Symposia, jamboree, or orchestrated propaganda ?
by Chakravarthi Raghavan
Geneva, 12 March -- The World Trade Organization (WTO) is playing host next week for two symposia, billed for sometime as a major initiative for "dialogue with civil society", but which appears to be more like a jamboree (with over 500 official and NGO participants) than an occasion for serious discussions.
The word 'symposium' came into English from Greek, and means "a drinking party... with conversations etc after banquet". From this, it has come to be used to describe a "philosophical or other friendly discussion; set of contributions on one subject from various authors and points of view."
Organised as an initiative of the WTO Director-General, there will be one symposium on trade and environment (15-16 March) and a second on trade and development (17-18 March), with speakers and discussants drawn from mostly neo-liberal "establishment" figures, but with a small sprinkling of dissenters among discussants.
Symposia by definition do not involve any conclusions. But the programme for the two show that the WTO head will make some "closing remarks" that could be presented as the conclusions.
The environment symposium is an outcome of an initiative of the EC Trade Commissioner Sir Leon Brittan, who called for a ministerial meeting on trade and environment, to resolve the trade/environment conflicts. But there was much demurral, and it became a high-level symposium.
Both the WTO head, and the EC and the US, have been trying to "coopt" the NGOs by talk of transparency and enabling them to get documents more easily, and to enable them to present briefs to dispute settlement panels and observe these proceedings.
By and large, most developing countries are not favourable to this.
But much more, a large section of NGOs from the South, as well as the development groups of the North, have rejected these facades of transparency, insisting on real transparency at the WTO: transparency of participation and decision-making process to all WTO member governments (and not informal decisions among a few presented and quickly adopted by consensus in formal meetings).
And these NGOs are also coalescing around the demand that the WTO being a formal international treaty, any moves for changes to existing rules, agreements and understandings, should be publicly notified and tabled six months in advance -- so that NGOs and business community in countries could know and study proposals in advance, and discuss and influence their governments and their negotiating stands and positions.
They also demand properly maintained minutes of meetings, and their prompt publication, to enable governments and civil society of each country to know which delegates and countries attended and were present (and acquiesced or supported) when the socalled consensus decisions were taken, so that governments can be held accountable.
This they argue is now very much important than in the days of the old GATT, dealing only with border trade concessions in goods. Now that the WTO has entered the domestic jurisdictions of economic policy management and autonomy of countries, the public of each country have to know how their governments behaved or functioned, so that they can be held accountable.
When the WTO head, Mr. Renato Ruggiero, brought up the idea of the high-level meet on trade and environment at the General Council, Egypt called for a Trade and Development symposium to focus on the various concerns of developing countries who are being increasingly marginalised and losing, in the WTO liberalization process.
But the focus of the Trade and Development symposium has been changed to promote the view that "trade liberalisation" produces growth and development (viewed synonymously with growth). The focus appears to be more in line with the view that the US wants to promote -- judged by the statements of the USTR, Mrs. Charlene Barshevsky (including that in Febraury at Davos symposium about what the symposium should do), namely that developing countries should liberalise their trade sectors in goods and services fast, and this will benefit them.
At the beginning of his term, at UNCTAD-IX in Midrand (South Africa) early in 1996, Mr. Ruggiero was complacent enough to tell a high-level panel of heads of governments and ministers that his job and that of the WTO was only to reward the most efficient producers, and that it was for others to take care of the distributional consequences and issues of equity. He was also an enthusiastic promoter of the "Globalization" thesis - telling developing countries that it was a fast track train and if they don't get on it, they would be left behind. This provoked a controversy and a response from critics that he was "inviting" developing countries standing on station platforms to jump on to a fast-track train on a middle track, and speeding to unknown destinations, and the chances were that those who attempt to jump on board this fast moving train would fall and be killed.
And in the early stages of the financial crisis in Asia, in promoting financial services liberalization accord, he declared that the WTO was not the problem but a solution to the crisis. And some trade diplomats from the South repeated this slogan without any empirical evidence, just as they are now repeating the slogan that foreign investment will result in growth and development.
More recently, with growing opposition from civil society against this "globalization" and the IMF/World Bank/WTO policies and ideologies, he has been talking about "managing globalization", and establishing not a new financial architecture, but a new architecture for the global economy (with the WTO, IMF and World Bank managing it).
And Venezuela and some others even have come up with the view that there is nothing wrong with WTO policies or globalization, and all that is required is public relations "sell" through a PR consultant or firm.
And the WTO head, who has been talking of the WTO as "my organization", and for whom the two symposia will be a swan song, has been trying to orchestrate a view (from invited speakers and WTO members, particularly of the developing world) to project a "positive" view of the WTO, and not on the negative effects or talk of "losers" in the WTO process.
In a discussion with the informal developing country group earlier this week, Ruggiero reportedly gave a pep talk to developing country diplomats asking them to present only the positive aspects of the WTO/Uruguay round Accords and effects, and not the negative side they have brought up in the preparatory process. And when some diplomats demurred, and said they would highlight both positive aspects and the many negative effects on their countries and need for changes, Ruggiero reportedly took on a hectoring tone warning them that the NGO critics would use it to damage the WTO. This led reportedly to some heated exchanges with some ambassadors.
Though the WTO, the IMF and the World Bank promote the neo-liberal view about trade liberalization and its producing growth and development, there is little conclusive and empirical evidence on this score, either historically or in more recent neo-liberal era since 1980s.
The more recent anecdotal evidence everywhere seems to point to benefit for the few, and marginalisation for the large majority everywhere.
Historically, growth and investment (from domestic savings and capital accumulation) and technical change came first and trade followed. And there is little support for the big bang view of trade liberalization advocated by the neo-liberal economists and trade policy advocates.
As a footnote in the UN's Economic Survey of Europe (1989-1990) when arguing against the "big bang" approach in Russia and eastern Europe, noted, "Adam Smith accepted that the sudden abolition of trade barriers could lead to serious unemployment especially if labour mobility was low. 'Humanity may in this case require that the freedom of trade should be restored only by slow gradations, and with a good deal of reserve and circumspection' (Adam Smith, Wealth of Nations, ed. by Campbell and Skinner, Oxford, Vol 1, p 469). Smith also considered the effect on the owner of specific capital goods: 'The equitable regard...to his interest requires that changes of this kind should never be introduced suddenly, but slowly, gradually, and after a very long warning' (Smith, ibid p 471). Ricardo agreed with this approach and recommended that Britain's corn law duties should be phased out over a ten-year period from 1846 (see M. Panic, National Management of International Economy, 1988, p 124)."
And free trade ideologue, Prof Jagdish Bhagwati (who is no longer popular at the WTO, because of such views and his opposition to capital account liberalization, and more recently against tightening TRIPs), in a letter to the Financial Times (over the banana dispute) criticising the US unilateralism and as a nation believing in the law of the jungle, not the rule of law, has said: "Nor can economists forget that, while lawyers and business lobbies prefer tight deadlines for both decisions and implementation, the economic effect can be disastrous in imposing the supreme folly of 'shock therapy' on countries by legal means." Strongly castigating the leadership of the WTO, IMF and the World Bank with compensation and adjustment programmes for affected countries, Bhagwati adds: "Nothing in the doctrine of free trade requires that we ride rough-shod, at breakneck speed and with reckless regard, over the economies of the small and poor nations."
Free Trade theories, and trade based on them, at best can claim to redistribute the benefits of trade from one class of population or sector of activity to others. This may, under stipulated conditions, lead to savings, investment and perhaps growth and development. But it is not automatic or causative.
Internationally, while trade among economies similarly situated, and more particularly intra-industry trade (of same or similar products, competing on basis of price, brand name etc), has shown some correlative or associative growth results, there is no empirical evidence of a causative link between trade liberalisation and sustained economic growth and development. And the efficiency and resource allocation gains claimed for free trade are based on a presumption of perfect markets, which exist only in economic textbooks, but nowhere in the real world.
And unfortunately, in economics as a science, and among neo-liberal economists as a profession, there has been a growing tendency to ignore critiques, but cite only each other and the conclusions of one based on assumptions by the other, with repeated assertions of assumptions becoming facts.
Even Anne Kruger, the former World Bank Chief economist and strong advocate of neo-liberal economics and trade liberalization, in her article in the Journal of Economics (Sep 1998) says that discussing trade liberalisation is to address the removal or at least reduction of incentives for import-substitution (IS) industrialization.
"The reason why trade liberalization delivers more rapid growth," she says "is that IS (import-substitution strategy), over time, becomes a failed strategy... Trade liberalization undertaken from a period of declining growth rates or even falling real GDP can normally lead to a period of growth above the rates previously realized." There are always benefits to trade liberalization... but clearly one could not expect to achieve an outer-oriented trade regime, simply by replacing quotas with tariffs or increasing the size of quotas. An outer-oriented trade strategy, as she defines it, is one in which the development strategy itself is based on the growth of domestic economic activity in response to producer incentives that closely mirrors international prices."
This envisages, not a liberal or laissez faire state, but one intervening on behalf of capital against other sections of society.
Also, as the World Bank Chief economist, Kruger pushed her policies on developing countries via the Bank's structural reform programmes, which have failed to produce any sustainable growth or development in the countries of the South, and is seen by a growing volume of critics (to whom the Bank is currently paying heed) to be a flawed development strategy.
Writing in the same journal, Jose Antonio Ocampo (now ECLAC's executive director) and Lance Taylor, argue that microeconomically, the case for liberalisation is dubious under increasing returns to scale.
Distributional effects of commercial policy changes can be regressive and large. Ocampo and Taylor note that when neoclassical economists turned their attention to problems of development in the late 1960s, they were led by trade specialists. The analysis of trade interventions has been central to the debate ever since, overwhelming discussion of the production-related factors. With the World Bank investing heavily in economic research, and with methodologies relying on cross-country regression analysis and computable general equilibrium (CGE) models, very little effort was devoted to historical and institutional studies of specific countries, undertaken by people with enough local knowledge to know what they are talking about, complain Ocampo and Taylor.
By now there are scores, if not hundreds of econometric studies of impacts of exports on economic growth, the relationships between 'openness' (defined in terms of trade shares or prevalence of protection) and growth and, in CGE models, the growth and output effects of specific policy changes. The regression equations typically leave a substantial part of total variance unexplained, so that even if they point to 'modest' positive effects of liberalization or openness on growth, they cannot possibly hold good for all the countries included in the sample. For this and similar reasons, Ocampo and Taylor note, Sebastian Edwards (1993), Dan Rodrik (1995) and Gerry Helleiner (1995) broadly conclude that trade policy changes do not matter very much. Helleiner argues that a stable and preferably weak exchange rate is the best single explanation for successful trade performance in the medium term, and an overly complex set of incentives can frustrate even the most entrepreneurial of potential traders.
David Greenaway, Wyn Morgan and Peter Wright, writing a third article in the same issue of Journal of Economics, note that in contrasting the dynamic performance of East Asian economies with that of sub-Saharan Africa, a number of analysts have identified "openness to international trade" as one common factor in East Asia, and that growth of exports and growth of GDP appear to be highly correlated, even if causality is sometimes in doubt and on average, and over times, countries with a more open trade orientation appear to do better. This proposition, the three authors note, has underpinned an extraordinary wave of unilateral trade reform in developing countries - 90 countries over the last 20 years having initiated some kind of reform or another, some voluntary and most initiated by the Bretton Woods Institutions.
The basic economic rationale is straightforward: if there appears to be a long-term association between performance and openness and if an economy is presently relatively closed, then liberalisation is a necessary bridge to become more open. But has it worked? Has liberalization of the World Bank proved to be a successful bridge? Has it led to growth?
Examining the empirical evidence and analysing the various studies, Greenaway, Morgan and Wright say that despite wide range of techniques used, the broad country coverage and the wide range of liberalization experiences examined, only one study (by Papageorgios, Mciahely and Choksi, 1991) is very supportive of the view that liberalization is a panacea that results in more rapid export growth, more rapid growth of real GDP, and without serious transitional costs of unemployment or government's fiscal position. This study has been challenged by a number of others.
All the remaining studies suggest:
First, liberalisation and reform programmes more generally tend to be associated with a fairly rapid improvement in current account of the BOP and with an improvement in growth rates of real exports. Second, the impact on growth is more ambiguous and/or more complicated. Both positive and negative growth rates have been found. Third, a proportion of countries that have undergone adjustment show a subsequent improvement in investment. "However, many appear to have experienced an investment slump."
In their conclusion, they also state: "Perhaps, the most important lesson of our results is that in evaluating the impact of trade policy and changes in trade policy on growth, it is vitally not to equate liberalization with openness and equally vital to remember that openness is a function of many factors, not just liberalization." (SUNS4394)
The above article was originally published in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.
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