Part 2 of 2 Trade -- a market fundamentalism

Part 2 of 2 Trade -- a market fundamentalism

Yanuar Nugroho, Director, Business Watch Indonesia, Surakarta,
yanuar-n@unisosdem.org

There is series of issues called the "Singapore Issues" or
"New Issues" to be launched at Cancun, that consist of the issues
of investment policy, competition policy, transparency in
government procurement and trade facilitation.

Actually, investment policy will be the only new issue at
Cancun. How important is this issue?

Investment negotiations at Cancun, if allowed to succeed, will
create binding rules within the WTO on investments globally -- a
multilateral investment framework (MIF). The concern of all those
that are against negotiations on a MIF are that the outcome of
the negotiations within the WTO would be unfair and against the
interests of developing countries. Will developing countries go
for that?

Although there are reasons for developing countries to
maintain the position of "No to New Issues", before these reasons
are listed it is important to note that, once negotiations begin,
it is difficult to back-roll the process. Thus, negotiations will
most likely lead to an agreement. Once this agreement is reached
and signed by participating countries it is generally
irreversible, becomes binding to the signatories regardless of
the government of the day, and becomes subject to the dispute
settlement and sanctions procedures within the WTO.

SEATINI put in its newsletter (July 2003) that most developing
countries are not ready for an investment agreement and they
should block the investment issue at Cancun, since there is a
need for a full understanding of the development implications and
clarification of the many questions that are being asked.
Investment is not a trade issue and should not be brought under
the remit of a trade body such as the WTO. Developing countries
have not fully analyzed the implications of a MIF for their
economies and for their policy options.

Nevertheless, the industrialized and the major developed
countries are the advocates of a WTO investment agreement. At a
recent meeting on June 10 and June 11 in Geneva of the WTO's
Working Group on Trade and Investment (WGTI), the principal
message from the major developed countries was that negotiations
on investment should be launched at Cancun.

The argument for this position was that a WTO agreement on
investment could complement the existing networks of bilateral
investment agreements and other bilateral and regional
agreements. It cannot be denied that a relationship exists among
investment agreements, investment flows, trade flows and trade
rules.

What should we (developing countries) do?

First, developing countries should play an active role in the
remaining meetings of the working group and strongly voice their
concerns over the issues listed for clarification. In Geneva,
several developing countries maintained that there were many
issues that were still unresolved and that they did not agree
that negotiations should commence. Second, developing countries
should insist that any investment framework -- whether inside or
outside the WTO -- should have a fair balance between the rights
and obligations of investors and host countries, and between the
rights and obligations of host and home governments.

We are constantly told that the way to reduce poverty is
through economic growth. Experience tells us this is not true.
The UN's Human Poverty Index 1998 (HPI-2) for industrial
countries showed that Sweden, with one of the lowest rates of
economic growth per person, had the best record in human welfare.
Whereas the U.S., with the highest rate of economic growth -- and
a higher per capita GDP than Sweden -- had proportionally more
people who were "functionally illiterate" (20.7 percent) than in
any other industrialized country. Ten percent of the U.S.
population depended on private charity for food and 44 million
had no health coverage.

The WTO, with the absence of higher authority, treats free
trade as an ultimate good and its experts are forced to make
decisions on social and environmental issues that are outside
their terms of reference and beyond their competencies.
Economists still believe that further economic growth -- of
course through trade -- will relieve poverty. This is how free
trade or "market fundamentalism" has become the organizing
principle of the world. Be careful of such fundamentalism. It is
so subtle that we do not even realize we are part of it.