UNDP Human Development
United Nations Development Programme (UNDP) - 2003|
Making Global Trade Work for People
Contents - Foreword - Acknowledgements - Abbreviations
TRADE FOR HUMAN DEVELOPMENT
CHAPTER 1 - HUMAN DEVELOPMENT AND TRADE
Trade and human development have a complex relationship. Understanding their
interaction requires understanding the complexity of trade policy and human
development as part of broader development policy.
Human development - the concept and its implications.
Linking trade and human development.
Is trade liberalization good for growth and human development?
Does trade liberalization improve gender outcomes?.
How do gender inequalities affect trade performance?.
What really matters for trade as part of a broader industrialization and development strategy.
Chapter 2 - THE GLOBAL TRADE REGIME
‘Human development requires fair governance—a framework of institutions, rules
and established practices that ensure fair processes and outcomes secured through participation
of people and accountability of the powerful’.
—Adapted from Human Development Report 2002
Can there be fair outcomes without fair processes?.
The World Trade Organization - A major shift in global trade rules.
The World Trade Organization's formal governance structure.
Special and differential treatment.
ANNEX 2.1 Exceptions from World Trade Organization commitments for developing
ANNEX 2.2 Special provisions for the Least Developed Countries in the World
Trade Organization agreements.
Chapter 3 - TOWARDS A HUMAN DEVELOPMENT ORIENTED GLOBAL TRADE REGIME
The rules and procedures of the multilateral trade regime determine how countries
benefit from it. This chapter examines the regime’s governance principles and
suggests approaches that give higher priority to human development.
The multilateral trade regime and its implications for human development.
A trade regime friendly to human development is possible.
From a market exchange to a human development perspective.
Chapter 4 - REFORMS TO THE GLOBAL GOVERNANCE OF TRADE
This chapter applies chapter 3’s suggestions for human development–oriented
trade to today’s multilateral trade regime. The chapter analyses pressing issues and
challenges for the global governance of trade and offers recommendations for
improving it consistent with human development objectives. In addition, the chapter
analyses regional trade agreements and makes suggestions for their evolving
relationship with the multilateral trade regime.
Changes needed in the global trade regime.
Background analysis and additional issues.
ANNEX 4.1 Regional trade agreements and the multilateral regime.
PART 2 - AGREEMENTS AND ISSUES
The current focus on reducing global poverty has direct implications for discussions
at the World Trade Organization (WTO). Indeed, the multilateral trade
regime will be well governed if it is focused on the achievement of the Millennium
Chapter 5 - AGRICULTURE
Agriculture plays a central role in the economies of low-income countries, accounting
for more than 70 per cent of employment—compared with 30 per cent in middleincome
countries and just 4 per cent in high-income countries. Particularly in
low-income African countries, agriculture is also a major source of foreign
exchange earnings and supplies incomes, basic foods and subsistence livelihoods
for most of the population (UN, 2002).Women in rural Africa produce, process
and store up to 80 per cent of food, while in South and Southeast Asia women do
60 per cent of cultivation work and other food production (UNIFEM, 2000). In
most developing countries achieving equitable, sustainable progress on human
development requires increasing food security and agricultural productivity,
incomes and employment.
Should agriculture be treated differently?.
Tariffs and market access.
Food security, employment and livelihoods.
Proposals for the future.
Chapter 6 - COMMODITIES
The problems facing primary commodities (agricultural primary commodities
and mineral commodities, but not fuel) are closely related to those afflicting agriculture,
because about 80 per cent of commodity exports—for developing countries
and for the world—are agricultural. Despite progress in diversifying exports
and broadening national economic structures, most developing countries—86 of
144 for which data are available—still depend on commodities for more than half
their export earnings. This number has remained virtually constant for the past ten
years. Moreover, for many countries a large share of export income comes from
only one commodity or just a few. For 55 countries, three commodities together
account for more than half of export earnings.
A brief history.
The situation today.
Proposals for the future.
Chapter 7 - INDUSTRIAL TARIFFS
Developing countries attach great importance to levels of and changes in industrial
tariffs because industrial products—defined as all non-agricultural products—
account for more than 70 per cent of their exports (UNCTAD, 2002;WTO,
1994; Michalopoulos, 1999). Especially for industrial products with high value
added, tariff levels and changes determine developing countries’ effective access to
industrial country markets as well as the extent to which their industrial strategies
translate trade into benefits for human development.
Market access since the Uruguay Round.
Higher tariffs and policy space in developing countries.
The way forward.
Chapter 8 - TEXTILES AND CLOTHING
As Adam Smith ( 1998) pointed out, basic and proper clothing enables people
to appear in public without shame and thus is an important means to human
development. Clothing plays a crucial role in human development not only in the
form of finished goods. The labour-intensive production of textiles and clothing
generates significant employment—and productive employment provides people
with the means for a decent standard of living and enhances their self-esteem and
their participation in society.Moreover, in most economies, employment in textile
and clothing production is biased towards women and thus has a gender dimension.
But the processes often used in textile and clothing production may have serious
adverse effects on human health and the environment. All these issues have
implications for human development. So does the structure of international trade
in textiles and clothing.
The road to agreement on textiles and clothing: a historical review.
Growth in textile and clothing trade.
The underlying dynamics of the agreements on textile and clothing.
Factors and events influencing the present situation in textile and clothing trade.
The future outlook fro textile and clothing trade.
Chapter 9 - ANTI DUMPING
Under article VI of the General Agreement on Tariffs and Trade (GATT), a member
country of the World Trade Organization (WTO) can unilaterally impose antidumping
duties to protect its domestic industry from imports of ‘dumped’ goods
and offset material injury caused by such imports. Anti-dumping practices, particularly
anti-dumping duties, are thus targeted at firms, not governments (unlike
countervailing duties), and are therefore not required to be imposed on a mostfavoured-
nation basis (unlike safeguard measures). These two characteristics make
anti-dumping the politically least difficult measure to apply of the trade remedies
available to WTO members.
The faulty economic logic of anti dumping - Industry and consumers both suffer.
Problems with anti dumping methodology.
Effects of anti dumping on developing country exporters.
Developing countries' growing use of anti dumping.
The way forward.
Chapter 10 - SUBSIDIES
The Agreement on Subsidies and Countervailing Measures (ASCM) governs the
use of subsidies and regulates the actions that countries can take to counter their
trade impact.The ASCM builds on the Tokyo Round subsidy code (issued in 1979)
but takes the important step of defining what a subsidy is, making it the first international
agreement on acceptable levels of government support for production and
Definition of and limits on subsidies.
Issues for developing countries and human development.
The way forward.
Chapter 11 - TRADE RELATED ASPECTS OF INTELLECTUAL PROPERTY RIGHTS
The contentious introduction of the Trade-Related Aspects of Intellectual Property
Rights (TRIPS) Agreement into the framework of the multilateral trade regime has
probably aroused more controversy than any outcome of the Uruguay Round. This
stems from the far-reaching implications of TRIPS for human development in the
spheres of technology, public health, education, and conservation, stewardship and
ownership of traditional knowledge and biological resources.
The TRIPS agreement.
TRIPS in the context of development.
Setting the agenda.
ANNEX 11.1 Main provisions of the TRIPS agreement.
ANNEX 11.2 TRIPS and traditional knowledge.
Chapter 12 - TRADE RELATED INVESTMENT MEASURES AND INVESTMENT
Governments use two measures to attract and regulate foreign direct investment:
performance requirements (such as local content, local manufacturing, export performance
and technology transfer requirements) and investment incentives (such
as loans and tax rebates). Performance requirements are intended to ensure that
foreign investment contributes to the host country’s development and is consistent
with its policy goals.
Investment incentives involve a wide range of fiscal and monetary policy tools.
When these incentives are related to trade in goods, they are called Trade-Related
Investment Measures (TRIMs). Some TRIMs entail performance requirements.
Such measures have been extremely important for many developing and some
industrial countries, often serving as part of broad strategies aimed at achieving
economic growth, industrialization and technology transfer. TRIMs have also been
used to guard against and counter anticompetitive and trade-restrictive business
practices—particularly those of transnational corporations.
The TRIMS agreement.
Where we are now.
The way forward.
Chapter 13 - GENERAL AGREEMENT ON TRADE IN SERVICES
The provision of services has become one of the most important determinants of
global GDP and trade. Thus it has critical implications for human development.
Efficient and equitable infrastructure and social services are crucial to countries’
competitiveness and people’s well-being. Excluding public services, services
account for more than 60 per cent of GDP in industrial countries and 50 per cent
in developing countries (Corner House, 2001).
Services are also the fastest growing component of international trade, jumping
from US$0.4 trillion in 1985 to US$1.4 trillion in 1999—equal to almost onequarter
of global trade in goods and about three-fifths of foreign direct investment
flows (Mashayekhi, 2002). In 1997 industrial countries accounted for about twothirds
of trade in services (exports and imports).
Features and structure of the agreement.
Opportunities provided by the agreement.
Problems created by the agreement: actual flexibility.
Human development implications of the agreement at the sectoral level.
Operationalizing beneficial articles.
The way forward.
Chapter 14 - COMPETITION POLICY
Competition policy refers to a set of laws and regulations aimed at maintaining
a fair degree of competition by eliminating restrictive business practices by private
enterprise.According to Graham (2000, p. 205), competition policy includes
‘both anti-monopolies (antitrust) and regulation of state aid (i.e. subsidies and
subsidy-like measures)’. Restrictive (or anticompetitive or unfair) business practices
are those that limit entry into a market by other enterprises or regulate supply
in a way deemed harmful to other (existing or potential) producers or to
consumers. Such practices include collusion, predatory pricing behaviour, capacity
expansion that deters market entry and mergers and acquisitions that reduce
Experience with domestic competition policy and lessons for developing countries.
The need for domestic competition policy in today's world.
An international agreement on competition policy in the World Trade Organization.
The way forward.
Chapter 15 - TRANSPARENCY IN GOVERNMENT PROCUREMENT
All economic activities undertaken by national, provincial or municipal governments—
whether providing physical infrastructure, purchasing and maintaining
defence equipment or providing public goods such as education and health care—
require procuring intermediate goods and services. The procurement of goods and
services by different tiers of government accounts for 10–20 per cent of GDP, a significant
share of national public finance. Globally, non-defence-related procurement
amounts to an estimated US$1.5 trillion (Hoekman, 1998). Among
developing countries, procurement is estimated to account for 9–13 per cent of
GDP (Choi, 1999). How procurement is undertaken is therefore crucial for the
implementation of development policy.
Government procurement under the multilateral trade regime.
The development dilemma.
A direction for the future.
Chapter 16 - TRADE FACILITATION
The World Trade Organization (WTO, 2002a) defines trade facilitation as ‘the simplification
and harmonization of international trade procedures’. And it defines
these procedures as the ‘activities, practices and formalities involved in collecting,
presenting, communicating and processing data required for the movement of
goods in international trade’ (WTO, 2002a). This definition covers a wide range of
activities, such as transport formalities, import and export procedures (for example,
customs or licensing procedures) and payments, insurance and other financial
requirements.Trade facilitation has not historically been a subject of discussion for
negotiation in the multilateral trade regime, as a brief history shows (box 16.1).
Potential for increased vulnerability.
Implementation and opportunity costs.
The way forward.
Chapter 17 - STANDARDS
Two related agreements, the Agreement on Technical Barriers to Trade (TBT) and
the Agreement on Sanitary and Phytosanitary Standards (SPS), together cover the
issues relating to standards in the World Trade Organization (WTO). The TBT
Agreement aims to ensure that regulations, standards, testing and certification procedures,
which vary from country to country, do not create unnecessary obstacles
to trade. The SPS Agreement aims to prevent domestic sanitary and phytosanitary
standards from being trade restrictive and protectionist. It focuses on protecting
human, animal and plant life and the importing country from risks arising from
the entry of pests, toxins, diseases and additives (box 17.1).Under the TBT and SPS
Agreements, countries are encouraged to adopt international standards, though
they are given flexibility in introducing more rigid or more lax regulations.
Scientific justification is required for more rigid regulations.
Issues for developing countries.
The way forward.
Chapter 18 - TRADE AND ENVIRONMENTAL POLICY
The health and economic well-being of people living in poverty depends on a wide
range of environmental resources: fresh water for drinking, sanitation and agriculture;
fertile soil and healthy fisheries for the production of food; and the diverse products
of forest and marine ecosystems.Moreover, the diversity of nature—its aesthetic,
nutritional and pharmacological variety—greatly enriches people’s physical and
spiritual experience. But when natural resources are depleted, or when air, soil and
water are polluted, poor and economically vulnerable people suffer the most.
Why do environmental standards and the measures used to achieve them matter to human development.
Do societies face trade offs between high environmental standards and trade and investment flows?.
What principles should guide the management of trade offs between environmental and trade policies?.
Which procedures and institutions should be entrusted with managing trade offs between environmental and trade policies?.
The way forward.
Chapter 19 - STRENGTHENING CAPACITIES
A global trading system based on a negotiating framework cannot deliver fair outcomes
unless its members have the capacity to both negotiate international trade
agreements and extract benefits from them that are in their interest. None of the
reforms proposed in this book will bring the hoped-for results unless developing
countries gain the capacity to use the reforms effectively in achieving their development
goals. Strengthening the capacities of developing countries, especially the
least developed countries, is therefore a crucial part of a human development–
oriented multilateral trading regime.
Most developing countries lack the capacity to set the agenda for and the pace
of negotiations in the multilateral trading system, to negotiate effectively on issues of
greatest concern to them or to fulfil their commitments to the trading regime.Many
of the reforms proposed in this book include measures to develop such capacities.
Technical assistance within the framework of the World Trade Organization.
Technical assistance after Doha.
From OVERVIEW (excerpts):
Making Global Trade
Work for People
Human development is a process of expanding people’s choices, allowing them to
live secure lives with full freedoms and rights.Human development requires equitable,
sustainable economic growth. It also requires promoting gender equality and
fostering people’s participation in decisions that affect their lives.
By expediting economic growth, creating jobs and raising incomes, globalization
has the potential to advance human development around the world. But globalization
has also increased vulnerability and insecurity. Multilateral institutions
can play a major role in maximizing the potential benefits of trade and globalization
while minimizing their risks. But the evolution of these institutions has not
kept pace with the challenges of the 21st century.
By expanding markets, facilitating competition and disseminating knowledge,
international trade can create opportunities for growth and promote human development.
Trade can also increase aggregate productivity and exposure to new technologies,
which can spur growth. Indeed, the regions that have grown the fastest
over the past 20 years have also had the highest export growth.
But liberalizing trade does not automatically ensure human development, and
increasing trade does not always have a positive impact on human development.
The expansion of trade guarantees neither immediate economic growth nor longterm
economic or human development. Internal and external institutional and
social conditions play a significant role in determining whether and to what extent
a country or group of people reaps the benefits of trade (Rodrik, 2001).
Pervasive gender discrimination in economic life causes trade policy to have
very different effects on women and men. Trade liberalization has also had mixed
results for gender outcomes. It is particularly troublesome from a human development
perspective if export growth comes at the expense of exploiting female
workers, neglecting care work1 and increasing gender inequalities in opportunities
and benefits (Ça˘gatay, 2001).
A key message of this book is that an evaluation of the multilateral trade regime
should be based on whether it maximizes possibilities for human development—
especially in developing countries. To achieve that goal, the regime needs to shift
its focus from promoting liberalization and market access to fostering development
(Rodrik, 2001). The regime should provide developing countries with policy space,
giving them the flexibility they need to make institutional and other innovations—
while still recognizing that trade liberalization and market access can make important
contributions to human development in specific situations and certain sectors.
While the evidence on trade and human development shows that the links
between them run in both directions, trade theories do not offer clear or unequivocal
conclusions about the direction or dynamics of the relationship. But while the
debate about the relationship between trade liberalization, economic growth and
poverty reduction continues, evidence shows that trade liberalization is not a reliable
mechanism for generating self-sustaining growth and poverty reduction—let
alone human development (Rodrik, 2001).
Conventional wisdom holds that trade is linked to human development
through economic growth. Though there is no automatic relationship between
growth and human development, growth can contribute to human development
if increased incomes and higher government revenue translate into social and productive
spending that positively influences human development indicators
(UNDP, 1996). Meanwhile, the absence of growth makes it extremely difficult to
achieve human development objectives.
But what does the evidence reveal about the links between trade liberalization
and economic growth? A close study of the empirical literature finds no compelling
evidence that trade liberalization is systematically associated with higher growth (see
chapter 1). Some leading researchers argue that the only systematic relationship
between trade liberalization and growth is that countries dismantle trade barriers as
they grow richer. Moreover, the experiences of industrial countries and successful
developing countries provide two other important lessons. First, economic integration
with the global economy is a result of successful growth and development—not
a prerequisite for it. Second, domestic institutional innovations—many of them
unorthodox and requiring considerable policy space and flexibility—have been integral
to most successful development strategies.
Thus multilateral trade rules need to seek peaceful co-existence among
national practices, not harmonization. This point has obvious implications for the
governance of global trade, not least because of the need to permit asymmetric
rules that favour the weakest members—especially the least developed countries.
In the long run such rules will benefit both industrial and developing countries.