THE POLITICS OF INTERNATIONAL TRADE REGULATION IN THE DEVELOPING WORLD: LAW AND POLICY OF “PREFERENTIAL” TREATMENT IN THE GOVERNANCE OF WORLD TRADE, by Remonda B. Kleinberg. Carolina Academic Press, Durham, N.C.: 2011. 222pp. Hardback $40.00. ISBN: 9871594608001. Reviewed by Erick K’Omolo, Faculty of Law, The University of Hong Kong. Email: ekomolo [at] hku.hk.
pp.66-69
The place of developing countries in world trade has received much attention in recent years. With available statistics indicating that most of the developing world remains significantly underdeveloped despite articulated benefits of liberalisation and their increased accession to membership of different multilateral trade regimes, the question of the ‘quality’ of their participation and its relevance to their development becomes central. Moreover, the obligations attached to acceding to the world trading system means that the developing world increasingly has to rely on regulations governing a multilateral trade system for recourse. However, the operational politics of the world trade system, including the dominance of industrialised nations, has resulted in mixed results for the developing world with most emerging nations still having to significantly rely on preferential schemes. But the generally whimsical nature of preference schemes means that their contribution to the development priorities of the developing world is doubtful, leading to renewed calls by developing countries for further negotiations within the Doha ‘Development’ Agenda.
Professor Remonda Kleinberg’s timely book investigates this central question of participation of the developing world in the world trade system, with special emphasis on the World Trade Organisation (WTO). Focus is deservedly accorded to the Dispute Settlement Body (DSB) and how it has applied trade regulations and special and differential (S&D) requirements in disputes involving developing country members since its inception. Accordingly, she highlights the apparent inconsistency surrounding the push for adoption of special and differential schemes and the commitment to implementation when it comes to development priorities of the South. The book is thus systematically built on the central thesis of inadequacy of multilateral trade policies and regulations within the context of trade liberalisation and global politics to meet the development interests of the developing world, while evaluating selected disputes presented to the WTO’s DSB.
In chapter one, Kleinberg introduces the distinct methodology and organisational structure of the book and also highlights the historical optimism that the developing world initially had toward a “reformed” multilateral trading system, despite their absence during initial General Agreement on Tariffs and Trade (GATT) negotiations in 1947. This sense of optimism was heightened, in part, by pressure from industrialised nations and global trade institutions that dangled liberalisation as panacea to economic development, and the developing world’s own desire for increased market access for their products, amongst others. The chapter argues that the preponderant belief then was that a more legally [*67] structured world trade system would trigger these benefits, thus leading to their en masse accession to GATT 1994/WTO Agreements. However, this has turned out to be an illusion, as developed nations continued to implement restrictive measures whilst jurisprudence from WTO-DSB pointed toward less emphasis on special conditions of the developing world.
Chapter two analyses the historical theoretical patterns that informed trade and development practises over the years, from the classical orthodoxy of liberalism to the New Model codified in the Uruguay Agreements two decades ago. Kleinberg chronologically relates various theoretical models to trade practises adopted by developed and developing countries alike in their quest to industrialise. For instance, the Keynesian conception of the post-war era and import substitution industrialisation (ISI) of 1960s are broadly identified as having influenced inward-looking trade practises, especially by the developing world in their quest to spur domestic growth of their industrial sectors.
Conversely, structuralist and dependency models are identified as having shaped policies that emphasised less dependency on primary products’ exports and limited interaction with developed countries in the process of industrialisation. Although less explicit, the overarching argument in this second chapter is geared to expose the tension existing between competing interests in a world trade system that urges unqualified liberalisation with less emphasis on special conditions of the developing world and the continued need for state intervention to guide industrialisation in the developing world. Kleinberg makes an implicit case for balancing these interests because liberalisation with its S&D measures, as previously conceived, have simply failed to work.
Chapter three discusses legal and policy options that have existed in the world trading system, focusing on development concerns of the developing world. Kleinberg traces the application of S&D and preference schemes within the legal provisions of the world trade law as a way of addressing development concerns of the South. The preferential schemes, that allowed participating developed countries to legally deviate from the Most Favoured Nation principle (MFN) in treatment of products from certain developing countries, were envisaged as opportunities to help stimulate the growth of exports from such developing countries thereby diversifying their economies. The chapter reveals that, by and large, the multilateral trading system has been indifferent to development priorities of the developing world in its legal provisions. Indeed, it was not until 1965, and as a result of direct pressure from United Nations Conference on Trade and Development (UNCTAD) that GATT 1947 added its Part IV on ‘Trade and Development,’ calling for the application of special measures that support development of developing countries, including non-reciprocity. However, it still allowed unilateral actions by developed countries that could renege on the commitments when there were “compelling reasons, which may include legal reasons” (p.44).
Thus most developing countries continued to experience restrictions to their exports that limited chances for diversification, which is a prerequisite for sustainable growth.
In fact, even under the Generalised System of Preferences (GSP), which allowed for a more permanent deviation from Most Favoured Nation (MFN) treatment, the preference-granting developed nations like the US built [*68] constraints that tended to exclude competitive products from the developing countries. Kleinberg thus builds a strong case for a mismatch between codification of preferential measures and ‘living their spirit’ in this chapter. However, she does not offer specific examples where these GSP programs have been unilaterally abused and the recourse, if any, taken by the affected developing countries.
Since GATT 1947 was adopted as part of the Final Act of 1994 forming the WTO, it follows that most of the preferential measures were incorporated into the WTO system. However, from its inception the developing world has yet to significantly benefit from legal and policy shifts that prioritises development. Chapter three connects this lacuna in development to the renewed calls by the developing world for more concessions to aid their development. This, by and large, led to commencement of on-going Doha ‘Development’ negotiations.
In chapter four, an in-depth analysis of the application of GSP programs through invocation of the GATT Enabling Clause is undertaken. Kleinberg successfully demonstrates by offering selected case studies how the GSP has been used unilaterally by the preference-granting countries, often developed countries, without due regard to sustainability of growth in the receiving developing countries. Though apparently popular, and rarely challenged due to the leverage the preference-granting states have over developing countries, Kleinsberg demonstrates that their discretionary nature has seen product lines being limited to those that do not threaten granting states. In addition, the European Union (EU) and United States (US) gradually introduced non-trade related conditions that at best served domestic interests and international politics, rather than developing nations. Moreover, they imposed a ‘graduated’ system meant to remove countries whose exports had increased exponentially. Even Japan, in granting preference, retained an ‘escape clause’ that allowed the suspension of countries whose exports threatened its domestic market.
Notwithstanding the above negative aspects, Kleinberg argues that GSP's still remain popular, and even some Beneficiary Developing Countries (BDCs) like India, Brazil and Thailand have moved to grant preferences. In fact, the proliferation of several unilateral preference schemes has intensified with increased formation of regional trade agreements (RTAs). Chapter four highlights most of the RTAs that have been acceded to in the developing world in recent times to demonstrate this new approach for preferences. However, Kleinberg casts a shadow as to the real beneficiaries of preference schemes with most BDCs clearly still underdeveloped.
With increased utilization of preference schemes and the codification of a dispute settlement system within the WTO Dispute Settlement Understanding (DSU), it would have been expected that most developing countries would seek to ‘enforce their rights’ against violations by developed states. However, chapter five shows that developing countries are reluctant to press their claims. Kleinberg presents somewhat astonishing data showing that the Dispute Settlement Body (DSB) remains exclusive to developed and high-income developing countries, although the number of disputes registered overall is on the increase. The hope for an elaborate and self-enforcing world trade system is thus a mirage to the majority of LDCs.
The challenges that the developing world encounter in world trade system notwithstanding, existing trends point toward their increased participation in [*69] the WTO dispute settlement system. In chapter six, Kleinberg presents a detailed analysis both of provisions of the DSU that entrench preferential treatment of developing countries and case studies of disputes that have so far been filed by them invoking preferential provisions. By and large, high-income developing countries have increasingly filed or defended disputes at the DSB. However, the invocation of preferential treatment provisions in the WTO Agreements tends to be limited. Based on analyses of selected case studies the chapter shows that their significance in the final panel reports is limited.
Furthermore, due to their comparatively vulnerable situation developing countries tend to lose in disputes that do not reach the panel stage. Chapter six concludes that the development interests of the developing world are left precarious as competing interests between liberalisation and S&D treatment relegate sustainable development objectives of the South to lesser status.
There is little doubt that with this book Kleinberg has meticulously moved this debate to a different level. Examples of disputes analysed, particularly in chapter six, help to show that the tension between the interests of the developed countries of the North and the developing countries of the South is not only theoretical but also poses a challenge in practical enforcement of provisions that codify preferential treatment for developing countries. Throughout all of these examples, real politics that determine the global balance of power are as of yet an invincible hand for the global North.
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Copyright 2012 by the author, Erick K’Omolo.
