6:38 AM Sep 13, 1994


Kuala Lumpur, 12 Sep (TWN/Martin Khor) -- The GATT trading system is being loaded against developing countries and the imbalances within the system will worsen sharply if the major countries of the North succeed in introducing their "new issues" on the agenda of the World Trade Organization set to come into force in 1995.

This distinct view emerged at the end of a three-day regional "brain-storming meeting" here on the Trade Agenda for the l990s attended by senior trade policy officials, negotiators and academics from nine Asian countries.

Participants in the meeting seemed to share doubts about the promised benefits from Uruguay Round as well as misgivings about Northern attempts to bring in and link new issues such as the environment, labour standards and competition policy to the trade agenda of the WTO.

Malaysia's International Trade Minister, Rafidah Aziz, set the tone in an opening address by warning that the competence of the WTO should not be overstretched by so rapidly being asked to take on new and extraneous issues. "Attempts to justify the relationship between trade and extraneous issues will not help remove fears and doubts of developing countries about the emergence of new forms of protectionism that can negate the results of the Uruguay Round," she said.

As the meeting progressed, more and more participants voiced suspicions that the GATT and its successor, the WTO, were being used by developed countries to impose increasingly onerous obligations on developing countries in ways that would open up their markets to Northern companies, whilst at the same time cut down the Southern countries' development capacity and their export competitiveness.

The meeting was co-sponsored by the UN Conference on Trade and Development, the Malaysian Institute of Diplomacy and Foreign Relations and the Malaysian Institute for Economic Research. It was attended by l50 participants, including senior Trade officials from India, China, Pakistan, Bangladesh, Sri Lanka, Korea, Malaysia, Indonesia and Thailand.

After lengthy discussions, they came to the conclusion that the moves to link environmental issues and labour standards to trade within the WTO context were prompted by Northern protectionist motives.

Fearing that cheaper Southern products would successfully compete in international markets, the major Northern countries were devising new instruments to thwart this challenge.

Thus, by raising the charge that lower environmental and labour standards in the South are tantamount to "eco-dumping" and "social dumping", these Northern countries are trying to raise the cost of production of Southern products, or to enable importing countries to impose discriminatory duties and trade restrictions on these products, and thus render them uncompetitive.

As Mohammad Afzal Bajwa, Joint Secretary of Pakistan's Commerce Ministry, put it: "Everyone with a cause is trying to get everything (environment, labour rights, animal rights) into GATT because of the possibility of getting a government to use GATT's system of trade sanctions to enforce what they perceive to be the proper standards or rights."

UNCTAD official Victor Ognivtsev explained the power of the future WTO's bite: "All agreements in the WTO are linked together through the integrated dispute settlement mechanism and its provisions for cross-retaliation. Eventually all agreements are linked to trade sanctions. Any new issue would also face this eventuality."

The problem, he pointed out, is that the major countries are so strong they could use retaliation or the threat of retaliation to bring developing countries into line. But the latter, being the weaker trading partners are in practice unable to use the same threat on the stronger parties.

Moreover, such is the near-absolute power presently wielded by the few major countries that they have so far shaped the GATT's negotiating agenda and will, in all likelihood, continue this practice in the new WTO.

The definition, interpretation and treatment of how "environment" and "labour rights" are linked to trade (in terms of their alleged trade distortive characteristics) will be determined by the North, unless developing countries unite and put up a strong intellectual and negotiating challenge.

Otherwise one can certainly expect more issues to be loaded on to the WTO agenda, with even more adverse effects for the South.

Ognivtsev revealed that recently a representative from a U.S. women's rights group had informed him that it was considering promoting "trade-related women's rights" and might be addressing this issue to the GATT Director-General.

"This gives the impression that it is possible for attempts to be made to link all issues to trade," he remarked.

Malaysian economist Dr Sieh Lee Mei Ling, who presented a paper on trade and labour standards at the meeting, said she was told by American colleagues at a recent forum in Washington that there might be a case to link trade to postal rules.

"That's ludicrous, but it can happen," she said.

The trick is to label the chosen issue "trade related", and then proceed to show that existing standards in the South are lower than in the North. The South is then said to be guilty of "dumping" (or unfairly providing a subsidy), and thus the North can legitimately impose countervailing duties on the South's products and render them uncompetitive.

Dr Sieh predicted that attempts to incorporate labour standards in the WTO will not only threaten but destroy the international trading system. Certainly, if all other kinds of issues (including women's rights, postal rules, human rights, even judicial systems) are added on to the negotiating agenda, the system would suffer from a massive overload as well as loss of confidence from developing countries.

Several trade officials made strong concluding statements at the end of the two-day meeting affirming that developing countries should pool their efforts to stem the Northern onslaught and to move from being reactive to an active strategies in trade negotiations.

Long Yongtu, China's Assistant Foreign Trade Minister, said after taking part in the discussions, he felt that the title of the meeting should be changed to Trade Agenda of Developed Countries for the l990s, adding "We need to think of an agenda for developing countries."

Through China's negotiations to gain entry into GATT, he now strongly felt that GATT is unbalanced and dominated by the North.

"The difficulties we face trying to join GATT is living proof how much the industrialised countries dominate the organisation. How naive we were to think we were going to GATT to follow international rules. Now we are having second thoughts as to who make these rules and in whose favour they are made.

"Developing countries need a think tank, providing fresh and dynamic ideas for our negotiators and policy makers. We have been very passive, taking whatever the industrialised countries set down. The items on the new trade agenda are from them, in their interest. We need to change the situation. We need to create a more balanced trade system."

Ms Anjali Prasad, Deputy Secretary in India's Commerce Ministry, said: "The deliberations here convey a clear message: in international trade negotiations of the future there is no getting away from our standing together, otherwise developing countries are bound to be the losers. We must assess how relevant existing fora such as the G77 and Gl5 can be in future when developing countries are so heterogenous. How practical is it for developing countries to have a common voice in future?"

Bajwa said it was crucial that UNCTAD to provide information and analysis on negotiations on the new issues as there was a big information gap at present.

"Should the social clause be part of the WTO? It depends on the nature of the organisation," he said.

"Can it be put in the GATT framework? There are serious doubts about this. If you introduce the social clause, the basic MFN (most favoured nation) principle is washed out. It would then be conditional MFN whereas previously it would be unconditional MFN treatment."

Dr Ishaq Talukdar, economics division chief of Bangladesh's Planning Commission, said he was leaving the meeting more worried than before. "It appears the North is giving us something with one hand and taking away with the other hand," he commented. He added the WTO should be focusing on issues that were really more trade- related, such as how the terms of trade were siphoning away resources from the South.

"Trade brings prosperity only if there is a net surplus; it does not bring more wealth if it takes away surplus. The adverse terms of trade has made many developing countries poorer. The Northern countries are denying us our comparative advantage, the very basis on which trade should be based. They should allow us to have our comparative advantage and survive."

The Third World Network proposed that in order to counter the North's "new issues", the developing countries should be active and take the initiative to place their own relevant issues, which are more legitimately trade-related, on the WTO agenda. These issues include the poor and deteriorating terms of trade of Third World commodities; the negative effects of currency exchange shifts and fluctuations; and monopolistic, oligopolistic and olipsonic practices of TNCs, including transfer pricing between branches of the same firm that are clearly trade distortive.

Amb. Harun Siraj, Malaysia's Permanent Representative to the UN in Geneva, agreed that it was important to put forward the issues that are so relevant to the South's interests and yet have not yet found their rightful place in the WTO, such as exchange rate fluctuations and low commodity prices. Indeed, the listing of these issues in the Marrakesh GATT Ministerial meeting had somewhat blunted the US attempt to make the labour issue so prominent at Marrakesh.

Dr Mohammed Yusof Ismail, deputy secretary-general of Malaysia's Ministry of Energy, Telecoms and Post, said it was clear the Northern countries were increasingly worried that their products would in future be no longer so competitive and that they would try to restrict the capability and competitiveness of developing countries, particularly in East Asia.

"We can no longer play a reactive role but must become proactive, and link trade to the issues that are to our interests." It was important to work out a modus operandi and recommend to the governments what to do as a whole.

Dr Yusof proposed the formation of a Working Group on World Trade Agenda for developing countries, to develop strategic thinking, articulate ideas and communicate with trade negotiators. A lead country could take the initiative to set up the Group. Further meetings to follow up on the issues should be arranged. The product of the deliberations should be circulated to governments and negotiators for support and follow up.

"If we fail to take concrete common actions like this, and continue to negotiate unilaterally, country by country, we won't have a future. We need to act with a sense of urgency, to adopt a "fast track" approach, and to form such a group soon."

The Kuala Lumpur brainstorming meeting succeeded in bringing some of the region's key policy makers, researchers and also NGOs together for a sober assessment of the future threats posed by a Northern-imposed post-Uruguay Round trade agenda.

By the end, it was clear to participants what needed to be done: a joint strategy to intellectually counter the Northern-initiated new issues; and a joint approach to place on the WTO agenda the more legitimate and really trade-related factors that distort trade and skew the trading system in favour of the major countries and against the South. But up to now governments of developing countries have not shown the necessary political will to take common approaches in recent trade negotiations. Whether the South can now get its act together, and fast enough to meet the negotiating schedules of a WTO that is waiting to be born, remains to be seen.