Justice and Inequality in the World Trading System: A Critical Assesment

By Dominykas Broga
2012, Vol. 4 No. 11 | pg. 2/2 |

Moreover, tariff patterns suggest the same trend of one-sided utility. Finger, Reincke and Castro demonstrated that in the tariff negotiations during the Uruguay Round, there were great tariff imbalances between developed and developing countries. The tariff reductions given and received by individual countries did not correspond. For example, and South Korea gave their trading partners reductions that amounted to 6.16 per cent and 5.99 per cent while the reductions they received were 1.22 per cent and 1.87 per cent, respectively.27 Moreover, it is easy to notice that developing countries face greater trade barriers on the lines of their potential rather than general tariff restriction.28 Concerns for preferential tariff inequality are supported by a vast majority of instances. Tariff escalation appears directed against the products in which developing countries have a comparative advantage. In 1997 it has been estimated that developing countries faced tariffs 10 per cent higher than the global average, and the least-developed 30 per cent higher, with highest tariffs on textiles, leather and agricultural commodities. 29 For leather, oilseeds, textile fibers, and beverages, tariffs continue to be 8-26 per cent higher on the final product than on the underlying raw material. These goods account for a large proportion of what developing countries produce: for Bangladesh and Sri Lanka it represents half of their export earnings, for 24 per cent of exports, for Asia 14 per cent of exports, for and the Caribbean 8 per cent of exports. The Uruguay Round agreement was concerned to phase out the quotas over a ten-year period and reduce tariffs, but only to an average tariff of 12 per cent – which is three times the average levied on industrial country imports.30 Hence, whilst the Uruguay Round achieved substantial tariff reductions, these reductions have been so much more advantageous to the industrialized countries (reducing tariffs on 45 per cent of what they export) than developing countries (for whom the reduced tariffs affected 20-25 per cent of their exports).31

In turn, when developing countries export to rich country markets, they face tariff barriers that are four times higher than those encountered by rich countries. Those barriers cost them $100bn a year- twice as much as they receive in aid.32 The result is that developing countries cannot afford to ‘move up the ladder’ of industrialization. Rather, they become locked into producing primary commodities. Hence, such examples indicate the violation of both Rawlsian and Nozickian principles of fair trade. Trading system seems to favor outcomes designated along the lines of the need of developed rather developing ones. 33 Also, tariff correlation results in the worse rather than better overall position of the LDCs. While WTO regulations promote equal and tantamount membership, it seems that breach of fairness towards developing countries is undoubtedly apparent.

On the other hand, libertarians might provide a reasonable defense of the tariff differences. It might be argued that the cardinal rule for free trade concessions is reciprocity: “If you withdraw my market access, I will restrict your imports.”34 If a country gives little in terms of market access they will not enjoy the reciprocal benefits. As developing countries did not offer any market access concessions, under the principle of non-reciprocity, they did not receive any significant consideration in return. Also one should take into account that developing countries do not have an inherent right based on law to development. It is rather the individual claim than the claim to the international trading system as a whole.

Egalitarianism and World Trade

Finally, egalitarianism provides the clearest notion of fairness as equality in treatment and representation of equal members in the multilateral negotiations. Egalitarians claim that the world trading system is inherently unfair because of unequal treatment of member states of WTO. Emeric De Vattel in 1753 argued ‘since men are naturally equal, and a perfect equality prevails in their rights and obligations, as equally proceeding from nature – Nations composed of men, and considered as so many free persons living together in a state of nature, are naturally equal, and inherit from nature the same obligations and rights. or weakness does not in this respect produce any difference. A dwarf is as much a man as a giant; a small republic is no less a sovereign state than the most powerful kingdom’35. As such, the legal claim of procedural equality implies that states should be treated as equal members in all bilateral agreements and trade negotiations. Thus, liberal institutionalists argue that cornerstone of international justice is the equality in the status of states.36 Yet, Gilbert R. Winham notices that world trade regime is neither inclusive nor participatory.37 ‘While 28.8% of world trade is accounted to developing countries and they constitute two-thirds of WTO membership, they are still treated as marginal participants in the decision-making process’38 and are frequently excluded from negotiations.39 For instance, pyramidal bargaining during the Tokyo Round40 or the Seattle Summit, where the EU, , and the US met in closed committees, whereas other nations were not invited shows that the interests of the developing countries do not amount to the ‘hill of beans’.41 Furthermore, in respect of more general rules governing investment, negotiations on a Multilateral Agreement on Investment have proceeded among OECD countries without the formal participation or representation of developing countries.42Moreover, such negotiations are seen unfair as a variety of programs, namely, the ‘Generalized System of Preferences (GSPs) and ‘Special and Differential status (S&D) with respect of trade obligations, were adopted unilaterally by the great economic powers in the economic ‘interest’ of developing countries without any consultation with the recipient of such implementations.43 Also, in the WTO Ministerial conference at Cancun in 2003, many developing countries grouped in the G-20 and in the ‘African Group’ expressed disappointment that their priority issues had not been discussed in the final negotiations because the Chair had chosen to place the controversial ‘Singapore issue’ first on agenda.44 Thus, the legitimacy and fairness of representation should be given essential attention in asserting neo-liberal claim that the equality of opportunity persists in the WTO.

In conclusion, three different philosophical frameworks, the Rawlsian ‘principle of difference’, Nozickian ‘means and ends’ notion, and egalitarianism were used to analyze the fairness of principles of the world trading system. It has been argued that developing countries are treated unfairly in membership and reciprocity relations. Also, double-standardization in the application of WTO regulations and preferential status of LDCs show clear injustice in equality of opportunity for trade practices. While neo-liberals reject the notion that unequal outcomes are unjust in the world economy on the assumption that equality of opportunity exists, the evidence shows that the equality of opportunity is only a formal one. The fact that so many barriers remain highlights the costs to developing countries of their political inequality in .45 All three frameworks reveal some degree of inherent unfairness toward developing countries in the international trading system, and it can thus be reasonably concluded that the world trading system, at least in part, inhibits fair treatment of all its members.


References

Arnold, G. (1989). The Third World Handbook. London: Cassell.

Brown, A. G., & Stern, R. M. (2010). Concepts of Fairness in the Global Trading System. Discussion Paper No. 544.

Cohn, T. H. (2005). Global Political Economy: Theory and Practice. New York: Pearson , Inc.

Henderson, D. (2004). The Role of Business in the Modern World: Progress, Pressures and Prospects for the Market Economy. Washington, DC: Institute of Economic Affairs.

Hoekman, B. (2004). Dismantling Discrimination Against Developing Countries: Access, Rules and Differential Treatment. London: Centre for Economic Policy Research .

Hurrell, A., & Woods, N. (1999). Inequality, and World Politics. Oxford: Oxford University Press.

International, O. (2002). Oxfam International. Retrieved November 29, 2010, from Make Trade Fair: http://www.maketradefair.com/en/index.php?file=26032002105641.htm

Izquierdo, E. d. (2006). Book Review of Lee Yong-Shik 'Reclaiming Development in the World Trading System'. Cambridge: Cambridge University Press.

Kapstein, E. B. (2006). Economic Justice in an Unfair World: Toward a Level Playing Field. Princeton: Princeton University Press.

Pauwelyn, J. (2005). Book review of Garcia, Frank J.'Trade, Inequality, and Justice: Toward a Liberal Theory of Just Trade'. Duke Law School Legal Studies research Paper Series , 101-114.

Petersmann, E.-U. (2004). Challenges to the legitimacy and efficiency of the world trading system: democratic and competition in the WTO: introduction and summary. Journal of International Economic Law , 585-603.

Programme, U. N. (1997). Human Development Report 1997. New York: Oxford University Press.

Rawls, J. (1999). A Theory of Justice. Harvard: Harvard University Press.

Winham, G. R. (1986). and the Tokyo Round negotiation. Princeton: Princeton University Press.


Endnotes

1.) Kapstein, E. B. ‘Economic Justice in an Unfair World: Toward a Level Playing Field’ page 1

2.) Ibid. page 45

3.) Hurrell, A., & Woods, N. ‘Inequality, Globalization and World Politics’ page 20

4.) Rawls, J. ‘A Theory of Justice’ page xiv

5.) Arnold, G. ‘The Third World Handbook’ page 151

6.) Pauwelyn, J. ‘Book review of Garcia, Frank J.'Trade, Inequality, and Justice: Toward a Liberal Theory of Just Trade’ page 103 

7.) Ibid. page 104

8.) Ibid. page 106

9.) Pauwelyn, J. ‘Book review of Garcia, Frank J.'Trade, Inequality, and Justice: Toward a Liberal Theory of Just Trade’ page 106

10.) Oxfam International ‘Make Trade Fair’ from http://www.maketradefair.com/en/index.php?file=26032002105641.htm

11.) Arnold, G. ‘The Third World Handbook’ page 151

12.) Henderson, D. ‘The Role of Business in the Modern World: Progress, Pressures and Prospects for the Market Economy’ page 109

13.) Pauwelyn, J. ‘Book review of Garcia, Frank J.'Trade, Inequality, and Justice: Toward a Liberal Theory of Just Trade’ page 109

14.) Ibid. page 107

15.) Ibid. page 109

16.) Cohn, T. H. ‘Global Political Economy: Theory and Practice’ page 108

17.) Hurrell, A., & Woods, N. ‘Inequality, Globalization and World Politics’ page 18

18.) Brown, A. G., & Stern, R. M. ‘Concepts of Fairness in the Global Trading System’ page 13

19.) Kapstein, E. B. ‘Economic Justice in an Unfair World: Toward a Level Playing Field’ page 45

20.) Pauwelyn, J. ‘Book review of Garcia, Frank J.'Trade, Inequality, and Justice: Toward a Liberal Theory of Just Trade’ page 104

21.) Ibid. page 111

22.) Programme, U. N. ‘Human Development Report 1997’ page 18

23.) Petersmann, E.-U. ‘Challenges to the legitimacy and efficiency of the world trading system: democratic governance and competition culture in the WTO: introduction and summary’ page 594

24.) Hurrell, A., & Woods, N. ‘Inequality, Globalization and World Politics’ page 18

25.) Hoekman, B. ‘Dismantling Discrimination Against Developing Countries: Access, Rules and Differential Treatment’ Page 14

26.) Cohn, T. H. ‘Global Political Economy: Theory and Practice’ page 109

27.) Brown, A. G., & Stern, R. M. ‘Concepts of Fairness in the Global Trading System’ page 10

28.) Hurrell, A., & Woods, N. ‘Inequality, Globalization and World Politics’ page 20

29.) Programme, U. N. ‘Human Development Report 1997’ page 86

30.) Hurrell, A., & Woods, N. ‘Inequality, Globalization and World Politics’ page 18

31.) Programme, U. N. ‘Human Development Report 1997’ page 86

32.) Oxfam International ‘Make Trade Fair’ from http://www.maketradefair.com/en/index.php?file=26032002105641.htm

33.) Cohn, T. H. ‘Global Political Economy: Theory and Practice’ page 125

34.) Pauwelyn, J. ‘Book review of Garcia, Frank J.'Trade, Inequality, and Justice: Toward a Liberal Theory of Just Trade’ page 111

35.) Izquierdo, E. d. ‘Book Review of Lee Yong-Shik 'Reclaiming Development in the World Trading System' page 18

36.) Kapstein, E. B. ‘Economic Justice in an Unfair World: Toward a Level Playing Field’ page 17

37.) Ibid. page 48

38.) Ibid. page 19

39.) Kapstein, E. B. ‘Economic Justice in an Unfair World: Toward a Level Playing Field’ page 48

40.) Izquierdo, E. d. ‘Book Review of Lee Yong-Shik 'Reclaiming Development in the World Trading System' page 19

41.) Cohn, T. H. ‘Global Political Economy: Theory and Practice’ page 242

42.) Hurrell, A., & Woods, N. ‘Inequality, Globalization and World Politics’ page 20

43.) Kapstein, E. B. ‘Economic Justice in an Unfair World: Toward a Level Playing Field’ page 48

44.) Petersmann, E.-U. ‘Challenges to the legitimacy and efficiency of the world trading system: democratic governance and competition culture in the WTO: introduction and summary’ page 586

45.) Hurrell, A., & Woods, N. ‘Inequality, Globalization and World Politics’ page 20

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