Making the WTO ‘More Supportive of Development’? The Doha Round and the Political Rationality of the WTO’s Development Mission Donatella Alessandrini
Lecturer in Law
Kent Law School
University of Kent
This is a refereed article published on: 26 March 2009
Citation: Alessandrini, D. (2009) ‘Making the WTO “More Supportive of Development”? The Doha Round and the Political Rationality of the WTO’s Development Mission’, 2009 (1) Law, Social Justice & Global Development Journal (LGD).
This article is concerned with the Doha ‘Development’ Round of the World Trade Organisation (WTO). Its historic significance seems to lie in the fact that the international community has undertaken the unprecedented effort to deliver the long-standing development promise of the multilateral trade regime. Thus, despite its past failures, the claim is that its successful conclusion is a ‘political must’ for development. Contrary to this assumption, the paper argues that the ‘failure’ and ‘promise’ of development that the multilateral trade regime articulates are inherent in the ‘science of development’ established at the end of the colonial era. In particular, the paper claims that the General Agreement on Tariffs and Trade (GATT) and the WTO have contributed to the creation, consolidation and transformation of a development apparatus that links forms of knowledge about the so—called Third World with forms of power and intervention. By emphasising the permanence of the ‘civilising mission’ within the WTO’s Doha agenda, it makes the case for challenges to be made not only to its current market-access mindset but also to the three normative assumptions that have provided the ‘science of development’ with its political rationality.
Science of Development, Neo-Liberal Rationality, GATT, WTO, Doha Round
The establishment of the WTO in 1995 signalled a new era of international trade relations. The precursor of the WTO, the General Agreement on Tariffs and Trade (GATT), had disciplined trade relations among states for over four decades. Since its outset, the GATT had had to confront the claims of its developing country members that its rules were unfavourable to their trade interests. As a result, several initiatives were undertaken between the 1950s and 1980s to take into account the specific problems developing countries faced within the international trading regime.
However, trade scholars have pointed out that the development—related trade activity of GATT resulted in an asymmetry of trade rules between developed and developing country members that did not address the source of the discrimination against the competitive exports of the latter (Hudec, 1987). According to mainstream trade literature, whereas the asymmetry of rules provided the legal basis for such discrimination, its underlying rationale must be traced back to the erroneous economic assumptions about development and the resulting counter—productive legal claims advanced by developing countries. To put it succinctly, by relying on trade protection as opposed to trade liberalisation and insisting on unilateral measures on the developed countries’ part, developing countries failed to stop the discrimination against their competitive exports and consequently to develop their economies by means of liberal trade (Hoekman & Kostecki, 1995).
Thus, the entry into force of the WTO legal regime was supposed to have signalled the ‘rational choice’ by developing countries to abandon their failing economic policies and legal strategies and embrace a rules-based multilateral trading system endowed with an effective enforcement mechanism. By adhering to the same set of rules and the economic rationale they embody, namely the unquestionable belief in the universal beneficial role of trade liberalisation, developing countries would finally be able to demand and enforce compliance with WTO rules so as to enjoy the benefits its legal regime is supposed to generate.
Yet, soon after its agreements were operationalised, it became apparent that the benefits of multilateral trade liberalisation had not materialised as far as developing countries were concerned (Charlton & Stiglitz, 2005). The ‘failure’ of development within the WTO is imputed to the improper implementation of its rationale, and, in particular, to the less than full liberalisation achieved with respect to the sectors of interest to developing countries. Hence, the Doha Round (WTO, 2001) was meant to finally deliver the long-standing development promise of the international trading regime by addressing the reasons for the difficulty of developing countries to ‘participate fully in the work of the WTO and to derive maximum benefits from it’(Moore, 2001a). Despite the fact that the Round has been fraught with many difficulties and suspended twice as a result of the ‘irreconcilable’ differences among its members, developing countries are called upon to behave responsibly, recognise the unprecedented opportunity offered to them and realise that the successful conclusion of the Round is ‘a political must for development’ (Lamy, 2007).
This article investigates the rationales behind the six-decades long ‘failure’ of the development enterprise of the multilateral trading regime. Trade scholars have acknowledged that both the GATT’s and the WTO’s selective trade practice has violated the development principles they have purported to promote (Hudec, 1997, Michalopoulos, 2001). Consequently, they have argued that international efforts should continue in order to finally redress the imbalances of the international trading regime. This underlies the so-called market access argument, according to which the multilateral trading system will deliver its development promise provided that WTO developed country members open up their markets to developing countries’ competitive exports.
There is however another perspective from which to look at the ‘failure’ and the ‘promise’ of development within the current round of negotiations. The central argument of this article is that development has always occupied a central position within the multilateral trading regime. Taking the cue from Anghie’s account of the Mandate System under the League of Nations (2000), the first part argues that development has been constructed as a ‘science’ functioning on the basis of a universal economic rationality and a linear and consequential reading of history that articulates a mutual reinforcing relationship between a ‘civilising mission’ and the furtherance of the interests of the major trading powers.
The second part brings the insights on the ‘science of development’ to bear on the Doha Round and contends that rather than implying a rethinking of the WTO’s development rationale, its significance rests in the intensification of the ‘political rationality’ of development. The article does not advance any practical suggestions for reforming the WTO’s development agenda. However, by taking leave from the urgent calls to resume negotiations, it contributes to a much needed reflection on the normative assumptions pervading the WTO’s development agenda. In so doing it argues that any alternative to the current state of affairs needs to simultaneously challenge the three normative assumptions on which development operates and the interests it serves.
The ‘Science of Development' and the ‘Development Mission’ of the Post-War Period
Trade has always been an essential underlying element of international law. Already at the time of Westphalia, the new system of sovereign rights over mutually exclusive territories was based on the acknowledgment that future quarrels between European sovereigns were to exert no influence on the right to trade of private actors (Arrighi, 2000:43). As Arrighi notes, ‘The considerable freedom granted to private enterprises to organise commerce peacefully across political jurisdictions even in wartime…marks the birth not just of the modern inter-state system, but also of capitalism as world system’ (ibid., 44). The relationship between trade and the so-called civilising mission was a crucial aspect of the colonial enterprise of European states in the non-Western world: as Anghie (1999: 64) argues ‘trade was an indispensable part of the civilising mission itself; the expansion of commerce was the means by which the backward natives could be civilized’.
At the beginning of the twentieth century, however, it became apparent that colonies would soon have achieved independence. This meant that their vast economic resources would no longer be under the direct control of the imperial powers. A new means which enabled the latter to continue to operate in the territory of the ex—colonies was therefore needed in order to ensure their future access to natural resources: this means was soon to be provided by the emerging ‘science of development’.
Although the institutionalisation and professionalisation of development occurred in the immediate post-war period (Escobar: 45-46), its antecedents can be traced back to the Mandate System under the League of Nations. As Anghie (2000: 285) has pointed out, it was with the Mandate System that the ‘civilised-uncivilised’ dichotomy of international law was reconceptualised in economic terms and development as a scientific discipline first emerged. Economic backwardness, rather than racial and cultural connotations, made the people of the mandate territories unable ‘to stand by themselves under the strenuous conditions of the modern world’ so that for the League’s members ‘the well-being and development of such peoples form[ed] a sacred trust of civilization…’ (League of Nations: Art.22). [emphasis added] At the same time, the promotion of the so-called well-being of natives was accompanied by another objective, that is, the utilisation by the mandatories of the economic resources of the mandate territories (Anghie, 2000: 278).
The neutral character of the League, as opposed to the self-interested nature of the colonial powers, was therefore achieved through the resort to economic rationality and the establishment of a neutral body of experts, the Permanent Mandate Commission (PMC). The Commission was given the task to gather, analyse and elaborate a vast amount of information regarding different territories and several subject areas (ibid.: 280). The result was that the PMC could claim to be able to formulate neutral policies to be adopted in the different mandate territories. Thus, once the failure of so-called backward societies was established in supposedly neutral terms, economic rationality, which happened to be the privileged domain of ‘advanced’ countries, was posited as the means through which mandate territories could overcome their inability to ‘stand by themselves’ and achieve equal status in the international community.
On this premise, the ‘development mission’ of the international community was deployed in the immediate post-war period. This enterprise relied on three normative assumptions borrowed from the experience of the Mandate System, namely: the positioning of a dichotomy between the status of developing and developed societies in terms of an economic gap, the reliance on economic rationality as the neutral terrain on which to bridge this gap, and the invocation of the help and expertise of the most ‘advanced’ members of the international community to facilitate this inevitable and desirable process. As will be argued below, these three elements have set the terms within which it has been possible to think about, speak of, and reformulate ‘development’ since de-colonisation.
In the immediate post-war period, the basic underpinnings of development thinking were that the economic growth and progress experienced by industrialised countries were both desirable and inevitable. With development economics and modernisation theories, the so—called backwardness of Third World societies came to be neutrally theorised and new forms of interventions based on economic rationality were made possible.1 Development was made to coincide with rapid economic growth, indiscriminate industrialisation and capital accumulation to be achieved through injections of foreign capital and participation in the liberal trade regime whose rules had been established by the GATT. Thus, the radical transformation of Third World societies and their incorporation within the world capitalist system was posited as a necessary and desirable historic event to be achieved at the expense of other forms of societal organisation with nothing to contribute to the development process (Escobar, 1995: 78).2 For its part, GATT further elaborated the development norm of the post-war period through its institutionalisation of the ‘failure of developing countries to develop their trade as rapidly as that of the industrialised nations’ (GATT, 1958: 18). The development-related trade activity that followed was to be informed by this premise. To be sure, as Escobar (1995: 31) writes, ‘if during World War II the dominant image of what was to become the Third World was shaped by strategic considerations and access to its raw materials, the integration of these parts of the world into the economic and political structure that emerged at the end of the war grew more complicated’. Indeed, development economics and modernisation theories were soon to be challenged by dependency thinking. Most of the reformist dependency theories which impacted on the international trade regime hardly questioned the fundamental assumption that development was the necessary and inevitable result of a natural and linear historic process. However, they argued against the assumption that trade liberalisation would automatically lead to greater growth and development for all countries, pointing out that the imbalances deriving from historical trading relationships and the rules of the GATT greatly limited the trade prospects of developing economies.3 Consequently, the coalition of developing countries embarked on reforming the rules of the international trade regime. The result of thirty years of GATT’s development agenda was the recognition that some flexibility from GATT’s legal rules was appropriate in order to allow developing country members to reach the ‘advanced’ stage of their economies. Notwithstanding the fact that industrialised countries actively discriminated against the trade interests of developing countries (Hudec, 1987), GATT’s provisions granting so-called Special and Differential Treatment (SDT) conceded that, in order to correct the inequalities of the international trading system, developing countries were entitled to non-reciprocal commitments during negotiations, formal enhanced market access, regulatory autonomy and policy discretion in their own economies. Hence, the GATT legal structure provided for the freedom of states to decide about the optimal degree of intervention and trade liberalisation and, most importantly, did not substantially regulate other dimensions of its members’ domestic policy.
From Post-War Development to Neo-Liberal Development
The 1980s, however, signalled the reversal of this rationale. With neo-liberal theories, the market mechanism and rational economic behaviour exhumed from neo-classical economics were employed to explain the failure of the state—based development which had prevailed for three decades in both developing and developed countries. This section focuses on a particular aspect of early neo-liberal theories, namely the way in which their economic analysis of development intersected with political representations of Third World societies. This is important for two reasons: firstly, to expose the continuity of a discourse about the ‘nature’ of Third World societies that belies the alleged neutrality and objectivity of neo-liberal analyses; and secondly to show how neo-liberal development linked with, while displacing, earlier development approaches thanks to the three normative assumptions inherent in the ‘science of development’.
From rational economic behaviour…
Early neo-liberal writers such as Lal, Bauer, Balassa and Krueger refuted the basic assumptions underlying development economics and dependency theories.4 Lal (1983:5) for instance argued that the so-called dirigiste dogma, namely the belief in the active role of the government in promoting development, derived from the erroneous assumption that the differences in the structures of developing economies required separate economic analysis and policies from those applicable to the developed economies. The means on which he relies to show the fallacy of this assumption are the price mechanism and rational economic behaviour. The price mechanism is the principal organiser of economic activity, therefore the neo—classical analysis of human economic behaviour is not limited to agents operating in developed countries. Hence, the fallacy of the dirigiste dogma consists in denying the universality of rational economic behaviour. This flaw derives from:
the paternalist attitude born of a distrust of, if not contempt for, the ordinary, poor, uneducated masses of the Third World…. It is easy to suppose that these half-starved, wretched and ignorant masses could not possibly conform, either as producers or consumers, to the behavioural assumption of orthodox neo-classical economics that people would act economically (ibid., 104).
This passage is crucial in that it seems to address the civilising attitude of development economics towards so-called backward societies when, in actual fact, it is constructing a new vision of backwardness that extends beyond economics to include institutional and social arrangements. Lal denounces the paternalist attitude of development economics that had conceived of the ‘masses of the Third World’ as irrational economic agents. Simultaneously, these ‘uneducated masses’ are still in need of assistance in order to overcome their ‘political and emotional resistance’ to sound economic policies. As he points out ‘the major benefit the developing countries derive from…the multilateral trade institutions…is the technical assistance built into the process of transferring the aid money to the recipient countries. Though often sound on general economic grounds, their advice is nevertheless resented for political and emotional reasons…’ (ibid., 104). [emphasis added]
The reformulation of the premises underlying the Mandate System is fully accomplished. The Mandate System, borrowing from the science of colonial administration, was based on the assumption that the inhabitants of the ex-colonies were ‘not yet able to stand by themselves’ and therefore needed guidance in order to pursue their material as well as moral and educational progress. The result was the creation of a ‘science of development’ able to formulate universal policies by relying on the neutrality of economics. In the immediate post-war period, development economics would carry over precisely these assumptions, namely that ‘backward societies’ were characterised by an economic stage which was different from that of the advanced economies; that reliance on economic rationality would pave the way to their development; and that this process would be facilitated through the expertise and guidance of the ‘advanced’ members of the international community. Lal seems to distance himself from the ‘paternalist’ attitude of development economics by invoking the universality of rational economic behaviour. However, far from being removed, these assumptions are reformulated in his analysis.
Firstly, non-Western societies are still characterised as backward although, in contrast to the analysis of development economics, they do not require different economic analysis and policy prescriptions. The modus operandi of the PMC based on the collection, analysis and elaboration of a vast body of information from the mandate territories continues to operate. As Lal (105) writes, ‘there is by now a vast body of empirical evidence from different cultures and climates which shows that uneducated peasants act economically as producers and consumers. They respond to changes in relative prices much as neo-classical economic theory predicts’.
Secondly, reliance on neo-classical assumptions about rational economic behaviour and the price mechanism provides the premise for the replacement of development economics with the universality of neo-liberal economic laws. Therefore, the universality of neo-classical economics is invoked to argue for the applicability of market-based policies in developing countries. In other words, the means invoked to achieve development is once again the neutrality of economic laws, this time neo-liberal laws.
Thirdly, developing countries are still in need of assistance in order to achieve development. The formal argument is that despite the fact that individuals in the developing world conform to the neo-classical model of rational utility-maximisers, their social and institutional arrangements are such that they will resist sound economic reforms. Lal (104) is here referring to the second failure he imputed to development economics, namely the overemphasis on physical capital formation as opposed to human capital formation. The latter needs to be encouraged through appropriate institutional arrangements both domestically and at the international level. Thus, it is necessary to make foreign aid conditional upon the adoption of sound, rational policies prescribed by the donors.
…to failing institutional and social arrangements
Lal’s analysis can be read in conjunction with similar studies that emerged in the 1980s. Bauer, for instance, had already claimed that ‘emergence from poverty [in the Third World] does not require large-scale capital formation’ (Bauer, 1981: 248). He was also sceptical of human capital formation, since his researches into the economic growth of the Malayan, West African and Indian economies had shown that their different economic performances could not be explained in ‘terms of differences in human capital formation’ but in terms of people’s ‘personal preferences, motivations and social arrangements’(1984:7). Thus, whereas Lal would argue for technical assistance and conditional aid in opposition to the overemphasis on physical capital formation, Bauer had anticipated the idea that institutional and social reforms in developing countries were necessary to stimulate growth. The theoretical basis for both, however, was a discourse about the Third World’s societal organisations, which was presented as neutral, rational and technical rather than political. The relevance of these theoretical constructions would gradually increase as their acceptance extended beyond traditional economic sectors. North (1993: 6), for instance, would argue that:
transferring the formal political and economic rules of successful western market economies to Third World and Eastern European economies is not a sufficient condition for good economic governance…as it is the informal norms that provide the essential legitimacy to any set of formal rules…it is essential to change both the institutions and the belief systems for successful reform since it is the mental models of the actors that will shape choices.
Technical assistance and conditional aid, together with institution building, would become crucial tools in the development arsenal of the international economic institutions for radically transforming institutional and social arrangements in developing countries. Thus, the neo-liberal transformation of the ‘science of development’ set out to operate a radical alteration of economic, political and social arrangements beyond the market, or, in other words, to reconceptualise in market terms all spheres of human interaction. The beginning of this shift can be traced in Lal’s and Bauer’s works, where all individuals are intrinsically rational economic agents able to seize any economic opportunity. It follows that radical reforms are necessary for abolishing previous policies based on false economic assumptions such as those of development economics and dependency theories. Hence, the ‘science of development’ is transformed with regard to the means necessary to achieve the undisputed result, namely catching up with the economic stage of the developed economies, so that the market, rather than the state, is posited as the crucial engine of development.
Thus, by positing the price mechanism as the principal organiser of human behaviour and economic activity, early neo-liberal scholars define direct government controls both at the national and international level as the major dogma of development economics (Lal, 1981:27; Jaastad et. al., 1986: 131-179). For instance, the economic crises developing countries experienced during the 1980s are seen as the result of distortions induced by the economic policies pursued by their own governments (Balassa, 1989: 95-96; Krueger 1993: 3-4). Not only do insights into the structural imbalances of the international trading system gradually disappear from the development debate, but also, the impact of external phenomena such as the critical shortage of foreign exchange, the oil shock and the debt crisis is believed to have been magnified by the adoption of erroneous policies. Thus, the neo-liberal policy prescriptions that follow are based on the transformation of inward-looking, state-based economic structures into market-oriented economies, accompanied by reforms of their institutional and social arrangements. The theoretical tenets of these reforms were soon to inform the transformation of the international trade regime as its scope was extended well beyond the regulation of trade in goods. However, the point made here is that the neo—liberal shift in development thinking would have not been possible without the disciplinary authority on which ‘development’ as a science rests.