WTO:  The Reality

In previous issues, I looked at the benefits of as well as the misconceptions surrounding the WTO.  In this issue, I will examine the explanations offered by the WTO to determine how these measure up in reality.

Let’s face the facts - this is not a perfect world that we live and trade in.  We do not operate along the tenets of perfect trade - protectionism and other barriers do exist.

WTO agreements - are they shaped by Governments or by powerful lobbies??

One of the lines of defence offered by the WTO is that its policies are determined by member governments. Governments do not exist in a vacuum.  Most of the governments today practise some form of democracy.  Governments of today are moving away from controlling the means of production. In most economies it is the private sector that is responsible for producing the items that are traded.  Today's trade policies therefore have to reflect and support the private sector's business policy as it is the private sector which is doing the trading, not the Government.

The main architects of the WTO have “grandfathered” several areas of their own interest into the agreement and these have a debilitating effect on other members.

Is the Playing Field Really Level?

The playing field is by no means level. Different economies have different strengths. The developed countries of this world have vast resources, superior technology and larger financial might.  It takes substantial financing and strong negotiating skills to ensure the representation that is required in order to effectively pursue and secure satisfactory trade conditions.   Trade missions require funding to cover associated expenses such as traveling and accommodation. And these missions have to prepare adequately, sometimes conducting extensive research which can be quite costly.

Even when two or more countries from a region  join together and pool their resources, their bargaining strength might not hold much sway.  The region’s Herculean efforts to address the full tariffication of the EU banana regime is a case in point.

The cost of the processes for remedy under the WTO are generally too costly for small developing economies, and needs to be addressed in the new round, if we are to benefit from a level playing field.

More jobs??

As one of the benefits, the WTO suggests that it helps to facilitate economic growth and jobs. With its recent  shift in economic policy, China is one of those countries which are definitely benefiting from open trade.  Statistics show overall growth in the economy, with new markets opening up and more employment being provided for the people.

 The question to be asked is, what impact does this have on other countries and other economies.  Countries which previously supplied products and services that are now being provided by China might find that their markets are contracting. What this means is that countries have to ensure that they are involved in the production of goods and services for which they are best suited.  No longer can we continue production based on historical practices. This will mean continuous training and adaptation.

More serious consideration will have to be paid to services as a strategy for global success in small developing states, (and here we are not limited to tourism).

Improved Cost of Living??

The principle here is that if each country can trade with minimum distortions, (tariff and non tariff barriers to trade), they will then have the opportunity to buy from the least cost producers. This makes sense generally, except where products and services can be interrupted by external influences such as natural disasters, or war.

This particularly raises the issue of food security for small countries. A balance will have to be struck which will protect vital and vulnerable local industries, while at the same time pushing them to become more efficient.