At a roundtable discussion convened by the Commonwealth Secretariat yesterday at Marlborough House in London, Columbia University Professor Joseph Stiglitz, recipient of the Nobel Memorial Prize in Economic Sciences, and LSE economist Andrew Charlton reiterated their call for the WTO to enshrine the "Right to Trade" within its dispute settlement system, and for the setting up of a Global Trade Facility fund administered by UNCTAD to assist countries maximise benefits of new market access won through the dispute settlement system and compensate for any losses.
In a joint report for the Commonwealth Secretariat on aid for trade, the two economists contend that so far aid for trade has not delivered on its promise. It has not proved to be additional, predictable and effective. Indeed without additionality, aid for trade is just another form of conditionality, and may actually impair the overall effectiveness of assistance programmes. Worse still aid for trade has become a substitute for meaningful reform of the global trading system, according to the report.
As part of a pro-development multilateral liberalization agenda, Prof Stiglitz says it is imperative to install alternative mechanisms to rebalance the global trading system and make trade work for poor people. He proposes that members of the WTO should adopt a general 'right to trade ' operating within the dispute settlement body.
Under such a mechanism, developing countries would be able to bring an action against any advanced country where 3 conditions are met:
- a specific group of poor people within a developing country can be identified as being significantly and directly affected by a specific trade or trade-related policy of an advanced country.
- the effect of the policy acts to materially impede the economic development of those poor people.
- the impediment operates by restricting the ability of the people to trade, or gain the benefits of trade.
A developing country (or countries) bringing successful actions under the right to trade could access a range of remedies, including elimination or change to the offending policy as a result of mediation, bilateral sanctions, and compensation from a multilateral aid-for-trade fund.
To complement the right to trade, Prof Stiglitz proposes the creation of a Global Trade Facility -- a dedicated fund established at the global level, to which all donors would contribute resources that would be allocated to developing countries based on their needs.
The Global Trade Facility would provide resources to support developing countries' actions under the dispute settlement system and fund genuine aid for trade assisting countries to maximise the benefits of new market access won through the dispute settlement system.
The Facility could also compensate developing countries for any losses -- such as reduced aid or other retaliation -- associated with any right to trade dispute.
It would also provide some adjustment and ongoing support to third party developing countries that may be negatively impacted as a result of changes to advanced countries' trade policies, for example where a developing country was receiving preferences whose value is eroded by liberalization emanating from a right to trade case.
The Facility would be supported by a funding commitment of 0.05% of GDP of advanced industrial countries, which would comprise just 7% of the total commitment (of 0.7% of GDP) to developing countries. There would be an additional commitment of a small percentage of the value of the advanced countries' exports to least developed countries.
According to this proposal, the Global Trade Facility would be administered by UNCTAD and supported by a small secretariat operating within but independent of UNCTAD, much as the Global Environment Facility is administered by the World Bank.
Attending the roundtable in London were Geneva-based Ambassadors, H.E. Wayne McCook of Jamaica, H.E. Faizel Ismail of South Africa, and H.E. Anthony Maruping of Lesotho who is also current President of UNCTAD's Trade and Development Board. Prof L Alan Winters of Sussex University, and Dr. Richard Kozul-Wright of UNCTAD were also on the roundtable.