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

3.3.4 Dispute settlement

The lack of expertise in the developing countries shows up at a subsequent stage as well. One of the undoubted plus points of the WTO, compared with its predecessor the GATT, is its streamlined mechanism for settling disputes between members – on the whole quite impartially. But although many of the larger developing countries have won cases against the most powerful members like the EU and USA, the smaller ones are hamstrung by their inability to field lawyers specialised in international trade law, and seldom bring complaints. They are further handicapped by not being able to enforce the rulings of the WTO's dispute settlement bodies, which is left to the aggrieved parties themselves: if the ‘guilty’ member does not modify its behaviour, or compensate the complainant, the latter has the right to restrict its imports from that country in order to penalise it.

This kind of retaliatory punishment can be quite comprehensive, since all but one of the UR agreements constitutes a ‘Single Undertaking’. This allows a country that does not fulfil its commitments under one agreement to be punished by suspending commitments made to it under other agreements. For example, a country that does not enforce European patents, whether deliberately or because it does not have the expertise to do so, can have its garment exports to the EU blocked by punitive tariffs. However, a small developing country would find it virtually impossible to impose this kind of punishment on a much larger WTO member: by shutting out imports (the bulk of which typically consist of essential machinery, drugs, or food) from the USA or the EU, it would only hurt itself without inflicting much pain on the offender. (Think of who would be hurt more if you alone were to boycott your local supermarket.) Of course, if the punishment is the other way around – a developed country punishing a developing one – it can be devastating to the victim at little cost to the punisher. (No prizes for guessing who would be hurt more if your supermarket decided to boycott you!)

To sum up, most developing countries are simply overwhelmed by having to implement existing agreements, negotiate new ones, and argue their cases in the dispute settlement process on such a wide range of issues, each of which is technically complex.

Question

So, if the UR agreements are so bad, why did so many developing countries sign on, why do they not quit, and why are so many more applying to join the WTO?

One reason, just argued at some length, has undoubtedly been the developing countries' lack of comprehension of what many of the agreements entailed for them, and the loopholes that limited their benefits. But the more crucial reason is trade is a key part of developing countries' strategies for growth, and whatever the pains and disappointments of being WTO members, they would certainly have been worse off had they stayed out and had their exports shut out of developed country markets altogether. Without the WTO, the kind of trade sanctions I discussed in the previous paragraph could be used quite arbitrarily by powerful countries. In an unequal world, as I ruefully admitted above, being a junior member of the gang is better than being excluded.

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