Learning from Doha: can "development" be operationalized in international economic law?

Author:Ofodile, Uche Ewelukwa
Position:Proceedings of the One Hundred Third Annual Meeting of the American Society of International Law: International Law as Law

This panel was convened at 9:00 a.m., Thursday, March 28, by its moderator, Matjaz Nahtigal of the University of Ljubljana, who introduced the panelists: Uche Ewelukaw of the University of Arkansas; Robert Howse of New York University School of Law; Andrew Mitchell of the University of Melbourne Law School; and Sanjay Reddy of Columbia University, Barnard College, and the School of International and Public Affairs.

INTRODUCTORY REMARKS BY MATJAZ NAHTIGAL *

Since the beginning of the Doha trade round, so many things in the international, economic, social, and legal environment have changed that it is questionable how--and to what extent--to remain faithful to the trade talks which started in a significantly different context. Not only has each new meeting of the Doha round led to shrinking gains for the majority of the developing countries, but also, since the beginning of the financial crisis, the leading industrial countries in the world have become more reserved about the future of trade liberalization.

This debate is anchored in the firm belief that the traditional conflict between free traders and protectionists should be replaced by a more promising debate about the existing global trade arrangement and any alternatives. Furthermore, such a debate on the future of the trade regime can be taken only in a broader context of redefinition of the entire Bretton Woods system, which was originally designed to establish international financial security, stability of exchange rates, flows of investments, and alleviation of poverty. At the moment, the debates on global monetary issues, currency issues, liquidity, and coordinated fiscal stimulus measures certainly come before global trade issues. The conceptual and practical issues within the Doha development round and beyond will return sooner rather than later.

The immense complexity of the trade talks with 150 highly diverse countries in terms of size, overall level of development, climate conditions, and social inequality does not necessarily mean that the members of the WTO cannot reach a new agreement. Such an agreement--if genuinely trying to address challenges of the developing countries--would have to be substantially different from the proposal which led to the suspension of talks in the summer of 2008.1 Despite the initial optimistic promises of substantial gains and poverty alleviation throughout the developing countries, the deal on the table in Geneva would have increased the welfare of the poor countries only marginally.

This is not only a debate on how to strengthen development and productive capabilities of the developing countries; this is also a debate about how to achieve Pareto improvement of the international economic and legal framework, and on how to achieve a more diverse and more inclusive framework for developing and developed countries, where an increasing number of middle class people are also being placed under growing economic and social pressure.

Therefore, what would the genuine pro-development round require in order to live up to the initial Declaration in Doha? The recent surge of protectionism due to the global financial and economic crisis in most of the G-20 countries, as recorded by the World Bank, offers us an interesting new perspective. Contrary to the WTO rules prohibiting direct subsidies, both the United States and the European Union are having to bail out not only their financial institutions, but also their automobile industries. The recent analysis by Ha-Joon Chang has shown that the huge rescue packages, which were explained as a part of the green initiative, are more likely to be examples of prohibited subsidies to their industries. The main reason why these subsidies are portrayed as green initiatives is not a sudden turn to the green (no matter how welcome and important this idea is), but primarily an attempt to legitimize government bailing out efforts in light of the existing WTO system. Ha-Joon Chang concluded that this action by the leading economies only confirms inherent contradictions and inequities in the current trading system. His conclusion is that rather than trying to cover this up by painting everything green, we should start rethinking how to truly reform the system so that not just rich countries but also the developing countries can use policies that are more suitable to their conditions. (2)

In strictly legal terms, the Special and Differential Treatment (S&DT) Principle was interpreted substantially more broadly before the Uruguay Round than after it. Despite many references to the S&DT Principle (for example, para. 44 of the Doha declaration), and the historical evidence from the developed and developing countries that the S&DT Principle can assist economic development, the present reading of the S&DT Principle leads to a very narrow interpretation with short-term objectives and anti-development effects. (3) More policy space, tools, and instruments are needed not only for the developing countries but also for the developed ones in order to be able to start building productive capacities in new technologies, energy efficiency, and other sectors.

If properly designed, the inclusion of labor and environment standards can benefit citizens of trading partners, both in the developing countries and in the developed countries. Sanjay Reddy and Christian Barry have shown that poorer countries can avoid a trade-off between enhancing labor standards and taking full advantage of job-creating production and trading opportunities if current international trade rules are reformed so that they reward, instead of punish, countries that improve labor standards. (4)

Finally, the further we move with alternative ideas about the future orientation of the trade regime, the closer we come to the topic which is missing on the table of trade talks. On the one hand, the movement of capital around the world is almost completely liberalized while, on the other hand, labor remains largely within home countries. More inclusive trade talks, together with labor standards protecting and empowering the labor force, both in developing and developed countries, should eventually lead to a discussion of how to combine mobility of both capital and labor around the world. (5) Faster diffusion of intellectual property and technologies should be taken into consideration.

Without the capability of addressing inequalities between developed and developing countries, as well as within countries, this may only exacerbate the current crisis. On the other hand, the ability of countries to find common grounds in the strengthened multilateral framework may help all of them, acting primarily in their self-interest, to advance collectively in a more diverse, inclusive, and pluralistic global economy. (6)

* Associate Professor of International Law and International Relations, Faculty of Social Sciences, University of Ljubljana.

(1) This argument was put forward by JOSEPH STIGLITZ & ANDREW CHARLTON, FAIR TRADE FOR ALL (2005), p. 132.

(2) Ha-Joon Chang, Painting Carmakers Green; Developed Nations are Trying to get Around WTO Subsidy Rules by Portraying their Industry Bail-outs as Green Initiatives, THE GUARDIAN, Feb. 3, 2009.

(3) For a detailed analysis of this argument see Ajit Singh, S&DT: The Multilateral Trading System and Economic Development in the Twenty First Century in PUTTING DEVELOPMENT FIRST (Kevin Gallagher ed., 2005), esp. p. 252 and pp. 259-261.

(4) CHRISTIAN BARRY & SANJAY REDDY, INTERNATIONAL TRADE & LABOR STANDARDS 80-85 (2008).

(5) ROBERTO UNGER, FREE TRADE REIMAGINED 193-212 (2007).

(6) Robert Howse, Mainstreaming the Right to Development in International Trade Law and Policy at the World Trade Organization, UN doc E/CN.4/Sub.2/2004/17, June 2004.

THE "NEW" DEVELOPMENT AGENDA: CHALLENGES TO OPERATIONALIZING SPECIAL AND DIFFERENTIAL TREATMENT

  1. INTRODUCTION

    The world is witnessing the third wave of globalization. However, neither in the first wave (approximately 1870-1914), the second wave (approximately 1945-1980), nor in the third wave (approximately 1990-present) have developing countries ("DC"), particularly least developed countries ("LDC"), fully benefited or effectively participated in the global trading system. Rather, as Dowlah notes, "[m]ounting evidence suggests that the pace and magnitude of marginalization of the LDCs have been deepening in the rapidly globalizing world economy ... while unprecedented levels of benefits, stemming from economic globalization, are being accrued to the developed countries...." (1) Special and differential treatment (SDT) can and should be operationalized. However, operationalizing SDT requires expanding our vision of SDT and an honest acknowledgement that accepted wisdom about the efficiency of markets, the limited role for governments in economic and industrial planning, and the relationship between trade liberalization and development is somewhat flawed. It would also require a reversal or at least a revision of some of the damaging changes and rules introduced following the Uruguay Round ("UR") of trade talks. DCs are tired of empty promises of accommodation and aid for trade. The time to act is now. While it would appear that there is no incentive for developed countries to make SDT more effective, the credibility and legitimacy of the global trading system is squarely on the line. Moreover, a post-Doha Round system which fails to deliver economic welfare gains to DCs and which creates an even greater number of "left behinds" (individuals, groups, countries, as well as regions) may have serious implications for the security interest of leading industrialized countries. DCs must resist the pressure to strike yet another bargain that creates even greater asymmetry in costs and benefits. No bargain is better than a bad bargain and definitely less dangerous than a "grand bargain" that is based on speculation, empty promises, and mere conjecture.

  2. SDT: LESSONS OF THE...

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