In what way is Susan Strange’s notion of “structural power” evident in the current multilateral trade negotiations?
Ragnhild Hoel • Kristin Skagen • Louise
Moe • Olav Aardal • Daniel Alvarenga
The Doha round was expected to be concluded in 2004. Fast forwarding three years into 2007 the endeavour carries on. Right at the start, rich countries rhetorically committed themselves to abolish one of the major obstacles to the development of LDCs (Least Developed Countries) and ODCs (Other Developing Countries) - the presence of extensive direct and indirect mechanisms of trade distortion disfavouring the developing world. These distortions were pushed through by tough bargaining by rich countries and sometimes seem like the status quo, they have however been slowly challenged as of late. Adapting Strange’s (2004:24-25) conceptualization of structural power, the ideological, economic and technical power to “shape and determine the structures of the global political economy within which other states, their political institutions, their scientists and other professional people have to operate” is today being dispersed. Developed nations were indeed the prime movers behind global trade but developing nations and particularly the emerging markets of the BRICS (Brazil, Russia, India, China, South Africa) no longer stand back and limit themselves to playing the “amendment game” at the table of trade negotiations. The result has, up until 2007, been little more than “stalemate” in Qatar although small development-victories have slowly been achieved recently.
The aim of this paper is to analyze the global political economy of the current multilateral trade negotiations, using Strange’s notion of structural power. We start out by looking at the way in which structural power works, before briefly analyzing the Doha round and the theoretical debate over if there has been a shift in the distribution of structural power in the architecture of international trade. In order to focus the scope of our reflection we will not look at the pillar of trade in agriculture, an important but already extensively explored one. Instead we finalize our piece with how structural power is present in the dimensions of Trade Related Intellectual Property Rights and Services (TRIPS) and Trade in Services of the current negotiations.
Controlling Beliefs – What is Structural power?
Quite different from a direct and visible form of power-exercise, structural power works through shaping the framework within which states interact with each other. Structural power is hence not about the explicit use of force, but rather about the ability to set the agenda. The state, or group of states, who posses structural power, have control of the political agenda, and thereby substantial control of what issues will be objects of political debates and decision making (Strange 2004).
A shift in structural power on a global scale can be identified, as the developing countries have grown stronger and become more visible on the international arena since the 1990s. The developing world was not meaningfully involved in multilateral trade negotiations before the launch of the Uruguay Round and the creation of the World Trade Organization (WTO). At this point the markets of the larger developing countries had gained enough significance for the developed world, and they were therefore brought into the negotiations (Mattoo & Subramanian 2004; Drapner & Sally 2005).
In the aftermath of the Uruguay round, the WTO was criticized for harming the interests of the developing world, and it is against this backdrop that the Doha round must be understood. The declaration of the Doha round as a developmental round was a way of nurturing public relations (Jwara & Kwa 2003). This is in line with Strange’s understanding of structural power as primarily concerned with setting the agenda (Strange 2004), since the ability to do so necessarily rest upon a basis of ideological support. It is questionable, however, to what extent the agenda of the Doha round is in fact developmental, and also, how fundamental and overarching the changes in structural power between north and south are.
The Doha round and its backdrop
Before a round of multilateral trade negotiations starts, there must be a meeting of delegates from all WTO countries who discuss the agenda of the forthcoming round. The Seattle Ministerial Meeting commenced in December 1999, and was intended to launch a new round of WTO negotiations. This intention did not materialize, due to a number of important factors. Even before the meeting started, conflicting interests of various WTO members led to heated debate over the selection of a new WTO director general. Insufficient attention was hence given to the normal preparations, leading to a bad starting point for ensuring a successful meeting (Winham 2005).
Another crucial factor that contributed to the failure in Seattle was the continued use of ‘Green Room’ discussions. As the developing countries had begun to participate more actively in WTO talks, the organisation adopted the so-called ‘concentric circles model’. This meant that once the number of participants in a meeting exceeded a certain number, the efficiency level of the group would start plummeting. Instead, an ‘inner circle’ of members would be chosen to discuss, debate and negotiate the different issues. Once again the powerful developed countries were involved with a few of the middle-sized and large developing countries, and the rest were left frustrated (Blackhurst 2000).
By 1999 India and Brazil, traditional leaders among the developing countries, including South Africa, Nigeria and Egypt were starting to push through their agenda. They were participants in the ‘Green Room’ discussions. However, they were all middle-sized developing countries, and their interests were in some respects very different from the smaller developing economies. The United States (US) and the European Union (EU) also had disagreements and combined with organisational faults, insufficiencies and differences, an agreement in Seattle proved impossible (Page 2001).
The meeting that was to launch the Doha Round started in November 2001. The agenda was pre-negotiated and well prepared. Particularly important issues were: agriculture; implementation and execution of previously agreed upon policies; and the growing concern for easier and cheaper access to medicines needed to combat diseases in poorer countries – especially HIV/AIDS. Developing countries feared that the TRIPS agreement, backed especially by the major pharmaceutical companies and the US, would prevent such access (Jwara & Kwa 2003).
Throughout the meeting, language proved to be a major barrier. English was the conference language, despite French and Spanish also being official WTO languages. Interpretation facilities were confined to the big conference rooms only, while it was in the smaller rooms that the real action took place. Six facilitators had been chosen to deal with issues that required intensive discussion in the smaller rooms. Delegates from most developing countries saw this as the revival of the green room process. In addition there were too many meetings, and it was not clear where these were held and who was being consulted on what basis (Jwara & Kwa 2003).
The US and the EU promoted a set of ‘new issues’, such as transparency in government procurement and trade facilitation. Most of the developing countries rejected negotiation on ‘new issues’, and saw flexibility within the TRIPS agreement as far more crucial. However, the date for an agreement on the TRIPS issue was extended to 2016. An agreement outphasing all forms of agricultural export subsidies was eventually reached, although including the words “without prejudging the outcome of the negotiations”, otherwise no deal would have been achieved (Jwara & Kwa 2003:103). Many of the most crucial decisions were made in the absence of several developing countries’ ministers, as negotiations went into over-time, and not everyone was able to reschedule their flights. A green room meeting was finally held, where only the most influential actors participated. Eventually a conference document was accepted by all, although by some more willingly than others (Jwara & Kwa 2003).
The first meeting of the Doha round was held in Cancun, Mexico, in 2003. The four key areas for negotiations were agriculture, industrial goods, trade in services, and updated customs codes. However, a bloc of developing nations led by Brazil and supported by China, which became known as G-22, managed to bring the conference to a halt after five days. This was due to agricultural disputes and disagreement concerning the ‘new issues’, representing an important step for developing countries, even though the poorest countries continued to have little influence (Peterson 2003). The second meeting was held in Hong Kong in December 2005. Hong Kong was to reverse the process of a widening gap between rich and poor countries, by giving developing countries real access to rich countries’ markets for agricultural goods and industrial products. However, the deadline for the elimination of export subsidies was only set to 2013 (Halle & Mann 2006).
New Players - Old Rules
While it is true that a change towards a stronger role of the developing world has taken place, it is equally true that structural power inequality between the developed world and the developing world remains significant, while inequalities between the ‘developing countries’ furthermore are increasing (Alden & Vieira 2005). Moreover, in order to understand the differences in structural power on a global scale, one cannot understand the developing world as one category. While India, China, Brazil and South Africa have gained significantly more power in international trade negotiations, a large number of WTO members are small and very poor, and therefore structurally disadvantaged (Mattoo & Subramanian 2004). Robert Cox, writing in 1981, proposed the possibility of a Third World coalition, as a counterbalance to the core country hegemony. Such counter hegemony would according to Cox “consist of a coherent view of an alternative world order, backed by concentration of power sufficient to maintain a challenge to core countries” (Cox in Alden & Vieira 2005:1090). While it is clear that the clique of the hegemons of “Southern” countries pursuing strategic cooperation is challenging the positions of the leading states of the “North” (Alden & Vieira 2005), it is, however, less clear if this challenge is associated with a ‘coherent view of an alternative world order’.
Alden & Vieira (2005) hold that the creation of a ‘trilateralist’ diplomatic partnership, between the three middle-income countries South Africa, Brazil and India, reflects an important increase of the power of the developing world in the time of globalization, as does the booming Chinese economy, and the Chinese involvement in Africa (Alden & Viera 2005; Alden 2005). However, the uneven record of cooperation between countries in the “South” and the increasing economic inequality and diversity between ‘developing countries’, indicates that we may have witnessed a restructuring of power on a global scale, but substantial differences in structural power are persisting (Alden & Vieira 2005). According to Rodrik (2001:7), part of the reason for this is to be found in the very structures of the WTO, which favor the developed world –and thereby maintain structurally based power inequalities- since “there is little in the structures of the negotiations to ensure that their outcomes are consistent with developmental goals, let alone that they seek to further development”. In the same vein, we will argue that the increase of power of the larger developing countries has happened within the logic of negotiations in terms of ‘market access’, rather than altering this logic. That is, these changes do not reflect a true change in structural power or in the ‘logic of the game’, but rather show that some of the larger developing economies have gained more resources and are therefore better at playing the old game. Accordingly, Sally & Drapner (2005) define the increased power of the developing countries as a ‘negative’ bargaining one, meaning the ability to obstruct an agreement. Such power is, however, inferior to the positive structural power to control the agenda-setting and shape of the framework within which states interact (Strange 2004).
The fact that countries negotiate market access on a reciprocal basis means that poor countries with small markets are per definition structurally disadvantaged in these negotiations (Mattoo & Subramanian 2004). The WTO is meant to be an arena where negotiations follow certain rules, but as illustrated above, a lot of the work of pushing the agenda of a trade negotiation within the WTO is done between the meetings (Jwara & Kwa 2003). Because of the structural power inequalities, the poorest countries do not become engaged in meaningful international trade negotiations, but rather submit to the requirements of their stronger trading partners, who in return grant them enhanced market access (Jwara & Kwa 2003; Mattoo & Subramanian 2004).
Crudely put, this leaves us with a general picture of the developed countries controlling the agenda. Simultaneously the least developed countries try to reap as much benefits as possible resulting from an agenda which, taken as a whole, is not theirs. As the GATT turned into the WTO, the agenda became much broader, and, according to Bhagwati (2005(a)), issues unrelated to trade were added to the agenda of the WTO. Again, it is significant how these issues are biased towards favouring the developed world, which illustrates the continuous structural power inequalities (Bhagwati 2005(a); Jawara & Kwa 2003).
One example of how rich developed countries are setting the agenda at the cost of the developing countries is the TRIPS agreement. The agreement taken by itself, resulted in a reduction of the welfare of the developing countries (Panagariya 1999). Moreover, Bhagwati (2005(b)) makes the argument that intellectual property does not belong on the WTO agenda, since it only deals with collecting royalties and does not involve trade directly.
Intellectual Property Rights – A story of structural inequality
The TRIPS agreement was created in order to protect intellectual property rights by giving patent holders the sole right to an invention for twenty years, and countries in breach of it may face international trade sanctions. Although TRIPS covers all intellectual property rights, it has been the aspect of pharmaceuticals and other healthcare innovations that has been of particular concern to the developing countries in the Doha round, especially those that are hit the hardest by HIV/AIDS (Lanoszka 2003). Because the TRIPS agreement allow for private owners of inventions/drugs, these owners can charge higher prices which can prevent people from the developing countries from getting potentially life-saving medication (Cahill 2001). To combat this, the TRIPS agreement allows for countries to declare a national emergency and institute what is known as compulsory licensing, which is the right to make a drug without paying royalties to the patent holder. On paper, this seems fair and it could perhaps suggest an acknowledgement by the developed countries of their moral responsibility to make sure life-saving drugs are available and affordable for everyone.
However, many developing countries simply do not have the resources, infrastructure or legal framework necessary to deal effectively with the implementation of the TRIPS agreement and as such find it hard to make those rules work in their favor. Out of the 98 developing countries party to the WTO in 95, 25 did not have any patent laws concerning pharmaceutical products, and out of those that did, 56 of them had patent rights for a much shorter period than the 20 years given by the TRIPS agreement (Braga 1996, in Lanoszka 2003). In addition, most developing countries have historically relied heavily on compulsory licensing to deal with public health issues. Therefore, the inclusion of the TRIPS agreement into the WTO meant that many developing countries had to amend their existing Intellectual Property Rights (IPRS) legislation or simply draft new laws (Lanoszka 2003). Although this is true also for many developed countries, it presents a particular challenge for the developing countries because the “standards of protection of intellectual property are modeled on western legal practice and are set at a level comparable to those in the developed countries” (Lanoszka 2003:182). There is also a disparity in the level of development and research capabilities between the developed and the developing countries, and as such the TRIPS agreement can be said to contribute to the increase in economic strength of the developed countries (Lanoszka 2003). It can therefore be argued that the TRIPS agreement in itself, by definition, constitutes an example of structural power, and how the developed countries are able to set the rules by which the developing countries must play. The element of structural power concerning the TRIPS agreement that pertains to the Doha round specifically becomes evident upon examining recent actions by the developed countries.
Since the TRIPS agreement was signed, the industrialized nations have attempted to focus attention on primarily securing IPRS for the companies based in their own country, and as a result have largely ignored their obligations to “disseminate technological knowledge to address the developmental objectives of the poorer countries” (Mukerji 2000:53-57, in Lanoszka 03:186). The US, which is the leading advocate in patent holder rights have repeatedly threatened to retaliate against “any trading partner who makes use of the national emergency clause” (Abbott 2005:324). The US also filed complaints in the WTO against both Brazil and Argentina for what they saw as violations of the TRIPS agreement (Lanoszka 2003:186).
Because of international pressure stemming from the increasing severity of the HIV/AIDS situation, together with the ambiguity of the TRIPS agreement concerning compulsory licensing and parallel imports of generic drugs, the Doha Declaration set out a goal to rectify this situation of inaccessibility. The declaration reads “We agree that the TRIPS agreement does not and should not prevent Members from taking measures to protect public health…and to ensure access to medicines for all”. Scholars and commentators have however pointed out that the declaration did not resolve the question of imports of generic medicines for countries that lack manufacturing capabilities (Lanoszka 2003). Although the developed countries along with the pharmaceutical industry publicly supported the declaration, pharmaceutical companies have since lobbied actively in Canada to restrict implementing legislation, and the US has sought to limit the scope of the declaration.In the negations following the declaration, the US has insisted that the text only refers to identified diseases, and not future ones, and that a distinction should be made between infectious and non-infectious diseases (Abbott 2005).
On the face of it developing countries have received more attention, but it could be argued that the declaration serves as little more than lip service, designed to improve the “moral image” of the developed countries. As such the element of structural power is still present.
Trade in Services – An untapped world
Services have been part of multilateral trade negotiations since 2000. By 2004, 30 to 40 per cent of workers in the developing world were employed in the sector. This percentage rises up to 70 in the case of developed countries (UNCTAD 2007). The trend is for services to progressively take over agriculture as the most significant sector of the economy, this is also the case for LDCs and ODCs. Services and knowledge-intensive industries hold the greatest added-value in the value-chains of the current international economic architecture. These industries are complex, capital intensive and demanding for host states but they are also invaluable economic multipliers of the countries competitiveness and in the development of their socio-economic indicators. The centrality of this particular aspect for the developing world is striking (UNCTAD 2007).
Strange’s notion of structural power is evident in the Doha Round trade negotiations of services in several points. First of all any concessions pertaining cuts in farm subsidies were invariably dependent on the opening up of the developing country’s market to industrial products and the services market. The stalemate in the negotiations that followed can be understood as a refusal by parts of the developing world to allow the chronic structural power leverage of the developed countries to once again dominate the outcome of the rules of trade. Being as it is that these countries hold greatest comparative advantage in services sector, it is understandable why it is the case that this is the first dossier they bring into the table in negotiations with “finance insurance, consumer goods, logistics, audits, and legal affairs being the main targets” (Zuming 2007:28). Conversely, restrictions endure on second-tier services pertaining semi-skilled workers in which developing countries could potentially have an advantage vis-à-vis the developed world, such as tourism, construction, professional services and music (Njinkeu & Ogunkola 2002:9).
The implications at stake when trade in services is being discussed must also be understood within the migration-development nexus debate. Even though there are negative consequences of labour migration, such as brain-drain, the positive impact could be substantial for developing countries (Nyberg-Sørensen et al, 2002). Recent reports show that “liberalizing the movement of workers could amount to 156 billion dollars if developed countries increased their quota of workers from the developing world by 3%” (Kategekwa 2006:3). However, political pressures from the installed interests of inward-looking lobby groups, xenophobia and protectionist demagogy together with plain realpolitik from parts of the developed “North” prevents liberalization of labour migration. The structural power leverage of the developed world is again obvious.
Economic diplomacy has indeed fixated in relative gains instead of being replaced by noteworthy structural changes in the rules of the trade game looking for absolute improvement in the world economy while also giving particular attention to the “cries” of LDCs. This can arguably start being done by means of for example: smaller “intelligent” aid packages coordinated with the greater issues of fairer trade rules; easier migration for semi-skilled workers; and minimum standards of technological learning prior to progressive technological liberalization for the developing world. A development-focused liberalization is dependent on concrete expansion of service export opportunities; and improved efficiency and productivity of services sector in LDCs and ODCs through technological learning and not mere knowledge and technology transfer.
We have seen that the developing countries have been awarded more attention in the current multilateral trade negotiations than in the Uruguay round. Developmental issues have been put to the forefront of the agenda, and there has also been an increase in overall awareness of the particular challenges to the implementation of the WTO framework in developing countries. HIV/AIDS has brought the public health aspect of TRIPS to the forefront, resulting in the Doha Declaration seeking to clarify the ambiguity of TRIPS. Furthermore, developing countries seem to take more advantage of the bargaining power provided by consensus-style decision-making in the WTO. There has also been an emergence of south-south coalitions, examplified by the BRICS, slowly counterbalancing the dominance of the North. On the downside, their emergence can bring about new lines of fragmentation within the developing world widening the gaps between those actors that can have a challenging voice at the negotiation table and those that are chronically excluded. Whether the concerns of those left out will be represented by the BRICS and other emerging economies at the table, remains doubtful.
A thorough analysis of the current trade negotiations indicates that the element of structural power inequalities is far from absent. Although the Doha declaration explicitly stated that TRIPS did not exclude countries from taking appropriate steps to secure public health, developed countries have since used their position and influence to limit the scope of the Declaration. Furthermore, developing countries` bargaining power is restricted to negative power, through their ability to block decisions. Positive bargaining power, meaning the ability to dictate what is on the bargaining table, lies very much still with developed countries. Thus structural power is reiterated.
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