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TRADE: “African States Need Advice Body Outside WTO for Talks”

Isolda Agazzi

GENEVA, Nov 24 2009 (IPS) - Since before the creation of the World Trade Organisation (WTO) in 1995, two groups of people have confronted each other: supporters of trade liberalisation, who regard the pursuit of growth as paramount, and opponents of trade liberalisation, who see unfettered trade as the cause of many socio-economic problems.

But since the eruption of the economic crisis last year, a new group is starting to emerge: those who believe that the old model is dead and that the WTO can contribute to poverty alleviation and environmental protection, provided it is reformed. Or, rather, that it returns to its original mandate.

“The objective of the WTO, as inscribed in its charter, is to achieve sustainable development. Yet the international trade regime has lost its initial mandate and aspiration and falled into blind orthodox liberalism, departing from embedded liberalism,” according to the report titled “A Sustainable Development Roadmap for the WTO”.

This new study by the International Institute for Sustainable Development (IISD) was recently launched in Geneva. The IISD is a Canada-based, globally operating non-profit policy research institute that promotes policies with a focus on the global economy, environment and “social well-being”.

“Italy is greatly concerned about the waves of illegal immigrants that wash up on its shores and yet little or no consideration is given in Italy’s trade policy debate to the need to help African countries use trade to build economies that might offer an alternative to these same immigrants,” says Mark Halle, IISD’s Europe representative and trade and investment director.

To contribute to the achievement of sustainable development, the WTO has to undertake some major reforms. Among others, the study argues that developing countries need trade-related technical assistance to implement their trade law obligations and to utilise the dispute settlement mechanism.

The cost of pursuing a dispute settlement – 500,000 dollars on average — is prohibitively high for small economies, which have to hire foreign legal experts and pay them Northern wages.

Developing countries can barely afford to retaliate against powerful ones, as shown by the reluctance of African states to use the dispute settlement mechanism against the U.S. for its illegal subsidies to cotton producers. The study suggests the possibility of imposing monetary penalties on non-complying states or to allow cross-retaliation.

In the cotton case, the U.S. was found guilty by the WTO appellate body in 2005 in a dispute against Brazil but it has never complied with the ruling. Recently, an arbitration panel has allowed Brazil to pursue retaliation against the U.S. in other sectors (intellectual property and services).

But for African countries, it would be difficult even to cross-retaliate. Monetary compensation could be a possible way out.

The study also suggests making public the hearings of the dispute settlement deliberations, which would allow civil society groups to monitor the activities of government representatives in Geneva.

Another key issue is accession. Among the 29 countries currently seeking accession to the WTO, seven are African. These are Algeria, Sudan, Ethiopia, Libya, Equatorial Guinea, Comoros and Liberia.

The problem is that the accession process is very slow and developing countries end up taking on commitments that are more stringent than those of existing members. For example, recently acceded least developed countries have cut their tariffs even more than developed countries that are already WTO members.

The study sees a possible way out in a new agreement on accession that lays out objective criteria and avoids the country-by-country bargaining currently taking place.

Negotiations are another key problem, as show by the Doha Round where each country is seeking the best possible solution for itself. This contradicts the principles of “special and differential treatment” and “less than full reciprocity” for developing countries as inscribed in the Doha declaration.

“The WTO is not serving its mandate,” argues IISD environmental economist Aaron Cosbey, author of the report. “We still come back with mercantilist positions based on narrow interests. There is no room for mercantilism in a small world.” Mercantilism is the narrow pursuit by states of their vested commercial interests.

He believes the solution to be the creation of an independent panel to advise the negotiators. “African countries need an outside body to deliver the best economic knowledge on policy questions of importance to the negotiators.

“Such a body should be able to say what the consensus is on, for example, whether it makes sense for African countries to open up their financial services sectors to competition.

“What has been the experience of countries in similar situations? What domestic prerequisites — regulatory, judicial — need to be in place before opening these sectors can be successful? Outside expertise on key issues in the negotiations would make it easier for African and other developing countries to argue their case,” he adds.

Such an outside body should also provide impartial and reliable information to avoid, for example, the current confusing situation where assessments of the impact of the Doha Round produce completely different outcomes, depending on the source of the study.