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Accounts differ, but it is probably right to say that there are between 63,000 and 77,000 transnational corporations (TNCs) driving today's global economy. TNCs’ presence and influence are felt everywhere from New York to Bangalore to Nairobi, by people in all walks of life, by wealthy shareholders and assembly-line workers earning the minimum wage. TNCs dominate world production, foreign direct investment (FDI) and international distribution networks. Their assets and revenues are sometimes compared (usually incorrectly) with small nations’ gross domestic product (GDP). Such comparisons are utterly misleading because those making them usually confuse the gross sales of the companies with countries’ GDP.
Transnationals are praised by those who maintain that they are efficient at creating new employment opportunities in developing countries and at serving as the link between local businesses and overseas markets that these businesses might not otherwise access, and that they are an important source of technology transfer to host countries. TNCs are also the principal targets of anti-globalisation critics. Some argue that TNCs are associated with environmental degradation, abuse of labour rights and exploitatively low wages, and that their activities are damaging to the prospects for sustainable growth in poorer regions of the world. We have all seen the sweatshop accusations by critics of TNCs. In China, TNCs have contributed to the huge FDI flows that have powered the economy at a white-hot rate of growth, but some economists argue that manufacturing in China is a modern example of immiserising growth.
This book explores the complex relationship between international trade and poverty reduction through a combination of research papers and contemporary case studies. Written mainly by developing-country authors in consultation with local businesses and communities, the case studies contribute to our understanding of the ways in which low-income communities are dealing with trade as a practical challenge, especially in the Asia-Pacific region where approximately two-thirds of the world's poor live. While making it clear that there is no 'one size fits all' formula, the research and stories highlight a number of necessary preconditions, such as political commitment and cooperation at all levels, if trade is to successfully reduce poverty. Openness to trade, serious commitment to domestic reform, trade-related capacity building, a robust and responsible private sector and access to the markets of developed countries are all identified as powerful tools for building trade-related sustainable development.
The Uruguay Round agreements that established the World Trade Organization (WTO) and the rules-based system as a single undertaking represented a quantum leap forward in the history of the General Agreement on Tariffs and Trade (GATT) and the WTO. It was an immensely complicated undertaking to simultaneously negotiate and reach agreement in such complex areas as intellectual property protection, designing a workable approach to governing trade in services, developing an agreed approach to measuring support to agriculture and disciplining trade-distorting investment measures. It was also not a simple task to elaborate the structure of the WTO as an institution. Of course, the crowing jewel was the new understanding on dispute settlement which, over the past ten years, has proven to be the most effective system of international dispute settlement the world has ever seen. With all of that on the table, in additional to more traditional market access and trade regulation issues, no one was surprised that the Uruguay Round took an extra three years to conclude and that the subsequent implementation of the many different agreements has sometimes presented special problems to the Members of the WTO.
I begin my discussion of major issues in the Doha Development Agenda negotiations with this brief recollection of the Uruguay Round in order to drive home a very important point at the start of this chapter. The Doha negotiations are very different from the Uruguay Round. This is a market access round, not a round involving the introduction and elaboration of complex new rules like the last round.
In 2004 Mauritius, a small island state located thousands of kilometres from its major markets, was facing two major challenges: the probable erosion of preferential treatment for its main export product (sugar) and a serious disruption to its textile and apparel industry, as a result of the impending expiration of the global restraint system that encouraged producers to seek out locations that could benefit from marginal quota allocations. In addition to the likelihood of less favourable access for sugar in the European Communities (EC), the Mauritian sugar industry faced the prospect of stiff competition in the future from Brazil and new-to-market entrants benefiting from the EC's ‘Everything but Arms’ (EBA) initiatives.
Many of the island nation's problems could have been anticipated at the time it underwent a WTO trade policy review in 2001. Paragraph 20 of theWTOSecretariat's Executive Summary put the situation well at that time:
Mauritius' participation in the multilateral trading system and in various regional agreements reflects its interests as a small, export-oriented economy with advantages in a few products, sugar, textiles and clothing in particular. As part of its economic success is due to preferential market access granted by major trading partners, Mauritius is taking steps to adjust to changes in this international environment.
Notwithstanding its considerable geographic disadvantage and the shocks sustained by the traditional pillars ofits economy, Mauritius is a success story. The degree of success achieved is particularly evident when this country is compared to other island states with similar resource limitations.
This 2005 compilation of 45 case studies documents disparate experiences among economies in addressing the challenges of participating in the WTO. It demonstrates that success or failure is strongly influenced by how governments and private sector stakeholders organise themselves at home. The contributors, mainly from developing countries, give examples of participation with lessons for others. They show that when the system is accessed and employed effectively, it can serve the interests of poor and rich countries alike. However, a failure to communicate among interested parties at home often contributes to negative outcomes on the international front. Above all, these case studies demonstrate that the WTO creates a framework within which sovereign decision-making can unleash important opportunities or undermine the potential benefits flowing from a rules-based international environment that promotes open trade.
This case study of Fiji explores the way in which its government and people are preparing to deal with the expected end of preferential trading relationships, and is based largely on interviews conducted in Fiji over several days in August 2004. In March 1997 the WTO Secretariat published its report of Fiji's first review under the Trade Policy Review Mechanism (TPRM). Paragraph 37 of the report's summary observations provides a good starting point for the current study. It reads, in part:
Fiji's economy depends heavily on sugar, tourism and clothing. The need to lessen the dependence on the sugar industry may become more urgent as Fiji's preferential status in its sugar export markets is eroded in the long term. Similarly, the clothing sector, also facing an erosion of preferential access, could require efficiency gains to remain competitive. Diversification of the economy will, however, require attention to the problem of shortages of professional and technical personnel that have resulted from the high rates of emigration over the past decade.
What has happened in Fiji since 1997 to facilitate diversification of the economy away from reliance on preference-dependent sectors and what policies and strategies are being pursued to this end? Can this small island nation adapt its workforce and economy to cope with the challenges of the early twenty-first century? Fiji's successful adaptation to change would be important to both the country and the region, while failure would probably have grave consequences.