Much ado about nothing

The era of colonialism is over. However, exploitative trade practices by First World countries against poor nations are still alive and kicking. Overly biased import policies by richer nations, who weave a complex web of tariffs and duties, set the tone of discrimination against Third World countries.

For instance, Bangladesh-made garments entering the US market are slapped with duties and taxes/tariffs that are in general 20 times higher than those that UK-made garments have to face. Similarly, imported Indian garments have to face import tariffs of around 

19 per cent, as compared to the 0-1 per cent charge applicable on European and Japanese garment imports. Such discrimination debilitates the value additions made by producers belonging to poor countries. According to internal estimations of Brazil, its agricultural exports’ earning has reduced by more than $10 billion because of trade barriers in the West. For Mozambique, exports to EU are lower by $100 million a year because of restrictions that are almost equal to the total amount of financial aid it receives.

‘Free trade’, as advocated by WTO, is nothing but a myth. Richer nations, led by United States, spend a billion dollars a day in extending subsidies to their farmers. The figure is six times the amount of aid they provide to the poorer nations. These domestic subsidies extended by rich nations to their farmers work in two ways against poor nations. First, these subsidies act as export barriers for poor countries – as their generally low priced produce becomes relatively costlier in the export market. And second, the surplus produced in the rich nations, because of the protection and supportive subsidies, is dumped easily at lower prices in developing countries, thus putting the local producers in these poor nations out of business.

The discriminatory and potentially catastrophic policies pursued by developed nations are usually endorsed and even backed by WTO. The deals struck through the framework of WTO more or less protect the interests of the rich countries while turning a blind eye to poorer nations – one reason why the November 2013 WTO General Council Meeting turned out to be another big failure, with members failing again to agree on a trade deal.

WTO has also failed miserably in its promise of fairness and justice. Despite its commitment to improve access to its expensive legal system and make it easier for poor nations to file suits, nothing much has been done. In the last one and a half decades, no African nation could file a suit or was a complainant; merely one ‘less developed nation’ filed a claim. In a paper titled, Is WTO Dispute Settlement System Biased against Developing Countries? An Empirical Analysis by Fabien Besson and Racem Mehdi of University of Paris, the authors write, ‘Within the context of trade disputes increase, the position of developing countries draws special attention. There is evidence that developing countries have a disadvantageous position in the WTO DS system. Park and Panizzon (2002) provide statistical documentation of the WTO disputes initiated between 1995 and 2001. 

Roughly one third of WTO disputes (80 out of 235) have involved developing countries as plaintiffs, which is slightly higher than their share of disputes initiated under the GATT period. On the other hand, developing country defendants have been the target of roughly 45 per cent (109 out of 242 disputes) of WTO disputes, which is much higher than was the case under the GATT. Most developing and all the least developed countries have not used the system even once since its inception, whereas the G4 countries (EC, USA, Japan and Canada) are over-represented.’

In addressing Blue Box subsidies (unfair trade subsidies in rich countries), which directly contradicts the vision of WTO, no timetable has been finalised by the organisation to decide its fate. The stubbornness of EU and US in holding onto their stands is made easy by passive (and sometimes even active) support of WTO and other global economic bodies. The EU’s refusal to offer anything beyond its Common Agriculture Policy, which is an already agreed reform, demonstrates the attitude of the Western nations towards the developing ones and highlights the helplessness of WTO in resolving unfair trade practices pursued by the West. Despite the WTO’s stand for free trade, EU, Switzerland, Norway and Japan have been able to protect their so called ‘sensitive products’, with no voices raised against them by the organisation.

To be fair, not many global forums or organisations have been able to uphold their founding motives and core objectives; still, WTO is one that leads the list of such organisations. Instead of bridging the gap between two worlds, it is exactly doing the reverse. WTO, through its policies, is only facilitating the process of rich nations growing richer at the cost of the growth of poor countries. Fundamentally, its allowing the West to gain economic and political control over the developing and underdeveloped world. The era of colonialism begins, again!

The author is a management guru and director of IIPM think tank