News 2 of 118

WTO Accession: Tough Love or a Heavy Hand?

IDRC Photo: N. MacMillan

2005-12-13

Thirty-one countries from war-torn Afghanistan to Yemen are queued for membership in the World Trade Organization (WTO). Despite the disarray in the current Doha Round of trade talks and the growing number of regional and bilateral trade agreements being struck outside the WTO arena, few would-be members are ready to give up their place in line. The reasons officials give for staying in the queue range from improved market access for their exports to the positive signal — a seal of approval really — that WTO membership sends to the global trading and investment community.

“WTO accession provides a predictable business environment and gives a powerful guarantee to investors that there will be no policy reversals,” says Mamo Mihretu, an Ethiopian trade lawyer and consultant examining the impact of WTO accession for the Ethiopian government. Attracting foreign investors is critical to Ethiopia’s long-term strategy to boost exports to promote economic development and alleviate poverty. “WTO accession is one means of doing that,” says Mihretu.

To become a full-fledged WTO member, Ethiopia must negotiate a separate set of legally binding commitments with each member of its Working Party — the body created to consider would-be members’ applications. Any WTO member can join any Working Party and all Working Party members must approve the acceding country’s application.

Critics have long claimed that negotiating a unique entry cost for each new member leaves the accession process open to abuse by Working Party countries looking to gain a commercial advantage over would-be rivals.

“It seems paradoxical,” says Simon Evenett, Professor of International Trade and Economic Development at Switzerland’s University of St Gallen, “that an institution like the WTO, which describes itself as a rules-based organization, doesn’t have a rule on what price you have to pay to join it.”

The legal instruments outlining the accession process offer little guidance to acceding countries, stating simply that new members will be welcomed into the WTO on “terms to be agreed.” 

The absence of standardized rules, says Evenett, fuels a steady stream of “hearsay, suspicion, and rumor,” including claims that the accession process is too costly and complex, takes longer to complete, subjects new applicants to tighter rules than existing WTO members obey, and ignores the human and financial constraints of developing countries.

To separate fact from fiction, Evenett drew upon a network of Southern and Northern researchers to examine the costs and benefits to developing countries of WTO accession. With support from Canada’s International Development Research Centre (IDRC) and Switzerland’s World Trade Institute Foundation, network members pored over the experience of the 20 countries that have joined the WTO since its creation in 1995.

Criticism warranted

The study results lend credence to critics’ charges that the accession process is becoming more onerous and costly.

“Since 1995, the time taken to become a full member has risen steadily and now stands at almost 10 years,” says Evenett.

So too has the price if the levels at which would-be members can set their tariffs — known as tariff bindings — are used as a proxy. Newer members are increasingly asked to set their tariff bindings at levels below the ceilings agreed to during earlier Uruguay Round trade negotiations. In other words, recent WTO members have opened their markets more fully to imported goods than did earlier entrants into the multilateral trading system. This has serious implications for local labour markets, especially in industries that must compete with imported goods and services in the local marketplace.

Then there are the “nonmarket access” rules new members must negotiate. Some, such as Jordan’s commitment to give international treaties precedence over any national laws or state acts, go well beyond commitments made during the Uruguay Round. Others may require an acceding country to forgo rights guaranteed to current WTO members. Ecuador, for example, agreed to eliminate all state subsidies before its date of accession and to never introduce them afterwards.

While critics maintain that these “WTO+” commitments and “WTO-” rights fly in the face of the organization’s founding principles of equal treatment and nondiscrimination for all members, Evenett is more guarded in his assessment. “To the extent that there are WTO+ and WTO- commitments, they have the potential for creating second class citizens within the WTO system.”

The real question, however, says Evenett, is not whether the price of accession is rising, but whether it is worth paying because of the positive development impacts of WTO membership.

“If that is the case,” he says, “then demands made by WTO members — rich and poor — of acceding countries might simply be a case of ‘tough love.’ Otherwise, it’s simply a power play designed to wring commercial advantage out of weaker partners.”

For more information:

Susan Joekes, Team Leader, Trade, Employment and Competitiveness program initiative, PO Box 8500, Ottawa, Ontario, Canada, K1G 3H9; Tel: 33 1 45 24 82 15; Fax: 33 1 44 30 61 50; Email: sjoekes@idrc.ca

Simon J. Evenett, University of St Gallen, HSG—SIAW, Bodanstrasse 8, 9000 St Gallen, Switzerland; Tel: +41 71 224 2315; Fax: +41 71 224 2298; Email: simon.evenett@unisg.ch; www.evenett.com

Top of Page

News 2 of 118