G. Srinivasan

New Delhi, Jan. 21

THE report on "The Future of WTO" by eight eminent persons from a group of top business leaders and economists presented in Geneva to mark the first decade of the world trade monitoring body presumably focuses not only on institutional improvements but also revisits some of the fundamental principles of the multilateral trading system.

The recommendations of the Consultative Group headed by the last Director-General of the then General Agreement on Trade and Tariffs (GATT), Mr Peter D. Sutherland, with celebrity members like Prof. Jagdish Bhagwati of Columbia University and Prof. Kochi Hamada of Yale University, besides the Chairman, Reuters, Mr Niall FitzGerald, range from "realisable reforms" largely pertaining to technical nature for rejuvenating the institution to helping developing countries find their feet in adjusting to the WTO-dominated global trading system.

An important conclusion of consequence for developing countries like India which is not a part of any major regional trading bloc and is only lately discovering the virtue of going in for preferential trading arrangements (PTAs) with like-minded countries, the Board has expressed qualified reservations.

The eminent persons remain "unconvinced by the economic case for them and especially concerned that preferential treatment is becoming merely a reward for governments pursuing non-trade related objectives".

The Group rightly apprehends that the "non-discriminatory, most-favoured nation (MFN) treatment a fundamental principle of the WTO is close to becoming exceptional treatment".

Stating that the first test of any new initiative should be that it clearly improves trading and development prospects of beneficiaries and does not harm the interests of those outside, the experts caution the member governments to show "restraint or risk more damage to the multilateral trading system".

Moving a step further, they say the long-term remedy to the "spaghetti bowl" of discriminatory preferences is through the effective reduction of MFN tariffs and non-tariff measures in multilateral trade negotiations. In this regard, they ask the advanced members of the WTO to consider seriously a commitment to establish a date by which all their tariffs will move to zero.

Again, they duly recognise the fact that developing countries, as they increasingly turn to trade liberalisation, often could not afford adjustment mechanisms to cushion the short-term impact on employment and other aspects of social welfare. "International development agencies, chiefly the World Bank, should have, or should improve, programmes to fund trade policy related adjustment assistance for developing countries", the Group said.

In the post-WTO regime governing global trade, interaction with civil societies in developing countries by the WTO has become an accepted reality and hence the experts note the "improved WTO relationships with civil society cannot be achieved without more resources".

On WTO's Dispute Settlement Understanding (DSU) which is a positive step in the general system of rules-based international trade diplomacy and which helped many a developing country to wrest victory against arbitrary and unilateral trade policy measures of trade majors, the experts pertinently point out that "any measures or ideas for reform that would create a sort of `diplomatic veto' or the opportunity for specific disputants to "nullify" or change aspects of the final adopted panel report should be strongly resisted". The issue of compliance with panel and Appellate Body rulings is important and in some respects, worrisome, the Group said. In particular, the notion that the DSU provides a free choice to losing parties whether to implement obligations or otherwise, to provide compensation or endure retaliation is erroneous.

Rightly do the experts say that "buying out" of obligations is harmful to the systems, to the trading conditions and to the interests of developing country complainants, which cannot resort to a credible retaliatory option? Monetary compensation to poorer complaints, as a palliative pending full compliance, might be an apt response "worthy of experimentation".

On organisational issues, proposals like holding WTO Ministerial Conference on an annual basis, the Director General of the WTO to report on trade policy developments to ministers in writing on a six-monthly basis and a WTO summit of world leaders to be held in every five years would not only help strengthen political leadership of member countries in keeping abreast of developments to their constituencies but also demystify much of the miasma of mistrust currently shrouding the WTO.

Considering the fact that out of the five ministerials held in a decade of its existence, Seattle and Cancun meetings came a cropper for want of understanding with divisions between developed and developing countries wider, the Consultative Board has come out with suggestions worthy to ponder over if multilateralism is to be meaningful, say trade policy analysts.

(This article was published in the Business Line print edition dated January 22, 2005)
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