Book Review-III 

The WTO and the Multilateral Trading System 

Bhagirath Lal Das

Third World Network, Penang, 2003, Pages 249.

Bhagirath Lal Das in his book The WTO and the Multilateral Trading System provides useful insight into the working of the WTO and its weaknesses so that the poor countries are made aware about how they should face the new challenges. The writer has successfully explained the inherent weaknesses of the WTO system and given various recommendations in this regard. The book provides the points of view of both the Developed Countries (DC’s) and the Least Developed Countries (LDC’s). The writer is of the view that the interests of all parties must be safeguarded for the smooth functioning of the system. The book covers the past and present of the regime and focuses on the future of the multilateral trading system, which depends on how WTO rules are implemented and deficiencies in the system addressed. The writer thinks that different actors like NGOs; UNCTAD etc can play a role for the success of the multilateral trading system. The WTO was established on January 1, 1995 and its working over the year can be assessed. The basic issues of WTO are related to implementation of its rules and regulations and their subsequent implications and in the case of the LDC’s how the DC’s implement these rules and regulations.

The book highlights the main features of WTO, i.e. most favoured nation treatment principle, national treatment and transparency. It also covers issues relating to goods, services and ideas. The WTO agreement would be implemented along three tracks, i.e. formulation of laws and procedures and establishment of institutions, elimination of certain specified trade measures within a prescribed time frame, where it would be notified to the WTO from time to time. The LDC’s are required to take three types of action for its implementation i.e. compulsory actions (e.g. legislation on the protection of International Property Rights (IPR’s) as required by TRIPs agreement), discretionary actions (as those required in the area of safeguards, subsidies and anti-dumping) and elimination of measures. Notification is necessary to achieve transparency as required by the WTO multilateral trading system.

            The writer is critical of the WTO regime from various angles. According to him there is a mismatch between the objectives and the instruments. The objectives might be “lofty” but the instruments implemented are either inappropriate or inadequate. The objective of the system as given in the preamble to the GATT and the WTO agreement stipulates that member states could contribute to achieving these objectives “by entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce (trade relations).” The writer has criticized the “instrument of reciprocity” as a hurdle to achieve its objectives and calls it a “built-in mechanism” in the system that would increase disparity among its members.

            The writer believes that not only the basic weakness of the WTO--“the weakness of its fundamental base”--but also its “processes in practice” create further problems which are hurdles in achieving the objectives of the WTO, i.e. elimination of poverty, free and fair trade etc. This lacuna in the GATT system was, however, recognized and provisions for special and differential treatment for the LDC’s were included in the WTO. The deficiencies can be addressed by including provisions of special and differential treatment e.g. in custom duties and other barriers to trade. However, according to the writer these actions in support of LDC’s are fewer and inadequate as taken by the DC’s. The writer stresses the importance of special and differential treatment and believes that it should be an “inherent element” of the system in order to achieve its objectives.

             The writer has given many suggestions in this regard. He is of the view that in the present structure of the WTO following improvements can take place to give the LDC’s their legitimate share, e.g. integration of S&D provisions, improvement in implementation, decision making process and a more representative negotiating structure for the LDC’s addressing the current inadequacies. Other suggestions include expansion of export opportunities, development of production and infrastructure, relaxation of national treatment principal, appropriate export prices etc.

            Another important aspect the author has discussed is what are the future prospects of WTO and the role of different actors in facilitating the working of the WTO, i.e. LDC’s, DC’s, NGO’s, the UN Conference on Trade and Development (UNCTAD) etc. The writer feels that the DC’s should have an “enlightened self-interest” in the rapid growth of the developing countries because of the prospects of new markets. According to him the present WTO rules hinder the development of the LDC’s. Therefore, the DC’s should improve these rules and regulations so as to facilitate the development of the LDC’s. He suggests that the DC’s should acquire a percentage of government procurements from developing countries. However, the “initial burden” seems to fall on developed countries. The author says that the DC’s can fight protectionism with a strong systematic institutional mechanism where ad hoc policies would not be effective. The protectionist lobbies are very strong in U.S.A. In this regard the writer has given an example of the opposition to business process outsourcing in New Jersey. Developed countries have a stake in fighting protectionism at both levels.

             Regarding the role of the LDC’s, the author says the LDC’s should realize that their strength lies in their majority in WTO, their growing markets and as a base for future scientific research. They can improve their strength and role in various ways, e.g. through an analytical study of the subject for which a national commission can help the concerned governments. Such a commission could analyze the pros and cons of the matter and recommend a clear, well worked out stance keeping in view the national interests. A country can then build coalitions with other countries on its stance, which is an important tool in multilateral negotiations. The LDC’s should carefully examine in terms of rights and obligations, the result of negotiations and see whether it is in “consonance” with its development. “It is important to know that the ‘why’ of an agreement is ‘economics and politics’ and the ‘how’ of an agreement is law. ”

            The author believes that the WTO Secretariat can play an important role by adopting a neutral and impartial stance. It should refrain from pursuing a ‘particular line’ on a subject and must follow a broad based recruitment policy. The UNCTAD can also contribute with its studies and analyses, as it comes up with useful ideas during the Uruguay round in the area of services. Its inter-governmental machinery can help in building consensus on important issues. 

            The author believes that the NGOs can also play an important role in raising awareness in the public and advise governments on various issues in trade negotiations to adopt a balanced approach. As Oxfam and MSF (Medecines Sans Frontieres) have worked on the issue of availability of essential medicines in Africa (as constraints imposed by TRIPS) and advocacy by Oxfam and the Institute for Agriculture and Trade Policy (IATP) on the issue of agriculture subsides. The future of WTO also depends on the way different actors play their important roles.

            The writer has put forward following important questions. Can the multilateral system be reformed? What are the future prospects for WTO? The bilateral and regional arrangements are seen as major impediments to it. It might detract or lessen the importance of the multilateral system. The writer says that there is already discontent in many sections of the population in Mexico under NAFTA and in Africa under the African Growth and Opportunity Act (AGOA). The author believes that it does not ensure a good outcome in the long run.

            Some developing countries like Brazil, China and India might perceive benefits in regional arrangements but the author feels that these opportunities might be curtailed if seen as a threat to their domestic production. The writer believes that a developing country cannot get a better deal in a bilateral arrangement as compared to a multilateral one. There is more criticism and discontent in a bilateral arrangement if LDC’s are put in a disadvantageous position than would be the case in a multilateral arrangement/framework. It will amount to “expanding ill will.”

            The writer is of the view that as “economic disparity” or inequality can cause instability within a country, the increasing disparity between DC’s and LDC’s would cause instability of the international system. The writer opines, “International economic relations and linkages can play a significant role in fostering peace and stability in the world. And the multilateral trading system can be a useful instrument for deepening these relations and strengthening the linkages.”

            Though the writer believes that the WTO system provides challenges, its main strength lies in its decision-making process, i.e. the principle of one country one vote, which LDC’s can use to their advantage. Though DC’s see it as a threat, LDC’s consider it as an impractical weapon. However, the decision can only be taken if there is consensus. According to the author it should rather motivate the mighty and strengthen the weak and the LDC’s should defend themselves. The need is that LDC’s and DC’s should work for the betterment of humanity.

            One unique feature of this book is that it is published by an NGO i.e. TWN (Third World Network). It, therefore, gives due share to the problems of LDC’s and DC’s as well as highlight the importance of NGOs in influencing public opinion and influencing governmental stance. For the last five years, NGOs are making an important contribution for preparing LDC’s for trade negotiations and pointing out the inadequacies and imbalances in the trading system. NGOs like TWN and Southern and Eastern African Trade Information and Negotiations Institute (SEATINI) contributions are important in this regard.

            The book ends on an idealistic tone. It states, “The compulsions arising from the emerging tensions in the world will make it imperative for all countries, big and small, strong and weak, to work in unison for their common good. The multilateral trading system can be a good area in which to start.”

      Though we may or may not agree with the views of the author, one cannot negate the need to work for the common future of humanity.                                                                       

Nuzhat Khanum
Assistant Research Officer, IPRI