute is brought to the WTO and if that leads to a ruling by the
Dispute Settlement Body (which consists of all members). Normally the Dispute
Settlement Body makes a ruling by adopting the findings of a panel of experts
or an appeal report.
Even then, the
scope of the ruling is narrow: it is simply a judgement or interpretation of
whether a government has broken one of the WTO’s agreements—agreements that the
infringing government had itself accepted. If a government has broken a
commitment it has to conform.
In all other
respects, the WTO does not dictate to governments to adopt or drop certain
policies.
As for the WTO
Secretariat, it simply provides administrative and technical support for the
WTO and its members.
In fact: it’s
the governments who dictate to the WTO.
2. The
WTO is NOT for free trade at any cost
It’s really a
question of what countries are willing to bargain with each other, of give and
take, request and offer.
It
all depends on what countries want to bargain
es, one of the
principles of the WTO system is for countries to lower their trade barriers and
to allow trade to flow more freely. After all, countries benefit from the
increased trade that results from lower trade barriers.
But just how low
those barriers should go is something member countries bargain with each other.
Their negotiating positions depend on how ready they feel they are to lower the
barriers, and on what they want to obtain from other members in return. One
country’s commitments become another country’s rights, and vice versa.
The WTO’s role
is to provide the forum for negotiating liberalization. It also provides the
rules for how liberalization can take place.
The rules
written into the agreements allow barriers to be lowered gradually so that
domestic producers can adjust.
They have
special provisions that take into account the situations that developing
countries face. They also spell out when and how governments can protect their
domestic producers, for example from imports that are considered to have
unfairly low prices because of subsidies or “dumping”. Here, the objective is
fair trade.
Just as
important as freer trade — perhaps more important — are other principles of the
WTO system. For example: non-discrimination, and making sure the conditions for
trade are stable, predictable and transparent.
3. The
WTO is NOT only concerned about commercial interests. This does NOT take
priority over development
The WTO
agreements are full of provisions taking the interests of development into
account
Sustainable
development is a principal objective
Underlying the
WTO’s trading system is the fact that freer trade boosts economic growth and
supports development. In that sense, commerce and development are good for each
other.
At the same
time, whether or not developing countries gain enough from the system is a
subject of continuing debate in the WTO. But that does not mean to say the
system offers nothing for these countries. Far from it. The agreements include
many important provisions that specifically take developing countries’
interests into account.
Developing
countries are allowed more time to apply numerous provisions of the WTO
agreements. Least-developed countries receive special treatment, including
exemption from many provisions.
The needs of
development can also be used to justify actions that might not normally be
allowed under the agreements, for example governments giving certain subsidies.
And the
negotiations and other work launched at the Doha Ministerial Conference in
November 2001 include numerous issues that developing countries want to
pursue.
4. In
the WTO, commercial interests do NOT take priority over environmental
protection
Many
provisions take environmental concerns specifically into account.
The preamble of
the Marrakesh Agreement Establishing the World Trade Organization includes
among its objectives, optimal use of the world’s resources, sustainable
development and environmental protection.
This is backed
up in concrete terms by a range of provisions in the WTO’s rules. Among the
most important are umbrella clauses (such as Article 20 of the General
Agreement on Tariffs and Trade) which allow countries to take actions to
protect human, animal or plant life or health, and to conserve exhaustible
natural resources.
Beyond the broad
principles, specific agreements on specific subjects also take environmental
concerns into account. Subsidies are permitted for environmental protection.
Environmental objectives are recognized specifically in the WTO agreements dealing
with product standards, food safety, intellectual property protection, etc.
In addition, the
system and its rules can help countries allocate scarce resources more
efficiently and less wastefully. For example, negotiations have led to
reductions in industrial and agricultural subsidies, which in turn reduce
wasteful over-production.
A WTO ruling on
a dispute about shrimp imports and the protection of sea turtles has reinforced
these principles. WTO members can, should and do take measures to protect endangered
species and to protect the environment in other ways, the report says. Another
ruling upheld a ban on asbestos products on the grounds that WTO agreements
give priority to health and safety over trade.
What’s important
in the WTO’s rules is that measures taken to protect the environment must not
be unfair. For example, they must not discriminate. You cannot be lenient with
your own producers and at the same time be strict with foreign goods and
services. Nor can you discriminate between different trading partners. This
point was also reinforced in the recent dispute ruling on shrimps and turtles,
and an earlier one on gasoline.
Also important
is the fact that it’s not the WTO’s job to set the international rules for
environmental protection. That’s the task of the environmental agencies and
conventions.
An overlap does
exist between environmental agreements and the WTO — on trade actions (such as
sanctions or other import restrictions) taken to enforce an agreement. So far
there has been no conflict between the WTO’s agreements and the international
environmental agreements.
5. The
WTO does NOT dictate to governments on issues such as food safety, and human
health and safety. Again commercial interests do NOT override
The
agreements were negotiated by WTO member governments, and therefore the
agreements reflect their concerns.
Safety
concerns are built into the WTO agreements
Key clauses in
the agreements (such as GATT Art. 20) specifically allow governments to take
actions to protect human, animal or plant life or health. But these actions are
disciplined, for example to prevent them being used as an excuse for protecting
domestic producers — protectionism in disguise.
Some of the
agreements deal in greater detail with product standards, and with health and
safety for food and other products made from animals and plants. The purpose is
to defend governments’ rights to ensure the safety of their citizens.
As an example, a
WTO dispute ruling justified a ban on asbestos products on the grounds that WTO
agreements do give priority to health and safety over trade.
At the same
time, the agreements are also designed to prevent governments setting
regulations arbitrarily in a way that discriminates against foreign goods and
services. Safety regulations must not be protectionism in disguise.
They must be
based on scientific evidence or on internationally recognized standards.
Again, the WTO
does not set the standards itself. In some cases other international agreements
are identified in the WTO’s agreements. One example is Codex Alimentarius,
which sets recommended standards for food safety and comes under the UN Food
and Agriculture Organization (FAO) and World Health Organization (WHO).
But there is no
compulsion to comply even with internationally negotiated standards such as
those of Codex Alimentarius. Governments are free to set their own standards
provided they are consistent in the way they try to avoid risks over the full
range of products, are not arbitrary, and do not discriminate.
6. The
WTO does NOT destroy jobs or widen the gap between rich and poor
The
accusation is inaccurate and simplistic. Trade can be a powerful force for
creating jobs and reducing poverty. Often it does just that. Sometimes
adjustments are necessary to deal with job losses, and here the picture is
complicated. In any case, the alternative of protectionism is not the solution.
Take a closer look at the details.
The relationship
between trade and employment is complex. So is the relationship between trade
and equality.
Freer-flowing and
more stable trade boosts economic growth. It has the potential to create jobs,
it can help to reduce poverty, and frequently it does both.
The biggest
beneficiary is the country that lowers its own trade barriers. The countries
exporting to it also gain, but not as much. In many cases, workers in export
sectors enjoy higher pay and greater job security.
However,
producers and their workers who were previously protected clearly face new
competition when trade barriers are lowered. Some survive by becoming more
competitive. Others don’t. Some adapt quickly (for example by finding new
employment), others take longer.
In particular,
some countries are better at making the adjustments than others. This is partly
because they have more effective adjustment policies. Those without effective
policies are missing an opportunity because the boost that trade gives to the
economy creates the resources that help adjustments to be made more easily.
The WTO tackles
these problems in a number of ways. In the WTO, liberalization is gradual,
allowing countries time to make the necessary adjustments. Provisions in the
agreements also allow countries to take contingency actions against imports
that are particularly damaging, but under strict disciplines.
At the same
time, liberalization under the WTO is the result of negotiations. When
countries feel the necessary adjustments cannot be made, they can and do resist
demands to open the relevant sections of their markets.
There are also
many other factors outside the WTO’s responsibility that are behind recent
changes in wage levels.
Why for example
is there a widening gap in developed countries between the pay of skilled and
unskilled workers? According to the OECD, imports from low-wage countries
account for only 10–20% of wage changes in developed countries. Much of the
rest is attributable to “skill-based technological change”. In other words,
developed economies are naturally adopting more technologies that require
labour with higher levels of skill.
The alternative
to trade — protection — is expensive because it raises costs and encourages
inefficiency. According to another OECD calculation, imposing a 30% duty on
imports from developing countries would actually reduce US unskilled wages by
1% and skilled wages by 5%. Part of the damage that can be caused by
protectionism is lower wages in the protectionist country.
At the same
time, the focus on goods imports distorts the picture. In developed countries,
70% of economic activity is in services, where the effect of foreign competition
on jobs is different — if a foreign telecommunications company sets up business
in a country it may employ local people, for example.
Finally, while
about 1.15 billion people are still in poverty, research, such as by the World
Bank, has shown that trade liberalization since World War II has contributed to
lifting billions of people out of poverty. The research has also shown that it
is untrue to say that liberalization has increased inequality.
7. Small
countries are NOT powerless in the WTO
Small countries
would be weaker without the WTO. The WTO increases their bargaining power.
Everyone
has to follow the same rules
In recent years,
developing countries have become considerably more active in WTO negotiations,
submitting an unprecedented number of proposals in the agriculture talks, and
working actively on the ministerial declarations and decisions issued in
in November 2001. They expressed satisfaction with the process leading to the
this bears testimony to their confidence in the system.
At the same
time, the present rules are the result of multilateral negotiations (i.e.
negotiations involving all members of GATT, the WTO’s predecessor). The most
recent completed negotiation, the Uruguay Round (1986–94), was only possible
because developed countries agreed to reform trade in textiles and agriculture
— both issues were important for developing countries.
In short, In the
WTO trading system, everyone has to follow the same rules.
As a result, in
the WTO’s dispute settlement procedure, developing countries have successfully
challenged some actions taken by developed countries. Without the WTO, these
smaller countries would have been powerless to act against their more powerful
trading partners.
8. The
WTO is NOT the tool of powerful lobbies
The WTO
system offers governments a means to reduce the influence of narrow vested
interests.
Governments
can use the WTO to resist lobbying
This is a
natural result of the “rounds” type of negotiation (i.e. negotiations that encompass
a broad range of sectors).
The outcome of a
trade round has to be a balance of interests. Governments can find it easier to
reject pressure from particular lobbying groups by arguing that it had to
accept the overall package in the interests of the country as a whole.
A related
misunderstanding is about the WTO’s membership. The WTO is an organization of
governments.
The private
sector, non-governmental organizations and other lobbying groups do not
participate in WTO activities except in special events such as seminars and
symposiums.
They can only
exert their influence on WTO decisions through their governments.
9. Weaker
countries do have a choice, they are NOT forced to join the WTO
Most
countries do feel that it’s better to be in the WTO system than to be outside
it. That’s why the list of countries negotiating membership includes both large
and small trading nations
Countries
willingly want to join
The reasons are
positive rather than negative. They lie in the WTO’s key principles, such as
non-discrimination and transparency. By joining the WTO, even a small country
automatically enjoys the benefits that all WTO members grant to each other. And
small countries have won dispute cases against rich countries — they would not
have been able to do so outside the WTO.
The alternative
would be to negotiate bilateral trade agreements with each trading partner.
That could even include regularly negotiating the renewal of commitments to
treat trading partners as equals.
For this,
governments would need more resources, a serious problem for small countries.
And in bilateral negotiations smaller countries are weaker.
By joining the
WTO, small countries can also increase their bargaining power by forming
alliances with other countries that have common interests.
10. The
WTO is NOT undemocratic
Decisions in
the WTO are generally by consensus. In principle, that’s even more democratic
than majority rule because no decision is taken until everyone agrees
Decisions
are by consensus. Agreements are ratified in parliaments.
It would be
wrong to suggest that every country has the same bargaining power.
Nevertheless, the consensus rule means every country has a voice, and every
country has to be convinced before it joins a consensus. Quite often reluctant
countries are persuaded by being offered something in return.
Consensus also
means every country accepts the decisions. There are no dissenters.
What is more,
the WTO’s trade rules, resulting from the Uruguay Round trade talks, were
negotiated by member governments and ratified in members’ parliaments.
From WTO Website
http://www.wto.org
About the Author
Aprilia Gayatri
NPM : A10.05.0201
Fakultas Hukum Universitas Padjadjaran, Bandung.
E-m@iL :
apienx_mail@yahoo.com
apienxmail@gmail.com
Blog :
http://binchoutan.wordpress.com
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