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Robert Wade

21 Feb 2017Personal Essays

Third World is a term originally used to distinguish nations that neither aligned with the West nor with the East during the Cold War, including also many members of the Non-Aligned Movement. Today, however, the term is used to denote nations with common characteristics, such as poverty, high birth rates, and economic dependence on the advanced countries (Third World: definitions and descriptions).

Because the economies of underdeveloped countries have been geared to the needs of industrialized countries, they are involved only in a few modern economic activities, such as mining or the cultivation of plantation crops. Monitoring over these activities has often remained in the hands of industrially developed foreign firms. Nevertheless, these countries play significant role within the framework of international relations. The Bandung conference, in 1955 was the beginning of the political emergence of the Third World. This conference was a logical completion of the process of decolonization. Thus, with increasing importance the problem of the future of the developing countries became the focus of a permanent, although essentially academic, debate. Despite that debate, the unity of the third world remains hypothetical, expressed mainly from the platforms of international conferences. The striking interest to the countries of the third world is in that immense potential those countries have.

A person that paid great attention to the developing countries is Professor of Political Economy and Development Robert Hunter Wade. Mainly, he is interested in how to improve the development prospects of developing countries in today's world under the strong impact of globalization. He focuses on the problem of the role of these countries and especially within the international system of rules, regimes, and organizations, which bear upon their development prospects. Consequently, Professor Robert Hunter Wade involves in his research the problem concerning economic growth, income distribution, and poverty, the working of international capital markets and their propensity to crisis, international environmental politics, the possibilities of national industrial and technology policies. He closely investigates East Asian development, the ideas and inner workings of the World Bank, the IMF and the WTO, the role and place of developing countries within international organizations.

After numerous integration and globalization processes the world now is experiencing a surge of international set of laws aimed at limiting the development policy opportunities of developing countries governments. Due to these processes the world is becoming narrower. “Of the three big agreements coming out of the Uruguay Round – on investment measures (TRIMS), trade in services (GATS), and intellectual property rights (TRIPS) – the first two limit the authority of developing country governments to confine the choices of companies operating or hoping to operate in their territory, while the third requires the governments to enforce precise property rights of foreign (generally Western) firms in the face of ‘theft’ by domestic firms. Together the agreements make comprehensively illegal many of the industrial policy instruments used in the successful East Asian developers to promote their own firms, industries and technological capacities. They are likely to lock in the position of Western countries at the top of the world hierarchy of wealth” (Robert Wade, 2003).

Within this research paper it is important to outline some very essential facts about the “shrinking” of the “development space”, to analyze the role of the World Trade Organization in this process. Now it is very significant for analysts to learn what strategies are viable for developing countries today.

According to Robert Wade international organizations are in power to formulate, proliferate and enforce regulations that lead to the situation when developing countries are being more tightly constrained in their national development strategies. “These regulations are not about limiting companies’ options. To a certain extent, they are about limiting the options of developing country governments to hold back the options of companies operating or hoping to operate within their borders” (Robert Wade, 2003). In consequence, these new regulations are intended to widen the range of the opportunities of foreign firms to penetrate markets of the developing countries, with fewer restrictions and obligations. In fact, it is somehow the meddling into the national policies of the third world countries. Here we see the allusion to the term “shrinking of development space” and are bound to agree with the Professor, for it is difficult to argue with real facts.

Today the countries of the Third World form a potential resource of raw materials and convenient and beneficial markets where Western countries meet no competition.
The process of issuing proliferation of international market-opening and technology-rent-protecting regulations is exceptionally profitable for developed countries under the auspices of the United States of America. But intrusion within economies and policies of developing countries should become a legitimized method. Guiding by that necessity this interference was framed in the shape of international treaties and bilateral agreements with assistance of few economic organizations (Power politics in the WTO, 2002).

As we all know, the process of globalization is weakening the power of states to regulate. “The net result is that the ‘development space’ for diversification and upgrading policies in developing countries is being shrunk behind the rhetorical commitment to universal liberalization and privatisation” (Robert Wade, 2003). The real meaning of the term of “shrinking” is that by those regulations that are being written within the bilateral and multilateral agreements prevent the third world countries from forming their independent national economies and policies, in fact they are barred from development and still tottering on the same level of advancement in terms of acquiring new industrial and technology policies. Developing countries even faced the problem of exporting their goods, for tariffs outlined by industrially developed countries are rocketing incredibly. “All this constitutes shrinkage not only of development space, but also of “self-determination” space. It ties the hands of developing country governments “forever” (Robert Wade, 2003). What is it if not violating the freedom of the country and infringing of all possible rights?

Proving his words Professor Robert Hunter Wade gives an example of how successfully developed countries systematically tip the battling field against developing countries by means of different economic international agreements. In evidence thereof he proposes to research three international agreements TRIPS, TRIMS and GATS. He also states “globalization erodes the insulation of the North from the responses to poverty, inequality and subordination in the South – including migration, imploding states, civil wars, religious fundamentalism, and destruction of symbols of the structure of domination” (Robert Wade, 2003).

Generally speaking, the WTO’s TRIPS Agreement is an attempt to narrow the gaps in the way the rights are protected around the world, and to bring them under common international rules. It establishes minimum levels of protection that each government has to give to the intellectual property. It covers protection of trademarks, copyrights, industrial designs, and data secrets. From the first sight this agreement seems innocent enough. Under patents, all it does is to oblige WTO members to set up minimum standards for intellectual property protection, and it provides an argument resolution and enforcement mechanism. The minimum standards embrace: limits on states’ abilities to deny patents to certain types of products and limits on states’ flexibility in the use of technologies or products patented in their territory, including states’ ability to insist on compulsory licensing. In other words we see that this agreement handicaps developing countries through both economic and political mechanisms. There are too many vague and unclear things. Either developing or developed countries have certain obligations that should be followed.

Theoretically, in case of failing to meet these obligations both sides may be taken to the dispute settlement mechanism of the WTO. But the agreement gives no recourse as for the neglecting of the obligations from the side of developed countries. There was not a case that developing country has taken a developed country to the dispute settlement mechanism for not following all the obligations presented and consented in the agreement. It happens mostly because to start a case will cost a lot for a poor country. Again we see the example of hopeless position of the developing countries. Even existing international organizations that are called to protect rights and freedoms maintain inert regarding this situation.

Another agreement represented by Professor Robert Wade is The Agreement on Trade-Related Investment Measures and applies only to measures that affect trade in goods. This agreement limits the development space of developing countries even more than the previous one, for it covers a broader range of economic activity. Recognizing that certain investment measures can have trade-restrictive and distorting effects, it states that no Member to the Agreement shall apply a measure that is prohibited by the provisions of GATT. The central point about TRIMS is that it moves trade rules from the principle of “avoid discrimination” between countries to “avoid trade and investment distortions”. It interprets most “performance requirements” on foreign firms as distortions, and bans or seeks to ban them (Robert Wade, 2003).

Again third world countries at a loss, incapable in fact to change the situation. The TRIMS agreement outlaws performance requirements concerning local content, trade balancing, export requirements, and it also bans requirements on public agencies to procure goods from local suppliers. Consequently, a country that strives to impose such requirements can be taken to the Dispute Settlement Mechanism, and will loose the case for sure. In theory the plaintiff (in general it is the US or the EU) has to present evidence that the specific requirement is misrepresented, but in practice, as it is very easy to guess, the US and the EU do not. It is sufficient for them to simply declare that such requirements are misinterpreted by definition. Unfortunately, their assertions generally overcome, for they are leading actors on the international arena.

Using this agreement as an example we come to conclusion that space of developing countries is really “shrinking” the farther the faster. Thus, we cannot deny Professor Robert Wade’s ideas.

The third document Robert Wade decided to include in his work is The General Agreement on Trade in Services (GATS). In theory everything is very decent and logical. The GATS was inspired by such objectives as creating a credible and reliable system of international trade rules, ensuring fair and even-handed treatment of all participants (that is principle of non-discrimination), stimulating economic activity through guaranteed policy bindings, and promoting trade and development through progressive liberalization. The articles of the agreement in fact are a list of ways in which governments should not meddle in the market, should not place obstacles in the way of service trade between countries, and should not regulate the behaviour of multinational corporations operating in their country.

Frankly speaking GATS agreement is interfering even further into internal economy than two previous. It makes it almost impossible for a third world countries to shield and protect their national industries from strong competition with solid foreign companies. The former will lose for sure. In evidence thereof, it is necessary to give an explicit example from Robert Wade “For example, GATS requires “most favoured nation” treatment, such that a government must treat firms from all WTO members equally. GATS also requires “national treatment”, such that all foreign service providers must be treated at least as well as domestic firms. They cannot be required to use domestic suppliers, managers or staff, unless local firms are under the same requirement. In addition, GATS requires “market access”, which prevents a government from putting a limit on the number of service suppliers or outlets and on where they operate. All this in the name of fairness” (Robert Wade, 2003). Moreover, as for the guaranteed benefits for developing countries they certainly will remain on paper.

Proceeding we should analyze whether agreements on the whole are bad for development. Professor points out that there are at least two reasons that represents negative impact of the agreements on the development. One reason is that very often most agreements are vague at points where this imprecision benefits the developed countries, and very accurate at points where precision works against developing countries. Ambiguity allows the developed countries to move up the level of threat to developing countries.

“The second reason concerns the gulf between the agreements’ constraints on public policies in developing countries and the public policies adopted by the successful developers” (Robert Wade, 2003). Almost all industrially developed countries experienced a transitional period protectionist policy before reaching political and economic power and independence. Such industrial countries as United Kingdom, Germany, the United States of America, and even Japan that was protectionist for most of the twentieth century right up to the 1970s. Moreover, none of these countries came close to matching our criteria for “democracy” till the late stages of their catch ups.

As for measures that would be constructive to undertake in order to improve the position of the third world countries within the international arena it is very easy to say that the international economic regime must be changed radically and developing countries should be given … but the politics is very complicated thing. The problem is that there is an enormous pressure from the US and some other developed countries either on the third world countries or on the whole international system. On the other hand, developing country governments are not cooperating closely enough to put forward the draft of necessary changes. They negotiate for better market access as an end in itself, not for “development space”.

And now when the world becomes smaller WTO has come to affect crucial aspects of people’s lives around the world, we should work right now to make it more open. At present the talks to create new trade agreements are obscure, and disputes about existing rules are mostly resolved in secret. Speaking about the third world countries we may claim that their governments are often left out of the horse-trading sessions. The world society and governments of the developing countries in particular should press the WTO to reduce the current ambiguity of the important international agreements, which serve to the advantage of the developed countries.

There is a big place for a great improvement and advancement af for the countries of the third world. There still remain a lot of urgent problems that are so vital to resolve. Possibly from the beginning a clear system of operating rules will help to create a slight balance between the developing countries and the industrially developed world. Nevertheless it would take much time to stable the situation. Developed countries should lessen the pressure on the countries of the third world and give them a minimal freedom for national development. Fro the governments of the developing countries it is essential to combine their efforts in the struggle for equity. These governments are to have the right of voice within their domestic territories; they have to institute negotiating committees on different questions.

As Professor Robert Wade says that only economic crisis is likely to bring radical changes to the current economic system that is possible in future to prevent “shrinking” of developing space. Nevertheless, minute changes are probable even outside of crisis circumstances, produced by some mixture of global social movements of NGOs, communities of scholars rethinking development strategies, and developing country governments pushing quietly ahead to promoting new activities.

Some little changes should take place also within the multilateral economic organizations in terms of creating of friendly environment, relation to the countries of the third world as a independent unit. The urgent issue is that it is important to construct principally new concept regarding developing countries, to legitimise expanded ‘special and differential treatment’ for developing countries, to give new and real meaning to the principles of reciprocity’, ‘national treatment’ and ‘international best practice’. Both sides should be responsible for adhering trading commitments fixed within economic agreements in order to keep alive a principle of “national protection”. It would be constructive to cite here Professor Robert Wade “More specifically, the rules of the international economic regime should allow developing countries to speed up import replacement by means of tariffs and subsidies. The rules should allow developing countries to give less scope for intellectual property protection than the current TRIPS standards, and assistance in enforcing those lower standards.

Developing countries should have the right to discriminate against patent rights when – after an appropriate period of years – the product is not locally produced. This is a key to import replacement, which is a key to industrial transformation” (Robert Wade, 2003).

Speaking about international organizations we note that such institute as WTO need to be a subject to much closer inspection by NGO’s. All in all, these positive changes would give more space for different forms of nationwide capitalisms to prosper, with the international framework designed to make best use of international economic stability rather than at utmost free movement of goods and capital.

One more remedy to my mind to prevent “shrinking” of the developing space is integration. But under this term we imply not national but integration into the world economy. We may claim that integration is always good for development. It would give a chance for developing countries to become more independent and provide them with opportunity of fester economic growth. Professor Wade speaks about two types of integration, ‘external integration’ and ‘internal integration’ (or articulation) that should not be mixed up. Moreover, development of domestic economy deals with internal integration.

To Professor’s point of view, an internally integrated economy has a well-established inner structure. Domestic production is well connected to domestic consumption; democratic regimes have an opportunity to prosper. Therefore, the key question for developing countries is to learn how to establish more articulated economy. Professor explains that “to put the same point in more familiar terms, today’s development theory assumes that the principle of comparative advantage – specialization between countries in line with the location preferences of firms in free and competitive markets – should be the principle of development policy” (Robert Wade, 2003).

Thus, having researched a question about the phenomenon of “shrinking” the development space we should determine the credibility of this fact. It seems to me that it is very difficult to doubt, fro too many fact are speaking in support of the statement of Professor Wade. After examination of numerous examples not a mark of scruple should remain and we are bound to agree with the theory of Professor Robert Wade about “shrinking” of development space.

Reference:

  • Third World: definitions and descriptions, http://www.thirdworldtraveler.com/General/ThirdWorld_def.html.(Last accesed 23.10.2005)
  • Professor Robert Wade. http://www.lse.ac.uk/people/[email protected]/, (Last accessed 24.10.2005)
  • Robert Hunter Wade, 2003. “What strategies are viable for developing countries today? The World Trade Organization and the shrinking of development space”. Crisis States Programme. Working papers no.1.
  • For an account of the dominance of the G7 (Group of Seven) states inside the WTO see Aileen Kwa, ‘Power politics in the WTO’, Focus on the Global South, Chulalongkorn University, Bangkok, November 2002.

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