Multilateral Trade Negotiations and the Changing Prospects for Third World Development: Assessing from a Southern Perspective

By Ho, P. Sai-wing | Journal of Economic Issues, June 1998 | Go to article overview

Multilateral Trade Negotiations and the Changing Prospects for Third World Development: Assessing from a Southern Perspective


Ho, P. Sai-wing, Journal of Economic Issues


It has been three years since the establishment of the World Trade Organization (WTO) and the implementation, subject to differentiated phase-in periods for different areas, of the agreements reached in the Uruguay Round of multilateral trade negotiation (MTN). The latter is, of course, the eighth in a series of MTN that were held under the auspices of the General Agreement on Tariffs and Trade (GATT) in the last half century, during which the international trade and investment environment for Third World development (especially the trade aspect) has been periodically recast and altered. Given the ongoing pace of globalization and the persistence of underdevelopment in many parts of the Third World, it is timely to review how the trade and investment environment has evolved and, based on that review, to consider the prospects for development in the foreseeable future.

The conclusions drawn from such an exercise depend on initial assumptions as to how trade and foreign investment are related to the process of development. "The [mainstream] theory of trade and welfare provides the underpinnings for the general principles that underlie GATT . . ." [Bhagwati 1987, 551-2]. Hence, MTNs held under the auspices of GATT have been judged largely according to how closely the results of the negotiations conform to the prescriptions of that theory [see Baldwin 1995, 153; OECD 1993, chaps. 2-3]. To strive for better balanced judgments, there is obviously a need to conduct reviews and assessments from non-mainstream perspectives as well.

This paper conducts such an exercise from a "Southern" perspective. The latter is largely constructed from the North-South literature.(1) Despite some deficiencies in this literature, as a whole it constitutes a fairly concerted and powerful challenge to mainstream trade and development analyses. This paper begins with a brief summary of the key issues (and related agreements) that have arisen from the different rounds of MTNs and that strongly impinge on Southern development. A Southern perspective on trade, investment, and development is then surveyed. Given that perspective, appraisals of the obstacles to, and prospects for, Southern development in the light of the changing environment are carried out. Some concluding comments are then offered.

MTNs and the Changing Trade and Investment Environment

At the risk of oversimplification, the several rounds of MTN can be viewed as a story of the changing degree of freedom and autonomy enjoyed by Southern countries in their pursuit of national development-related policies. These changes can be divided into "traditional" and "new" areas. In the "traditional" areas of negotiation, there has been an intense fight for Special and Differential (S&D) treatment by the South. This reached its climax in the Tokyo Round, the "high-water mark of S&D treatment" [Hudec 1992, 73]. Bear in mind that the prime focus of GATT-sponsored MTNs had been tariff reduction in accordance with the dual-principle of reciprocity and most-favored nation (MFN) treatment. S&D treatments thus relate to the relative autonomy to employ both tariff and quantitative measures (Article XVIII), the right of nonreciprocity in tariff bargaining (Part 4, Trade and Development, Article XXXVI), the privilege to export under the generalized system of preferences (GSP) ("Enabling Clause," Tokyo Round), and the autonomy to deploy subsidies (exemption from the general obligation of Article IX; see also the Code on Subsidies and Countervailing Duties, Tokyo Round).

The stage for the significant erosion of these treatments was set during the Tokyo Round, thanks to the inclusion of a "graduation" text in the Tokyo Declaration [see Hudec 1987, 86], which "proved to be the opening shot in what became a long and tedious baffle" [Winham 1986, 94]. Within the traditional realm of negotiation, the powerful onslaught by the Northern countries on S&D treatment during the Uruguay Round can be mainly witnessed in two areas of the agreements. …

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