World Trade Organisation (WTO) main role is to monitor and resolve trade disputes. The WTO replaced the General Agreement on Tariffs and Trade (GATT) in 1995 under the Marrakech Agreement. In the wake of globalization, the roles of WTO have increased, and now it is also expected to help developing countries gain from global trade. Two-thirds of the WTO members are developing countries; thus, it is important to determine the extent to which this membership has led to. development. The failure of foreign aid to alleviate the high levels of poverty has shifted focus on trade. A joint report by the World Bank and WTO (World Bank Group & World Trade Organization, 2018) indicated that trade openness could have a positive impact on poverty reduction. Trade can benefit the poor by lowering the prices of what they buy and increasing the prices of what they sell. Trade can also benefit poor countries by helping them respond to adverse shocks of domestic supply by opening up overseas markets. However, despite these positive impacts that trade can have poor countries, WTO is far from developing the right trade policies that will help the poor countries benefit. It has failed to implement special treatments for poor countries and come up with fair trade policies.
The least developing countries have, to a small extent, benefited from WTO negotiations. One of them is the Singapore meeting in 1996, where it developed A plan of Action for the LCDs. In this plan, poor countries would be provided with technical assistance to participate in trade. Moreover, developed countries would increase marker access for the LCDs. The result was IMF and World Bank, WTO, and International Trade Center, and the UN created a joint framework to provide developing countries with technical assistance (Rena, 2012). WTO has indicated that it organizes 300 technical assistance activities every year, and it trains at least 14,000 government officials (WTO, 2020). The second one was the Doha Development Round, which was launched in 2001. The main negotiation focus was to respond to the needs of developing countries. Doha Development Round aimed at giving developing countries special treatment to enhance development needs. It was a plan to make globalisation more inclusive and help poor countries by removing barriers and subsiding agricultural activities. This led to the removal of import duties and import quotas on all exports from the least developed countries.
However, to a large extent, WTO has failed to improve the economic development of developing countries, WTO has focused on trade liberations. In free-trade countries will export products that they have a comparative advantage. This is in line with the comparative advantage theory, which is the main justification for trade liberalization. The theory indicates that when a country has a lower opportunity cost than other countries in the production of a certain good, it should focus on the development of this product. The theory stipulates a country should stop making products that it does not have a substantial comparative advantage and specialize in products it can make at a low cost. The theory is against trade restrictions because there is no need to restrict the import of products that are produced at low costs and are of high quality. A brief history of developing countries indicates that in the 19th century, the countries were the main supplier of the primary products, and this was envisaged by the comparative advantage. However, after WWII, developing countries started participating in industrialisation, but this was short-lived due to the debt crisis and the changing international environment. The countries were forced to accept trade policies developed by the World Bank, IMF, and later WTO. WTO has failed to live up to its main role, and today, poor countries find themselves in a situation where rules are imposed on them. For example, poor countries are manipulated by rich countries. They have been forced to reduce tariffs up to 90% of their trade. Despite some of the poor countries having a comparative advantage in some activities such as farming because they are endowed with good soils and climate, they are struggling to sell produce at the right market prices. The reduced tariffs, coupled with huge subsidies, is lowering the competitiveness of the exports of poor countries. It has caused some exporters of poor countries out of business. The poor countries are not getting the same treatment from rich countries. Rich countries are imposing high tariffs on imports that are important to poor countries. These high tariffs aim at discouraging industrialisation in poor countries. WTO is far from achieving fair trade and thus hampering the growth of poor countries. According to (Baldwin, 2016), most countries have been involved in massive tariff cuts through other channels except through WTO. What makes worse is that poor countries find themselves in a position where they cannot seek justice with WTO. The trade dispute process of WTO is expensive, and it also requires expertise, all of which poor countries lack.No African country has filed a complaint because of the complexity legal case and expensive. The countries continue to be involved in unfair trade where they face high tariffs from developed countries and are forced to lower tariffs. This results in poor countries spending more money on developed countries to some extent, the poor countries continue developing rich countries.
WTO’s main aim is to provide every country with a win-win situation when it comes to trade. This involves building the supply-side capacity for developing countries. This is because higher exports will result in higher incomes and high levels of employment. However, the policies that have been put in place have not been efficient in supporting the infrastructure required to enhance the exports of developing countries. Some of its policies have focused on protecting developed nations. The first major policy under WTO is TRIPS. Ir focuses on property rights, patents, copyrights, and industrial design. When it comes to property rights, the developed countries are the main producers. The US leading country in the number of patents, followed by Japan and then Germany. Patents are important to developed countries. TRIPS increases the price of patent knowledge. It limits the ability to develop countries because it promotes privatization and monopoly ownership of knowledge (Siddiqui, 2016). It limits the ability to develop countries in manufacturing and medicine sectors. The poor people in developing counties fail to access affordable medicine because of the protection that pharmaceutical companies enjoy (Rena, 2012). TRIPS makes the prices of essential products such as medicine very high, and poor countries are faced with the worst epidemics. A high price for medicine means that poor citizens of poor countries will direct a lot of money to wealthy pharmaceutical companies. MOREOVER, TRIPS is widening the gap between the poor and rich countries. It also lowers research and development activities directed towards improving the livelihoods of people in developing countries (Wade, 2003).
WTO has failed to close agriculture negotiations that were initiated at Doha. This is because of the interest of developed countries. Large exporting countries such as the US and the European Union want market access for their products. These countries offer farmers with subsidies; hence they can sell agricultural products at a lower price (Anderson, 2010). There are a number of agricultural strategies that WTO has implemented that are failing the poor countries. The first is WTO has failed to reduce huge agricultural subsidies paid to rich-country farmers. The overproduction of rich country farmers continues to threaten the livelihood of the poor country farmers. For example, the amount of subsidies paid to rich country cotton farmers amount to $47 billion. These subsidies have created barriers for 15 million cotton farmers in African Countries. At least five million of the poorest farming families have been forced out of cotton farming due to the subsidies given to developed countries. Secondly, the special treatment rules have never been effective and operational. WTO has failed to close up on the special treatment rules (Wolfe, 2009). This is because WTO decisions are made by consensus, and it has become difficult to agree. According to (Windham, 2008) least developed countries do not have representation in WTO, and they depend on the position taken by developing countries as a bloc. Poor countries’ voice in the negotiations is lost among the big political weights who seek to protect agricultural markets.
The problem with WTO policies is failing to recognize the importance of protecting infant industries. Though trade liberations are promoted by comparative advantage, comparative advantage is achieved through the long-term protection of the infant industry. This is supported by the infant industry argument, which stipulates that there is a need to protect young industries from international competition. This theory is supported by the fact that developed countries used tariffs to protect infant industries. For example, the tariff protection that the US GAVE STeeL RAIL INDUSTRY AND German to iron and steel industry in the 1850s has played a major role in development (Duong, 2014). Some countries offer a good example of the need to protect infant industries. A good example is Vietnam, which was not a member of the WTO until 2007. Before 2007, Vietnam was still getting markets for products such as coffee and other agricultural products. In this period, it was also able to diversify into manufacturing. In comparison with a company such as Nicaragua, which has been a Nicaragua, which has been a member state of WTO since 1995, Vietnam was better off. Nicaragua coffee and clothing export have not been able to compete with Vietnam despite being part of the WTO and having access to lucrative markets. South Korea offers a good example of a country that has developed through protection. Critiques argued that South Korea had a comparative advantage in growing rice; hence it should focus on it. It should not restrict imports of industrial goods because it could never catch up. However, through trade protection, South J…Korea has caught up, and the industrial sector has grown (Greenwald & Stiglitz, 2006). The industrial growth sector has spilled off the rural sector leading to the growth of national income faster. Similarly, India and China have thrived through the protection of infant industries (Birdsall, Rodrik, & Subramanian, 2005; Siddiqui, 2016; Dollar, 2005). Having some level of government protection has, to a large extent, led to the growth of these countries. Moreover, in the wake of the 2008 global crisis, G20 countries implemented protectionist measures.
Therefore, WTO trade policies and trade liberalisation has contributed to development of poor countries to a small extent. The secret of lowering poverty does not lie in trade preferences or access to markets. As proved by Vietnam, India, China, and South Korea, it lies in the protection of domestic industries. Creating opportunities for domestic investors have far-reaching spilling effects on the economy than trade liberalisation. It creates jobs in the economy and promotes industrialization . as put by (Hickel, 2017), what poor countries need from WTO is justice and not charity. The countries need to operate in a situation where there is fair trade. There is no justice for as long as the TRIPS agreement is upheld by WTO because it is limiting access to information in the production of essential products such as medicine. There will be no justice for as long as rich countries continue to impose high tariffs on products that are key to poor countries and force them to lower tariffs. More importantly, there will be no justice as long as the rich countries continue to subsides agricultural activities forcing poor farmer countries out of business. If WTO does not find a way to end agricultural subsidizes, poor countries will face food insecurity issues and plunge into higher poverty levels.