Guest blogger Yash Tandon sets out a forward-looking agenda for global trade governance and sustainable development from a Southern perspective.
The world’s multilateral negotiations on trade and on sustainable development over the last decade yield two important lessons for the multilateral system.
The first lesson concerns the interconnectedness of things: trade, security, employment, human rights, development, terrorism, migration, poverty, climate change are all interconnected. For the developing countries of the South, trade and climate change are a dual facet of their continuing sustainable development challenges.
Consider, for instance, flower exports from Kenya. Naivasha in Kenya is Europe’s major source of cut flowers. The United Kingdom alone imported 18,000 tons of flowers from Kenya in 2008, up from about 10,000 tons in 2001. Kenyan flower growers draw water out of the Lake Naivasha at an average rate of approximately 20,000 cubic meters a day. Yet Lake Naivasha is dying; in 2008 it shrank to about 75 percent of its 1982 size. At this rate, in another 50 years it would shrink to a pool of muddy dead water. The papyrus swamps that were the breeding grounds for the lake’s fish have almost gone and the flamingoes have disappeared. Even as the population working in the flower farms is increasing, people (especially fishermen) are facing severe food and water insecurity problems.
The second lesson concerns the salience of power in the multilateral system. Principles are one thing; how they get manipulated by those who have authority over institutions that set the agenda and the terms of the negotiations, are quite another. This power also extends beyond institutions; it includes the power over knowledge, and the power to define the text, the language, and the ideology within which negotiations take place.
To really understand the workings of the multilateral system requires years of experience. In October 2008, for example, Bill Clinton said: “we all blew it, including me as president” by treating food crops as a commodity rather than a right of the poor (Associated Press, October 26, 2008). Clinton reprimanded the World Bank, the International Monetary Fund (IMF), and other global institutions, and cited corn subsidies and US food aid policies as key problems contributing to the global food crisis. In the World Trade Organization (WTO), however, food continues to be characterized as a tradable commodity and negotiated as market access issue.
Trade and the conditions of trade differ. The first is simply a word; the second relates to the historical and present circumstances under which countries are integrated into the global system of production and exchange. Trade does not automatically translate into development. In fact, the proposition that “trade is good” is an abstract, ideological proposition, elevated as axiomatic truth in WTO discourse. The conditions under which countries engage in trade are, on the other hand, historically created realities that continue to structure the present.
The natural resources of the South are seriously undervalued in the global market. Why, for example, should African countries remain providers of commodities and cheap domestic and migrant labour? If you factor in the real value of the labor power of the workers of the South, and add the environmental cost of exploitation of the South’s resources, then the countries in the South should be getting at least four or five times more value than they currently receive from their participation in the global economy.
These hard realities are embedded in the global division of labor over which Africans have had little say. These conditions are reinforced daily because powerful countries have carrots to dangle and sticks to whip the weak to conform to their will. These conditions are legitimized by the WTO and enforced by the applied or threat of sanctions and retaliations. The experience of much of the South is that forced trade liberalization has led to de-industrialization and de-agriculturalization, especially of countries that are vulnerable to the carrots and stick policies of Europe and the United States. How else might you explain that African cotton famers in their thousands are forced to surrender their livelihoods just because the rich and powerful United States can provide subsidies to its a few hundred cotton producers?
The simultaneous near-death of both the WTO and the Bretton Woods institutions is related to a dual weakness in the global economic system — the dominance of trade over industry and of finance over production. The present crises are indicative of this deeper malaise in the system. Symptomatically, the WTO has been in the media spotlight more than the United Nations Industry and Development Organization (UNIDO). But it should have been the other way around. Industry precedes trade; if there is no production there is no trade.
For sure, trade is important. A development-friendly outcome to the Doha Round would have been a good thing. After goods are produced they must be consumed. Markets are important for distribution of goods produced, and for realizing the value contained in these goods so that the production cycle begins again. However, the present global trading system is heavily loaded against the countries of the South on account of both historical and structural reasons.
Besides the challenges associated with undervalued labor power and natural resources, global rules also heavily favor the suppliers of capital and the holders of intellectual property-protected technologies. A 2007 study carried out by the United Nations Conference on Trade and Development (UNCTAD) found that most least developed countries (LDCs) have opened up their economies to global trade and are highly integrated in the global economy, but they are not climbing the economic and technological ladder. Out of the 24 value chains of LDC exports, upgrading occurred in only 9 since 1990s, and downgrading occurred in 12, representing 52 percent of LDC exports. The study of 155 firms in Bangladesh, for example, showed that there was no development of technological capacity in agro-processing, textiles, garments, and pharmaceuticals. The UNCTAD study attributed this to “economic liberalization without learning;” global integration without innovation resulted in the increasing marginalization of 767 million people in the LDCs, which remain locked into low value-added commodity production and low-skill manufacturing.
Within the WTO framework, the Agreement on Trade-related Investment Measures (TRIMS) discourages local content requirements, thus undermining effective industrial policy and learning, which are the bases for industrialization. Implementation and enforcement of the Agreement on Trade-related Intellectual Property Rights (TRIPS) involves very high transaction costs and complex procedural requirements that the poorest countries of the South cannot afford. Furthermore, developed countries drive hard bargains against poor countries in bilateral free trade agreements (FTAs) with them. For example, in Economic Partnership Agreements (EPAs) with the African, Caribbean, and Pacific (ACP) countries, the European Union has sought to include patenting for biotechnology inventions and plant varieties, and legal protections for databases that go far beyond the requirements of WTO-compatibility.
So the question is: what would a forward-looking agenda for global trade governance and sustainable development look like from a Southern perspective? What should the new architecture of the global trading system look like? The global financial meltdown has created an opportunity to look afresh at all institutions of global economic governance, including the WTO, where there is a serious case for fundamental reform. The WTO rests on two pillars:
- Ideological: The myth that trade is the “engine of growth.” This is not true; production is the engine of growth.
- Enforcement: The negotiated texts of the WTO are binding, and so no country can ignore the WTO.
The first ideological pillar of the WTO is now fully discredited. The second enforcement pillar needs to be critically reviewed. Has it really brought gains of development for the global poor?
To conclude, here are a few of the most important preconditions for a new trading architecture.
- Development cannot be equated with trade liberalization. The stated objective of the Doha Round is development maximization not trade liberalization.
- The South is the home of most of the global poor and its countries should be the agenda-setters at the WTO. The responsibility for development cannot be handed over to those who are responsible for so much of the poverty and under-development in the South.
- Trade is secondary to production, employment and human rights. If you do not have industries to produce goods, you have nothing to trade. If you do not have jobs and proper wages for the workers and peasants, you do not have domestic markets in which to sell goods and services.
- Recognize the primacy of food security over trade. Do not get mesmerized by the reduction of negotiations into mathematical numbers and coefficients in the name of trade liberalization and market access.
- Recognize the significance of South’s control over and ownership of natural resources – land, forest, minerals, water, minerals, fish, and biogenetical resources.
- Treat intellectual property as part of a heritage of humanity over centuries of painstaking research, analysis, documentation, and experimentation; it is a global public good and a force for social good; it should not be monopolized by corporations for their profit maximization.
The new global trade and sustainable development architecture must address the above issues. If it does not, then the underdevelopment of the weakest members of the international community will have the same future in the next thirty years as they had in the last thirty years. The world must move forward, not backward.
Yash Tandon is the former Executive Director of the South Centre.
This article is part of a forthcoming compilation on a trade agenda for G20 leaders edited jointly by Dr. Carolyn Deere Birkbeck (Global Economic Governance Programme) and Ricardo Meléndez-Ortiz (International Centre on Trade and Sustainable Development (ICTSD)). The compilation will be published on 23 March 2009.
June 24th, 2009 at 2:56 am
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