7:36 AM Jul 12, 1996

TIME FOR REFLECTION, NOT ADVENTURISM AT SINGAPORE

Kuala Lumpur, Jul 11 (Martin Khor) -- The new trade agenda issues being pushed by the Industrial Countries are no more than an attempt to win what was given up in the Uruguay Round Negotiations, and facilitate a TNC-led integration of developing countries into a neo-liberal order reminiscent of the liberal order of the 19th century, a leading Third World trade analyst said here.

Mr. Chakravarthi Raghavan, Chief Editor of the South-North Development Monitor, was speaking on the 'New Issues and Developing Countries' at the Conference organised by the Malaysian Institute of Strategic and International Studies (ISIS) on "The World Trade Organization: Perspectives from the South".

Ironically, he said, this effort to bring about a neo-liberal order and integrate developing countries, through the instrumentality of TNCs, into a global economy in a way reminiscent of the colonial- era relationships, is being sought when the pendulum is swinging back in terms of economic theories, development fashions and the role of the State.

The world economy is in a state of flux, full of uncertainties, as a result of the failure of both central planning and liberalism to deliver benefits to the masses of people.

"This is a time for reflection, not one for embarking on adventure, leave aside adventurism," Raghavan warned.

The US and industrial countries sought to bring in many issues in the Uruguay Round by using the "trade-related" phrase. But, by and large, they had to confine things to those issues directly related to trade and distortive of trade. And the Uruguay Round accords became possible only when the major Northern countries moderated and gave up some of their demands on behalf of their Transnational Corporations, whether under the TRIMs negotiations or in the Services negotiations, for the right of investment and restrictions on rights of host countries.

But even before the Uruguay Round was concluded in December 1993, they tried to come back with their original demands. They sought to introduce more issues, but now abandoning any pretence about their being 'trade-related' and instead used the term "trade and..." to describe these issues.

They were thus reopening the Uruguay Round package with its balance of rights and obligations, and attempting to create a new balance in their favour. Having failed to get a commitment to get these new issues in at the Marrakesh Ministerial Meeting, the major countries are now trying to use the Singapore meeting to reopen the package, and forge instruments to carry out global governance within the framework of trade agreements.

Raghavan noted that there were a number of problems relating to the implementation of the Uruguay Round agreements and several Declarations and Decisions favouring the poorer countries adopted by the Ministers at Marrakesh, but little attention had since been paid to them.

Instead, almost from the first day of the WTO's existence, and more so since Mr. Renato Ruggiero took over as the Director-General, the focus has been on the new issues proposed by the EU and the US.

Raghavan noted that the WTO Secretariat chief had been "going around the world canvassing support for the issues raised by the US and EU", and no one so far appears to have formally raised this question of the DG's role and stance in any WTO body.

"Representatives of developing world are as responsible for this state of affairs as those of the developed," Raghavan said.

He said that the industrial world had been meeting and concerting among themselves to promote these new issues and efforts are being made to extend multilateral trade obligations into additional areas of domestic policy to enable "global governance" to be carried out within the ambit of trade agreements and WTO trade-retaliations.

In contrast, added Raghavan, the developing world has been largely passive at the WTO. The informal group of developing countries at the WTO has been non-functional, he said. Even the regional and sub-regional groups have not been active enough, but have been allowing the major nations and the WTO secretariat to push them around.

The Kuala Lumpur meeting was the first so far of a meeting organized on the WTO within the South. But this initiative had to be carried forward and continued with consultations among capitals, governments and Geneva diplomats.

"Otherwise, South governments, civil society and negotiators will receive a harsh judgement at the hands of history."

Referring to the Trade and Environment issue, Raghavan said that some of the industrial countries appear to be seeking to get a "mini-package" at Singapore, and get an amendment or understanding to ensure that trade measures purported to be taken under so-called Multilateral Environment Agreements should get in advance a blanket exemption from WTO obligations.

Complex issues of ecology, trade and development cannot be resolved by such gimmicks or ex-ante authorization for actions which are intended as protectionist measures. Lurking behind these issues are some ill-thought out demands of Northern environment lobbies for the right of powerful countries like the US to take unilateral trade sanctions and measures against the developing world.

Such unilateral measures would have the aim or result of imposing disciplines on the South to follow the values of the North, for the South to carry the burden of adjustments, whilst the North could continue to enjoy and enhance its quality of life.

Such demands included trade restrictive actions based on concepts like eco-dumping, process and production methods (PPMs), and environmental accounting to reflect true ecological costs in prices of products.

While several of these concepts might make sense in terms of overall issues of environment protection and sustainable development, and are even attractive to ensure fairer prices for commodities, they teemed with problems, and the WTO and trade officials are ill-equipped to deal with them.

Some of the discussions within the WTO's Committee on Trade and Environment (CTE), he said, clearly suggest that the North countries are looking for gimmicks to satisfy their domestic lobbies, but satisfy at the same time the greed of their corporations..

The Northern countries preferred to do this rather than seriously address the issues of equity and environment which may require a state regulatory and interventionist role within countries and strong cooperative approaches internationally to ensure the burden is not unfairly shifted to the shoulders of the poor countries who have largely not been responsible for the ecological problems.

On the Labour Standards issue, Raghavan traced the history of these efforts from the early 19th century mercantalist era to the current, and said that Northern unions and some social groups have become particularly concerned and worried about the perceived effects of globalization on their societies, and which they are blaming on the alleged unfair competitiveness from the South.

Unfortunately for the people and workers of the North, the high and persistent unemployment and marginalisation and increasing poverty even within the North are due mainly to wrong macro-economic policies and not to competition from the poorer countries.

The ILO director-general had taken up the trade-labour issue after the failure at Marrakesh of the US and France to link trade with a social clause, but he has since retreated in the face of strong opposition from the South countries. The North countries now talk only of "core" labour standards, and there is talk they now only want some recognition of the issue (without commitment to negotiation) at Singapore.

However, said Raghavan, there is little doubt that this is just a beginning to bring the issue onto the WTO agenda.

While no one could accept the argument of some Southern governments that differences in cultural and other values justify restrictions on trade union rights of workers in a modern market economy, the real problem about bringing the issue onto the WTO agenda is very different, he said.

The WTO is a contractual organization based on rights and obligations of members. A member who thinks another's actions have upset this balance has the right to get a ruling to have the measures changed or, in the final analysis, retaliate to establish a new balance. The WTO has no provision for collective sanctions.

But when there are cases of failure to observe fundamental human rights (which do not merely involve civil rights, but economic and social rights too) or core labour standards, and these cases are seen as issues relating to the collectivity of the international community and its conscience, it would be a problematic and dangerous precedent for such violations to be judged by the WTO on a dispute procedure or for the ILO or the UN as a political body, and then enforced through WTO trade sanctions by individual powerful countries.

"It would enable the powerful countries to use such sanctions or threat of sanctions to exercise their will over the weaker countries, and misuse it for protectionist purposes, but would not help the interests of labour at all - either in the North nor in the South."

Several of the countries with problems of child labour or unsafe conditions at work have excellent laws on their statute books and are parties to ILO conventions, unlike the United States, but clearly have problems of administration and enforcement.

"But when the Labour Secretary of the US gets up at the International Labour Conference this year and says that a rich country like his does not have the funds to establish an extensive labour enforcement machinery, or to prevail over the authorities at the state or local levels, is it fair to coerce developing countries into doing so through the WTO sanctions?" he asked.

On the competition laws issue, Raghavan noted that it was ironic that while the industrial countries, including the majors like Europe and the US, have doggedly prevented the UNCTAD-negotiated Restrictive Business Practices Code from being equipped with teeth and made mandatory, or committing themselves to cooperate with developing countries to stamp out anti-competitive practices of the TNCs based in the industrial countries, they now want the WTO to deal with a part of the problem and create rules to break open markets abroad for their TNCs and their exports.

The industrial world has not only shown little interest in international cooperation to eliminate vertical RBPs and curbing the activities of their own corporations, but some of these countries even encourage export cartels.

The whole competition theory is being put on its head by talking of oligopolistic competition being in the consumer interest. The WTO/GATT report about the gains of the Uruguay Round even argued that the largest gains from the Round would come in conditions of monopolistic or oligopolistic competition and assumptions of increasing returns to scale.

Whatever the merits of these ideas in the trade among industrial countries, which involve a great measure of intra-industry trade, they have little application to developing countries which face the RBPs practised by the TNCs through inter-industry trade.

An oligopolistic Coca-cola/Pepsi-cola type of competition in the South, he said, may bring down prices, but would also destroy the entire indigenous beverage industry, of the South, both capital and labour. The profit maximisation benefits of such competition accrues to the home countries of these transnational corporations, and not the host economies, and thus reduces welfare in the host economies.

And if the oligopolistic competition were of the nature of the IBM/Compaq competition, it is one that prevents market entry for newcomers and reduces the technological capacity of developing countries from being enhanced.

Instead of raising the issue now in the WTO, Raghavan proposed that UNCTAD, which has been dealing with these issues, and has experience from the RBP code and its weaknesses, should be encouraged to study these issues more. The Intergovernmental Group of Experts (IGE) that monitor the RBP code should also take up the issue and suggest strengthened and mandatory disciplines.

On the corruption issue, Raghavan said that developing countries could ill afford to have their resources wasted through corruption. But corruption has several aspects beyond the question of payments to Third World officials for government procurement and the erosion of market concessions.

When the President of the United States rings up heads of other governments soliciting business (government contracts, civil aircraft or defence purchases etc) for US corporations, or when the chiquita bananas company, by contributing to the election funds of both American parties, makes sure that its interests are made into a trade sanctions issue, are these also not cases of money and political power being used to interfere with the market?

Should trade sanctions be applied only to the countries and their exports when their leaders have purportedly taken money? Should not the corporations and their CEOs, not merely their local agents, be brought to trial and jailed, in the countries where they paid or offered bribes?

Should not the whole gamut of issues involved including money laundering, transfer pricing, tax avoidance and evasions, bank secrecy for secreting such funds abroad, be dealt with through UN instruments?

Citing a recent study that suggested that corruption had in fact increased under conditions of marketisation and deregulation, Raghavan contended that this was a major problem, but one too serious to be dealt with through gimmicks like 'transparency notifications' or making the government procurement code a WTO covered agreement.