Many of us thought that the World Trade Organization (WTO) was dead when the world financial and economic crisis demolished the myth of the benefits of free trade regimes, and that the poor of the world could rejoice. But suddenly, by some kind of voodoo trickery, it is back.

Trade liberalization, the WTO promises, will bring benefits to all countries. In reality, rich countries have taken full advantage of the opening of markets in developing countries, while failing to open their own markets. Now the issue is agricultural trade, the most important issue for the poor of the developing world.

At the WTO's Cancun conference in 2003, developing countries were expected to accept a deal whereby, in return for making minor reductions in import tariffs and subsidies, they would be forced to accept a regime of free-flowing investments. The Cancun conference failed mainly because of the combined efforts of India, Brazil and South Africa to stand up against protectionism in developed countries.

• Agriculture: If the proposal for the WTO's recently revived Doha Round of Negotiations is any indication, developing countries would have to cut agricultural tariffs by 36 percent, and even the most important products for poor farmers would face cuts of around 19 percent.

Yet, the proposal does not imply real cuts in the huge U.S. and EU farm subsidies — although both pretend to be set to make cuts to subsidies, of 70 and 80 percent respectively. The current U.S. subsidy totals around $7 billion; a 70 percent cut would cap this at $14.5 billion. Similarly, according to estimates, EU subsides by 2014 will be around 12 billion euro; an 80 percent cut would cap subsidies at 22 billion euro.

Agricultural subsidies to farmers in the United States, European Union and Japan have risen to almost $1 billion a day. Together with other measures such as tariffs and quotas, these subsidies make it difficult for developing countries to compete in rich-country markets. Even more damaging, the subsidies enable agricultural exports from rich countries to drive small farmers out of business.

Developed-country subsidies thus threaten domestic food security while undermining export potential. Developing countries wanted this situation to be addressed before they agreed to another round of negotiations, but their request fell on deaf ears.

• Public Health: Patent rights, which grant temporary monopolies to drug manufacturers, keep drug prices and company profits up. In 1994, the World Health Organization agreement on "trade-related aspects of intellectual property rights" (TRIPS) mandated that member countries bring their laws into compliance with restrictive standards that maximize the rights of patent holders. Developing countries have proposed a clear declaration from the WHO that "nothing in the TRIPS agreement shall prevent members from taking measures to protect public health."

The U.S., Switzerland, and other rich countries have opposed this statement, and have proposed weaker, similar- sounding language in its place.

• Tariffs: In the U.S., the average tariff rate for imports of industrial goods is 4.9 percent with variations up to 350 percent. In Japan, the tariff rate (1998) was 4.3 percent with variations as high as 60 percent. In the EU, the average tariff rate is 4.8 percent with variations up to 89 percent. The variation range is due to specific tariffs on a variety of products that can hide the real degree of protection afforded the rich countries.

Commodities subjected to high tariffs in developed countries tend to be the very products in which poor countries have a comparative advantage. High tariffs against the export of industrial goods from poor countries cover 63 percent of all their export items. High tariff rates against the export of agricultural products from poor countries constitute 97.7 percent of all their agricultural exports. Moreover, tariff rates escalate with the processing of a natural product. Thus the idea that the developed countries have already reduced their tariff rates is a myth.

• Investment flow: Developed countries have initiated a strong campaign for the free flow of investments as a condition for WTO membership. The demand is that all countries allow complete freedom for multinational companies to invest in any sector they choose with complete freedom to withdraw their investments and to remit profits across the border.

Member countries would not have any form of control over exchange or capital flows. Foreign companies would be treated on a par with domestic companies. Domestic subsidies for socially needy industrial sectors would not be allowed as they are considered a hindrance to competition. And host governments would not be allowed to discriminate against foreign companies on government purchases or contracts.

The implication is that foreign investors could conceivably gain control of all natural resources, including agricultural land, and home governments would not be permitted to direct investments to socially desirable sectors or to economically backward regions.

Given these conditions, multinational trade negotiations are bound to fail because of the divergent interests of participating nations.

Therefore, for developing countries, it would be better to have a trade management system in which each country, not only developed ones, pays for its imports with its own currency. In that case, a developed exporting country would be obliged to buy from the country to which it exports. The system would not lead to a massive surplus for one country and a deficit for another, but rather to a balanced trade regime that benefits everyone.

The WTO, instead of being an arbitrator and promoter of "free trade," should be an advisory council for planning such a trade system so as to maximize the interests of everyone.

Dipak R. Basu is professor of international economics at Nagasaki University. E-mail: [email protected]