[asia-apec 305] FOCUS-on-APEC#9 Part 6

[gonzalo]

The US / EU Agenda for the WTO SMC

In contrast to the interests of the developing countries, the US was 
strongly pushing for the ITA and telecommunications deal to be 
completed and the EU, the inclusion of the investment issue in the 
WTO. 

The advantage and the apparent necessity to all countries to 
liberalise in these areas was highlighted by both Brittan and the US 
Trade Representative, Charlene Barshefsky. At a press conference 
given by the EU, Brittan commented on the issue of 
telecommunications, stating that ÔSome countries say that they 
cannot afford to open up. I would say that they cannot afford not 
to open up their telecommunications. This is a catalytic industry. 
Opening up the telecommunications market will have a positive 
effect for not just the telecommunications industry but the market 
as a whole. With the increased use of high technology, opening up 
the telecommunications market to foreigners does not mean being 
swallowed up, but increasing diversity.Õ

Similarly, Barshefsky noted that ÔThe telecommunication 
investment is atypical of inward investment in many countries. It 
is usually larger than other investments and is long-term in nature. 
That is, it is a permanent investment and therefore can generate 
jobs and growth. This is the difference from other types of 
investments which may be exploitative. It is neither an export or 
import. It takes the cooperation of 2 countries and will expand 
trade globally. It is like a handshake. The issue is not a north versus 
south issue. Both types of economies can benefit equally. This is 
what is unusual about growth in this industry.Õ

She cited Chile as an example of a success story. Once the 
infrastructure had been built, there was a very significant increase 
in traffic in their telecommunication lines. 

Barshefsky added that the US information economy represents 1/6 
of its total economy. Worldwide, the information economy 
represents 1/16 of the total world economy. The difference, she 
told the press, between 1/6 and 1/16 is job growth.

Similarly, the Information Technology Agreement, said 
Barshefsky, Ôcan be likened to the cars and trucks on the road. 
Telecommunications are like building the roads. We are not talking 
about anyone having an advantage in exports or importsÕ. 

She further adds that developing countries do see the advantage of 
opening up their markets as it will lead to decreased prices. 
ÔCurrently, more money is being spent on telecommunications than 
on oil. People are therefore paying too much all over the world for 
telecommunications. We want to lower the market price but need 
open markets in order to do so.Õ

Despite their rather convincing comments on mutual benefit, it is 
clear that the largest gains will go to the US. The ITA is a political 
and economic victory for the Clinton administration. The US 
accounts for 50% of the IT market. 1.8 million jobs in the US are 
IT-related and US IT exports amounted to $90 billion in 1995. 
With the greater market access to US IT products this agreement 
brings, employment in this industry will certainly increase. The 
other economies which will benefit are several of the East Asian 
and Southeast Asian countries which are also manufacturers of IT 
products. 

The majority of countries, many of these are low-income 
economies will more likely be disadvantaged. No South Asian, 
Latin American or African country is part of the 28 countries 
which have signed on the ITA. However, lower cost IT products 
will be made available to them, given the Most Favoured Nation 
(MFN) status. This could be beneficial to them in the development 
of their industries. However, it will also stop the growth of any 
local IT industry from being developed, should they wish to do so 
in the future. At the same time, the increasing need for IT products 
will force these countries to increase their IT imports, leading to a 
greater problem with their balance of payments as well as a largely 
US / Japan monopolisation of the market. Even though they are not 
signatories to the ITA, it would become increasingly difficult for 
them to continue protecting their markets.

Likewise, the EU had been pushing for investment to be brought 
into the WTO. This was openly supported by the WTO 
Secretariat even before the SMC, despite the fact that many 
developing countries had stated their strong stand against such a 
move. Brittan in his comments to the press at the SMC said that he 
hoped Ôdeveloping countries will understand that there should be 
discussion in the WTO on investment. There is currently a 
shortage of investments. Investments are flowing to countries with 
an open environment. We need to find an agreement within the 
WTO on investments such that it meets the concerns of all.

In the end a study on the issue was agreed upon but one which 
would not automatically lead to negotiations being carried out 
within the WTO. The other issues raised by the developed 
countries, and which were heatedly debated, were labour rights, 
competition policy and government procurement. These issues 
which took up the rest of the time at the SMC led to the matters 
important to the developing countries being largely sidestepped.


Developing Countries Powerless in a System based on Bargaining 
and Reciprocity

Despite being the majority within the WTO, the developing 
countries were unable to significantly tailor the agenda of the week 
to suit their needs. They loose out because as small economies, 
they have no clout in a system that works on cross sectoral 
bargaining and reciprocity. 

Essentially, the poorer countries are not in a position to combat 
pressures put on them by the major trading nations if they are 
dependent on these nations in one way or another. For instance, 
the US could promise to ease up slightly on their textiles 
restrictions should India agree to a study on investments within the 
WTO. Since IndiaÕs economy is fairly heavily dependent on 
textiles and clothing, they may feel pressured to agree to such an 
arrangement. Alternatively, an African country such as Burundi 
which is in the throes of civil war may be promised much needed 
technical assistance should they agree to liberalising in the 
telecommunications sector.

As Das of the Third World Network writes, this principle of 
reciprocity 

Ôis appropriate among countries at almost similar levels of 
economic development; but it does not work well when there are 
wide economic disparities among the participants. The principle of 
reciprocity implies that you get more, if you give more. If you are 
not capable of giving, you do not get anything. In this process, 
disparities have grown over time between the rich countries that 
can give and the poor countries that do not have the capacity to 
giveÕ (Bhagirath Lal Das 1996, Third World Network WTO 
Ministerial Conference Briefings No. 1, ÔKeep WTO on TrackÕ).


Lack of Coordination between the Developing Countries

To further compound the situation, there is very little cooperation 
and consensus between the developing countries on the various 
contentious issues. While this is understandable given the vast 
diversity in the economies of the developing world and their 
corresponding differences in interests, their lack of cooperation is a 
great loss to the group as a whole. 

Contrary to this, the developed countries are much more strategic. 
At the SMC as well as during the normal run of events at the WTO 
Geneva headquarters, meetings are frequently held amongst the 
QUAD (quadrilateral countries). These included the US, the EU 
representing 15 countries, Japan and Canada. The developing 
countries, however, do not organise themselves into groupings and 
in the end, find themselves being largely reactive to what was going 
on, rather than proactive in negotiations. 


Non-Transparent Process

One of the most striking features of the WTO process at the SMC 
was the lack of transparency even for delegates themselves. The 
Secretariat and host of the SMC seemed to use their privileged 
position in favour of the US, EU and other more powerful trading 
economies.

The main negotiations took place in informal group meetings 
between about 30 countries out of the total 127 members. This 
group was chosen by the Chairperson, Yeo Cheow Tong and the 
Director General Renato Ruggerio. There had been no prior 
consensus about how the composition of the group had been 
arrived at. This left many delegates of the developing countries 
unaware of where the critical negotiations were talking place and 
what the latest developments were. 

Given that enough of them voiced complaints,  the issue of the 
need for greater transparency was addressed in the final press 
conference delivered by the WTO Secretariat. Both Ruggerio and 
Yeo explained that in wanting to maintain a certain level of 
efficiency, they had chosen a group that was representative of a 
diversity of interests. 

They acknowledged that the transparency process had to be 
improved in the future but without compromising on efficiency. 
When asked how they envisaged doing this, however, they said 
that it was yet to be decided. 

It is alarming that an important issue such as the equal 
participation of a member-driven organisation is not even given 
time and space for reflection at the SMC, highlighting again, the 
power imbalance at work at the conference. 


Human Resource Imbalance

The other major factor that is the reason for the huge power 
imbalance in the WTO process is the stark difference in human 
resource capacity between the countries. The US, for example, sent 
over 100 delegates to the WTO, while most of the developing 
countries had about 6 or fewer representatives. 

Similarly, on a day-to-day basis, many of the developed countries 
have a team of 12-14 persons working solely on the WTO in 
Geneva. This does not include the huge numbers that will be 
working on WTO issues in their capital cities. In contrast, of the 29 
LLDCs, only 10 of them have a permanent office in Geneva. And 
most of them only 1 or 2 persons in their office covering the work 
of all the international bodies based there. 

Therefore, while the rules based system is being expounded as one 
of the best features of the multilateral trading organisation which 
will benefit the developing countries, the poorest of these 
unfortunately do not possess the resources needed to make full use 
of the system, nor the technical expertise required. The WTO 
Secretariat is currently offering courses to trade officials of 
developing countries in order to upskill the bureaucrats on the 
technicalities of trade. Developed countries too are offering some 
amount of technical assistance. The help offered, however, is but a 
drop in the ocean in comparison to the need.

In the meantime, decisions which have a huge impact on the lives of 
millions in these countries continue to be made for these countries 
within the WTO.