Custom «Developing Countries in World Trade» Essay Paper

Only ten developing countries were amongst the original twenty-three contracting parties to the General Agreement on Tariffs and Trade (GATT). Developing countries in the 1960s and 1970s, if they were concerned about trade regulations at all, had to rely on the United Nations Conference on Trade and Development (UNCTAD) to advance their interests in world trade. Subsequently, in the 1986-1994 Uruguay round, many developing countries began to participate actively in trade negotiations and joined the World Trade Organization (WTO). Most current WTO members are developing countries and they account for more than two-thirds of the membership. They play a growing role in the world trade politics because they represent a majority, because of their influence in the world economy and because they pursue development enhancements through global trade. Further, the voting system in the WTO is of invaluable help to developing countries because it is premised on a rule of one vote for one country, regardless of the country's political or economic power.

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This paper suggests how to improve the position of developing countries in international trade. It considers the special and differential treatment provided for developing countries in order to examine whether it is sufficient or needs reforms. It also gives an account of the market access problems of developing countries and the technical and financial assistance they need to promote their interests. The paper considers the difficulties that face developing countries in the dispute settlement process, and provides suggestions for strengthening their participation in litigation procedures. The essay then shows the experience of developing countries with Trade-Related Aspects of Intellectual Property Rights (TRIPS), and considers how to enhance their achievement. Finally, the paper mentions the cooperation between the WTO, the International Monetary Fund and the World Bank.

Integrating developing countries into a global trading regime is a difficult mission to fulfil. Thus, WTO agreements embrace provisions granting developing and least-developed countries preferential treatment. The General Agreement on Tariffs and Trade (GATT) contains special provisions for trade and development which establish a principal of non-reciprocity between developed and developing countries. This means that when offering trade concessions developed countries should not anticipate receiving identical or reciprocal commitments from developing countries.

The General Agreement on Trade in Services (GATS) also grants developing countries favourable treatment. Furthermore, WTO agreements generally include provisions that are of interest to developing countries, giving these countries more time to accomplish their duties. They also enhance developing countries' opportunities for global trade by offering better access to foreign markets. The WTO regime provides provisions that aim at safeguarding the interests of developing countries, as well as endowing them with the flexibility to implement WTO agreements. The WTO also provides developing countries with technical assistance and special provisions offering favourable treatment for the least-developed countries.

Neither the WTO nor the GATT provides a formal definition of a developing country. However, Article XVIII of the GATT includes one inadequate definition of a developing country as a country whose economy "can only support low standards of living and is in the early stage of development". The WTO classifies its membership into three categories: developed countries, developing countries and least-developed countries. The WTO agreement also refers to least-developed countries as "namely those recognised as such by the United Nations". The determination of whether a country is developed, developing or least-developed is premised on a self-selection method. The absence of general international agreement on the term "developing country", together with inconsistent and different uses of the term, has rendered it ambiguous.

The foundation of the WTO places great pressure on developing countries to be active participants in global trade. The WTO embraces a wide range of various areas, such as trade in services and intellectual property. This entails that developing countries should have sufficient capacity to participate effectively in negotiation rounds and to pursue their own interests. In addition, the new system of dispute resolution requires a high level of capacity and skilled legal staff.

This section provides an overview of the special and differential treatment and then focuses on Doha outcomes. Special and Differential Treatment (SDT) is a component part of the WTO agreements aiming at enhancing the interests of developing countries and integrating them into the world trade regime. This treatment helps developing countries in enhancing and sustaining the development process through broadening and diversifying the exports of these countries.

The WTO agreements embrace 145 distinct Special and Differential Treatment provisions, which pursue the enhancement of developing countries' opportunities in trade and safeguarding their interests. The agreements also grant these countries flexibility and transitional periods for implementing their commitments under the WTO. They are also concerned with providing these countries with the technical assistance required to fulfil their obligations and to participate efficiently in global trade.

One rationale behind offering SDT for developing countries is that they lack the institutional capacity to implement WTO agreements. Another basic justification for SDT is the concept that world trade has adverse effects on developing countries and thus, their relative weakness must be envisaged in the world trade regime.

However, developing countries believe that the current special and differential treatment provisions are ineffective, insufficient and non-binding. They also think that the WTO, as a member-driven organization, serves the interests of developed countries that have influential power within the WTO.

The Doha Ministerial Declaration (2001) along with the implementation decision stresses the importance of special and differential treatment provisions, deeming them a component part of the WTO regime. It proclaims a comprehensive review of SDT provisions, fortifying them so that they are clear, effective and workable. It takes account of the issue of market access for products of interest to developing countries such as textiles and agriculture. Furthermore, according to leading authorities, it concerns the technical assistance required to enhance developing countries' ability to implement WTO agreements and consequently advance their positions in global trade.

The WTO Members assert that developing countries should be accorded preferences in a general, non-reciprocal and non-discriminatory manner. Developing countries have provided 88 proposals with the objective of strengthening the hortatory provisions of SDT. These suggestions include enhancing access to developed countries' markets, further exemptions from WTO agreements, commitments to developing countries being offered technical and financial assistance and greater development aid.

There is a need to promote SDT discipline in order to enhance the interests of developing countries and to engage them fully in the global trade system. SDT should be designed in a way that enhances and encourages trade, eliminating the barriers to it. SDT provisions that aim at providing technical and financial assistance should be granted due consideration to enhance the institutional capacity of developing countries. In addition, the wording of SDT provision should be precise and binding to ensure effective functioning. The current SDT provisions need to be recast and the concept of one size fits all should be reconsidered and amended; developing countries are not similar in terms of wealth, progress and knowledge, and thus criteria must be set to determine those developing countries that need favourable treatment.

SDT provisions were included in WTO agreements without a specific framework, determining the objective of SDT and the countries that need these provisions. The current functioning of SDT depends on various provisions in WTO agreements, rendering the achievement of its purpose difficult. As Kleen and Page (2005) argue: "A framework for SDT would ensure predictability....it could also provide guidance in connection with the drafting of provisions in specific agreements.....A framework agreement could help conserve developing countries' negotiating capital and prove a useful instrument in connection with efforts to harmonise trade and development. Having a framework might also allow us to analyze what the existing provisions achieve".

If the option of introducing a framework for SDT fails, it will be necessary to develop the current Enabling Clause in a way that responds to developing countries' needs. The suggested clause would not provide a complete framework; rather it would contain general rules concerning the contributions and concessions anticipated from developing countries.

Providing developing countries with better market access is of crucial importance for integrating them efficiently into the global trade regime. There are three basic requirements to enhance market access for developing countries. First, developed countries should dismantle tariffs and border measures imposed on products that are of interest to exporters in developing countries. Secondly, a review of the barriers which hinder developing countries in accessing global markets and determining and invoking special and differential measures to offer better access. Thirdly, the problems inherent to developing countries' market access must be taken into consideration when negotiating trade agreements that may have adverse effects on this issue.

Furthermore, it is fundamental to translate theory into practice, and thus developed countries must be restrained from practices that have adverse impacts on developing countries' interests. The WTO should enhance the conditions of market access for developing countries to guarantee that the world trade system serves the interests of these countries. Greater consistency must be ensured in the policies of the WTO.

The enhancements of market access should cover the trade in goods and trade in services. First, with regard to trade in goods, the Generalized System of Preferences contains a list of products that serve the needs of developed countries. This system should be amended in a way that satisfies the needs of developing countries and dismantles barriers that hinder beneficial market access. Second, the WTO should enable developing countries' firms and workers to have access to advanced technology, knowledge and expertise.

Developed and wealthy countries are demanded to open their markets to developing countries. They should liberalize the areas of agriculture and the trade in services and manufacturing in order to help developing countries integrate fully into global trade. Despite the fact that special and differential treatment urges developed countries to grant developed market access without barriers to developing countries' products, developed countries do not adhere to this principle because of the absence of reciprocal concessions in their relationship with developing countries. The Generalized System of Preferences (GSP) has also done little to accord developing countries better market access and has not enabled many of the developing countries' products to access global markets. The United States and the European Union have designed difficult conditions regarding their GSP programmes. It is believed that if developed countries liberalized the areas that are of vital concern to developing countries, such as agricultural products and textiles, even on the basis of most favoured nation, the developing countries would gain valuable benefits from such a concession. The developed countries' recourse to imposing quotas, as well as granting subsidies and national support constrains the flow of developing countries' products into the former's markets.

The devising of product standards by the International Standards Organization (ISO) is a major source of concern for developing countries. The WTO relies on these standards and requires countries that have different standards to justify them. The imposition of ISO standards may have an adverse effect on market access, as developing countries' concerns stem from the absence of their effective participation in the formulation of these standards. As a result, the interests of developing countries are not considered seriously when setting these standards. Developing countries need to cooperate with each other, consolidate their position and speak with one voice to enhance and strengthen their bargaining power in the sphere of global trade. They would benefit from intergovernmental institutions' assistance to participate in formulating these standards in a way that will safeguard their interests.

Developing countries would benefit a great deal from global trade if they liberalized their markets on the basis of reciprocity. The traditional WTO tariffs would offer developing countries enhanced efficiency in their domestic products and would provide better access to developed countries' markets. If developing countries reduce tariff barriers imposed on imports, their exports would have greater access to foreign markets. Domestic reforms in developing countries' policies, such as enhancing the efficiency of their industries, would advance the positions of these countries in world trade. Furthermore, some WTO policies should be amended, such as those regarding safeguards and anti-dumping. The overuse of these measures minimizes exporters' benefits from market liberalization. In addition, the WTO should adopt a multilateral mechanism to adjust trade rules that are inappropriate for developing countries in order to satisfy the needs of these countries and engage them fully in global trade.