Mattoo, Aaditya and Arvind Subramanian. "The WTO and the poorest countries: the stark reality". World Trade Review, Vol.3, No.3 (2007): 385-407.

Mattoo, Aaditya and Arvind Subramanian. "The WTO and the poorest countries: the stark reality". World Trade Review, Vol.3, No.3 (2007): 385-407.

• Ever since the Uruguay Round, which established the WTO as the replacement for GATT, small and poor countries have had a deliberate influence over the course of liberalization that the WTO engenders. The author contend that this is strange because small and poor countries cannot fully take advantage of the opportunities offered by the WTO (385, 388).
• Small countries are not highly valued as markets because of their size, limiting their bargaining power in the WTO, a problem in an institutions where bargaining is central (388).
• Poor countries lack incentives to further liberalize or modify the current trade regime under the WTO, because they risk losing the preferential access to rich markets that they now enjoy. More general liberalization hurts their relative advantage in these markets, making their interests at odds with the goals of the WTO (388).
• Further liberalization of global markets through the format of 'most favored nation' tariff rules would increase the efficiency of global markets and produce more growth, but would negatively impact small, poor nations. From an egalitarian perspective, the solution is to compensate those states who lose from increased liberalization (388).
• Preferably, the compensation would come in the form of the adjustment of tariffs to continue preferential access and increased amounts of financial and technical aid for development. Political support, however, for these policies in lacking, and the world is instead moving towards eliminating some regulations that small, poor countries find burdensome (388).
• Until the formation of the WTO, trade negotiations were almost entirely between large, wealthy nations who bargained to achieve mutually beneficial deals. Small, poor nations benefited from the 'most favored nation' trading rule, but did not otherwise participate in GATT (389).
• During this stage, industrialized countries did not exert pressure on small, poor countries to liberalize because it allowed them to avoid discussing the liberalization of their protected and uncompetitive sectors, like agriculture and textiles (389).
• In the 1980s, developing countries had started industrializing to a significant degree and became attractive to developed countries as markets for exports. This led to new complaints about developing countries being free riders in the GATT system, benefiting without contributing their own liberalization. This pressure led the beginning of the Uruguay Round of talks in 1986, resulting in the creation of the WTO in 1994 (389).
• The Uruguay Round resulted in a mutually beneficial trade regime that imposed the same obligations on all its members, satisfying the interests of the rich, industrialized countries. In return, poor countries got concessions on intellectual property rules and the liberalization of textile and, sometimes, agricultural sectors in rich countries (390).
• The issue resulting from the creation of the WTO was that all countries were included equally regardless of their interests in liberalization. The deal made sense between rich countries and large poor countries, but not for the small, poor countries whose markets were not important (390).
• The initiation of the Doha Round of discussions was meant to address the concerns of small, poor nations who feel unfairly burdened under the liberalization requirements of the WTO. Two major concessions have already been made in negotiations, one to continue the waiver for 'most favored nation' rules on trade with least-developed-countries, and another to review the agreement on intellectual property (390).
• Small countries, most of them poor, now compromise around 50% of WTO members, giving them potential veto power in all decisions. Most of the major changes to WTO policy envisioned at the Doha Round and previous discussions require a minimum vote of 2/3 majority, meaning that placating small countries is necessary for any progress (391).
• Small, poor countries feel unfairly burdened by the WTO system in ways that affect them disproportionately. The trade-related-intellectual-property system [TRIPS] hinters the production of pharmaceuticals in all developing states, but it especially damages small, poor countries without any industrial infrastructure (392).
• The concessions received by developing countries at the Uruguay Round did not generally benefit small, poor countries. The concessions on textiles primarily benefited larger, industrialized countries, while the smallest and poorest nations received no equivalent benefits from the WTO (392).
• The WTO offers benefits in terms of increased access to export markets, promotion of internal liberalization, and a guarantee of good trade relations. These benefit small, poor countries less than others. Firstly, their markets are not attractive, meaning they cannot engage in reciprocal deals with other countries, as they have very little to bargain with (393). Furthermore, they do not benefit from liberalization in general for the same reason of being uncompetitive (396).
• Small, poor countries mainly benefit from their exemption from WTO regulation under a number of agreements with the EU, Canada, and the USA that allow them to export certain goods to those countries at tariff rates far below those allowed under the 'most favored nation' rule (396-397).
• The extend of their benefit from these systems is, however, limited by onerous regulations regarding product origin and health and safety standards. Furthermore, the benefit that poor exports see from these programs is disputed, with some arguing that rich importers end up benefit more from the initiatives (398).
• Some small, poor countries may even see loses under the liberalization of rich, industrialized nations. Small, poor countries are often food importers, leaving them particularly vulnerable to increases the global food prices as a result of liberalization of agricultural markets (398).
• The authors suggest that small, poor countries could be compensated for their losses from continued liberalization in the Doha Round in a number of ways, including: increased preferential market access; liberalization of markets in which they are competitive; relieved of detrimental obligations imposed by WTO; relieved of beneficial, but costly, obligations imposed by WTO; and provided with financial or technical development assistance (401).
• Preferential access to markets provides short term benefits for small, poor countries, but ultimately retards liberalization of both rich and poor states. The concessions implicit in preferential access for small, poor countries make rich countries more protectionist regarding other exports, and discourage small, poor countries from liberalizing and increasing competitiveness (402).
• Liberalization of sectors in which small, poor countries are competitive exporters would be beneficial overall, but would be politically difficult because small, poor countries do not have anything to bargain with. This was demonstrated at the Cancun Meeting in 2003, when West African nations could not offer anything that would convince the USA to liberalize its cotton market (403).
• There is a growing consensus that, in recognition of the limited ability of small, poor countries to affect decisions made at the WTO, the most onerous regulations imposed on them, like TRIPS or standardized customs valuation, should be waived. This would make membership in the WTO seem like less of a burden (403).
• Small, poor countries have also discussed being exempt from certain WTO requirements prohibiting quotas or tariff levels, allowing them to maintain protectionist policies. Although the authors question the long-term benefits of such policies, there is likely little objection from other WTO members, just because it does not matter whether the markets of small, poor states are protected or not (403-404).
• Provision of financial aid as compensation for losses under increased liberalization is a popular solution in the impasse at the Doha Round, because it is politically cheap since it does not challenge powerful domestic interest groups like trade liberalization would. This arrangement might, however, only encourage corruption in recipient countries without improving trade conditions (404-405).