A recent study by the International Monetary Fund (IMF) stated, to the bemusement of few, that developed countries reaped 73% of the benefits deriving from the new multilateral order of the World Trade Organisation (WTO), since its inception in 1995, to only 27% apportioned to developing countries. However, upon the creation of the WTO, there were great hopes of generalised economic growth and promises that trade liberalisation would bring about prosperity to the developing world.
As evidenced by the IMF report, the almost eight years of experience of the WTO have been harsh on the less developed economies. Whilst their tariffs have been removed or greatly reduced and while they liberalised trade in services and accepted new rules on the new areas of trade, barriers to the traditional trade in agriculture and textiles have not been removed by the European Union (EU), the United States of America (USA) and Japan. In the same manner, the major economies continued to use the practice of selective tariff peaks and bizarre anti-dumping practices against the smaller economies.
Accordingly, developing countries, almost without exception, have been during this period victims of an enormous crisis of international financial volatility, decreased exports, dramatic reduction of prices of their agricultural commodities and other basic products, economic, social and sometimes political crisis and generalised despondency. The prices of agricultural commodities have fallen consistently over the period and more than 30% since 1998. Coffee prices have fallen more than 70% since 1997. In accordance with the WTO, Africa and Latin America depend on 19% and 36%, respectively, of the agricultural sector for their exports. In Brazil, agribusiness answers for 25% of the GDP, 37% of the total number of labour posts and 40% of exports. Conversely, the infamous agricultural subsidies have been on the rise in the USA and in the EU, arrant champions of the specious rhetoric of free trade who no longer have market economies in agriculture.
Brazil´s participation in global trade fell from 1.6% in 1995 to approximately 0.8% today. Since the inclusion of trade in services in the multilateral system, Brazil´s exports of services have grown 0.6% per year and Mexico´s 0.9%. On the other hand, the USA has been expanding its exports of services to the tune of 10% per year, whilst the United Kingdom expands its at 7%. As a result, the EU, USA and Japan have approximately 70% of the total world volume of exports of services.
In spite of receiving large amounts of foreign investment, Argentina, Brazil and Mexico have had at least a duplication of unemployment since 1995, since a considerable part of such funds were employed in the privatisation programmes of the respective governments. The industrial salary in Mexico has fallen by half as a result of the perverse logic that dictates that the more miserable the country´s population, the greater its competitiveness in the world markets. Accordingly, Argentina´s economic growth in the period has been negative, whilst Brazil´s and Mexico´s have been puny, at about 2% and 2.5% respectively.
Other Latin American countries are faring even worse, with even more acute economic crisis and some, like Colombia, Paraguay and Venezuela, with serious political problems as well. Uruguay´s reserves of foreign currency are now under US$ 1 billion, a dismal number for a country known up to a few years ago as the Switzerland of Latin America. Peru, Ecuador and Bolivia have grave problems both in the economic as in the political area. Colombia is facing an armed insurgency. Venezuela had a failed military coup a couple of months ago. Paraguay is presently under a state of siege.
It is to be noted that in all those countries, the new world order of the WTO, compounded to the use of the IMF as an instrument of regional policy by the USA, has had devastating effects. It is about time it is reviewed in depth. Will it be done during the Doha/Development Round?
Lawyer admitted in Brazil, England and Wales and Portugal. GATT and WTO panelist. Brazilian government ad-hoc representative for the Uruguay Round of the GATT. Post-graduation professor of the law of international trade.