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Studies such as those from which the following facts are culled demonstrate that current trade liberalization rules and policies have led to increased poverty and inequality, and have eroded democratic principles, with a disporportionately large negative effect on the poorest countries. It is such studies that have provided the impetus for restructuring the WTO as the TRO.

The numbers of people living on less than $2 per day has risen by almost 50% since 1980, to 2.8 billion—almost half the world’s population. And this is precisely the period that has been most heavily liberalized. (World Bank, Global Economic Outlook 2000)

Recent evidence suggests that the numbers of people living on less than $1 per day is growing in most regions of the world (with the notable exception of China). (World Bank, Global Economic Outlook 2000)

The world’s poorest countries’ share of world trade has declined by more than 40 per cent since 1980 to a mere 0.4 per cent. (UNCTAD, Conference on Least Developed Countries 1999)

The poorest 49 countries make up 10% of the world’s population, but account for only 0.4% of world trade. This disparity has been growing. (UNCTAD, Conference on Least Developed Countries 2001)

51 of the 100 largest economies in the world are corporations. The Top 500 multinational corporations account for nearly 70 percent of the worldwide trade; this percentage has steadily increased over the past twenty years. (CorpWatch)

The U.N. estimates that poor countries lose about US$2 billion per day because of unjust trade rules, many instituted by our organization—14 times the amount they receive in aid. (UNCTAD, Conference on Least Developed Countries 2001)

In 59 countries, average income is lower today than 20 years ago. (United Nations Human Development Report, 1999)

In 1980-1996 only 33 of 130 developing countries increased growth by more than 3% per capita, while the GNP per capita of 59 countries declined. Around 1.6 billion people are economically worse off today than 15 years ago. (United Nations Human Development Report, 1999, p. 31.)

Poor are getting poorer in both relative and absolute terms, as one UNICEF study has commented: “A new face of ‘apartheid’ is spreading across the globe…. as millions of people live in wretched conditions side-by-side with those who enjoy unprecedented prosperity.” (UNICEF figures based on World Bank "World Development Indicators 1997")

UNCTAD estimates that LDCs will lose between $163 and $265 million in export earnings as a result of implementation of Uruguay Round agreements, while paying $146 – 292 million more for their imports. (UNCTAD)

In 1999, outstanding external debt of LDCs was 89% of their aggregate GDP. This has been increasing steadily. (UNCTAD)

Inequality back to top

The richest fifth have 80% of the world’s income and the poorest fifth have 1%; this gap has doubled between 1960 and 2000. (United Nations Human Development Report, 1999)

In almost all countries that have undertaken rapid trade liberalisation, wage inequality has increased—20-30% fall in wages in some Latin American countries. (UNCTAD 1997)

Even in the First World, the gap between upper executive and worker salaries has never bigger--it is in fact many times bigger than it was twenty years ago. (UNCTAD 1997)

Wages of unskilled labour declined by ~25% between 1984 and 1995. Unskilled wages in the US have fallen by 20% (in real terms) since the 1970s. (UNCTAD 1997)

Trade liberalization is negatively correlated with income growth among the poorest 40 per cent of the population, but positively correlated with income growth among higher income groups. In other words, it helps the rich get richer and the poor get poorer. (Lundberg and Squire, Inequality and Growth; Lessons for Policy, World Bank 1999, Chapter 3.)

At the start of the 19th Century, the ratio of real incomes per head between the world’s richest and poorest countries was three to one. By 1900, it was 10 to one. By 2000, it has risen to 60 to one ($29,000 to $500). (“The Assessment: The Twentieth Century – Achievements, Failures, Lessons,” Angus Maddison, Oxford Review of Economic Policy, winter 1999, cited in Martin Wolf FT 26/1/2000)

A World Bank study found that implementing Uruguay Round agreements on various things can cost more than a year’s development budget for the poorest countries. (Yves Bertholet, United Nations Coordinator of Regional Development, 1999)

The latest round of trade talks has cost sub-Saharan Africa an estimated US$600 million per year. This could be why in June 1999, 30 African countries signed a declaration against new trade agreements. This could be why, also, developing nations used the opportunity of the Seattle protests to voice their opposition to WTO trade talks. ("Africa Recovery", United Nations, 1999)

Access back to top

Only 12 of the 29 LDC WTO members have offices in Geneva. 29 WTO members and observers are not able to afford an office in Geneva. We have approximately 50 meetings per week, well beyond the capacity of most developing countries to participate.

We have seen that developed countries tend to corner LDC negotiators in “corridor chats” and offer both promises and threats about aid and investment which many LDCs are ill equipped to fend off. It is psychologically very difficult to oppose those who are giving you money—the dynamic is that of bribery.

It has now become clear that some LDCs did not realise what the implications of what they signed in the Uruguay round would be, and in many cases there are rules whose effects only become perceptible when they have to be implemented.

Unfair trade barriers back to top

We have allowed First World countries to raise trade barriers protecting their companies, even as we have served as their forum for insisting that Third World countries lower their trade barriers more and more.

Since the Uruguay round, subsidies for agriculture in the OECD countries have doubled—even as the OECD countries demand that TW countries slash their own subsidies; India, it is said, is giving a “negative subsidy” of US$25 billion. (Department of Agriculture and Co-operation, India Ministry of Agriculture)

If rich nations opened their markets to LDCs,increased export opportunities would generate an estimated $700 billion of additional trade for the developing world (UNCTAD Trade and Development Report 1999).

There is no causal link between foreign investment and poverty reduction. 80% of FDI is in the form of mergers and acquisitions, little in the form of productive investment that creates jobs and exports. (World Development Movement, "Briefing from Doha" citing Prof. Alan Winters, 'Trade Liberalisation and Poverty', DFID 1999)

The implication of that is that trade negotiations should focus on making existing trade rules fairer—an agenda proposed by most developing countries—rather than on the agenda currently in sway of further opening up markets of the poorest countries and the extension of WTO rules to investment and services. (Barry Coates "What`s Wrong With Doha" BBC News 7/11/02)

The majority of LDCs with strong import liberalization have experienced anaemic or negative growth over the past 20 years.

HIC tariffs on manufactured imports from developing countries are on average 4 times greater than those on manufactured imports from industrial countries

According to a world bank study, the elimination of FW-favoring trade barriers systematically approved by us would lift 300 million people out of poverty. (World Bank, "Global Economic Prospectus 2002")

Under the Uruguay Round Agreement on Textiles and Clothing, FW countries were obliged to have removed 33% of their quota restrictions on textiles by 2001 and all by 2005. So far the EU has removed less than 5% of restrictions and the US 6%. ("Doha Ministerial Joint Statement of Ministers of 24 Developing Countries")

Import duties on sugar are 151% in the US, 176% in Western Europe, 278% in Japan. "In Uganda the rate is only 25% and yet we are told to reduce it , and this will affect the 250.000 people involved in sugar in the country. It is a sad story" (Ugandan Sugar Producer Mr M. Mahdevi speaking of striking inequalities in the trade system that make it harder for developing countries to compete. Speaking at the Kampala meeting, Uganda, end of August 2001, Martin Kohr.)

Unfair First World barriers have cost developing countries US$700 billion a year in lost export earnings—some 14 times the amount that poor countries receive in aid. (World Development Movement, "Briefing from Doha" citing Prof. Alan Winters, 'Trade Liberalisation and Poverty', DFID 1999)

Trade and development back to top

Developing countries face higher tariffs on processed goods than on commodities; this is one of the reasons that the poorest countries are heavily dependent on a few commodities. Typical example, Burundi, where 98% of the exports are coffee, tea and cotton. ("IMF Calls For Farm
Subsidy Cuts," Andrew Walker, BBC News, 29 April 2002)

A trade dominated by basic commodities means that these countries do not develop their infrastructural technologies, including education and training. The populations remain essentially in the service of more complex industries in the First World, which favors First World development but not that of the Third World. ("The Great Trade Robbery," OXFAM)

India processes 1% of the food it grows; the U.S. processes 70% of the food it grows. (Vandana Shiva, "War and Peace on Our Farms and Tables," 3 September 2002)

Tariffs increase with level of processing—in Japan and the EU tariffs on fully processed food are twice as high as those placed on first-stage processed food; in Canada they are 12 times as high. This means the incentive for TW countries is to output skill-unintensive staples rather than develop their technological infrastructure. (WTO Negotiations on Agriculture - Cairns Group Negotiating Proposal, 21 December 2001)

In Malaysia, the strategic use of local content policy enabled the Malaysians to build a “national car” in cooperation with Mitsubishi; that now has achieved about 80% local content and has captured 70 % of the Malaysian market. But our TRIMS (Trade Related Investment Measures agreement) would make that illegal today. (Autoportal, "Malaysia Market Summary")

Focus on basic commodities also means prices plummet. Prices for commodities traded by LDCs have plummeted – by 19% in 1990-98 and by some 70% since 1960. (UNCTAD Handbook of Statistics 2000)

Commodity prices have fallen dramatically, by some two thirds over the past 30 years, so that farmers have had to triple production just to maintain their incomes. One example among many: in just the last three years, Tanzanian farmers experienced a decline of 50% in the price of coffee (OXFAM Briefing Paper No 9, November 2001)

In 1998, cereal companies like Kellogg’s, Quaker Oats, and General Mills enjoyed return on equity rates of 56%, 165%, and 222% respectively. That year, a bushel of raw unprocessed corn sold for less than $4, while a bushel of corn flakes sold for $133. The emphasis of regulation should be on determining whether the low rates of return of farmers are due to others making too high rates of return. (OXFAM News, "What's Eating Us?" Brian O'Neill)

While farmers earn less, consumers have been paying more. In many TW places, food prices have recently doubled. Consumption of food grains in many rural areas has dropped considerably. (OXFAM News, "What's Eating Us?" Brian O'Neill)

The number of livelihoods lost in the maize sector as a consequence of trade liberalization and the subsequent fall in maize prices is estimated at between 700,000 and 800,000, representing 15% of the economically active population in agriculture. (UNDP Occasional Paper 32, 1997)

Research has shown that those who suffer most from commodity price declines are the rural poor—i.e. the majority of Third World people. Basic agriculture employs over 50% of the people in developing countries, and accounts for 33% GDP. (UNCTAD Press Release, "UNCTAD Calls For Policy Changes to Avoid Throwing World Economy Into Recession," 25 August 1998)

The Agreement on Agriculture (AoA) has led to surge of food imports into the 16 countries studied but not to an increase in their exports, resulting in a concentration of farm holdings and increased marginalisation of small producers and added to unemployment and poverty. (Paper presented at an FAO Symposium on Agriculture, Trade and Food Security, September 1999, synthesis of Case Studies of 16 Countries.)

Liberalised trade has resulted in increased imports of foodstuffs: “The majority of the poor are not benefiting bot are instead made more vulnerable to food insecurity” (Hezron Nyantgito 1999 ‘Kenya: Impact of the Agreement on Agriculture” on food security’, Nairobi: Institute of Policy analysis and Research)

Democracy back to top

Top 100 transnational corporations increased assets 697% between 1980 and 1995. At the same time employment in these corporations went down. ("TNC's, Employment is Not the Point," Susan George, TNI Website, 2/99)

Six corporations now control most of the U.S. media (versus 50 in 1983). It is clear that this situation makes for increasingly more limited freedom of expression, and greater power on the part of corporate interests to manage public resentment. Many studies have shown that there has been a rapid and profound “dummying up” of the news and of general content as a result of these mergers, as the side effect of extensive collaboration. (Mediachannel.org, "Media concentration Chart")

Corporations account for the majority of int’l trade, but WTO agreements apply to government policies and actions rather than companies. The reason is the original thinking behind GATT, which was to regulate the power of bad governments to interfere with entrepreneurial effort. This was based in a world in which governments had enormous power, enormously more than corporations, and governments had been shown recently to do some very bad things. Now the situation has changed, but these rules continue to benefit corporations against governments. This is outdated. ("The WTO and SAFE Trade," Greenpeace)

Nearly every single environmental or public health law challenged at the WTO has been ruled illegal. While it is likely that many should legitimately have been ruled illegal as they were, the fact that so few have gotten through has led us to question the validity of our processes. (Third World Traveller, "World Trade Organization")

WTO negotiations have included efforts to reduce government measures that impede or prevent the timely movement of business persons on a temporary basis amongst WTO members; at the same time there have been no efforts to loosen immigration laws for people who desperately need work. This highlights that we are focussing more on business needs than on those of humans.

Some of the problems at the WTO have become rather notorious. “The theory that the WTO is a black box in the hands of unknown and mysterious multinationals has played well among NGOs for years, and there’s some truth in that,” said European Commission head Pascal Lamy in 1999. ("Democratizing the World Trade Organization," Fiona McGillivray 2000)

Investment agreements are opposed by most civil society groups. This is not arbitrary. (Third World Network, "Transparency, Participation, and
Legitimacy of the WTO," 1999)

The most powerful statement against terrorism would be for governments of the rich nations to redress the deep inequities in the trade system and reverse the marginalization of poorer countries. The WTO’s current configuration makes this impossible, and extending its work into new areas of the global economy will only make matters worse.

A matter of perspective helps. On September 11, 3000 people died in the towers as a result of terrorism. On the same day, 24,000 people died of hunger, 6,020 children were killed by diarrhoea, and 2,700 children were killed by measles. (New Internationalist Magazine, November 2001,  pp. 18-19)

General Agreement on Trade and Services (GATS) back to top

The European Commission has noted that GATS is “first and foremost an instrument for the benefit of business.”

In Europe there has been little consultation with civil society groups, and little public debate, about the appropriateness of GATS, and of subjecting services to the rigors of the free market. The E.C. and several European governments, however, have been working closely with business lobbies such as the European Services Forum, a business lobby group like the US Council of Service Industries.

Another key player in organizing GATS has been the US Council of Service Industries. It is estimated that it has been instrumental in implementing GATS. While this industrial lobby has needs and desires, we must ask whether they are more important needs and desires than those of the poor.

We have known for quite a while that without the enormous pressure generated by the American financial services sector, particularly companies like American Express and CitiCorp, there would have been no services agreement and therefore perhaps no Uruguay Round and no WTO. It has taken us this long to fully accept the undemocratic nature of this pressure.

It is clearly dangerous to enact health care privatization with a loosening of rules upon the industry. Even in the First World, such as the U.S., the decline of health care quality after privatization has been well documented. We must balance the needs of the poor against pressures from HICs, as when US Trade Representative Charlene Barshefsky calls for more privatization, “allowing majority foreign ownership of health care facilities”, “restricting licensing of health care professionals” reducing “excessive privacy and confidentiality regulations”, etc.

Water privatization, almost everywhere else that it has applied, has meant more expensive and lower quality water for poorer communities, or even—as in Puerto Rico—no water at all for the poor. (The rich in these places benefit from fine water.)

It is dangerous in general to depend on theoretical benefits which are very unlikely to occur when human life is at stake, for example with water privatization. Many examples of negative effects of water privatization—higher prices, lower quality, even absent service for those unable to pay the new prices—has been well documented, not only in developing countries like Bolivia and Argentina and Puerto Rico but in the First World as well.

In Puerto Rico, water privatization of 1995 meant poor communities went without water while US military bases and resorts enjoyed unlimited supplies.

In Argentina, privatization resulted in doubled water rates and poorer quality. Outrage forced the water company out; this reversal would have been impossible under GATS.

It has been decided that the right to exceptions built into GATS agreements depends on setting the specific exception areas before the agreement takes effect, during the writing stage. This requires unrealistic levels of foresight. Also, specific exceptions can be removed through later negotiations, while the other direction is more difficult. The cumulative report is to disable government’s ability to watch out for citizen interests.

Whether governments’ ability to regulate trade to benefit their citizens should be considered a “right” is disputable. In any case, it is important for us to open such a wide-ranging agreement such as GATS to public scrutiny before enacting it; so far there has been virtually no public information or debate on GATS even though the outcome of GATS negotiations will profoundly affect the lives and livelihoods of people everywhere.

GATS aims to accelerate and enforce liberalization of many industries for which liberalization has been proved disastrous in well-known examples from the HICs as well as the LDCs. Some of these industries include water delivery, energy, refuse disposal, medical, rail transport, etc. When liberalization is undertaken in LDCs, it is more disastrous and lethal than in the HICs.

GATS is disadvantageous for LDCs also because of the complex nature of the negotiations. Already more than 1500 mistakes have been registered in existing GATS commitments. This is especially a problem for developing countries who have very few negotiators in Geneva and often lack technical experts in international trade law.

We have in the past described the benefit of GATS as helping to “overcome domestic resistance to change”—to render domestic protest against privatization futile. It is time we examined whether this is really the appropriate tactic to raising living standards, or whether listening to the concerns of the poor is in fact necessary.

Trade-Related Intellectual Property Agreement (TRIPS) back to top

Industrial countries hold 97% of patents worldwide, and more than 80% of patents in developing countries. Yet more than half of the world’s most frequently prescribed drugs are derived from plants or synthetic copies of plant chemicals. It is estimated that if just a 2% royalty were charged on genetic resources that had been developed by local innovators in the South, the North would owe many billions of dollars in unpaid royalties for medicinal plants.

Liberalization often enables the the knowledge of the poor to be converted into the property of global corporations. Resentment occurs when the poor are then made to pay for seeds and medicines that they themselves have evolved or created the basis for, without receiving royalties for the part they played in development.

Out of 26,088 applications for patents in Africa in 2000 and 2001, only 31 were from residents of Africa.

70 patents have been granted to FW companies on the products of the Neem tree of India, which has always been used locally for treatment of fever, snake bites, leprosy and as a natural insecticide and disinfectant.

In 1998, a US company (Rice Tec) was awarded a patent (number 5,663,484) on the basmati variety of rice, grown only in India and Pakistan.

In 1987, 50% of biotech patents were held by the public sector. In 1999, less than 10% were held by the public sector. 70% were held by the “big 6” (Dow, Novartis, Aventis, Monsanto, Astra Zeneca, DuPont).

This year (2001) 14 million people in developing countries will die from infectious deseases. But the TRIPs agreement will raise the costs of medicines.

Of the 1,223 new chemical entities developed between 1975 and 1996, only 11 were for the treatment of tropical disease. So much for the trickle-down! (United Nations report: UNCHR 2001:12)

(Countries such as, India, Argentina, The Dominican Republic, Brazil, Vietnam and Thailand, have all been threatened under the ‘Special 301’ provisions of US trade law. By contrast the US seems prepared to override patents at home in the case of patented antibiotics to treat anthrax.)

A key factor in the industrial take-off of FW and industralising countries was easy access to new technology (e.g. US copying British, Japan copying US, Korea copying Japan). What is “technological diffusion to the country developing is “piracy” to the country leading.

A common perception of TRIPs and similar agreements has been that they make sharing and exchange, which are the basis of survival for much of the world, into a crime. As Gandhi said, “The earth has enough for everyone’s needs, but not for some people’s greed.” This is not just an “emotional” argument; it is accurate.

Theory and miscellaneous effects back to top

Perhaps the most comprehensive assessment of the links between economic growth and trade liberalization undertaken to date concluded that there is no clear link between them. This means that the projected benefits are merely hypothetical. We are fairly certain today that in the case of developing countries, the hypothesis is entirely misleading, and is in fact false—that liberalization adversely affects developing nations. (Winters, Alan, 1999: ‘Trade liberalisation and Poverty’, London: Paper for DFID)

The period 1960 to 1980 saw greater improvement and growth in developing countries than the period from1980 to 2000. Yet 1960-1980 was the height of Keynesian economics, whereas the WTO’s sort of liberalization philosophy has reached its peak in the latter period.

In 1980-1996 only 33 of 130 developing countries increased growth by more than 3% per capita, while the GNP per capita of 59 countries declined. Around 1.6 billion people are economically worse off today than 15 years ago. (UNDP Human Development Report, 1999, p. 31.)

FDI rose by 13 times in the 1990s compared with the 1970s, but GDP growth was 50% lower. One of the reasons is that foreign investment has concentrated on purchasing assets rather than creating new sources of production (in the period 1995-98, transfers of property accounted for nearly two-thirds of total FDI flows); over 80% of FDI is in the form of mergers and acquisitions (97% of which are acquisitions); most of the FDI is in the form of massive deals (50% comes from deals of over $1 billion); 41% of FDI in developing countries (excluding China) is in the form of mergers and acquisitions; EU multinationals have taken over from the US as the biggest buyers in developing countries; cross-border mergers and acquisitions have increased by over 25 times since 1980 (as a proportion of world GDP).

When investment is in the sources of production, these are basic sources of production, not bringing technical skill to the population.

World foreign direct investment (FDI) has increased from $200 billion in 1989 to over $1.1 trillion in 1999; developing countries share has been falling (38% in 1997 to 24% in 1999) despite extensive changes to laws to attract foreign investors (94% of changes in regulations in 1994-99); the LDCs with 10% of the world’s population receive 0.5%.

The most severe financial crises have occurred in the countries that were most integrated, including South Korea and Mexico which had just graduated to the OECD. (UNCTAD Secretary-General Rubens Ricupero, 1999)

There is no causal link between more foreign direct investment (FDI) and growth. Some of the most successful Asian tiger economies (e.g. South Korea) received low levels of foreign investment. (Dani Rodrik, Harvard Professor, Making Investment Work.)

There is also no causal link between foreign investment and poverty reduction. 80% of FDI is in the form of mergers and acquisitions, little in the form of productive investment that creates jobs and exports. To increase the productiveness of the investment, governments must retain discretion to maximize benefits and minimize costs, but our investment agreements have aimed to prohibit these discretionary policies.

The powers of governments to intervene to minimise costs and maximise benefits for host communities and society are being eroded by bilateral investment treaties and the proposed investment agreement in the WTO; the largest recipient of FDI in the developing world is China, with one of the most restrictive investment regimes.

More and more thinkers are noting that there is no evidence that liberalization favors growth or benefits to the poor. There is also no evidence that Foreign Direct Investment is an engine of growth. (Prof. Dani Rodrik of Harvard in his policy paper "Making Openness work")

A recent review of the evidence of links between trade liberalization and economic growth concluded there is no clear causality. (Prof. Alan Winters, “Trade Liberalization and Poverty,” DFID 1999.)

Even the link between trade and investment is unsure. The Economic Commission for Latin America and the Carribean (ECLAC) Notes point out that FDI into Latin America in the 1990s were 13 times higher than in the 1970s, but the average growth rate in the 1990s was 50% lower.

"Not all FDI is in the best interests of host countries. Some can have an adverse effect on development." (UNCTAD World Investment Report 1999: “Foreign Direct Investment and the Challenge of Development”)

Good for employment? 200 largest multinationals hold 28% of global trade but only 1% of global employment.

Recent studies show that growth, accumulation of capital and strong production economy came first and liberalization later. France and Germany embraced laissez-faire briefly, found they were losing out, and reversed themselves in the 1880s. The UK liberalised after industrialisation, at a time when they were the world’s leading economic power. The US industrialised itself through the 19th and most of 20th Century behind high tariff walls and protectionism. (Paul Bairoch and Richard Kozul-Wright, Dani Rodrik and National Bureau of Economic Research)

Multinationals account for around two thirds of world trade (UNCTAD 1996) and around half of that takes place within the same multinational (UNCTAD 1999). So much of the WTO legislation has benefitted companies internally, and “leakage” of technology to the society has been minimal.

Drought today is very often caused by mining of scarce groundwater in arid regions to grow thirsty cash crops for exports instead of water-prudent food crops for local needs. The best strategy for preventing drought and desertification is diversity, and returning land to local production. This requires a new, fresh look at liberalization and trade policies in LDCs.

Diversity and sustainable food production systems are being destroyed in the name of increasing food production. But this makes rich sources of local sustenance disappear. Nutrition per acre decreases. “High yields” of single cash crops do not mean better nutrition--in fact, the opposite tends to be true.

The effects in the FW are also quite strong. The US Centre for Disease Prevention in Atlanta has calculated that nearly 81 million cases of food-borne illnesses occur in the US every year. Deaths from food poisoning have gone up more than four times due to deregulation (of factory-farmed meat).

Many experts are beginning to see that excessive population growth is entirely a symptom of unsustainable development and the excesses of corporate globalization. The population of India was stable until 1800; it was colonization and dispossession of land that triggered the high rates of growth still in evidence to this day. The highest population growth rates in England occurred after the enclosures of the commons. It’s the loss of livelihood-generating resources and their replacement by unstable wage-labor that lead to high population growth. It is time to solve this problem at its root, rather than attempting to put balm on the symptoms—balm that in any case turns out to be poison.

Any feedback on this page should be sent to studies@gatt.org. The World Development Movement has more information on much of the above.