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The heavy price of WTO
membership
By Alan Boyd
SYDNEY - Cambodia and Nepal have become
uncomfortable symbols of the failure of international
trade negotiations after their acceptance as the newest
and poorest members of the World Trade Organization
(WTO).
They don't really want to be there, and
can barely afford to meet their membership commitments.
But being marginalized would entail an even greater
sacrifice," maintained Cambodian Commerce Minister Cham
Prasidh. "For the sake of national reconciliation and
peace in Cambodia, we paid heavy prices and now, for the
sake of world integration, we had to pay another before
we could join the WTO." But, he added: "If we are kept
outside, we are likely to suffer."
The immediate
price being paid is a package of tariff concessions and
liberalization obligations so binding that they threaten
to stifle the same development strategies that were
designed to benefit from membership of the elite trading
family.
It wasn't supposed to be that way when
the world community met in the Qatari capital Doha in
November 2001 and pledged to link the next round of
trade talks directly to the plight of the globe's
poorest nations. A reworking of the WTO's rules, with
ostensibly more lenient eligibility criteria, was needed
before Nepal and Cambodia could win acceptance as the
inaugural members under this new era of tolerance.
The Nepalese had been waiting 14 years for their
chance, after lodging an application with the General
Agreement on Tariffs and Trade (GATT), the WTO's
predecessor. Cambodia needed eight years of hard talking
to win its endorsement. In the process they became the
first least-developed countries to join since the WTO
was established in 1995, although 29 other LDCs,
including Bangladesh and Myanmar, were transferred
automatically from the GATT after it was eclipsed by the
WTO.
Unattached LDCs, whose response will have a
critical bearing on the success on the three-year Doha
poverty plan, have understandably followed the accession
ordeals of Nepal and Cambodia with keen interest.
Central Asian states Armenia and Kazakhstan have already
applied, while United Nations development agencies are
busy coaching seven LDCs for membership, including
Bhutan and Laos. Applications are also in the pipeline
from Uzbekistan and Vietnam, which are no longer classed
as LDCs.
Acceptance of Nepal and Cambodia was
intended to serve as an inspiration for these
applicants. Within hours of Cambodia's approval, Vietnam
had made an official request for Phnom Penh's help in
raising its own qualification standards, and Bhutan is
reportedly talking with Nepal.
"LDCs are needed
so the United States and Western Europe can say Doha is
working, and the forum is not only about the interests
of farmers in rich countries. But it could just as
easily unravel if they don't get it right," said an
Asian diplomat.
Getting it right means
convincing the poorest nations that they will not be
ambushed by WTO membership. Third World delegates
successfully campaigned in Doha for a more structured
reforms process that would take account of varying
stages of development by deferring reform commitments
when necessary.
Doha's ministerial declaration
recognized "the particular vulnerability of the
least-developed countries and the special structural
difficulties they face in the global economy", while
pledging to promote their "effective participation in
the multilateral trading system".
The most
crucial element of this commitment was an understanding
that LDCs would not be pushed into offering the same
market access as their richer counterparts before they
were ready - the declaration spoke in glowing terms of
the need to give LDCs "a share in the growth of world
trade commensurate with the needs of their economic
development".
Yet when it came to the litmus
test of negotiations for the Cambodian and Nepalese
memberships, Doha failed miserably, offering a raw deal
on market access, the protection of agricultural goods
and adherence to patent rules.
Nepal, 40 percent
of whose 23 million population live below the poverty
line and with a per capita annual income of only US$240,
had to agree to sweeping cuts in import duties that will
add only 10-20 percent to the cost of most incoming
goods.
Industrial products, predominantly
carpets, textiles and garments that are manufactured in
back-street shophouses and small cooperatives, will
attract a modest tariff of about 24 percent, while the
levy on agricultural imports will be 42 percent.
Cambodia is already obligated through its
membership of the ASEAN Free Trade Area (AFTA) to remove
most import tariffs by 2015, but will have to implement
much of this package earlier to meet the WTO
requirements. It will be unable to levy duty on
agricultural goods, the main income source for 80
percent of the population, above 60 percent. In
contrast, European Union farm tariffs range up to 252
percent, the US levies a maximum of 121 percent and
Canada 120 percent.
Additionally, neither
applicant was able to take advantage of the Doha
concession on intellectual property rights, under which
LDCs were to be allowed to wait until 2016 before
complying with aspects of the Trade Related to
Intellectual Property Rights (TRIPS) protocol.
Both will have to comply by 2007. But in
practical terms, some elements of TRIPS - especially
those relating to data protection and generic forms of
pharmaceuticals - will take effect immediately after
Cambodia and Nepal take up their seats. Even existing
members were allowed a 10-year wait.
"The
scandal is that the powerful members of WTO have asked
more concessions from Cambodia than they have asked from
themselves," charged Phil Bloomer of the British-based
charitable group Oxfam, which released a scathing report
on the negotiations.
So how did Doha's focus on
the poor go so badly awry?
Diplomats discount
talk of a conspiracy by rich nations and point instead
at the WTO's flawed vetting framework, which in effect
leaves applicants at the mercy of their peers, and these
countries' vested trade interests. A seat is not offered
until an applicant has satisfied the demands of every
existing member, and especially the grouping's power
brokers, a practice that encourages backroom deals on
market access in return for votes.
Despite the
Doha promise that LDCs would not be pressured, Phnom
Penh had to renegotiate an offer of market access for
agricultural and industrial products after it was
rejected as too restrictive by some WTO signatories.
"Without the support of key WTO members, there
is no chance that any country would enter the WTO. This
is why acceding countries are forced into negotiating
bilateral agreements with all key players," the Oxfam
report on Cambodia noted. "In short, the big players
call the shots."
China also went through the
gauntlet during its laborious WTO negotiations, agreeing
to deep tariff reductions in return for access to
Western markets. But the impact will be more
far-reaching for LDCs such as Cambodia and Nepal that
lack China's economic muscle.
Nepal, for
instance, gets 80 percent of its foreign-exchange
earnings from shipments of textiles and other industrial
exports, and is in no position to quibble. More than
100,000 are employed in the garments industry alone.
Export revenues fell by 13 percent last year after
political unrest and a series of attacks on factories by
Maoist insurgents. Tourism arrivals, responsible for 12
percent of foreign exchange, have also plummeted.
In Cambodia, which is still rebuilding from the
economic and social devastation wrought by two decades
of civil war, the premature opening of agricultural
markets and dilution of barriers against industrial
imports will probably outweigh the likely benefits from
increased foreign investment, at least in the short
term.
Garment manufacturers, who earn 80 percent
of Cambodia's exports income, will not be able to match
the Chinese economies of scale. Farmers, constituting
most of the workforce, will have to contend with imports
of cheap Vietnamese rice and Thai consumer goods.
Political leaders still have to sell the
agreements to their own people. The WTO's accession
process requires formal ratification within 30 days for
membership to become effective in early 2004.
But both governments appear resigned to their
fate, even expressing surprising confidence that Doha's
act of faith will eventually be realized through a more
accountable and equitable trade bloc.
"It is our
conviction that joining this organization would not only
enhance our effectiveness and efficiency in trading
capacity but would also result in the expansion of
trade, leading to a higher level of growth and
enhancement of quality of life of our people," Hari
Bahadur Basnet, Nepal's trade and industry minister,
said after his country's membership had been accepted.
(Copyright 2003 Asia Times Online Co, Ltd. All
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