Yash Tandon

Clare Short, the UK Secretary of State for International Development, gave the key-note address to the WTO-initiated NGO symposium on the eve of the official opening of the Third Ministerial Conference at Seattle, USA.  In it she advocated a “development round” of negotiations over the next three years. In defence of this, she gave four reasons.

1.      “With a broader range of issues,” Short argued,  “many more developing countries could benefit. For example, poor countries could gain greatly from a reduction in non-agricultural tariffs and from removal of peak tariff peaks.”

2.      A round with a limited agenda would work against the interests of the poor countries. With a “limited agenda there are real dangers that developed countries will strike a deal between themselves, outside the WTO, and the poorest countries will be left out.  Negotiations on issues such as investment, competition and public procurement could also bring significant benefits to poor countries.”

3.      A broad agenda will bring into stream discussion on multilateral agreement on investments.  “… I remain convinced.” Short said, “that a negotiated investment agreement reached in the WTO – where three-quarters of members are developing countries – could help developing countries to attract the investment they desperately need.” 

4.      A broad agenda will provide an opportunity to discuss the link between trade and the environment.  Short acknowledged that developing countries fear that environmental conditionalities will “obstruct their development.”  But, says Short, many developing countries have signed multilateral environmental agreements, and they do stand to suffer the serious consequences of global environmental problems.

This article examines the politics behind Clare Short’s above expressed concerns for the developing countries.  But first it is necessary to record that the Minister also said many good things besides the above.  She said that the developed countries must “take seriously” the specific trading needs of the least developing countries (LDCs).   She said that the developed countries “should also practice what they preach … and be prepared to open up sectors that matter to developing countries – like agriculture, textiles and clothing.”  She said that much needs to be done to strengthen the “capacity of the developing countries to negotiate, to implement and to take advantage of the agreements reached.”  She said that the labour issue is best kept out of the WTO.  “Child labour,” she said, “is a development problem, not a trade problem.”  To add honesty to purpose, she admitted that the WTO bore a “heavy imprint” of the “northern countries” that founded the GATT, and that it should become transparent and fairer in its rule making so that the “rich and powerful” do not “bully the rest”, so that the strong do not “deceive and defraud” the weak.

All in all it was, as they say, a  “balanced” speech.   Other articles in this Bulletin give an account of how the Third Ministerial at Seattle was a complete negation of all the good things that Short had to say in her speech.  The Ministerial lacked transparency; the strong (including UK itself) was trying to “bully” the weak; and matters of concern to the developing countries were not being “taken seriously”.  And finally, when the developing countries shouted “foul play”, and threatened to withdraw from the negotiations, thus exercising their ultimate “negotiating skill” that was left to them, many of them said that this was going to hurt the developing countries more than the developed ones.

But these are issues dealt with elsewhere in this Bulletin.  What this article does is to give a brief critique of the Short thesis that a “broad round” is best for developing countries.  Given that she had only short time to deliver her speech, this piece too will be brief.

1.      Ever since the Singapore Ministerial in December 1996, the developing countries have been arguing, “broadly”, that they want to limit the next round to issues of implementation, the built-in agenda, and rectifying the many existing anomalies in the Uruguay Round Agreements. These have been reflected in several resolutions they passed just months before the Third Ministerial  – for example, by the LDCs in the Sun City conference in June 1999; by the Group of 15 in Bangalore in September 1999; by the Group of 77 in Marrakesh in October 1999; and by the Organisation of African Unity in Algiers in October 1999.  (See Bulletin No.2 Vol. 8 for reference material on these).   The question is: how does Clare Short presume to know what is best for the developing countries more than the developing countries themselves?  Why does she not practise what she preaches, namely, “take seriously” the concerns and expressions of interest of the developing countries themselves?   Why does she go on saying that a “broad” round is good for the developing countries when the latter say they want only a “limited” round?  

2.      On what ground does Short rest her case that an MAI “could help developing countries to attract the investment they desperately need”?   There is, at best, a very tenuous link between MAI, capital flows and development; at worst there is a dangerous link between the trio.  Short needs to explain why China remains the most attractive magnet for FDIs even when her regulatory regime is much more severe than that of many countries in Africa.  Furthermore, if an MAI is saddled with “national treatment” conditionality, as indeed the proposed MAI is, then it makes local businesses in the developing countries hostage to the power of corporate capital of the developed countries. This is not just a matter of logic (big capital kills small capital), but also one of recorded history.  Can it be that hiding behind Short’s “knowledge” that MAI is good for the developing countries is the old American dictum that “what is good for Ford is good for America”, that what is good for, for example, the British Telecoms is also good for Kenya or Malaysia.

3.      On what grounds does Short rest her case that an agreement on Procurement “could also bring significant benefits to poor countries”?  All logic and evidence point to the opposite. If the developing countries open up their public procurement to trade liberalisation, they would open up market access for the suppliers of developed countries without having any chance to compete in the markets of the developed countries.  There is no reciprocity here, only a one-sided gain for the corporate suppliers from the developed countries. Secondly, the developing countries will lose one remaining instrument they have to affect social policy if procurement is removed from the domain of policy options. There are other arguments against the Short thesis, but these will do for now.

4.      Admittedly, developing countries, as Short says, also suffer from global environmental problems.   And indeed, the environment is already in the WTO.  There is a Committee that is studying the matter.  The developing countries are saying that the Committee should continue exploring the matter further.  It is dangerous to jump the gun and begin applying the sanctions machinery on issues related to the environment. For example, it is already bad enough that Uganda is not able to export fish to Europe because it cannot meet the high Sanitary and Phytosanitary standards set by Europe.  How much worse would it be if these were linked with sanctions to ensure that Uganda complies with these standards?

It turns out that what Short describes as matters of interest to the developing countries are really matters of interest to UK exporters disguised as matters of interest to developing countries.  When Short says that she knows what is best for the developing countries, it is simply a hangover from the imperial days.   Sadly, Short is not alone in this self-created, probably even sincerely held, illusion that the West knows best what is good for the rest.   Most ministries of “development” in the West think that way.  Many of them REALLY do believe that globalisation and liberalisation are good for the developing countries; that they need FDIs so badly that they have to open their doors to liberal inflow of capital from the West; that the obstacles to investment are poor governance and corruption; that if aid can be tied to good governance, and capital flows tied to “national treatment”, the developing countries would be on their way to “growth” which would trickle down to the poor.  Here, then, is the West’s answer to the Poverty problem that is blight on their history and conscience.  Admittedly, there are partial truths in all these.  But only partial.  The bigger truth is that the developing countries are suffering from two major problems: one is the debt overhang, and the second is the fundamental asymmetry of trade relations (including a secular decline in their terms of trade).  Even if all debt were to be cancelled tomorrow, it would arise sphinx-like because of this fundamental asymmetry that history has created between the developing countries and the developed world.  The WTO underpins this asymmetry by bringing in, and legitimising, the power of sanctions of the powerful over the weak.

The WTO chose Clare Short the role of giving the keynote address on “development”.  Why they did so is a puzzle.  Ever since the “development decade” began in the 1960s, it has been always assumed (in the North) that it is the experts from the North who know what is “development” and what is best for the South.  This is the assumption that has guided the Washington Consensus (now in disarray), and that is now guiding the Post-Washington Consensus (soon to be discredited).  It is the same assumption that probably guided the WTO to choose Clare Short to talk to the NGOs on the issue of “development”, the assumption that she knows what is good for the poor in the South.  Does she really?