Imposing discipline on a super power

When the World Trade Organisation was formed as a successor to GATT, many Indian critics claimed it would be a neo-colonial instrument of domination. They said cross-conditionalities would be used by rich countries to bring cases against and impose trade sanctions on low-income countries like India.

Defenders of the WTO argued the contrary — they said it would, for the first time, give developing countries a way to deal with unfair trade practices by rich countries. The WTO has teeth in its dispute settlement machinery, which GATT did not. The one-country one-vote principle in the WTO means that, unlike in the World! Bank and the IMF, the economic strength of rich countries does not translate into a voting majority.

In its first year of functioning, the WTO has proved its critics wrong. The WTO has received 27 complaints, details of which are given in the accompanying table. So far one judgment has been delivered. And that has been in favour of developing countries against the mighty US. So much for the neo-colonial theory.

Brazil and Venezuela complained in April 1995, that the US was discriminating against their exports of petrol. The US government was insisting on new quality standards for imported petrol, but had given domestic US producers time to adjust to the new standards. This, said Brazil and Venezuela, violated WTO rules on fair trading. They have won their case.

In the old days of GATT, a dispute of this nature would have dragged on for years without resolution. Besides, GATT could levy penalties only through unanimous decisions, which were virtually impossible. So, although the US had laws like Super 301, which went against the spirit of GATT, no developing country could seek a remedy.

But now the WTO dispute machinery no longer requires unanimous decisions. Its procedures are quick — all disputes are to be settled within 18 months, including time for appeals. The verdict in the petrol case was given in nine months. Thus, the WTO enables countries with a share of only 1 per cent in world trade to obtain rapid justice against the world\’s economic superpower. Without WTO, this would be inconceivable.

The US is very unhappy about the verdict. But it has not threatened to ignore the ruling or walk out of WTO. Instead it has gone on appeal to a higher WTO panel. This is encouraging: it suggests that the US is going to work within the WTO machinery instead of making unilateral decisions, as it has done in the past.

Of the 27 cases registered with the WTO in 1995, the vast majority were against rich countries — ten against the European Community, four against the US, four against Japan, two against Australia.

There were three cases against Korea, which used to be a developing country but is now about to join the OECD, the group of rich countries. One case each was registered against four middle-income countries — Poland, Malaysia, Brazil and Venezuela. Not a single complaint was made against any low-income country.

The complaints against middle-income countries were not made by OECD countries. The case against Venezuela was registered by Mexico; against Poland by India; against Malaysia by Singapore; and against Brazil by the Philippines. Such disputes were very much South-South affairs, not neo-colonial ones.

The bulk of complaints were by rich countries against one another. This drives home the fact that it is silly to confuse trade with colonialism, as the Indian Left tome-times does.

In many cases (like the US-Japan dispute on automobiles), the disputes were settled bilaterally, and the WTO did not have to deliver a verdict. This is in line with the WTO spirit of emphasising negotiation and compromise, and keeping adjudication as a last resort.

Right-wingers in the US object to WTO on the ground that it infringes the country\’s sovereignty. Ironically, the Left in India voices the same objection. In fact, WTO amounts to the pooling of sovereignty by members — by promising to obey WTO rules, each country surrenders certain rights but gains rights from others too. In this pooling, the poor countries are the greatest gainers, since they have too little bargaining power to strike equally good deals in bilateral talks.

The Indian Left says WTO limits India\’s sovereign right to have its own patent rules. Very true. But WTO also limits the sovereign right of the US to impose any trade regime it wants and that is a great gain for India. It cannot have the benefits of WTO without its costs.