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VOA
Session on Cambodia’s accession to WTO;
September 6, 2004;
10 AM - 10:30 AM
Subject: Voice of America Direct dialogue with Cambodian audience from Cambodia
on the issue of Cambodia’s recent accession to WTO
Introduction:
Good evening Ladies and Gentlemen, and dear friends:
It is a great pleasure and honor to be invited by VOA to participate in this
session in direct dialogue with all of you listeners from Cambodia, on the
subject of the recent accession of Cambodia as member to WTO. I will take about
4 to 5 minutes of your time to introduce the subject under review. In this
introduction, I will provide a summary of what WTO is, and what are the main
benefits that a country can expect for being a member of WTO. I will also
discuss the condition under which a country, and Cambodia in particular, would
or would not benefit from this membership, or what kind of reforms it will
require for Cambodia to take in order to benefit from WTO.
What
is the WTO?
The World Trade Organization (WTO) is the only global international organization
dealing with the rules of trade between nations. At its heart are the WTO
agreements, negotiated and signed by the bulk of the world’s trading nations
and ratified in their parliaments. The goal is to help producers of goods and
services, exporters, and importers conduct their business.
The
world is complex.
This brief section tries to reflect the complex and dynamic nature of trade. It
highlights some of the benefits of the WTO’s trading system, but it doesn’t
claim that everything is perfect—otherwise there would be no need for further
negotiations and for the system to evolve and reform continually.
That
said,
there are many over-riding reasons why we’re better off with the system than
without it. Here are 10 of them.
A. The ten benefits
1.
The
system helps promote peace
2.
Disputes
are handled constructively
3.
Rules
make life easier for all
4.
Freer
trade cuts the costs of living
5.
It
provides more choice of products and qualities
7.
Trade
stimulates economic growth
8.
The
basic principles make life more efficient 9.
Governments
are shielded from lobbying
10.
The
system encourages good government
1.
The system helps to keep the peace
This sounds like an exaggerated claim, and it would be wrong to make too much of
it. Nevertheless, the system does contribute to international peace, and if we
understand why, we have a clearer picture of what the system actually does.
Peace is partly an outcome of two of the most fundamental principles of the
trading system: helping trade to flow smoothly, and providing countries with a
constructive and fair outlet for dealing
with disputes over trade issues. It is also an outcome of the international
confidence and cooperation that the system creates and reinforces.
History is littered with examples of trade disputes turning into war. One of the
most vivid is the trade war of the 1930s when countries competed to raise trade
barriers in order to protect domestic producers and retaliate against each
others’ barriers. This worsened the Great Depression and eventually played a
part in the outbreak of World War 2.
Two developments immediately after the Second World War helped to avoid a repeat
of the pre-war trade tensions. In Europe, international cooperation developed in
coal, and in iron and steel. Globally, the General Agreement on Tariffs and
Trade (GATT) was created.
Both have proved successful, so much so that they are now considerably expanded
— one has become the European Union, the other the World Trade Organization (WTO).
Crudely put, sales people are usually reluctant to fight their customers. In
other words, if trade flows smoothly and both sides enjoy a healthy commercial
relationship, political conflict is less likely.
What’s more, smoothly-flowing trade also helps people all over the world
become better off. People who are more prosperous and contented are also less
likely to fight.
But that is not all. The GATT/WTO system is an important confidence-builder.
The trade wars in the 1930s are proof of how protectionism can easily plunge
countries into a situation where no one wins and everyone loses.
The short-sighted protectionist view is that defending particular sectors
against imports is beneficial. But that view ignores how other countries are
going to respond. The longer term reality is that one protectionist step by one
country can easily lead to retaliation from other countries, a loss of
confidence in freer trade, and a slide into serious economic trouble for all —
including the sectors that were originally protected. Everyone loses.
Confidence is the key to avoiding that kind of no-win scenario. When governments
are confident that others will not raise their trade barriers, they will not be
tempted to do the same. They will also be in a much better frame of mind to
cooperate with each other.
The WTO trading system plays a vital role in creating and reinforcing that
confidence. Particularly important are negotiations that lead to agreement by
consensus, and a focus on abiding by the rules.
2.
The system allows disputes to be handled constructively
As trade expands in volume, in the number of products traded, and in the numbers
of countries and companies trading, there is a greater chance that disputes will
arise. The WTO system helps resolve these disputes peacefully and
constructively.
There could be a down side to trade liberalization and expansion. More trade
means more possibilities for disputes to arise. Left to themselves, those
disputes could lead to serious conflict. But in reality, a lot of international
trade tension is reduced because countries can turn to organizations, in
particular the WTO, to settle their trade disputes.
Before World War 2 that option was not available. After the war, the world’s
community of trading nations negotiated trade rules which are now entrusted to
the WTO. Those rules include an obligation for members to bring their disputes
to the WTO and not to act unilaterally.
When they bring disputes to the WTO, the WTO’s procedure focuses their
attention on the rules. Once a ruling has been made, countries concentrate on
trying to comply with the rules, and perhaps later renegotiating the rules —
not on declaring war on each other.
Around 300 disputes have been brought to the WTO since it was set up in 1995.
Without a means of tackling these constructively and harmoniously, some could
have led to more serious political conflict.
The fact that the disputes are based on WTO agreements means that there is a
clear basis for judging who is right or wrong. Once the judgement has been made,
the agreements provide the focus for any further actions that need to be taken.
The increasing number of disputes brought to GATT and its successor, the WTO,
does not reflect increasing tension in the world. Rather, it reflects the closer
economic ties throughout the world, the GATT/WTO’s expanding membership and
the fact that countries have faith in the system to solve their differences.
Sometimes the exchanges between the countries in conflict can be acrimonious,
but they always aim to conform with the agreements and commitments that they
themselves negotiated.
3.
A system based on rules rather than power
makes life easier for all
The WTO cannot claim to make all countries equal. But it does reduce some
inequalities, giving smaller countries more voice, and at the same time freeing
the major powers from the complexity of having to negotiate trade agreements
with each of their numerous trading partners. Decisions in the WTO are made by consensus. The WTO agreements were negotiated
by all members, were approved by consensus and were ratified in all members’
parliaments. The agreements apply to everyone. Rich and poor countries alike
have an equal right to challenge each other in the WTO’s dispute settlement
procedures.
This makes life easier for all, in several different ways. Smaller countries can
enjoy some increased bargaining power. Without a multilateral regime such as the
WTO’s system, the more powerful countries would be freer to impose their will
unilaterally on their smaller trading partners. Smaller countries would have to
deal with each of the major economic powers individually, and would be much less
able to resist unwanted pressure.
In addition, smaller countries can perform more effectively if they make use of
the opportunities to form alliances and to pool resources. Several are already
doing this.
There are matching benefits for larger countries. The major economic powers can
use the single forum of the WTO to negotiate with all or most of their trading
partners at the same time. This makes life much simpler for the bigger trading
countries. The alternative would be continuous and complicated bilateral
negotiations with dozens of countries simultaneously. And each country could end
up with different conditions for trading with each of its trading partners,
making life extremely complicated for its importers and exporters.
The principle of non-discrimination built into the WTO agreements avoids that
complexity. The fact that there is a single set of rules applying to all members
greatly simplifies the entire trade regime.
And these agreed rules give governments a clearer view of which trade policies
are acceptable
4.
Freer trade cuts the cost of living We
are all consumers. The prices we pay for our food and clothing, our necessities
and luxuries, and everything else in between, are affected by trade policies.
Protectionism is expensive: it raises prices. The WTO’s global system lowers
trade barriers through negotiation and applies the principle of
non-discrimination. The result is reduced costs of production (because imports
used in production are cheaper) and reduced prices of finished goods and
services, and ultimately a lower cost of living.
There are plenty of studies showing just what the impacts of protectionism and
of freer trade are. These are just a few figures: Food
is cheaper
Negotiating agricultural trade reform is a complex undertaking. Governments are
still debating the roles agricultural policies play in a range of issues from
food security to environmental protection.
But WTO members are now reducing the subsidies and the trade barriers that are
the worst offenders. And in 2000, new talks started on continuing the reform in
agriculture. These have now been incorporated into a broader work programme, the
Doha Development Agenda, launched at the fourth WTO Ministerial Conference in
Doha, Qatar, in November 2001. Clothes
are cheaper
UK consumers pay an estimated Ł500 million more per year for their clothing
because of these restrictions. For Canadians the bill is around C$780 million.
For Australians it would be A$300 annually per average family if Australian
customs duties had not been reduced in the late 1980s and early 1990s.
The textiles and clothing trade is going through a major reform — under the
WTO — that will be completed in 2005. The programme includes eliminating
restrictions on quantities of imports.
If customs duties were also to be eliminated, economists calculate the result
could be a gain to the world of around $23 billion, including $12.3 billion for
the US, $0.8 billion for Canada, $2.2 billion for the EU and around $8 billion
for developing countries. The
same goes for other goods …
If Australia had kept its tariffs at 1998 levels, Australian customers would pay
on average A$2,900 more per car today. In 1995, aluminium users in the EU paid
an extra $472 million due to tariff barriers.
One of the objectives of the Doha Development Agenda (DDA) is another round of
cuts in tariffs on industrial products, i.e. manufactured and mining products.
Some economists, Robert Stern, Alan Deardorff and Drusilla Brown, predict that
cutting these by one third would raise developing countries’ income by around
$52 billion. …
and services
In China, competition from a second mobile phone company was at least part of
the reason for a 30% cut in the price of a call. In Ghana the cut was 50%.
The group of economists led by Robert Stern estimates that lowering services
barriers by one third under the Doha Development Agenda would raise developing
countries’ incomes by around $60 billion.
And so it goes on. The system now entrusted to the WTO has been in place for
over 50 years.
In that time there have been eight major rounds of trade negotiations. Trade
barriers around the world are lower than they have ever been in modern trading
history. They continue to fall, and we are all benefiting.
5.
It gives consumers more choice, and a
broader range of qualities to choose from
Think of all the things we can now have because we can import them: fruits and
vegetables out of season, foods, clothing and other products that used to be
considered exotic, cut flowers from any part of the world, all sorts of
household goods, books, music, movies, and so on.
Think also of the things people in other countries can have because they buy
exports from us and elsewhere. Look around and consider all the things that
would disappear if all our imports were taken away from us. Imports allow us
more choice — both more goods and services to choose from, and a wider range
of qualities. Even the quality of locally-produced goods can improve because of
the competition from imports.
The wider choice isn’t simply a question of consumers buying foreign finished
products. Imports are used as materials, components and equipment for local
production.
This expands the range of final products and services that are made by domestic
producers, and it increases the range of technologies they can use. When mobile
telephone equipment became available, services sprang up even in the countries
that did not make the equipment, for example.
Sometimes, the success of an imported product or service on the domestic market
can also encourage new local producers to compete, increasing the choice of
brands available to consumers as well as increasing the range of goods and
services produced locally.
If trade allows us to import more, it also allows others to buy more of our
exports. It increases our incomes, providing us with the means of enjoying the
increased choice.
6.
Trade raises incomes
Lowering trade barriers allows trade to increase, which adds to incomes —
national incomes and personal incomes. But some adjustment is necessary.
The WTO’s own estimates for the impact of the 1994 Uruguay Round trade deal
were between $109 billion and $510 billion added to world income (depending on
the assumptions of the calculations and allowing for margins of error).
More recent research has produced similar figures. Economists estimate that
cutting trade barriers in agriculture, manufacturing and services by one third
would boost the world economy by $613 billion — equivalent to adding an
economy the size of Canada to the world economy.
In Europe, the EU Commission calculates that over 1989–93 EU incomes increased
by 1.1–1.5% more than they would have done without the Single Market.
So trade clearly boosts incomes.
Trade also poses challenges as domestic producers face competition from imports.
But the fact that there is additional income means that resources are available
for governments to redistribute the benefits from those who gain the most —
for example to help companies and workers adapt by becoming more productive and
competitive in what they were already doing, or by switching to new activities.
7.
Trade stimulates economic growth, and
that can be good news for employment
Trade clearly has the potential to create jobs. In practice there is often
factual evidence that lower trade barriers have been good for employment. But
the picture is complicated by a number of factors. Nevertheless, the alternative
— protectionism — is not the way to tackle employment problems.
This is a difficult subject to tackle in simple terms. There is strong evidence
that trade boosts economic growth, and that economic growth means more jobs. It
is also true that some jobs are lost even when trade is expanding. But a
reliable analysis of this poses at least two problems. First,
there are other factors at play. For example, technological advance has also had
a strong impact on employment and productivity, benefiting some jobs, hurting
others. Second,
while trade clearly boosts national income (and prosperity), this is not always
translated into new employment for workers who lost their jobs as a result of
competition from imports.
The picture is not the same all over the world. The average length of time a
worker takes to find a new job can be much longer in one country than for a
similar worker in another country experiencing similar conditions.
In other words, some countries are better at making the adjustment than others.
This is partly because some countries have more effective adjustment policies.
Those without effective policies are missing an opportunity.
There are many instances where the facts show that the opportunity has been
grasped — where freer trade has been healthy for employment. The EU Commission
calculates that the creation of its Single Market means that there are somewhere
in the range of 300,000–900,000 more jobs than there would be without the
Single Market.
Often, job prospects are better in companies involved in trade. In the United
States, 12 million people owe their jobs to exports; 1.3 million of those jobs
were created between 1994 and 1998. And those jobs tend to be better-paid with
better security. In Mexico, the best jobs are those related to export
activities: sectors which export 60 per cent or more of their production, pay
wages 39% higher than the rest of the economy and maquiladora (in-bond assembly)
plants pay 3.5 times the Mexican minimum wage.
The facts also show how protectionism hurts employment. The example of the US
car industry has already been mentioned: trade barriers designed to protect US
jobs by restricting imports from Japan ended up making cars more expensive in
the US, so fewer cars were sold and jobs were lost.
In other words, an attempt to tackle a problem in the short term by restricting
trade turned into a bigger problem in the longer term.
Even when a country has difficulty making adjustments, the alternative of
protectionism would simply make matters worse.
8.
The basic principles make the system
economically more efficient, and they cut costs
Many of the benefits of the trading system are more difficult to summarize in
numbers, but they are still important. They are the result of essential
principles at the heart of the system, and they make life simpler for the
enterprises directly involved in trade and for the producers of goods and
services.
Trade allows a division of labour between countries. It allows resources to be
used more appropriately and effectively for production. But the WTO’s trading
system offers more than that. It helps to increase efficiency and to cut costs
even more because of important principles enshrined in the system.
Imagine a situation where each country sets different rules and different
customs duty rates for imports coming from different trading partners. Imagine
that a company in one country wants to import raw materials or components —
copper for wiring or printed circuit boards for electrical goods, for example
— for its own production.
It would not be enough for this company to look at the prices offered by
suppliers around the world. The company would also have to make separate
calculations about the different duty rates it would be charged on the imports
(which would depend on where the imports came from), and it would have to study
each of the regulations that apply to products from each country. Buying some
copper or circuit boards would become very complicated.
That, in simple terms, is one of the problems of discrimination.
Imagine now that the government announces it will charge the same duty rates on
imports from all countries, and it will use the same regulations for all
products, no matter where they come from, whether imported or locally produced.
Life for the company would be much simpler. Sourcing components would become
more efficient and would cost less. Non-discrimination
is just one of the key principles of the WTO’s trading system. Others include:
·
transparency
(clear information about policies, rules and regulations);
·
increased
certainty about trading
conditions (commitments to lower trade barriers and to increase other countries’ access to one’s markets are legally binding);
·
simplification
and standardization of customs procedure, removal of red tape, centralized
databases of information, and other measures designed to simplify trade that
come under the heading “trade facilitation”.
Together, they make trading simpler, cutting companies’ costs and increasing
confidence in the future. That in turn also means more jobs and better goods and
services for consumers. 9.
The system shields governments from
narrow interests
The GATT-WTO system which evolved in the second half of the 20th Century helps
governments take a more balanced view of trade policy. Governments are
better-placed to defend themselves against lobbying from narrow interest groups
by focusing on trade-offs that are made in the interests of everyone in the
economy.
One of the lessons of the protectionism that dominated the early decades of the
20th Century was the damage that can be caused if narrow sectoral interests gain
an unbalanced share of political influence. The result was increasingly
restrictive policy which turned into a trade war that no one won and everyone
lost.
Superficially, restricting imports looks like an effective way of supporting an
economic sector. But it biases the economy against other sectors which
shouldn’t be penalized — if you protect your clothing industry, everyone
else has to pay for more expensive clothes, which puts pressure on wages in all
sectors, for example.
Protectionism can also escalate as other countries retaliate by raising their
own trade barriers. That’s exactly what happened in the 1920s and 30s with
disastrous effects. Even the sectors demanding protection ended up losing.
Governments need to be armed against pressure from narrow interest groups, and
the WTO system can help.
The GATT-WTO system covers a wide range of sectors. So, if during a GATT-WTO
trade negotiation one pressure group lobbies its government to be considered as
a special case in need of protection, the government can reject the
protectionist pressure by arguing that it needs a broad-ranging agreement that
will benefit all sectors of the economy. Governments do just that, regularly.
10.
The system encourages good government
Under WTO rules, once a commitment has been made to liberalize a sector of
trade, it is difficult to reverse. The rules also discourage a range of unwise
policies. For businesses, that means greater certainty and clarity about trading
conditions. For governments it can often mean good discipline.
The rules include commitments not to backslide into unwise policies.
Protectionism in general is unwise because of the damage it causes domestically
and internationally, as we have already seen.
Particular types of trade barriers cause additional damage because they provide
opportunities for corruption and other forms of bad government.
One kind of trade barrier that the WTO’s rules try to tackle is the quota, for
example restricting imports or exports to no more than a specific amount each
year.
Because quotas limit supply, they artificially raise prices, creating abnormally
large profits (economists talk about “quota rent”). That profit can be used
to influence policies because more money is available for lobbying.
It can also provide opportunities for corruption, for example in the allocation
of quotas among traders. There are plenty of cases where that has happened
around the world.
In other words, quotas are a particularly bad way of restricting trade.
Governments have agreed through the WTO’s rules that their use should be
discouraged.
Nevertheless, quotas of various types remain in use in most countries, and
governments argue strongly that they are needed. But they are controlled by WTO
agreements and there are commitments to reduce or eliminate many of them,
particularly in textiles.
Many other areas of the WTO’s agreements can also help reduce corruption and
bad government.
Transparency (such as making available to the public all information on trade
regulations), other aspects of “trade facilitation”, clearer criteria for
regulations dealing with the safety and standards of products, and
non-discrimination also help by reducing the scope for arbitrary decision-making
and cheating.
Quite often, governments use the WTO as a welcome external constraint on their
policies: “we can’t do this because it would violate the WTO agreements”.
B.
And the ten misunderstandings
1. The
WTO dictates policy
1. WTO is a member-driven organization
·
the
rules of the WTO system are
agreements resulting from negotiations among member governments,
·
the
rules are ratified by members’ parliaments, and
·
decisions
taken in the WTO are virtually all made by consensus among all members.
In other words, decisions taken in the WTO are negotiated, accountable and
democratic.
The only occasion when a WTO body can have a direct impact on a government’s
policies is when a dispute is brought to the WTO and if that leads to a ruling
by the Dispute Settlement Body (which consists of all members). Normally the
Dispute Settlement Body makes a ruling by adopting the findings of a panel of
experts or an appeal report.
Even then, the scope of the ruling is narrow: it is simply a judgement or
interpretation of whether a government has broken one of the WTO’s
agreements—agreements that the infringing government had itself accepted. If a
government has broken a commitment it has to conform.
In all other respects, the WTO does not dictate to governments to adopt or drop
certain policies.
As for the WTO Secretariat, it simply provides administrative and technical
support for the WTO and its members.
In fact: it’s the governments who dictate to the WTO.
2.
WTO is not a free trade at any cost.
Yes, one of the principles of the WTO system is for countries to lower their
trade barriers and to allow trade to flow more freely. After all, countries
benefit from the increased trade that results from lower trade barriers.
But just how low those barriers should go is something member countries bargain
with each other. Their negotiating positions depend on how ready they feel they
are to lower the barriers, and on what they want to obtain from other members in
return. One country’s commitments become another country’s rights, and vice
versa.
The WTO’s role is to provide the forum for negotiating liberalization. It also
provides the rules for how liberalization can take place.
The rules written into the agreements allow barriers to be lowered gradually so
that domestic producers can adjust.
They have special provisions that take into account the situations that
developing countries face. They also spell out when and how governments can
protect their domestic producers, for example from imports that are considered
to have unfairly low prices because of subsidies or “dumping”. Here, the
objective is fair trade.
Just as important as freer trade — perhaps more important — are other
principles of the WTO system. For example: non-discrimination, and making sure
the conditions for trade are stable, predictable and transparent.
3.
The WTO is NOT only concerned about
commercial interests. This does NOT take priority over development
Underlying the WTO’s trading system is the fact that freer trade boosts
economic growth and supports development. In that sense, commerce and
development are good for each other.
At the same time, whether or not developing countries gain enough from the
system is a subject of continuing debate in the WTO. But that does not mean to
say the system offers nothing for these countries. Far from it. The agreements
include many important provisions that specifically take developing countries’
interests into account.
Developing countries are allowed more time to apply numerous provisions of the
WTO agreements. Least-developed countries receive special treatment, including
exemption from many provisions.
The needs of development can also be used to justify actions that might not
normally be allowed under the agreements, for example governments giving certain
subsidies.
And the negotiations and other work launched at the Doha Ministerial Conference
in November 2001 include numerous issues that developing countries want to
pursue.
4.
In the WTO, commercial interests do NOT
take priority over environmental protection
The preamble of the Marrakesh Agreement Establishing the World Trade
Organization includes among its objectives, optimal use of the world’s
resources, sustainable development and environmental protection.
This is backed up in concrete terms by a range of provisions in the WTO’s
rules. Among the most important are umbrella clauses (such as Article 20 of the
General Agreement on Tariffs and Trade) which allow countries to take actions to
protect human, animal or plant life or health, and to conserve exhaustible
natural resources.
Beyond the broad principles, specific agreements on specific subjects also take
environmental concerns into account. Subsidies are permitted for environmental
protection. Environmental objectives are recognized specifically in the WTO
agreements dealing with product standards, food safety, intellectual property
protection, etc.
In addition, the system and its rules can help countries allocate scarce
resources more efficiently and less wastefully. For example, negotiations have
led to reductions in industrial and agricultural subsidies, which in turn reduce
wasteful over-production.
A WTO ruling on a dispute about shrimp imports and the protection of sea turtles
has reinforced these principles. WTO members can, should and do take measures to
protect endangered species and to protect the environment in other ways, the
report says. Another ruling upheld a ban on asbestos products on the grounds
that WTO agreements give priority to health and safety over trade.
What’s important in the WTO’s rules is that measures taken to protect the
environment must not be unfair. For example, they must not discriminate. You
cannot be lenient with your own producers and at the same time be strict with
foreign goods and services. Nor can you discriminate between different trading
partners. This point was also reinforced in the recent dispute ruling on shrimps
and turtles, and an earlier one on gasoline.
Also important is the fact that it’s not the WTO’s job to set the
international rules for environmental protection. That’s the task of the
environmental agencies and conventions.
An overlap does exist between environmental agreements and the WTO — on trade
actions (such as sanctions or other import restrictions) taken to enforce an
agreement. So far there has been no conflict between the WTO’s agreements and
the international environmental agreements
5.
The WTO does NOT dictate to governments
on issues such as food safety, and human health and safety. Again commercial
interests do NOT override
Key clauses in the agreements (such as GATT Art. 20) specifically allow
governments to take actions to protect human, animal or plant life or health.
But these actions are disciplined, for example to prevent them being used as an
excuse for protecting domestic producers — protectionism in disguise.
Some of the agreements deal in greater detail with product standards, and with
health and safety for food and other products made from animals and plants. The
purpose is to defend governments’ rights to ensure the safety of their
citizens.
As an example, a WTO dispute ruling justified a ban on asbestos products on the
grounds that WTO agreements do give priority to health and safety over trade.
At the same time, the agreements are also designed to prevent governments
setting regulations arbitrarily in a way that discriminates against foreign
goods and services. Safety regulations must not be protectionism in disguise.
They must be based on scientific evidence or on internationally recognized
standards.
Again, the WTO does not set the standards itself. In some cases other
international agreements are identified in the WTO’s agreements. One example
is Codex Alimentarius, which sets recommended standards for food safety and
comes under the UN Food and Agriculture Organization (FAO) and World Health
Organization (WHO).
But there is no compulsion to comply even with internationally negotiated
standards such as those of Codex Alimentarius. Governments are free to set their
own standards provided they are consistent in the way they try to avoid risks
over the full range of products, are not arbitrary, and do not discriminate.
6.
The WTO does NOT destroy jobs or widen
the gap between rich and poor
The relationship between trade and employment is complex. So is the relationship
between trade and equality.
Freer-flowing and more stable trade boosts economic growth. It has the potential
to create jobs, it can help to reduce poverty, and frequently it does both.
The biggest beneficiary is the country that lowers its own trade barriers. The
countries exporting to it also gain, but not as much. In many cases, workers in
export sectors enjoy higher pay and greater job security.
However, producers and their workers who were previously protected clearly face
new competition when trade barriers are lowered. Some survive by becoming more
competitive. Others don’t. Some adapt quickly (for example by finding new
employment), others take longer.
In particular, some countries are better at making the adjustments than others.
This is partly because they have more effective adjustment policies. Those
without effective policies are missing an opportunity because the boost that
trade gives to the economy creates the resources that help adjustments to be
made more easily.
The WTO tackles these problems in a number of ways. In the WTO, liberalization
is gradual, allowing countries time to make the necessary adjustments.
Provisions in the agreements also allow countries to take contingency actions
against imports that are particularly damaging, but under strict disciplines.
At the same time, liberalization under the WTO is the result of negotiations.
When countries feel the necessary adjustments cannot be made, they can and do
resist demands to open the relevant sections of their markets.
There are also many other factors outside the WTO’s responsibility that are
behind recent changes in wage levels.
Why for example is there a widening gap in developed countries between the pay
of skilled and unskilled workers? According to the OECD, imports from low-wage
countries account for only 10–20% of wage changes in developed countries. Much
of the rest is attributable to “skill-based technological change”. In other
words, developed economies are naturally adopting more technologies that require
labour with higher levels of skill.
7.
Small countries are NOT powerless in the
WTO
In recent years, developing countries have become considerably more active in
WTO negotiations, submitting an unprecedented number of proposals in the
agriculture talks, and working actively on the ministerial declarations and
decisions issued in Doha, Qatar, in November 2001. They expressed satisfaction
with the process leading to the Doha declarations. All of this bears testimony
to their confidence in the system.
At the same time, the present rules are the result of multilateral negotiations
(i.e. negotiations involving all members of GATT, the WTO’s predecessor). The
most recent completed negotiation, the Uruguay Round (1986–94), was only
possible because developed countries agreed to reform trade in textiles and
agriculture — both issues were important for developing countries.
In short, In the WTO trading system, everyone has to follow the same rules.
As a result, in the WTO’s dispute settlement procedure, developing countries
have successfully challenged some actions taken by developed countries. Without
the WTO, these smaller countries would have been powerless to act against their
more powerful trading partners.
8.
The WTO is NOT the tool of powerful
lobbies
This is a natural result of the “rounds” type of negotiation (i.e.
negotiations that encompass a broad range of sectors).
The outcome of a trade round has to be a balance of interests. Governments can
find it easier to reject pressure from particular lobbying groups by arguing
that it had to accept the overall package in the interests of the country as a
whole. A
related misunderstanding is about the WTO’s membership. The WTO is an
organization of governments.
The private sector, non-governmental organizations and other lobbying groups do
not participate in WTO activities except in special events such as seminars and
symposiums.
They can only exert their influence on WTO decisions through their governments.
9.
Weaker countries do have a choice, they
are NOT forced to join the WTO
The reasons are positive rather than negative. They lie in the WTO’s key
principles, such as non-discrimination and transparency. By joining the WTO,
even a small country automatically enjoys the benefits that all WTO members
grant to each other. And small countries have won dispute cases against rich
countries — they would not have been able to do so outside the WTO.
The alternative would be to negotiate bilateral trade agreements with each
trading partner. That could even include regularly negotiating the renewal of
commitments to treat trading partners as equals.
For this, governments would need more resources, a serious problem for small
countries. And in bilateral negotiations smaller countries are weaker.
By joining the WTO, small countries can also increase their bargaining power by
forming alliances with other countries that have common interests.
10.
The
WTO is NOT undemocratic
It would be wrong to suggest that every country has the same bargaining power.
Nevertheless, the consensus rule means every country has a voice, and every
country has to be convinced before it joins a consensus. Quite often reluctant
countries are persuaded by being offered something in return.
Consensus also means every country accepts the decisions. There are no
dissenters.
What is more, the WTO’s trade rules, resulting from the Uruguay Round trade
talks, were negotiated by member governments and ratified in members’
parliaments.
C. An evaluation of Cambodia’s costs and benefits for joining WTO
Washington D.C. September 6, 2004
Naranhkiri Tith, Ph.D.
D. Specific Problems for Cambodia with respect to its membership of WTO as
perceived by NGOs and others:
1.
Small businesses worry about WTO
Phnom Penh Post, Issue 13/18, August 27 - September 9, 2004
2.
Issue
#3, September 3, 2004
WEDNESDAY SEPTEMBER 1, 2004
National Assembly votes in favor of WTO membership.
The National Assembly unanimously voted to ratify a law on Cambodia’s
accession to the World Trade Organization, just barely meeting a membership
deadline set by the international trade body, all newspapers report today.
Almost a year after WTO officials gave their nod to Cambodia’s requested
membership, 106 of 107 lawmakers passed the accession package. Opposition
lawmaker Son Chhay, who has expressed concern over Cambodia’s weak position in
the trade club, left the room during the vote. He later told The
Cambodia Daily that had he been present, he would have voted in favor of
the WTO membership.
National Assembly President Prince Norodom Ranariddh said the vote approving
Cambodia’s WTO accession gave the country a space in history amongst other
poor nations inside the global trade group, Samleng
Yuvechun Khmer reports.
Commerce Minister Cham Prasidh told reporters after the vote that he was very
happy with the Assembly’s action. “If we join the WTO, there is a 95 percent
change that the economy will be alive. But if we are slow to reform, we will
die,” he said in Samleng
Yuvechun Khmer and The
Cambodia Daily.
Although Cambodia first applied to join the WTO in October 1994, it was not
welcomed into the organization until July 2003, Koh
Santepheap writes. Ongoing political deadlock stemming from last
year’s national elections further prolonged the National Assembly’s approval
of the WTO accession package, according to The Cambodia Daily.
With the Assembly’s positive vote, the Cambodian Senate and head of state must
sign the agreement, TheCambodia
Daily writes. The country’s official WTO membership will then commence
30 days after the government alerts the organization of its actions.
Cham Prasidh said the government must now pass more than 40 laws to attract
investors and meet conditions set by the WTO. The minister said it would take
two years to enact the reforms, which include improving anticorruption efforts,
reducing bureaucracy, and increasing security, according to Samleng Yuvechun Khmer.
3.
Law
of the jungle: Cambodia's accession to the WTO
Oxfam does not oppose the decision of the Royal Government of Cambodia to join
the World Trade Organisation (WTO); clearly this is a decision for Cambodia and
Cambodians.
back
to headlineshttp://www.phnompenhpost.com/TXT/default.htm
- law Phnom Penh Post, Issue 12/19,
September 12 - 25, 2003
4.
Building Entrepreneurial Economies |