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I. INTRODUCTION
BACKGROUND
The world has fast-tracked in the post-World War II era. Aside from being busy with the reconstruction of their devastated states, government around the world was more adamant in adopting more peaceful measures in their political and economic national policies. There was the redirection of many foreign policies towards global cooperation and coordination among nation-states. The focus of international treaties was diverted to the economic aspect, instead to political agenda. The occurrence of these rapid changes in the world order in the post-World War II has paved the way to the phenomenon called “globalization,” where a borderless interconnected world has been created in either political, cultural and economic dimensions. One of the important features brought about by globalization is the so-called borderless economy of the world, the interconnection of weak and strong economies of various states. Gone were the days of protectionism as when national economies become liberalized to attract foreign investments. In short, national sovereignties have been reduced and subjected to international institutions like the World Bank (WB), International Monetary Fund and, now the World Trade Organization (WTO).
THE GATT/WTO
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In genealogy, the General Agreement on Tariff and Trade (GATT), established in 147, was the precursor of the WTO. The GATT preamble states that “trade and economic endeavor should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income.”1 These objectives were reinforced in the Marrakesh Agreement, at the Uruguay Round that established the WTO in 14.
What makes WTO different from GATT? By its nature, WTO is a permanent institution with a permanent framework and has its own secretariat while GATT was only a set of rules, with no institutional foundation and applied on provisional basis. The scope of WTO is broader than GATT. While the latter was applied to trade in goods, WTO agenda now includes agriculture services (financial, telecommunication, information technology, etc.) intellectual property rights; electronic commerce, and possibly in the next round, investment, government procurement, and competition policy. Unlike the previous GATT system, the WTO agreement is a single treaty instrument, which was accepted by the WTO members as a “single treaty undertaking.” Article II of the WTO Agreement, provides that “the Multilateral Trade Agreements in Annexes 1, and are integral parts of the WTO Agreement, binding on all members.” Most of all, the greatest accomplishment of WTO is the institution of the Dispute Settlement Body (DSB). Through the DSB, WTO has specific time limits to settle disputes between trading parties, thus making it making it faster than GATT.4 WTO likewise operates automatically hence ensuring less-blockages than GATT.5 In addition, WTO has permanent appellate body to review findings by dispute settlement panels.
PRINCIPLES GOVERNING WTO
The trading system principles embodied in WTO include non-discrimination, free trade, predictability, fair competition and development and economic reforms for less developed countries (LCDs).6 By non-discrimination, all members of the organization are granted Most Favored Nation (MFN) status, where each member state is accorded the same “best” treatment to all WTO members. The General Agreement on Trade on Services (GATS) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) grant Most Favored Nation treatment. This means that every time the country lowers a trade barrier or opens up a market, it has to do so for the same goods and services from all its trading partners-whether rich or poor, weak or strong.7 Under non-discrimination principle is also the so-called National treatment, where foreign imported goods, services, trademarks, copyrights and patents are treated equally to those of domestically produced goods, services etc.8 With free trade, hindrances to trade, whether tariffs or non-tariffs barriers and other technical regulations; are coming down through negotiation. More and more tariffs rates and market-opening commitments are “bound” in the WTO.10 Thus, increasing predictability and stability in business and future opportunities. Foreign companies, investors and governments should be confident that trade barriers should not be raised arbitrarily.11 The system also proves to be more competitive by discouraging “unfair” practices such as export subsidies and dumping products at below cost to gain market share.1 Similarly, special and differential treatment are provided for developing countries by giving them more time to adjust, greater flexibility and special privileges.1
II. POSITIVE IMPLICATIONS OF THE WTO SYSTEM
From the above mentioned principles of WTO are derived its benefits. Several prominent authors and practitioners of international trade law purport different positive aspects of the system. According to J.H.H. Weiler and Sungjoon Cho, one of the most important reasons for having WTO - it is a forum for countries to thrash out their differences on trade issues.14 Foremost, according to Weiler, et. al., the system helps to keep the peace among countries. 15
Peace is partly an outcome of two of the most fundamental principles of the trading system helping trade to flow smoothly, and providing countries with a constructive and fair outlet for dealing with disputes over trade issues. It is also an outcome of the international confidence and cooperation that the system creates and reinforces.16
WTO system helps resolve disputes peacefully and constructively. Trade disputes which, are settled at WTO prevent more serious political conflict among states and decrease tension in the world. Secondly, WTO reduces some inequalities, giving smaller counties, such as the Philippines, more voice, and at the same time freeing the major powers from the complexity of having to negotiate trade agreements with each of their numerous trading partners.17 The arguments apply to everyone, rich and poor countries can be challenged by all members if they violate an agreement, and they have an equal right to challenge others in the WTO’s dispute settlement procedures.18 Indeed, smaller countries have increased their bargaining powers vis-à-vis more powerful countries. They are given opportunities to form alliances and to pool resources.1 Thirdly, free trade cuts the cost of living of people around the world.0 It gives consumers more choice, and broader range of qualities to choose from. In the same manner, trade raises global income and simulates economic growth, and that can be good news for employment.1 WTO’s own estimates for the impact of the 14 Uruguay Round trade deal were between $10B and $510B added to world income.
In the same token, the system shields governments from narrow interests.4 WTO helps governments take a more balanced view of trade policy. Governments are better placed to defend themselves against lobbying from narrow interest groups by focussing in trade-offs that are made in the interests of everyone in the economy.5
Lastly, the system encourages good government.6 Under the WTO rules, once a commitment has been made to liberalized a section of trade, it is difficult to reverse.7 The rules also discourage a range of unwise policies as well as help reduce corruption and bad government. For business, that means greater certainty and clarity about trading conditions. However, for governments, it can often mean good discipline.8
Another significant observation of WTO is that of Razeen Sally. According to him, international treaties strengthen the hand of governments and shift the balance of interest group politics within the domestic sphere. Binding international obligations protect governments against politically influential domestic producer groups clamoring for protection against imports. At the same time, intergovernmental negotiations mobilize the support of domestic exporters, who have a stake in lobbying their governments to “concede” market access at home in return for improved market access for their products abroad.0
As appointed out by Das (001), the WTO system has several elements that have the potential to impact positively on international trade. As has been discussed previously, WTO provides opportunity for sharing benefits among members such as the MFN principle.1 It provides also for burden sharing in times of crisis for a member. This is attained through the safeguards provision (Art. XIX of GATT 14 and WTO Agreement on Safeguards), which is used by a member to restrict imports when its domestic industry suffers injury from imports or there is a threat of such injury; and balance-of-payments provisions (Art. XII and XVIIIB of GATT 14), which enables a member to take important restrictive measures if it faces balance-of-payments problem. Lastly, it provides protection to a member against possible harassment by other members through unilateral trade-restrictive actions.4 Furthermore, the WTO Agreement confers certain rights on the Members in the areas of goods, services and intellectual property. These cannot be unilaterally suspended, withdrawn or restricted.5 Similarly, if an obligation has been taken on the level of the duty on a product, the country taking the obligation cannot unilaterally increase the duty or levy any additional charge on the import of that product, generally or from a particular source.6 These are set of procedures for taking an action against any country. But one point is clear there can be no retaliatory restraining action in these areas for any perceived grievance, which is external to these areas.7
Looking at various positive perspectives on WTO, it seems that the system is a great advantage to any member states in the out set. Where the volume of world trade is a yardstick to measure the success of the WTO, indeed, the result would be excellent. Nonetheless, a profound scrutinization of the system would lead us to a different viewpoint of the system. A question of which countries really benefited the increased trade would come into mind. Whether or not the agenda of the WTO, the implementation of its agreements, and the much praised dispute settlement system all serve to advance the interests of developed countries, sidelining those of the developing countries such as the Philippines. Whether or not there is marginalization in the world system. Whether or not the rules uniformly applied to WTO members have brought inequalities because of the different economic circumstances. Whether or not national sovereignty of a country has been undermined already. All these bewildering issues allow us to examine the backlogs of the system as tackled in the next portion.
III. MAJOR IMBALANCES OF THE SYSTEM
WTO is similar to the splitting of an atom. Both have great potential for productivity and destruction. In this chapter, let us focus in the negative polarity of the system.
Nelson Mandela, commenting on the Uruguay Round, said “The developing counties were not able to ensure that the rules accommodated their realities… it was mainly the preoccupation and problems of the advanced industrial economies that shaped the agreement.”8 He added that rules applied uniformly are not necessarily fair because of the different circumstances of members.
Indeed, there is some truth to the above statement of Mandela. It cannot be denied that the interests of developed countries dominate the system. For instance, according to the WTO report, the least developed countries (LDCs) represent 0% of the world’s population, but they generate a mere 0.0% of the trade flows. Accordingly, to gain new market access in developing countries, the developed countries acting in the interests of Trans-National Corporation (TNCs) have rapidly imposed new agreements in telecommunications, information technology and financial services, which are of less interest to the former since such agreement are not their primary sectors.40
Some critiques from developing countries also give emphasis that they have little power within the WTO framework for the following reasons
Although developing countries make up three-fourths of WTO membership and their vote can in theory influence the agenda and outcome of the trade negotiations, they have never used this to their advantage. Most developing country economies are in one way or another dependent on the US, the EU, or Japan in terms of imports, exports, aid, security, etc;4
Trade negotiations are based on the principle of reciprocity or “trade-
offs.” That is, one country gives a concession in an area, such as the lowering of tariffs for certain product, in return for another country acceding to a certain agreement. This type of bartering benefits the large and diversified economies, because they can get more by giving more;4
. Developing countries have fewer and technical resources;44
4. Developing countries have discovered that seeking resource in the dispute settlement system is costly and requires a level of legal expertise that they may not have.45
To fully understand the existence of inequalities and imbalances of the system, it is best to examine the built-in agenda in the WTO.
LIBERALIZATION IN AGRICULTURE
WTO obligations can threaten the viability and position of some domestic enterprises and farms in many developing countries. The loss of competitiveness of the local sectors can arise from reductions in tariffs, rules prohibiting or constraining government subsidies or other measures that support local firms and farms, and the liberalization of foreign investment in services. Those local firms and farms are unable to withstand the competition and may lose their market shares or even close down, thus adding to unemployment. Since export capacity and opportunities are limited for many developing countries, they may be unable to relocate the retrenched workers or farmers to new production facilities, and thus there would be a net increase in unemployment or a net loss of livelihoods in these countries.46 It is also important to mention that agriculture in most developing countries is not a commercial operation, however, being instead carried out largely on small and household farms.47 If such farmers are asked to face international competition, they most certainly lose out.
GENERAL AGREEMENT ON TRADE ON SERVICES (GATS)
In theory, it allows each country to liberalize at its chosen pace and in various sectors that it believes to be appropriate. It includes a principle of “progressive liberalization” rather than a minimum standard of liberalization, and Article XIX prescribes ‘appropriate flexibility’ for individual developing country members to open fewer sectors and liberalize fewer types of transactions.48 Thus, countries are under pressure through new negotiations to ‘roll forward’ their liberalization commitments, which are binding, but they are to ‘roll back’ these commitments, except through a willingness to offer adequate compensation.4 This agreement is likewise criticized for pressuring developing countries to make high levels of commitments in sectors, such as financial services and telecommunication services, which are primarily important to developed countries. The movement of labor, which is of interest to developing countries, has not been given the same special treatment.
AGREEMENT ON TRADE-RELATED INVESTMANT MEASURES (TRIMS)
Investment measures that are in violation of obligations under Article (on national treatment on internal taxation and regulation) and Article 11 (on general elimination of quantitative restrictions) of GATT 14 would be prohibited under this agreement.50 The measures prohibited in the said agreement are themselves useful and necessary instruments for developing countries’ industrialization and development.51 The Philippines has been a recipient of a case filed by the US against the former regarding pork and poultry.
AGREEMENT ON TRADE-RELATED INTELLECTUAL PROPERTY RIGTHS (TRIPS)
This agreement concerns protection of almost all intellectual property that is in the hands of the developed countries. Many developing countries claim that they do not enjoy any reciprocal benefit from its protection and that they cannot be selective in the protection of intellectual property if they have any. Several issues need to be pointed out in relation to this Agreement.
Foremost, TRIPS obliges developing countries to establish (IRP) Intellectual Property Rights laws with high standards equivalent to those of developed countries. This will hinder technology transfer, as local firms will be prevented from practicing reverse engineering and other measures for imitative innovation.5 Developing countries are overwhelmingly dependent on innovations made in the North. In the same manner, firms in developing countries are required to pay royalties for use of technology from developed countries or to get permission from IPR holders, mostly from developed countries, to use modern technologies.5
Another relevant issue is the increase in prices of consumer products (such as medicines) charged by companies owning IPRs, which reduces consumers access and affects their welfare, health and lives.54 The case of medicines for HIV/AIDS highlighted this issue. Patent-protected brands of medicines usually sell more expensively than generic non-protected versions. In the U.S., a year’s supply to a patient of a combination of three patent-protected HIV/AIDS medicines costs US$10,000-US$15,000 while an Indian generic drug is worth US$50-600.55
The most striking issue of TRIPs is the phenomenon called “bio-piracy,” where North have been able to patent biological resources and knowledge of their use, most of which originate in the South.56 Developing countries have been the source of a vast body of indigenous knowledge which firms of developed countries obtain protection for their profitable use. Under article 7.(b) of TRIPS, patent for microorganisms and non-biological and microbiological processes are excluded in the coverage of protection.57 Thus, it appears that WTO members allow patents for certain types of life forms and living processes. Notably, IPRs for plant varieties are also granted under Article 7.(b) of TRIPS. In fact, patents have been in genes on natural compounds from plants that are traditionally grown in developing countries (including rice, cocoa, and cassava) and on genes in staple food crops originating in developing countries (including maize, potato, soybean, wheat). Patents have also been granted in plants used for medicinal and other purposes by people of developing countries. Example include US patent for the use of turmeric for healing wounds (this was successfully challenged by the Indian people for this purpose), and the patenting by US scientists of a protein from Thai bitter gourd after Thai scientist found its compounds could be used against the HIV/AIDS virus.58
DISPUTE SETTLEMENT UNDERSTANDING (DSU)
Dispute Settlement Body is a powerful arm of the system. However, the ultimate instrument for enforcement through this process is retaliation against the erring country, which is not practical or useful for developing countries. Some international law practitioners consider this process less useful in actual practice to developing countries than to developed countries. The possibility of retaliation would mean that the complaining country would be imposing high tariffs on some products from the erring country, making those products available to the consumers of the complaining country at higher price, or obliging them to purchase from some other countries. There is an economic cost involved in either case; and a developing country may find it difficult to shoulder that burden. A developing country will also naturally hesitate to take retaliatory measures against powerful developed countries. It will have to weigh the political cost before taking action. A retaliatory action by a developing country may not have any significant impact on the erring country if it is major developed country, because the level of its total exports.5
The weak trading partners, particularly the developing countries, are disadvantaged in this regard for other reasons too, including the high cost involved in the dispute settlement process, the delay in relief and inadequate relief in the best situations. Full relief may take nearly 0 months; and by then the weak economy of a weak trading partner could have suffered irreparable damage. There is much less resilience in the production and trade in developing countries compared to that in developed countries; hence, the damage due to delay may be much higher in the former than in the latter. 60
Moreover, the relief is prospective, namely, from the time the implementation of the recommendation starts after the adoption of the report of the panel/Appellate Body. There is no provision for retrospective compensation with effect from the time the error was committed.61 For a developing country, the loss may be heavy because of its weak economy.
From the viewpoint of developing countries, Bhagwati (1) has raised an important issue with respect to the strict timetables followed by the DSB procedure. Referring to the Bananas case, he notes that strict timetables can sometimes result in substantial “shock therapy imposed by legal means” on third countries that cannot cope with rapid and substantial adjustment costs. In the Bananas case, the parties directly involved are the US and EC economies. The tight DSB timetables reflect the rights of successful plaintiffs rather than the economic difficulties of the true targets of adjustment.6
There is a controversy relating to a situation when there is a recommendation of the panel. In such a disagreement, the issue is whether a member has the right to unilaterally determine whether or not the other party has properly implemented the panel ruling. And if the determination is negative, to move to impose trade retaliation measures or whether the determination of companies has to be done by the original panel. Citing again the Banana dispute between the US and the EC when the US claimed it can determine for itself whether the other party has complied or not. And that if it determines that it has not, it can seek authorization straight away under Article .6 to take retaliatory measures and suspend concessions. (Without going through the Article 1.5 process of referring to the original panel on whether or not the erring member has complied with the ruling.) This unilateral US action generated some uncertainty and disquiet among members.6
It can also be observed that WTO secretariat has been playing too large a role and an inappropriate role at that, in guiding the dispute settlement process. According to C. Raghavan
From the time a dispute is sent to a panel process until the end of the proceedings, the system now works such that the secretariat has assumed a very important role-from the choice of panelists through to the panel proceedings.64
This role of the secretariat officials should be of considerable concern to developing countries. To begin with, there is a general dominance of developed country views and interests at the WTO Secretariat. In addition, the officials of the Secretariat, especially lawyers, are predominantly from developed countries, giving the latter extra advantage in disputes with developing countries.65
NEW ISSUES
There are emerging issues at WTO which remain subjects for future negotiations in the upcoming rounds.
ENVIRONMENTAL ISSUES
The measure to improve environmental protection and standards are used for protectionist objectives by the developed countries that would act against the interests of developing countries. The implication is that if a country has lower environmental standards in an industry or sector, the environmental cost of that country’s product is not internalized and the price of the product is thus too low (being unfairly subsidized by the low standard), amounting to “eco-dumping”, as a result, an importing country would have the right to impose trade penalties on the goods concerned,66
Within all countries should be expected to adhere to the same standard, or whether standards should be allowed to correspond to different levels of developments. The use of a single standard would be inequitable, as poorer countries that can ill afford high standards would find their products uncompetitive.67
Labor
Similar is the apprehension of labor standard. The proposal is to enforce labor standards through the machinery of the WTO, which in the real sense means that imports may be restricted if a country is considered to deviate from these standards.68
INVESTMENT
This proposal seeks to ensure free entry of investors into a country without any concern for the needs and priorities of the host countries, such as higher production, development and absorption of technology, development of infrastructure and the survival of domestic investors.6
COMPETITION POLICIES
Under this consideration, established firms of developed countries check comparatively stronger firms in developing countries so that they do not stand in competition with them.
Considering the above-mentioned issues, the system cannot be regarded to be bereft from structural and operational flaws. Each issue brought significant concerns to the developing economies as well as to the developed industrialized economies, which are members of the WTO Agreement. There seems to be a vivid resurgence of the North-South dichotomy in terms of economic aspect and the hegemony of the industrialized countries, specifically the US. The question then is-Is WTO a masquerade of economic imperialism of the North? At this time, it is difficult to adhere to such claims of some critiques from the South. There are so many variables and factors beyond WTO that made possible such present observation of the system. Other aspects of globalization do not include purely economic bases. Hence, I leave the elucidation of these ideas in my conclusion.
IV. PHILIPPINE MEMBERSHIP IN THE WTO
On April 14,14, Rizalino Navarro, then Secretary of the Department of Trade and Industry, representing the Government of the Philippines, signed in Makkaresh, Morroco, the Final Act Embodying the Results of the Uruguay Round of Multilateral Negotiations. By signing the Final Act, Secretary Navarro on behalf of the Republic of the Philippines agreed (a) to submit, as appropriate, the WTO agreement for the consideration of their respective competent authorities, with a view to seeking approval of the agreement in accordance with their procedures and (b) to adopt the Ministerial Declarations and Decisions. Pursuant to Section 1, Article VIII of the Constitution, Philippine Senate adopted Resolution 7, concurring in the ratification by the President of the Philippines of the said Agreement, on December 14, 14.70
The Philippines joined the WTO as a founding member with the goal of improving Philippine access to foreign markets, especially its major trading partners, through the reduction of tariffs on its exports, particularly agricultural and industrial products.” Then President Ramos also saw in WTO the opening of “new opportunities for the service sector and more investments into the country.” Likewise, the Philippines is said to benefit from the WTO system of dispute settlement by judicial adjudication through the independent WTO settlement bodies where trade disputes were settled mainly through negotiations and solutions were arrived at frequently on the basis of relative bargaining strengths.71
However, the said act by the executive and the legislative departments was not without oppositions that led to the controversial case of Tañada vs Angara. The Supreme Court held that there was no grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the political branches of the Government. The political act undertaken being not in contravention to any provision of the Philippine Constitution. Some of the important issues of the said case are hereby tackled.
Issue on the Limitation of Philippine Sovereignty
Indeed, the Philippines has voluntarily restricted the exercise of its sovereign rights as it subjected itself to the WTO rules as a member thereof. By the doctrine of incorporation, the Philippines is bound by the generally accepted principles of international law, which are considered to be automatically part of our own laws. A state that has contracted valid international obligations is bound to make in its legislation such modifications as may be necessary to ensure the fulfillment of the obligations undertaken. The underlying consideration in this partial surrender of sovereignty is the reciprocal commitment of the other contracting states in granting the same privilege and immunities to the Philippines. In the same manner, under the pacta sunt servanda, the Philippines is obliged to perform in good faith international agreements such as WTO.7
Issue on Economic Nationalism
With respect to the issue of economic nationalism, Philippine membership in the WTO was sorely contended as being inconsistent with Sec. 1, Art. II and Sections 10 and 1, Art. XII of the Philippine Constitution. The Court held otherwise. The Court clarified that while the Constitution indeed mandates a bias in favor of Filipino goods, services, labor and enterprises, at the same time, it recognizes the need for business exchange with the rest of the world on the bases of equality and reciprocity and limits protection of Filipino enterprises only against foreign competition and trade policies that are unfair-the Constitution did not pursue an isolationist policy.7
There is hardly any basis for the statement that under the WTO, local industries and enterprises will be wiped out and that Filipinos will be deprived of control of the economy, for quite to the contrary, the weaker situations of developing nations like the Philippines have been taken into account. GATT itself provided built-in protection from unfair foreign competition and trade practices including anti-dumping measures, countervailing measures and safeguards against import surges.
The fundamental law encourages industries that are “competitive in both domestic and foreign markets,” thereby demonstrating a clear policy against a sheltered domestic trade environment, but one in favor of the gradual development of robust industries that can compete with the best in the foreign markets.74
With the conclusion of the above-mentioned case, it is clearly manifested that the three branches of Government are united in envisioning the merits of the WTO system. Economic liberalization proves to be the victor of government policy as the state strives to survive in this age of globalization. Clearly, the isolationist policy has been thrown out by our Constitution.
V. CONCLUSION
It is recognized that the WTO system is imperfect in the presence of some imbalances that reflected the North-South dichotomy, or the gap between the developed and the developing economies while being interrelated and interconnected to each other. There may be inequality in fact among Member countries as developed economies are in control of major agreements in the negotiations. However, the WTO system provides small countries with legal equality through the Dispute Settlement Understanding where developing countries, like their developed counterparts, can contest their claims. Also, it cannot be said that only the developing countries are the ones suffering from the burdens of present international trade malpractice. In fact developed countries are also plague with piracies of high technologies. This phenomenon cannot be solely attributed to the imperfection of the system. There are other variables outside the system that are brought about by globalization. Thus, it cannot be said that WTO is a masquerade for economic imperialism of the North.
This picture only depicts the complexity of the world economy as of today. This is to say that the WTO system is just one of those ways to cope with the complexities of time. It should be pointed out that the system is primarily a trade forum, designed to tackle the challenges of the international economic scene. It is not an over-all encompassing system that would incorporate other non-trade agenda such as environmental and other social and cultural issues. There are other agencies of the United Nations which can addressed specifically non-trade-related issues. What is being sought by the system is economic prosperity of a stable multi-lateral framework that can improve the standards of living around the globe.
There is still a hope for WTO. Its defects are curable as there may be many multilateral negotiations, called ‘rounds,’ to come in the future. Developing countries have to recognize their own potential as important actors in the international economic scene. Some of them have impressive economic growth, some have rich natural resources (i.e. Philippines), some have a vast wealth of technically trained personnel, and all of them provide a great prospects for future growth of the market.75 What is needed is a full realization of these potentials, synergic combinations of these positive factors and a new confidence about their role in the international economy.76
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