The stark reality facing the WTO and the poorest countries

• Pages: 309-312

Page 309

IMF SURVEY: How does the influence that small and poor countries wield in the global trading system negotiations differ from that of larger developing countries?

MATTOO: The WTO is a mercantilist institution in the sense that countries trade off one another's protection-you give me better access to your market, and

I'll give you better access to my market. The currency for these negotiations is market size. However, the small and poor countries don't have much to offer either individually or collectively to the rest of the world in terms of market access. So their influence derives not from this traditional coinage of the WTO but from the fact that the WTO is a very democratic institution. Each country has one vote and to make any major decision, traditionally you need consensus. But legally you need at least a large majority-typically two-thirds of the membership. And the small and poor countries now constitute a majority of the WTO membership. Perhaps even more important, they wield a moral influence derived from generally having benefited little from the global trading system, particularly the Uruguay Round negotiations.

IMF SURVEY: How does small country size affect the main benefits that WTO membership offers?

SUBRAMANIAN: Since the coinage of the WTO is market size, because you have less to offer, you can ask less of your trading partners, and this somewhat diminishes the extent to which you can seek greater access in the markets of your trading partners. By the same token, because one of the important benefits of the WTO is for a country to be able to open its own markets, the fact that a country has a small market means that the trading partner is less interested in the country opening up its market, resulting in fewer pressures from within the WTO on opening-including making such market openings irreversible. This makes a small country doubly disadvantaged.

IMF SURVEY: At the same time, you have also noted the growing influence of these small and poor countries in the world trading system. What do you think the consequences would be if the demands arising from this growing influence are not addressed?

SUBRAMANIAN: Since, unfortunately, our paper has sometimes been misunderstood, we need to make it completely clear that we think that this influence is desirable. This empowerment of the small and poor countries is going to lead to more egalitarian outcomes. The real challenge is how the interests of these countries are going to be accommodated. If their interests are not accommodated, the ability of the system to deliver even broader multilateral liberalization might be stymied. These interests need to be accommodated in the most desirable way-that is, in a way that allows the system to continue to deliver broader liberalization but also to address the development needs of these countries. If that were not to happen, I think it will be a significant stumbling block to further multilateral liberalization.

IMF SURVEY: You argue that the overall impact of the liberalization of nontariff agricultural support policies on the smaller, poor countries is negligible...