The litigious of damming in the Doha Round: the economic policy of multilateral trading system

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1 The litigious of damming in the Doha Round: the economic policy of multilateral trading system Abstract: Sérgio Leusin Jr 1 Through this brief reading of the evolution of the multilateral trading system it is clear that the exercise of power is monopolized by some countries in this forum. As much as it has seen a great evolution in action, and the role that developing countries played in the system, their demands insist on not be met. Should be assessed, although the subjects indicated that affect the interests of developing countries, there is, on the other hand, a unified position of these countries. And perhaps this is the great challenge for the developing countries in the next rounds. Key-Words: WTO, multilateral negotiations, trade, decision-making and tariff negotiations, World Trade System. The ongoing transformation of political reality in the international order has been accelerated by important economic phenomena. It is probably the emergence of some countries and their resulting increased political influence, associated with the relative economic slowdown of advanced economies such as the US and certain European Union countries that will strengthen themultipolarity. Although countriessuch as the BRICs represent fairly well a group of countries that have been highlighted in the economic field, albeit still weak in the political one, recent events have demonstrated the intention of these countries to make political use of their economic prestige. This research presents itself timely because there are great uncertainties about current world politics and economics as well as misgivings as to whether the rise of multilateralism or the fall ofunilateralism will be seen. In times like these the rise of the protectionism is more probable, or at least, the disposition of some countries togive up the historical trade concessions is lesser. And among many questions about the future of the multilateral trading system, there is maybe one sure thing, which is the need for all developed and developing countries to be willing to cede. This research is important because it highlights the real involvement of emerging countries in current circumstances that will facilitate the identification of political vectors in the next round of the WTO. 1 SérgioLeusinJúnior is a PhD candidate in the International Strategic Studies Doctoral Program (PPGEEI) of the Federal University of Rio Grande do Sul (UFRGS). leusin01@gmail.com 550

2 1. The International Trade Organization (ITO): the genesis of the Multilateral Trading System (MTS) and the arena of discussion between developed and developing countries It is possible thatthe (re)opening of the Multilateral Trading System was,paradoxically, the protectionist experience of The Tariff Act of 1930, when President Hoover signed the infamous Smoot- Hawley Tariff,which increased nearly 900 American import duties to the highest level in American history.bhagwati (1988) describes this policy in the following terms - the US-legislated Smoot-Hawley tariff had been the most visible and dramatic act of anti-trade folly (Bhagwati 1988, 22). According tomcdonald et al. (1997) and Irwin et al. (2008) the foreign retaliation for Smoot-Hawley was widespread, reaching countries such as Spain, Italy, Switzerland,United Kingdom and its dominions (principally Australia, Canada, New Zealand, and South Africa).As stated byeichengreen (1986) there isan intimate connection between the Great Depression and the Smoot-Hawley Tariff. The Economist (2008) asserted that the Smoot-Hawley tariff was one of the principal causes for the deepening of the Depression 2, and the worldwide protectionism deriving from this law took decades to dismantle. Irwin et al. (2008) made a good summary of the economic and political consequences of the Smoot-Hawley tariff: The outcome of these protectionist and discriminatory trade policies was not just a contraction of world trade, but a severe breakdown in the multilateral trade and payments system that the world economy had enjoyed prior to World War I and had started to revive in the late 1920s. Official conferences and multilateral meetings, notably the World Economic Conference in 1933, offered pronouncements to resist protectionism, but failed to stem the spread of inward-looking antitrade economic policies. The economic distress of the decade also had political consequences, undermining faith in democratic governments to manage their economies and hence abetting a turn to more authoritarian regimes in Germany and elsewhere (Irwin et al. 2008, 07). However, the initiative to begin to try reversing this detrimental protectionism worldwide was also American.Thus,for the first time in its history, the United States began to take a serious and active role in reducing trade barriers and expanding world trade in cooperation with other countries.given the Roosevelt administration s recognition that they hadno political backing to undertake a unilateral reduction in the midst of the depression, they sought to negotiate bilateral trade agreements in concert with others to reduce tariffs.bearing that in mind, an important tool for this bilateral tariff reduction was 2 Irwin (1998) does not agree with this argument, according to the author there are no strong theoretical or empirical grounds for maintaining that higher average tariffs led to business cycle downturns (Irwin 1998, 335). 551

3 the approval of the American Congress of Reciprocal Trade Agreements Act (RTAA) of , which allowed the President to reduce tariffs by up to 50 percent adopting the unconditional 4 most-favorednation (MFN) clause (Irwin et al 2008). Between 1934 and 1940, the U.S. signed agreements under the RTAA with 21 countries that accounted for over 60 percent of U.S. trade (Irwin 1998). Kirshner (2009) argues that the RTAA revolutionized U.S. trade policy and the global economic order, for Haggard (1988) the RTAA marked an important institutional innovation in American trade policy and would be the institutional foundations of U.S. hegemony. However, thiskind of negotiation bilateral negotiations- had limits because, for example, if the U.S. negotiated tariff reduction with, say, country A, the other countries would also take advantage of the tariff reduction without having participated in the process. Incidentally, these countries, which did not participate in the negotiation, are known as free-riders. This conjuncture showed for all countries that tariff reduction needed to be done with the participation of many countries, that is to say, it made it clear that the best way of doing negotiations was the multilateral way of negotiations. Therefore, it can be said that this North-American initiative was the responsible for(re)building the spirit of the multilateral trading system. The path to the creation of the International Trade Organization (ITO) started with the end of the Second World War. In the same time that the World Bank and the International Monetary Fund (IMF) were being created, there was the intention to create a similar institution in order to organize world trade. Since then successive multilateral conferenceshave taken place and the outcome of this process was the Havana Charter, the draft agreement for the creation of the ITO. However, the ITO never came into being, since the agreement required ratification in the U.S. Congress, whichdid nothappen. According tonarlikar (2005), the reason forthe non-ratification by Washington was related to internal changes in the U.S., due to the fact that the vectors of the ITO were created with the bigger support from the Democratic Party.Besides, at the end of the process the Republican Congress (that at that moment was the majority party), showed signs that it was extremely unlikely that the U.S. would ratify the Havana Charter.The author made a brief examination of the content of the Havana Charter, which is enough to understand the 3 The RTAA of 1934 needed to be renewed ten years later, and although the Republicans rejected the RTAA in 1934, the consequences of Smoot-Hawley may have altered their positioning in 1945, when the act was renewed. 4 In 1923 the U.S. trade policy had adopted the unconditional 4 most-favored-nation, before this, the United States had adhered to a conditional MFN policy, in which U.S. tariff concessions to one country would not be extended to others unless a reciprocal reduction was offered (Irwin 1998, 333). 552

4 seeds of its failure, principally because of the far reach of its mandate. 5 Therefore, in 1950, Democratic President Truman announced that he would not submit the Havana Charter to the Congress for ratification. Another possible interpretation of the reason for the U.S. non-ratification of the Charter is given by Thorstensen (2001), that is to say, the Americans feared the loss of their sovereignty in the commercial area. At the same time that the Havana Charter was elaborated, the U.S. sought to ensure the early gains of the tariff reduction accomplished during the negotiations of the ITO. The Americans chose this way because they wereaware of thedifficulty ofthe Havana Charter to be approved by the Congress, but a trade agreement could be negotiated and implemented more easily under the authority granted to the Executive by the RTAA (Narlikar, 2005). The outcome of this American strategy was the General Agreement on Tariffs and Trade (GATT), at the Geneva Conference in The representation of the 23 countries at the Geneva Conference was less than the 53 countries that were presented in the Havana Charter, forthis reason it was called the "rich man's club" or industrial nations club by developing countries. However, not only developing countries demonstrated dissatisfaction with this news, Irwin et al (2008) remarked that the British were sorely disappointed about this. On this event Narlikar (2005) remarked three different perspectives about how theito should be. The Americans thoughtthat free-trade was the remedy for unemployment and economic instability.the British, on the other hand, believedthat the agreement should have some exceptions to the principles of free-trade, such as the inclusion of the system of imperial preferences, and provide escape clauses for countries experiencing difficulties in balance of payment. Despite these two different understandings, the negotiation of the Havana Charter was being builtwith the approval of theamericans and the British. On the other hand, developing countries led by Brazil, Chile and India broke the consensus and demanded that the Havana Charter included, asnarlikar (2005) describes, exceptions that allowed them to impose special quantitative and other restrictions to facilitate their economic development (Narlikar 2005, 13).At that time, developing countries were the biggest defenders of the infant-industry argument 6. According totoye (2003), the failure of the creation of the ITO could be seen as a missed opportunity. Not only due to the weak representativeness of the GATT, but also because of the fact that the Havana 5 For example, according Narlikar (2005): hence, besides covering the obvious area ofcommercial policy, the 106 articles of the ITO extended to areas ofemployment, economic development, restrictive business practices,and commodity agreements. It gave recognition to the importanceof ensuring fair labour standards, and also incorporated provisionsthat allowed governments to address their development andhumanitarian concerns (Narlikar 2005, 12). 6 Infant Industry Argument refers to an argument in favor of protecting the domestic industries through government backing, help, and intervention. For more details about Infant Industry argument see Xu (2006) and Irwin (2000). 553

5 charter s exceptions to free-trade rules, especially those made in the interests of the economic development of poorer countries, might have helped to reduce global inequalities (Toye 2003, 283). The author thinks that it is important as wellto have in mind the Cold War context when it comes to analyzing the reasons why the ITO did not work.this point of view can really make sense if one is to consider the great number of new independent countries willing to take part in the negotiations of the Havana Charter, and the consequences of the pressure of these countries to shape the ITO in accordancewith their needs. In fact, if the U.S.really wanted to shape the ITO according to their understandings about how it should be a multilateral trading system, they would have ended up internationally isolated. Clearly this was not the American objective, given that the historical post-war context had confirmed the U.S. as the world's leading exporter. It is possible that for this reason the U.S. decided to accept the system of imperial preferences demanded by the British, according to Miller (2000), it was this political and economic context that justified the American adaptation in the negotiation process. The Americans wanted the British as a strong ally, and the multilateral system without the imperial preferences would not help the UK get out of the crisis and, it would strengthen the other side, the side of developing and poor countries. 1.1 The General Agreement on Tariffs and Trade (GATT): an interim agreement that lasted for almost 50 years Up to now this article showed a brief summary of why the ITO was not born. Likewise, the reasons for the long life of the GATT can too be explained in various ways.perhaps the main reason for the long life of the GATT was its simplicity and the appropriate timing that was created. The ITO Charter had 106 articles, the GATT had less than 40, and the GATT is a simple agreement and not an organization, with legal personality 7, like the ITO would have been.as highlighted by Narlikar (2005) the GATT had CONTRACTING PARTIES 8 rather than members as seen in the ITO. In other words, thecontracting PARTIES of GATT were interested only in the contract, rule-orientated, as long as the members were interested in how to provide cooperation in international affairs.in the ITO, for example, the existence of an organizational hierarchy was planned, with the presidency and secretariat.in the GATT, in turn, the decision-making was taken by all CONTRACTING PARTIES according to their 7 The legal personality, which allows collective action against individual countries, is one of some changes when GATT has become in WTO. 8 According Wilkinson and Scott (2008) Contrating Parties (capitalized) is uses distinguish between the signatory states acting as a committe-of-the-whole and the signatories as collective. 554

6 individualinterests and not for the interest of the group, and there was no room left for the creation of a spirit democratic or fair. According Velasco e Cruz (2005) the GATT filled the void of the major failure that was the ITO creation. Even the WTO (2012a) considers that the draft of the ITO Charter was ambitious, and so helps the researcher to understand why the GATT had success. While the GATT was concerned only with the real side of trading relations, the ITO mayhave helped to create a fairer world, given that its principal objective was realizing the aims set forth in the Charter of the United Nations, particularly the attainment of the higher standards of living, full employment and conditions of economic and social progress and development, envisaged in Article 55 of that Charter (UNITED NATIONS CONFERENCE ON TRADE AND EMPLOYMENT - Havana Charter 1948, 14). As can be seen, the Havana Charter extended beyond world trade disciplines, given that in the GATT rules there were not great concerns about rules on employment for example. It is worth noting that it isn t logical to make a parallel between the GATT and the ITO, because, at that time, the idea wasn t that the GATT replaces the ITO, but the opposite. However some issues such as decision-making process, Green Room 9 meetings and The Principal Supplier Principle should be analyzed, because many of these issues still remain in current discussions in thewto. In the GATT, the decision-making was taken by majority of votes, but according tonarlikar (2005) the decision could be arrived at if none of the countries present objected to it.however, in crucial moments of negotiations, the decision-making process of the GATT was notoriously restrictive to the sub-groups of CONTRACTING PARTIES following The Principal Supplier Principle, that is, the major exporters and importers of the particular product that negotiated the tariff reductions.as highlighted by the author, this way of negotiation strengthened the power asymmetries between developing and developed countries, principally because The Principal Supplier Principle automatically excludes many developing countries from the decision-making as well as of agenda-setting.an author that well observed the effect on distributions of power between countries due the adoption of The Principal Supplier Principle was Gowa (2005). Another issue that should be considered is the technical weakness of developing countries delegations and consequent difficulty in the effective participation in these meetings. 9 According WTO (2012b): The Green Room is a phrase taken from the informal name of the director-general s conference room. 555

7 1.2 Rounds of trade negotiations under the GATT The core objective of GATT was promoting negotiations of the tariff reduction to ensure the growth of international commercial trade with security and predictability.specifically in this matter the GATT had success, because according to Bagwell and Staiger (1999), in the eight rounds of trade negotiations, the ad valorem 10 tariffs on industrial goods, for example, had the average reduced from 40 to 4 percent. Another highlight of its success is the growth of its scope; the agreement began with 23 countries and ended with 128signatories as at the end of 1994.However, there isno consensus about the impact of the GATT on world welfare and trade,gowa (2005) observed that the agreement had a positive and significant impact on trade between only five of its members, namely Britain, Canada, France, Germany and the United States. Other researches carried out by Rose (2004), Bernstein (2008), and Chang and Lee (2011) shows that the effect of the postwar multilateral agreements on trade could be surprising and not as obvious as normally declared. In the 47 years of its existence, the GATT had eight rounds of negotiations, and in the first rounds the focus was on tariff negotiations of industrial goods. The agricultural liberalization and the breakdown of its subsidies system in the US and Europe were not the subject of negotiations in the first rounds. Meanwhile, the participation of developing countries in the first rounds of negotiations was not noticed or is misunderstanding. According to Wilkinson and Scott (2008) the participation of developing countries in the GATT cannot be limited just to the participation of these countries in trade rounds alone. As highlighted by the authors, there are two broad interpretations of the participation of developing countries in the GATT. Below (Box 1)there is a compilation made by the authors about these interpretations of the developing countries' participation in GATT. 10 Duty or other charges levied on an item on the basis of its value and not on the basis of its quantity, size, weight, or other factor. 556

8 Box 1 - Interpretations of developing country participation in the GATT Authors Developing countries like a free-riding Sees the exclusion of developing countries interests from the GATT to have been the consequence of their choice not to Jagdish Bhagwati engage in reciprocal tariff bargaining, which allowed the industrialized states to maintain high levels of protection on developing countries exports. Argues that developing countries, in their relentless but mis-guided pursuit of the import-substitution strategy of T. N. Srinivasan development, in effect opted out of the GATT. Bernard Hoekman and Michel Kostecki Authors Diana Tussie and Miguel Lengyel Amrita Narlikar Paul Collier Argue that, although the rationale for S&D [special and differential treatment] was based on prevalent theories that import substitution was a necessary element in effective development strategies and that the GATT was for a long time a club that was primarily of relevance to OECD countries, developing countries nevertheless opted not to participate fully in the GATT a decision that precluded developing countries from getting their interests on to the agenda of the GATT. Developing countries like a "quiet bystanders" Suggest that developing countries acted in this way because they perceived the GATT to be neither a friendly nor a fruitful institution in which to promote their interests and because many failed to maintain [an] official representation in Geneva. Argues that many developing countries chose not to participate in the GATT because of (i) a distrust of GATT rules ; (ii) a perception that the GATT was a poor substitute for the more development friendly but ultimately unrealized International Trade Organization (ITO); (iii) a decision-making system that, despite the nod to one-member-one-vote and a pursuit of decisions by consensus, crowded out developing countries and gave rise to a range of untoward activities designed to generate consent; (iv) the use of bilateral negotiations between the two main suppliers of a good (the so-called principal supplier rule) as the basis for negotiations; and (v) the deliberate stacking of the agenda with issues of benefit only to the industrial states. Sees the success of the GATT as resulting, in part, from the way in which developing countries were excluded from the institution. Source: Wilkinson and Scoot (2008:474) As can be noted there is a strong thought that considers the developing countries as supporting actors in GATT discussions. However, the developing countries have had the same claims since the early debate of the GATT. Despite the constantpleas used by the developing countries, such as Prebisch- Singer s thesis of terms-of-trade 11, industrialization via import substitution, and the infant industry argument were losing strength over time, these claims express the disagreement with the course of the multilateral trading system as a whole. Evidence of this pressure is shown by the establishment of an expert committee, led by developing countries on the GATT CONTRACTING PARTIES. The outcome of this committee was the Harberler Committee Report of the 1958, well-known as the Haberler Report in honour of Professor Gottfried Haberler (WTO 2012c). Other eminent economists such as James Edward Meade (British economist), Jan Tinbergen (Dutch economist), and Roberto de Oliveira Campos (Brazilian economist) also participated in this panel. The Haberler Report concluded, as stated byharrod (1959,554), that GATT rules are slightly unfavorable, in their total incidence, to poorer countries and the under-developed countries have manfully tended to maintain their purchases at the expense of their reserves or with the help of 11 The secular downward trend in the prices of primary commodities relative to those of manufactures. 557

9 loans and grants. Furthermore, the HalberlerReport recommended, categorically, a moderation of agricultural protectionism in western Europe and North America (GATT 1959, 178). This report provided technical content for the claims of developing countries and was one of the main reasons the GATT members thought it was a good idea to provide special and differential treatment for developing nations trade policies.however, the path to the realization of this idea took time, because the creation of the United Nations Conference on Trade and Development (UNCTAD) 12 was necessary. Furthermore, only in 1968 the Generalized System of Preferences (GSP) was institutionalized whereby developed economies grant improved market access to exports from developing countries (UNCTAD 2012). During the first negotiations in the GATT, the participation of developing countries was not effective, if compared with the level of concessions made by developed countries. This notwithstanding, this interpretation is one of the most misunderstood about developing countries participations in the GATT. According to Wilkinson and Scoot (2008) the researcher should not limit the understanding of the participation of the developing countries in the GATT to trade rounds alone. The authors proposed an alternative view of the participation of developing countries in the GATT. As stated by the authors, that "developing countries have always been active participants in the GATT" (Wilkinson and Scoot 2008, 477), is due to the role played by them in seeking to shape the multilateral trading system in according to their needs, or providing chairs and vice chairs for Trade Negotiating Committees. Below is a summaryof the negotiations and trade rounds in the GATT and WTO. As stated by Oliveira (2007), in the first twenty years after the creation of the GATT, the developing countries chose not to participate in the GATT negotiations.at this time they preferred to participate with a lower level of rights and obligations. However,certain events were important for the developing countries in the first decades of the GATT, and changed the way of participation of some developing countries (WTO 2012e), such as: After the Second Round at Annecy, during the fifth Session of the CONTRACTING PARTIES, in1950, the US president indicated that the ITO Charter would not be re-submitted to the US Congress; 12 The UNCTAD is a permanent organ of the United Nations (UN) General Assembly, established in 1964 to promote trade, investment, and development in developing countries. 558

10 SEMINÁRIO BRASILEIRO DE ESTUDOS ESTRATÉGICOS In the Fourth Round at Geneva, in1956, the GATT commercial policy course for officials of developing countries began; In 1958 the Haberler Report was created; In 1961 the Short-Term Arrangement covering cotton textiles was agreed as anexception to the GATT rules. The arrangement permitted the negotiation of quota restrictions affecting the exports of cotton-producing countries (these were generally developing countries); TheKennedy Round, in1964, dealt with problems of Developing Countries (special and differential treatment) Part IV, Art ; In 1973, the Tokyo Round dealt with non-trade barriers produced the antidumping and subsidies agreement and the general system on preferences. In1974 the Multifibre Arrangement (MFA) 14 entered into force. In 1973, the first concrete result of the Round was the reduction of import duties and other trade barriers by industrial countries on tropical products exported by developing countries. 13 For more details see the text of GATT, available at 14 According to the WTO (2012c): The MFA seeks to promote the expansion and progressive liberalization of trade in textile products while at the same time avoiding disruptive effects in individual markets and lines of production. The MFA was extended in 1978, 1982, 1986, 1991 and MFA members account for most of the world exports of textiles and clothing which in 1986 amounted to US$128 billion.it superseded the arrangements that had been governing trade in cotton textiles since

11 There are no WTO definitions of developed or developing countries. Developing countries in the WTO are designated on the basis of self-selection although this is not necessarily automatically accepted in all WTO bodies. To becoming WTO members, all countries should ratify their respective accession packagesurce. Source: Bernstein (2008), *Constantine (2000), **Word Bank (2012), and ***WTO (2012) 2005 Doha Round Dispute Settlement Understanding Nepal, Cambodia, Saudi Arabia environment, trade facilitation, WTO rules, Moldova, China, Chinese Taipei, Armenia, F. Y. R. of Macedonia, 149 trade and development, trade and agricultural subsidies. Estonia, Jordan, Georgia, Albania, Oman, Croatia, Lithuania, =104 access, services, intellectual property, SEMINÁRIO BRASILEIRO DE ESTUDOS ESTRATÉGICOS Talks stalled on North/South issues and Ecuador, Bulgaria, Mongolia, Panama, Kyrgyz Republic, Latvia, 73** + (31)*** Agriculture, non-agricultural market United Arab Emirates Paraguay, Qatar, Slovenia, Solomon Islands, Saint Kitts and Nevis, Guinea, Guinea Bissau, Honduras, Liechtenstein, Papua New Guinea, the Grenadines, Swaziland, Kingdom of Angola, Djibouti, Grenada, 123 Dominica, Fiji, Mali, Slovak Republic, Saint Lucia, Saint Vincent and of WTO, etc rationalizing agricultural tariffs Mozambique, Namibia, Bahrain, Brunei Darussalam, Czech Republic, settlement, textiles, agriculture, creation Further tariff reductions, difficulties in Rica, Tunisia, Venezuela, El Salvador, Guatemala, Macao, 1994 Round services, intellectual property, dispute Antigua and Barbuda, Botswana, Morocco, Lesotho, Bolivia, Costa Uruguay Tariffs, non-tariff measures, rules, WTO takes over GATT process Colombia, Thailand, Zambia, Belize, Maldives, Hong Kong, Mexico, 79* licensing established 1979 Round agreements procedures on dispute resolution, dumping, 102 Singapore, Suriname, Philippines Tokyo Tariffs, non-tariff measures, framework $ 300 bilion reduction in bilateral tariffs, Iceland, Egypt, Mauritius, Romania, Zaire, Bangladesh, Hungary, 71* Barbados, Ireland, Korea Republic of, Poland Gambia, Guyana, Rwanda, Switzerland, Yugoslavia, Argentina, Niger, Senegal, Spain, Kenya, Malawi, Malta, Togo, Burundi, The 62 d'ivoire, Cyprus, Gabon, Jamaica, Kuwait, Madagascar, Mauritania, 1967 Round negotiation rules established Cameroon, Central African Republic, Chad, Congo Republic of, Côte Kennedy Tariffs and anti-dumping measures $ 40 bilion reduction in bilateral tariffs, Israel, Portugal, Trinidad and Tobago, Uganda, Benin, Burkina Faso, 28* 1961 billion of trade; EEC talks begin Dillon Round Tariffs 4,400 tariff concessions covering $4.9 Nigeria, Sierra Leone, Tanzania - at Geneva Fourth Round Tariffs $2,5 billion reduction in bilateral tariffs Uruguay, Japan, Ghana, Malaysia - affected Torquay covering most of items not previsously 38 Italy, Nicaragua, Sweden, Austria, Germany, Peru, Turkey 1951 Third Round at Tariffs 8,700 reductions in bilateral tariffs, Denmark, Dominican Republic, Finland, Greece, Haiti, Indonesia, - at Annecy Second Round Tariffs 5,000 reductions in bilateral tariffs - - Syria Rhodesia and America Pakistan, 23 Africa, Great Britain and Northern Ireland, United States of India, Lebanon, Netherlands, New Zealand, Norway, Pakistan, Rhodesia, Syria, South China, Cuba, Geneva covering on fifht of world trade ($10 billion) Cuba, Czechoslovak, France, India, Lebanon, Luxemburg, Ceylon, Chile, 1947 First Round at Tariffs 45,000 reductions in bilateral tariffs Australia, Belgium, Brazil, Burma, Canada, Ceylon, Chile, China, Brazil, Burma, +(LDCs) countries Year Name Subjects covered Action New members Countries Participating Developing Box -2 GATT and WTO trade rounds The contrary position of Brazil on the EEC creation and its Imperial Preference System in the fifth Round opened in the Dillon Round should also be highlighted. As stated by Oliveira (2007) Brazilian Diplomacy believed that the creation of the EEC should not have had as one of its bases the damages from countries such as Brazil. The author highlights that these events worked to strengthen the discontent in the country, and in many other developing countries, with the directions of the multilateral trading system.another example of this discontent with the directions of the multilateral trading system was the 560

12 Australian lobby against non-tariff barriers in the negotiations and subsidies on agriculture (Wilkinson and Scott 2008, 493). The Kennedy Round created great expectations for developing countries, and actually showed some victories for these countries. Some outcomes of the Halberler Report were, in addition to legitimizing the lasting demands of developing countries, first; the creation of UNCTAD in 1964, second but not least, the creation of an appropriate forum for these countries to organize themselves and strengthen their claims. Thus, the Kennedy Round showed that developing countries had the desire to change the labels (free-riding and quiet bystanders) that had been won in the first rounds of negotiations 15. Moreover, in this round the developing countries managed to introduce a development dimension (Part IV Art ) into the GATT. The significance of this is that thepart IV allowed the preferential treatment 16 of the developing countries, provided some flexibility to the strict reciprocity conditions of the GATT and opened the door for the institution of the generalized system of preferences (GSP) 17 at UNCTAD II in New Delhi in However, these political results did not bring effective outcomes for developing countries in this round of negotiations.according to Wilkinson and Scott (2008 p. 498) old issues such as market access and agricultural matters remained without solution. The intention to change the participation of some developing countries in the GATT can be observed from the engagement of Brazilian diplomacy to convince the economic governmental departments to offer tariff concessions in the Tokyo Round. As stated byfarias (2008),in the Tokyo Round, Brazil began to abandon the negligent position, and tried to engage effectively in tariff negotiations. According to the author, Brazilian diplomacy understood that without offers of tariff concessions from the country, there was not the possibility of the country having success in their demands that required normative changes in the rules of the institution. However, due to the domestic divergences in Brazil, the country failed to offer effective tariff concessions in the Tokyo Round. Both Farias (2008) and Oliveira (2007) agree about changes in the political climate in the Tokyo Round. On one side developed countries, principally the U.S., were more demanding about the need for 15 For example, according to Wilkinson and Scoot (2008: 498): In the Kennedyround, 23 countries declared themselves to be participating under the terms established for developing countries and 14 of those(argentina, Brazil, Chile, Dominica n Republic, India, Israel, Jamaica, Republic ofkorea, Malawi, Peru, Spain, Trinidad and Tob go, Turkey, and Yugoslavia) madetariff bindings or concessions included in the Schedule. 16 According to the WTO (2012d): Part IV of the GATT includes provisions on the concept of non-reciprocal preferential treatment for developing countries when developed countries grant trade concessions to developing countries they should not expect the developing countries to make matching offers in return. 17 As stated by Arroio (1972), the GSP is one of the most important outcomes of the UNCTAD. 561

13 the developing countries to offer tariff concessions. On the other hand, the developing countries were engaged in enforcing the GSP, established in 1968 and authorized by the GATT in At the end of the Tokyo Round, the institution of the Enabling Clause 18 made the non-reciprocal principle explicit and effective (Oliveira, 2007). All these happenings represent political victories for the developing countries, althoughold issues, such as agricultural themes again were not resolved.even though these facts represented partial victories for developing countries, the political environment at the end of the round was not as favorable to them as to the developed countries; the developing countries were guilty for the weak outcomes of the round. It is worth noting that this political environment worsened at the start of the discussion of the new round of negotiations.perhaps the shaping of the GATT's agenda for the Uruguay Round was the most important matter in this trade negotiation.as stated by Wilkinson and Scott (2008), developing countries, led by India and Brazil, were strongly against the inclusion of services in the Uruguay Round since the start of agenda setting.once again the new round began with two different points of view about the right directions of the GATT negotiations.the Developed countries wanted and considered a priority the inclusion of services, intellectual property and investment issues in the Uruguay Round. The Developing countries, on other hand, had advocated the need for the solution of all disputes earlier, such as textile and agricultural matters, before inserting new items in the agenda.this impasse was onlyresolved due to the strong position of US, which required and led the inclusion of these themes. This threatened the multilateral system as a whole, by signaling that bilateralism rather than multilateralism could be prioritized. This situation has put developing countries in an environment of paradox, because the same countriesthat were then labeled as free-riding or quiet bystanders at that time needed to defend and legitimize the system of multilateral trade. The literature about the Uruguay Round is rich and covers many issues and points of view. The Uruguay Round was labeled by Ostry (2000) as the grand bargain, because of the bargain conducted between developed and developing countries. As stated by the author, the developing countries accepted 18 According WTO (2012d): The Enabling Clause officially called the Decision on Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries, was adopted under GATT in 1979 and enables developed members to give differential and more favorable treatment to developing countries.the Enabling Clause is the WTO legal basis for the Generalized System of Preferences (GSP). Under the GSP, developed countries offer non-reciprocal preferential treatment (such as zero or low duties on imports) to products originating in developing countries. Preferencegiving countries unilaterally determine which countries and which products are included in their schemes.the Enabling Clause is also the legal basis for regional arrangements among developing countries and for the Global System of Trade Preferences (GSTP), under which a number of developing countries exchange trade concessions among themselves. 562

14 the inclusion of thetrading system of trade in services (GATS), intellectual property (TRIPS) and investment (TRIMS), and the opening of theorganisation for Economic Co-operation and Development (OECD) markets to agriculture and textiles. However the results were not as expected for both parties. The Economist (1994) considered the round as complicated, exhausting and intellectually dispiriting: the round has been all these things, and adds but a successful outcome (fingers crossed) will be something well worth celebrating (pg 73). Finger and Nogués (2001) highlighted that the outcomes of the grand bargain of the Uruguay Round was unbalanced, because while the developed countries reduced import barriers, particularly in textiles and agriculture, the developing countries needed adopted new domestic regulations in areas such as services and intellectual property could prove costly to them. For Ostry (2000) an unintended consequence of the grand bargain was a divide among the member countries. According to Stevens (1996) there are many reasons for the misunderstanding between the protagonists of the Uruguay Round principally due to the wide-ranging nature of the debate about the outcomes of this round. As highlighted by the author, three are the reasonswhy the debate about this round is a "slippery" subject to assess. The first reason is related to the different points of view about the role of trade in growth and development, and the role of the State in relation to trade. For the author "discussion easily slips from the narrowly technical to the broadly theoretical and even ideological level (Stevens 1996, 71)." The second reason is about the complexity of the final document and the process of understanding it. The third reason is related to how the countries would implement what had been agreed on paper. Compared with the last rounds, developing countries added substantially to their role, inboth qualitative and quantitative terms,following the Uruguay Round. This round had a special and careful appraisal in relation to the potential and the range that the agreement could reach, and this understanding was the reason for the change in theengagement of developing countries. Stevens (1996) suggests that the political environment of the Uruguay Round was the result of anaccumulation of expectations, but also due to the international economic changes occurring in key trading countries. For example, developing countries, such as Brazil and India, carried out economic reforms, which included trade liberalization, during the development of the round, and so their positions in the negotiations evolved substantially. Moreover, simultaneously, new forms of protectionism by developed countries, principally non-tariff barriers to trade, increased.for the author these changes altered the balance of interest for many developing countries in strengthening GATT disciplines. 563

15 Another important issue about the Uruguay round was the process of the proliferation of coalitions among developing countries. According to Guimarães (2005) this was the major innovation in commercial negotiations under GATT.Until the launch of the Uruguay Round, it is possible to say that the pattern in the behavior of the developing countries, and the nature of their coalitions, principally the G-77 19, were aimed at asserting the demands that sustained the attempted construction of the ITO. It was probably Narlikar (2002) who produced the most widely used theoretical framework about coalitions. This is shown below in Box 3 which summarizes the academic research of Narlikar and Tussie (2004) about coalitiontypes over the past two decades: Box 3 CoalitionTypes Bloc-type coalitions Countries come together against a backdrop of ideational and identityrelated factors. These coalitions seek combine like-minded states and try to adopt collective positions across issue areas and over time. These coalitions dominated Third World diplomacy until the early Source: Narlikar and Tussie (2004) As stated by Narlikar (2002), between 1982 and 1986, in the pre-negotiation phase of the Uruguay Round, the genesis of the G-10 represents the turning point in the history of coalition formation among developing countries. This was because of the new nature of the G-10 coalition, and the new leadership of these countries. For the author, the G-10 differs from G-77becausein this case the claim of the G-10 was simple and clear, members would block the opening of a new trade round until old issues were attended.in other words, the author refers to the position of developing countries in building the G-10 with the objective of organizing their resistance against the entrance of services in the next round. Tussie and Lengyel (2002) have an interesting point of view about this behavior change in the negotiating position of the developing countries: Issue-based alliances Alliances are formed for instrumental reasons. These coalitions are directed towards specific threats and dissipate after the particular issue has been addressed. This type of coalition came into vogue in the Uruguay Round. 19 According to G-77 (2012): The Group of 77 (G-77) was established on 15 June 1964 by seventy-seven developing countries signatories of the Joint Declaration of the Seventy-Seven Countries issued at the end of the first session of the United Nations Conference on Trade and Development (UNCTAD) in Geneva. The Group of 77 is the largest intergovernmental organization of developing countries in the United Nations, which provides the means for the countries of the South to articulate and promote their collective economic interests and enhance their joint negotiating capacity on all major international economic issues within the United Nations system, and promote South-South cooperation for development. 564

16 This historic shift in policy and preferences reflected a myriad of domestic and international, economic and political, developments. Decreasing returns from and fatigue with import substitution, together with the fall of the Berlin Wall, led to the deideologization of trade and closer integration into the world economy. Developing countries began to swim with rather than against the current. (Tussie and Lengyel, 2002, 516) For these authors this change happeneddue to the sum of economic and political changes in the international sphere as well as changes in the domestic environment of these countries. This seems to be a common point in the literature on the subject. This is because the processes of economic liberalization in many developing countries during the 1980s, and the increased industrialization in countries such as South Korea and Mexico, had been crucial to a greater engagement by these countries in the multilateral negotiating process. Despite this innovative and positive understanding of the developing countries behavior that began after the Uruguay Round, Panagariya (2002) argues that the developing countries may have been shortchanged in the Uruguay Round. According to the author there were three reasons for believing this understanding. First, the Cairns Group had expected that the Uruguay Round would solve issues relating to access to markets to agricultural products, but this expectation was not realized. Second, it is possible to say that the developing countries committed to cutting theirs tariffs 20 more deeply than developed countries. Finally, in the words of the author; in new areas such as intellectual property, developing countries are required to adopt standards already prevalent in developed countries. This means they have implementation obligations that effectively do not apply to the latter (Panagariya 2002, 25). The Doha Round as stated by WTO (2012e) is also known semi-officially as the Doha Development Agenda as a fundamental objective is to improve the trading prospects of developing countries. However, the first round of the WTO also began with different points of view about the priorities that should be placed on the agenda. In this round the Europe Union tried to diversify the agenda in order to obtain the maximum benefits in exchange for the imminent reduction of agricultural subsidies that would have to do it. The U.S. had given priority to opening agricultural markets in return for opening markets for industrial products. The developing countries, in turn, wanted to make the round in an end to old disputes that dragged on for decades and turn the round effectively in a development 20 In the area of market access in industrial products. 565

17 round. The Doha Round is widely studied and there is no news to be presented. However, some issues should be reviewed. Narlikar and Tusie (2004), for example, investigated the role of coalitions of developing countries at the Cancun Ministerial, especially, and noted the unique role of developing countries in this forum. This coalition has created a pioneering balance of power between developed and developing countries in the WTO.And if the G-10 at the Uruguay Round represented the turning point in the history of a coalition formation among developing countries, the G-20 at the Doha Round presented a new exemplar of proactive diplomacy of developing countries (Narlikar and Tusie, 2004). As stated by the authors, the G- 20 was a product of almost twenty years of learning by developing countries, and if the developing countries effectively were able to influence the results of the Cancun Ministerial, it was due to their effective coalition formation. The behavior of the G-20 was different to the older coalitions involving developing countries because rather than simply seeking to block the agenda, the G-20 was proactive and effective proposals were submitted. Panagariya (2002) and Bergsten (2005) also noted that a new balance of power was created in Doha, but according to the former, this outcome did not go so far as to reverse the imbalance that was created in the Uruguay Round agreement. As stated by Bergsten (2005), this new balance of power could be the result of the consensus-decision rule 21, because with this arrangement, a larger and more diverse group of developing countries had veto power at every stage of the process. However, Panagariya (2002) argues that, despite the better balance between the interests of developing and developed countries, the balance was in favor of developed countries 22. In keeping with the author,developing countries face several asymmetries in the Doha negotiations, principally due to two reasons. Firstly, given the very large share of world trade held by developed countries, their bargaining power was much higher than that of developing countries. This is because the developed countries hold much of the international trade, and this trade is concentrated in three partners (U.S.-EU-Japan) with relatively similar levels of per-capita incomes. The second reason is related to the lack of strategic thinking and poor research capacity of the developing countries in the Doha negotiations. For the author, this imbalance has contributed to the achievement of results gained in the Doha Round, in which developing countries were forced to accept and adapt internally to meet the requirements agreed on the 21 Consensus-decision rule means that all of them must accept the outcome of discussions. 22 Kleen (2008) also agree with this argument. 566

18 Singapore issues 23. It's worth bearing in mind that the Singapore issues represent obligations and costs to the developing countries, while the benefits of the regulation of these issues are concentrated in developed countries. However, the main lesson of the Doha round is that developing countries have abandoned their old labels, and a further delay in the process of trade liberalization as occurred is not of interest to them. As stated by Tussie and Lengyel (2004), even the industrial countries started to see the engagement of developing countries in multilateral trade talks through new lenses (pg 486). And even if Doha can represent the greatest failure of the multilateral trade talks since the 1930s, according tokrugman and Obstfeld (2010, pg177), the international trade remains freer than any other period in recent history. Conclusion The great event which shows the evolution of the GATT to the WTO was the coverage of the service sector in the agreement.and the great event which shows the non-evolution of the GATT to the WTO is the ineffective existence of agricultural matters in the agreement. It is observed that the silence of the GATT with respect to trade in services was becoming increasingly uncomfortable, since modern economies have focused on the production of services rather than the production of physical goods. However, developing countries have not had success and it cannot be said that the WTO represents an institutional advance. A more critical analysis of the Doha round could even suggest an institutional regression of the WTO in relation to the GATT, principally because the Doha round was especially fruitful in the emergence and flourishingof the old North-South debate. Through this brief reading of the evolution of the multilateral trading system, it is clear that the exercise of power is monopolized by some countries in this forum. As much as it has seen a great evolution in action and the role that developing countries played in the system, their demands insist on not being met. It could be said that, although the arguments presented here indicate that the interests of developing countries were partially met, there is not a unified position amongst these countries. This perhaps is the greatest challenge for developing countries in the next rounds. References 23 According to Panagaraiya (2002, 2): The term Singapore issues refers to four issues first introduced into the WTO work program in the 1996 Singapore Ministerial Declaration: foreign investment, competition policy, trade facilitation, andtransparency in government procurement. At Doha, EU insisted upon the inclusion of these issues into the negotiating agenda while m any developing countries opposed it. 567

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