Developing countries in the world trade regime
Developing countries in the world trade regime

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Developing countries in the world trade regime

3.2.3 Fighting on too many fronts

Although I have dwelt on the agreements relating to agriculture, textiles, and intellectual property, there are some two dozen others, each involving intricate legal and technical details. These include agreements on:

  • Sanitary and phytosanitary (SPS) measures: these are standards applied to imported agricultural products so as to protect plants, animals and humans in the importing country. However, these standards are often arbitrarily used to restrict imports in order to favour domestic producers. The relevant agreement regulates how such standards can be applied, although they are still abused.

  • Subsidies and countervailing measures: export subsidies are in most cases prohibited, but there are elaborate rules defining what constitutes a subsidy, and when and how the importing country can impose a ‘countervailing duty’ to offset it.

  • Trade-related investment measures: this agreement prevents countries from forcing foreign firms operating in their territories to use domestically produced components (for example, a Toyota plant in India cannot be forced to use spark plugs made in India) or to export a minimum amount of their output.

The apparently diverse agreements in this short list, like most of those discussed in greater detail earlier in this course, all try to ensure that there should be minimum government interference with international trade. In particular, they require that domestically produced products should not be given direct or indirect protection from import competition (although of course loopholes exist).

Question

Can you think of an exception to those generalisations among the agreements discussed?

If you are wondering how the TRIPS agreement fits in, you share the puzzlement of many commentators, who believe that it had no business being part of an international trade agreement in the first place, and that the first two letters of the acronym are mere window-dressing. The fact is that the USA threatened to walk out of the negotiations (which would have doomed the Uruguay Round) unless TRIPS was included, a threat widely seen as a response to corporate pressure from large US companies in industries such as pharmaceuticals, software and biotechnology.

There is also a deeper purpose to my terse listing of some of the UR agreements (and there are many more!). If your head is spinning with all these issues, imagine the plight of producers in developing countries, having to deal with unfamiliar rules in a foreign language; rules that can affect their profits and perhaps their very existence. Imagine also the plight of governments of many of these countries, with few trained specialists, having to negotiate agreements on issues that they do not fully comprehend. It is difficult to understand the implications of getting into an agreement when it relates to a subject on which one has little experience. This might account for the loopholes that developed countries were able to retain and later exploit.

Even after agreements are concluded, each of the subjects (and the new ones listed for negotiations) is reviewed and discussed by a separate committee or working group at the WTO headquarters in Geneva. According to one calculation (Blackhurst, 1999, p. 38), the various WTO committees and working groups between them held an average of 46 meetings a week in 1996 – and the workload has only increased and proliferated since then. Each issue requires technical expertise. Several developing countries cannot afford a permanent diplomatic mission in Geneva; many others can maintain only a small embassy staffed by general-purpose diplomats who also deal with the other international organisations that have their headquarters there (for example, the International Labour Organization, the International Committee for the Red Cross, the World Health Organization …). Ranged on the other side of many of the issues are developed countries with well-staffed missions, backed by legions of economists, lawyers and technical personnel specialising in WTO-related issues in their universities, government agencies and think tanks.

Apart from bearing the economic and social impact of the agreements themselves, developing countries therefore have to incur the costs of setting up administrative institutions to comply with their requirements. They must calculate, for example, the tariff equivalent of quotas, or permissible countervailing duties. They must also retrain their customs inspectors, and set up agencies to evaluate patent applications and to check for violations of technically complex patents or sanitary standards established in other countries. Such agencies were only established in developed countries once they had attained a certain level of economic and institutional development, and these countries therefore already have a stock of the relevant expertise and experience. In many developing countries, such agencies now have to be set up from scratch to comply with the UR agreements, before these countries have reached a comparable stage of economic development. Setting up institutions characteristic of mature economies may not be the best use of their limited resources. According to one calculation, the implementation of just three agreements (on customs valuation, TRIPS and SPS) would cost each country about $150 million – an amount exceeding the entire development budget of many countries (Finger and Schuler, 2002).

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