Addressing Developing Country Priorities and Needs in the Millennium Round Joseph E. Stiglitz Senior Vice President and Chief Economist The World Bank Harvard University November 29, 1999

Outline Introduction Importance of development round Why voices of developing countries must be heard Backdrop to development round: A changed world Principles of the development round Increasing the benefits of trade liberalization for developing world Conclusion: A blueprint for buy-in

Introduction Uruguay Round: Significant Advances, Significant Limitations Advances –Created WTO Wider Scope, Better Dispute Resolution Than GATT –Dealt With New Issues Intellectual Property Agricultural Services –Phase-Out of MFA

Weaknesses –Inadequate treatment of agriculture –Selective treatment of services –Unbalanced treatment of intellectual property –Questionable treatment of non-tariff barriers, especially dumping and countervailing duties –Items that did not make it onto agenda All in all—an agenda that reflected interests and concerns of developed countries At end: sub-Saharan Africa actually worse off, In spite of increasing role of developing countries in international trade: 1/3 of exports of goods, 1/4 of exports of services Outcomes not surprising

Importance Of Next Round Progress required if momentum is to be maintained Replacement of tariff barriers with non- tariff barriers Changing structure of trade means that smaller percentage of trade is covered

Why The Voices Of The Developing World Must Be Heard Trade liberalization is not an end in itself, but means to ends Higher standards of living, faster growth But if negotiations unbalanced, developing countries could be made worse off – higher poverty, more economic instability Self-interest of developed countries Economic self-interest: developing countries have been an engine of growth Political self-interest: global stability

An unbalanced agenda could lead to Lack of confidence in liberalization agenda Undermine reform movement more generally Cynicism at hypocrisy of west –Especially important as relationship between developed and less developed countries is being redefined at end of cold war and post- colonial period New round must broach new areas Should revisit old areas Old agreements reached through less than fully transparent process, in ways which did not adequately represent interests of the developing countries Still: developing countries will be disadvantaged, simply in terms of negotiating personnel

Changing World 1.Non Tariff Barriers 2.Changing Patterns Of Production 3.Global Governance Without Global Government

Non Tariff Barriers 1. Increased role of NTBs –Implies that attention has to be focused on more than tariffs (or even quotas) –Other issues: competition, “fair trade” laws, regulatory barriers 2. Some of these barriers raise difficult questions concerning boundaries of national sovereignty 3. May be particularly important in sectors representing increasing share of global trade 4. Many of barriers imposed by sub-national governments, raise issues of decentralization

Changing Patterns Of Trade 1. Increased importance of service sector 2. Increasing importance of trade facilitation 3. Increasing importance of South-South trade 4. Increasing importance of intra-firm trade

Global Governance Without Global Government Importance of consensus building and legitimacy Importance of process—open, transparent, balanced Reflecting general interests, not special interests Recognize special problems of the poor Effectiveness and fairness of enforcement

Principles 1. Fairness 2. Comprehensiveness 3. Transparency Comprehensiveness and transparency important for achieving fairness (and perception of fairness) Comprehensiveness and fairness also important for political viability Perception of fairness also requires that outcomes and process not be driven by special interests Pay special attention to impacts on poor

Fairness Credit for binding previous trade concessions Special needs of developing countries 1. Higher cost of liberalization –Poorer safety nets –Weaker markets—higher unemployment (gains from liberalization arise from moving workers from low productivity to higher productivity, not in moving workers from low productivity to unemployment) –Implications (Longer transition times & transition assistance) 2. Special human needs –Drugs 3. Promoting economic growth –Balanced intellectual property rights regime –More problematic: infant industry »Real problems »Developed countries have hidden subsidies, but have been widely abused

Increasing The Benefits Of Trade Liberalization For Developing World Opening up markets in developed world Complementary investments In infrastructure In institutional infrastructure Regulation, competition To promote investment More likely to occur if trade agenda reflects national interests, not special interests

Increasing The Benefits Of Trade Liberalization For Developing World Issues of poverty must be addressed Trade liberalization involves real losers Compensations seldom paid Losers disproportionately among very poor Openness exposes countries to greater risks Instability leads to poverty Compounded by full capital account liberalization Capital account liberalization associated with greater risk, but not faster growth

Concluding Remarks New trade round must address concerns of developing countries Must reflect new area of greater democracy: openness And transparency Must reflect changing role of developing countries Increased importance in trade End of colonial relationships