Political Economy WTO – Master’s level 2.1 standard – 3000 words

Does WTO policy, on the whole, work against the interests of developing countries?


It will be argued here that WTO policy does, on the whole, work against the interests of developing countries. Firstly, the history and aims of the WTO will be sketched out, and this will be situated within the context of shifts in the balance of power between nation states and transnational entities. List’s argument of how a nationalist agenda in trade came to be replaced by a ‘cosmopolitan economy’ will then be analysed and discussed. It is proposed that, while operating as a supposedly ‘universal’ system of trade, the WTO operates ‘asymmetrically’ in the interests of richer countries, at the expense of developing countries. Case studies will be presented of the imposition of neo-liberal trade agendas onto Ethopia in 2000, as well as the WTO’s role in East Asia in 2001. The focus will then be on how the WTO ideologically legitimates its claims to universality through the systematic imposition of discourses of ‘common-sense’. This argument will be developed through the work of Cox, Sinclair, Crane and Amawi, and Stiglitz, drawing on Gramsci’s work on hegemony, and Paterson’s analysis of trasformismo. Finally, modes of opposition to WTO policy will be discussed, considering whether strategies of state policy or transnational opposition can provide effective means of challenging WTO asymmetry.


The World Trade Organisation (WTO) was established as a permanent entity in 1995, its role being to oversee the trade agreements negotiated under the General Agreement on Tariffs and Trade (GATT) (Wilson, 2000, p.4). One of the primary aims of GATT is to reduce barriers to free trade, reducing tariffs for example (Sek, 2000, p.8). Its role also includes administering the ‘single dispute settlement procedure’ and evaluating member trade policies (Wilson, 2000, p.4). Its establishment can be understood in the context of redefinitions of global power and the relation between nation states and transnational organizations. Cox, for example, has discussed shifts in the discourse of international relations. He argued that previous distinctions between states and civil society, with foreign policy as the arm of the state, could no longer be sustained (1981, pp.126-7). He emphasized instead the importance of transnational and trans-governmental networks, arguing that proper attention must be given to the relation of global social forces and processes to state power (p.128), and focusing, as Sinclair has pointed out (1996, p.3), on changing forms of state power rather than ‘the state’ as a monolithic entity.


More recent work in the field has developed this focus on the importance of transnational organizations and structures of power. Hardt and Negri, for example, in Empire (2000) argue for the importance of understanding transnational networks of power over and above state control:


The United States does not, and indeed no nation-state can today, form the centre of an imperialist project. Imperialism is over. No nation will be the world leader in the way modern European nations were (2000, p.xiv)


They propose instead the necessity of understanding a new system of power based on “the organization of global flows and exchanges” of globalised capitalism (p.xv). Such power is based, rather than within territory, on the constant shifting of margins and centres, mobilized by discourses of hybridity, fluidity and indeterminacy (p.39). This network of power is controlled and directed through various organizations including not only the WTO, but also the International Monetary Fund (IMF) and the World Bank. Trade theorists such as Wilson, have pointed out how such organizations have developed as boundaries between nation states become more open and fluid:


The establishment of the WTO places an international trade organization on a par with the International Monetary Fund and the World Bank, as had been envisioned in the late 1940s. As economies become more integrated, trade and money issues also become more interrelated. (Wilson, 2000, p.5).


This shift in power from the state to transnational organizations of trade has also been emphasized by Klein:


The latest state of market integration has meant that power and decision making are now delegated to points even farther away from the places where the effects of those decisions are felt…Real power has moved from town to state, from state to national, from national to international, until finally…to the WTO and the IMF. (2002, p.200)


Some have focused on how bodies such as the WTO have power over nation states. Crane and Amawi for example describe how “states are limited in their use of power by ‘international regimes’ – tacit or explicit agreements on acceptable behaviour within a given issue area. The World Trade Organization constrains the use of economic power in international trade with threats of costly counteraction against undue protectionism” (1997, p.13). On one hand this could be interpreted, as Hardt and Negri propose above, as a constraining force on dominant nation sates such as the US, which could act in the interest of developing countries. On the other hand, others have argued that these ‘international regimes’ are still dominated by state interest. Chomsky points out for example, in relation to the US trade embargo with Cuba, how “the WTO had no competence to rule on US national security or to compel the US to change its laws” (2003, p.89). What is clear throughout all of this analysis, is how politics has been redefined around these relations. As Crane and Amawi go on:


Interdependence…creates new sources of power. It produces networks of mutual asymmetric interdependence which leaders must consider when defining and defending state interests. Interdependence redefines politics. (1997, p.14)


The ‘asymmetry’, or imbalance proposed here, is also alluded to in Friedrich List’s analysis (1997). He has analysed how a nationalist agenda in international trade, “how a given nation can obtain prosperity, civilization and power by means of agriculture, industry and commerce” (1997, p.48) came to be dominated by the ‘cosmopolitan economy’ of transnational free trade. He argued that this dominance was based on the fundamental underlying assumption that “all nations of the earth form one society living in a perpetual peace” (p.50). Based on this assumption, “the principle of international free trade seems to be perfectly justified” (p,50). It had, in other words, become ‘common sense’. However, as List goes on to argue, this founding assumption is false, the state of affairs of equality between peaceful nation states has not actually come into being (p.51), so it cannot hold as a legitimation of the cosmopolitan economy. What such an economy does create instead is “a universal subjection of the less advanced nations to the supremacy of the predominant manufacturing, commercial and naval power” (p.51). List’s observations can be understood as equally valid in a contemporary context where, it will be argued, the ‘common sense’ of free trade is ideologically justified and normalised in the subjection of developing countries to the supremacy of networks of power necessary for the functioning of global multinational capitalism. New networks of power, while proposing themselves as ‘universal’ actually act in this ‘asymmetric’ way (Crane and Amawi, 1997, p.14) working in the interests of richer countries, while masquerading as neutral, universal and independent.


Organisations such as the WTO play a vital role in this strategy of ideological normalization . As Stiglitz has argued, the IMF, the World Bank, and the WTO have ‘set up the rules of the game’ in such a way that “has served the interests of the more advanced industrialized countries – and particular interests within those countries – rather than those of the developing world (2002, p.214). He describes this as a system of  “global governance without global government” (p.21):


One in which a few institutions – the World Bank, the IMF, the WTO – and a few players – the finance, trade, and commerce ministries, closely linked to certain financial and commercial interests – dominate the scene, but in which many of those affected by their decisions are left almost voiceless (pp.21-22).


Such political asymmetry is built specifically into the everyday operations of the WTO system, which compels all members to follow certain policies, where those policies tend to rule out the nationalist alternative. Klein gives examples of the WTO overturning environmental laws protecting endangered species because this interfered with lifting barriers to trade laws (2002, p.5), or challenging France’s decision to ban hormone-injected beef as this interfered with the free market economy (p.5). Relating this specifically to issues in developing countries, an example can be the very different ways that agricultural products are treated compared with manufacturing products in the WTO’s ostensibly ‘universal’ commitment to free trade. As Hertel and Martin have argued, in relation to the ‘Uruguay Round’ of talks, “in contrast with industrial products, agriculture is assured a place on the negotiating agenda and considerable attention has been focused on the specific approaches that might be used to bring about liberalization in this sector” (2001, p.61). They go on to analyse how the Uruguay Round trade discussions led to “a wide range of loopholes, such as the selection of a period with high support base and ‘dirty tarrification’ in developing counties” (p.61). The effect of such ‘dirty tarrification’ is to create a disproportionately large gap between tariff bindings and applied rates in developing countries.


Keyber, Merbis and Overbosch have discussed the case of Ethopia specifically, where trade laws universally applied have failed to take into account arguments from a national perspective, and failed to account for the needs of consumers in Ethopia (2000, p.iii). They show how “it is virtually impossible to challenge [WTO] concessions” (p.9) in Ethiopia, and issues such as the higher rate of devaluation of currency, the lack of resources, and lack of administrative capacity in developing countries are not taken into account by policy (p.10). While the WTO claimed that there would be benefits for developing countries in joining the Agreement on Agriculture, their report argues that developing countries “actually lost some of their preferential treatment and no explicit rules for financial compensation have been worked out” (p.12). Ethiopia in particular suffers from a limited supply capacity and lack of access to international markets, “liberalization policies of the past years were apparently unsuccessful in attracting foreign investments, presumably due to lack of infrastructure, training and institutional capacity” (p.63). What the report proposes is a form of ‘regionalization’, where co-operation comes from within the country “and is not imposed from outside” (p.64). This perspective however, is not taken up by the WTO, which is described as “reluctant” to extend activities beyond its current mandate (p.68), Impositions of ‘fair trade’, the report argues, are actually damaging the possibilities for Ethopian agricultural exports, failing to account at all for specifics of the situation such as the low application of fertilizer, low use of agro-chemicals and natural raising of livestock (p.68).


Such failures of the WTO to work in the interests of developing countries can also be seen elsewhere Stiglitz draws attention to the crisis in East Asia in 2001, where “the conditions imposed through rescue packages included trade liberalizations measures that were unrelated to the crisis” (2001, p.9). Such liberalization led directly to increased poverty (Stiglitz, 2002, p.82) as it failed to understand the specific national causes and issues involved (p.83).  In other words, ‘assistance’ is used to drive the neo-liberal political agenda of the WTO at the expense of the economic interest of developing countries:


Today the emerging markets are not forced open under the threat of the use of military might, but through economic power, through the threat of sanctions or the withholding of financial assistance in times of need. (Stiglitz, 2002, p.62)


Assuming then that WTO policy does work against the interests of developing countries, then it is interesting to consider the processes and mechanics of ideological normalization that legitimate its actions. Drawing on Cox (1981), Sinclair (1996), and List (1997), it can be argued that ‘common-sense’ is institutionalized as a political agenda. Proposing itself as universal, the WTO operates in the interests of a particular model of neo-liberal multinational capitalism, which is in the interests of the richer countries and masquerades as neutral trade theory. As Cox has argued, “theory is always for someone and for some purpose” (1981, p.128) and it can be understood in relation to Gramsci’s theorizing of hegemony:


Hegemony is defined as the ability of one class to articulate the interests of other social groups to its own…the interests of these groups can be articulated in order to neutralize them. (Mouffe, 1979, p.183)


As Paterson has argued, NGOs critical of WTO policy are allowed to participate in WTO talks but “this is superficial” (2009, p.57). The WTO manufactures the ‘common sense’ necessary for maintaining consent and legitimacy through a process of transformismo, articulating and co-opting the voices of those opposed to its agenda (p.43):


From a distance, the WTO appears to be engaging with civil society and bringing their environmental, democratic, economic, political and social issues into its framework. Yet…all of these changes are cosmetic and designed to assimilate and absorb counter-movements and ideas to make them consistent with the demands of the global economy .In doing so the WTO is able to legitimise the existing system of governance. (Paterson, 2009, p.57)


Returning to Cox’s argument, he discusses how the ‘common rationality’ of neo-realism is produced and sustained:


The notion of substance at the level of human nature is presented as rationality assumed to be common to the competing actors who appraise the stakes at issue, the alternative strategies, and the respective payoffs in a similar manner. (1981, p.132)


Developing List’s argument, the idea of a common rationality is presented as reinforcing a non-historical mode of thinking. Modes of thought different to the proposed a historical norm are presented as incomprehensible on their own terms, disallowing for the contingent production of historically specific modes of normativity. Cox gives the example of the inability to understand the irruption into international affairs of Islamic intergalism (pp.131-2), but a similar case could be made for the position of diverse and incommensurable national agendas, which cannot be reduced to the ‘common rationality’ of the WTO. The system, as Cox argues, gives the appearance of being ‘value free’ “in its exclusion of moral goals” (p.132) but actually depends on all the involved states thinking in the same way, which, as the Ethiopia example presented above shows, is not true. As Klein has argued, “what is being designed at the WTO is not rules for trade but a template for a one-size-fits-all government, a kind of McRule” for promoting a specific neo-liberal economic agenda (2002, p.78), Cox opposes an understanding of system based on unchanging substance with one based on the continuing creation of new forms. Positivism, as Sinclair has argued (1996, p.7) cannot account for change and Cox’s historicist epistemology is vital for understanding the possibility of the new and change in world order.


What then, can be done? Stiglitz proposes a more pragmatic approach, where less emphasis is placed on ideology and more on ‘what works’ (2001, p.22). Cox discusses the possibility of some form of national cohesion among disparate groups marginalized by WTO policy:


Newly mobilized non-established workers in the third world, and socially marginal in poor countries are all in some way or another potentially opposed to international capital, and to the state, and world order structures most congenial to international capital.  (1981, p.150)


He also points out, however, problems with this approach:


These forces do not however have a natural cohesion, and might be dealt with separately, or neutralized, by an effective hegemony…when hegemony failed within a particular country, it could re-assert itself through the world structure. (1981, p.150)


This returns to Gramsci’s analysis of hegemony and Paterson’s specific points about the hegemonic functioning of the WTO. Hardt and Negri, interestingly do not advocate forms of national state cohesion and state power against the transnational forces of Empire. They propose instead adopting its own transnational capacities, reorganizing and redirecting flows of capital, “autonomously constructing a counter-Empire…to contest and subvert Empire” (2000, p.xv). This ‘counter-power’ of creative force they name ‘multitude’ (2005):


These new figures and subjectivities are produced because, although the struggles are indeed antisystemic, they are not posed merely against the imperial system – They are not simply negative forces. They also express, nourish, and develop positively their own constituent projects. (Hardt and Negri, 2000, p.61)


Such a shift in thinking requires a shift from nation-focused opposition. It also, however, draws on the necessity for creativity proposed in Cox’s argument. It has been argued here throughout that WTO policy acts against the interests of developing countries. Examples have been given from agricultural policy in Ethopia and from the WTO’s role in East Asia in 2001. A focus on the processes of ideology and hegemony at play in the WTO structure is vital for an analysis of how it discounts the possibility of national interests in the name of a supposedly universal neo-liberal free trade agenda, operating against the interests of developing countries. Once this ideological critique is made, then the WTO can be challenged and brought into account. Arguments such as Paterson’s however (2009) suggest that the WTO co-opts and uses opposition as part of its own processes of legitimation. What can be done to rebalance the demands for developing countries in free trade agreements may, on one hand, involve the importance of accounting for the diversity, flexibility and specific demands of nation state agendas against the WTO and its masquerade of universality. On the other hand, it may, as Hardt and Negri propose (2005) involve the formation of counter-currents of transnational networks, which can operate, within a landscape where the relation between state and transnational organization is in constant flux, to propose alternative means of engaging with trade, and fundamentally, with the interests upon which it legitimates its agenda.










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