Global Policy Forum

by Mike Moore*

Of the many obstacles facing the World Trade Organisation, the biggest is a myth - that developing countries are losing ground in the world trading system, and risk further impoverishment and marginalisation if a new trade round is launched. Like many myths, this one grows in conviction the further it departs from reality. We are told that the developing countries' share of world trade is declining; that their exports face the highest tariffs and the most protected markets in the world; and that they lack the ability to influence or change a system inherently biased in favour of the rich and powerful.

We owe it to the developing countries - as well as to the WTO - to re-examine this myth in the light of some facts. One is that developing nations are not losing out in world trade, despite what the WTO's critics say. The opposite is the case. Over the past decade, developing countries have consistently outperformed industrialised countries in terms of export growth - an average increase of almost 10 per cent a year, compared to 5 per cent for the industrialised countries. And trade among developing countries is growing more quickly than the trade with the industrialised North.

Last year, developing-country exports rose by 15 per cent - three times their GDP growth - the best in five decades. Even with the current economic slowdown, developing countries are expected to show much stronger trade growth this year than the industrialised economies. These numbers demonstrate the average performance among developing countries; some are doing better, some worse. Even so, claims about poor-country "marginalisation" distort the facts. For example, the 49 Least-Developed Countries saw the dollar value of their exports rise by 28 per cent in 2000 - some $34 billion - the second year in a row where they exceeded the world average. Bangladesh, Cambodia, Madagascar and Nepal saw their exports soar in the 1990s - matching or even exceeding China's impressive performance.

The second claim - that rich-country markets are more closed and protected, while developing countries are being forced to open up - is also a distortion. It is true that many developing-country exports continue to face significant barriers in rich country markets. Often the products in which developing countries are highly competitive are the ones that confront the highest protection.

However, what is not true is the assertion that industrialised countries are more closed or more protected than developing countries. The average bound tariff for the U.S. is just 3 per cent, for Europe it's 3.6, and for the industrialised countries as a whole it's under 4 per cent. In comparison, the average bound tariff for developing countries is over 12 per cent. While developing countries slashed their tariffs by 20 per cent during the Uruguay Round, developed nations cut theirs by almost 40 per cent.

This helps explain why, each year, developing countries claim a larger and larger share of the industrialised world's imports - from 15 per cent in 1990 to almost 25 per cent in 2000. Over half of Japan's manufactured imports now come from developing countries. For the U.S., the share is 45 per cent and rising. These trends do not reflect that altruism of the industrialised countries so much as their self-interest - a realisation that imports from the developing world are key to low inflation, rising productivity and increased living standards.

The third claim is that developing countries lack a voice in the WTO. How then to explain that so many "development" issues are now at the top of the WTO's agenda? From being a fringe issue a generation ago, the debate over how to get better integrated development priorities into the trading system has moved to the centre of the preparatory process for the Fourth WTO Ministerial Conference - and its resolution will largely decide whether new negotiations are launched in Doha. Developing countries such as India, Brazil and South Africa are in the forefront of nations defining the parameters of the WTO's future programme - their Ministers, Ambassadors and officials are among the most influential trade-policy practitioners today.

Indeed, the idea that a new round of negotiations must be a "development round" is now almost universally espoused - from Ms. Clare Short, U.K. Minister of Development, to Mr. Kofi Annan, U.N. Secretary- General, Mr. Jim Wolfensohn, World Bank president, and Mr. Horst Kohler, IMF managing director. This is evidence of a new, more assertive role for developing countries. Why? Because the WTO has emerged as one of the most important international institutions for development. Developing countries already account for a third of the world trade, from a fifth in the 1970s. At current trends, their share will grow to well over half of the world trade in the next 25 years. They need stronger multilateral rules, not weaker ones; more trade liberalisation, not less. Already a third of the cases before the WTO's dispute settlement body are brought by developing countries. They have gained significantly from trade liberalisation under the Uruguay Round and, according to a study, would realise some $200 billion if the remaining trade barriers were to be halved in a new round. That is three times what the developing world receives in overseas aid. Eight times what poor countries have so far been granted in debt relief.

This is to the credit of the developing countries themselves. The steps they have taken to open up their economies and encourage competition have created new incentives to find lower-cost inputs and to seek new markets abroad. The biggest change is in attitudes. More and more, developing countries have come to see protectionism as a self-inflicted wound. It not only punishes consumers, grossly inflating the price they pay for necessities such as food or clothing, but it also handicaps exporters and entrepreneurs, who cannot hope to compete in world markets without access to world-priced inputs, efficient services and modern technology. Trade liberalisation is the key to developing countries, not just because it opens markets, but because it makes their own economies stronger.

It is a fact that the developing world would be much worse off without the multilateral trading system. It is also a fact that the trading system can be greatly improved. Many critics - even some supporters - have spoken out about the inequities in the system, and they are right. Inequities exist. This is precisely why we need a new round of negotiations. There is no other way to change the rules of the WTO. No other way for developing countries to translate their interests and demands into real changes to the trading system. No better opportunity for developing countries to use trade reform and capacity building as tools of growth and poverty reduction.

Defining and refining rules for trade - keeping the system relevant to a fast-changing world economy - will always be work- in- progress. Governments will never stop and say they have finished, that they are satisfied. The challenge is to secure balanced progress that reflects common interests. Governments must feel committed, not coerced. They must see justice in the WTO agenda and national advantage in pursuing it.

But they must also be reminded of the achievements. More has been done to address poverty in these last 50 years than in the previous 500. Since 1960, child death rates have been halved in developing countries; malnutrition rates have declined by a third; access to safe water has improved dramatically. While the current U.N. Millennium Declaration targets show that there is still a long way to go, and we need to keep in mind that trade is just one contributor to the progress that has been secured, we should not lose sight of the important role the multilateral trading system has played. The question is how we share this gift of opportunity and do a better job as an institution designed to serve our member-governments.

*The writer is Director-General of the World Trade Organisation.

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