Trade Justice

Our main aim is to address the problems which developing countries face in their trading relationships with the rest of the world, especially with the rich countries of the *G7[i]. But we also look at other issues connected to world finance and their effects on developing countries.

To do this we obviously need to take a close interest in the way the rules and regulations for both trade and finance, which are largely drawn up by the rich countries, affect poorer countries. And when we find anything which has a really serious adverse impact we decide what action, if any, we can take.

*[i] The G7, Group of Seven is a forum, created by France in 1975, for governments of seven nations of the northern hemisphere: Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States; Russia was a member of the then G8 but was suspended in 2014. The European Union is represented within the G8, but cannot host or chair.

Most producers operate within a system of trade which is far from fair in the sense that many cannot make a decent living from the price they obtain for their products.  The term ‘fair trade’ defines a trading partnership, based on dialogue, transparency and respect that seeks greater equity in international trade. This is also a good enough definition of Trade Justice.

International Trade Rules and the World Trade Organisation [WTO]

The depression of the 1930s and the Second World War gave prominence to the idea that the future economic success and stability of the world would be helped by agreed rules on trade.  The Bretton Woods Conference of 1944 proposed the creation of an International Trade Organization (ITO) to establish rules and regulations for trade between countries. but the U.S Senate would not accept the proposed treaty.  Some historians have argued that the failure may have resulted from fears within the American business community that the International Trade Organization could be used to regulate (rather than liberate) big business.

Only one element of the ITO survived and still survives: the General Agreement on Tariffs and Trade (GATT). Seven rounds of negotiations occurred under the GATT before the eighth round,  known as the Uruguay Round which began in 1984 and concluded in 1995, led to  the establishment of the WTO. The GATT principles and agreements were adopted by the WTO, which was charged with administering and extending them and resolving trade disputes between member countries. Unlike the GATT, the WTO has a substantial institutional structure.

The mission of the WTO is to increase international trade by promoting lower trade barriersand providing a platform for the negotiation of trade and to their business. It was agreed that the WTO should follow these fundamental principles of trading:

1. A trading system should be free of discrimination in the sense that one country cannot privilege a particular trading partner above others within the system, nor can it discriminate against foreign products and services.
2. A trading system should tend toward more freedom, that is, toward fewer trade barriers (tariffs and non-tariff barriers).
3. A trading system should be predictable, with foreign companies and governments reassured that trade barriers will not be raised arbitrarily and that markets will remain open.
4. A trading system should tend toward greater competition.
5. A trading system should be more accommodating for less developed countries, giving them more time to adjust, greater flexibility, and more privileges.

According to WTO rules, all WTO members may participate in all councils, committees. In practice, most of the WTO’s decisions are made in informal meetings, often called “Green Room meetings, to which most members are not invited.

At the highest level the Ministerial Conference meets at least every two years. It brings together all 164 members of the WTO, all of which are countries or customs unions. The Ministerial Conference can make decisions on all matters under any of the multilateral trade agreements.

Trade Justice and the WTO

At the Fourth Ministerial Conference in 2001 in Doha, Qatar, The Doha Round of negotiations was launched.  Its aim is to achieve major reform of the international trading system through the introduction of lower trade barriers and revised trade rules.  These talks drag on without coming to any conclusion as the richer nations demand concessions from the developing countries, which in turn are refusing to yield. One reason for this is that the US in particular, but also the EU, feel threatened by the rise of China as a trading nation. Another hindrance is that changes to the rules of trade require the agreement of all WTO members.

There has been just one significant agreement and that was in 2013 on trade facilitation, which is designed to cut red tape and speeding up of port clearances.

It is apparent from this history and from the inequality of power between the richer countries and the poorer, and despite the good intention of the founders of this system, moves towards enabling poorer countries to benefit from the WTO have not succeeded.  A particular example of this failure is cotton. Cotton is vital for the economies of cotton-producing countries in West Africa: Benin, Burkina Faso, Chad and Mali, known as the Cotton-Four (C-4). The exports from these countries face stiff competition from the US in particular which continues to give domestic support to its cotton growers.

The WTO is committed to the idea that free trade and competition will lead to the greater wealth of the developing world. This commitment flies in the face of the fact that the richer nations, the UK in particular, and also the US,  developed under the protection of tariffs on trade from their competitors. The ideal of free trade depends on equality between countries and that equality is notably absent.

The WTO, Free Trade and the developing nations

We can see the impact of the WTO’ s commitment to free trade in the signing of Economic Partnership Agreements [EPAs] between the EU and the African, Pacific and Caribbean [ACP] countries. The need for such agreements arose from the challenge made in the World Trade Organisation to long established agreements between the EU and the ACP which had offered a degree of protection for the exports from the ACP countries, most of which were former European colonies. The agreements require trade liberalisation – the removal of tariffs – in return for continued entry for ACP goods into EU markets. There has been much criticism of the way these agreements have been pushed through under threat of the total removal of protection and diminishing levels of aid. This approach has resulted in rushed deals, removing the opportunity for appropriate expert or public scrutiny as well as debate of the content either in ACP countries or Europe.

The 18th Ordinary Session of the Assembly of Heads of State and Government of the African Union, held in Addis Ababa, Ethiopia in January 2012, adopted a decision to establish a Continental Free Trade Area . The Agreement Establishing the African Continental Free Trade Agreement (AfCFTA) entered into force on 30 May 2019 for 24 countries . The main objectives of the AfCFTA are to create a single continental market for goods and services, with free movement of business persons and investments, and thus pave the way for accelerating the establishment of the Customs Union. It will also expand intra-African trade through better harmonization and coordination of trade liberalization and facilitation and instruments across the RECs and across Africa in general.

 See more https://www.tralac.org/resources/by-region/cfta.html

The Transatlantic Trade and Investment Partnership (TTIP)

TTIP [Transatlantic Trade and Investment Partnership.] This proposed treaty between the US and the EU was widely criticised for the threat it is reckoned to pose to EU food standards which are higher than those of the US, and for the investor-to-state dispute settlement [ISDS] clauses. It is argued that these clauses, which are already included in other trade treaties, make it possible for major corporations to block government policies with the support of secret arbitration tribunals operating outside the jurisdiction of domestic courts. For example, companies will be allowed to appeal against regulations or legislation that depress profits, resulting in fears that multinationals could stop governments reversing privatisations of parts of the health service.

All the aspects of TTIP which are troubling are likely to be included in a Trade Treaty between the UK and after Brexit. the US Campaigners are calling for transparency and openness in trade agreements, a strengthened role for parliaments with opportunities for revisions before and after the conclusion of agreements, an expanded role for civil society organisations and the prevention of corporate capture of trade negotiations. http://tjm.org.uk/trade-issues/developing-an-alternative-trading-system

A new Director General was appointed in March 2021,  Ngozi Okonjo-Iweala. She is a firm believer in the power of trade to lift developing countries out of poverty and assist them to achieve robust economic growth and sustainable development. This ambition is proving hard to realize at a time when international trade has been disrupted by Covid and the war in Ukrain. But she is a woman of great determination and considerable negotiating skills.

Trade and Climate Change.

The World Trade Organisation’s biennial Ministerial Conference took place in Abu Dhabi, in March 2024. These conferences are not known for reaching agreement on difficult issues such as climate change. However, Ngosi Okonjo IWeala, the Director-General , was determined to confront the view that free trade is part of the climate problem because it generates transport emissions and can help drive carbon-intensive economic growth. Instead, she argues the body can be part of the solution: by tackling fossil fuel subsidies, harmonising carbon price policies to prevent emissions merely being displaced to other countries or tackling import tariffs for low-carbon goods like electric cars, which tend to be higher than for combustion ones.

A commitment to sustainable trade is in the WTO’s 30-year- old founding document, with members aspiring to “protect and preserve the environment and to enhance the means for doing so”. But the founding document also has enshrined in it the principle that all other policy measures must not unnecessarily restrict or create obstacles to international trade. Moreover, and in stark contrast with climate agreements, all trade and investment agreements are both fully binding and enforceable.

Some countries, like India, say the issue has no place on an WTO agenda it wants confined to pure trade matters. Many developing states fear that countries’ new policies in this area, such as the EU’s carbon border tax, will place them at a trade disadvantage since they have fewer resources to decarbonise their industries. Some wealthy states prefer to go it alone with their own policies, believing they have enough flexibilities under the rules as they are, and that a big multilateral negotiation on new rules would not be helpful, and could even constrain some of their future environmental measures.

These different perspectives are deep seated and will not be drawn together easily. The agreement of the Ministerial contains a single paragraph at the end on the topic of the challenges of climate change: “Co-sponsors of three environmental initiatives at the WTO presented at the Conference the next steps they are taking to advance work on plastics pollution, environmental sustainability, and fossil fuel subsidy reform. “ For those like Okonjo IWeala who see the WTO as a possible forum to help the world cope with the threat of climate change the hopeful sign is that groups of countries keen to make progress on environmental topics are discussing these ideas. These talks known as “plurilaterals” may form the basis for broader negotiations on new rules binding for all countries.