Implementing WTO agreements

Lessons from Latin America

As developing countries gradually started to implement the commitments negotiated in the Uruguay Round Agreements (URA) after 1995, it became apparent that this was more difficult than expected. The net balance of gains and losses associated with implementation were quite unclear, if not negative.

Boxing bananas at a packing station in Dominica to be shipped to the UK. The African, Caribbean and Pacific group of countries get preferential market access to Europe for their banana trade. Under WTO agreements the EU has to move away from its current preferences and change its quota-based system of import controls to a tariff-only system by January 2006. Several Latin American countries are concerned that they will be unable to compete in the EU market as the tariff which the EU might apply to banana imports from non-ACP countries would be too high. Producers in ACP countries fear that the proposed tariff may not be high enough to maintain their existing market shares.
(Taken from: Global Monitoring Report, World Bank, 2005)
Photo by: Philip Wolmuth/Panos Pictures

One reason is that the World Trade Organization (WTO) agreements essentially reflect the needs and practices of developed countries. This in turn implies that implementation burdens weigh disproportionately on developing countries.

Recent case studies from the Latin American Trade Network focus on the implementation of WTO agreements in four areas: trade related aspects of intellectual property rights (TRIPs), sanitary and phytosanitary measures (SPS), customs valuation and telecommunications in Argentina. A number of lessons arise:

• Implementing agreements is 'institution-intensive' as compliance with new requirements or exercising new rights requires upgrading public sector agencies and administrative skills. In Argentina, the estimated total expenditure incurred in implementing the four agreements was close to US$ 560 million between 1995 and 2002.
• The manner in which WTO agreements are expected to be implemented not only underestimates the complexities and implications of what is required, but also reduces developing countries' ability to make it more suitable to local capabilities and needs. All four agreements called for complementary policies. They also required the private sector to become actively involved in implementing and managing new commitments.
• The capacity to implement agreements and benefit from them was partly determined by whether the country had any current domestic policy reforms and the priority the reform area had for the domestic policy agenda. In the case of SPS, a reform process that was largely consistent with WTO requirements was already initiated in the late 1980s. However, this was partially true of customs valuation reforms. TRIPs reforms were completely new.
• The scope and depth of implementation depended on the sequence of reforms and the consistency between national policies and WTO-driven requirements: there was a higher probability of successful implementation if there was a closer fit between domestic reform decisions and policy changes required by WTO. Although Argentina considered customs valuation changes necessary, the local authorities did not consider it as the main problem of customs administration. Their major concern was under-invoicing. This poor fit meant that the implementation of WTO agreements experienced considerable setbacks.

Conflicts around implementation depended on whether key public and private stakeholders perceived reforms as being imposed from outside or whether they felt ownership of them. TRIPS rules, by far the most controversial, were perceived as imposed from the outside and not to Argentina's benefit. Most politicians, bureaucrats and other key policy influencers did not support its implementation.

Complementary policies can ensure potential gains from the agreements and/or control their harmful secondary effects. Argentina provides two examples. First, pest-free and plague-free zones had to be created to take advantage of the new market opportunities that the SPS agreement opened up for farm products. Second, stricter competition laws should have accompanied TRIPS implementation to avoid transnational pharmaceutical companies from abusing their power to increase medicine prices.

The relevance of the WTO as a rule-making forum is highly dependent on countries undertaking research and analysis. It is not necessarily true that WTO rules and disciplines embody, by definition, the right diagnosis and solutions to development problems. It is important to:

• determine whether proposed WTO rules are consistent with national priorities
• see whether there are domestic stakeholders that will be affected positively or negatively
• identify and pursue complementary actions that can address potential negative effects.

A much greater focus on research in all developing countries can identify contextual issues and ensure that trade negotiations and implementation of agreements will be beneficial. This is true not just for multilateral negotiations but at all international levels - whether bilateral or regional.

Miguel F. Lengyel
Latin American Trade Network
Ayacucho 551
(1036) Ciudad de Buenos Aires
Argentina
T +5411 5238 9375
F +5411 4375 2435
mlengyel@latn.org.ar

See also

The implementation of WTO Agreements: the case of Argentina, by Miguel Lengyel, 2004
www.latn.org.ar

The Doha Agenda and development: a view from the Uruguay Round. Asian Development Bank, Manila by Michael Finger, 2002

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