Tuesday, May 29, 2012

Developing countries and the WTO

Chiedu Osakwe's article titled "Developing Countries and GATT/WTO Rules" in the Minnesota Journal of International Law throws light on the complex nature of engagement of developing countries in the multilateral, rule based trading system. He argues that developing countries in recent years have gradually implemented liberalizing and trade policy reform as against protectionist tendencies earlier. It has been argued that developing countries have shifted tracks from inward looking protectionist policies to a more open, rule based system of trade policy due to the multilateral trading system.

The role of the WTO in encouraging this change on policy behaviour has been highlighted. 
"The effect of the rules-based Multilateral Trading System in particular has been underestimated. The architecture of the WTO has operated to secure rule-compliant, trade-reformist behavior and exercised systemic constraints on individual Members to check and counter protectionism. This architecture rests on the pillars of enforceable rules, under the DSU, periodic Trade Policy Reports and monitoring reports, within the framework of the TPRM, and the accumulating effects of the terms of accession of RAMs, pursuant to Article XII accession negotiations. This architecture, renovated by periodic trade rounds, has acted in combination with domestic growth priorities, in developing countries, to generate and sustain the momentum for trade liberalization."
Particularly interesting are the observations on the Dispute Settlement mechanism of the WTO. 
"The DSU is the foundation of the rules-based Multilateral Trading System. It ensures that trading rules are enforced, that WTO Members operate on the basis of the rule of law and that the trading system is secure and predictable. Recourse to and frequency of invocation of the DSU suggests deeper institutional engagement in the rules-based system. Greater recourse to dispute settlement is associated with trade opening behavior and commitment to domestic reforms. The data suggests that in the fifteen-year period between 1995 and 2010, developing countries, taken together, have increased recourse to dispute settlement as “complainants.” As a group, they are now fairly active users of the system. Increased recourse to dispute settlement would suggest greater sensitivity to the content of trade measures and the effects they carry for consistency or inconsistency with the rules of the trading system.
 Regardless, what is more important is the fact that developing countries have been respondents in cases regarding the WTO-consistency of measures taken.This increases awareness and sharpens sensitivity that trade measures that developing countries take (as with other Members) should aspire to be WTO-consistent."
The increasing use of the DSU by developing countries is an encouraging sign. As Pascal Lamy had opined, every initiation of a dispute at the WTO should not be seen as a "trade war". In fact, it acts as a safety valve to air grievances and sort out differences. However, developing countries need to augment their capacities to engage with the DSU. The decisions of the Panel and Ab indicate the detailed analysis of fact and law. Most of the cases rely on complex issues of data, economic analysis and judicial interpretation. The need for a "law and economics" approach is vital to sustain one's claims. The teams involved must be multidisciplinary with  government officials, trade policy experts, data analysts, trade economists and international trade lawyers. Developing countries can expect a large number of disputes as they integrate into a rule based system both from fellow developing countries as well as the developed world. While developing countries coalitions do exist it must be remembered that when "national" domestic interests are involved, the coalitions will not be able to sustain itself. The increasing heterogeneity of developing countries interest was also brought to light in the article:
"The composition and role of developing countries in the Multilateral Trading System is complex and evolving. The group is heterogeneous. It is neither a monolith nor is it unitary. Its interests are mixed, uncertain, and in some cases, divergent.


In the Doha Round, various developing country negotiating coalitions have emerged that provide snapshots of the diversity of the trade and economic interests of developing countries in the Doha Round. For instance, in the agriculture negotiations, several groups are operative. These include the Commodities Group; the Cotton-4; the G20 of Members committed to ambitious liberalization in agriculture; the G3-33 with defensive orientations in agriculture; the G-90; the LDCs; the RAMs; small and vulnerable economies (SVEs-Agriculture); and the Tropical and Alternative Products Group. Although the Cairns Group of agricultural  exporters includes developed Members such as Australia, Canada, and New Zealand, its other Members are developing countries. For instance, Mauritius, a Member of the African Group is designated a developing country, but participates in the Doha Round Agriculture negotiations with developed Members in the G-10, with high levels of domestic support and low ambition levels in the agriculture negotiations. This is in contrast to South Africa, another developing country member of the African Group, participating with other developing countries in the G-20 group, with low levels of domestic support and high levels of ambition in the agriculture negotiations."
Increasingly countries will pursue their domestic national trade interests within legitimate limits and seek remedies. The example of Brazil taking on Argentina's import restrictions  is only one example of a developing country questioning each other's policies. This in itself need not be seen as a negative development. The body of jurisprudence built around the WTO Agreements by the Panel and AB decisions is an indication of an increasing involvement and willingness of countries to engage with a rule based system without foreclosing the "negotiated" route.

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