By Sharon Atieno
Africa’s capacity to produce goods and services needed for competition in the global marketplace is still minimal thus, there is need to emphasize that global trade agreements must be sensitive to Africa’s current minimal ability to compete effectively. This also extends to poor handling of various aspects of global trade disputes. The situation is linked to lack of appropriate national policies when dealing with trade disputes that involve subsidies in agriculture and industries especially in developed nations.
This is more so when the World Trade Organization (WTO) has been marred with allegations from within its members of laxity in terms of implementing negotiations and safeguarding interests of all member States. This has resulted in a call for action that includes making reforms which will enable the multilateral body to carry out its functions more effectively.
In a three day Nairobi conference titled: Challenges for the multilateral trading system- Perspectives from East Africa, several areas were noted as needing reforms to make the WTO more effective. These include: state owned enterprises and industrial subsidies, the organization’s appellate body, decision making, transparency and notification, developing country classification and long standing issues.
”There is need for the appellate body of the dispute settlement mechanism to be replaced before the tenure of the three jurists come to an end,” stated Dr. Chris Kiptoo, Principal Secretary, Ministry of Industry, trade and Cooperatives Kenya. He cautioned that absence of this crucial part of the discipline mechanism, will lead to increase in indiscipline cases.
The dispute settlement panel makes a decision after hearing a case that is presented before them. The final stop of the discipline mechanism chain is the appellate body. A decision by the panel cannot be implemented by the disputing WTO members without the appellate body’s approval. The body consists of seven jurists, the tenure of four has come to an end leaving just three, whose tenure will come to an end in less than two years.
Many WTO agreements require member States to notify the WTO Secretariat of new or modified trade measures, after which the information is communicated to members. If the notification is not made, this is assumed to be a breach of the WTO obligations. The WTO often takes punitive measures which are considered to be mild compared to the offence which leads to huge losses at the exporter’s expense.
Long standing issues such as special and differential treatment, agriculture and fisheries subsidies among others which are largely covered by the Doha agreement. Being that different countries have different interests there is bound to be division during negotiations and implementation of the negotiations. The differences can be found in subjects of immense importance to developing countries such as agriculture.
Countries such as China, India and Brazil are classified as developing countries yet they have capabilities similar to those of developed nations. Reforms should be considered during classification as these countries are too developed to be placed in the category of developing countries.
“Some governments believe that the problem of overcapacity that is, production that exceeds demand and leads to depressed prices and unemployment is being driven by companies that are state owned or state controlled that have access to subsidies in one form or another. Subsidies could range from bank loans and below market rates, cheap real estate to direct government support and they think that because of the connection between the government and the enterprise whatever form that may take, their domestic industries are disadvantaged and maybe in fact injured leading to unemployment,” states Keith Rockwell, director, WTO information and external relations division. He cited the example of China whereby many advanced countries have complaints about steel and steel production in China.
For Many developing countries including many African countries, subsidies are important for the growth of industries. The WTO rules allow subsidies in certain contexts, with difficulties being incurred when subsidized industries begin to export on a wide scale thus affecting other industries in other countries for instance, in the case of steel.
“Though the existing subsidies and countervailing agreement would already work, some believe that the appellate body has made rulings with respect to public bodies which are too broad and don’t allow for action to be taken by the importing country. Others believe that the subsidy agreement needs to be made stricter so that access to these funds would be more limited for companies that are producing products that are in overcapacity,” added Rockwell.
There have been complaints about the decision making process of the WTO whereby decisions are arrived at by consensus. It is a requirement that all member States should agree on a decision before action can be taken, if one member opposes then no action can be taken. Though this is a good demonstration of democracy, it has made the multilateral organization stall in performing some of its activities for example, in the appointment of new jurists for the appellate body, where the U.S has a differing opinion about the appointment process and procedures. Countries have to meet for the decision to be carried out on the issue yet time is running out for the existing jurists.
Moreover, if a member is not present or does not voice their dissenting opinion at the meeting, their decision is considered to be in support of the consensus. “Having representation in Geneva or a big delegation during meetings is often advantageous in decision making and negotiations as it makes it easier to voice your issues,” states Rockwell. It is often difficult for least developed countries to send big delegations to take part in the negotiations due to financial incapacities making it hard for them to strongly air their concerns. Also, only a handful of least developed countries in the WTO have permanent offices in Geneva which they use to cover all United Nations activities as well as WTO.
These reforms call for a revision of the WTO rules to make them more effective and realistic to the current situations if the organization is to carry out its functions freely and fairly to the satisfaction of all its membership.
