SUNS #5275 Monday 3 Februay 2003

New York, 30 Jan (IPS/Mithre J Sandrasagra) -- The only way to reverse widespread enmity toward globalization in developing countries is to make trade work as an engine of growth and human development, says a UN Development Programme (UNDP) report released Thursday.

To achieve that, says the 341-page document, 'Making Global Trade Work for People', four basic principles should be incorporated into the World Trade Organisation (WTO).

* Trade must be seen as a means to an end, not an end in itself;

* Trade rules and standards should allow for diversity across regions and nations;

* Countries' rights to protect their institutions and development priorities must be recognised; and

* No country should be allowed to impose its institutional preferences on others.

Multilateral trade institutions, which can play a major role in maximising the potential benefits of trade, need to shift their focus away from promoting trade liberalisation and market access to fostering development, adds the report, because there is no compelling evidence that liberalisation leads to higher growth and poverty alleviation.

"The UNDP report does not call on developing countries to quit the WTO," Ali S. Mchumo, deputy secretary-general of the East African Community, told IPS at the report's launch. Rather, the institution provides an important democratic framework for the rule of law.

"If we fail to change WTO rules, at least we have the opportunity to name and shame our oppressors," added Mchumo, the former Tanzania ambassador to WTO and chair of its General Council in 1999.

The UNDP began the inquiry that led to the report after the debacle of the WTO Seattle Ministerial in 1999, which was interrupted by anti-globalization protesters.

The UNDP process included experts from government, academia and civil society, working in association with the Rockefeller Brothers Fund, the Rockefeller Foundation, the Ford Foundation, the Heinrich Boll Foundation and the Wallace Global Fund.

Munir Akram, Ambassador of Pakistan to the UN, described the reaction to a paper he presented in 1996 on the developmental concerns of Third World countries: "I was almost laughed out of the room."

But today, big business, civil society and rich and poor governments are increasingly convinced that something is going wrong with globalization, said Kamal Malhotra, lead author of the report.

The combination of unfettered capitalism and rigged trade rules are playing a major role in developing countries falling further and further behind, says the report. "Today's rich countries in the past enjoyed many of the protections they now seek to deny developing countries," it adds.

"We are not anti-free trade," said Mark Malloch Brown, UNDP administrator. "There is no more important engine of development than trade," he added, but developing countries must benefit more from the process.

The report examines the cases of Vietnam and Haiti. Since the 1980s, Vietnam has taken a gradual approach to economic reform. It engages in state trading, maintains import monopolies, retains quantitative restrictions and high tariffs on agricultural and industrial imports and is not a member of the World Trade Organisation (WTO). It has also been incredibly successful economically, achieving a growth rate of over 8%.

But Haiti, at the behest of the World Bank, undertook comprehensive trade liberalisation between 1994 and 1995, slashing its import tariffs and removing all quantitative restrictions. Its economy has gone nowhere, according to the report, and its social indicators are deteriorating.

Integration with the global economy is a result of successful growth and development - not a prerequisite for it, said Malhotra. For example, India and China, countries often cited as examples of what openness can achieve, implemented their main trade reforms almost 10 years after the onset of higher growth. Even now, the report underscores, trade restrictions imposed by the two nations remain among the highest in the world.

"Low-income countries have little to bargain with," said Malhotra, because any threat of retaliation by developing countries does not have serious financial repercussions for rich countries. He suggests that a "collective action clause" be put on the WTO's agenda so that developing countries can act in a more unified manner.

The paper also focuses on agricultural tariffs, which have been cut far less than industrial ones. Agriculture remains the economic mainstay for the world's poorest people, providing employment for more than 70% of the developing world.

According to the report, tariffs on industrial imports fell from 40% in 1945 to 4% in 1995, but agricultural tariffs still hover around 62%. For exports that would greatly benefit economies of developing countries, such as sugar, rice and dairy products, rich countries maintain tariffs of 350-900%, virtually eliminating any profit margin.

Meanwhile, developing countries, forced to cut their tariff and non-tariff barriers as prerequisites for World Bank and International Monetary Fund (IMF) loans, have markets that are wide open to rich countries' exports. Mexico, for instance, has suffered as a result of huge imports of US grain, while the African market has been flooded by European Union beef, said Murray Gibbs, project coordinator of UNDP's Asia Trade Initiative.

To ensure that the trade system lives up to its potential to contribute to human development, Akram said, "we must consider moving subsidies out and moving development in ... we must get tariff discrimination out ... and we must do something about the WTO's anti-dumping agreement that is being abused worldwide".

The solutions will not come easy. Malloch Brown pointed out that though Norway has eliminated all barriers to exports from least developed countries (LDCs), imports of products from those nations remain low because differences in market conditions in Africa and Scandinavia, language problems and deteriorating African infrastructure have chilled trade.

It takes 20 days to move products from Kampala, Uganda to the port of Mombasa, Kenya, a journey that could take less than two days, Malloch Brown said, pointing out that "a trade round without a commitment to building up infrastructure capacity will sell the South short".

The report also warns that developing countries' growing dependence on food imports is having an enormous impact on gender dynamics.

In South and Southeast Asia, women perform 60% of food cultivation and production. Rural African women produce, process and store up to 80% of food. But the erosion of domestic food production in the South affects food security, social cohesion in rural communities, and women's income, employment and status.

The WTO declined an invitation to participate in Thursday's event. "I've lost sleep over what we said about the WTO in this report," Malloch Brown confessed, adding that, "running one international organization, one must be careful not to undermine another international organisation".