WTO Winners and Losers: The Trade and Development Disconnect

Article excerpt

"There must be something in the pie for everyone. Not pie in the sky when we die, but pie on the table." (1)

I. INTRODUCTION

The World Trade Organization ("WTO" or the "Organization") is premised upon increasing prosperity by opening markets to greater trade flows. (2) Although the goals of the Organization include enhancing development and reducing poverty, thus far the WTO has had difficulty bridging the gap between its trade expansion focus-exemplified by members' substantive commitments to provide greater access to their markets-and its desire to promote development-largely framed in aspirational, nonbinding terms. This article explains why current measures to assist developing countries ("DCs") (3) are not a complete solution to the trade and development disconnect. It further proposes using the concept of Kaldor-Hicks efficiency as the basis for a framework under which the WTO's trade and development aims could be pursued in a more integrated fashion by adopting a direct or indirect compensation mechanism.

Historically the WTO has concentrated its negotiations on issues of market access and not on development directly. This reflects an underlying assumption that the rising tide will raise all boats--that liberalizing markets alone will make all WTO members better off. However, this assumption is flawed. Trade liberalization, while wealth-generating in the aggregate, does not necessarily lead to greater wealth for each participant. Instead, the multilateral trading system thus far has resulted in winners and losers, and will continue to do so for the foreseeable future. (4) The WTO's stated objective of ensuring that all WTO members benefit from the system cannot be met unless and until the WTO institutionalizes measures to systemically ensure that the losers also become winners. Increasing the number of members benefiting from the world trading system would do more than just meet the aspirational goals of the WTO. Members would benefit from increased volumes of trade and thus greater overall wealth would be generated within the membership. And from a pragmatic standpoint, more steps should be taken to help the losers as these members have the ability to hamstring further progress in the Doha Round and any future rounds. (5) Therefore, it would behoove the membership to take steps to ensure the Organization's policies are in the best interests of all the members.

As a result of the assumption that trade liberalization benefits all participants, DCs' requests for special and differential treatment or other forms of assistance have been treated as an obstacle or stumbling block that needs to be addressed in order to get agreement on the latest round of liberalization measures. In reality however, DCs' pleas for differential treatment arise out of the reality that not all members will benefit as a result of a given round of negotiations. The degree of disparity is exacerbated when the negotiated outcome includes agreements such as TRIPS, which impose high implementation costs on poorer countries, and excludes meaningful additional market access in areas of importance to these countries, such as agriculture.

The recent focus within the WTO on generating funds for Aid for Trade and the creation of an Aid for Trade Task Force to recommend ways to operationalize Aid for Trade can be seen as an effort to bridge the trade and development gap through providing supply side and capacity-building assistance to needy WTO members. The goal is to help these countries get the most out of the market access they have by enhancing their ability to export. This assistance-particularly if it is ultimately coupled with a successful Doha Round in which barriers to trade from DCs drop significantly-will certainly help countries in need benefit more from their WTO membership. However, Aid for Trade, as currently formulated, addresses only one part of the trade and development disconnect. In particular, Aid for Trade and other measures, such as trade-related technical assistance and capacity building, are designed to help members participate in international markets more successfully going forward. …