Before the Southern states begin to fault the WTO, the central concern for them ought to be domestic policies and the shortcomings in that regard
Moeed Yusuf
moeed@sdpi.org
While no outright consensus was achieved at the WTO (World Trade Organisation) ministerial meeting, which was held in Hong Kong in December 2006, members have agreed to continue talking in the "interest of all".
On the sidelines of the ministerial talks was violent opposition to the idea of a global trading regime. It is not the scale of the opposition but the message the opponents conveyed to policymakers sitting inside the Hong Kong Convention Centre: the WTO regime has attached to it negative externalities which will force many to lose out in the bid to create a global free-trade regime.
What is important is the fact that the opposition at the meeting was not a result of any perceived threat from WTO, but came from groups who have already begun to feel the brunt of the free-trade regime. This is a stark reality, in total contrast to the perception of those sitting inside the Convention Centre and who look to the WTO as a means of bringing gains for all. The latter deduction is entirely flawed.
Proponents of free trade continue to profess that WTO would bring global benefits by increasing inter-state economic flows. However, it is absurd for member states to perceive, as some do, that this automatically translates into a "benefit-for-all" regime. WTO pundits themselves are the first ones to oppose any such extension of the regime's mandate. The fact is that the WTO is only aimed at increasing the size of the global economic pie, which could potentially increase the size of the pie for individual countries. In other words, WTO principally looks at a global improvement in economic flows. It is virtually silent on intra-national benefits.
To begin with, while the multilateral trading arrangement might bring benefits to most countries, there is no guarantee that every member state would gain. More importantly, it certainly does not flow from the arrangement that such a development would improve the livelihood opportunities (and thus poverty) of all citizens of the South.
The first question strikes at the heart of inter-state politics. The most contentious issue that has prevented trade talks from reaching a consensus is that of market access. The deadlock is largely a result of power play in international politics. The EU and the US are using their international leverage to continue protecting their domestic producers while pushing the Southern states to liberalize. The latter is in no position to force a change in the North's attitude, especially given the imbalanced power structure. Clearly, tangible movement on the issue of market access lies at the mercy of the North. The South can only exert its utmost pressure and play a wait-and-see game.
The second leg of the equation--i.e., benefits translating from the national to the individual level--directly concerns the Southern governments. Here it revolves around Southern national policies, which look to ensure benefit-sharing between the rich and the poor. The need for the Southern countries to ensure an all-inclusive system of benefit-sharing remains as strong under the WTO as without it. Notwithstanding the South's claims that the advent of the free-trade regime would bring benefits to all, there is no automatic connection between the two.
The lack of an effective benefit-sharing mechanism in the Southern countries, misplaced institutional preferences, and inherent policy biases favoring the influential large-scale producers ought to be the focus of governments in the South. Were WTO to bring gains at a national scale, there is every possibility that the influential elite will capture most of it, given the present institutional context across the South. In fact, were the WTO to manage a level playing field (by resolving market access and other such issues), the stakes to hijack the "trickle down" and benefit-sharing mechanisms would be higher.
As the potential gains increase, two things are likely to happen in an adverse policy environment. First, large-scale producers are likely to exert the influence that they so often enjoy in the South to receive most of the benefits. Second, given the necessity of efficient production, the economies of scale and a slew of environmental and quality standards, large-scale producers with resources at their disposal would be in a position to adapt more quickly than small-scale producers in the South.
This could easily result in weeding out the less competitive small-scale producers. Already literature is emerging, which challenges common wisdom by shedding pessimism on the ability of small producers to gain from market-access opportunities. The opposition from the Korean farmers and other such groups in Hong Kong is evidence of such a development.
If the South's policies are not altered to cater to the interests of the small-scale producers, there could be serious repercussions. Trade pundits are increasingly looking at SMEs (small and medium enterprises) as the engines of economic growth within countries. Given their contribution to the GDP and their employment-generation potential, Pakistan itself has laid high priority on SMEs in its Medium-Term Development Framework. If most of the SMEs were weeded out--in case of agriculture, this would be small farmers--it would severely impact employment levels within the country, which would automatically translate into higher poverty levels. While trade skeptics stop here, the chain needs to be extended to include all social impacts associated with rising poverty levels, the most obvious one being increased crime and, perhaps, more recruits for extremist interests.
The point is that the WTO, at best, will bring gains for national economies. It will not alter the domestic policy structures of the countries, which need to be in place if the benefits are to trickle down to the poorest. The onus of correcting domestic policy biases and give incentive to small-scale producers in a free-trade regime is entirely on the Southern states. There is no reason for the governments in the South to wait for the creation of a level playing field before they would take such measures. By the same token, one must not link any failure of the small producers under the WTO to the regime itself. The central concern ought to be domestic policies and the shortcomings in that regard.
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