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WDI Economists Tell WTO Best Ways to Help Poor Nations

9/10/2003 --

ANN ARBOR, Mich.---As trade ministers gather this week at the World Trade Organization meeting in Cancun, Mexico, delegates from the William Davidson Institute (WDI) will present policy briefs focusing on enhancing the role of developing nations in the current WTO negotiations and on labor standards related to the WTO.

Attending the conference are Katherine Terrell, professor of business economics and public policy at the University of Michigan Business School and Gerald R. Ford School of Public Policy and WDI director of Labor Markets and Human Resources, and Alan Deardorff, a WDI faculty associate and professor of economics and public policy at the Ford School.

Both co-wrote position papers with WDI faculty associate Robert M. Stern, professor emeritus of economics and public policy at the Ford School. Terrell's and Stern's paper is titled "Labor Standards and the World Trade Organization." (www.wdi.bus.umich.edu/news/Labor%20Standards-WTO2.pdf) and Deardorff's and Stern's is "Enhancing the Benefits for Developing Countries in the Doha Development Agenda Negotiations" (www.wdi.bus.umich.edu/news/Cancun%20Positions2.pdf).

Terrell and Stern contend that incorporating international labor standards into the WTO and other trade agreements will not improve wages and working conditions of workers in developing nations and will not keep more jobs in industrialized countries.

"For poor countries, sustainable improvement of the wages and working conditions of workers can only be achieved through solid economic and social development policies, deployed with the assistance of international organizations," Terrell says. "For the industrialized countries, we recommend that more effort be focused on preparing workers to be able to adapt to the evolving global economy."

In their paper, Stern and Deardorff recommend several important actions that could be taken in the current round of trade talks to help developing countries.

"Developing countries are at a disadvantage in the negotiating process, due to their resource limitations, and in many cases due also to their inexperience in negotiations," Stern says. "Offsetting these disadvantages, however, are their large numbers and the compelling case that can be made for meeting their needs. What is needed is leadership and cooperation on their part, and a willingness to listen and be flexible on the part of their developed country counterparts."

Stern and Deardorff offer the following recommendations:

  • The WTO should establish a formal structure for its negotiations that will assure every developing-country member that its interests are represented.
  • Developed countries must commit to reducing their production and export subsidies that stimulate production of agricultural products that are of export interest to developing countries, as well as reducing import tariffs and other barriers that decrease world prices of these products.
  • Both developed and developing countries should commit to reducing their most restrictive trade barriers, including the elimination of all quotas and the substantial reduction of their highest import tariffs.
  • The rules for administered protection---safeguards, countervailing duties and anti-dumping---should be redrafted to focus their use on cases of legitimate economic justification, but to discourage their use as protectionist devices that limit market access.
  • WTO rules governing the formation of Preferential Trading Relationships should be revised to insure that they contribute to the liberalization and simplification of the multilateral trading system.
  • Negotiations should deliver on the promise made at the 2001 WTO meeting in Doha, Qatar, to provide needed flexibility for developing countries to gain access to essential pharmaceutical products and provide similar flexibility for other products, such as those of biotechnology and information technology, that are needed to improve the health and facilitate the progress of developing countries.
  • Negotiations on trade in services should be pushed ahead, with attention given not only to the service industries of greatest interest to developed country exporters, but also to activities in which developing countries may have comparative advantage, such as outsourcing and the movement of natural persons.
  • Negotiations on the ¿Singapore Issues¿ should proceed cautiously, taking due account of the difficulties many developing countries would have in conforming to whole new sets of procedural obligations, especially on investment and competition policies.
  • The WTO needs to agree on both the formal mechanisms for providing the kinds of technical assistance to developing countries that were specified in the Doha Declaration, and on the means to finance that assistance.
  • The Doha Round of trade negotiations should provide "special and differential treatment" of developing countries, especially of the least developed countries, but this treatment should entail assistance with bearing the costs and fulfilling the obligations of the agreement---not exemption from the provisions for their own market liberalization.



For more information, contact:
Bernie DeGroat
Phone: 734.936.1015 or 734.647.1847
E-mail: bernied@umich.edu