Why are developing countries at a disadvantage - Assignment Example

It is clear that competition and free trade are essential for a healthier world economy and that the WTO’s agenda has good intentions. However, critics argue that while globalisation has the potential to become a positive force for economic growth, too many of the benefits go to well off countries while the cost of adjusting markets and implementing agreements are having to be endured by millions of already poor workers within developing countries.

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(Jose Bove – The OCED Observer 2001)

The cost of simply implementing its agreements can sometimes take up an entire years development budget for many of these nations, which would seem to question whether these countries are putting what little resources they have to good use. (Brett (Parris The OECD Observer; Paris; Oct 2000)

Why are developing countries at a disadvantage?

Firstly there is a lack of funds and skills among developing countries which are needed in order to maintain a big presence at WTO meetings. While rich countries can afford to fly in teams of trained lawyers, many 3rd world nations lack the resources needed to ensure that they are represented at WTO proceedings.

(Consumers International – Aug 1999)

Also when they do manage to represent themselves at the meetings they are still very much at a disadvantage. All trade negotiations are based on the principle of reciprocity and this kind of bartering, for the most part, only benefits the large and diversified economies because they can get more by giving more. Usually negotiations and trade offs only take place among the developed countries and some of the richer developing nations.

(Aileen Kwa – WTO and Developing Countries)

The WTO also claims that competition generates wealth for everyone, although competition is only meaningful if competitors are able to survive. This is particularly true within agriculture where labour productivity varies by a factor of a thousand to one between a grain farmer in the US and a peasant in the heart of Africa. The playing field for competition is simply not level when there is a majority of 1.3 billion farm workers who harvest the land with their hands and a minority of 28 million mechanised farmers equipped to export.

(Jose Bove – The OCED Observer 2001)

One of the reasons why the WTO is a much stronger institution than the GATT is that it has a dispute settlement system. However, this system bases itself on trade retaliation.

If a small country wins a case against a large economy, and if that economy still refuses to implement the necessary policy changes, the small country can retaliate – for example, by not allowing certain products into the country. However, this system is only a real threat to small economies. The US, for example, would not be unduly worried if a certain line of her products are not allowed into a small economy. But it would be very difficult for small countries to stand up to a large economy, such as the US, and possibly face closure of the US economy to their products.

When commenting on the Uruguay Round, Nelson Mandela said ‘the developing countries where not able to ensure that the rules accommodated their realities….. it was mainly the preoccupations and problems of the advanced industrial economies that shaped the agreement’.