Index

Expert Opinion: Making Trade Liberalization Work for the Poor

By Sitanon Jesdapipat

When read carefully, the General Agreement on Trade in Services (GATS) is simply an investment agreement in disguise. The modes of liberalization and classification of environmental services are so comprehensive that one wonders how the fate of developing countries can escape the fine net of the private sector.

Unbridled liberalization can create a one-way street for the private sector to take away services traditionally provided by the government, and place high price tags on them. It represents a costly recourse for developing countries, once they are committed to the process. Although access and affordability are widely and often questioned, other inevitable impacts have not yet been adequately addressed. Local communities, for example, can be deprived of their right to help themselves, to innovate and reap the benefit from appropriate technologies; such as, for example, cheap, simple and cost-effective end-ofpipe water treatment. Instead, expensive, complex and sometimes outdated “white elephant” technologies exclusively imported from foreign producers are not only encouraged, but often mandated.

Not only is it difficult to tame privatization— especially when local capital weds foreign capital—it can also force local communities and individuals to unnecessarily become dependent on foreign technology, the choice of which is often driven by the needs of the investor rather than those of the users. The inability to innovate and self-help marks the end of development in its truest sense. The true social and environmental costs of liberalized trade can be significant for developing countries, especially if local innovation is foregone for the sake of increased foreign investment at all cost.

One, therefore, wonders if freer trade at any cost is really good for developing countries. Given the nature and extent of the dependence it can create, can this really be a lasting motor of sustainable development? A more pertinent question, perhaps, is how to innovate a global policy that can ensure more than a short-term win-win outcome for private investors and host countries.

If trade is to be an instrument for delivering improved human well-being and if the profit motive is to be used as a vehicle for sustainable development, then the processes, instruments and end results all have to be realigned to be humane. This is different from the notion of human development that emphasizes efficiency, empowerment, participation and equity—which are necessary but insufficient conditions for humane development.

Specifically, if freer trade is to be an instrument for humane development, then participation and democratization of negotiations on trade in services must be a precondition, with due respect for systems of local governance, local priorities and local innovation. It is obvious that unequal capacity to negotiate cannot ensure a fair and efficient outcome. Because trade in services can often affect basic human necessities such as water, it is critical that prior to negotiations on free trade in services, careful and transparent assessments of the potential impacts of liberalization be conducted and broad structured participation be ensured—or even mandated, if the North are to practice the good governance they preach.

Importantly, communities and consumers of environmental services—particularly the poorest and most vulnerable communities—must be allowed to use maximum flexible safeguards to protect their long term interests in the process of implementation. Moreover, domestic capacity needs to be enhanced to adequately implement commitments. Otherwise, developing countries may become victims of their own naïve, honest, but poorly informed negotiating positions.

The final text of a negotiation, however, is not the sole indication of freer services trade. The consequences of an agreement are the true test of the value of free trade—that is, the extent to which weaker parties stand to lose or gain from an unequal balance of power in the negotiating process. Equally important are how injuries are redressed and win-win expectations actually realized. Given that the distribution of benefits may not be fairly and justly managed, it is also crucial that a redistribution of benefits is dealt with as an integral part of the final package of the trade negotiations. Otherwise, freer trade will not succeed in serving the objectives of sustainable development, and might even work against such a goal.

While all of this is true for most trade negotiations, it may be most true for negotiations related to trade in environmental services. This is because such services are often the foundation of the most basic human needs, and bring large multinational corporations face-to-face with poor and vulnerable population groups in the most unequal negotiations. The poor can often have the most to lose from such negotiations, and it is their interests that must be protected above all else.

Sitanon Jesdapipat, from Thailand, is a Technical Advisor for the Red Cross/Red Crescent Climate Centre in the Netherlands.