Box I.1. Globalization after the Seattle debacle

The establishment of WTO represented a major success of the international community in creating a rules-based system pertaining to some important aspects of the globalization process. However, the Third WTO Ministerial Conference, held in Seattle in November and December 1999, which was to advance the process further, could not come up with an agreed agenda for a new round of multilateral negotiations because of sharp divergences between the developed and the developing countries, and within them, on a wide range of issues. Some of the major stumbling blocks are briefly discussed below.^a

A second round of negotiations on trade liberalization during 2000 had been mandated under the Agreement on Agriculture. Several developing countries and the United States wanted the negotiations to aim at a progressive elimination of export subsidies and a substantial reduction in domestic support. Other WTO members, including EU, Japan, Norway, the Republic of Korea and Switzerland, emphasized non-trade concerns and the multifunctionality of agriculture. A large number of developing countries, which have been heavily dependent on agriculture for employment and output, wanted a consolidation and extension of the special and differential provisions in various agreements, including the Agreement on Agriculture. On the other hand, the possible increases in world food prices emanating from lower agricultural subsidies from the developed countries was a matter of significant concern for the net food importers among developing countries. There were still other WTO members who wished to see substantial cuts in the persistent barriers to their agricultural trade, especially the high tariff peaks and tariff escalation on processed agro-products and manufactured goods.

A process of comprehensive negotiations was favoured by, among others, EU, Japan and a number of developing countries in Asia and Latin America which are exporters of agricultural products. This would serve to diffuse attention away from the politically sensitive issue of agriculture and offer scope for the cross-sectoral give-and-take that is essential to achieve ambitious results. But many other countries had not expected or did not favour a comprehensive approach; they felt insufficiently prepared for this purpose. Moreover, fundamental differences persisted over the inclusion of the so-called four Singapore issues: investment, competition policy, transparency in government procurement, and trade facilitation.

Indeed, many developing countries preferred to adopt a minimalist agenda for negotiations, focusing largely on a range of issues involved in the implementation of the WTO agreements already reached. One of these issues, for instance, related to the scheduled liberalization in textiles and clothing. The process apparently had not led to a significant removal of quota barriers in the developed importing countries, and market access was considerably negated by such measures as transitional safeguards and restrictive rules of origin. In addition, many WTO members (including Japan, the Republic of Korea and some European countries) were strongly convinced that anti-dumping investigations were being utilized to impede trade flows and reduce competition. Also, developing countries often felt excluded from the creation of international standards with which they were expected to comply fully, even though these were beyond their own technical ability or financial capacity. Furthermore, they sought a review and, where necessary, amendments or tightening of WTO rules in the pertinent agreements, including those on subsidies and countervailing measures, and trade-related investment measures in order to give them more policy flexibility and greater security of market access.

Another deep fissure was in the area of international labour standards on which the United States and EU were keen to push for further action. Developing countries, on the other hand, suspected protectionist motives, especially if trade sanctions were to be imposed to enforce compliance with agreed labour standards. An informal proposal at Seattle envisaged the establishment of a joint ILO/WTO working forum on trade, globalization and labour issues. The forum would be outside the WTO structure, be open to the relevant international organizations, including the World Bank and UNCTAD, and would promote a better understanding of the substantive issues involved through the facilitation of interactive dialogue between governments.

Trade-related aspects of intellectual property rights were another important area of focus at Seattle. Many developing countries wanted the scope of protection to be extended to include such items as handicrafts and agricultural products. Other matters of concern included the lengthening of transitional periods, especially in the case of pharmaceuticals (from 2000 to 2003), the possible exemption of the World Heath Organization list of essential drugs from patentability, and developing countries' own (technical and financial) capabilities to survey and record all available agricultural resources before 2005.

There were major procedural problems too. Initial negotiation in small groups of participants (usually major economies) was a common practice during the time of the General Agreement on Tariffs and Trade, but there were genuine fears in Seattle that the compromises reached through a similar process could undermine the interests of those who did not participate. A new modality was needed to ensure greater internal transparency and inclusion, given the much larger and diverse membership of WTO. The disruptions at Seattle also underlined the need for greater external transparency through, inter alia, more timely and extensive dissemination of information, as well as the greater involvement of all stakeholders, including civil society organizations.

It is against this backdrop of sharply divergent views that the tenth session of UNCTAD was held in Bangkok in February 2000. UNCTAD is not a negotiating forum and there was therefore no expectation that agreement would be reached on specific issues. Nevertheless, it is worth noting that the Bangkok Declaration which came out of this session agreed that globalization was an ongoing process that presented opportunities for countries to benefit, but also raised the risk of marginalization of countries, in particular the poorest countries, and of the most vulnerable groups everywhere. It was also agreed that globalization could be a powerful force for development, if it was properly managed. More specifically, the conference emphasized commitment to a multilateral trading system that was fair, equitable and rules-based, and that operated in a non-discriminatory and transparent manner and in a way that provided benefits for all countries, especially developing countries. That would involve, among other things, improving market access for goods and services of particular interest to developing countries, resolving issues relating to the implementation of WTO agreements, fully implementing provisions on special and differential treatment, facilitating accession to WTO and providing technical assistance. The future pattern of globalization and distribution of its benefits will be largely determined by the extent of the implementation of these commitments.

Footnote:

^a For further details, see "The Seattle crisis and post-Seattle strategy", paper prepared by the Group of Fifteen, Federation of Chambers of Commerce, Industry and Services, Cairo; and Anwarul Hoda, "Imperatives for South-South cooperation in the multilateral trading system", paper presented at the ESCAP Seminar on Interregional Cooperation in Trade and Investment: Asia -Latin America, Bangkok, 15 and 16 February 2000.