Monday, September 10, 2012

Joseph Stiglitz proposes a "Right to Trade"

Joseph Stiglitz  recently spoke about a radical concept of the "Right to Trade" for developing countries that are impacted by the change in trade policies of the developed world.Calling for a change in the multilateral trading rules to incorporate such a concept, it essentially implies that the Right to Trade would be a tool in the hands of the developing world to take advantage of trade to work for the poor.UNCTAD reported it here.

The Commonwealth Secretariat summarized the concept here:
"As part of a pro-development multilateral liberalisation agenda, Prof Stiglitz said it is imperative to install alternative mechanisms to rebalance the global trading system and make trade work for the poor. He proposes that members of the WTO should adopt a general Right to Trade policy operating within the dispute settlement body. 
Under such a mechanism, developing countries would be able to bring an action against any developed country and access remedies. 
“A developing country (or countries) bringing successful actions under the Right to Trade could access a range of remedies, including elimination or change to the offending policy as a result of mediation, bilateral sanctions, and compensation from a multilateral Aid for Trade fund,” he said. 
“Under this arrangement, developing countries should be able to club together to impose joint sanctions where they have been affected by actions of policies of a developed country.”
The proposal works as follows:

"Under such a mechanism, developing countries would be able to bring an action against any advanced country where 3 conditions are met:       
 - a specific group of poor people within a developing country can be identified as being significantly and directly affected by a   specific trade or trade-related policy of an advanced country.        
 - the effect of the policy acts to materially impede the economic development of those poor people.    
    - the impediment operates by restricting the ability of the people to trade, or gain the benefits of trade." 

What implications does this have for the DSM of the WTO? It presupposes that developing countries need special rights under the multilateral system to ensure that trade is beneficial to it's people. It is definitely a radical thought considering that "national" treatment is the underlying philosophy of the WTO as well as the principle that the same rules apply to both the developing and developed worlds. What would constitute "developing" countries n this context? An emerging economy like China too fits this bill. How would the developed economies react to this proposal? He also stated that the Aid for Trade program of the WTO had not worked to the fullest extent possible and that a Global Trade Facility, a fund to be managed in the hands of UNCTAD must ensure that the developing countries are adequately compensated. Another example of the friction between the WTO and UNCTAD? I have written about the UNCTAD-WTO relationship here. Further, how would the proposed arrangement actually work? Would it be as a result of the dispute settlement decisions where developed countries measures are found to be restrictive? What about protectionist measures by developing countries? What about developing countries disputes inter se?

A strikingly out of the box proposal but as suggested by many delegates at the Commonwealth meeting - "the proposals were "radical", "progressive", "mischievous" and "interesting but risky". They added that more work needed to be done to tease out details of how these would work and be enforced."

Time for a radical change? With the Doha round in an impasse, it is difficult to visualize this radical agenda being accepted by the WTO members, by consensus.

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