Gains from globalisation

Work on this book began "as an answer to the protesters at the December 1999 WTO ministerial meeting in Seattle, who challenged the current institutional model of an interdependent, globalized economy". The author's objective is therefore to take on the anti-WTO ideas of the protesters. Who were these people?

There was a hard core of anti-capitalists, anarchists who were there to have fun in a "carnival against capitalism". Obviously no dialogue with this group is possible.

Thankfully, however, these were the fringe element, radicals who had little in common with the rainbow coalition of interest groups protesting against the meeting. These mainstream groups were of all sorts "" environmentalists and union members, human rights groups, NGOs, those afraid of losing their jobs to sweatshops in Third World countries, and protectionists of all hues.

The key emotion among all these protesters, according to the author, is fear of the WTO. Workers and businessmen fear competition from imports, unions fear an erosion of labour standards, some groups fear a loss of sovereignty, others fear that the WTO is a tool of big business.

NGOs have claimed that the WTO is non-representative, and that its procedures are undemocratic. Kent Jones' book is a defence of the WTO against its critics, although he acknowledges that it is far from being a perfect institution.

His avowed aim is to show that global trade policy rules "can co-exist with and reinforce social and environmental goals "" but not without the creation of new global institutions".

But this book is far from being a polemic in favour of the WTO. Rather, Jones' approach is to discuss what the WTO does, and the historical background of its practices.

The approach is to inform and thus convince, rather than rant against the protesters or praise the institution to the skies. The book therefore offers a wealth of information about how the WTO was formed, its principles, its practices, and its history. The upshot is a powerful exposition of the benefits from trade to all countries and sections of society.

Jones starts off with the most basic justification for the WTO "" it gives governments a strong argument to pursue pro-trade policies.

"The WTO rules of non-discrimination, national treatment, tariff binding, and reciprocity in negotiations...allowed each country to play its most effective pro-trade card at home: securing market access for their exporters. The price of such access, of course, was that each country also had to make concessions in the form of reciprocal market access for imports."

The WTO is supposed to ensure that everybody plays by the rules and that rich countries or those with larger markets do not use their clout to wring concessions from others.

That's not how it works, of course, as anyone who has followed events in Cancun knows. The chapter on "WTO and the interests of developing countries", therefore, is of special interest.

Jones discusses a host of issues, taking the reader through the benefits of developing country membership, special and differential treatment, trade-related intellectual property issues, and internal governance and green room politics.

Jones acknowledges that developed countries have often practised protectionist policies for products of interest to the South, the obvious example being textiles, and that they have liberally used anti-dumping and countervailing duties against products from the developing countries.

He also agrees that TRIPS (Trade-related intellectual property rights) is a controversial subject, and that the TRIPS rules have benefited developed countries.

In one sense, however, this book has been overtaken by events. Cancun has been instrumental in shifting the focus of attention away from protesters in the developed countries and NGOs to the grievances of developing countries, in particular to the inequities of trade in agricultural products.

More recently, acting on Brazil's complaint, the WTO has found that massive US cotton subsidies violate international trade rules. Oxfam points out that "US export credits for cotton, soybeans, corn, oilseed, oil products and rice, worth $1.6 billion in 2002, constitute export subsidies".

In other words, the ruling has far wider implications, and can be used to proceed against developed country subsidies for other agricultural commodities as well. The developments at Cancun have shown that developing countries can operate as a bloc, thwarting the efforts of the developed world to have it all their own way.

Jones points out that some of the attempts to broaden the ambit of the WTO are best done outside the institution. Labour standards, for instance, are best addressed in the International Labour Organisation, while environmental issues should be taken up by another world body formed for the purpose.

As for the move towards protectionism, Jones says that governments must promote measures that facilitate adjustment to change.

The record of the East Asian countries, and, more recently, the high growth rates achieved by India and China show the benefits that trade can confer on developing countries. As manufacturing investment shifts to China and services to India, a protectionist backlash in the US and in other countries is a real possibility.

All the more reason, therefore, for nations to sit together and find ways to strengthen the WTO and to make it more acceptable to a wider audience. Kent Jones' book will help towards realising that objective.

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WHO'S AFRAID OF THE WTO?

Kent Jones
Oxford University Press
Pages: 236