CHAPTER IINTRODUCTIONThe WTO was born out of negotiations, and everything the WTO does is the result of negotiations. The bulk of the WTOs current work comes from the 198694 negotiations called the Uruguay Round and earlier negotiations under the General Agreement on Tariffs and Trade (GATT). The WTO is currently the host to new negotiations, under the Doha Development Agenda launched in 2001.Where countries have faced trade barriers and wanted them lowered, the negotiations have helped to openMARKETS for trade. But the WTO is not just about opening markets, and in some circumstances its rules support maintaining trade barriers for example, to protect consumers or prevent the spread of disease.At its heart are the WTO agreements, negotiated and signed by the bulk of the worldsTRADINGnations. These documents provide the legal ground rules for international commerce. They are essentially contracts, binding governments to keep their trade policies within agreed limits. Although negotiated and signed by governments, the goal is to help producers of goods and services, exporters, and importers conduct their business, while allowing governments to meet social and environmental objectives.The systems overriding purpose is to help trade flow as freely as possible so long as there are no undesirable side effects because this is important for economic development and well-being. That partly means removing obstacles. It also means ensuring that individuals, companies and governments know what the trade rules are around the world, and giving them the confidence that there will be no sudden changes of policy. In other words, the rules have to be transparent and predictable.TRADErelations often involve conflicting interests. Agreements, including those painstakingly negotiated in the WTO system, often need interpreting. The most harmonious way to settle these differences is through some neutral procedure based on an agreed legal foundation. That is the purpose behind the dispute settlement process written into the WTO agreements.While the WTO is driven by its member states, it could not function without its Secretariat to coordinate the activities. The Secretariat employs over 600 staff, and its experts lawyers, economists, statisticians and communications experts assist WTO members on a daily basis to ensure, among other things, that negotiations progress smoothly, and that the rules of internationalTRADEare correctly applied and enforced.TRADEnegotiationsThe WTO agreements cover goods, services and intellectual property. They spell out the principles of liberalization, and the permitted exceptions. They include individual countries commitments to lower customs tariffs and otherTRADEbarriers, and to open and keep open servicesMARKETS. They set procedures for settling disputes. These agreements are not static; they are renegotiated from time to time and new agreements can be added to the package. Many are now being negotiated under the Doha Development Agenda, launched by WTOTRADEministers in Doha, Qatar, in November 2001.Implementation and monitoringWTO agreements require governments to make their trade policies transparent by notifying the WTO about laws in force and measures adopted. Various WTO councils and committees seek to ensure that these requirements are being followed and that WTO agreements are being properly implemented. All WTO members must undergo periodic scrutiny of their trade policies and practices, each review containing reports by the country concerned and the WTO Secretariat.Dispute settlementThe WTOs procedure for resolvingTRADEquarrels under the Dispute Settlement Understanding is vital for enforcing the rules and therefore for ensuring thatTRADEflows smoothly. Countries bring disputes to the WTO if they think their rights under the agreements are being infringed. Judgments by specially appointed independent experts are based on interpretations of the agreements and individual countries commitments.BuildingTRADEcapacityWTO agreements contain special provision for developing countries, including longer time periods to implement agreements and commitments, measures to increase theirTRADINGopportunities, and support to help them build their trade capacity, to handle disputes and to implement technical standards. The WTO organizes hundreds of technical cooperation missions to developing countries annually. It also holds numerous courses each year in Geneva for government officials. Aid for Trade aims to help developing countries develop the skills and infrastructure needed to expand their trade.OutreachThe WTO maintains regular dialogue with non-governmental organizations, parliamentarians, other international organizations, the media and the general public on various aspects of the WTO and the ongoing Doha negotiations, with the aim of enhancing cooperation and increasing awareness of WTO activities.The WTO agreements are lengthy and complex because they are legal texts covering a wide range of activities. But a number of simple, fundamental principles run throughout all of these documents. These principles are the foundation of the multilateralTradingsystem.Non-discriminationA country should not discriminate between itsTRADINGpartners and it should not discriminate between its own and foreign products, services or nationals.More openLoweringTRADEbarriers is one of the most obvious ways of encouraging TRADE; these barriers include customs duties (or tariffs) and measures such as import bans or quotas that restrict quantities selectively.

Predictable and transparentForeign companies, investors and governments should be confident that trade barriers should not be raised arbitrarily. With stability and predictability, investment is encouraged, jobs are created and consumers can fully enjoy the benefits of competition choice and lower prices.More competitiveDiscouraging unfair practices, such as export subsidies and dumping products at below cost to gainMARKETshare; the issues are complex, and the rules try to establish what is fair or unfair, and how governments can respond, in particular by charging additional import duties calculated to compensate for damage caused by unfair trade.More beneficial for less developed countriesGiving them more time to adjust, greater flexibility and special privileges; over three-quarters of WTO members are developing countries and countries in transition toMARKETeconomies. The WTO agreements give them transition periods to adjust to the more unfamiliar and, perhaps, difficult WTO provisions.Protect the environmentThe WTOs agreements permit members to take measures to protect not only the environment but also public health, animal health and plant health. However, these measures must be applied in the same way to both national and foreign businesses. In other words, members must not use environmental protection measures as a means of disguising protectionist policies.

CHAPTER IIRECENT TRENDS OF WTOFour recent trade trendsThe first of the four trends highlighted in this report is the economic rise of developing and emerging economies, which is explored in depth in Section B. Not co incidentally, the rising living standards in developing regions since 2000 have gone hand-in-hand with rising shares in world trade for these countries. By embracing a policy of trade openness and integration, these countries now have access not just to the capital, technology, and resources needed to fuel rapid industrialization, but to vast and expanding overseas demand for their surging exports. The old patterns of world trade dominated by the advanced economies in the North are being transformed as emerging economies in the South become new poles of trade expansion. Since 1990, South-South trade that is, trade among emerging and other developing economies has grown from 8 per cent of world trade in 1990 to around 25 per cent today, and is projected to reach 30 per cent by 2030. Trade corridors between Asia and North America, and between Asia and Europe, now surpass the old transatlantic trade corridor, while trade corridors between Africa and Asia or Latin America and Africa are growing in importance. Even as the Souths share of world trade expands, world trade as a whole continues to grow, meaning that developing countries have ever-richer and more diverse markets for their exports. In short, the rise of new trade powers is a positive sum game. But despite these gains, developing countries still have a long development path ahead of them, since they fall short of industrial countries on a large number of important economic indicators. Significant proportions of their populations still live below the poverty line. Incomes in emerging economies are still a fraction of those in developed economies. While the export success of todays emerging economies highlights new opportunities and paths for other developing countries, the pace of growth among developing countries remains uneven. Some are experiencing high and sustained growth, others are struggling to move beyond middle-income levels, while still others may be falling behind. This report sheds light on the growing importance of developing countries in the world trading system, and explores how the WTO can play an increasingly central role in advancing their various development objectives.A second, related, trend, explored in Section C, is the growing integration of global production especially the rise of supply chains which is transforming the nature of trade and the way developing countries connect to the global economy. A combination of reduced transport and logistics costs, improved information technologies and more open economies have made it easier to unbundle production, not only within countries, but across a range of them. Four-fifths of world trade are now channelled through multinationals that locate various stages or tasks of the production process in the most cost-efficient locations around the planet.A second, related, trend, explored in Section C, is the growing integration of global production especially the rise of supply chains which is transforming the nature of trade and the way developing countries connect to the global economy. A combination of reduced transport and logistics costs, improved information technologies and more open economies have made it easier to unbundle production, not only within countries, but across a range of them. Four-fifths of world trade are now channelled through multinationals that locate various stages or tasks of the production process in the most cost-efficient locations around the planet.While the average import content of exports is around 25 per cent and increasing over time and almost 30 per cent of merchandise trade is now in intermediate goods or components, increasing exports now directly hinges on increasing imports and on removing obstacles to imported inputs. Since value chains involve the integration of production platforms, not just cross-border trade flows, these obstacles can involve everything from tariff barriers and transport bottlenecks to differing standards, investment restrictions and inefficient service suppliers. The emerging world of unbundled production offers an important new channel for trade growth and development, while at the same time highlighting differences in countries capacity to integrate or in the quality of their integration as well as the costs of remaining on the margins.A third major trend, examined in Section D, is the rising price of agricultural goods and natural resources since 2000. With some of the fastest-growing developing economies in the Middle East, Africa and Latin America recently having shifted from how developing economies can diversify out of resources to how they can strengthen their comparative advantage in resources, benefit more (and more widely) from them, and reduce the adverse impact of the boom and bust cycles that typically characterize these markets. This section identifies a number of key issues to be addressed if developing economies with actual or potential comparative advantages in agriculture or natural resources are to exploit higher commodity prices. These include reducing new and less transparent forms of trade protection, guaranteeing adequate rates of return on natural resources and addressing the social and environmental issues critical to inclusive and sustainable growth.As the world economy has become more interconnected through trade, investment, technology and people flows, it has also become more interdependent. This is the subject of Section E. Just as the economic benefits of widening and deeper integration now spread more quickly across countries and regions, so too do the economic costs, as exemplified by the way in which the shockwaves from the 2008 financial crisis and the subsequent economic downturn reverberated globally. Policy decisions in one country can have simultaneous and often unintended spill-over effects in many distant countries. These spill-overs can become major setbacks for developing economies, especially for the smallest and poorest countries, which lack adequate shock absorbers and are the most vulnerable to economic volatility.As the world economy has become more interconnected through trade, investment, technology and people flows, it has also become more interdependent. This is the subject of Section E. Just as the economic benefits of widening and deeper integration now spread more quickly across countries and regions, so too do the economic costs, as exemplified by the way in which the shockwaves from the 2008 financial crisis and the subsequent economic downturn reverberated globally. Policy decisions in one country can have simultaneous and often unintended spill-over effects in many distant countries. These spill-overs can become major setbacks for developing economies, especially for the smallest and poorest countries, which lack adequate shock absorbers and are the most vulnerable to economic volatility.Sections B to E follow similar structures in examining the opportunities and challenges that these four trade trends present to developing countries. They first provide broad, stylized facts about these trends and their determinants. Subsequently, the development implications of the trends are analysed, clarifying how participation in supply chains, increasing commodity prices and the global recession have played a significant part in different development patterns across countries in the last 15 years. Finally, the sections identify policies that have proved successful for emerging economies. This highlights the obstacles that need to be removed if other developing countries are to benefit from these trends, and the additional policies that may be needed to maximize benefits and reduce risks.Building on this analysis, Section F shows how existing WTO rules and practices address development challenges, and how flexibilities currently available to developing and least-developed countries in these trade rules can help facilitate their integration.Expanding trade may be essential for development but it is hardly sufficient. Countries that have succeeded in transforming trade and economic growth into inclusive, sustainable and broad-based development whether measured in terms of improving health, rising education, increasing opportunities for women, or decreasing poverty have also pursued a range of policies that not only share the gains (and costs) of trade openness but ensure that societies are equipped to benefit from global economic integration. While such policies are largely beyond the scope of this study, the report does consider income distribution not including income per capita and environmental quality as dimensions of development. This broad perspective is also useful in understanding how the multilateral trading system can contribute to creating a more thus reinforce popular support for further trade opening and global economic cooperation.

CHAPTER III

IMPACT OF WTO PROPOSAL ON DEVELOPED COUNTRIESWTO and Least Developed Countries About two thirds of the WTOs around 150 members are developing countries. They play an increasingly important and active role in the WTO because of their numbers, because they are becoming more important in the global economy, and because they increasingly look to trade as a vital tool in their development efforts. Developing countries are a highly diverse group often with very different views and concerns. The WTO agreements include numerous provisions giving developing and least-developed countries special rights or extra leniency special and differential treatment. Among these are provisions that allow developed countries to treat developing countries more favourably than other WTO members.

THE LEAST DEVELOPED COUNTRIES (LDCS)

Members reaffirmed their determination to fulfilling commitments made at Doha concerning LDCs. Various commitments have been made in respect of LDCs under the Doha Ministerial Declaration (DMD). Indeed, the Multilateral Trading System (MTS) must be sensitive to the special needs of LDCs. A key issue in this regard is the provision of duty-free and quota free market access for products originating in LDCs as called for in various international accords (Doha, LDC III, and Millennium Declaration). A report by UNCTAD on A Trade Marshall Plan for LDCs notes that, significant commercial gains would accrue to LDCs from the provision of bound duty free, quota treatment to all exports of LDCs by developed countries. Such treatment is likely to bring welfare gains of as much as US$8 billion and will add up to US$6.4 billion (10 per cent) per year increase in LDC exports, which currently represent just 0.68 per cent of world trade (Puri, 2005).

LDCs have called for duty-free and quota free access for ALL their products and for such treatment to be BOUND under the WTO. For example, the Fourth LDC Trade Ministers Meeting in Livingstone (June 2005) called on the 6th WTO MC to agree on Binding commitment on duty-free and quota-free market access for all products from LDCs to be granted and implemented immediately, on a secure, long-term, and predictable basis, with no restrictive measures introduced. Both issues remain outstanding in that not all WTO members provide LDCs with fully free trade treatment, apart from EBA and AGOA and some GSP schemes, and all such treatment provided so far are not bound in the WTO. Such treatment is sanctioned by Part IV of GATT and the Enabling Clause. In terms of similar treatment that could be provided by developing countries in a position to do so, some progress is taking place, mostly within the context of South-South regional trade agreements. In terms of legal coverage for South-South preferences, a waiver has been provided.A related issue is for LDCs to be granted exemptions from tariff and subsidy reduction commitments. Addressing the deeper end of Trade Related Technical Assistance (TRTA) is also a key concern of LDCs in view of diversifying their production and improving competitiveness in traditional areas as well as emerging areas of comparative and competitive advantage; developing human, institutional, regulatory and R&D capacities and infrastructures; and achieving greater technology-intensity, value-added, value retention and diversification of products and competitiveness.

SOUTH-SOUTH COOPERATION

Trade among countries of the South, by offering manifold opportunities to developing countries to increase their profile in international trade, can have a decisive influence in shaping any new trade geography. Today, South-South trade accounts for just over one tenth of total world trade, and is growing at double the rate. Moreover, over 40 per cent of developing country exports are to other developing countries, and trade among them is increasing at double-digit annual rates (UNCTAD, 2003b as cited in Puri,2005:43). South-South trade in services is also on the rise and has substantial possibilities. LDCs also need to take advantage of the opportunities offered by South South trade cooperation and integration. The share of LDC exports to other developing countries has shown a robust growth from 22 per cent in 1998 to more than 31 per cent in 2003. South-South economic and trade co-operation therefore offers additional opportunities to LDCs for assured development gains from the trading system (Puri,2005:43). In terms of trade or tariff preferences, many developing countries have been providing special tariff concessions for LDCs, including Duty-Free, Quota-Free Treatment (DFQFT) elements, as part of regional trade and economic cooperation agreements. Whilst it is true those developing countries with high level of poverty and populations engaged in similar economic activities may not be able to afford duty and quota free market access across the board for LDCs, those in a position to do so could take recourse to the Generalized System of Preferences (GSTP) multilateral route. Several developing countries have granted preferential market access for LDCs and many others are willing to do more so under the GSTP. The GSTP has been conceived as the cornerstone of economic cooperation among developing countries and has been designed to give concrete expression to their political commitment. Estimates suggests that, if developing countries agree to reduce the average tariffs applied to each other by 50 per cent in the current GSTP round, this would generate an additional $15.5 billion in trade. This is not an alternative to, but a complement to the multilateral liberalization process (UNCTAD, 2003a; Puri,2005:43). The situation in which LDCs find themselves today is similar to that of Europe in the aftermath of the Second World War. At current conversion levels, a Trade Marshall Plan for LDCs should deliver development gains in the range of $62.5 billion per year. Bound DFQFT and preferential access on services could yield almost half of the amount. Additional aid for trade funding at, say $1 billion for 50 LDCs would be a small-ticket item compared to the original Marshall Plan outlays and might have a multiplier effect on trade and supply capacity in LDCs. It would have the advantage of covering most aspects of the trade-related enabling and empowering that LDCs require in order to reap real development benefits. It would cushion adjustment shocks and build productive capacity, competitiveness and critical infrastructure. It would stimulate export expansion and improve terms of trade; spur economic growth, employment generation and poverty reduction and gender equity; and register efficiency gains. In a symbioticresponse, these LDCs in turn will become new and viable markets for other countries, including the developed ones, and contribute to the sustainability of the global enterprise. Developed countries tended to argue that it was important to agree on a coherent vision on especially the principles and objectives of SDT before engaging in negotiations on agreement-specific issues. They argued that the deliberations should proceed first with clarifying the purpose of SDT and other crosscutting systemic and institutional issues before discussing agreement-specific proposals. This raised the very difficult differentiation debate i.e., tailoring SDT to those developing countries that need them the most and to move away from generalised SDT, and graduate those developing countries that would not need them owing to their competitive trading situation (Third World Network, 2005: 32).

Developing countries, in contrast, tended to favour the resolution of agreement specific considerations first rather than engaging in a debate on principles which in any case are already well established in Part IV of the GATT and the Enabling Clause. Developing countries were also resistant to the notion of differentiation and graduation in relation to beneficiaries of SDT provisions, and definition of developing countries (Third World Network, 2005: 33)

A year later, in October 1997, six international organizations the International Monetary Fund, the International Trade Centre, the United Nations Conference for Trade and Development, the United Nations Development Programme, the World Bank and the WTO launched the Integrated Framework, a joint technical assistance programme exclusively for least-developed countries. In 2002, the WTO adopted a work programme for least-developed countries. It contains several broad elements: improved market access; more technical assistance; support for agencies working on the diversification of least-developed countries economies; help in following the work of the WTO; and a speedier membership process for least-developed countries negotiating to join the WTO. At the same time, more and more member governments have unilaterally scrapped import duties and import quotas on all exports from least-developed countries.

It can be viewed that developing countries should have freedom in fixing tariffs in agriculture, especially in the face of high Northern subsidies. Trade liberalization cannot set the determining framework for how food is produced and how agriculture is organized. Countries cannot ignore the issues of economic, social, and environmental sustainability. One can find a fault with WTO is that it has externalized these basic issues in the AoA (Rena,2006b:75).

It can be viewed that developing countries should have freedom in fixing tariffs in agriculture, especially in the face of high Northern subsidies. Trade liberalization cannot set the determining framework for how food is produced and how agriculture is organized. Countries cannot ignore the issues of economic, social, and environmental sustainability. One can find a fault with WTO is that it has externalized these basic issues in the AoA (Rena,2006b:75).

Role of WTO A Critical View

Ten years ago, a new World Trade Organisation that put developing country needs at the centre of the international trade negotiation agenda was proposed. The Ministerial Declaration adopted at the start of the Doha Development Round of trade negotiations, on 14 November 2001, was a promising response to the anti-globalisation riots of the 1990s. But the WTO membership has failed to deliver the promised pro-development changes. Finding "development" in the Doha Development Round today is like looking for a needle in a haystack. Developing countries have been completely sidelined by the economic and political interests of global powers. According to the Guardian1,here are 10 examples of how the WTO has failed the poor:

1. Cotton: the Fair trade Foundation revealed last year how the $47bn in subsidies paid to rich-country producers in the past 10 years has created barriers for the 15 million cotton farmers across west Africa trying to trade their way out of poverty, and how 5 million of the world's poorest farming families have been forced out of business and into deeper poverty because of those subsidies.

2. Agricultural subsidies: beyond cotton, WTO members have failed even to agree how to reduce the huge subsidies paid to rich world farmers, whose overproduction continues to threaten the livelihoods of developing world farmers.

3. Trade agreements: the WTO has also failed to clarify the deliberately ambiguous rules on concluding trade agreements that allow the poorest countries to be manipulated by the rich states. In Africa, in negotiations with the EU, countries have been forced to eliminate tariffs on up to 90% of their trade because no clear rules exist to protect them.

4. Special treatment: the rules for developing countries, called "special and differential treatment" rules, were meant to be reviewed to make them more precise, effective and operational. But the WTO has failed to work through the 88 proposals that would fill the legal vacuum.

5. Medicine: the poorest in developing countries are unable to access affordable medicine because members have failed to clarify ambiguities between the need for governments to protect public health on one hand and on the other to protect the intellectual property rights of pharmaceutical companies.

6. Legal costs: the WTO pledged to improve access to its expensive and complex legal system, but has failed. In 15 years of dispute settlement under the WTO, 400 cases have been initiated. No African country has acted as a complainant and only one least developed country has ever filed a claim.

7. Protectionist economic policies: one of the WTO's five core functions agreed at its inception in 1995 was to achieve more coherence in global economic policy-making. Yet the WTO failed to curb the speedy increase in the number of protectionist measures applied by G20 countries in response to the global economic crisis over the past two years despite G20 leaders' repeated affirmations of their "unwavering" commitment to resist all forms of protectionist measures.

8. Natural disaster: the WTO fails to alleviate suffering when it has the opportunity to do so. In the case of natural disaster, the membership will have taken almost two years to agree and implement temporary trade concessions for Pakistan, where severe flooding displaced 20 million people in 2010 and caused $10bn of damage. Those measures, according to the International Centre for Trade and Sustainable Development, would have boosted Pakistan's exports to the EU by at least 100m this year.

9. Decision-making: the WTO makes most of its decisions by consensus and achieving consensus between 153 countries is nearly impossible. But this shows anotherfailure of the WTO: to break the link between market size and political weight that would give small and poor countries a voice in the trade negotiations.

10. Fair trade: 10 years after the start of the Doha Development Round, governments have failed to make trade fair. As long as small and poor countries remain without a voice, the role of campaigning organisations, such as Traidcraft and Fairtrade Foundation, which are working together to eliminate cotton subsidies, will remain critical.

CHAPTER IV

THE PROPOSED NEW ISSUES IN THE WTO AND THE INTERESTS OF DEVELOPED COUNTRIESTHE PRESSURE FOR AND DANGER OF NEW ISSUESThe Uruguay Round has already introduced new areas into the multilateral trading system, vastly expanding its scope. In recent years, the developed countries have intensified the pressures to incorporate yet more and more issues which are to their advantage into the WTO. This is being resisted by many developing countries, on the grounds that (i) they are not ready for negotiations on yet more new issues as they are already unable to grapple with the problems generated by the Uruguay Round, (ii) the proposed issues are not in their interests but instead can seriously harm their economies should they become the subject of new WTO rules; and (iii) the issues are not directly related to trade and do not belong to the WTO.There is a long list of "new issues" being put forward by the developed countries to link trade (and the possible use of trade measures and sanctions as enforcement mechanisms) to several economic and non-economic areas. Three working groups have been created to examine trade and investment, trade and competition policy, and government procurement. Trade and environment is already being negotiated under the WTO's Committee on Trade and Environment. There have been strong attempts by many Northern governments to link trade with labour standards in the WTO. It is possible that a wide range of other issues, such as human rights, tax systems, cultural behaviour, will also be sought to be linked to trade measures in the WTO in future.The linking of issues to the possibility of sanctions under the device of attaching a "trade related" prefix to the chosen topics was successfully used in the Uruguay Round to inject IPRs (through a trade-related intellectual property rights agreement) and investment issues (through a trade-related investment measures agreement) into the GATT/WTO system. The justification for introducing these issues was that they were "related to trade."In fact, the real objective was to link the chosen issues to the threat of "trade retaliation and penalties" for non-compliance of disciplines. The device of bringing in new topics by alleging that they are trade-related has continued to be used in on-going WTO negotiations. In fact the pretence of being directly trade-related is no longer even necessary and may unnecessarily restrict the scope of the issues being introduced. The prefix "trade-related" has now been dropped in proposals for these new issues, which are now sought to be brought into the trade arena through simply using the word "and", as in "trade and environment", "trade and labour standards", "trade and investment" and "trade and competition policy."The device of linking trade with other issues (when the intention is really to link the dispute settlement system of the WTO to new policy areas) is being increasingly used for the purpose of further opening up Third World economies or to reduce their competitiveness in the scramble for world market shares. The WTO could also be used as an instrument to shift a great portion of the burden of future global economic adjustment (for instance, because of environmental imperatives) to the South, which presently has a weaker negotiating position in the WTO forum.THE PROPOSED NEW ISSUES AND DANGERS FOR THE SOUTHThe European Union, backed by Japan, Canada and other developed nations, were at the forefront of attempts to launch a new comprehensive "Round" of trade negotiations at the WTO Ministerial Conference in Seattle. They hoped that in such a Round, several issues would be made the subject of negotiations for new multilateral Agreements that will be legally binding on WTO members.Although the US originally seemed cool to the idea of a comprehensive new Round (preferring to push issues it liked on a sector by sector basis), it may eventually agree to go along with the proposals for initiating negotiations on the proposed new issues. For example, it has been among the strongest advocates for the issues of labour and government procurement.Several developing countries spoke up strongly against such a new Round with new issues thrown in. They believe that instead of injecting the new issues, the WTO should allow developing countries (who after all form the majority of the membership of the WTO) the time and space to tackle the problems of implementation of the existing Agreements. Despite such an opposition by these countries, it is unclear whether a sizable number of them will be able to withstand the intense pressures for the new issues that will continue to build in future.The main category of new issues being proposed are international investment rules, competition policy and government procurement. These three issues were put on the agenda of the first WTO Ministerial Conference in Singapore in 1996. Most developing countries were against having any negotiations for Agreements on these issues, but the pressure from the developed countries was so strong that they compromised and agreed to taking part in "working groups" to discuss the issues.The developing countries made it clear that the working groups had the mandate only to discuss the topics in a sort of academic way, in what was called an "educative process". The working groups had no mandate to start negotiations for Agreements.The three working groups have now gone through several years of discussion in the working groups. In the process before and at Seattle, many developed countries made it clear they intended to "upgrade" the talks at the working groups into negotiations for agreements. However, the Seattle Conference ended without a Declaration, and the three issues (investment, competition, government procurement) have not become the subject of negotiations for new Agreements. Instead, the three working groups have resumed their discussions. Although these discussions are considered at a low level of intensity at present, it can be expected that there will again be intensification of pressures to upgrade the working groups into negotiating groups, especially in the build up to the next Ministerial Conference when the idea of launching a New Round will again be highlighted.Many countries are also proposing that "industrial tariffs" (the reduction of import duties on manufactured products) be another new issue for negotiations. Although there have of course been several previous negotiating rounds on tariff-cutting in this sector, the issue is nevertheless considered "new" in that fresh negotiations on the industrial sector are not mandated in the WTO agreements. Thus, a decision to negotiate on this issue would mean a fresh commitment on the part of members.Some of the developed countries are also proposing that "trade and environment" and "labour standards" to be part of a proposed new Round. The governments of these countries want to placate environmental groups and labour unions who have been protesting about the negative effects of free trade. If the environment and labour standards are also thrown into the pot of the New Round, the influential civic groups may then be won over, or at least they may not campaign so hard against the proposed Round or so the establishment thinking goes.

THE IMPLICATIONS FOR DEVELOPED COUNTRIES OF FOUR NEW ISSUES: INVESTMENT, COMPETITION, GOVERNMENT PROCUREMENT AND INDUSTRIAL TARIFFS(a) The Investment IssueOn the INVESTMENT ISSUE, the developed countries are pushing to introduce new rules that give new rights to foreign investors, making it easier for them to enter countries and to operate freely. Pressures would be mounted on WTO member states to liberalise investment flows and to grant "national treatment" to foreign investors and firms. Governments would lose a large part of their present rights to regulate the operations of foreign investors. Restrictions on the free flow of capital into and out of the country could be prohibited or contrained. Moreover, the "performance requirements" that host governments now place on foreign companies (such as technology transfer, the use of local professionals) would come under pressure. There is even talk of prohibiting or disciplining the use of investment incentives to attract foreign investments.The recent proposal by the European Union on investment negotiations in the WTO is a watered down version of the discredited "MAI" (multilateral agreement on investment) that the developed countries had negotiated (but failed to conclude) in the OECD. The original OECD-MAI model had defined foreign investment to include both short-term flows and foreign direct investment; given rights to foreign investors to enter any country (i.e. "pre-establishment rights"), own 100 percent equity, and be automatically given "national treatment." Due mainly to public protests, the MAI negotiations collapsed, and the EU has taken a lead in getting negotiations for an investment agreement started at the WTO.Implicitly acknowledging that an MAI replica would not be politically acceptable either to many developing countries nor to civil society worldwide, the EU has put in the diluted version, in which countries could still have options on the degree of liberalisation and "national treatment" to offer in a "positive list" on a sector-by-sector basis, and only for direct foreign investment. However, this can be seen as a tactical move to make their proposal more acceptable. Once such a watered-down version enters the WTO, pressures will then pile up to get the developing countries to liberalise more and more, and to offer national treatment.The entrance in principle of investment policy per se in the WTO would tremendously expand the mandate and powers of the WTO, and pose a serious threat to developing countries. Investment liberalisation in the South will become an objective to be intensely pursued by the developed countries, just as trade liberalisation has been so ruthlessly pursued. Developing countries would find it increasingly difficult to defend the viability of (or to give preferences to) local investors, firms or farmers, which are all much smaller than the transnational companies and will thus be unable to withstand the latter's onslaught. They would face the threat of having their local products wiped out by competition from the bigger foreign firms, or of being taken over by them.(b) The Competition IssueOn COMPETITION POLICY, the EU is advocating a new agreement that would look unfavourably on domestic laws or practices in developing countries that favour local firms, on the ground that this is against free competition. The EU argues that what it considers to be the core principles of the WTO (national treatment and non-discrimination) should be applied through the WTO on competition policy.Through an agreement on competition in the WTO, it would be compulsory for developing countries to establish domestic competition policies and laws of a certain type. Distinctions that favour local firms and investors would be called into question. For example, if there are policies that give importing or distribution rights (or more favourable rights) to local firms (including government agencies or enterprises), or if there are practices among local firms that give them superior marketing channels, these are likely to be called into question and disciplines may be imposed on them.The developed countries are arguing that policies or practices that give an advantage to local firms create a barrier to foreign products or firms, which should be allowed to compete on equal terms as locals, in the name of free competition. Such pro-local practices and policies are to be targeted for phasing out or elimination in negotiations for a competition agreement.Developing countries may argue that only if local firms and agencies are given certain advantages can they remain viable. If these smaller enterprises are treated on par with the huge foreign conglomerates, most of them would not be able to survive. Perhaps some would remain because over the years (or generations) they have built up distribution systems based on their intimate knowledge of the local scene, that give them an edge over the more endowed foreign firms. But the operation of such local distribution channels could also come under attack by a competition policy in the WTO, as the developed countries are likely to pressure that the local firms also open their marketing channels to their foreign competitors.At present, many developing countries would argue that giving favourable treatment to locals is pro-competitive, in that the smaller local firms are given some advantages to withstand the might of foreign giants, which otherwise would monopolise the local market. Providing the giant international firms equal rights would overwhelm the local enterprises which are small and medium sized in global terms.However, such arguments will not be accepted by the developed countries, which will insist that their giant firms be provided a "level playing field" to compete "equally" with the smaller local firms. They would like their interpretation of "competition" (which ironically would likely lead to foreign monopolisation of developing country markets) to be enshrined in WTO law and operationalised through a new Round.In the discussions at the WTO's Competition Working Group, developing countries have raised issues which are more relevant to them, including the restrictive practices of transnational companies, and the abuse of anti-dumping measures by the US and other developed countries (that are anti-competitive in that they prevent the competitive exports of developing countries from having access to their markets). However, such extremely relevant and legitimate concerns under the topic of "competition" have not been welcomed, especially by the US. Given the relatively weaker negotiating position of the South, it is more likely that the interpretation of developed countries could prevail, should there be a decision to begin negotiations for a competition agreement in the WTO. Then, another instrument would be available to the developed countries to pry open the markets of the developing countries.(c) The Issue of Government ProcurementOn GOVERNMENT PROCUREMENT, the developed countries want to introduce a process in the WTO whereby their companies are able to obtain a large share of the lucrative business of providing supplies to and winning contracts for projects of the public sector in the developing countries.At present, such government expenditure is outside the scope of the WTO, unless a member country voluntarily joins the "plurilateral" agreement on government procurement. This means that governments are now able to set up their own rules on procurement and project awards, and most developing countries give preferences to locals in such awards.The aim of the rich countries is to bring government spending policies, decisions and procedures of all member countries under the umbrella of the WTO, where the principle of "national treatment" (foreigners to be treated on par with or better than locals) will apply.Under this principle, governments in their procurement and contracts for projects (and probably also for privatisation deals) would no longer be able to give preferences or advantages to citizens or local firms. The bids for supplies, contracts and projects would have to be opened up to foreigners, who should be given the same (or better) chances as locals. It is even proposed that foreign firms that are unhappy with the government's decisions can bring the matter to court in the WTO.Since government procurement expenditure in some countries is bigger in value than imports, such an agreement to bring procurement under the WTO rules would tremendously enlarge the scope of the WTO and its rules.As most developing countries would object to having their public-sector spending policies changed so drastically, the developed countries have a two-stage plan for this issue: firstly, to have an agreement limited to achieving greater "transparency" in government procurement; secondly, to have a broader agreement that would cover the aspects of liberalisation, market access for foreign firms, and the national treatment principle. Stage One would inject the procurement issue into the WTO multilateral system; Stage Two would seek to "fully integrate" government procurement into the WTO system. This strategy was revealed in the presentations and non-papers of the US and EU during the preparations of the 1996 Singapore Ministerial.In the preparations for the WTO Seattle Conference, the United States had tried to have an agreement on "transparency in government procurement" signed in Seattle itself. With some other Members, it put forward a draft of elements of a transparency agreement, in the form of an agreement. An analysis of that draft showed it contained several elements that went beyond transparency.After Seattle, the discussions are continuing to focus on issues such as scope and the role of the dispute settlement system. Many developing countries are also adamant that a transparency agreement, if there is one, should not lead on towards liberalization and national treatment. However it can be expected that should there be a multilateral agreement on transparency in government procurement, there will be intense pressures in future to extend it to market access and national treatment issues, for example on the ground that these are core principles of the WTO. By agreeing to a transparency agreement, developing countries would be put on the road to a full-scale procurement agreement incorporating liberalisation and national treatment. At stake is the right of governments to reserve some of its business for local firms. With the removal of that right, a very important instrument for assisting local firms, for national development, macroeconomic objectives and for socio-economic objectives, would be removed. However despite such important issues at stake, there has been little analysis from a development point of view of the implications of the integration of government procurement in the WTOs multilateral system. Until the full implications are studied by each country, developing countries should be extremely cautious about agreeing even to a transparency agreement. After all, transparency or for that matter government procurement are not directly trade issues although like so many other subjects they of course may have a relationship to trade.

(d) Industrial TariffsBesides the three issues of investment, competition and procurement, another economic issue that was being pushed for as part of a New Round is "industrial tariffs." This would entail another round of negotiations to further reduce duties on manufactured products. Since the tariffs in this sector are generally lower in the developed countries, a new round of tariff cuts would mainly entail new commitments by the developing countries.Most developing countries have already significantly reduced their tariffs on industrial products in recent years. Many did this under the structural adjustment programmes directed by the IMF and the World Bank. An influential study by the UN Economic Commission for Africa on the effects of structural adjustment policies in 1991 warned that: "External trade liberalisation for underdeveloped economies can have some serious side effects. For one, it can lead to dumping of cheap products from outside such as clothes, shoes, creams, etc. This undermines the local industries that produce or those that would have started to produce these products as they cannot compete with similar but much cheaper products from abroad. So African infant industries fail to take-off under extensive trade liberalisation."In recent years, many African and Latin American countries have suffered from "de-industrialisation", a process in which local industries and enterprises have been closed or taken over as they are made uncompetitive by rival imported products.A further round of cuts in industrial tariffs, as proposed by the developed countries, would render the industrial sector and industrial enterprises of most developing countries even more unviable. Therefore, there should not be another formal round of negotiations to further cut developing countries' tariffs.The developed countries should commit themselves to reducing their tariff peaks and tariff escalation, and not use the promise of this as a carrot to draw in the developing countries to cut the latter's industrial tariffs in a new Round.CONCLUSIONOf course a justification can always be made that this or that issue is linked in some way to "trade." But that does not mean that it is justified to link the issue to the WTO and its system. For an issue to be linked to the WTO system in an integral way, it must be made to meet a strict test with clear criteria, and moreover there should be a framework that helps specify in which way the particular issue should be integrated in the WTO. Issues chosen should be for the benefit of Members, especially the developing countries that form the majority, and should be treated in a manner that leads to equitable results.At present there is no such framework determining whether and how "new issues" should enter the WTO system, nor a way to determine the likely benefits and costs and their distribution among the WTO membership.Yet there are very strong pressures, emanating from the developed countries, to add more and more items onto the WTO agenda. There is now a clear danger that this could lead to very negative consequences: (a) an overload of the WTO system, making it impossible for developing countries to cope with negotiations and implementation; (b) a distortion of the WTO system, where fairness in the process of trade operations is replaced by protectionism; (c) a failure of credibility as citizens in developing countries perceive the WTO as an instrument by the developed countries to impose unfair and inappropriate rules and policies that are disadvantageous to the developing countries. Moreover it is also unlikely that the intended objectives of the proponents of the new issues will be met.In the light of the already onerous obligations undertaken by developing countries in the existing WTO Agreements, the immense problems of implementation, and the possible serious economic and social dislocation that will result in many countries, it is most inappropriate for the continuing and intensifying pressures to place more new issues onto the WTO.At present the WTO does not have a systematic way of enabling the assessment, introduction (or rejection), and the appropriate incorporation of new issues. As a result, several new issues have been absorbed during the transition from GATT to the WTO through the Uruguay Round. And many more new issues are in various stages of brewing, with advocates in governments (mainly of developed countries) and in social organisations pushing hard to gain entry for their favourite issues.A system or procedure for assessing potential or proposed new issues should be established. The criterion should not only be whether an issue is "trade related", because a case can always be made that almost any issue is related in some way with trade. The criterion should be whether the entry of a particular issue would add advantage and benefit to the Members of WTO (especially the majority, ie the developing countries, and to the majority of people in these countries) and to the WTO system, with the ultimate goal of equitable and sustainable development (rather than liberalisation, which is only a means). And given the fact that the WTO is mainly a negotiating body, with the mandate and task of formulating and monitoring the implementation of Agreements, issues should not be allowed to easily enter the system, even for a "study process" in a working group.Discussions on potential new issues should take place in appropriate fora outside the WTO, in a setting more conducive to perspectives broader than the more narrow framework of trade relations. In such discussions the role of trade relations can be placed in the broader context of equitable and sustainable development, and the specific role of the WTO (if any) can be demarcated. Until the discussion is sufficiently "brewed" or "matured" in the appropriate fora, the issue should not be brought into the WTO system, either for discussion in working groups and certainly not for negotiations for new Agreements.Unless the trend for putting more and more issues into the WTO basket is reversed, the trade system will become overloaded and over-bloated. It will not be able to carry out the tasks which it was originally intended to do, because it would have taken on other tasks it is ill suited to perform, as well as grappling with a host of new and complicated issues which will tie up its Members, diplomats and policy makers with knots too difficult to disentagle from.WTO Members can decide to limit the WTO to the tasks it is supposed to do, and to review its rules and system to put it back on the right track, or it can decide to throw more issues and complications into the system, with unknown and probably dire consequences.

BIBILIOGRAPHY

http://www.wto.org/english/thewto_e/whatis_e/whatis_e.htmBhagwati, J., G. David and A. Panagariya. 1998. Trading Preferentially: Theory and Policy. Economic Journal, 62: 1128-1148 Dubey M., (1996) An Unequal Treaty: World Trading Order After GATT, New Delhi: New Age International Ltd. Finger, J. M., Ingco, Merlinda D., and R. Ulrich. 1996. The Uruguay Round: Statistics on Tariff Concessions Given and Received. Washington, DC.: World Bank. Graham Dunkley (2004) Free Trade: Myth, Reality and Alternatives, New York: Zed Books ltd. Gulati, Ashok and Ketly, Tein (1999) Trade Liberalization and Indian Agriculture, New Delhi: Oxford University Press. Mathur, V., (2002) Indian Economy and WTO: New Challenges and Strategies, New Delhi: New Century Publications. Merlinda D Ingco and Johan D. Nash (eds). 2004. Ed.). Agriculture and the WTO: Creating a Trading System for Development: Washington, D.C.: World Bank.

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