There is almost total consensus among economists that liberalization of world trade provides countries an opportunity to better themselves by specializing in the production of goods and services that they can produce relatively cheaply and in which they have a comparative advantage. Professor Paul Krugman of Massachusetts Institute of Technology writes: "One of the things that almost all economists agree on is the desirability of free trade: Adam Smith said it; David Ricardo provided its mathematical justification; and ever since, every economist emphatically describes it." Or, as the Nobel laureate Paul Samuelson puts it: "The concept of comparative advantage that underlines the economist's case for free trade is one of the few ideas in economics that is both important and right without being obvious."
Trade liberalization and improvement, and rectification of trade distorting measures would raise the efficiency of the world economy and in turn elevate living standards in the trading nations. Studies conducted independently by the World Bank and the Organization for Economic Cooperation and Development estimate, respectively, that the accord will bring about an overall increase in yearly global output of about $213 billion and $274 billion. Undoubtedly, tariff reduction, the elimination of nontariff and other trade distorting measures, and the like will result in increased world growth and trade. However, the pertinent questions that arise are these: Do all of the nations reap the benefits, or only some? Are some nations better off at the expense of others? The rest of the paper focusses on the agreement from this angle.
IMPLICATIONS FOR LESS DEVELOPED COUNTRIES
(LDCS), INCLUDING MUSLIM LDCS
On the completion of Uruguay Round, Praful Bidwai commented:
For the South (Third World Countries) the issues go much beyond trade and directly concern long term policies on investment, agricultural growth, food subsidies for the poor, intellectual property rights and patents, and the potential for development itself. At stake is not just the sovereign rights of governments to make domestic policies, but also the skewed nature of the prevalent foreign trade regime, with its strong, built-in protectionist bias.
6
The UN Development Program estimated that in 1991, Northern protectionism cost the Southern countries $30 billion in lost export alone.
As for TRIPS, the GATT agreement compels the members to legislate a regime of intellectual property protection, including patents, that inhibits innovation and invention, but legitimizes old, established monopolies. Less than 5 percent of the world's 30 million or so patents originate in the South. "This will mean innovators in the South are effectively barred from putting to use novel ideas and processes, however appropriate they might be to their societies or economies, on the ground that they are already patented elsewhere, and that even the importation of patented products from North to South amounts to the 'working' of the patent."
7
The Third World now will be forced to permit and strengthen the North's monopolies in the fields of drugs, food, and health-related goods. Additionally, it will further raise health cost in the LDCs. Today, countries like India and China have been producing pharmaceutical products at one-half or less of their cost in the West. Such countries not only meet their domestic demands, they earn lucrative foreign exchange because of the competitiveness and cost-effectiveness of their products. This measure will hurt the competitiveness of Third World exporters, such as South Korea, Taiwan, Malaysia, and Indonesia. The measure will invariably injure the agricultural sector of the Third World, too. Growth in agriculture is attributed to good quality seeds and sophisticated research in plant breeding.
Analogously, the repercussion of the GATT agreement on service will be hostile and ill-conceived for the Third World.
The agreement would allow multinational firms to invade newly developed service sectors by demanding treatment on at par with fledgling domestic firms. Potentially, this poses a threat to Third-World insurance, banking and media, which national governments have no way of meeting once they sign on the dotted line. This is a recipe for unfettered cultural imperialism and finance capital domination.
8
In compensation for the "memorandum of humiliation and discrimination," the North pledged to give the South greater access to its textiles and to phase out the discriminatory MFA. Even if the West were to fulfill its promise, it would take seven to ten years to get it implemented.
The Agreement also attempts to bar Asian companies, which are competitive in the international market owing to their cost-effective techniques, which include the use of low-wage workers, children, and labor-intensive techniques. The United States is also attacking their competitiveness by passing rules against child labor.
