UNIT 20 RESPONSES TO

GLOBALIZATION AND
WORLD TRADE
ORGANIZATION
Structure

20.0 Objectives
20.1 Introduction
20.2 Beginnings of Globalization
20.3 World Trade Organization
20.3.1 Ministerial Meeting in Singapore, 1996
20.3.2 Ministerial Meeting in Geneva, 1998
20.3.3 Ministerial Meeting in Seattle, 1999
20.3.4 Ministerial Meeting in Doha, 2001
20.3.5 Ministerial Meeting in Cancun, 2003
20.3.6 Ministerial Meeting in Hong .kong, 2005

20.4 The Uruguay Round and Agriculture

20.5 The Way Ahead
20.6 Let Us Sum Up
20.7 Key Words
20.8 Some Useful BookslReferences
20.9 AnswerslHints to Check Your Progress

20.0 OBJECTIVES
After going through this unit, you will be in a position to:

• explain the emergence of globalization U; world trade;

• discuss World Trade Organization and its role in international agriculture trade;
and

• discuss the negotiation trends in agricultural trade.

20.1 INTRODUCTION
Globalization is defined in many ways and viewed from different aspects. Yet all
will agree that globalization means expansion of economic activities across the
globe. It refers to a process of economic integration, economic openness and
economic inter?ependenc~ in the w~rld economy. There m:ewidespread cross
border economic transactions. Besides, the process also involves profit and
competition which are the driving forces of globalization.
61
Agricultural Policies
.
Globalization evokes a.positive as well as a negative points of view. It is positive
in Selected Countries
when it is viewed as a process of deepening integration of world economy. If it
is viewed as a strategy for disintegration, it becomes suspect.

20.2 BEGINNINGS OF GLOBALIZATION'

Starting from the 1950s economic, political and intellectual factors contributed to
the beginnings of globalization. Globalization was possible because of vanishing
barriers to international economic transactions. In addition there was emergence
of new technologies. Even industrial organization changed its form. There were
changes in outlook and functioning. All these emerging trends made globalization
possible.

• Trade Liberalization

Trade Liberalization led to expansion of international trade. The liberalization of

foreign investment led to enormous growth in international investment. Financial
liberalization led to globalization of finance. It was also linked with dismantling of
regulations and controls.

• New Technologies

There had been a virtual technological revolution in transport and communication.

This helped in a big way and became a crucial factor to give a spurt to globalization.
Communications technology and computertechnology richly contributed to
transmission of information and processing of information that led to information
technology. In turn information technology reached information to far corners of
the world with remarkable speed. Cost effective technology gave a big boost to
globalization. •.

• New Forms of Industrial Organization

Industrial organization witnessed new forms and strategies. Production system

became flexible in accordance with technical progress. The distance between
producers and consumers decreased. Externalization of services had a strong
influence on the industrial firms and on the prpcess of globalization.

• The Process of Globalization .

The process of globalization .started in the early 1970s. By then the United States
of America was acknowledged as the only superpower since the Soviet Union
disintegrated. The United States became a dominant economic power with a
national currency which was accepted internationally. It was a prerequisite for
globalizationand the economy of US fit into that role. Globalization was increasingly
. perceived as a means to bring in efficiency, equity, growth and developm~nt in the'
world economy.

• Neo-Liberal Model

Neo-liberal model of political economy is of the view that the governments are
not capable of intervening in markets efficiently. It was suggested that the
government's role' should be minimal. Market is the preferred-alternative because
it performs' better .. Market prices should confirmas closely as possible to
62 international prices. There should be no constraints like political' objectives,
 Responses to Globalization
economic concerns or national boundaries. That will result in a global economic
and World Trade
system characterized by free trade, capital mobility and open markets. Those Organization
who j,oin the system will prosper economically and those who do not will be
deprived of economic prosperity.

• Inequalities and Asymmetries

It is feared that there are inequalities and asymmetries in the process of globalization
because of economic reasons. Some countries would experience an exclusion
from the process of.globalization that may result in exclusion from the process of
development. This will increase the economic distance between the nations. That
will lead to political and social divides among nations.

• Unequal Partnership

The fact of the matter is, as witnessed by the twentieth century, no country is
excluded from globalizationbecause no one can afford it. But an unequal partnership
remains. For more broad-based development more countries should be provided
with opportunities to improve their development prospects and to improve their
people's living conditions. Thus world economy should benefit maximum number
of people.

• Reduced Autonomy of the Nation

It is l?erceived that globalization tends to reduce the autonomy of the nation in

economic matters. To overcome this, any strategy of development should cr~ate
space for national interests. The state as an institution can introduce correctives.
The twentieth century which witnessed success in economic development of
countries had also witnessed the state playing crucial economic role in the entire
process of development.

• Important Role of the State

/

In any country that pursues development in the context of globalisation, the state
has an important role to play in domestic economic sphere and in interaction with
the outside world. Within the country the state has to create the pre-conditions
for more equitable development. In the internationalcontext, the state has to
endeavour to reduce inequalities in the process of globalization. It should bargain
for conditions which are conducive to development. Nation states must endeavour
to influence the conditions of globalization to make the playing field less uneven.
There should be greater symmetry in the rules of the international trading system.
This results in more equitable outcome which should be the desired goal of
globalization.

• . Need for Reshaping Rules

. In this context there is a need to influence and reshape the rules of the multilateral
institutions like the World Trade Organiation (WTO), the International Monetary
F~md(IMF) and the WorWBank (~). That should enable developing countries
to voice their concef!1in these forums to make them function more democratically,

• Corrective Measures-

For globalization to be effective as a developmental strategy, and to benefit

maximum number of people some precautions and some corrective steps are to
be taken, The nation states should be acting in the interest of its people without
Agricultural Policies being manipulated by the pressure groups. The developmental strategies should
in Selected Countries
have people at the centre stage. Economic and political inequalities, the rich and
the poor divide will certainly result in unequal partners in globalization. This cannot
be wished away but corrective measures can be taken to make globalization more
equitable and fruits of development reach out to wider population.

Check Your Progress 1

Note: i) Use the space given below for writing your answers.
ii) Compare your answers with those given at the end of this unit.

1) What is globalization?

..................................................... ; .
..........................................................................................
...........................................................................................

2) What are the inequalities and asymmetries in globalization?

..
3) What is the role ofthe state in the context of globalization?

.........................................................................................

20.3 WORLD TRADE ORGANISATION

The World Trade Organisation (WTO) was established in 1995 keeping in mind
the need for the multilateral trade system to promote global prosperity. It is a
successor to the General Agreement on Tariffs and Trade (GATT) which was a
temporary legal agreement. Besides tariffs and trade the World Trade Organisation
agreements also incorporate intellectual property, investment and services,
liberalization of agriculture and textiles and garments. As and when discussions
take place, new issues arise and they too become part of WTO. Now trade
facilities, transparency in government procurement, competition, investment policy
and environment are some of the new issues which have come under the purview'
ofWTO. Now WTO has 149 members. In the last eleven years the members
have gone a long way in their approach to trade policy and in addressing the
challenges imposed by globalization.
 Responses to Globalization
Trade and Development
and World Trade
Organization ...
There is a general recognition that trade cannot be separated from development
can be furthered through trade. The Agreement for setting up the WTO visualizes
. a Ministerial Conference once every two years. Accordingly there have been six
Ministerial Conferences so far - Singapore (1996), Geneva (1998), Seattle (1999),
Doha (2001), Cancun (2003) and Hong Kong (2005).

20.3.1 Ministerial Meeting in Singapore, 1996

WTO was formed in January 1995 and the first Ministerial meeting took place
in December 1996. Many issues that were discussed and agreed in the Uruguay
Round (1986-94) were yet to be implemented. So the Singapore Ministerial
Declaration is known for issues like transparency in government procurement,
trade facilities, competition policy and investment. These are also remembered
and mentioned as Singapore issues.

• Working Group on Trade and Investment

In the Singapore Conference it was agreed to establish a working group to

examine the relationship between trade and investment. It was also agreed to
establish a working group to study issues raised by members relating to the
interactionbetween trade and competition policy including anti-competitivepractices.
The Declaration ofthe Singapore Conference further said that the development
dimension is taken fully into account. "It is clearly understood that future negotiation,
if any, regarding multilateral disciplines in these areas, will take place only after an
explicit consensus decision is taken among WTO members regarding such
. negotiations."

• Labour Standards

On core labour standards the Declaration said, "We renew our commitment to
the observance of internationally recognized core labour standards. The International
Labour Organisation (ILO) is the competent body to set and deal with these
standards, and we affirm our support for its work in promoting them."

• Environment

On the environment the. Declaration said, "The Committee on Trade and

Environment has made an important contribution towards fulfilling its Work
Programme. The Committee has been examining and will continue to examine,
inter alia, the scope of the complernentaries between trade liberalization, economic
development and environmental protection. Full implementation of the WTO
Agreements will make an important contribution to achieving the objectives of
sustainable development."

• Multilateral and Regional Liberalization

In the Singapore Ministerial meeting there was a concern about compatibility

between multilateral liberalization and regional liberalization. In this context the
Declaration noted, "the importance of existing regional arrangements involving
developing and least developed countries. The expansion and extent of regional
trade agreements make it important to analyse whether the system ofWTO rights
and obligations as it relates to regional trade agreements needs to be further
65
Agricultural Policies clarified ... In this regard, we welcome the establishment and endorse the work
in Selected 'Countries
of the new Committee on Regional Trade Agreements. We shall continue to work
through progressive liberalization in the WTO as we are committed in the WTO
Agreement. .. , and in so doing facilitate mutually supportive process of global and
regional trade liberalization."

• Implementation

Since implementation was an issue the Singapore Ministerial meeting also took
note of it. "We attach high priority to full and effective implementation of the
WTO Agreement in a manner consistent with the goal of trade liberalization ...
with respect to industrial market access, monitoring of implementation would be
enhanced by the timely availability of trade and tariff data. Progress has been
made also in advancing the WTO reform programme in agriculture, including in
implementation of agreed market access concessions and domestic subsidy and
export subsidy commitments."

• Textiles and Garments

A jpecial paragraph found a place in the Declaration on textiles and garments. It

said, "We confirm our commitment to full and faithful implementation of the
provisions of the Agreement on Textiles and Clothing (ATC). We stress the
importance of the integration of textile products, as provided for in the ATC, into
GATT 1994 under its strengthened rules and disciplines because of its systemic
significance for the rule-based, non-discriminatory trading system and its
..
contribution to the increase in export earnings of developing countries."
.

• Differential Treatment for Developing Countries

About the commitments faced by developing countries and Least Developed

Countries the Declaration said, "The integration of developing countries in the
multilateral trading system is important for their economic development and for
global trade expansion. In this connection, we recall that the WTO Agreement
, embodies provisions conferring 'differential and more favourable treatment for
developing countries, including special attention to the particular situation of least
developed countries."

20.3.2 Ministerial Meeting in Geneva, 1998

The Second Ministerial Meeting ofWTO took place in Geneva in 1998. It was
, concerned with the 50th anniversary of GATT and the East Asian financial crisis.
In the Ministerial declaration on 20 May 1998 it was stated that the WTO shall
provide the forum for negotiations among its members conceming their multilateral
trade relations. It may also provide a forum for further negotiations and a frame.
work for the implementation of the results of such negotiations, as may be decided .
by the Ministerial Confetence.

• Successful Conclusion of Service Sector

The conference had successful conclusion of service sector and plurilateral

agreements. The Declaration referred to this: " ... we welcome the .successful
conclusion of the negotiations on basic telecommunications and financial services
and we take note of the implementation ofthe lnfonnation Technology Agreement.
66 We renew our commitment to achieve progress. , e "beralization of trade in goods
::Inn I;:prvir:pl;: "
 Responses to Globalization
• Concern over Small Economies
and World Trade
Organization.
The Declaration also mentioned. small economies "We remain deeply concerned
over the marginalization ofleast developed countries and certain small economies,
and recognize the urgent need. to address this issue which has been compounded
by the chronic foreign debt problem facing many of them."

20.3.3 Ministerial Meeting in Seattle, 1999

The third ministerial meeting in Seattle had foreseen some controversies. Millennium
Round was expected to be launched soon. WTO's press release on 28 June
1999 said: "The WTO's 3rd Ministerial conference, scheduled to be held on 30
November- 3 December 1999 in Seattle, Washington, will launch the next major
world trade negotiations due to start early in 2000. Ministers and other senior
officials from over 150 governments are expected to attend the four-day meeting
at the Washington State Convention and Trade Centre in Seattle."

• Expectations Belied

It was expected that WTO General Council would submit recommendations

regarding the WTO's work programme to Ministers to take decisions on the
scope, structure and time-frames of negotiations to liberalize international trade in
sectors such as agriculture and services. But that did not happen.

• NoAchievement

In the conference the developing countries expressed dissatisfaction regarding

imperfect market access liberalization in developed countries both in goods and
services. Instead of discussing the market issues the conference had Singapore
issues 'and labour and environmental standards on the agenda. So the Seattle
.Ministerial Conference failed to achiev~ much. .
.
20.3.4 Ministerial Meeting in Doha, 2001
The Doha Ministerial Conference in 2001 successfully launched the Doha
Development Agenda (DDA) and the deadline was set as 1 January 2005. The
Declaration said: 'The negotiations to be pursued under the terms of this declaration
shall be concluded not later than 1 January 2005. The Fifth Session of the
Ministerial Conference will take stock of progress in the negotiations, provide any
necessary political guidance, and take decisions as necessary."

• Positive Steps for Sustainable Development

The Doha Ministerial Meeting is remembered for several positive steps towards
sustainable development. The Declaration said, "We strongly reaffirm our
. commitment to the objectiveof sustainable development, as stated in the Preamble
to the Marrakesh Agreement. We are convinced that the aims of upholding and
safeguarding an open and non-discriminatory multilateral trading system, and acting
for the protection of the environment and the promotion of sustainable development
can and must be mutually supportive."

The Meeting also reaffirmed the declaration made at the Singapore Ministerial
Conference regarding internationally recognized core labour Standards.
67
Agricultural Policies
• More Transparency
in Selected Countries
Reflecting the growing dissatisfaction with WTO decision-making process and
negotiations, the Declaration said, "we· are committed to making the WTO's
operations more transparent, including through more effective and prompt
dissemination of information, and to improve dialogue with the public."

• Special and Differential Treatments

Developed and developing countries already had different points of view on

agriculture. The Declaration at Doha reconfirmed its commitment to the Agreement
on Agriculture to establish a fair and market-oriented trading system. This would
be achieved through strengthened rules and specific commitments on support and
protection. This was aimed at correcting and preventing restrictions and distortions
in world agricultural markets. A section on special and differential treatment said,
"We reaffirm that provisions for special and differential treatment are anintegral
part of the WTO Agreements."

20.3.5 Ministerial Meeting in Cancun, 2003

The Fifth Ministerial Meeting ofWTO was held in Cancun from 10 to 14 September
2003. Doha Development Agenda had already started and was slated to be
reviewed in Cancun meeting. But the meeting faced a lot of disagreement on four
key issues - agriculture, Singapore issues, the issue of patents and drug prices
and the issue of special and differential treatment to developing countries. The
dissatisfaction with WTO decision - making processes also emerged as another
Issue.

• No Ministerial Declaration

Cancun meeting had no Ministerial Declaration though a draft Ministerial text was
circulated on 13 September 2003. It was known as the Derbez text.

• The Derbez Text

The Derbez Text included commitments, the mandate on agriculture and the
mandate for negotiations on market access for non-agricultural products. The text
also referred to the provisions for special and differential treatment as an integral
part of WTO Agreements. There was disagreement about inclusion of the
Singapore issues in the Derbez Text.

20.3.6 Ministerial Meeting in Hong Kong, 2005

Before the Sixth Ministerial meeting in Hong Kong, the General Council Decision
was accepted on 31 July 2004. This provides an agreement for the Doha
Development Agenda. This text gives hope that DDA will come to a successful
conclusion but later than the agreed date 1 January 2005. This text too has
agricultural differences and the non-agricultural market access (NAMA) differences.
Much ofthe proposed liberalization in agriculture, remained unrealistic, though a
basis was provided for substantial agricultural liberalization.

• Toned Down Expectations

The Sixth WTO Ministerial Meeting was held in Hong Kong 13- 18 December,
2005, was perceiv ed as critically unimportant as it was expected to put into
68
 . Responses to Globalization
.action the development promises of Doha Development Agenda, Yet no one was
and 'World Trade
sure of a positive outcome. The expectations from the ministerial meet were Organization
toned down substantially because of continuing differences over issues related to
agriculture aa well as non-agricultural market access (NAMA) and services .

• ' A Mega Alliance

A mega alliance of 110 countries led by India and Brazil was formed to protect
their fanners interests and to gain a foothold in the advanced markets like Japan,
US and European Union. The alliance included the G-20, G-33, African,
Caribbean and Pacific (ACP) nations, African groups and small economies group
(SEG) apart from the G-90 comprising other least developed countries (LDCs).

• A Common Strategy

This mega group had put together a common strategy and joint statement to
'derive maximum benefits' from the WTO trade talks. The phasing out of export
subsidies on agricultural products by 2013 is claimed to be the biggest single
concession from the developed countries. Developing countries are allowed to
maintain subsidies that protect farmers livelihoods.

• Lower Barriers to Services

The Hong Kong declaration also called for lower barrier to services which is the '
economic' engine of the post-industrialised world. All the member nations agreed .
to reduce industrialtariffs by targeting peak rates of duty, as against focusing on
the average level of tariffs which allowed them to maintain protectionist rates on
select, critical items. Least developed countries were promised free access to
world markets by 2008.

• Reaffirming Doha Declaration

- -
A significant achievementof'theHongKong ministerial meet ofthe WTO is the
unanimous approval of the draft text hy-.al1149 member countries. As WTO
Director-General Pascal Lamy assessed the outcome, it has managed to put the
Doha round on track. The declaration said, "we reaffirm the Declarations and
Decisions we adopted at Dohaand our full commitment to give effect to them.
We rerte\'Vour resolve to complete theDoha.Work Programme fully and to
. conclude-the
. -.'
negotiations launched
.
at Doha successfully in 2006." ,

• WTO's Position Reaffirmed

The meet also reaffirmed WTO's position as a democratic multilateral organization

accommodating regional trade flow and conflicting economic and political interests.

Check Your Progress 2

Note: i)Use the space given below for writing your answers.
ii) Compare your answers with those given atthe end of this unit.

1) Why was World Trade Organisation established?

....................•..... ' .

..> .
....... .: . 69
Agricultural Policies 2) WhatisDohaDevelopmentAgenda?
in Selected Countries

.
........................................................... .

3) What is the outcome of the Ministerial meeting in Hors Kong?

20.4 THE URUGUAY ROUND AND

AGRICULTURE
The Uruguay Round (1986-94) and the Agreement on Agriculture (AOA) were
significant for agricultural trade. For the first time, trade in agricultural products
was brought into the global trading system. The AOA accomplished three basic
points.

1) ''Tariffication''. Conversionof a range of protection (quotas, voluntary restraints,

minimum prices, etc.) into bound tariffs.

2) Disciplines on export subsidies on agricultural products: Commitment to new

subsidies, with some programmed cuts.

3) Classification of domestic support into boxes of "green," "blue" and "amber,"

depending whether they are trade distorting, with some reduction commitments.

The Uruguay Round (UR) was considered as an important milestone for developing
countries in their integration into the global economy. As a group, developing
countries have shown much higher growth rates of output, employment, and trade
than industrial countries. They have become increasingly important markets for
industrial countries and for each other.

Many developing countries were active participants in the Uruguay Round and
helped in formulating new rules for the world trading system.

20.5 THE WAY AHEAD

It is observed that agriculture will clearly continue to bea difficult issue in the
WTO. But the lessons from the UR experience arec1ear.The degree of liberalization
achieved by the UR should not be overrated. There is still a lot remains to be
achieved. The UR set some useful rules and structures for liberalization. But the
results are yet to come. That is why WTO negotiations on agriculture are a
recurring feature.

70
 Responses to Globalization
• Addressing Distortions
and World Trade
Organization
There is a need for developed countries to recognize that their agriculture support
and protection lead to curtailment of the development of poorer countries. WTO
negotiations must address the obvious distortions by export subsidies. They should
agree to a time frame for their total elimination. Market - distorting domestic
support must be significantly reduced.

• Recognizing Differences

Food security and food safety and environment issues must be pursued. Special
. and differential recognition ofthe differences between developed and developing
countries has an important value in the trade negotiating process. Its importance
cannot be rrllrWrrrized. .

Check Your Progress 3

Note: i) Use the space given below for writing your answers.
ii) Compare your answers with those given at the end ofthis unit.

1) What is the significance of the Uruguay Round?

..........................................................................................

2) What are the basic accomplishment of Agreement on Agriculture?

....... ."
. . .

3) What distortions are to be addressed in future?

20.6 LET US SUM UP

We understand that globalization means expansion of economic activities across
the globe. It is a means to bring in efficiency, equity, growth and development. But
there are inequalities in partnership among developed, developing and least
developed countries. Some precautions are to be taken. World Trade Organisation
with 149 members is a democratic multilateral organization helping member countries

71
Agricultural Policies to have amicable negotiations. So far six Ministerial Meetings were held. The
in Selected Countries
Development Agenda acquires primary importance. The future holds hope for all
member countries.

20.7 KEY WORDS

AmberBox .• Agricultural supports considered to distort trade and is
subject to reduction commitments,

ATC Agreement on Textiles.and.Clothing of the WTO.

Blue Box Permitted agricultural supports linked to production, but <,

subject to production limits. It's considered minimally trade'

,- distorting.

Dlstortion When pricesand production are, higher or lower than

levels that wouldusually exist in:a competitive market.

Green Box Agricultural supports considered not to distort trade and

therefore permitted with no limits.

TBT Technical' Barriers to Trade.

The Boxes A box isa category of domestic support in agriculture.

TRIMs Trade - related investment measures.

.TRIPs Trade - related intellectual property rights .

UNCTAD ,United Nations Conference on Trade and Development:

20.8 SOME USE,FUL BOOKSIREFERENCES

,
Anne O. Krueuer (ed.), (2000). WTO as an International Organisation, Oxford
University press, New Delhi.

Bibek Debroy and Mohammed Saqib (ed.), (2005). WTO at Ten (VOlume 1&
Volume II), Konark publishers, New Delhi.

Bibek Debroy (ed.), (1998). Globalization, Konark publishers, New Delhi.

Merlinda D. Ingco, (200~). Agriculture, Trade. and, the WTO. The World
Bank, Washington, D.e. '

Website: http://www.WTO.org

20.9 ANSWERS/HINTS TO CHECK YOUR .

PROGRESS
Check Your Progress 1

l) Globalization means expansion of economic activities across the globe. The

process involves profit and competition. It is a means to bring efficiency, equity
'mn npvplnntnpnt
 Responses to Globalization
2) . Economic reasons will result in inequalities and asymmetries. They need to be
and World Trade
corrected. Organization

3) The state has an important role in domestic economic sphere and in interaction
with the outside world.

Check Your Progress 2

e.

1) The World Trade Organization was established for multilateral trade system to
promote global prosperity. .

2) Doha Development Agenda was launched at Doha Ministerial Conference. This

suggested positive steps for sustainable development.

3) The Hong Kong declaration was unanimously approved. Developed countries

agreed to phase out export subsidies on agricultural products by 2013.

Check Your Progress 3

1) Uruguay Round was significant for agricultural trade. It was an important step
for developing countries.

2) The Agreement on Agriculture helped tariffs, export subsidies and classification

of domestic support into boxes.

3) Export subsidies by rich countries cwtail development of poorer countries. These

need elimination. Differences between developed and developing countries must
be recognized.

73