In order to assess the eff ect of WTO rules on poverty and the development process, it is necessary to assess its impact on developing States, the home of the vast major-ity of the world’s poor. Th at is not to deny the existence of poverty in developed States; it is to recognize that developed States have greater capacities to combat poverty within their own borders if they have the political will to do so. Developing States have lesser capacities and far greater numbers of poor people, and are there-fore more vulnerable if dislocations and adjustments are forced on them by inter-national trade rules and policies.
Of course, States themselves do not have human rights, so any ‘unfairness’ or
‘inappropriateness’ within WTO rules with respect to developing States does not directly raise human rights issues. However, the impact of WTO rules on particu-lar types of States bears an instrumental relationship with the facilitation of those States’ capacities to fulfi l their human rights obligations. In particular, increased growth should increase available resources, which should in turn facilitate develop-ment and poverty alleviation and a concomitant increase in the level of enjoydevelop-ment of human rights. However, growth and development may not necessarily lead to such outcomes. Th us, this issue bears an instrumental and indirect relationship with human rights rather than a direct relationship. Nevertheless, this issue is of crucial importance to the subject matter of this book.
A rights consistent trade policy with respect to poverty and development will have the following elements. First, a State’s trade policy should actually contribute to economic development and growth so as to enhance opportunities for climb-ing out of poverty. Secondly, the State must ensure that it retains and improves its capacities to fulfi l its human rights obligations, including its obligations to provide for the rights of those who need assistance. It must also of course exercise those capacities in good faith. Th irdly, the State should implement strategies to ensure that the gains from economic growth and development are equitably distributed.
Finally, the trade policy should be rooted in core human rights principles such
¹0 Commission on Human Rights, ‘Mainstreaming the right to development in international trade law and policy at the World Trade Organization (paper prepared by Robert Howse)’, UN doc. E/CN.4/Sub.2/2004/17 (9 June 2004) para 10.
as non- discrimination, participation, empowerment, and accountability.¹¹ While these factors are intrinsically linked, it is the fi rst factor which is the main focus of this chapter.
At this point, it is worth noting that developing States are diff erentiated within the WTO between developing States and least developed countries (LDCs).
LDCs have a GNI per capita of around $US750 per person and graduate from LDC status when they reach $US900 GNI per capita.¹² Hence a State is not an LDC if it has a per capita income of $US2.50 per day. A further unoffi cial category of developing States is that of small and vulnerable economies (SVEs), which are characterized by certain vulnerabilities, such as ‘physical isolation, geo-graphical dispersal and distance from the main markets’, as well as inadequate infrastructure and markets.¹³ While SVEs may be richer than LDCs, they are still very poor countries.
Bias against developing States within the WTO
In Chapter 3, the disadvantages for developing States within WTO processes were discussed. Current substantive WTO rules, as refl ected in the Marrakesh Agreement, are also biased in favour of developed States against developing States,¹4 as has been conceded by the Director- General of the WTO, Pascal Lamy.
He stated, in his famous call for a ‘Geneva consensus’ in a speech in New York in 2006:
Th e impression has also arisen that in the case of the multilateral trading system, [fl aws in the system] have tended to work to the disadvantage of a certain part of the WTO Membership, that comprising the developing countries. Th is bias will in the long run not be sustainable and it is therefore necessary to correct it if we want the multilateral trading system to thrive. . . .
In sum, while the political decolonization took place more than 50 years ago, we have not yet completed the economic decolonization. It is therefore one of the purposes of the current multilateral negotiations to continue the rebalancing of our rules in favour of developing countries.¹5
¹¹ See, eg, Offi ce of the High Commissioner for Human Rights, ‘Report on Indicators for Promoting and Monitoring the Implementation of Human Rights’, UN doc. HRI/MC/2008/3 (6 June 2008) para 10.
¹² Th e income criteria for LDCs varies from year to year. Th ese income estimates refl ect the World Bank’s 2006 triennial review of LDCs. Th ere are also other criteria, relating to low levels of human resource development and high degrees of economic vulnerability. See, generally, <http://
www.un.org/esa/policy/devplan/profi le/criteria.html> accessed 20 September 2010.
¹³ See WTO doc. WT/COMTD/SE/W/20, 9 February 2006 and Rashid S Kaukob, ‘Development Eff ects of the Doha Round on Small and Vulnerable Economies [SVEs]’ (CUTS CITEE Working Paper 1/2009) <http://www.cuts- citee.org/pdf/WP09- 01.pdf> accessed 20 September 2010.
¹4 Sarah Joseph, ‘Trade to Live or Live to Trade’ in Mashood Baderin and Robert McCorquodale (eds), Economic, Social and Cultural Rights in Action (Oxford University Press, Oxford, 2006) 393–
400. See also Ilan Kapoor, ‘Deliberative democracy and the WTO’ (2004) 11 Review of International Political Economy 522, 527.
¹5 Pascal Lamy, ‘It’s Time for a new “Geneva Consensus” on making trade work for development’
(Emile Noel Lecture New York University Law School, New York, 30 October 2006) esp at 3–4
<http://www.wto.org/english/news_e/sppl_e/sppl45_e.htm> accessed 19 September 2010.
Much permissible protectionism under WTO rules aff ects goods in which some developing States have a comparative advantage, particularly agricultural goods, which deprives developing States of external markets. At the same time their under-developed industries have been exposed to competition from the under-developed world.
Th e asymmetrical impact of international economic law is exacerbated by the poli-cies of the International Monetary Fund (IMF) and the World Bank, which are largely dictated by developed States, but which only bind their client borrowers, largely developing States.¹6 Th e political philosopher Professor Th omas Pogge has suggested, bluntly, that:
the design of the global institutional order refl ects the shared interests of the governments, corporations, and citizens of the affl uent countries more than the interest in global poverty avoidance, insofar as these interests confl ict.¹7
Th e implementation of WTO rules is not currently achieving optimal outcomes regarding promotion of the right to development and the alleviation of poverty because current rules are biased against the poorest States. At worst, unbalanced WTO rules could exacerbate underdevelopment and poverty in those States, and therefore prejudice the right to development as well as economic, social, and cul-tural rights in the poorest States. In this respect, the economists Joseph Stiglitz and Andrew Charlton report that, by some estimates, 48 LDCs have suff ered economic losses of around US$600 million per year as a result of the Uruguay Round.¹8
Th e unfairness in the current rules as well as Doha Round proposals is explained below.
Special and diff erential treatment
Th e development needs of the developing States (‘the South’) are blatantly more pressing than those of developed States (‘the North’). Th ese special needs are rec-ognized in the WTO and are served by numerous provisions allowing for ‘special and diff erential treatment’ (SDT). Th e need for SDT is referenced in the preamble to the Marrakesh Agreement which states:
Recognizes . . . that there is a need for positive eff orts designed to ensure that developing countries, and especially the least developed among them, secure a share in the growth of international trade commensurate with the needs of their economic development.
¹6 In late 2008, the IMF lent money to Iceland after the collapse of its banking system in the wake of the Great Financial Crisis, a rare instance of a developed State being subjected to IMF disciplines.
‘IMF approves $2.1bn Iceland loan’, BBC News (online at <http://news.bbc.co.uk/1/hi/7738874 .stm>), 20 November 2008. Greece received a loan in 2010. Helena Smith, ‘Greece activates €45bn EU/IMF loans’ Th e Guardian, 23 April 2010 <http://www.guardian.co.uk/business/2010/apr/23/
greece- activates- eu- imf- loans> accessed 22 September 2010.
¹7 Pogge, above n 6, 725.
¹8 Joseph E Stiglitz and Andrew Charlton, Fair Trade for All (Oxford University Press, New York, 2005) 47.
Most SDT provisions in WTO agreements permit longer timelines for compli-ance for developing nations.¹9 Furthermore, developing States have relatively high tariff bindings,²0 so their WTO obligations in respect of granting market access to goods are not generally as onerous as those of developed States.
‘Trade aid’, that is aid designed to alleviate the burdens of trade liberalization, is recognized as essential, and was formalized after the Singapore Ministerial meeting in 1996. Th e Singapore Plan of Action provided for the creation of the
‘Integrated Framework for Trade- Related Technical Assistance to Least Developed Countries’,²¹ which coordinates policy eff orts in this regard between the WTO and other international fi nancial and development agencies,²² and identifi es tech-nical assistance needs in relevant States. Since 2000, the Integrated Framework has presided over a trust fund to fi nance trade reform in LDCs.²³ However, there are concerns that trade aid has not added to the aid budgets of donor States: rather aid money is being redirected into trade aid leaving recipient States no better off in terms of total aid receipts.²4
SDT measures were authorized in the GATT after the Tokyo Round (1973–
1979) with the introduction of the ‘Enabling Clause’, which permits preferential market access for developing States and limits the expectations of reciprocity in negotiating rounds to levels ‘consistent with development needs’.²5 Th us, States (especially developed States) may off er preferential market access to developing States under the ‘General System of Preferences’ (GSP) without breaching the MFN principle. An example of a current GSP measure is the European Union’s
‘Everything but Arms’ (EBA) initiative, under which the EU imposes no duties or quotas on imports from LDCs apart from arms and armaments.²6 Th e EBA is a welcome departure from the normal practice of States excluding goods of the greatest interest to developing States from GSP schemes, which seriously under-mines their utility for GSP benefi ciaries. However, the eff ectiveness of the EBA
¹9 Bernard Hoekman, ‘Operationalizing the Concept of Policy Space in the WTO: Beyond Special and Diff erential Treatment’ (2005) 8 Journal of International Economic Law 405, 406;
J Hunter, ‘Broken Promises: Agriculture and Development in the WTO’ (2003) 4 Melbourne International Law Journal 299, 315.
²0 Each WTO Member commits to a schedule of ‘tariff bindings’ regarding named goods. A Member may not impose tariff s above those bound rates.
²¹ WTO, ‘Singapore Ministerial Declaration’ (Adopted on 13 December 1996), WTO doc. WT/
MIN(96)/14 (18 December 1996).
²² Th ose other agencies are the IMF, the International Trade Centre, UNCTAD, the UNDP, and the World Bank.
²³ Hunter, above n 19, 317.
²4 See Human Rights Council, ‘Th e Cotonou Partnership Agreement between the European Union (EU) and the African, Caribbean and Pacifi c Countries (ACP countries) (Report by Dr Maria van Reisen, High Level Task Force on the Right to Development), UN doc. A/HRC/12/Wg.2/TF/
CRP.3/Rev.1 (5 May 2009), para 59, commenting on the EU’s aid budget.
²5 Hoekman, above n 19, 405–6. Th e full name of the Enabling Clause is ‘Diff erential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries’, L/4903, GATT BISD 26S/203, 28 November 1979.
²6 See European Commission, ‘Everything but Arms’ (undated) <http://ec.europa.eu/trade/
wider- agenda/development/generalised- system- of- preferences/everything- but- arms/> accessed 20 September 2010. Full trade liberalization under the EBA (outside the arms fi eld) has only recently been completed, as liberalization for bananas, rice, and sugar was phased in over a decade.
(and other GSP schemes) is undermined by complex requirements regarding rules of origin, whereby all production must be verifi ed as taking place in an LDC, cre-ating administrative and compliance costs for LDCs.²7 While richer States are not required to implement the Enabling Clause by off ering preferential terms to poorer States, conditions apply if they do, such as the requirement of non- discriminatory implementation: preferences must be off ered on similar terms to similarly situated States and be based on objective criteria.²8
One problem with GSPs is that they are dependent upon the largesse of the importing State: their withdrawal can have sudden and dramatic impacts on the exporting State if it has become dependent on the maintenance of the GSP.
Th is situation can easily arise in developing economies with little diversifi cation.
Th erefore, GSP schemes can be manipulated to secure desirable outcomes for the importer rather than the intended benefi ciary, the exporter. For example, the US has threatened withdrawal of GSP preferences from States which do not respect higher standards of intellectual property protection than those mandated under TRIPS.²9 Th e vagaries of GSPs mean that they do not necessarily promote sustain-able economic policies. GSPs leave developed States as the drivers of trade policies in developing States, rather than developing States driving their own policies.³0
Th e most important SDT provisions are not compulsory: developed States do not have to off er trade aid nor do they have to off er preferential market access to developing States.³¹ Hortatory provisions which call for special treatment are far more common in WTO rules than the granting of enforceable advantages to developing States.³² Furthermore, most of the longer timelines granted under WTO agreements have expired, yet massive economic inequalities remain. Th e timelines have proven to be arbitrary: a better trigger for the end of SDT is the attainment of some level of development rather than the expiry of a particular month of December.³³ SDT provisions have not apparently accommodated the
‘real needs’ of developing States.³4
²7 See Olivier Cadot and Jaime de Melo, ‘Why OECD Countries should reform Rules of Origin’
[2008] 23 World Bank Research Observer 77. See also Paul Collier, Th e Bottom Billion (Oxford University Press, New York, 2008) 169; Stiglitz and Charlton, above n 18, 181.
²8 See European Communities—Tariff Preferences, WTO doc. WT/DS246/AB/R (7 April 2004) (Report of the Appellate Body), and discussion in J Harrison, ‘Incentives for Development: the EC’s Generalized System of Preferences, India’s WTO Challenge and Reform’ (2005) 42 Common Market Law Review 1663.
²9 Ken Shadlen, ‘Resources, Rules and international political economy: the politics of devel-opment in the WTO’ in Sarah Joseph, David Kinley, and Jeff Waincymer (eds), Th e World Trade Organization and Human Rights: Interdisciplinary Approaches (Edward Elgar, Cheltenham, 2009) 119, n 22.
³0 See also Stiglitz and Charlton, above n 18, 100.
³¹ J Michael Finger and Philip Schuler, ‘Implementation of Uruguay Round Commitments: the Development Challenge’ (World Bank policy research working paper no. 2215, September 1999) 5.
³² Anthony E Cassimatis, Human Rights Related Trade Measures under International Law (Martinus Nijhoff , Leiden, 2007) 405.
³³ See also Yong- Shik Lee, Reclaiming Development in the World Trading System (Cambridge University Press, Cambridge, 2006) 157.
³4 Th omas Cottier, ‘From Progressive Liberalization to Progressive Regulation’ (2006) 9 Journal of International Economic Law 779, 788. See also Joel Trachtman, ‘Legal Aspects of a Poverty Agenda
It is also worth noting that signifi cant pressure on developing States regarding trade liberalization has been generated outside the WTO. For example, many developing States have been forced by bodies such as the IMF and the World Bank, as part of loan conditions, to impose much lower tariff s than those to which they are bound under the WTO.³5 Th ese external pressures from inter-national fi nancial institutions pertain largely to developing States as they are by far the major clients of such institutions. Th e existence of such ‘arm- twisting’, even though the WTO is not responsible for it, undermines the effi cacy of the WTO’s SDT provisions and is probably not taken into suffi cient account in WTO negotiations.