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Trade and power

By Prem Shankar Jha

There is an old adage that information is power, and two days into the Cancun meeting of the minister of the WTO, its truth has already been amply demonstrated. For perhaps the first time, not excluding even the Doha meeting of two years ago, India is not isolated. Its bargaining positions have drawn strong and persistent support from other developing countries, and the support is not melting away under pressure from the `Quad' of developed countries and trading blocs — the EU, the U.S., Canada and Japan. The reason is that at Cancun the developing countries are, for the first time, armed with the solid, statistical evidence they need to fight the relentless demands from the Quad to open their economies ever wider to trade and investment.

The information they have collected has enabled them to go on the offensive against the Quad countries and demand that they meet their obligations under the Uruguay Round fully before demanding fresh concessions from the developing countries. So damaging is it that it has, for the first time, put the industrialised countries on the defensive.

Much of this information has been collected painstakingly by a Delhi-based organisation, the Research and Information Systems for the Non-Aligned and other Developing Countries (RIS). Set up in 1984 in the heyday of South-South cooperation, the RIS has been collating and supplying information on trade and development to the Indian Government. Recently, however, it decided to go public and has produced what could be the first ever Trade and Development report produced in a developing country for the developing countries. Its findings make compelling reading.

Developing countries were persuaded to sign on to the wide-ranging commitments of the Uruguay Round of trade negotiations by meticulously crafted studies that showed that the resulting freer trade would increase world gross domestic product by $213-510 billion a year. The rise in the developing countries would be $86-122 billion. They therefore agreed to bind, that is, put a ceiling on, future tariffs on 61 per cent of their imports against 13 per cent till then. They also committed themselves to lowering their trade-weighted average duties on imports by 28 per cent. The RIS' report shows that while the developing countries have exceeded the targets for liberalisation they had accepted, the gains from the resulting trade have gone almost entirely to the developed countries.

For not only has their growth slowed down but, if we exclude China, their share of global exports has gone down from 34.06 per cent in 1980 to 32.50 per cent in 2002. Data at this level of aggregation cannot be conclusive. But what the report shows beyond a shadow of doubt is the way in which rich countries have manipulated the commitments they made in the Uruguay Round to suit their own narrowly conceived objectives.

While they have brought down their average level of tariffs, they have done nothing to reduce, much less eliminate the discrimination that exists in their tariff structure against developing countries. The U.S., for instance, has brought down its average rate of tariff to under 2 per cent, but within this the trade weighted tariff on simple manufactures is 10.5 per cent while that on all other goods is just 0.8 per cent. Shoes and clothing are the worst hit. These make up just 7 per cent of its imports but fetch fully half of its revenues from import duties. As a result of this anomaly, Nepal 's $200 million worth of exports to the U.S. pay $25 million in duties while Ireland's $18.6 billion pay $29 million. All the countries of the Quad have similar duty structures.

Market access for their products, particularly textiles, was another area in which the industrialised countries made commitments that they have fulfilled only in letter. By the beginning of 2003 they were supposed to have removed quotas on 51 per cent of all textiles and garments covered by the Multi-Fibre Agreement.

In practice, the products have been so chosen that in value terms the EU has lifted quotas on only 20 per cent of the textiles exports so far. The Quad are now demanding further access for their textiles beyond what was envisaged in the Uruguay Round, in exchange for fulfilling their commitments under it.

These are only the tip of the iceberg of the trade and investment discrimination that the rich are practising against the poor. Other forms are proliferating non-tariff barriers, exclusions that make nonsense of the Quad's demand for free competition, and huge subsidies they give to transnationals for investing in their countries that they wish to keep out of discussions about freeing investment in the developing countries. These are masked as employment generation.

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