Basic text of the presentation made at the 47th Congress of the Union Internationale des Avocats, on the 3rd September 2003, in Lisbon, Portugal.
The Effects of the WTO Order
When the World Trade Organization (WTO) was created and started operations in 1995, it was heralded solemnly that a new era of world prosperity had started. In practically, in all the developing world, including in major emerging economies such as Brazil and India, important political leaderships voiced great hopes in the results of the Uruguay Round. However, the final phase of the Uruguay Round was characterised by a great omission on the part of developing countries, which permitted the hegemonic powers to mould the system to their desires, cultures, idiosyncratic preferences and ultimate economic advantage. The substantive alterations in the multilateral trade system included the demands of the developed countries in the insertion of the so-called “new areas”: services, investments and intellectual property. On the other hand, the traditional areas of trade interesting developing countries, namely agriculture and textiles, were only nominally admitted into the system. In practice, agriculture continued distorted by textiles continued to face quotas the maintenance of massive subsidies practised by the main trade partners.
An only apparent positive result of the negotiations occurred with respect to the dispute settlement mechanism, which was a depository of many hopes in the end of unilateralism and arbitrary action in the multilateral trade system. Once the WTO order had been co-opted for the promotion and leverage of the economic interests of a few developed countries, it was effectively used with a view to extract specific advantages, to the detriment of most other members. Accordingly, in the 7 years subsequent to the foundation of the WTO, international prosperity was restricted, more than ever, to developed countries, notably the United States of America (USA) and the European Union (EU). By the end of the Uruguay Round, in 1993, an ominous analysis of the World Bank had already indicated that the results of the negotiations would benefit developed countries by 64 percent and developing countries by 36 percent1.
Reality proved much worse. In accordance with a recent study by the International Monetary Fund (IMF), in the 6 years since the execution of the respective multilateral trade agreements, developed countries reaped 73 percent of the benefits of the Uruguay Round, against only 27 percent for developing countries2. This imbalance is more acute in the new areas, particularly in services, in which US exports have been growing at a rate of 10 percent per year since 1995, the United Kingdom´s at a rate of 7 percent, France´s at 5.7 percent and Japan´s at 4.8 percent. By contrast, during the same period, South Africa´s exports of services grew by 0.3 percent, Brazil´s by 0.6 percent, Mexico´s by 0.9 percent and India´s by 1.2 percent. Today, the USA, the EU and Japan directly control not less than 70 percent of the world trade in services.
Accordingly, after the inception of the WTO, developing countries have been the victims of major international financial volatility crisis, reduction of exports, dramatic reduction of the prices of their agricultural commodities, economic crisis and generalised despondency. In accordance with WTO statistics, both Asia and Latin America had a worse performance in trade in goods in the 4 years after 1995, than in the 4 years before3. The prices of agricultural commodities fell consistently during the period and more than 30 percent after 19984. Coffee prices fell 70 percent since 19975. In accordance with the WTO, Africa and Latin America respectively depend in 19 percent and 36 percent of the agricultural sector for its exports6. In Brazil, the agricultural business sector answers for 25 percent of the GDP, 37 percent of the total of jobs and 40 percent of the exports.
Brazil’s participation in global trade fell in 50 percent since the launch of the Uruguay Round in 1986 to today. From the creation of the WTO in 1995 until the end of 2001, Brazil accumulated a trade deficit of US$ 21 billion, higher than the total aggregate since its independence. This deficit caused the export of more than 3.5 million jobs. In addition, during this period, the growth of the economy was only approximately 2.4 percent per year, in average. This growth had a wayward nature and thus caused a negative impact in the creation of jobs and an asymmetric distribution of income, penalising the poor. In Argentina, the situation is not different, as the accumulated GDP since 1995 represents a negative 4.3 percent and unemployment is currently at an extraordinary 35 percent of the workforce. Mexico became an exporter of misery, which is done either by the low aggregate value goods of the maquilladoras or via economic migrants. Migrants´ remittances equal foreign investments in value7. The income of Mexico´s industrial workers has been reduced in 50 percent since 1995 and 80 percent of the population live under the threshold of poverty.
The economic crisis was followed by social and political instability in most areas of the developing world. In Russia, barter became the main means of trade. In Africa, the situation remains dramatic and even success stories like the Republic of South Africa lacked international support in access to the markets of the main trade partners as well as any tangible support to redress the decades of the monstrous apartheid regime. As a result, the frustration of expectations of South Africans is marked indeed. The crisis affected even developed economies, like Japan`s. Also in Asia, the Philippines, Indonesia, Thailand and Malasia have had serious problems. India and Indonesia have had most of their development programmes unlawfully derogated by WTO´s dispute settlement system. Even the People´s Republic of China (China) has had a marked reduction in its economic growth since its accession to the WTO in 2001.
Some Detrimental Aspects of Certain WTO Agreements to Developing Countries
Thus, under the perspective of developing countries, the experience of the WTO has not been positive. As previously indicated, the modest concessions made in the agricultural and textile areas during the Uruguay Round were not sufficient to ensure free trade in the respective segments, as carefully made with a view to ensure the maintenance of the competitive advantages of developed countries8. In addition, the WTO´s legal order of the Agreement on Agriculture has condoned the non-authorised increase of the illegal agricultural subsidies by developed countries which have reached more than US$ 1 billion per day. Those subsidies distort the prices of agricultural commodities and impede the access of the produce of developing countries, not only to those markets subsidising, but also to the market of third parties and, in certain cases, threaten their domestic industries.
The USA, for instance, has today no fewer than 10 direct agricultural subsidies´ programmes and another 10 of an indirect nature. In terms of absolute volumes, US subsidies have today reached the astounding volume of US$ 150 billion, for a total agricultural production of US$ 128 billion, which corresponds to 115% of the value effectively produced. Those extraordinary numbers demonstrate that the USA ceased being a market economy in the agricultural area. The situation is not different in the European Union and in Japan. On the contrary. Thus, developed countries place their agricultural commodities abroad with dumping practices characterised by prices that are, in average, at least 1/3 lower than local costs9.
The inclusion of the new areas in the multilateral trade system permitted to developed countries access to the services markets of developing countries and ultimately the domination of the worlds’ trade in services. However, horizontal barriers, notably in the area of immigration, adopted in a consistent and uniform manner time and format by developed countries based on US immigration laws, have not permitted developing countries service providers access to their markets. During the Uruguay Round of the General Agreement on Trade and Tariffs (GATT), I had the opportunity to call this practice the “cartel of shame” and to warn about its effects to developing countries10. Under the General Agreement of Trade in Services (GATS), individual lawyers, who are the professionals accredited as such in all jurisdictions, are treated as companies, with a view to limit the international movement of service providers from developing countries.
Similarly, the Agreement on Trade Related Investment Measures (TRIMS) addressed the preoccupations of developed countries in curbing a number of requisites that had been developing policies in emerging countries, many of them recommended by United Nations (UN) agencies. Among those practices made illegal one finds import substitution requisites; obligation of local content; restrictions with respect to financial remittances; obligation as to the necessity of exports; necessity of the participation of domestic capital, etc. However, the TRIMS´ agreement did not address the effects on international competitiveness of access to cheap lending sources, as available to companies based in developed countries, against expensive credit, if available at all to companies originating in developing countries. The TRIMS´ agreement also failed to address the matter of co-operation to avoid financial and tax fraud in developing countries. This failure legitimises domestic legislation in developed countries that not only condones but also incentivates flight capital in general, and fraud and financial crime in particular, when occurring in developing countries for the benefit of the international banking establishment.
The Anti-Dumping Agreement11, effete and pusillanimous, has permitted the maintenance, by the USA, of its idiosyncratic domestic legislation, contrary to the most basic principles of international law, which allows that country to impose anti-dumping rights to any import against which its industry cannot fairly compete in strict market terms. This was aggravated in extremis by the obligation for the dispute settlement system of the WTO to defer to domestic laws and regulations, in matters of anti-dumping, which is a dramatic violation of international law. Of course, developing countries are the greatest victims of unilateralism of the great powers, because they are most vulnerable and thus cannot resist properly. Thus, anti-dumping rights have been the source of the so-called tariff peaks that represent one of the major obstacles for the access of competitive products from developing economies into the US markets.
In the same manner, the Agreement on Trade Related Aspect of Intellectual Property Rights, Including Trade in Counterfeit Goods (the TRIPS Agreement) has subordinated the intellectual property authorities of domestic law in developing countries to those of the main developed countries. This was achieved by means of the institutionalisation of the concept denominated “pipeline”, by which the first application made automatically grants international protection. In addition, the TRIPS Agreement failed to treat the important matters of implementation of policies of public health, a dismal failure that resulted in the dispute between Brazil and the USA in the matter of pharmaceutical patents12. Similarly, there are no provisions for the treatment of conflicts of the WTO agreements, including the TRIPS Agreement, and other international treaties, in particular those regulating the matter of human rights, which occasionally fall in conflict with the former in matters of rights of intellectual property.
The Agreement on Subsidies and Countervailing Duties deals with the subsidies practised by developing countries, but eschews dealing with the subsidies put in place by developed countries. In addition, it fails to allow even basic alternatives for developing countries to protect nascent industries with a view to permitting them to one day become competitive. The agreement of course failed to deal with the matters of cheap credit, export credit, cheap technology, research grants, etc. These practices are put in place by developed countries to achieve competitive advantage. On the other hand, the Agreement on Rules of Origin allows free trade regional pacts to insert norms that deviate the traditional currents of trade and thus to artificially foster preferred commercial relationships, such as in the case of the North American Free Trade Agreement (NAFTA).
Even the Dispute Settlement Understanding (DSU), that inspired so many hopes at the close of the Uruguay Round, has been a complete disappointment from the perspective of the rule of law and its application. The decisions by the Dispute Settlement Body (DSB) have seen, in their majority, against developing countries and very often derogated rights granted by other international treaties, particularly in matters of such vital importance as development policies, balance of payments and export financing13. The DSB was perceived as manipulated by the large developed countries, particularly the USA, and its awards were accused of being written by the legal division of the secretariat of the WTO, always controlled by the hegemonic powers14. The lack of credibility of the DSU is such that, for the revision presently being undertaken under the Doha Round of the WTO, modifications thereof presented by the member states affected all of its 24 articles and its two annexes!
As a conclusion, we can clearly see that developing countries are more than the net losers of the globalisation ideology. They are its clear targets in move of imperialistic character without precedents in History. It is clearly impossible to conciliate this ideology with the rule of law in international relations. On the contrary, it is fundamental for the force of darkness that international law does not prevail. Thus, we can conclude that only today more than ever effective international law can present an obstacle to international tyranny and despotism and, accordingly, stop misery and despondency.