By Moin Siddiqi.

The World Trade Organisation (WTO) was created in 1994 as a multilateral body aimed at promoting greater liberalisation of trade in goods and services. Its roots date back to the 1950s with the signing of the General Agreement on Tariffs and Trade (GATT). Presently, of the 135 WTO members, 75% are from the developing world but over the past five decades, it has been in Western Europe and North America that most of the trade liberalisation has gone on. More recently developing nations have been opening their markets too.

The WTO has also concluded important agreements on the deregulation of financial services and telecoms. The gradual dismantling of trade barriers has led to an increasing integration of the global economy, a landmark of the late 20th century

Advocates of free trade argue that economic prosperity world-wide owes much to the burgeoning trade among nations. Expanding trade encourages improved productivity by domestic manufacturers, increased access to new technology and cheaper and better-quality products and services. Undoubtedly, the surge in world trade has underpinned the longest sustained economic expansion in modern history.

Between 1950 and 1998, the volume of global exports increased 18-fold, whilst global output increased six and a half times. This year, the growth in world trade is projected to increase by 6-7%, up from 4% in 1998-99.

Poverty can be eliminated in Africa and Asia only through robust growth. Liberal trade regimes enhance the profile of emerging markets. Chile for example doubled its gross domestic product (GDP) between 1989-1997 and in the process, attracted considerably more foreign direct investment (FDI).

The developing nations welcome the WTO's General Agreements on Trade in Services (GATS), which permits countries to liberalise at their own pace. It also encourages inward FDI and competition in sectors such as finance, information technology, telecoms and tourism. Increased bilateral trade also improves political ties.

The WTO's critics include labour unions, 'green' politicians, human rights and consumer groups who argue that free trade only benefits rich countries and big businesses. They maintain that globalisation leads to exploitation of untapped natural resources, cheap wages and other abusive practices such as child labour in the third world. They add that multinationals enjoy monopolistic powers which sometimes lead to bankruptcy of indigenous companies. Trade unions in rich countries fear that production will be re-allocated to low-cost countries, putting thousands of people out of work.

Some academics argue that modern global capitalism is cheating the citizens. The global trading system is neither fully liberal nor very fair to the developing countries. The WTO is in fact, so the argument goes, a rich-nations club where major trading blocs like the European Union (EU), America and Japan seek to impose their rules and standards.

These trading blocs are more interested in securing deals to reduce barriers on products in which their industries enjoy obvious competitive advantages. Furthermore, agricultural markets in the EU and Japan are highly protected by using food safety regulations as trade barriers. Whilst the phasing out of textile quotas under the Multi-Fibre Arrangement by 2005 remains painfully slow for poor nations, the industrial world maintains anti-dumping duties on most third world imports (the US has about 300 in place).

At the recent failed Seattle talks (see story, page 22), the developing nations felt marginalised in the decision-making process. But the reality is that most developing nations lack experienced trade negotiators, who can effectively tackle intensive and complex issues such as intellectual property rights, investment and competition policies.

The argument goes that in order to promote the growth of developing country exports, OECD countries should liberalise the farming and textile sectors. Critics demand duty-free market access for the highly indebted poor countries (HIPCs), 30 of which are Africans.

In essence, enhanced debt relief, tied to good policies, coupled with increased trade and FDI offer the best chance for sustained recovery in the HIPCS.