Sunday, May 27, 2012

The Doha development Agenda (DDA), The GATT , WTO and historical evolution of the MTS and beyond –(UN) – Free Trade

Question: Ha-Joon Chang (2003) argues that the DOHA round of trade, WTO and other institutions of global economic governance have ‘kicked away the ladder of development’? Critically examine

International Trade regimes have instigated and promoted the use of neo-liberal policies on trade but this discourse have led to developing countries benefiting less as well as the disappearance of the nation state welfare. While most DCs (Developed Countries) in their historical stages of economic development used protectionist industrial policies Global South countries have been argued to liberalize whilst their industries in their infant stages of development. Developing countries have not yet benefited from WTO trade liberalization phenomena but resulted in disastrous elements of national economics, with most of the domestic industries left to battle and compete with multilateral companies. Trade liberalization advocacy by the international Trade regimes have received various criticism with one of them envisaged on Western countries imperial interests and economic domination of the weak. This essay will critically analyse the argument by Ha-Joon Chang (2003) that the DOHA round of trade, WTO and other institutions of global economic governance have kicked away the ladder of development. In close analyse of the question the essay will bring out important an important hypothesis of the distraction of LDCs economies due to free trade liberalization regimes and ascertain neo-imperial interests of the Western countries by using international regimes to achieve their own national economic interests in the name of enhancing international development.

WTO’s failure to recognise the aspects of protectionist industrial policy as an important strategy for economic development has been criticised as the historical economic development of all western countries were centred on protection and promotion of the countries domestic markets to enable sustainable development free from outside development. The new era of free markets economies after the historical ideology of Adam Smith has left the developing countries experiencing development in reverse. According to Ha-Joon Chang (2003;2) developed countries did not enforce free trade policies in their stage of industrial revolution by they promoted national industries through tariffs, subsidies hence the countries had interventionist trade and industrial policies at the early stages of the development.

The industrial revolution in most developed countries such as Britain in its early stages was never complied by laissez-faire principles but was rather envisaged by stringent industrial policies aimed in protecting and promotion the manufacturing industries. Ha- Joon Chang (2003;4) retaliates that Britain as an intellectual fountain of the laissez-faire doctrines itself implemented protectionist policies till the 19th century especially the 1721 legislation that was aimed at promoting the domestic industry from foreign domination very mush similar with Korea, Japan and Taiwan during the post war period

The USA according to Ha-Joon Chang (2003:6) between 1816 and the end of the Second World War had one of the highest average tariff rates of manufacturing imports. The USA economy benefited largely from the high degree of protectionism before the end of the Second World War. USA has preached in the modern arena the beneficial effects of trade liberalization whist that success of its industrial revolution was richly characterised with rigid protective policies. It has turned to support the WTO free trade liberalization without criticizing the notion of the disappearance of the developing countries sovereignty in anticipation for economic development. Lovett et al (2004;45) in the period of 1889 to 1929 for a period of 40 years ending the Great Depression the USA resorted to trade protectionism policies, Lovett et al (2003) retaliates that Paul Bairoch a prominent Swiss economic historian, concluded that in the 19th century countries that adopted protective policies ( Britain and USA) experienced higher growth than Britain that had unilaterally shifted to free market economies. History has shown that the protectionism as a very important strategy for development. African countries in developmental stages of industrial and manufacturing sectors should adopt such strategies and learn from how such developed nations have gained such advanced economic prospects. However the international regimes through the SDT (Special and Differential Treatment) according to Bouet (2005;1337) have strategized in protecting countries that can have effects due to reduction of in tariffs nevertheless SDT should apply to all Global South countries as most of them are facing stiff competition from the international markets.

Germany, Netherlands, France and Switzerland according to Joan Chang (2003) all these countries in their economic stages resorted to protectionist policies in the advert of addressing the countries industrial backwardness. The WTO ignores such historical success of industrial protectionist this is were the thesis’ of Chang (2003) ‘kick down the ladder’ applies as most of the powerful economically developed member states in the international regimes show partiality and imperialism agendas in their decisions on trade liberalization. Whilst there is unequal representation of member states in the WTO and other international global regimes, to really propagate the move not to discuss the historical development discourse of these developed nations mainly characterised by protectionist policies is never on the agenda instead they initiate laissez-faire principles as if themselves attained development through trade liberalization in the 18th and 19th century.

According to Lovett et al (2004; 46) protective polices can promote national economic development however results in complicated efforts to promoted export oriented business and emerging companies access to foreign markets. Global South economies are still not mature to open up their markets to foreign competition, national development is the first step before considering a paradigm shift to businesses focused on exports and intrinsically concentrated on foreign markets. While the Global North has surpassed the national economic development stage trade liberalization works mostly top their advantage than developing nations.

The key fundamental question is how then are the very countries that benefited from stringent protectionist policies to boost economic growth and the well being of the manufacturing and industrial sectors advocates for Global South countries which are still in industrial revolution stage to adopt the laissez faire principles ignoring the aspect of protectionist policies. Development strategies complied in trade liberalization of the DOHA and WTO has bias economic prospects for the already developed nations. Chang (2003;14) NDCs used interventionist trade and industrial policies in order to promote their industries and could have been more stringent than for modern developing states. However developing countries in this globalization era where breaking down of national boundaries in terms of trade, flow of information and capital in terms of ownership of key industries, trade liberalization is the only option they are left with. To attain comparative advantage from trade liberalization developing regions that mainly characterised by raw materials and agricultural produce have faced stiff competition from EU and USA agricultural subsidised cheap products. The failure of the DOHA round trade agreement according to Hertel and Winters (2006:130) ensuring that the agreement will encompass developmental strategies in all developing countries, Africa is enormous and highly diverse hence other countries in Africa still need strategic policies that are propelled by interventionist trade and industrial policies.

Developing nations should retract from the WTO and any other international institution that hinders development of its manufacturing and industrial sectors unless as Chang (2003:14) propounds if the WTO rules and multilateral trade agreement is rewritten with the emphasis of the rule being more active in promoting the domestic industries through the use of tariffs and subsidies. The East Asian countries economic success is attributed to the rigorous aggressive nature of state activism in the economy where according to Chang (2003:11) the interventionist trade and industrial played a pivotal role. With a combination of human development through education and investment planning promoted by the state the Western countries and East Asian countries were able to build their economies on solid grounds. Whilst due to the WTO advocacy in African and other developing region education and other basic services have been privatized restricting human resources growth and technological development striping Africa naked of developmental initiatives.

However amid all the criticism the goal of trade liberalization by the WTO was to channel the productive resources across productive sectors. According to Bou`et et al (2005) the (AGE) Applied General Equilibrium models used in DOHA negotiations concluded that developing countries would gain more advantage from agricultural trade liberalization with DCs (Developing Countries ) reaping two thirds of the US$500 billion gains of the trade liberalization. “Ladder kicking” has been the DOHA and WTO unprecedented act the AGE is just a model not the true overview of what developing countries will attain from Trade liberalization instead marginalisation and underdevelopment.

In conclusion l totally agree with Ha-Joon Chang (2003) sentiments that DOHA round of trade, WTO and other institutions of global economic governance have kicked away the ladder of development with many of its developmental strategies in numerous times failed across the African continent. The so called developmental strategies through liberalization of trade will result in developing countries to experience economic growth deprivation and state decay with most of the international trade regimes advocate for economic policies that favour the already developed states. International trade regimes if they do not reform to accommodate developing to attain sustainable development, Africa countries should withdraw their signatories within such institutions. However with the success of the Asian economies through trade liberalization developing countries can emulate how they can use trade liberalization to their own advantage.

Bou’et A, Bureau J.C, Decreux Y, Jean S :2005 Multilateral Agricultural Trade Liberalisation: The Contrasting Fortunes of Developing Countries in the DOHA Round Oxford UK Blackwell Publishing
Ha-Joon Chang December 2003 Kicking Away the Ladder: The “Real” History of Free Trade
John Gerard Ruggie International Regimes, Transactions, and Change: Embedded Liberalism in
the Postwar Economic Order, Volume 36, Issue 2, International Regimes (Spring, 1982), 379-415.

William Anthony Lovett, Alfred E. Eckes, Richard L. Brinkman 2004 U.S. trade policy: history, theory, and the WTO New York M.E. Sharpe, INC
Thomas Warren Hertel, L. Alan Winters 2006 Poverty and the WTO: impacts of the Doha Development Agenda Washington DC Palgrave Macmillan and the World Bank