TCS Daily

The Usual Suspects

By Hans Mahncke - November 23, 2005 12:00 AM

HONG KONG - Hong Kong-based officials from the global NGO Oxfam have recently embarked on a WTO-bashing path. Their efforts are a precursor to the upcoming WTO ministerial conference to be held here in December. This is not entirely surprising.  After all, Oxfam is not necessarily known as an advocate for free markets. It is frequently critical of rich nations, particularly the United States, and the push for lowering barriers to trade. But in doing so they miss the real tragedy: faults within the WTO itself are leading to a stalemate on advancing global trade and therefore hurting poor countries.

From the outset, the WTO was meant to facilitate trade liberalization through multilateralism. Multilateralism was manifested in the Most Favored Nation (MFN) principle, meaning that the best terms offered to any one trading partner had to be offered to all. Furthermore, the imposition of quotas was largely prohibited. However, because of WTO's difficulties in accomplishing rapid liberalization, many countries are by-passing the multilateral WTO mechanism altogether, opting for bilateral arrangements instead. A recent example is the Sino-EU agreement on textiles. Here, the WTO part of the deal was abundantly clear: as of 1 January 2005, quotas on textiles were to be prohibited. Of course, as we all now know, this wasn't quite how it turned out.   

The WTO is plagued by two major faults. On the one hand, its rules have grown too complex, feature too many loopholes and allow for too much discretion on the part of those who actually understand them. On the other hand, if countries with greater negotiating clout cannot find a way to wiggle their way out of WTO commitments within the framework of multilateral rules, they simply circumvent these by entering into bilateral arrangements. Hence, assuming that NGOs are focused on a return to multilateralism, they ought to start investing their time and energy to lobby for fewer rules, rather than more.  

Unfortunately, the upcoming WTO meeting is unlikely to lead to any progress in this direction. Although Oxfam and others seem to believe that the WTO is a democratic body, the WTO actually has a one member, one veto, consensus voting system, which confers disproportionate power to the sorts of smaller, poorer countries which NGOs claim to protect. It is this necessity for consensus which means that the most we can expect from the HK ministerial session is an agreement on the framework for continued negotiations. Indeed, so long as NGOs, either by design or ineptitude, assert falsehoods which, in turn, get disseminated by members of the media without proper scrutiny, there will be a continued lack of pressure from the general public to abolish trade barriers. Meanwhile, politicians will continue to do the NGO's bidding.  

Ultimately, if someone, anywhere, wants to buy someone else's goods or services at a mutually agreeable price, why should government, or NGOs, interfere with such an arrangement? Government agents are only capable of unnecessarily complicating matters, and adding costs. The more rules there are, the more governmental agents there are, the more matters are messed up. And we are all poorer for it.  

Hans Mahncke is an International Law and Trade scholar at Hong Kong's Lion Rock Institute.

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