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Development Summary Papers Links

Development Summary

One of the main motivating factors of the WTO's commitment to trade liberalization is the notion that free trade is integral to economic growth. However, the success of trade liberalization has been ambiguous in some developing countries.[1] Commitments to reduce trade barriers can be difficult and expensive to implement, and opening domestic sectors can cause massive displacement of workers because some industries fail to be competitive on the global market. Developing countries are also concerned that trade liberalization will make them more vulnerable to price fluctuations and recessions in other parts of the world.[2]

In response to increasing criticism that trade negotiations are not sensitive enough to the concerns of developing countries, the WTO initiated the Doha Development round as the first trade round to focus specifically on the role of trade in development. According to its mandate, the Doha agenda focuses primarily on the areas most important to developing countries, such as agriculture and implementation issues. [3] Yet, when the Ministerial Conference in Cancun ended abruptly no progress had been made on agriculture, and developed and developing countries disagreed vociferously on whether to add the Singapore issues to the agenda. This antagonism between developing and developed countries and the lack of progress made in Doha raise the question of whether the WTO's attention to development is just rhetoric. Has the Doha Development Round lived up to its name?

Doha Development Round

Little of the development agenda has actually been accomplished; in agriculture, the US and Japan have resisted making any commitments, even as the EU finally began dismantling agriculture supports and reforming its subsidy program. At Cancun, developed and developing countries were unable to come to a consensus on a proposal, and were even more polarized on the issue of subsidies and domestic supports. See the GTN Agriculture page.

Adding to an already lengthy agenda, the US and EU have been major demandeurs for initiating negotiations on the four Singapore issues: investment, competition, transparency, and government procurement. Developing countries have objected to negotiating on these issues because they are overwhelmed with existing issues, and the commitments the US and EU are proposing may not be in their best interest. The Cancun talks broke down due, in part, to a stalemate on these issues. See the GTN Investment page.

WTO members have achieved some success in intellectual property rights (IPRs) negotiations by expanding developing country access to patented drugs via domestic production or importation. However, the issue of how much developing countries should tighten their non-pharmaceutical IPR laws is still under debate. Developed countries with substantial investor interests at stake (US, EU) argue that tightening IPR laws will bring more investment to developing countries by increasing investor protection, and in turn, the investment will stimulate development. [4] Developing countries are divided on this issue: while they want to protect the IPRs of their own inventors, they cannot afford the cost of implementing IPR law reforms. Furthermore, more technologically advanced developing countries like China and India have experienced high rates of growth and employment because of weak IPR enforcement. They are concerned that sudden IPR law compliance will choke their technology industries that are currently driving development. [5]

China's success with its investment policy shows that investors do not make decisions on whether to invest or not based solely on IPR laws. For example, China has made it standard economic policy to demand that foreign investors and technology firms share their patented technology to gain access to the Chinese market. [6] Thus, to convince developing countries of the necessity to tighten IPR enforcement will require more evidence that IPR laws and levels of investment are closely linked. See the GTN Intellectual Property Rights page.

Polarization at Cancun

At Cancun, many WTO members were inflexible in their negotiating positions, highlighting the polarization between the developed and developing countries, and leading to the collapse of the talks. Some developing countries mobilized against what they perceived as the US and EU's disproportionate level of control over the proceedings, and organized themselves as the Group of 20 (G-20) to create a stronger voice in negotiations. Meanwhile, developed countries continued to pressure developing countries to add the Singapore issues to the agenda without agreeing to make concessions in agriculture in return. [7]

While the polarity of WTO members in Cancun seemed to threaten the success of the Doha round, recent attempts to restart negotiations show that countries are now more willing to compromise. For example, the G-20 has taken a lead role in re-invigorating the Doha round after Cancun, and has taken a more flexible stance to keep negotiations on track. The G-20 has helped developing countries take advantage of their collective bargaining powers while proactively seeking a successful completion of the trade round. Similarly, the US has agreed to aggressive cutbacks in agriculture subsidies, as long as Japan agrees to begin reforms and the EU continues its reforms. Agriculture will remain a sensitive and integral component of the Doha agenda, but it seems that developed and developing countries are now prepared to return to the negotiating table. [8]

Criticism of WTO Rules

Developing countries have frequently criticized the WTO for its lack of transparency, citing closed-door, late night sessions, delayed release of meeting transcripts, and failure to invite developing country delegations to high-level meetings. They also criticize the WTO for giving industrialized countries more power to set the agenda, draft agreements, and dictate commitments to liberalize trade through its opaque decision making processes. At the 1999 Seattle Ministerial Conference, several groups of developing countries released statements criticizing their exclusion from key decision-making processes at the WTO, such as informal, closed-door 'green-room' meetings. [9]

At Cancun, a number of NGOs including the World Development Movement, Oxfam, and Third World Network, issued similar complaints and drafted a memo to the WTO calling for more transparent and democratic decision-making in the Doha Round. [10] Specifically, they ask that the WTO stop holding unrecorded informal meetings or 'mini-ministerial' meetings that developing countries are rarely invited to participate in, that meetings and their location be announced six hours before they are held, that all agenda additions or omissions be made as a whole group, and that small, under-financed developing country delegations receive special assistance to ensure that they can participate fully. However, during Cancun, none of the suggestions made by civil society groups were implemented. Although the WTO has taken steps to improve transparency such as improve its website and make its documents available to the public faster, it has yet to make any significant changes to the rules of procedure. [11]

The Prohibitive Costs of Participation and Implementation

The cost of participation in the WTO is an enormous obstacle for developing countries that prevents them from taking an active role in negotiations and shaping multilateral agreements to address their particular development issues. Not only are they not able to maintain a delegation in Geneva to be present at informal meetings throughout the year, but they can often only afford to send small delegations to participate in major conferences. As the issues increase in number and complexity, it becomes more and more difficult for the small developing country delegations to effectively participate in any of the proceedings. Additionally, larger developed nation delegations can easily overwhelm the negotiation capacity of developing countries and wield considerable control over the course of the negotiations.

The WTO's response to the high cost of participating in the WTO has been to provide financial assistance and capacity building programs through partnerships with the World Bank, the United Nations, and the International Monetary Fund. The financial assistance helps developing countries send delegations to WTO negotiations, and pays for training in specific issues and in the negotiating skills. For capacity building, the WTO holds seminars and workshops, provides legislation drafting assistance, and has created online reference centers. The World Bank and UN employ non-governmental organizations to hold trade negotiation workshops, train delegations, and help developing countries conduct research to support their negotiating positions at the WTO. In order to evaluate efforts during the Doha round to increase capacity building activities, the WTO has compiled a database of programs and examined case studies to determine where capacity building has improved. The NGOs in charge of each program carry out their own evaluation to determine the efficacy as a WTO/UN/World Bank requirement for continued funding.

The cost of implementation of WTO commitments is another barrier to development for developing countries; the cost of fully implementing Uruguay Round commitments is equivalent to a year's development budget in some developing countries. [12] Because of this barrier, the WTO gives developing countries more time to meet implementation deadlines, and provides loans and aid packages through partnerships with the World Bank and IMF. Still, developing countries' negotiating position are often determined by the daunting costs of liberalization, even if the potential gains are high. [13]

Balancing rights and responsibility

Civil society groups and NGOs, including Oxfam, the World Development Movement, the World Wide Fund for Nature, and the Third World Network, are increasingly calling for a balance of rights and responsibilities in trade liberalization. They argue regulations that protect the health and safety of a country's citizens are necessary complements to liberalization, and developing countries will only see the benefits from trade when the two policies work in concert. For example, in addition to having a set of protected rights, investors should also have to shoulder some responsibility for their actions in the country in which they are investing. [14] This concept is controversial in the WTO where regulations are considered barriers to trade. However, a minimum of regulations could protect against the negative externalities caused by liberalizing global trade.

Last updated March 2004


[1] Rodrik, Dani, "Feasible Globalizations," National Bureau of Economic Research Working Paper Series, September 2002. http://www.nber.org/papers/w9129.pdf
[2] Ravallion, Martin, "The Debate on Globalization, Poverty and Inequality: Why Measurement Matters," Development Research Group, World Bank, April 2003. http://econ.worldbank.org/files/26010_wps3038.pdf
Elliot, Kimberly and Debayani Kar and J. David Richardson, "Assessing Globalization's Critics," May 2002. http://www.iie.com/publications/wp/2002/02-5.pdf
[3] WTO Doha Gateway: http://www.wto.org/english/tratop_e/dda_e/dda_e.htm
[4] British Department for International Development background briefing. September 2001. http://www.cptech.org/ip/wto/dfid092001.pdf
OECD High-level Workshop on IPRs and Economic Development, Beijing, China, 20-21 April 2004. http://www.oecd.org/document/8/0,2340,en_2649_33703_25619528_1_1_1_1,00.html
[5] Intellectual property rights in India. IndiaOneStop.com. http://www.indiaonestop.com/markets-intellectual-prop-rights.htm
[6] Wall Street Journal. China article.
[7] ICTSD Bridges Weekly Trade News Digest, 19 February 2004. http://www.ictsd.org/weekly/04-02-19/story1.htm
[8] ICTSD Bridges Weekly Trade News Digest, 19 February 2004. http://www.ictsd.org/weekly/04-02-19/story1.htm
[9] Khor, Martin. Green Room will operate in Seattle too. Third World Network, November 1999. http://www.twnside.org.sg/title/operate-cn.htm
[10] Global Policy Forum. The Cancun Democracy Challenge. July 2003. http://www.globalpolicy.org/socecon/bwi-wto/wto/2003/07democracychallenge.htm
[11] Global Policy Forum. WTO Ignores Calls for Democratic, Inclusive Processes for Cancun. June 2003. http://www.globalpolicy.org/socecon/bwi-wto/wto/2003/0620ignore.htm
[12] Finger, J. Michael and Philip Schuler, "Implementation of Uruguay Round Commitments: The Development Challenge," DRAFT, September 1999 [online: web] URL: http://www.itd.org/wb/finger.doc.
[13] Second Joint WTO/OECD Report on Trade-Related Technical Assistance and Capacity Building (TRTA/CB). http://tcbdb.wto.org/publish/Report%202003%20final%20english%20without%20signature.pdf
See also OECD and WTO joint page on capacity building and technical assistance. http://tcbdb.wto.org/index.asp?lang=ENG
[14] World Development Movement. Allies or Antagonists? http://www.wdm.org.uk/cambriefs/wto/alliesantagonists.pdf