People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)

Vol. XXX

No. 22

May 28, 2006


Hopes Of The South Betrayed  


N M Sundaram  


THE agreement on TRIMs, considered import quotas and such other restrictions in the name of ‘local-content’ and ‘trade balancing’ requirements illegal. The developing countries by subjecting themselves to the agreement, deprived themselves of the legitimate use of sovereign trade policy as a tool for developing their own industries. On the one hand concessional development assistance was severely restricted and on the other the countries of the North sought unhindered right to penetrate the fragile capital markets of the developing countries. The North, in order to fortify its position further, found it expedient to form Multilateral Agreement on Investment (MAI) under the aegis of the Organisation for Economic Cooperation and Development (OECD) to further fortify its capacity to make inroads into the markets of developing countries. To quote The Economist dated March 15, 1998, the negotiators in the OECD “were oozing with optimism … that they could create a set of global rules that would lock in liberalisation.” These rich countries were obviously setting their sights much beyond the WTO in order to tighten the screw further. The TRIMs and the subsequent MAI were clearly offensive thrusts to break open and penetrate the fragile economies of the South by forcing them to open their markets for investments by the northern financial interests that were flush with funds.  


Globalisation and deregulation of finance capital had happened so fast and so massively and so recklessly as well that more than stable investment for productive activity and trade, what was experienced was huge flow of destabilising speculative capital. By 1990 it became the very force driving the world economy. As early as 1991, the UNCTAD cautioned of the “ascendancy of finance over industry”, in other words of speculation over production. (UNCTAD Trade and Development Report, 1998)  


The signing of the agreement on agriculture forced the developing countries to open up their markets even as the US and the EU went on raking in the system of heavy subsidisation of their agricultural products. In the process small-holder based agriculture was virtually decimated. Subsidy provided for agriculture in the OECD countries increased from $180 billion in 1995 in just two years after the WTO formation, to $280 billion in 1997 and further to $318 billion by 2002. Oxfam International in its publication entitled ‘Rigged Rules and Double Standards’, published in 2002, stated, that the EU and the US were spending more as subsidies by $9 to $10 billion per year, since the signing of the agreement on agriculture. The amount spent as subsidies was as high as 40 per cent of the value of agricultural production in the EU and 25 per cent in the US. (Ibid). Where is fairplay or level playing ground in all this? Where is the element of the so called free trade? 




As against this, in the earlier dispensation of UNCTAD, certain protection was afforded to the developing countries under the principle of “special and differential treatment” to these countries. The underlying principle was that trade and development being closely connected, it would not be equitable to subject the developing countries to the same standards, rules and conditions that could regulate trade among the developed countries. The extent of development being so vastly disparate, the principle of level playing field would require both protective tariffs and preferential access to their products of export to developed markets. Though unlike the UNCTAD, GATT was not primarily concerned with development, in fairness to it one must accept that it did concede the principle of providing “special and differential” status to developing countries, being a creature of the Bretton Woods system. Successive rounds of discussions under GATT, particularly the Tokyo round in 1973 as well as subsequent rounds recognised this. The 1979 agreement under GATT went so far as to provide a permanent legal framework for a general system of preferences in favour of developing countries. The Uruguay round, leading to the formation of the WTO, dispensed with all these salutary balances vitally necessary to lay a level playing framework. During the negotiations under the Uruguay round, the threat of removal of this protection was used as a bargaining lever and ultimately, a much diluted and distorted version was adopted, to make room for some temporary but woefully inadequate measures. The Marrakesh agreement leading to the formation of WTO thus shed all pretences of helping the process of Third World development. The neo-liberal agenda was in full swing.  


Similar was the fate of the principle of providing compensatory arrangement to Third World countries that were net importers of food. While these developing countries were forced to reduce their food subsidies, the northern counterparts merrily continued with theirs and even increased the quantum. The Marrakesh provision of providing for offsetting of food subsidies by these developing countries were blocked from implementation. World crude oil prices had more than doubled during 1995-96, but the World Bank and the IMF obstructed taking any measure of compensation on the excuse that the increase was not due to agreement on agriculture, and besides there was never any agreement on who would be responsible for providing the assistance. 




The limitation of quotas under the Multifibre Agreement (MFA) and such other restrictive arrangements were agreed to be removed under the Agreement on Textiles and Clothing by January 1, 2005. The quotas were aimed at shrinking or even denying access in developed markets to cheap textile and clothing imports from developing countries. These were to be lifted altogether. But the developed countries managed to retain selective approach in deciding which item to liberalise and to what extent. Thus even at the second stage of implementation of the agreement, only very small and selective access was allowed in order to protect their own markets. If still some leakages were found they were blocked by alleging inferior quality or by levying stiff anti-dumping duties.  


Then there was the stringent provision of ‘exclusive marketing rights.’ It is not the intention or the place to give a fuller description of the WTO being a tool for continuing domination by the countries of the North. That may have to await another occasion. What is important to emphasise here is that the expectation of trade becoming a tool for development of the Third World was completely belied and as always the scope of its management has been vastly expanded and crafted under WTO to the detriment of the Third World.   
After decolonisation of countries at the end of the Second World War, the promise of independent economic and social development provided an exciting impetus to these countries as national independence itself. But little did they realise that political independence itself was under compulsion and the instinct of imperialist exploitation continued unabated. No other country manifested this desire more openly than the United States that emerged the strongest among the imperialist powers after the war. The US wanted to incorporate the newly independent countries as satellite entities in the system of global capitalism that it came to lead. That meant no space for independent nationally oriented policies in the interest of development and welfare of the people. That also meant no economic and social equity and certainly a change in the system to socialism was taboo.  


As already mentioned, the multilateral trading system was necessary only to the extent of ensuring some order among the developed countries and that too under the tutelage of the dominant power, the US. More than that the multilateral trading system as all other institutions that evolved, including the UN itself, and all its agencies and initiatives, had to be subordinated to this paramount objective.  


More than all else, the newly independent developing countries that had manifested some degree of national aspirations for independent development, must be disciplined and brought within the orbit. That meant more intensive penetration by imperialism controlled global finance capital. The structural adjustment programme with its punishing regime of conditionalities was part of the process not withstanding the enormous social costs.  


The WTO was established to sub-serve the same objective of imperialism, that of comprehensively establishing its hegemony. As a means, the aim simply was to facilitate dismantlement of all trade barriers to commodities and products produced by TNCs while protecting the monopolistic trade practices of northern agriculture and high-tech industry.  


This wrenching resubjugation of the South inevitably generated resistance. The character and fate of that resistance as also the opportunities that beckoned must be discussed in some detail.