Globalisation: Implications for development policy

Globalisation is resulting in the countries of the South losing control over their power to determine and shape the economic policies that are most conducive to their development. In the present era of 'free trade agreements', the process of the loss of such economic sovereignty is bound to accelerate unless the peoples and countries of the South realise this danger and organise themselves to fight for a fairer international economic order.

By Martin Khor

Globalisation and its inequities

THE links between globalisation and development are complex, involving classic and contemporary issues of political economy, political science and social development.

It is also useful to distinguish between various levels of causation and effect: international, regional, national and local.

A key aspect of the globalisation and development relationship is inequity: in power, capacity and resources to begin with; in the trading and economic relationship; in the distribution of gains and losses. The way the world economic and trading system is set up is very inequitable; the terms of trade, finance, investment and technology transfer are inequitable; the distribution of benefits or losses is inequitable. In general, the more powerful parties gain from international economic relations; other countries gain as a whole but by less; still other countries actually stand to lose. And, at least within the latter two categories of countries, the weaker sections of society suffer most from the costs of adjustment.

Some developing countries (especially in East and South-East Asia) have carved a niche for themselves in the world market, and through a combination of factors have managed to attain high and sustained growth. Some of that growth may have 'trickled down' to broad segments of the population, and thus facilitated the partial fulfilment of basic needs, which is an important component of human rights promotion. There are surely some lessons to be drawn from their experience. However most countries are still in the grip of poverty, and it is too simplistic to prescribe that they can develop well, if only they take the same route as those countries that have grown.

The process of globalisation is playing a more and more crucial role in the determination of the effects of trade, other external economic relations, national development strategies, and human rights fulfilment. Globalisation was a key factor in the colonial experience. In the post-colonial world of today, globalisation has become even more intense, with economic competition between companies and countries providing even more of an impulse to international relations and to domestic policies.

Due to inequities in global economic structures, the South is transferring several hundreds of billions of dollars of economic resources to the North annually in terms of terms of trade losses, debt servicing, profit outflows, etc. This drain is a major cause of lack of resources in the South, profoundly affecting the ability to meet basic needs and thus having a determining effect on human rights.

In the colonial period, the colonised territories had their economies distorted to serve the requirements of the colonial master countries. The former became economically dependent on the latter and on the international market. This dependence supplanted the previous basic self-sufficiency of many of the colonised territories, and took many forms, including dependence on investments, trade, finance and technology.

In the post-colonial period, despite political independence, most Third World countries are still economically dependent (and even more so) on Northern countries, their TNCs and institutions. Each form of dependence is associated with specific mechanisms whereby the Southern countries have substantial funds and economic resources transferred abroad. The South-to-North outflow of resources far outweighs the North-to-South 'aid' (a large part of which consists of loans that have to be repaid anyway).

A financial haemorrhage

Recent South-North outflows are very large, in fact constituting a financial haemorrhage, and at present probably exceeds US$500 billion annually. These outflows arise from the South's adverse position in the international structures of trade, finance, technology and distribution. A major thread in these developments is the increasing power of transnational companies, and their impact on national and local economies and politics. Through mergers and acquisitions, fewer and fewer of these TNCs now control a larger and larger share of the global market, whether in commodities, manufactures or services.

In most Third World countries, transnational companies have come to play an important and an increasing role. Some governments have imposed various forms of control and regulation over these companies, but in recent years many of these governments have been competing with one another to attract these foreign firms to invest in their countries. Some of the local business elite, and many small local firms, compete with the TNCs and their products; whilst others work in collaboration with and have themselves profited from these big companies. But irrespective of an individual government's or people's attitude and desired policies towards these companies, there are now limited options for Third World governments in determining national policies affecting different aspects of TNC behaviour. This is due to recent developments such as the structural adjustment programmes as well as the recently completed Uruguay Round.

In order to oil the wheels of their business machine and to get a competitive edge over rivals, TNCs routinely bribe governments. Many Southern governments are thus seen, correctly, as corrupt, and some political leaders have been known to amass up to several billion dollars in overseas bank accounts. But the phenomenon of politicians receiving bribes is by no means restricted to the South. Recent scandals in Italy, Japan, France and Britain reveal that Northern government leaders and politicians have also been heavily corrupted by their corporations. Corporate influence over state policies seems therefore to be a universal phenomenon.

'Globalisation' of national economies

Another facet of globalisation is the 'globalisation' of national economies. Firstly, Third World countries are more and more subject to the pulls of the world market economy. Secondly, crucial areas of economic policy making that once were under the domain of national governments in the South have increasingly come under the control of foreign (Northern) governments or of international financial, trade and economic organisations controlled by Northern governments and acting in favour of transnational companies and banks.

This globalisation of national economic decision-making has been boosted by structural adjustment programmes (SAPs) imposed by the World Bank and IMF on indebted Third World countries as a condition for debt rescheduling since the 1980's; and by the Uruguay Round agreement (under GATT auspices) that was signed in April 1994. The implementation of these agreements in future years will greatly extend and accelerate the globalisation process. As this process is dominated and dictated by major industrial countries, they are able to make use of it to further subject the functions of the Southern economies to the interests of the North.

Debt and structural adjustment as conduits for globalisation of macroeconomics

The World Bank and IMF have been used by Northern governments as instruments to maintain control of the world financial and economic system. The debt crisis was an opportunity for these institutions to impose SAPs on indebted developing countries that needed debt rescheduling. The debt crisis weakened the South's ability to press ahead with the New International Economic Order movement, and the Northern banks, backed up by their governments and the Bretton Woods institutions, mercilessly devised ways to extract as much debt repayment (with interest) as possible, instead of equitably sharing the loan losses between the creditors and borrowers.

Structural adjustment thus had two roles: to restructure the economies of developing countries so that they can better save foreign exchange to service their debts; and to alter the fundamental macroeconomic and eventually social policies of countries of the South into a single 'monocultural' laissez-faire economic model that would be compatible with the long-term requirements of the Northern-dominated world economy. The advent of the SAP approach coincided with the economic reforms of Reagan and Thatcher in the US and the UK, that included deregulation, privatisation, cutting welfare and social expenditures, tax reductions for the rich and businesses, a rolling back of the principle of state responsibility in providing for the needs and welfare of citizens. Financial stability (and minimising inflation) took precedence over providing employment in macro-economic priority setting.

Structural adjustment was the mechanism for transferring the Reagan-Thatcher economic model (which has had such damaging effect on the poorer and middle-class sections of the UK and US populations) to the South. SAPs forced Southern governments to reduce the role of the state in the economy and in social services, to cut public spending (especially in the so-called 'non-productive' social sectors such as health and education and for food subsidies), to retrench public-sector staff, impose a freeze on wages and free prices from controls, to deregulate, and to liberalise externally (emphasise exports rather than production for the local market, reduce import tariffs, and liberalise the terms of foreign investment).

Many countries undergoing SAPs have suffered a drastic decline in incomes, on average by 15% in most of Latin America and 30% in sub-Sahara Africa during the l980s. Investment per capita fell 75% in Africa and 40% in Latin America during the 1980s whilst in the 42 poorest countries health spending fell by over 50% and education spending by 25%. Infant and child mortality rates rose in many countries. During the 1980s the numbers of the absolute poor increased in developing countries as a whole and in Africa they also increased relative to the total population.

A brilliant analysis of the effects of SAPs has been made by the Canadian economist Michel Chossudovsky, who has conducted case studies on the impact of SAPs in many countries and who is one of the world's leading economic experts on SAPs. He concluded: 'Structural adjustment is conducive to a form of "economic genocide" which is carried out through the deliberate manipulation of market forces. When compared to genocide in various periods of colonial history, its impact is devastating. Structural adjustment programmes directly affect the livelihood of more than four billion people.

'The application of SAP in a large number of countries favours the "internationalisation" of macroeconomic policy under the direct control of the IMF and World Bank acting on behalf of powerful financial and political interests (for example, the Paris and London clubs, the G-7). This new form of economic and political domination (a form of "market colonialism") subordinates people and governments through the seemingly neutral interplay of market forces.

'The Washington-based international bureaucracy is entrusted by the international creditors and multinational corporations with the execution of a global economic design which affects the livelihood of more than 80% of the world's population. At no time in history has the free market, through the instruments of macro-economics operating at a world level, played such an important role in shaping the destiny of "sovereign" nations.

'The restructuring of the world economy under the guidance of the Washington-based financial institutions increasingly denies individual Third World countries the possibility of building a national economy; the internationalisation of economic policy transforms countries into open economic territories and national economies into "reserves" of cheap labour and natural resources. The application of the IMF economic medicine tends to depress world commodity prices further because it forces individual countries to gear simultaneously their national economies towards a shrinking world market.'

Human rights implications

The implications of SAPs for human rights have been studied in detail in another outstanding report prepared for the UN by the Commission on Human Rights Special Rapporteur, Danilo Turk. He notes that all states possess varying degrees of legal obligations to fulfil economic, social and cultural rights.

He adds: 'The increasing integration and internationalisation of the global economy, as well as political and social structures and processes, increase the importance of international cooperation and responsibility. Never before have the actions of State X had as much real or potential impact upon State Y than at present. This obvious yet under-emphasised fact, and in particular the relevance thereof to the realisation of economic, social and cultural rights within the human rights framework, must be consistently addressed.'

Turk's report provides details on how SAPs have led to the denial of development, and on the negative impact of adjustment on the realisation and enjoyment of selected economic, social and cultural rights. In particular, the report records how harm is done to the realisation of:

* the right to work;

* the right to food;

* the right to adequate housing;

* the right to health;

* the right to education; and

* the right to development.

Turk quotes the conclusions of the UN Global Consultation on the Realisation of the Right to Development as a Human Right: 'Transfer of control of resources located in developing countries to interests in the developed countries, which intensified in the 1980s, is another obstacle to development. Similarly, the growing burden of indebtedness and structural adjustment falls heaviest on the poorest and weakest sectors of society and has clear human rights implications.

'Failure to take into account the principles of the right to development in agreements between States and the World Bank, IMF and commercial banks with regard to external debt repayment and structural adjustment frustrates the realisation of the right to development and of all human rights. The prevailing terms of trade, monetary policy, and certain conditions tied to bilateral and multilateral aid, which are all perpetuated by the non-democratic decision-making processes of international economic, financial and trade institutions, also frustrate the full realisation of the right to development.'

The Uruguay Round, GATT/WTO and the new globalisation era of trade agreements

The vastly increased scope of 'free trade agreements' has tremendous significance for the shaping of national economic and social policies, for distribution concerns, and ultimately for national sovereignty and human rights. It is crucial to understand the meaning and mechanics of this new era of trade agreements.

The conclusion of the Uruguay Round (UR) was heralded in the mainstream global media as a major triumph for the international economy and a boon for all countries. It is clear however that the results are at best mixed for some developing countries and for many others (especially the poorer countries) the UR is likely to have an overall negative effect that will further drain their economic resources. For all South countries, the Round will also foreclose a wide range of development options.

In a sense, the UR complements what SAPs are achieving. The Round will lead to a very significant external liberalisation of many sectors and facets of the domestic economy of all the developing country members of GATT and its successor, the World Trade Organisation (WTO). SAPs affect about 80 indebted developing countries facing repayment problems. Should some of these countries get out of the debt crisis and no longer require SAP loans, or should there be a change of government or government policies, the SAP policies can be changed or reversed.

However, once a country's government signs the UR agreement and enters the WTO, that country is obliged to follow the WTO rules. These rules will severely restrict or constrain the possible policy options in many areas. Non-compliance of the rules can bring about heavy penalties and punishment, including retaliation through measures affecting trade and other activities.

Due to the 'single undertaking' nature of having to sign on to all the multilateral agreements of the Round, and to the 'integrated dispute settlement system', countries also risk having 'cross-sectoral retaliation'. At the extreme, non-compliance can also lead to expulsion, and thus the threat of discrimination or trade boycott from other countries. The WTO structure is thus very powerful in terms of obtaining compliance from member countries. It is the organisation with the strongest 'bite' in getting its legally-binding rules enforced. Thus, signing onto a WTO agreement is a very serious business, unlike signing onto a UN Declaration, for even a UN Declaration of over 100 heads of government has little enforcement possibility and becomes only a moral commitment.

It would be very difficult, if not impossible, for a Third World government to change the GATT/WTO rules, or to escape from compliance of obligations. The disciplines of GATT/WTO are legally binding on present and future governments. Once the WTO agreements come into force, it would thus be difficult for a present government to change its basic structural economic policies relating to foreign trade, investment, sectoral policies in services and agriculture, or technology policy (vis-a-vis intellectual property rights) and for a present opposition party with a different economic platform to implement such a programme (should it come to power) if this were to contradict the WTO rules.

An alternative would of course be to opt out of the multilateral system, but few present governments or political leaders have the strength or courage to think along these lines.

Major concessions

The Round is expected to bring some benefits to those developing countries able to take advantage of certain changes. A lowering of Northern countries' industrial tariffs may benefit those Southern countries with a manufacturing export capacity. The planned phasing out of the multifibre arrangement will have positive effects on textile-exporting Southern countries. And the reduction of agricultural subsidies would improve the market access of those Southern countries that export agricultural products. These benefits will mainly accrue to the better-off developing countries that already have an export capacity. The weaker countries (and especially the least developed countries) would not be able to benefit, or to benefit much, from these. Several countries (especially in Africa, but also including Indonesia) are projected to suffer absolute losses as a result from the Round agreements. The benefits will also take a long time (10 to 20 years) to come on stream, and the rate of benefits fall significantly short of what had been requested by the developing countries.

In exchange for these, the South as a whole has had to make major concessions, especially in agreeing to bring in the new issues of services, investment measures and intellectual property rights, into the GATT/WTO system.

For particular groups of Southern countries, the UR will also result in specific problems. For instance, the agriculture agreement could have severe negative effects on many Third World countries. Most of them (excepting the least developed countries) will also have to reduce domestic subsidies to farmers and reduce tariffs on imported food. Many farmers will have to compete with cheaper imports and may not survive. Agricultural liberalisation will also raise world food prices, which may benefit food exporters but about 100 Third World food importers will face a higher food import bill and are likely to be among the biggest UR losers.

The UR also for the first time brought services into GATT, and liberalisation of services will be an important part of the WTO's agenda. In many Third World countries, the services sector is relatively shielded and local enterprises in banking, insurance, trade, the media and professional services have been able to develop. It is feared that with liberalisation, the Northern TNCs involved in services will make further inroads and eventually dominate the sector.

The South's collective loss was most acutely felt in the agreement on trade related intellectual property rights (TRIPs) through which countries are obliged to introduced IPRs legislation similar to Northern standards. This will hinder Southern countries' indigenous technological development (we should note that the present industrial countries did not have patent or IPRs laws, or laws as strict as will now be imposed through TRIPs, during their industrialising period, and this enabled them to incorporate technology design originating from abroad in their local systems) and give rise to increasing technical payments such as royalties and license fees to TNCs owning most of the world's patents.

Most Third World countries have exempted agriculture, medicines and other essential products and processes from their national patent laws, but with the passage of TRIPs, everything is subject to IPRs unless explicitly exempted. The prices of medicines are expected to shoot up in many countries, and foreign drug sales will increase rapidly at the expense of local products.

Foreign investments

In the area of TRIMs (investment measures), the most important point is that national policies relating to foreign investments have also now begun to come under the ambit of the GATT/WTO system. Originally the Northern countries proposed that foreign companies be given an automatic 'right to establishment' or 'commercial presence'. This would have given rights to foreign companies that were attained by the colonisers through war and bloodshed in the colonial era. Eventually the objections of some developing countries prevailed.

In the TRIMs agreement, 'investment measures' such as local content (obliging foreign firms to use at least a specified minimal amount of local inputs) will be phased out. This of course has serious enough implications in terms of a probable increase in foreign control of the national economy.

And once TRIMs is firmly set up within the WTO framework, the Northern countries will no doubt attempt to increase further the rights of TNCs, for instance by insisting again on the 'right to establishment'. And what was not attained in the UR may be sought to be attained through regional agreements, for example APEC and NAFTA (and its future extension in South America).

Recently, some developed countries led by the EU and including Canada and Australia, initiated moves to bring a 'multilateral investment agreement'.

The implications of GATT/WTO for human rights has been studied by Gurdial Singh Nijar, a senior Malaysian lawyer. He argues that the GATT treaty impairs a crucial facet of human rights, i.e. the sovereign right of a Third World state and its people to decide upon and pursue policies consistent with its stage of development. The Right to Development, adopted by the UN General Assembly in 1986, embraces the right of peoples to freely 'develop their political status and to pursue their economic, social and cultural development' and their right to 'full and complete sovereignty over all their wealth and natural resources'. Moreover, all efforts at the international level to promote and protect human rights and fundamental freedoms should be 'accompanied by efforts to establish a new international economic order'.

Nijar also argues that the agriculture treaty threatens national food security (and thus impairs the right to food) and that the TRIPs agreement, by opening the door to patenting of life-forms (including genetic materials of crops developed by Third World farmers and of medicinal plants used by indigenous peoples), violates the economic and cultural rights of Third World communities.

The threat of 'trade-related issues' in trade agreements

If the UR has gloomy implications, the post-UR scenario will be even gloomier unless Third World peoples and policy-makers make an effort to fight back in the future WTO negotiations. Northern government plans to link trade (including trade measures and sanctions) to the environment and to labour standards in a manner that is likely to be inequitable and thus harmful to the South are already well advanced. There will also likely be attempts to link even more issues to trade measures, possibly including 'trade-related women's rights', 'trade-related judicial systems' etc.

The linking of issues to the possibility of sanctions under the clever device of attaching a 'trade-related' prefix to the chosen topics has been successfully used in injecting services, IPRs and investments into GATT/WTO. This device is very likely to be used in future efforts either to further liberalise Third World economies or to reduce their competitiveness in the scramble for world market shares. The aim also is to use the GATT instrument to shift a great portion of the burden of future global economic adjustment (for instance, because of environmental imperatives) to the South, which presently has a weak voice in the GATT/WTO negotiating forum. Indeed it is precisely because the South is so weak in the GATT/WTO arena, coupled with the fact that GATT/WTO carries the power of 'bite' in the form of trade retaliation mechanisms, that this institution has been chosen as a vehicle to institute reforms favourable to the North.

It is imperative that peoples' organisations and political leaders in the South, and their friends in the North, realise the dangers and seriously organise among themselves to match the negotiating capacities of the North. Otherwise, as in the Uruguay Round, our participation in the decisions of the WTO may be limited, as it was in the Uruguay Round, during which one Third World Ambassador likened the South to the chicken that was given this choice by the chef: 'With which sauce would you like to be eaten?'

The new threat of a foreign investment treaty

Northern countries are now moving to start a new 'Round' at the WTO, through introducing new issues such as a foreign investment regime, trade and labour standards, and competition policy. They hope to get the first WTO Ministerial Meeting in Singapore in December 1996 to adopt a resolution that some of these issues be discussed in working groups, as a prelude to negotiating new treaties or agreements.

If political leaders and trade officials of the Southern countries do not take note of these developments and actively counter them, they may eventually be pressurised to accept new international economic rules that are even more stacked against them than those that already exist.

Most countries are already finding it a great strain to adjust to the Uruguay Round agreements which require major changes to many domestic laws and policies. Yet even before the implications of the Uruguay Round can be properly absorbed or even understood, the Northern countries are pushing for new issues to be put on the agenda for negotiations.

Among the issues the industrial countries want to table are foreign investment, labour standards, trade and environment and competition policy. A major advocate for these issues is Sir Leon Brittan, the European Trade Commissioner. He said the WTO's work programme should go beyond the UR and encompass the above issues.

Sir Brittan stressed that investment was the single most important new item for the WTO and the industrialised countries grouped in the Organisation for Economic Cooperation and Development (OECD) had agreed that the issue should be brought to the WTO.

So far, developing countries have done very little thinking on this issue, and have not adequately responded to the push being given by the European Union on it.

In March 1995, the EU held a meeting on the subject for Third World trade diplomats in Geneva. In an informal paper, it proposed the setting up in the WTO of a multilateral agreement on investments that would give foreign companies the right to enter and establish themselves in any sector of the economy and in all member countries of the WTO.

Further, foreign companies must be given 'national treatment', meaning that there cannot be any measures that favour local firms or discriminate against foreign ones. Restrictions placed on foreigners or foreign companies, for instance in opening branches, buying property, or having limits on equity ownership or profit repatriation, would no longer be allowed.

Although the EU has been the most active on this issue, they are supported by Canada and Australia. The United States and Japan may also have similar views, as they too were pushing for such rules to be introduced during the long UR negotiations. In the end, the rules on investments per se were rejected on the insistence of developing countries, and only rules on 'trade-related investment measures' were accepted in an agreement.

The rules which are now being proposed by the EU have thus been resurrected from the UR negotiations of the past, where they had been rejected as being not relevant to the GATT's mandate.

Beyond WTO's legitimate concerns

And now the newly proposed rules still go far beyond the legitimate concerns of the WTO, which are supposed to be restricted to the trade implications of investment measures. Instead of sticking to 'trade-related' investment measures (for which there already is an agreement in the WTO), the EU proposal would extend the scope of the issue to national policies, rules and operations of foreign investments per se and as a whole.

The WTO would no longer be a 'trade organisation', but be an organisation that regulates investments as well.

This would of course be a very major extension of the WTO's powers. It would also mean the extension and application of the WTO's principles and its system of dispute settlement (including the use of trade sanctions and trade retaliation) to investment policy. This would have the most profound effects on the behaviour, operations and effects of foreign investments worldwide, and on each country. Transnational companies would have the greatest freedom and rights to conduct business all over the world, free from the many government regulations they now face.

On the reverse side, it would mean that governments would no longer have the right or the power to draw up their own basic policies or laws regulating the entry, behaviour and operations of foreign enterprises in their economies. Existing national laws and policies that now place restrictions on foreigners would have to be cancelled or altered to fit the new multilateral investment treaty.

This would of course have serious implications, since most developing countries now have policies that deliberately seek to promote domestic companies and to protect citizens from excessive control of the economy by foreign firms.

In Malaysia, for instance, the New Economic Policy (NEP) was formulated to increase the share of Malaysians in equity ownership in the modern sectors. The NEP requires that citizens should own a certain percentage of the shares of companies and restricts the percentage of equity that foreigners can own in various sectors.

In 1970, foreigners owned 70% of the total share equity. Today the share has fallen to probably about 30%, whilst the share of the indigenous Malay community has risen from two to around 20-30%.

There are regulations that require foreign banks and insurance companies to incorporate themselves as local companies; that restrict the ownership by foreigners of houses and land; that limit the scope of operations of foreign banks; and that protect the business of local businesses and professions. It has been argued that without such 'social engineering' policies, Malaysia would not have enjoyed the political stability nor the building up of the domestic sector, that underlie the country's socio-economic development.

The EU proposals on setting up international investment rules in the WTO would have the most serious implications for countries which have found it necessary to regulate foreign investments and to promote the growth of local firms.

This is not simply a 'technical trade issue' that can be left to trade officials on the negotiating field alone to handle. It is primarily an issue with great economic, social and therefore political significance, as it will have such an important bearing on economic sovereignty; ownership patterns; the survival of local enterprises, businesses and farms; employment prospects; as well as social and cultural life.

In putting forward their proposals, the North is arguing that such rules are the best way to promote the entry of foreign investments into the South. Most developing countries indeed are trying their best to attract foreign investors. The issue however is not the desirability or otherwise of foreign investments.

Critical minimal control of economy

It is about the right of governments and peoples to choose the pattern and ownership of investments they want for their country, and in that context, the type of foreign investment they welcome, in which sector, and under what conditions. The power to regulate foreign investment, to obtain better terms and benefits from them, and the right to enact policies to aid the weaker local firms is essential to any country that wants to have a critical minimal degree of control over its economy and social life.

It should come as no surprise why the industrialised countries are piling on the pressure on this issue. They would like their companies to be able to operate much more freely in developing countries, and thus are asking that current restrictions and regulations be removed. Gaining access to the resources and markets of the South, and to the right to invest and operate in the developing countries, has been a major strategic objective of the governments and companies of the North.

It was this objective that largely prompted the takeover of the Third World's territories in the colonial era. The Opium Wars in China for instance were sparked by British insistence on the right to sell opium to China; they led to the progressive opening up of China not only to trade but to investment rights to imperial powers and to loss of territory, for instance Hong Kong. The Chinese termed the 'peace agreements' of the Opium Wars as 'the unequal treaties.'

It was the need to recapture control over resources, and to have national policies in favour of domestic rather than foreign interests, that spurred the anti-colonial struggles that finally led most colonies to win independence. It would thus be a great irony if the ex-colonial master countries were to succeed yet again to gain rights for their companies to establish themselves and dominate the economies of the former colonies, this time not through military conquest but through the device of a treaty to be agreed to by all parties. This would be the modern version of the 'unequal treaties', with possibly the same disastrous effects on many countries.

For it is likely that if governments are not allowed the powers to impose regulations on foreign companies, or to give a helping hand to domestic companies, then the bigger foreign firms will overcome the local ones and win a greater and greater share of the domestic as well as international markets. The irony would be all the greater should the developing countries agree to such rules without clearly understanding their full significance.

There is a danger of this happening should the social groups and political leaders not be alerted to the rapid developments on this issue in the WTO. The Northern countries have already long prepared for their investment initiative, and have given notice of their intentions. The Southern countries have to study the proposals in full and act together to respond to them as soon as possible. Development support groups in the North must also study the issue and influence their governments not to proceed with their initiatives for this investment agreement.

Given the already very heavy burden of adjusting to the Uruguay Round agreements, the developing countries have few resources left over to take on new issues on the trade agenda, especially since these can have such significant effects on their economies. They should thus argue against the adoption of a new agenda of negotiations, and insist instead that the Northern countries help them to overcome problems that may now arise in adjusting their national policies to the Uruguay Round agreements.

The above is an extract from a paper delivered by the writer at the 8th General Conference of the European Association of Development Research and Training Institutes at Vienna on 11-14 September 1996. Martin Khor is the Director of Third World Network.