MEMORANDUM SUBMITTED BY CHRISTIAN AID
Christian Aid is the official relief and development
agency of over 40 British and Irish Churches and works with communities
overseas through local organisations.
Christian Aid has been researching and campaigning
on international trade issues for over 10 years. We work in partnership
with the Africa Trade Network, and other organisations in Asia,
Africa, Latin America and the Caribbean. Our position is that,
although we recognise the importance of an international body
to regulate trade between countries, the WTO as it currently works
has not proved itself able to regulate trade in a way that is
beneficial to development. Christian Aid believes that the WTO
needs substantial reform if it is to adequately reflect the interests
of the world's poor. Change needs to happen in two key areas:
— the procedures of the WTO need to
be changed to allow developing countries to participate fully
in discussion and decision making;
— the principles on which rules have
been made in the WTO need to be reconsidered from a development
angle, in the light of evidence on the impact of WTO rules so
far.
SUMMARY OF
RECOMMENDATIONS
As a member of the WTO, and a key country in
the European Union and the commonwealth, the UK has an important
role in the post-Seattle development of the WTO and global trade
policy. The failure of the Seattle meeting has provided all WTO
members with space for much-needed reform.
Christian Aid urges the UK Government to press
for the following reforms in the WTO and other forums:
— developing countries need to increase
their capacity to negotiate and to participate in reform of the
WTO. They have already been assisted in this by the UK and others,
but such assistance needs to be institutionalised. All WTO members
should make binding commitments to contribute to a common fund
to support the activities of developing countries in Geneva;
— WTO members should agree an upper
limit to the size of delegations;
— the way decisions are made in the
WTO needs to be changed. Members need to explore ways of ensuring
that all countries are represented at all talks. A Ministerial
meeting to discuss WTO processes should be part of this, organised
in a way that guarantees genuine participation of all WTO members;
— in order to make trade policy more
accountable and transparent, governments should disclose all advice
they have received relating to trade negotiations, and written
documents should be made public;
— members of delegations should be
accountable to society as a whole, rather than to particular interest
groups. Delegation members should therefore disclose all agreements
with and payments from private sector bodies, trade unions, NGOs
and other groups. Schedules of all meetings between delegation
members and those bodies should be made public;
— negotiating binding rules before
the WTO is reformed will simply worsen the atmosphere of suspicion
and accusation that emerged in Seattle. There should be no new
negotiations until these capacity and reform issues are addressed.
Following reform of the WTO, Christian Aid urges
the UK Government to ensure that, before any new trade negotiations,
member governments will:
— conduct a thorough assessment of
the gains and losses of trade agreements so far, including the
distribution of these between large and small firms and developing
and developed countries;
— as a part of this, industrialised
country members should commit funds to enabling evaluations of
the impact of trade liberalisation in the lease developed countries;
— take proper account of the differences
between countries. It may be necessary to expand existing provisions
for special and differential treatment to allow discrimination
between countries in order to ensure that the gains from trade
are equally distributed. Non-discrimination, as currently practised
in the WTO, has led to very unequal outcomes;
— ensure that governments retain powers
to act to guarantee that the activities of both domestic companies
and foreign investors are beneficial to their populations;
— ensure that, in any future agreements,
the rights of multinational companies are balanced by obligations
to make essential goods such as medicines available to poor communities.
INTRODUCTION
1.1 All countries and people trade, whether
it is barter between two people in a remote village, or international
trade in oil worth billions of pounds each year. Trade between
developing and developed countries is worth much more than aid
flows: the UK government gives around £3 billion in aid each
year, but trade between the UK and developing countries is worth
about 100 times that.
1.2 The WTO's objective is "to help
trade flow smoothly, freely, fairly and predictably"[47].
In the last 50 years, trade has indeed become freer from government
controls. At the end of World War Two the average tariff imposed
on goods crossing national boundaries was 40 per cent, while now
the average is around 4 per cent and falling.
1.3 During this same period, though trade
has become less restricted, it has become more unequal. The least
developed countries have been particularly disadvantaged, and
their share of world trade has halved over the last 20 years,
until the poorest 10 per cent of the world's population participate
in less than half of 1 per cent of the world's trade[48].
More trade liberalisation will not necessarily help the poorest
countries in the world. At the end of the last round of trade
talks, it was predicted that Africa would lose out even further,
suffering losses of between $300 million and $600 million per
year after the agreements were implemented[49].
1.4 By contrast, in the four years since
the end of the last round of trade talks, the world's largest
companies have seen their proportion of global wealth increase
at an ever-faster rate. In the two years before the end of the
Uruguay Round, the proportion of world GNP controlled by the 10
biggest corporations increased by about 10 per cent per year.
In the two years after the agreement, the proportion of world
GNP controlled by these companies increased by 40 per cent a year.
1.5 The dramatic increase in inequalities
between countries and companies, at the same time as trade has
become more liberalised, indicates that rapid trade liberalisation
is not necessarily of benefit to poor communities. WTO members
need to look beyond trade liberalisation, and design trade policies
which have development and poverty reduction as their main objective.
To achieve this, the WTO needs to be changed so that the governments
of the poorest countries can participate more effectively and
ensure that trade rules are right for them. So far, trade liberalisation
has brought developing countries few benefits and many costs.
2. REFORM OF
THE WTO
2.1 Although, in theory, all countries are
equal at the WTO, the reality is quite different. Developing countries
have not been able to defend their interests in the WTO. It is
expensive to maintain a permanent representative in Geneva—the
United Kingdom Government estimates that it costs around $900,000
per year to keep its mission in Geneva (not including the costs
of office buildings)[50].
2.2 Over half of the least-developed country
members of the WTO have no representation in Geneva. These countries
have a total population of 81 million people who, despite being
members, have no voice at all at the WTO. Thirty countries could
not afford to send representatives to Seattle. Those developing
countries that do have some representation in Geneva often have
only one person responsible for all negotiations in the WTO, where
there can be more than 40 meetings a week on subjects ranging
from air transport to competition policy, environmental agreements
to industrial tariffs[51].
This means that the majority of the world's population are not
represented at most of the negotiations that go on in the WTO.
By contrast, the US has over 250 negotiators in Geneva[52]
and richer countries frequently fly in technical experts to deal
with complex issues.
2.3 There is a growing perception that within
the countries that dominate the agenda in the WTO, trade policy
making is largely determined by the interests of a few corporations,
and excludes the majority of the population. During the Uruguay
Round, large companies were influential in both drafting and negotiating
deals. In agriculture, companies were involved in negotiations
from the very beginning of the process. Cargill, a US firm which
controls half the global trade in grains, was heavily involved
in the preparations for the US negotiating position on agriculture
before the last round of trade talks—with some commentators
claiming that the company wrote the first draft of the US negotiating
position[53].
2.4 TNCs were also involved in the drafting
and negotiation of agreements on intellectual property rights
and services. According to the Corporate European Observer, intellectual
property rights were put on the agenda for trade talks by a committee
of 13 major companies, including General Motors and Monsanto,
which lobbied governments to include their proposals in the Uruguay
round of trade talks[54].
In the talks that followed, 96 out of the 111 members of the US
delegation negotiating on intellectual property rights were from
the private sector[55].
In the preparations for the Seattle meeting, businesses were offered
special opportunities to meet with key negotiators in return for
donations to cover the costs of the summit[56].
2.5 Christian Aid believes that, in order
to ensure that WTO rules really are in the interests of the whole
of the world's population, delegations should be more equal in
size and more open about the contacts they have with different
lobby groups. The principles of openness and avoiding conflicts
of interest are well established in the national governments of
industrialised countries, and they need to take the lead in ensuring
that the same standards are maintained in a body which is, according
to its former director-general, "writing the constitution
of the single global economy"[57].
2.6 In the short term, the priority must
be to ensure more effective participation in the WTO by developing
countries. There is a real danger that what happened in Seattle
will undermine the WTO to the extent that it ceases to function.
If this happens, the possibility of increased protectionism in
the US and other developed countries, and of developing countries
being forced into bilateral trade deals that work against their
interests will be greatly increased. This must not be allowed
to happen. The UK should use its influence in the EU and the WTO
to press for the following reforms:
— developing countries need to increase
their capacity to negotiate and to participate in reform of the
WTO. They have already been assisted in this by the UK and others,
but such assistance needs to be institutionalised. All WTO members
should make binding commitments to contribute to a common fund
to support the activities of developing countries in Geneva;
— WTO members should agree an upper
limit to the size of delegations;
— the way decisions are made in the
WTO needs to be changed. Members need to explore ways of ensuring
that all countries are represented at all talks. A ministerial
meeting to discuss WTO processes should be a part of this, organised
in a way that guarantees genuine participation of all WTO members.
2.7 In the longer term, as trade policy
making becomes more international, the same standards that apply
to domestic policy making need to be applied to international
negotiations. As an example of "best practice", the
following recommendations adapted from the Nolan Committee's report
on Standards in Public Life[58]
seem worth considering by WTO members:
— in order to make trade policy more
accountable, governments should disclose all advice they have
received relating to trade negotiations, and written documents
should be made public;
— members of delegations should be
accountable to society as a whole, rather than to particular interest
groups. Delegation members should therefore disclose all agreements
with and payments from private sector bodies, trade unions, NGOs
and other groups. Schedules of all meetings between delegation
members and those bodies should be made public;
— for an agreed period after participating
in a delegation, or holding a post within the WTO Secretariat,
individuals should have to seek clearance from a specially constituted
body before entering employment with private companies;
— the WTO should appoint a permanent
panel in order to monitor the conduct of delegations. This panel
should have the power to investigate complaints, and to enforce
appropriate remedies.
2.8 Negotiating binding rules before the
WTO is reformed will simply worsen the atmosphere of suspicion
and accusation that emerged in Seattle. There should be no new
negotiations until these capacity and reform issues are addressed.
3. TRADE LIBERALISATION
IN THEORY
AND IN
PRACTICE
3.1 Reform of the WTO is simply a means
to an end—the end being trade agreements that will benefit
the majority of the world's population. Trade agreements made
in the WTO, and its predecessor the GATT, have until now been
dominated by a particular model of trade policy based on the economic
doctrines of free trade and the political needs of the major powers.
The result has been a selective liberalisation that has not contributed
to development, and may have actively harmed the prospects for
many developing countries.
3.2 The Uruguay Round produced the last
major international trade agreement, involving significant policy
changes for many countries. However, there has been no systematic
evaluation of the impact of the Uruguay Round agreements on developing
countries, in spite of commitments to such reviews in the agreements.
What little evidence there is indicates that the impact was at
best mixed, and at worst mainly negative[59].
Prior to any new negotiations, Christian Aid urges the UK Government
to ensure that the right lessons are learned from past trade negotiations.
In order to do this, WTO members must:
— conduct a thorough assessment of
the gains and losses of trade agreements so far, including the
distribution of these between large and small firms and developing
and developed countries;
— as a part of this, industrialised
country members should commit funds to enabling evaluations of
the impact of trade liberalisation in the least developed countries.
3.3 What is known indicates that the Uruguay
Round agreement reflected the interests of the most powerful players
in the negotiations. As a result, the agreements where heavily
biased towards industrialised countries. While developing countries
were forced to open up their markets to companies from the developed
world, often with disastrous consequences for their own producers,
even institutions like the World Bank accept privately that developed
countries gave few concessions in return.[60]
3.4 In addition, developed countries did
not eliminate the escalating tariffs which they impose against
goods from developing countries. Tariff escalation means that
processed goods are charged higher tariffs than raw materials
to enter developed countries' markets—for example, while
cocoa beans can enter industrialised countries' markets tariff
free, the average tariff on chocolate is 8 per cent. Escalating
tariffs deter countries from developing their own processing industries,
while protecting processors in developed countries. This is particularly
critical for the poorest developing countries, many of which are
still dependent on a few primary products for most of their export
earnings. The prices of these products have been falling in real
terms throughout the post-war period, and in addition are extremely
unstable from one year to the next. Tariff escalation prevents
the poorest countries from diversifying into processing enterprises
which would allow them to earn more from their natural resources,
and to maintain more steady export earnings.
3.5 Imbalances in the Uruguay Round agreement
make the EU proposal for tariff and quota free access to industrialised
countries markets for all goods from least-developed countries
of particular importance.
— Christian Aid urges the UK Government
to press the EU to implement the proposal for duty-free access
as soon as possible, and to urge other WTO members to do the same.
In addition, there are specific concerns in
a number of sectors:
TEXTILES
3.6 Developed countries have been particularly
slow in implementing agreements where these might result in gains
for developing countries. Textile manufacture is one sector in
which some developing countries have managed to build up a domestic
industry, but one which is limited by lack of export opportunities.
The agreement on textiles should have given producers in developing
countries access to the markets of industrialised countries, but
most industrialised countries have been very slow to implement
it. By 1998, the European Union had only eliminated 14 of 219
quotas on textile imports from developing countries[61].
AGRICULTURE
3.7 Trade in agriculture is of great importance
to many poor countries and communities. However, trade liberalisation
in agriculture was very selective. While developing countries
had to open up their markets for primary products, allowing the
few companies that dominate these markets to increase their share
of the market, often at the expense of smaller firms, industrialised
countries have not opened their markets to producers from developing
countries. In addition, the protection that large companies enjoy
from industrialised country governments has been maintained, while
the protections granted to smaller producers have been whittled
away.
3.8 An example of the impact of this comes
from Uganda. Uganda depends on coffee for around 70 per cent of
export earnings[62].
Since liberalisation and membership of the World Trade Organisation,
the coffee regime has been liberalised, and production has increased.
However, the benefits have not been equally distributed. According
to the World Bank, key beneficiaries have been international coffee
houses, involved in 80 per cent of production and trade of Uganda's
coffee, while Ugandan traders have been squeezed out of the market[63].
INTELLECTUAL PROPERTY
RIGHTS
3.9 In order to profit from new inventions
or the commercial exploitation of existing technologies, companies
have argued for the right to patent them, gaining exclusive rights
in the development and marketing of new products. The last round
of trade talks agreed a new regime for Trade-Related Intellectual
Property rights (TRIPs), committing all countries to implement
domestic legislation allowing any company to register patents
in a variety of sectors.
3.10 Many developing countries have spent
a sizeable part of their budgets developing new institutions to
guarantee intellectual property rights, but it is not their companies
that have benefited[64].
Rather than being a tool for the development of domestic industries
in new markets, based on domestic resources, up to 80 per cent
of patents in developing countries are held by TNCs[65].
Academics argue that "the distributional impact of TRIPs
may in practice shift resources from consumers; public-sector
and developing countries to multinational research-based industries"[66].
3.11 In practice, the TRIPs agreement has
meant that developing countries are losing control of their natural
resources to the TNCs of industrialised countries. These natural
resources, which would potentially be a way for traders in developing
countries to develop production and trade, are instead being exploited
by firms from industrialised countries, effectively ruling out
future development options for developing countries.
3.12 As well as giving them rights over
products of the future, TRIPs has been another way for big companies
to maintain market share and guarantee their prices, in ways that
are actually anti-competitive and contrary to the free-market
principles that the WTO rules are supposed to uphold. The TRIPs
agreement forces every WTO member to guarantee patents on products
for 20 years. During that time, one company can have a monopoly
on a product, preventing technology transfer and preventing the
poor from having access to it, if the monopoly lead to firms charging
higher prices.
3.13 This is particularly crucial in the
case of medicines. Facing high costs for essential drugs, governments
in developing countries have used compulsory licensing policies
and parallel imports to get access to medicines more cheaply.
Though both are currently allowed under the WTO rules, pharmaceutical
companies in industrialised countries have already used WTO agreements
to try to persuade their governments to take action against this
type of drugs policies in developing countries, arguing that they
undermine other aspects of patent protection agreed under TRIPs[67].
Many developing country governments are concerned that their rights
to get cheap medicines might be undermined[68].
THE "BUILT-IN
AGENDA"
3.14 Talks on agricultural trade are scheduled
to begin during 2000. In order to ensure that new agreements are
balanced, and developing countries benefit, developed countries
need to make commitments to reform their highly subsidised and
protected agricultural sectors. However, this should not mean
that developing countries have to give up their rights to protect
food security and promote diversification in their agricultural
sectors.
— Agricultural negotiations must proceed
on the basis of the huge differences in the agricultural sectors
of the industrialised, the middle income and the poorest countries.
3.15 Talks on services liberalisation are
also scheduled to start in 2000. Financial services activity such
as banking and insurance is overwhelmingly concentrated in industrialised
countries. Liberalisation of financial services will eventually
open up markets in all WTO member countries to these companies.
However, provision of finance by large, profit-oriented companies
may not be the best way of providing resources for development.
In many developing countries, small institutions are trying to
meet the financial needs of the poor, through micro credit schemes,
revolving loans funds and other arrangements, which differ considerably
from the way financial services are provided in industrialised
countries. An agreement on services might force developing countries
to open their markets to institutions from industrialised countries—without
being able to impose conditions ensuring that loans are available
for the poor, for small enterprises, or for key local industries.
— Financial policy is a key part of
a country's development strategy. It is essential that future
WTO agreements do not take this out of the control of governments.
3.16 Health and education services are also
potential subjects for discussion under the WTO services negotiations.
This vital sector is one that is protected from open competition
in both developing and developed countries, and most governments
regulate health and education services to achieve specific social
objectives.
— WTO agreements must not undermine
the right of governments to set their priorities for health and
education services, and control the provision of those services
in order to meet the needs of their populations.
TRADE POLICY
FOR DEVELOPMENT
3.17 The experience of liberalisation so
far shows that imposing uniform rules on all countries, without
taking proper account of differences in economic structure and
levels of development, can have negative consequences for development.
It also shows that trade liberalisation alone will not necessarily
contribute to poverty alleviation, and may worsen it. Christian
Aid urges the UK Government to look beyond trade liberalisation,
and instead to make trade policy which will:
— take proper account of the differences
between countries. It may be necessary to expand existing provisions
for special and differential treatment to allow discrimination
between countries in order to ensure that the gains from trade
are equally distributed. Non-discrimination, as currently practised
in the WTO, has led to very unequal outcomes;
— ensure that governments retain powers
to act to guarantee that the activities of both domestic companies
and foreign investors are beneficial to their populations;
— ensure that, in any future agreements,
the rights of multinational companies are balanced by obligations
to make essential goods such as medicines available to poor communities.
3.18 Trade can contribute to development
only if the benefits of trade are spread among the majority of
the world's population, rather than concentrated in the hands
of a few individuals and corporations. In the long term, global
economic management will have to address the increasingly important
role of the TNCs in the international economy. This will be particularly
important for the least developed countries.
3.19 The rules made in the WTO should attempt
to reconcile the interests of people and of corporations. Governments
regulate at the national level to control restrictive business
practices, protect consumers and distribute wealth from rich to
poor. As economic activity becomes increasingly globalised, we
need to look at how we can regulate business activity at the international
level. A reformed WTO will be an important part of any such attempt.
— Christian Aid therefore urges the
UK Government to begin consideration, and discussions inside the
EU and with other governments on this issue, with the ultimate
aim of establishing institutions to control the activities of
TNCs at a global level where appropriate, including regulating
global anti-competitive practices and restrictive business practices.
Christian Aid
January 2000
47 World Trade Organisation, "Introducing the
WTO", Geneva, 1998. Back
48
Wickrema, S & P Madden, "The Lands that Trade Forgot",
Christian Aid, 1996. Back
49
Weston A, The Uruguay Round: Costs and Compensation for Developing
Countries, in International Monetary and Financial Issues for
the 1990s, Vol VII, UNCTAD: Geneva, 1996. Back
50
Department of Trade and Industry, written answers to questions
from UK Trade Network, September 1999. Back
51
Independent on Sunday, 18 July 1999. Back
52
World Development Movement, "Multinationals and the World
Trade Organisation", September 1999. Back
53
John Madeley, Big Business, Poor Peoples: The Impact of Transnational
Corporations on the World's Poor, London: Zed Press, 1999,
p 38. Back
54
Corporate Europe Observer, Issue 4, July 1999. Back
55
Ibid. Back
56
"Gates offers Ministers for Sale at World Trade Conference",
Independent on Sunday, London, 22 August 1999. Back
57
Renato Ruggerio, speech to UNCTAD Trade and Development Board,
8 October 1996. Back
58
HMSO, First Report of the Nolan Committee on Standards in Public
Life, 1996. Back
59
Eg, United Nations Development Programme, Human Development Report
1997, New York/Geneva; United Nations Conference on Trade and
Development, 1996, Globalisation and Liberalisation: The effect
of international economic relations on poverty, New York/Geneva;
Food and Agriculture Organisation, "Experience with the Implementation
of the Uruguay Round Agreements on Agriculture: Developing Country
Experiences", paper presented at FAO symposium on Agriculture,
Trade and Food Security, Geneva 23-24 September 1999. Back
60
At a meeting to launch the World Bank's World Development Report
for 1999, one of the reports authors commented that developing
countries had been "taken to the cleaners" during the
Uruguay Round. Back
61
United Nations Conference on Trade and Development (UNCTAD), The
Least Developed Countries 1998 Report, New York/Geneva. Back
62
Prakash S and M Kostecki, World Bank/WTO, Trade and Development
Case Studies, Uganda Case Study, World Trade Organisation: Trade
and Development Centre, 1997, p. 2. Back
63
Ibid, p. 4. Back
64
Fingler J and P Schuler, "Implementation of Uruguay Round
Commitments: The Development Challenge", World Bank, 1999. Back
65
Corporate Europe Observer, Issue 4, July 1999. Back
66
Koivusalo M, "World Trade Organisation and Trade-Creep in
Health and Social Policy", GASPP, Helsinki/Sheffield, 1999,
p 26. Back
67
The Guardian, London, 10 August 1999; ACTSA news, "AIDS
drugs trade row", Autumn 1999. Back
68
Inter Press Service, Health: Developing Nations see Trade Battle
on HIV Drugs, 27 October 1999. Back
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