ABSTRACT
It is almost three decades after the birth of World Trade Organization (WTO) but still advocates and critics are struggling about its merits and demerits. These discussions are not limited to academicians or pundits; but more importantly governments are continuously frame their policies based on the WTO. From U.S. & China tariff war to developing countries economic coalitions, from Trump’s menace to exit the WTO to Ukraine’s lawsuit against Poland with regard to grain dispute. In this article I argue that although the WTO has achieved success in certain areas, it exerts harmful influences, particularly on developing countries.
If you look at WTO official website and how it depicts the organization, you may start to think that WTO is the most successful intra-state agreements which every country should find it as a win-win deal. In fact, WTO is the heir of fortunate experience of General Agreement on Tariffs and Trade (GATT). It was 90’s, time of neoliberalism triumphalism and cold war was ended. Finally, on 1st January 1995 this multilateral trading system was born. Creation of international organizations after second World War are based on liberalism school of thought and the fact that with economic interdependence the world will be safer. Not surprisingly, trade is the core of economic interdependence and this is why GATT was created shortly (2 years) after end of the WWII. If the GATT only considered reduction of tariffs on goods, WTO extended the scope to all aspects of trade, from agriculture to Foreign Direct Investment; and with more institutionalized framework among them sanctions and dispute settlement.
According to adherents of WTO, this organization has proved its advantages. Basically, with less trade barriers, consumers are able to buy imported products with lower prices and manufacturing sector enjoys cheaper raw materials to produce goods. Competition is another key term that WTO fosters. In better words, companies and firms within a country don’t have any privileges from the government and are forced to produce good quality products in efficient ways in order to sustain their place in market otherwise, imported goods with cheaper price kick them out of the market. Moreover, organization provides a legal institutionalized basis for trade which makes it more predictable. Peaceful dispute settlement in the case of any tension in economic relations among country is one of these beneficial judicial instruments. Another special feature of WTO is the Most-Favored-Nation (MFN) principle which basically is non-discrimination principle and argues that each member cannot treat any other member differently unless treating all the members the same way. These are some of the main economic reasons that proponents of WTO have claimed in media and public discussions however, as mentioned before GATT and its heir WTO were created based on political concerns. Although it is controversial but supporters of WTO mainly from Liberalism and Constructivism schools of thought emphasize how economic interdependence provided by WTO have had influence on conflict resolutions and political tensions reductions. There are plenty of researches which shows the correlation between membership in WTO and decreasing trend of Militarized interstate disputes (MID).
Depiction of the WTO as a mere beneficial entity as was explained in the previous paragraph is not always the case. In fact, this institution has been under the severe criticisms from the beginning until now. First, the fact that all the countries by membership in the organization should oblige the same principles and should act in the same way, seems defective for the very truth that the states are different and diverse. Many developing countries have weaker institutions, less resources, fewer experts and in one word less capacity; for sure, we need more tailored rules corresponding to the status of each country. It worths to mention that trading is not as human rights; although, it is highly controversial but at least more reasonable to say human rights is the same for every nation however, trading needs institutions and capacity therefore, it is not wise to expect United States behaves similar to the least developed countries. Rich and powerful countries are equipped with an abundance of technical and administrative resources that developing countries lack, such as advanced technology, skilled advisors, and highly trained lawyers. As a matter of the fact, in the years between 2011 and 2020, exports of goods and services from least developed countries contracted [2].
Also, proponents of democracy criticize the organization because the fact that most economically powerful nations set the WTO agenda is against the democracy in global scale.
Many critics claim that WTO was made by developed western countries to control developing countries and prevent them to reach developed state [2]. At first glance it looks as a conspiracy theory but scrutinizing into the organization shows that organization’s neoliberal agenda reflects the interests of richer countries. With delving more into history, we find out all the today developed countries at the beginning chose the protectionist policies to develop. United States had very loose laws of patents during 18th and 19th centuries and literally without “theft” of technological secrets from Britain couldn’t have strong textile manufacturing industry. It is interesting that many sectors in Europe among them steel, aircraft and cars were backed by government supports. This is what as Robert Hunter Wade says Friedrich List’s “kicking away the ladder” of development by developed countries [5]; the ladder that these developed countries climbed themselves in the past for development. Developed countries by seeking intrusion to economics and polity space of developing countries through WTO, curb the available autonomous development strategies of these weaker countries and force them to comply with international obligations of the organization. We should not forget how this national self-tailored development policies worked for East Asian countries and as mentioned above for developed countries when they were developing. Meanwhile, the United States and the EU have not fulfilled their broad promises to enhance market access for developing countries [6]. Both have excluded significant portions of their economies from negotiations. Consequently, the actual opportunities for developing countries to diversify and upgrade their policies are being constrained, despite the rhetorical support for universal liberalization and privatization.
Actually, developing countries’ rights and developed countries’ obligations are unenforceable, while developing countries’ obligations and developed countries’ rights are enforceable. On paper, the rights and obligations of members look to be balanced between patent-holding (developed) and patentusing (developing) countries. In practice the agreement is skewed in favor of the developed countries, because of the difference in enforceability. The situation is more complicated with the fact there is fundamental incompatibility between the interests of rich and poorer members of the WTO. The comparative advantages of developing countries are agriculture and textile sectors; in contrast, developed countries are superior at technology and for this reason they are more sensitive to intellectual property. Surprisingly, WTO agreements are very strict at intellectual property rule and obliges every state not to produce imported goods (Even health products like medicine) if production is against this rule [7]; this is highly in favor of rich countries and especially Multinational Corporations (MNC). The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) is the specific agreement related to Intellectual Property. Daniele Archibugi and Andrea Filippetti have argued that the main motive for TRIPS was a decline in the competitiveness of the technology industry in the United States, Japan, and the European Union against emerging markets, which it largely failed to abate [1]. They instead argue that the main supporters and beneficiaries of TRIPS were IP-intensive multinational corporations in these countries. At the other hand, obligations of agriculture trades are much vaguer and more open to interpretation. It is a pity that the US and EU, two of the world’s largest importers of goods, impose high tariffs on agriculture which hurts farmers in developing countries. Moreover, U.S. and many European countries are implementing aggressive industrial policy to support frontier industries and firms. The US network of public laboratories and agencies (the Defense Advanced Research Projects Agency), and Germany’s giant development bank, KfW, are cases in point [7]. It is argued that, Western states have crafted World Trade Organization rules to enable them to use industrial policy instruments appropriate for frontier industries and to prohibit or make actionable instruments appropriate for developing country industries and firms well within the frontier (like local content requirements).
There are some researches that shows WTO’s strict rules are harmful from political point of view as well. Chatagnier and Lim in their paper argue why punishment and sanctions defined for transgression of principles of agreements make the general deals and more specifically the issue linkage (simultaneous discussion of two or more issues for joint settlement) harder to be achieved [4]; in the result of this blockade are tension rising and conflictual circumstances in the intrastate relations.
WTO doesn’t have good records for many other general issues other than economic and political affairs. Among them are failure to adhere to international law, implement labor standards, and enact environmental regulations. It is a truth that in recent years topics of climate change and environmental crisis has been put on agenda setting globally however, vividly WTO agreements are lack of any serious comprehensive regulation or principles for protection of biodiversity, pollution and more broadly environmental challenges [3].
To wrap it up, World Trade Organization today is at the peak of its maturity; Being based on the successful experience of GATT, it has given states the confidence to place all their trades under the shelter of the WTO for the sake of fair play, aiming to secure a larger portion of the cake for everyone. However, this ambition seems a dream for current organization. Although WTO has provided bunch of useful possibilities for trade as more competitive atmosphere for firms, cheaper price for imported products or predictive environment for trade but it suffers from many fundamental incoherences specifically to the detriment of developing countries. There are multiple propositions for the reform of the organization; none of them would be a good solution without taking into account needs and requests of developing countries which contains a broad range, from more flexible structure of the organization to consideration and obedience of comparative advantages of countries on a plane field. But there is not any doubt about the very fact that reform is a vital necessity because development is a necessity for safer stable world; and WTO is a protagonist in the play of countries whether for fostering and encouragement of development or suppressing and blocking it.
BIBLIOGRAPHY
Archibugi, Daniele, and Andrea Filippetti. 2018. “The Retreat of Public Research and Its Adverse Consequences on Innovation.” Technological Forecasting and Social Change 127 (February): 97–111. https://doi.org/10.1016/j.techfore.2017.05.022.
Bacchus, James. 2023. “The World Trade Organization: Myths versus Reality.” Cato.org. 2023. https://www.cato.org/publications/world-trade-organization-myths-versus-reality.
Beattie, Andrew. 2019. “The Dark Side of the WTO.” Investopedia. 2019. https://www.investopedia.com/articles/economics/dark-side-of-the-wto.asp.
Chatagnier, J Tyson, and Haeyong Lim. 2020. “Does the WTO Exacerbate International Conflict?” Journal of Peace Research 58 (5): 1068–82. https://doi.org/10.1177/0022343320960203.
H Wade, Robert . 2018. “Global Playing Field Is Level but Only for the West.” Www.ft.com. August 9, 2018. https://www.ft.com/content/c7cd567e-999e-11e8-9702-5946bae86e6d.
Rodrik, Dani. 2018. “Le Néolibéralisme Ou l’Économie Dévoyée.” L’Économie Politique 78 (2): 81. https://doi.org/10.3917/leco.078.0081.
Ruge, Nicolai, Danny Quah, and World Economic Forum. 2024. “Global Trade Is Fragmenting. The WTO Must Make a Stronger Case That It Can Benefit Us All.” World Economic Forum. February 28, 2024. https://www.weforum.org/agenda/2024/02/global-trade-wto-meeting.
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