The Consumer Guide to Trade Issues and Agreements by Consumers International
(CI)
(This is an edited version)
The recent interest in international trade may lead newcomers to this subject to believe that the development of global trading links is new. Yet, trade has been going on for millennia at the regional and global level. Many of the ancient empires, such as the Chinese, operated regular regional supply routes within the boundaries of their empires. The European supply lines of the Roman Empire were remarkably similar to the present European Union (EU), with special trade arrangements with Eastern Europe and North Africa. The Silk routes from Europe to China formed a complex network of routes during the period from 300 to 600AD, taking in Persian and Arab trade. The Roman Empire and the Han dynasty also regularly traded along those routes, even though they did not recognise each other diplomatically. The Sahara saw extensive North-South and East-West trade - the latter from Spain to the Arabian Peninsula. The northern Inuit peoples traded across the Bering Straits from Siberia in Russia to Alaska (in present day USA) and westward to Scandinavia. All of these predated the colonial periods of the last 500 years.
Today, international trade amounts to US$ 7,600 billion and for 24% of world output as compared to ten per cent in 1970. There has been a relative as well as an absolute increase in trade flows. Trade today is seen by some as an engine of world economic growth and by others a key component of unwanted globalisation. Those battling in Seattle suggested that the World Trade Organisation (WTO) was to blame for environmental damage, labour rights abuse and increases in global inequalities. In the meantime, we are told that consumers are the key beneficiaries from increased trade because it leads to choice and better value for money. The consumer movement must examine and address these issues further.
The WTO Agreements cover a wide range of goods and services from food and clothing to televisions and tourism. The Agreements not only aim to reduce tariffs, but also include rules on regulations allowed or needed at the national level such as investment measures and patents. With a powerful dispute settlement mechanism, the WTO stands out as an inter-governmental institution that can have a profound impact on our lives, affecting consumer rights in unprecedented ways.
Consumers must be active and heard in trade debates. Trade is, after all, about producers and consumers. Yet, little attention is paid to the views of consumers when negotiating trade agreements. This Guide aims to provide consumer activists with a layperson's overview to ensure an active involvement of consumer groups in debating and influencing this critical subject.
Chapter One explains basic trade theory, economic terms, trade policies and the potential impact on consumers. Chapter Two describes the evolution of the General Agreement on Tariffs and Trade (GATT). Chapter Three outlines the current trade agreements at the WTO agreed in the Uruguay Round. Some of the 'new' issues arising in WTO meetings are examined in Chapter Four. Regional arrangements and agreements are listed in Chapter Five. Finally, possible action by consumer groups is looked at in Chapter Six.
Trade is the exchange of goods and services between producers and consumers. People exchange things in order to gain access to a wider variety of goods and services than they would otherwise have. International trade is the exchange of goods and services across national borders through exports and imports. Companies trade across borders for the same reason as individuals trade within a market: to gain access to a wider variety of goods and services.
As countries have different resources and technologies of production, exchange can be mutually beneficial for producers and consumers. For example, it is advantageous for Saudi Arabia to sell oil, which it has in abundance to the United States in exchange for wheat, which it cannot produce efficiently, rather than attempting to grow wheat on dry and arid soil.
By producing for both domestic consumption and export, firms can produce on a larger scale, which can reduce the costs of each unit of production. Taken across an entire economy, countries in turn can benefit from each other, as each country will be producing more efficiently and goods may be available at a lower cost of production.
International trade can bring both consumption and productive gains to a country. Such trade enables countries to consume some goods and services more cheaply by importing them, and also to obtain some resources and products from other countries, which would otherwise be totally unavailable because domestic producers are unable to supply them (for example a scarce raw material or a high-technology product). International trade tends to promote productive efficiency by encouraging a reallocation of resources away from areas of the economy best served by imports into industries where the country will be able to exchange favourably with trade partners, because of a domestic advantage.
An advantage in trade derives from the ability to produce a commodity more efficiently at a lower cost than other countries. The gains to be made from trading internationally were initially examined by economists Adam Smith (1723-1790) and subsequently David Ricardo (1772-1823).
Adam Smith, over two centuries ago described the benefits of trade as a mechanism to allocate scarce resources into areas were they could be most effective thereby maximising both efficiency and social welfare. Smith spoke of the 'natural tendency to truck and barter,' arguing that individuals were naturally conditioned through pursuit of self-interest to specialise themselves and then offer their output to their trading partners who could be expected to do the same. Smith, in his best known book An Inquiry into the Nature and Causes of the Wealth of Nations, stressed the benefits of division of labour, specialisation and exchange.
Smith argued that one of the principal reasons and benefits for exchange was specialisation. Specialisation and the division of labour is the allocation of tasks among workers such that each one engages in tasks that he or she performs most efficiently. Specialisation is a form of division of labour whereby each individual or firm concentrate their productive efforts on a single or limited number of activities. If a person specialises in a single job or task, he or she is likely to be much more efficient than if he or she divides their time and efforts to a variety of jobs and tasks. The specialist can concentrate on the work he or she is best at doing: familiarity and repetition improves work for skills, and time is not lost moving from one job to another. For all these reasons, it was claimed by Smith that a person's output is greater as a result of specialisation.
Internationally, the concepts specialisation and the division of labour can be seen as each country specialising in the production of commodities that it is capable and efficient at producing, and exchanging with other countries for its other needs. A countries choice of which commodities to specialise in will be determined in large measures by the advantage it possesses over others in production of these things (for example lots of fertile land, technological expertise or cheap labour).
This, it is claimed, enables the total world output to increase, as all goods will be produced at a high level of efficiency and countries' standards of living will also rise as a result of efficiency in the allocation of resources and the access to a greater range of goods.
However, in order for these benefits to prevail Smith prescribed two key conditions:
1. Trade must operate in an entirely free market without the obstruction of tariffs and other protective measures. The 'invisible hand of the market' must be able to move goods freely across borders in order to make sure goods are allocated where they are needed and that prices for goods reflect the demand.
2. There must be free competition. Smith was deeply suspicious of monopolies, considering them 'conspiracies against the consumer' for they enable producers to price goods to their advantage not at the market price.
It is clear why two countries each with an absolute advantage in a product, that is the ability to produce a good more efficiently than the other, will find trade mutually beneficial. However, what happens to a country, which has no absolute advantage. Are there any gains to be had from trade? Will international trade only be beneficial to countries with an absolute advantage and therefore exacerbate inequalities? Not according to the classical economist David Ricardo and his theory of comparative advantage.
The theory of comparative advantage was developed by Ricardo in the early nineteenth century and has been a cornerstone of international trade theory ever since. The WTO cites Ricardo's theory as one of the most accepted and logical theories on international trade. Ricardo demonstrated that two countries could benefit from trade even when one of them had an absolute advantage in all lines of production. That is, a country with no absolute advantage in any good can still benefit from exchange with another country. He argued that the country with the higher productivity would gain from importing those goods in which its advantage was smallest, while the low productivity country would gain from importing those goods in which its productivity disadvantage was greatest. How did Ricardo do this?
Ricardo assumed only one factor of production - labour (which in his example is completely immobile between countries), two economies - England and Portugal - and two products - wine and cloth.
From this table, you can see that England can produce more cloth (six units compared to two units) and more wine (four units compared to three units) than Portugal per pound. What is important to notice is that although England is better at both, it is cloth where England is considerably better having an advantage of 6 over 2 compared with only 4 over 3 in wine.
| Amount of CLOTH produced for £1 | Amount of WINE produced for £1 | |
| England | 6 units | 4 units |
| Portugal | 2 units | 3 units |
| England has 6/2 advantage | England has a 4/3 advantage |
England has an absolute advantage in the production of both wine and cloth (i.e. it could produce both goods at a lower cost than Portugal). However, trade between the two would still be beneficial if they traded according to comparative advantage.
According to Ricardo a country has a comparative advantage in the product in which its absolute disadvantage is smallest - in this case Portugal, has a comparative advantage in wine (i.e. Portugal although worse at producing both wine and cloth, is less worse at producing wine). Therefore, England should produce and export cloth while Portugal should produce and export wine.
Ricardo uses the quantity theory of money to explain why England should import wine when it can produce it more cheaply domestically. The quantity theory of money asserts that the prices within an economy are determined by the size of the money supply. If the money supply increases, prices increase. If the money supply is depleted, prices fall.
Therefore, England starts by exporting both goods to Portugal. As Portugal pays its trade deficit (caused by importing both wine and cloth from England), its money supply is depleted and therefore, according to the quantity theory of money, prices fall in Portugal. Meanwhile, England's money supply swells because of inflows of money from Portugal importing both wine and cloth and this causes prices to rise.
So, prices are falling in Portugal as money goes to England to pay for wine and cloth, as this happens the price of Portugal's wine and cloth falls, making them increasingly competitive. In England, the reverse is happening, prices are rising and the prices of wine and cloth are going up making them less competitive. As England's prices rise and Portugal's prices fall, England's advantage in wine and cloth gets smaller.
Both countries will benefit from investing in the goods in which it has the highest comparative advantage. In England, this will be cloth, in Portugal, this will be wine and both will benefit from exchanging the two goods.
In short, a country does not have to be best at anything to gain from trade. What matters are relative productivity levels. A country will tend to specialise in those products for which its costs are lowest and rely on imports for those goods which it finds more expensive to produce, even if it could still produce those imported products more cheaply itself. In the integrated regional or global economy, this evolves into a specialisation in certain products by particular countries and indeed by particular regions.
Although as a theory, comparative advantage has undeniable logic, when applied to the real world, it becomes clear that it is based upon many assumptions which reduce its value in explaining what really happens in actual markets. The most important of which are listed below:
Although Ricardo's theory has been shown to contain a number of unrealistic assumptions, this does not mean that the theory of comparative advantage is irrelevant. All the critique means is that comparative advantage cannot be assumed to naturally emerge in a trading situation. Comparative advantage is still a key concept in trade strategies, for it is generally agreed that if you do not have a clear advantage, a comparative advantage can be created in order to benefit from trade.
As one would expect, developing countries' revealed comparative advantage tends to lie in those sectors where particular natural resources such as minerals are required or where a lot of labour is required. So, Asian producers tend to hold the advantage in textiles and clothing, North America in a wide variety of high tech manufacturing, Western Europe in semi-manufactures, design and consumer goods, Eastern Europe and Latin America in mining and related industries. The pattern of comparative advantage in agriculture is, of course, a function of natural resources, climate and labour availability. This is all obvious once stated, and yet, so often governments have ignored these facts in the context of policies of self-sufficiency or import substitution. So the production of glasshouse tomatoes in the Arctic Circle, cotton in the desert, obsolete national car companies or steel mills are testimony to the dangers of forgetting these factors.
The opposite danger also exists - of 'freezing' countries into fixed patterns of comparative advantage and not allowing them to evolve by, for example, educating their workforces and thus changing their comparative advantage. Such rigidities can be enforced by tariff escalation from moving up the production chain and adding value to their products.
Governments the world over apply a wide range of trade policy measures which have an enormous impact on the range of goods available to consumers and the prices they have to pay. Mechanisms at hand include import restrictions and export subsidies, as discussed below, allowing a country to have a degree of control over the level and nature of their imports and exports and the exposure of their industries to the world market. In other words, they can 'manage' trade. Strategies on how to 'manage trade' bridge two opposing ideologies - that of trade liberalisation and that of protectionism. Most countries use a mix of trade liberalisation and protection policies over time and in different sectors.
Trade liberalisation is the process of removing or reducing trade restrictions in the form of quotas, tariffs and exchange controls. It also seeks to restrict any form of government intervention to boost exports with subsidies or to protect domestic markets with price controls or food subsidies. It is a part of a general economic theory of laissez-faire, which advocates free markets both domestically and internationally. This policy approach is opposed to any form of government intervention believing that economies should be placed entirely in the hands of the market. (Adam Smith is a leading economist in the laissez-faire economic theory.) Free traders advocate allowing goods and services to flow freely between countries as the most economically efficient policy for meeting consumer and producers needs.
Trade liberalisation is currently the dominant global model for trade policy and is the basis for the General Agreement on Tariffs and Trade (GATT) and the World Trade Organisation (WTO). It is advocated by international institutions such as the International Monetary Fund (IMF) and World Bank which arose in the post-war period. The IMF and World Bank embarked on a liberalisation program in a large number of developing countries in Latin America and sub-Saharan Africa. These programmes known as 'structural adjustment' urged countries to open up their economies to the world market, by removing import controls and devaluing their exchange rate. In return for implementing these programmes, countries were promised economic improvements and received financial loans and support. There are no conclusive results on these programs yet, but overall it is speculated that they have been damaging particularly to the least developed countries. Structural adjustment policies have been found to contribute to rising hardships among the poorest groups in developing countries. These views are put forward and discussed by UNDP Human Development Report 1995 and Frances Stewart in "The many faces of adjustment" World Development 19 (1991).
Protectionists argue that governments may need to intervene in markets with special measures to achieve social, economic or political objectives. The most common type of intervention is to protect domestic producers from competition from the international market. Protection can be seen from a negative angle, as a tool to protect vested or powerful interests, or from a positive angle to support welfare interests or development objectives.
Protectionism is a deliberate policy on the part of governments to erect trade barriers such as tariffs and quotas in order to protect domestic industries from foreign competition or to rectify balance of payments deficits, for example. Protectionist measures can be used to create alliances with other countries, and shut other countries out of trade relations. They can also be used to protect the vested interests of the powerful or maintain the powerful position of richer countries in the international trade arena. The term "new protectionism" has been coined to refer to developed countries response to the increasing competition from the newly industrialising countries with new forms of import restrictions such as voluntary agreements and "escape clauses".
The most common strategy for protection is import substitution. Import substitution is a deliberate effort to replace imports with domestically produced goods. This is achieved by promoting the emergence and the expansion of industries domestically with the use of protective measures (tariffs and quotas) to prevent outside competition, subsidies and regulatory reforms, whilst the infant industries get started. It is proposed that this process is competed in two stages. Initially imported simple consumer goods (textiles, shoes) should be replaced with domestic production. Later in the second stage a wider range of more sophisticated manufactured items should be replaced by the creation of domestic industries in these areas. It is argued that this strategy will promote diversification, domestic innovation and technology and most particularly establish an export trade in more profitable manufactured goods. However, import substitution is potentially a hazardous policy if not controlled and applied carefully, it can lead to the ongoing protection of inefficient or even corrupt companies.
Other interventions include price controls imposed by governments to ensure that even if the market swings dramatically the price of food or other essentials will remain stable, therefore protecting consumers. Alternatively, workers can be supported by impositions of a minimum wage or income subsidies and producers can be given assistance in financing their production methods with loans or subsidies.
The promotion of exports has long been considered a major ingredient in any viable long-run development strategy. The export sector can be boosted by economic reform or through export incentives or subsidies such as providing financial rewards or tax rebates to this sector. These measures will attract industries into the export sector as well as lowering the price of exports.
The WTO, World Bank and IMF all advance the need to promote exports but through different means. The WTO encourages reduction in tariffs and non-tariff barriers. The World Bank encourages policies which will favour export industries and investment in them. The IMF calls for devaluations of the exchange rate. In some cases, policies prescribed by multilateral organisations have not worked in harmony and in other cases, critical parallel policies have been ignored or not enough attention paid to the proper sequencing of policies to achieve the desired result.
The practical side to the debate is less simple, and the distinction between the two camps outlined above is blurred. Neither type of policy is absolute. It is true, as history shows, that supply and demand tend to find each other. Openness to trade tends to be associated with greater prosperity. The divergent experiences of culturally similar countries such as the two Koreas (North and South) and the two Germanys (East and West) are particularly dramatic examples. Closed economies, such as Albania and Myanmar have tended to be the poorer for it and countries that have set out to be self-sufficient come what may, have often suffered huge losses. Studies have repeatedly shown that the costs of protectionist trade policies to the countries applying them are substantial and often far outweigh the benefits they are supposed to bring.
However, the variety of country experiences using one or both of these strategies, has led to their being no consensus on an exact trade strategy. Most countries employ a mixture of both strategies. For example, South Korea began her climb from one of the poorest nations in 1960 to one of the richest today by employing a combination of import substitution and export promotion strategies. This combination of both strategies has been used by many countries with considerably less success, demonstrating that there is no clear recipe, because of the variety of factors beyond trade policy, which play a role. It is worth noting that no currently industrialised country, developed without the use of a number of protective measures, indicating that they have played a vital role in the development process.
Furthermore support for free trade by international institutions or countries may in practice be inconsistent. For example, the two nations who have been the greatest advocates of free trade US and UK both use and have used a vast array of protectionist measures to ensure the survival of their companies in the international arena. Another example is the WTO, which in theory exists to remove protectionist measures, however serious attempts to prevent their usage have been patchy and inconsistent. Some observer's claim that the partialness of the WTO's response to the continued existence and creation of these measures is weighted in favour of the more powerful countries (whose industries are more developed) because of the disproportionate international influence they hold.
There are many policy elements which contribute to trade policies. These include trade barriers such as tariffs, quotas and non-tariff barriers, the terms of trade, balance of payments, exchange rate policies and subsidies. Any mix of these can be used to achieve certain objectives.
When goods cross international borders, a tax or duty known as a tariff, may be imposed at the point of entry. Tariffs in effect raise the price of imported goods and make them less attractive in the market of the importing country, and act as a source of government revenue.
Tariff escalation is the practice of increasing the tariff rate depending on how processed the product is. Thus, for example, raw coffee beans may be subject to only a 10% tariff to a country, but ready-to-use instant coffee may face a 100% tariff. This discrimination against the level of processing is sometimes called a tax on development as it discourages developing countries to process the primary products they produce to achieve better returns.
The access of imports into a country can also be limited by the use of quotas and export restraint agreements. Quotas in trade directly restrict the volume of imports to a specified maximum level in order to protect domestic industries from foreign competition. An export restraint agreement is a voluntary agreement between two countries to limit the volume of trade. For instance in Britain an agreement was reached with the Japanese motor manufacturers to limit the export of cars from Japan to 11% of the British market.
A country's terms of trade is the relationship between the price of their exports to the price of their imports. A country's terms of trade are said to be in decline if the relative price of their imports is rising and the relative price of their exports falling. These changes can clearly have an impact on a country's balance of payments, for if the amount they are spending on imports goes up, whilst their earnings from exports goes down, a balance of payments deficit will emerge without any changes in the flow of goods.
Deterioration of terms of trade is argued (initially by the economists Raul Prebisch and Hans Singer) to be one of the explanatory factors for why international trade has operated to the detriment of developing countries. The key theory in this area is the Prebisch-Singer thesis, based on the observation that developing countries primarily export primary products (of which there are a number of important exceptions). The thesis noted that the prices of primary products (foodstuffs and raw materials) tend to fall relative to those of manufactured goods (for example cars or computers) over a long period. Therefore, as developing country exports were almost entirely made up of primary products and their imports primarily of manufactured products, the thesis concludes that there is a long-term tendency for the terms of trade for developing countries to fall.
This conclusion is explained by the differences in the demand for primary products and manufactured products, and by the supply conditions under which they are produced in developing countries and developed countries. As an economy develops, the demand for manufactured goods tends to grow more rapidly than the demands for primary goods. For example as people get richer rather than buying more and more potatoes or bread they will buy manufactured goods. In developing countries, the existence of surplus labour keeps wages down. For example if a factor like new technology increases the productivity of labour in the export sector, production costs will fall as less workers are required. With wage rates staying the same, the total wages paid for the same amount of produce falls. This leads to falling prices in primary produce as they become cheaper to produce.
However, in developed countries, the supply of labour is limited and workers are organised in trade unions. They are therefore able to increase wages in line with productivity so the cost to produce remains the same and the price of the produce does not fall. Therefore developed countries gain both from their own productivity increases (through higher wages) and from the developing country productivity increases (through being able to purchase cheaper primary products).
The evidence for the Prebisch-Singer thesis has been heavily criticised. However, the experience of primary producers has provided support for these claims and has led to substantial interest in the thesis. UNCTAD has supported the claims that primary producers are subjected to deteriorating terms of trade.
The exchange rate is the rate at which the central bank will exchange one country's currency for another. It thus has a critical role in determining the actual price of traded goods in the marketplace. In some countries, the exchange rate is determined by demand and supply with little intervention by a central bank. In other cases, the government fixes the exchange rate. Some countries 'peg' their exchange rate to another currency e.g. US$ or French Franc and as that currency goes up and down so too does their own.
An overvalued exchange rate is an official exchange rate fixed at a higher level than its real market value; for example, 7 Kenyan shillings per dollar instead of 10 shillings per dollar. Overvalued exchange rates cheapen the real cost of imports while raising the real cost of exports.
Devaluation of a currency is the lowering of the official exchange rate between one country's currency and other currencies. Devaluation of a currency is a measure used to make imports relatively more expensive (as they will cost more in local currency) and make exports relatively cheaper (as they will now cost less to the outside world). The desired effect is to reduce a balance of payments deficit.
Depreciation or appreciation is the gradual decline/increase over time in the value or price of one currency in relation to other Governments can adopt measures to promote the demand for their country's exports by using export subsidies.
Export subsidies are a direct payment or tax concession or low interest loan made by the government to domestic firms to enable them to reduce the price of their goods when exported.
Subsidies can also be allocated to protect consumers by being used to keep food prices at an affordable rate. Two other areas where subsidies can be used are in employment and wages.
This is a statement of a country's trade and financial transactions with the rest of the world, over a particular period usually a year. The statement is divided into two main parts: (a) current account, and (b) investment and other capital transactions. The current account shows the country's profit or loss from its dealings in trade. It is made up of two headings: visible trade and invisible trade. The 'visible' trade balance (balance of trade) indicates the difference between the value of exports and imports of goods. The second 'invisible trade balance' is the earnings from or payments for services such as banking, tourism and insurance.
In addition to the current account, there is the capital account for investment and capital transactions. This section is for the capital flows caused by the purchase of assets, inter-bank dealings, foreign direct investment and borrowing.
If over a long period, a country spends and invests abroad as much as other countries spend and invest in it, there is said to be balance of payments equilibrium. In other words, a country's outgoings in terms of purchasing imports, investment abroad and lending are equal to its incomings in terms of export earnings, foreign investment and borrowing.
However, it is common for the reverse to be true, that a country is spending more than they are earning (balance of payments deficit) or earning more than they are spending (balance of payments surplus). This is known as balance of payments disequilibrium. It is not a problem unless the imbalance is large and persistent.
Tariffs are not the only trade barriers. They can also take the form of quotas and voluntary arrangements. Another form of non-tariff barrier is standards and technical regulations which imported goods must comply by. Technical regulations, industrial standards, food safety rules etc vary from country to country. Thus, if a standard cannot be met by an importer, there is effectively a barrier to trade. If the standards are set arbitrarily, they could be used as an excuse to protect domestic producers from foreign competition. International standards are increasingly being adopted at the national level to facilitate trade whilst still protecting consumers.
Other forms of non-tariff barriers can include (depending on their use) import licensing, rules for the valuation of goods at customs, pre-shipment inspection and rules of origin
The development prospects offered by international trade are an issue which is continually argued over. Supporters of free trade are optimistic and see trade as an engine of growth for every country. On the other hand, there is another more pessimistic opinion that trade without the correct measures in place is an engine for further global inequalities. These branches of opinion propose greater protection, and more inward looking policies. (This section borrows heavily from Todaro, 2001)
Trade optimists focus on the relationship between a country's trade policy, export performance and economic growth. They argue that trade liberalisation (including export promotion, currency devaluation, removal of trade restrictions, and generally allowing market supremacy) generates rapid export and economic growth because free trade provides a number of benefits:
Trade optimists do not recognise the need for systems of industry protection
such as those used in the import substitution strategy. They argue that such
systems will only prolong difficulties whereas export promotion will take time
but will gather increasing momentum and eventually trade will benefit all.
Trade pessimists tend to focus on three basic themes: (1) the limited growth of world demand for primary exports (2) the deterioration in the terms of trade for primary exports (3) the rise of new protectionism against the exports of developing countries in both manufactured and processed agricultural goods.
Developing countries' exports grow slowly firstly because of a decrease in demand of developing country goods. Demand has further decreased because of increased efficiency in the use of raw materials and the ability to develop synthetic substitutes. Secondly, because of competition from the rising productivity of agriculture in developed countries. Thirdly, because of the rising tide of protectionism put up by the developed world against developing country exports. Lastly, because primary product exports are characterised by limited growth in demand (i.e. world growth does not increase the demand for the exports in raw materials and foodstuffs), the price is prohibited from reaching the profitable levels of manufactured goods in which demand has a high capacity to grow.
The rise of new protectionism in the developed world results from the very success of developing countries in producing a wide range of both primary and secondary products at competitive world market prices. There has been a concern among workers in developed countries that global competition will result in job losses, as production costs may be higher in developed countries. This has led to pressure being placed on governments to step in and curtail or prohibit competitive imports from the developing world.
A famous example of new protectionism is the Multi-Fibre Arrangement (MFA), which is a set of quotas established by developed countries on the imports of cotton, wool and synthetic textiles and clothing from individual developing countries. The purpose of this agreement was supposedly to give poor countries guaranteed and growing access to the European and North American markets, but at the same time ensure that this growth does not disrupt the older established textile clothing companies in the developed world. The MFA is a form of protectionism, which discriminates against developing countries some of which are highly dependent on the textile industries for their economic development. The WTO's Agreement on Textiles and Clothing seeks to dismantle the MFA over time.
Trade pessimists conclude that free trade is harmful to developing countries for three reasons. Firstly, the slow growth in demand for their traditional exports means that export expansion, rather than increasing revenue results in decreasing prices and a transfer of income from rich nations to poor. 2001 has witnessed an example of this taking place with the dramatic fall in the price of coffee. Producers of coffee suffered catastrophic blows to their income, whereas the coffee merchants in the developed countries reaped the benefits of purchasing the inputs to their product at rock bottom prices. Secondly without import restrictions, markets may be flooded with imports, which will be very costly given that these imports are generally manufactured goods which have a tendency to rise in price and their exports are generally primary products which have a tendency to fall or stagnate in price. Thirdly given the disadvantages attached to exporting primary products, developing countries need to diversify their export base. Export promoting free trade policies tend to inhibit industrialisation and diversification, as governments are not able to intervene to attract its people into new areas of work and protect new industries.
UNCTAD has proposed four key objectives to improve the international trade system:
Trade liberalisation is the prime objective of the WTO and liberalising policies have been adopted by most countries. The Uruguay Round of the GATT negotiations has ensured some liberalisation in key sectors such as agriculture and services. On the other hand, trade rules also guarantee patent rights and test the validity of health and safety standards. The best way for consumers to assess the impact of multilateral trade rules is through the lens of consumer rights.
The ability of consumers to meet their basic needs; to be protected from unsafe goods; to be provided with suitable levels of information; to have a choice of reasonably priced goods; to be represented; to have access to redress and to have a healthy environment can all be critically affected by international trade. In some cases, these consumer rights can be furthered through increased trade and, in other cases, threatened. The key areas of concern are the impact on development and the economy; impact on choice and prices; influence on standards and on consumer representation.
Consumers have concerns beyond changes in price and the quality of goods to the broader impact on the economy and sustainable development. This is important to them both in terms of livelihoods and thus purchasing power but also the long-term ability of the country to provide them a decent standard of living. Especially in developing countries, consumer groups are concerned on the impact of liberalisation on smaller producers especially farmers.
Thus, a key issue for consumers is the long-term impact of trade on sustainable development, the economy and growth.
Economic theory predicts that the reduction of trade barriers should lead to increased competition, more efficiency and thus lower prices. This is because with trade liberalisation, the opportunity for foreign companies to compete with domestic companies is made possible. So, consumers are exposed to a wider range of goods and services.
The tendency in many countries is to see exports as virtuous, but imports as threatening. For consumers it makes no sense for competition to stop at national frontiers. Trade is itself one of the most important sources of competition in domestic markets. Trade increases income through specialisation and exploitation of economies of scale. Trade also augments the variety of goods available to consumers. Indeed, no country, even the largest, could provide its consumers with a high standard of living without extensive reliance on imports. Therefore, consumer organisations have usually favoured liberal trade policies, in order that consumers may enjoy access to a wide range of goods at competitive prices.
However, the increased choice and better value for money does not happen automatically. In some cases, liberalisation has led to less competition. For example in some goods, where globally there was a range of products, now there are just a handful of multinational companies supplying the global market place. Liberalisation sometimes eliminates smaller companies who cannot compete with companies with production facilities around the globe. In some cases, prices have not fallen with a reduction of tariffs. For example, in some regions, when tariffs fell, the trading companies kept prices the same but increased their profit margins.
A critical tool in ensuring the distribution of the benefits of trade liberalisation to consumers is the establishment and enforcement of competition law. Competition policy is a set of measures aiming to stimulate competition and protect consumers against anti-competitive conduct such as price fixing and monopolisation of the market.
Thus, trade liberalisation can yield benefits for consumers in terms of choice and price, but strong consumer policy and competition policies are needed to ensure that this actually happens.
One of the reasons why consumers have had reservations about opening up markets to competitive trade has been the fear that product standards may suffer and the public could be exposed to inferior or even dangerous goods. The fear is expressed that producers may take part in a 'race to the bottom', that low quality (and associated low price) will always undercut better quality.
The arguments differ between safety and quality. Whether a product is safe or not is not always apparent to consumers and so measures are needed to protect them, especially as the consequences of misjudgement can be serious. However, in the case of quality, the 'race to the bottom' concept tends to assume that consumers are not equipped - and do not have the tools - to understand 'value for money'.
In recent years, particularly since the establishment of the World Trade Organisation (WTO), the debate has shifted from the qualities of the products themselves to the consequences of their production in social and environmental terms. The fear is that the exploited worker, the polluted environment or the abused animals may be paying the price for the race to the bottom.
However, it is not correct to describe these issues as new. Pollution, desertification and exploitation have been present throughout history and the current rich countries went through horrors of industrialisation that we hope developing countries may be able to bypass. Even now, developed countries produce two-thirds of the world's industrial waste despite their claims to have 'higher' environmental standards.
In terms of international trade, the evidence of a race to the bottom in which developing countries encroach on world markets has not yet been proven. The evidence, both historical and geographical, suggests that the public demands higher standards themselves as living standards rise. If this is accepted, then economic growth for the poorer countries can be part of the solution rather than the problem.
To facilitate trade and comply with WTO rules, international standards, such as those developed at Codex Alimentarius and the International Organisation of Standardisation (ISO) are being increasingly adopted at the national level. In some countries, international standards will be higher than the domestic ones and in other places will be lower. Consumer participation in all levels of the standard setting process are needed to ensure that the standards set both protect consumers and are fair.
The preceding sections outline some of the areas of policy where consumer participation is critical. For consumers to benefit from trade, it is necessary that the consumer interest is a significant factor in trade policy making. The main influence on trade policy is domestic producers - either those seeking markets elsewhere or those who want to be protected from foreign competition. Departments of Trade around the world regularly meet with the private sector and loudly declare the extent to which they are meeting the needs of business. Why are governments not seeking the views of consumers in the same way?
Firstly, with limited resources, consumer groups are not readily able to analyse the impact of trade to formulate policies with which to influence their governments. They are more likely to be experts on food safety or health policies rather than economists and sometimes do not have the resources to be able to obtain the necessary research and analysis.
Secondly, the consumer voice is dispersed through a country's population and not concentrated as is the producer interest which makes it more difficult to focus on a few points.
Thirdly, and perhaps most importantly, many governments fail to consult consumers on trade and economic policies. It is therefore up to consumer groups to make the case, provide the evidence and clarify the consumer position to ensure that the consumer interest is properly articulated and represented. One such mechanism is the establishment of national trade committees with a mix of stakeholders represented. Getting the consumer policy ministry or competition authority interested in trade issues to be internal advocates for consumers is another.
However, representation at the national level is only part of the battle with many trade policy decisions made at the inter-governmental level, primarily at the WTO. The WTO is the only intergovernmental body to not allow international NGOs to observe proceedings. Such access is essential to feed back to the national level and to ensure that non-commercial considerations are not lost at the global level when handling trade disputes or making other trade policy decisions.
One of the challenges for consumers and the consumer movement are the trade offs that trade liberalisation forces us to make. For example, one may have increased access to basic goods but at lower quality. Higher standards in one region may affect livelihoods in another. Better value goods may come at the cost of less influence in influencing appropriate policies. How are we to make these value choices? In a multilateral rules-based system, it is difficult to deal with these issues on a case-by-case basis.
How to deal with these questions is one of the most difficult challenges the global consumer movement faces. However consumers are the only segment of civil society that is equipped to making these trade offs on a day-to-day level. Every time we shop, we make choices between quality and price. The global marketplace presents us with more complex choices, but ultimately the consumer ability to balance a mix of values will be respected increasingly as our views are increasingly heard.
Recognising the importance of trade for economic growth, governments have agreed to constrain their freedom to act unilaterally - in other words, to limit any action without consultation with other countries - on trade policy by signing up to the General Agreement on Tariffs and Trade (GATT). The GATT is a multilateral agreement which provides a set of rules for the conduct of trade and a forum, the World Trade Organisation (WTO), for negotiations on trade matters and for settling trade disputes between members. The GATT is, therefore, of great importance to consumers: its rules and procedures establish the framework in which international trade and trade policy take place. It has a real impact on the choice of goods available to consumers and the price they have to pay.
The world economic system which emerged after the Second World War was in many ways a new beginning. It reflected both the new political realities of the post war period - particularly the sharp division between East and West - and also the harsh economic and social experiences of the 1930s. In the West, the kind of economic order built after 1945 reflected the economic and political domination of the United States. It had both the economic and technological capacity and the political will to lead the way in building a new order.
The institutional basis of this new order came into being formally at a conference in Bretton Woods in New Hampshire (US) in 1944. The United Nations Monetary and Financial Conference held in Bretton Woods produced charters for the World Bank (International Bank for Reconstruction and Development or IBRD) and the International Monetary Fund (IMF). It also proposed the establishment of the International Trade Organisation (ITO) for which negotiations were held separately.
The IMF was to work to provide a stable system for international payments and exchange and the World Bank was to provide development loans and assistance. While the World Bank retained more or less this function, the IMF evolved into the institution which set the preconditions for financial assistance and, therefore, became involved in domestic and trade policy.
In 1945, the United Nations was set up. In 1946, a subordinate body, the Economic and Social Committee (ECOSOC), adopted a resolution to draft a charter for an 'International Trade Organisation' or ITO. Whilst negotiations on the charter of the ITO were taking place, a group of countries came to a consensus that there was a need for immediate tariff reductions. The United States took an initiative in preparing a document on the general agreement on tariffs and trade. Subsequent deliberations between the group of 23 nations, meeting in Geneva resulted in a set of mutual tariff reductions which were codified as the GATT. The agreement was intended to be a 'stepping stone' to the establishment of the ITO.
In the event, the International Trade Organisation never came into existence. A conference in Havana in 1947-48 did establish a charter for the ITO (the 'Havana Charter'). However, disagreements between the United States and Britain over the extent of the authority of the proposed ITO over the action of governments prevented the ratification of the charter. In particular, the United States Senate never ratified it.
By contrast, with the International Trade Organisation, the GATT was a multilateral agreement, not an organisation requiring all contracting parties to abide by certain international trade rules. The GATT was originally intended to operate under the umbrella of the international trade organisation, but, since this did not materialise, the GATT evolved as the main forum for international trade negotiations. The secretariat at Geneva became, in effect, a standing body to administer the GATT treaty.
The aims of GATT are to reduce levels of trade protection and to ensure that there is a fair and equal trading agreement between countries. Since its inception in 1948, eight rounds of trade negotiations have been completed. As a result of these negotiations, the average tariff (measured against trade flows) on manufactured products in the world's nine major industrial markets has fallen from 40 percent to below five per cent.
Seven rounds of trade negotiations under the auspices of the GATT were successfully
completed before the Uruguay Round which established the World Trade Organisation
(WTO).
1. 1947 Geneva Round
2. 1949 Annecy, France
3. 1950-51 Torquay, UK
4 1956 Geneva
5. 1960-62 Dillon Round
6. 1964-67 Kennedy Round
7. 1973-79 Tokyo Round
8. 1986-94 Uruguay Round
The first round in 1947, among the 23 founding countries resulted in 123 agreements covering just over half of world trade. This first Round was successful in cutting tariffs, largely as a result of the US, an enthusiast for free trade, being willing to cuts its tariffs on imports from Europe while not putting pressure on the European countries to abandon their trade restrictions on imports.
Negotiations in this and the succeeding four rounds (Annecy, Torquay, Geneva and Dillon) were on a bilateral 'product-by-product, request-offer' basis. Two countries exchanged two lists, one containing requests that the other country reduce tariffs facing the first country's main exports, the other being a set of offers to bind or reduce tariffs on goods for which the second country was a main supplier to the first.
These lists were also circulated to all other negotiating countries who would then be able to consider them in their own bargaining and who could join in the negotiations between the original pair of countries if they had a major interest. This procedure did much to transform the results of bilateral negotiations into multilateral liberalisation.
However, these subsequent rounds did not yield as great results as the first Round. The 1956 Geneva Round and the Dillon Round covered around US $ 2.5 and 4.9 billion in trade respectively compared to US$10 billion in the 1947 Geneva Round. Among the factors constraining further liberalisation were the reduction of the negotiation authority of the US Administration by the US Congress, the unwillingness of Britain and the Commonwealth countries to reduced preferences, and the creation of the European Community.
In addition, it became increasingly clear that the existing procedures were unlikely to yield major progress in liberalisation, largely because of the increasing membership.
The Kennedy Round (1964-7) was so named in recognition of US President Kennedy's support for the reformulation of the US trade agenda. This Round departed from the product-by-product approach to tariff reductions used in previous rounds, and adopted an across-the-board approach to cuts in tariffs for industrial goods. Tariff concessions covered an estimated total value of US $ 40 billion in trade (75% of world trade). In the end, the result was an average 35% reduction in tariffs, except for textiles, chemicals, steel and other sensitive products; plus a 15 to 18 % reduction in tariffs for agricultural and food products. A code on anti-dumping also emerged from this Round.
Developing countries played a minor role throughout the negotiations in this Round, benefited nonetheless from substantial tariff cuts particularly in non-agricultural items of interest to them. Their main achievement at the time however was that for the first time, being allowed to opt out of the reciprocal concessions and the majority did so.
The economic climate during the Tokyo Round negotiations was far from encouraging. The world was suffering from 'stagflation', non-tariff barriers were proliferating and trade relations between the US, the European Community and Japan were strained. Many problems which had been on the agenda for the Kennedy Round, but had not been resolved, notably agriculture and non-tariff barriers reappeared.
Ninety-nine countries took part in the Tokyo Round and it took six years to complete (1973 to 1979), a record broken only by the Uruguay Round. The Tokyo Round produced significant tariff reductions, but more importantly, it negotiated a series of new agreements or codes to deal with non-tariff measures and more favourable treatment for the trade of developing countries.
The total value of trade affected by the Tokyo Round negotiations on tariff reductions and tariff bindings (a commitment not to raise tariffs) came to more than US $300 billion. Because of these cuts, the weighted average tariff (that is, the average tariff measured against actual trade flows) on manufactured products in the world's nine major industrial markets fell from 7.0 per cent to 4.7 per cent. The Round resulted in nine separate agreements (six of which were called 'codes') and four understandings on the aim and operation of the GATT.
The Tokyo Round made some progress on agriculture, drawing up specific multilateral agreements on bovine meat and dairy products. The Round also managed to reduce the import duties and other trade barriers on tropical products imposed by industrialised countries on developing countries. However, the talks failed overall to liberalise trade in agriculture, since this would have required reform of domestic support policies, such as agricultural subsidies, which contracting governments were not prepared to consider. Agriculture therefore remained removed from the mainstream of the GATT rules.
A new clause established the legal basis on which developed countries could extend the generalised system of preferences (GSP) to developing countries. A consultation procedure and a committee on trade and development had already been set up to follow all GATT activities and ensure that the problems of developing countries received priority. The committee's role was strengthened at the Tokyo Round by the creation of two new sub-committees, one to examine any new protective measures taken by developed countries against imports from developing countries, and the other to consider the trade problems of the least-developed countries.
The Tokyo Round distinguished itself from previous rounds by grappling with the problem of non-tariff barriers, which are barriers to trade such as subsidies and technical barriers to trade. The core of the Tokyo Round's achievement was to arrive at agreements or codes designed to reduce non-tariff measures and bring them under more effective international discipline. Not all contracting parties subscribed to the codes. All the codes provided arrangements for consultation and dispute settlement.
With the benefit of hindsight, the Tokyo Round is of immense importance for two reasons. Firstly, it continued the downward trend in tariffs. Secondly, the Round was not conducted as a 'single undertaking'. That is to say, countries were able to opt in to the agreements, rather than wait for final agreement on all sectors. The contrast with the succeeding Uruguay Round was significant in this respect.
The agreement on subsidies and countervailing measures - the subsidies code - committed signatory governments to ensure that use of subsidies did not harm trading interests of other signatories. It stated that countervailing measures are only justified if it can be shown that the imports in question threatened or caused injury to domestic industry.
A revised anti-dumping code interpreted GATT's article on dumping and brought some of its provisions into line with those of the subsidies code.
The agreement on technical barriers to trade - the standards code - defined the procedures for considering new standards for industrial and agricultural products. It emphasised provision of information and consultation. It acknowledged the right of a country to take measures to protect human, animal and plant life or health, provided action did not create unnecessary barriers to trade. It encouraged the use of international standards and certification and referred to the Codex Alimentarius Commission (the intergovernmental body for international food standards).
The agreement on government procurement aimed to secure greater international competition in the bidding for government procurement contracts.
The customs valuation code aimed to set a fair, uniform and neutral system for the valuation of goods for customs purposes; provides a revised and expanded set of valuation rules.
The agreement on import licensing procedures committed governments to simple procedures that did not act as restrictions on imports.
The Tokyo Round agreed improvements in the existing mechanisms concerning the notification of trade measures, consultation, dispute settlement and surveillance. It also laid down guidelines for setting up a dispute panel and choosing panellists, and shortened the time-scale. Panel proceedings were expected to take three to nine months (three months in cases of urgency). If a dispute was not resolved through consultations, the council could ask an appropriate body or individual to conciliate between the two parties. If one of the countries involved in the dispute was a developing country, it could ask the director general of GATT to be the conciliator.
The technical assistance services of the GATT secretariat were made available on request to less developed countries to assist them in matters relating to dispute settlement. Where a less developed country brought a case, contracting parties agreed to take account not only of the trade coverage of the measures complained of, but also their impact on the economy of that country. If the panel's recommendations were not implemented within a reasonable period, the country bringing the case could ask the council to find an appropriate solution.
Finally, on the question of surveillance, it was agreed that there should be regular reviews of developments in the trading system.
However, the new codes caused additional problems since each had its own mechanism for settling disputes. Consequently, disputes arose over which dispute settlement procedure (the general GATT procedure or a code procedure) to invoke. This shortcoming pushed trade disputes outside the GATT and into the realm of unilateral trade retaliation.
By the end of the 1970s, the optimism generated by the strong performance of the world economy in the 1950s and 1960s had been diminished. Spiralling inflation and balance of payments problems brought a reversal of the trade liberalisation momentum of the preceding two decades and a resurgence of protectionism. World trade declined from a growth rate of nine per cent in the 1960s to six per cent throughout the 1970s and four per cent in the 1980s. The 1980s were particularly volatile, with growth in world trade plunging to minus three per cent in 1982, in response to the worldwide recession, and rising to nine per cent in 1988. In the following three years, world trade and economic growth declined.
In spite of the benefits brought previously by multilateral trade liberalisation, trade policy in developed countries in the 1980s and beyond was characterised by increased protectionism. The turbulent events of the 1970s and early 1980s challenged the industrialised economies to undergo dramatic economic readjustment. In developed countries, many industries, such as textiles and clothing, were becoming obsolete, and high levels of unemployment accompanied the shift to technological and industrial innovation. In the United States and European Community, these adjustments coincided with intense competition and cheaper imports from Japan, Korea, Taiwan and a number of other developing countries. In these circumstances, industrialised countries reacted defensively towards their trading partners.
For example, under the EC/Japan Tokyo Agreement of 1983, the volume of imports of Japanese video-recorders into the EC were limited, and Japan agreed to guarantee a share of the EC market to EC producers and not to undercut EC prices. Faced with complaints from BEUC, the European Consumer Federation, the European Commission replied to the effect that the agreement was a unilateral undertaking by Japan and, as such, did not fall under EC competition rules.
Such non-tariff barriers came to affect a larger proportion of imports into developed countries than they did at the beginning of the 1980s. Restrictions were also widespread in industries such as textiles, where comparative advantage had generally shifted to the developing countries. The United States maintained over sixty separate voluntary export restraints, limiting exports from a broad range of countries, including developing ones. In the European Community national non-tariff barriers are being replaced by Community-wide measures in some sectors -for example, the voluntary export restraint agreed between the Community and Japan restricting access of Japanese cars to European markets. In 1989, approximately one-half of total voluntary export restraints were directed at developing countries and four-fifths of all arrangements were intended to protect European Community and United States markets.
This was particularly disturbing because, by the end of the 1980s, a large number of developing countries had adopted or were edging towards more liberal trade policies. During the post-war period, developing countries had generally followed import-substitution policies, heavily influenced by the World Bank and IMF. The model preferred by the international institutions was to change in due course however. Many developing countries tried to reduce the costs of their industrialisation through preferential trade arrangements with each other but these were unsuccessful. By the mid-1980s, it became clear that the export-orientated economics of East Asia were achieving high levels of economic growth. At the end of the 1980s the trend among developing countries was one of export-orientated policies At the same time, although there were some trade liberalising moves in industrial countries, they tended to be discriminatory in nature - preferential status would be granted to selected groups of countries while restricting exports of more competitive newcomers. The new orthodoxy of export promotion and trade liberalisation was only partially implemented by the countries from which the theories emanated.
With the liberalisation of developing countries' trade policies came an increasing adherence to the GATT. Most of the 63 GATT members that joined during the course of the Uruguay Round were developing countries. Many had liberalised their trade regimes by simplifying complex tariff structures and reducing rates. Several countries, particularly in Latin America, also reduced - and even discontinued - non-tariff measures, particularly quotas.
The protectionist tendency in world trade was fuelled by the unilateral action of the two major players - the United States and the European Community. Both strengthened their bargaining positions in trade through national and Community law in the 1980s.
Section 301 of the United States Trade Act 1974 gave the US government the power to retaliate through trade measures against countries which were seen to be harming American commercial interests through illegal or "unfair" action. It was thought that these disputes would go through GATT, but in 1984, an amendment to the Act changed things. A potentially potent modification of section 301 known as Super 301 allowed the government to impose tariffs of up to 100 per cent on exports of a country which refused to open its markets to American goods. The Super 301 clause was revived in 2000 with the US setting out its complaints against Brazil, the Philippines, Romania, Japan, Korea, Malaysia, Mexico, the Ukraine and others for a wide range of actions involving various issues including intellectual property.
In a similar vein, in 1984, the European Community adopted the new "commercial policy instrument", a regulation to strengthen the common commercial policy "with regard to protection against illicit commercial practices" from outside the Community. However, under the European Community regulation, if an international proceeding is applicable, it must be invoked and followed through to its conclusion before counter action can be taken.
In spite of the overall slowdown, however, trade growth continued to exceed output - or production - growth by a sizeable margin. This trend was tangible evidence of the continuing integration of the world economy. It is important to note that some of it may however, be artificially stimulated by trade diversion rather than creation due to perverse policies such as dumping of agricultural surpluses.
The industrialised countries were the principal benefactors of, and participants in, world trade throughout the decades. This changed slightly in the 1980s as trade growth in Asia's fast-developing economies far exceeded growth in the rest of the world.
Conversely, persistent debt problems and generally low primary commodity prices resulted in poor trade performances in the least developed countries of Latin America and Africa. (This discouraging trend continued in the 1990s, with economic growth in the least developed countries at the lowest rate since the worldwide slump of 1982). This was then the context for the start of the Uruguay Round in 1986.
The importance of agriculture varies between developed and developing countries. Although only 5-10% of the population in developed countries is involved in farming - sometimes even less - the figure rises to between 50 and 80% in developing countries. Furthermore, two-thirds of the poor in developing countries live in rural areas. Yet, developing countries account for less than a quarter of agricultural trade today. As recently as 1950, they accounted for half. These dramatic shifts and contrasts make conflict unsurprising, and yet through its global movement, Consumers International has tried to bridge the differences.
By the mid 1980s, a central thesis of much of the work by Consumers International and BEUC, the European Consumer Federation, was that there was a common interest between poorer consumers in the North and producers, and ultimately consumers, in the developing economies. During the negotiations, the 'traditional' method of support for EU farmers through the Common Agricultural Policy (CAP) - the system of agricultural price supports and grants operated by the European Community- came from price guarantees, tariff barriers against imports and subsidised exports. As farmers were effectively promised a market at guaranteed prices, their natural response was to produce more, leading to the notorious food mountains. These in turn were off-loaded onto world markets though a system of export subsidies, with disastrous consequences for producers in other countries.
The Americans too operated a system of subsidised export enhancement with the same consequences for the rest of the world. (Debates took place about whether tax reductions and export credits (the US system) counted as subsidies in the same way as EU export subsidies. Neutral observers invariably concluded that they were equivalent. Consequently, the OECD famously calculated that the average American dairy cow received the equivalent in annual subsidy to the disposable per capita annual income of half of the world's human population. The US negotiating position was nevertheless to reduce export subsidies to zero, a position that Consumers International supported if it also incorporated US subsidies.)
Furthermore, the impact of the EU measure on consumers was regressive, because food figures heavily in the budgets of poorer families. In 1993, the poorest tenth of UK consumers spent 25% of their disposable income on food, the richest tenth only 14%. In Germany in 1990, the average family spent 14% of their budget on food, in Greece 36%. Any artificial boosting of food prices inevitably penalised poorer households disproportionately compared to other households.
Even in terms of social objectives, the CAP failed. The net effect of the first thirty years of the CAP was to increase the gap between rich and poor farmers. By 1988, the average income per person on the smallest farms in the EU was less than 10% of that on the largest farms.
Whilst claiming the need to protect European farmers from foreign competition, from 1980 to 1988, EU imports rose by only 0.8%; exports rose by 23%. The EU's share of the world wheat market increased from less than 7 per cent in 1971 to almost 22 per cent in 1990.
Large-scale subsidised exporting of European Union and US surpluses of some products drove down the world price and led to distortions in world trading patterns. For example, the joint effect of the policies of the European Union and the United States have, at times, led to the virtual collapse of the world price for cereals. By the late 1980s, it was estimated that the continued effects of EU export refunds and US export enhancement amounted to a 23% depression of world agricultural export prices.
The effects of these policies on developing country producers can be easily described. Their share of world food exports fell from 45% in 1961 to 28% in 1990 while the OECD share rose from 46 to 72%. Between 1980 and 1987, the IMF Food Commodity price index halved.
In sub-Saharan Africa, where some of the world's poorest people are dependent on cattle farming, European Union beef was sold at up to one half of the price of locally produced beef, with subsidies - destroying the market for local farmers. The Catholic Institute for International Relations estimated that world beef prices were depressed 40% by EU and US subsidised exports. There were reports of negative prices for European beef in Egypt, the traders making money on the export subsidy and then paying people to take the beef. The Uruguayans lost much of their beef export market in neighbouring Brazil, because of EU marketing practices in the late 1980s.
Even in sectors where one would assume that tropical countries have a natural advantage such as sugar and rice, the EU became an exporter because of subsidies. A World Bank study estimates that subsidised European Union sugar exports depressed world market prices by 30 per cent at the beginning of the 1980s and by 17 per cent in the long term.
Therefore, consumer bodies found themselves in the paradoxical position of arguing that food prices needed to rise (or stop being artificially depressed). Unfortunately, the resultant problems caused by rising food prices would hurt those countries (such as Bangladesh and Indonesia) which were net importers of food. Developing countries without the capacity to produce enough food for their own populations are dependent on buying food on the world markets or on food aid. Most experts agree that the best long-term solution to world hunger is the creation of healthy agricultural sectors in the developing countries themselves - not only providing food supplies to feed their own populations but also acting as a spur to overall economic growth.
This problem was recognised during the GATT negotiations and there was a ministerial decision setting out objectives for the provision of food aid and agricultural development aid for the least-developed and net food-importing developing countries disadvantaged by the agreement. Although this is an area where it is easy to state grand principles and hard to make those principles a reality, the inclusion of agriculture in the Round at all was something of a breakthrough.
By 1986 at the commencement of the Uruguay Round, serious weaknesses were apparent in the GATT system. These were:
Therefore, when the Uruguay Round was launched at a ministerial meeting in Punta
del Este in 1986, hopes were high that some of these issues would be addressed.
Ministers agreed the Punta del Este declaration as the basis for the negotiations,
which were expected to last four years. One hundred and five governments participated,
of which 96 were GATT contracting parties and the rest were in the process of
negotiating membership.
The declaration established a very ambitious programme for the negotiations. The old problem sectors of agriculture and textiles were on the agenda, along with the new area of services that had never before been covered by the GATT. Revised rules on safeguards, anti-dumping and subsidies were to be negotiated as well as new rules on investment measures and the protection of intellectual property. Other subjects discussed were improvements to the surveillance and dispute settlement procedures and the functioning of the GATT system.
The period following the Tokyo Round was one of worldwide economic recession and of conflict between the three major trading blocs, the US, the European Community (EC) and Japan. The US-EC disputes largely centre on agricultural issues. At the same time the US was attempting to induce the Japanese to open up their domestic markets to foreign goods and to American goods in particular, while the EC was attempting to limit Japanese export growth.
Japan favoured a new round preferring multilateral negations to the prospect of continued bilateral pressure from the US and EC. Other countries were generally in favour of a new round, but were concerned with other issues. The smaller industrial countries wished to constrain the tendency of the 'big three' to ignore GATT principles. The agricultural-exporting countries were concerned about the impact of subsidised US production and the EC subsidised exports on world markets. The developing countries' interests were in securing greater tariff preferences, reducing the impact of export restrictions in other areas particularly textiles and clothing and again, about agricultural trade.
By the mid-1980s, the US had lost its comparative advantage in several of its traditional exporting sectors, such as steel and the automobile industry. These sectors already enjoyed considerable protection from imports and had powerful domestic lobby groups defending their interests. The traditional policy response in such circumstances is to enlist the support of the export industries by securing greater freedom of access to foreign markets for their products. The export-oriented sectors from which the US could expect to gain however did not fall within the traditional range of industrial goods and so the US sought to introduce to the agenda for the proposed negotiations, several new items. These 'new issues' included trade-related investment measures or TRIMs, trade aspects of intellectual property rights or TRIPS and trade in services.
The Round was launched at the Ministerial meeting at Punta del Este, Uruguay in 1986 with the establishment of 15 negotiating groups.
As membership of the GATT increased, it was criticised for its failure to adapt to the aspirations of the new members. The Uruguay Round started with a commitment to five principles, which may have actually further limited the participation of developing countries:
1. The negotiations were done as a single undertaking i.e. commitment to each negotiated agreement was subject to commitment to the entire final package.
2. There were open talks in 15 negotiating groups.
3. All talks were concurrent.
4. Because of non-reciprocity, developing countries were not to be asked to open their markets to the same degree as the developed countries.
5. The negotiations covered four themes: market access, rule making, institutional reform and new issues.
Principles 1 and 3 created a process that was both slow and rigid, especially
as the 'single undertaking' principle led to the marginalisation of the weaker
participants. Likewise, the concurrent talks made the logistics of participation
far more difficult for the smaller and poorer delegations. With smaller delegations,
they could not participate as readily as more developed countries in simultaneous
discussions. Faced with these difficulties, the promise of greater openness
was more theory than reality.
The consequence of all of these elements was that when it came to ratification, the agreement was virtually non-negotiable, that is it was presented in effect as a take it or leave it document. In the event, the poorer countries 'took' it.
With hindsight, it is not surprising that the Uruguay Round proved to be highly controversial and overran its allotted four-year span by another four years. By the time of the 'mid-term' review in Montreal in 1988, provisional agreements had been reached on eleven of the 15 negotiating areas including the new area of services. However, four areas remained to be agreed. These were textiles/clothing, agriculture, intellectual property and 'safeguards'. The original negotiating deadline passed in December 1990 in Brussels and it took a further year, during which the negotiations were stalled mainly over agriculture. Eventually, the negotiations degenerated into a private meeting between the EU and the US, with the rest of the world relegated to the role of bystanders.
Whilst the Uruguay Round was by far the longest round of multilateral trade negotiations, it would be wrong to view it as a continuous set of negotiations. Long stretches of its seven-and-a-half years were spent waiting for this or that participant to come to terms with the need for a change in its negotiating position. Substantive negotiations ended in December 1993 with a final agreement adopted at the Ministerial meeting in Marrakech, Morocco in April 1994.
The main achievements of the Uruguay Round included a trade-weighted average tariff cut of 38%, the conclusion of the Agreement on Agriculture which brought agricultural trade for the first time under full GATT disciplines, adoption of TRIPS and TRIMs, the creation of a unified and predictable dispute settlement mechanism, confirmation of the Trade Policy Review Mechanism, the establishment of the World Trade Organisation which administers 15 multilateral agreements and four plurilateral trade agreements. Other results of the Round were strengthened provisions on anti-dumping, subsidies and safeguards. The new Agreement on Textiles and Clothing would bring this sector under the GATT gradually replacing various voluntary export restraint agreements.
Details of all of these Agreements can be found in the next chapter.
The World Trade Organisation (WTO) is the main intergovernmental body dealing with the rules of trade between nations. The backbone of the WTO are the agreements, which have been negotiated during the Uruguay Round and signed by 141 of the world's nations. These agreements provide the legal ground rules for international commerce. The agreements act as contracts between governments, which are overseen and supported by the WTO.
The process of overseeing trade practice internationally, involves the WTO having a clear administrative structure, mechanisms for research and dealing with conflict and a set of clear aims and principles to work in accordance with.
The main functions of the WTO are:
The members of the WTO are national governments. The European Union is a member in its own right as is each of the member states of the EU. However, the European Commission (EC) speaks for all EU members at most WTO meetings. Certain other bodies such as the IMF, the World Bank and UNCTAD are allowed observer status at selected meetings. There is no mechanism for NGOs to be observers to any of the WTO proceedings.
The WTO secretariat is based in Geneva, Switzerland. It consists of around 500 staff members, and is headed by a Director General. The secretariat's role is to serve the committees and other bodies by administering meetings; providing technical assistance; producing documents; and providing economic, legal and statistical analysis and advice. The WTO secretariat is supposed to be a neutral facilitator of discussions. Nonetheless, it has considerable influence over proceedings at the WTO, particularly in the prioritisation of issues.
The highest authority in the decision-making process is the Ministerial Conference, which is composed of representatives of all WTO members. This body meets at least every two years, and can take decisions on all matters. (Ministers met for the first time in Singapore 1996, then in Geneva 1998, and Seattle 1999, they are due to meet in Doha in November 2001.)
There are also three subsidiary bodies which carry out the day-to-day work of the WTO:
All three are in fact the General Council, although they meet under different
terms of reference. All three consist of WTO members and report to the Ministerial
Conference. The General Council acts on behalf of the Ministerial Conference
on all affairs of the WTO. It meets as the Dispute Settlement Body and as Trade
Policy Review Body to oversee procedures for settling disputes between members
and to analyse member's trade policies respectively.
Three main councils each handling a different broad area, report to the General Council:
· The Councils for Trade in Goods,
· The Council for Trade in Services
· The Council for Trade-Related Aspects of Intellectual Property Rights
(TRIPS)
The Councils for Trade in Goods and Trade in Services are composed of a number
of committees. Six other committees report directly to the General Council such
as the Committee on Trade and Environment and the Committee on Trade and Development.
Each of the higher-level councils has subsidiary bodies. For example, the Council for the Trade in Goods has eleven committees dealing with specific subjects (such as agriculture, anti-dumping, market access, subsidies, and so on). The Dispute Settlement Body also has two subsidiaries: the dispute settlement "panels" of experts appointed to adjudicate on unresolved disputes and the Appellate Body that deals with appeals.
The WTO continues GATT's tradition of making decisions not by voting but by consensus. On the one hand, this allows all members to ensure their interests are properly considered even though, on occasion they may decide to join an overall interests of the multilateral trading system. On the other hand, it is not always clear who is involved in making the consensus as there are no records of who voted for what.
Where consensus is not possible, the WTO agreement allows for voting - a vote being won with a majority of the votes cast and on the basis of one member, one vote. However, this is extremely rare, and most decisions are taken by consensus allowing room for compromise and trade-offs.
Often important breakthroughs are made, not at the formal bodies outlined above, but through informal consultations with governments or between smaller groups of interested countries.
The general aims of the WTO Agreements can be summarised as:
1. To use only approved instruments of trade protection, that is, tariffs not quotas.
2. To use them in a way that does not discriminate between WTO members, except for Customs Unions and the Generalised System of Preferences.
3. To submit all protection to a process of non-reversible reduction that is 'binding'.
These aims are outlined in key articles of the GATT.
The two most defining principles of the GATT are in Articles 1 and 3. Article 1 embodies the misleadingly named 'most favoured nation' principle. It actually rules out favouritism spelling out that "any advantage favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties." In other words, all members must treat each other as they would their most favoured trading partner.
Article 3 sets out the other definitive principle - that of 'national treatment' under which "internal taxes and other internal charges and laws, regulations and requirements ... should not be applied to imported or domestic products so as to afford protection to domestic production. ... The products of the territory of any contracting party imported into the territory of any other contracting party shall not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products."
Articles 1 and 3 are the cornerstones of the WTO's principle of non-discrimination - in other words, no discrimination against imports (other than agreed tariffs) or between imports. This is not to say that imports cannot be impeded, but that any rules applied to a product to protect the public or the environment have to be applied consistently between imported and domestic products.
The emphasis on products is important because GATT rules are generally thought to apply to products rather than to process and production methods (PPMs). Before the Marrakech treaty, GATT was understood not to allow discrimination against an imported product because of, for example, environmental damage in its country of origin. The importing country could protect its own environment against dangerous products but could not pass judgement on production methods in other countries. This was a matter of intense debate among environmentalists. However, the preamble to the WTO Agreements now includes the words: "while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development". This wording has subsequently been found to influence the interpretation of whether or not production processes outside the importers territory can be subject to WTO principles.
GATT is sometimes portrayed as prohibiting any barriers to trade be they for environmental, social or other reasons. In fact Article 20 (the general exceptions clause) allows measures to be taken to protect "human, animal or plant life or health" or for "the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption". The consensus view is that a country can do anything to imports that it does to its own products and it can do anything it considers necessary for public health or environmental protection purposes to its own production processes. What it cannot do is take unilateral action against other countries' internal production processes, and nor can it treat internal and imported products in different ways.
Article 20 also permits measures to be taken against the import of products of prison labour. It could be argued that this last exemption is a humanitarian measure, but equally one could apply more abstract liberal economic theory and argue that products of prison labour are by definition subsidised and not subject to market forces and therefore likely to be a form of dumping if exported. The provision is sometimes interpreted as the nearest GATT gets to a 'social clause' and as such is sometimes quoted as a precedent for other potential provisions such as measures to be taken against products of child labour. The prison labour sub-clause is also seen as allowing jurisdiction over a particular production method and is thus increasingly interpreted as opening the door to jurisdiction over other methods.
The WTO system provides a mechanism for the settlement of disputes when a country finds that another country is in breach of the rules and efforts to find satisfactory solutions through bilateral consultations fail. Disputes brought to WTO are generally the result of the information provided by industries or their associations to their government on the difficulties they are encountering in marketing their products outside markets.
The Dispute Settlement Understanding (DSU) - found under the Second Annex of the Agreement Establishing the WTO - establishes the procedures and rules under which disputes are handled within the WTO. Considered by many as the distinguishing feature of the WTO, the dispute settlement process is a strict and often unrelenting operation that once initiated, can only be stopped though consensus.
The new disputes resolution mechanism established under the WTO is firmer than the pre-existing system. While in the past, implementation of a disputes panel's findings could be blocked if there was not a consensus to proceed, now a consensus would be needed to stop proceedings. The system has therefore evolved from a requirement for positive consensus (single vote veto) to negative consensus (no single vote veto). This represents a strengthening of the prospects for the dispute settlement procedures to take effect.
The ultimate sanction available under the GATT is for retaliatory trade measures to be taken. So paralysed was the old system by the consensus principle that few, if any, measures were ever applied. Instead members took unilateral action by import levies, quotas, even import bans. The new system will make it easier to apply sanctions. The measures taken should operate within the same sector - for example, beef import bans in one direction could be countered by beef import bans in the reverse direction. Should there be no direct analogy, then another sector within the same country can be targeted for retaliation. This has led to some bizarre threats of retaliation against 'unrelated' exporters under threat from a dispute that does not directly concern them. For example, the US has raised tariffs on French cheeses in response to the EU banning US hormone-injected beef.
All WTO members sit on the Dispute Settlement Body (DSB), who administer and adjudicate over the rules of GATT. This process can be simplified into five steps
1. Consultation
2. Panel Phase
3. Appellate Review
4. Implementation
5. Remedies
Most of the Uruguay Round agreements set timetables for future work. Some additions and modifications have been made since then. The "built-in agenda" includes new negotiations in some areas, and assessments of the situation at the specified times in others. Part of the programme has already been completed (for example the market access negotiations in basic telecommunications ended in February 1997).
Here is a selection of the schedule, starting from 1995 when the WTO came into being:
Of key interest to consumers are the negotiations on agriculture and services
and intellectual property. Whilst the negotiations have deadlines by which they
are to be completed, if there is no political will or agreement cannot be reached,
then they are delayed further.
International factors in the economic activities of countries have increased greatly in recent decades. Trade has grown even faster than economic growth in the last 30 years - so also have foreign investment and international capital flows. Driven by economic growth itself, technological innovation, falling transport costs and international as well as domestic liberalisation of trade, investment and economic activity generally, which both creates demand for imports and also increases the capacity of economies to produce goods and services for export.
This is, of course, just another way of describing globalisation. While there are positive effects on promoting competition and in widening consumer choice, globalisation also allows anti competitive behaviour on an international scale and this can pose problems for national governments which have difficulties in dealing with behaviour taking place in other countries that can affect their own economies.
What are the arguments for co-operation in competition law and policy at the international level? What elements should be included in any such discussions and what are the competing possibilities for future action?
International co-operation in competition policy is an old issue, so is the possible involvement of the WTO system (and GATT before the WTO was formed) in the regulation of competition matters. In March 1948 at Havana, Cuba, under the auspices of the UN Conference on Trade and Employment, The "Havana Charter" was adopted containing three core elements:
The ITO was never formed. Under intense pressure from the US congress, and other
developed countries that feared it would become involved in issues of domestic
governance. This concern was particularly pronounced in the regulation of restrictive
business practices. Article 46 of the agreement stated:
"Each member shall take appropriate measures and shall co-operate with the (ITO) to prevent, on the part of private of public commercial enterprises, business practices affecting international trade which restrain competition, limit access to markets, or foster monopolistic control, whenever such practices have harmful effects on the expansion of production or trade and interfere with the achievement of and of the other objectives (of the Charter)."
Consumer concerns with anti-competitive conduct arise in four main areas: international cartels, mergers, monopolisation and the interaction between trade policy and competition.
Global cartels, that is, price fixing, bid rigging or market sharing schemes operating at the international level have long existed. It has been estimated that prior to World War II, 40% of world trade was affected by cartelisation. While not much attention was paid to the subject until recently, there appears to have been a sharp increase in the extent of global cartel activity, or at least in its detection, in the past few years. If there has been an increase in the amount of international cartel activity, rather than just an increase in the amount that has been detected, this is probably due to the impact of trade liberalisation. Liberalisation is generally good for competition, but it tends to put pressure on firms that have dominated particular local markets without much international competition. Facing competition for the first time, some of them tend to get together with producers in other countries to divide up world markets and to agree on prices and output. The vitamins case is the most spectacular example affecting over $20 billion in global trade turnover and increasing prices by around 70%.
In recent times there has been a spectacular increase in the extent of international
merger activity, in one sector after another - finance, communications, oil,
airlines, pharmaceuticals, automotive and professional services.
For the most part, mergers are not anti competitive and pose no major challenge
to consumer welfare, however, it is very important that vigilance be exercised
about these matters. Consumers in small and developing countries are especially
vulnerable to the effects of anti-competitive mergers
Misuse of market power (often called monopolisation) can also occur on a global basis. In November 1999 the United States District Court found that Microsoft possesses monopoly power in the markets for Intel-compatible PC operating systems and browsers, and that it has used this power to thwart competition in contravention of US anti-trust law, and resulting in substantial consumer detriment. The point about this case is that it is essentially about anti competitive arrangements in the United States, which have a global effect. It is part of the global competition picture. Moreover, the Microsoft case illustrates the importance of applying anti trust law to areas of the economy, which are characterised by high rates of technological innovation.
The interaction between trade policy and competition policy can also affect the interests of consumers. First, trade policy liberalisation can be frustrated by failures in the enforcement of competition policy. Supposing a country liberalises trade, allowing a potential flow of imports following the reduction or elimination of trade barriers. The benefits to consumers of this liberalisation can be defeated by restrictive practices in the liberalising market. For example, retailers in the liberalising market may reach agreement with manufacturers in the home market not to accept imports. Entry into that distribution sector may be difficult. Trade policy liberalisation in such cases can clearly be frustrated by failures to enforce competition policy properly, if the regulator does not exist or fails to take action to stop anti competitive practices.
Second, it is important to note the reverse relationship. Trade policy can be highly anti competitive. Nearly all forms of import protection whether they be quotas, tariffs, anti dumping laws and so on can reduce competition and damage consumer interests. It is important that recognition of the damaging effects on competition and consumers of trade restrictions balance the debate about the damaging effect on trade of failures in competition law enforcement.
Work in the WTO on competition policy issues so far has largely taken the form of specific responses to specific trade policy issues, rather than a look at the broad picture. New decisions reached at the 1996 Ministerial Conference in Singapore change the perspective. The ministers decided to set up a working group to look more generally at the relationships between trade and competition policies. The working group's tasks are analytical and exploratory. They will not negotiate new rules or commitments.
There are already some anti-competitive provisions under the WTO Agreements. GATT and GATS contain rules on monopolies and exclusive service suppliers. The principles have been elaborated considerably in the rules and commitments on telecommunications. The agreements on intellectual property and services both recognize governments' rights to act against anti-competitive practices, and their rights to work together to limit these practices.
It seems obvious that in a global economy characterised by ever increasing degrees of economic interaction between countries with ever greater activity on the part of multinational firms with global cartels and global market power that some kind of international effort is needed to deal with some of the problems. National governments alone cannot deal with all global problems. The issue is, with no international anti-trust regime, nor any likelihood of one being introduced in the future, what should and can be done to address the issues raised?
There are a number of policy implications of this. There seems to be six options:
1. Extraterritorial application of laws.
2. Enhanced voluntary convergence in competition laws and enforcement practices.
3. Enhanced bilateral voluntary cooperation between competition agencies.
4. Regional agreements containing competition provisions.
5. Plurilateral agreements.
6. Multilateral competition policy agreements.
For a multilateral approach, we need to define some terms developed at the OECD.
The impact and importance of globalisation and multilateral trade on consumers around the world is profound. Less obvious is the ways in which consumer organisations can influence trade policy making. At present the ability of multinational corporations to achieve their goals far outstrips the efforts of civil society.
For consumer rights to be integral to developments in trade policy, concerted action is needed by consumer groups. This section outlines some possible strategies, but for more information on current trade campaigns, please visit www.consumersinternational.org/trade.
Involvement by consumer organisations in the world of trade talks is not new, although by the media attention given to such actions, one might think it was. Such campaigning goes back half a century when, in the mid-1950s, the Consumers Association of Canada (CAC) played a major role in the removal of tariffs on food and children's clothing. The CAC also was able to take part in the 1980s negotiations leading to the Canada-US Free Trade Agreement (CUSFTA) and was prominent in the public debate surrounding it.
In the late 1970s and 1980s in Europe, BEUC, the European Consumer Federation, was working on trade issues in the EU, notably through analysis of the EU's agricultural policy, which was seen as protectionist.
By 1980, Consumers International (then the International Organisation of Consumers Unions or IOCU) was campaigning hard against the attempt by wealthy countries to use intellectual property provisions at the expense of developing countries. Also, at that time, Consumers International, together with BEUC, put together a trade 'toolkit', produced to advise consumer groups on lobbying techniques on trade issues.
Although these actions were important, they were not part of an ongoing campaign, but were fairly isolated examples of consumer organisations tackling trade issues. It was not until the Uruguay Round that consumer organisations began lobbying at an international level.
The effect of the GATT agreement, signed in 1948, was to dramatically liberalise trade between nations. The consumer view had always been that trade liberalisation should be good news for consumers because it means more choice in goods and services, but only if it did not lead a loss of consumer protection.
By the late 1980s, it was becoming clear that the checks and balances on trade that consumers groups felt were so vital were failing badly. Freer trade did mean that there was greater access to medicines worldwide. But in countries like Nigeria, for example, as much as half the drugs available to consumers were worthless fakes, and some were downright dangerous. Instances such as these worried consumer groups, who understood that free trade was beneficial only when there was sufficient consumer protection at both national and international levels. It was time for action.
From 1990 onwards, Consumers International took several delegations to Geneva to lobby government delegates to the GATT and GATT officials, including the then-GATT Director General Peter Sutherland - and Sutherland certainly seemed to have listened. The GATT's creation of the World Trade Organisation (WTO) in 1995 included the promise of "…expanding the production of and trade in goods and services while allowing for…sustainable development". And whilst Consumers International was not in favour of all the policies agreed, it was positive about the agreement as a whole.
In the mid-1990s, governments appeared to be taking consumer organisations seriously and, on a fairly narrow basis, became more open to consultation. For example, the EU and US governments worried about food exports between the EU and US saw an advantage in limited consultation for US and EU trade policy. The EU and US governments agreed with the consumer movement to create and fund the Transatlantic Consumer Dialogue (TACD) in 1998, which has since made some inroads in putting forward the consumer view on trade negotiations between the two regions. That governments were now prepared to put money into consumer representation on trade issues was a breakthrough, and a testament to the international impact of groups like Consumers International.
In 1999, WTO member governments planned a new round of trade talks in Seattle, USA. Consumers International was one of many civil society groups who opposed the talks. Consumers International felt that the WTO members had failed to implement agreements made under the Uruguay Round, causing an unequal distribution of the benefits of free trade. Opposition to the talks also came from within the WTO membership, with many representatives from developing countries feeling that a new agreement might favour richer nations at their expense.
As most people around the world now know, thanks to extensive television, radio and newspaper coverage of the 1999 Seattle trade talks, they broke down under a barrage of protest. Activists took to the streets, police threw tear gas and suddenly the WTO became the news of the week. What also was news, for many, was the surprising impact of non-governmental organisations. An editorial in the Economist magazine analysing the Seattle situation concluded, "…a new kind of actor is claiming, loudly, a seat at the table". In the subsequent EU/US Summit in Washington, the governments released a joint statement on the WTO acknowledging the need for "input from civil society".
WTO officials have expressed the view that the consumer organisations' lukewarm attitude contributed to the collapse of talks in Seattle. Clearly the main cause for the collapse was disagreement between the US and EU and a general lack of support for a new round from developing countries. However a contributing factor was the limited flexibility in negotiating positions by most governments which was partly a result of limited encouragement for further trade liberalisation from domestic interest groups including consumers. (For more information on Consumers International's policy for Seattle, see Consumer Rights and the Multilateral Trading System: What needs to happen before a millennium round.
There are now signs that WTO member governments and officials are convinced that the organisation should be more inclusive to civil society. Some members, particularly the US, EU and Canadian representatives, have been asking for more input from consumer organisations and other NGOs. Moreover, in the run up to the Doha Ministerial, the WTO has outlined specific activities to better inform NGOs of WTO activities.
There are two different types of campaigns - they are not mutually exclusive, but they do have different objectives. One is a journey campaign. The point of this campaign is change the way people think. Target campaigns aim to change politics, policies and practices. The categories overlap, as in the case of Consumers International's trade campaigns.
Target campaigns have clearly defined objectives, which can be broken down into sub-objectives. Through a co-ordinated series of activities one moves closer to these objectives. While in a journey campaign one has objectives too, the objectives do not necessarily tell which means one has to employ. One chooses activities, which maximise the interaction with the decision makers and/or the public without precise knowledge, what the effect of that interaction might be.
For consumer organisations and Consumers International in particular to continue to have an impact on trade policy, they will have to engage in both kinds of campaigning. Consumers International will have to work on getting acceptance of a new concept