Comment: GATT treaty and developing countries. (1994, 20 Marks)
The “GATT treaty” of 1994 is the Final Act of the Uruguay Round (1986–94), signed at Marrakesh on 15 April 1994 by ministers from most of the round’s 123 participating governments. It created the WTO from 1 January 1995. Its near-final text was the Draft Final Act that Director-General Arthur Dunkel tabled in December 1991. For developing countries it was the most consequential economic treaty since decolonisation: it extended trade rules into their domestic policy space, in exchange for access long denied to them.
What developing countries gained
- Agriculture inside the rules for the first time. The Agreement on Agriculture disciplined the export subsidies and domestic support of rich members, which had depressed world prices.
- Textiles: the discriminatory Multi-Fibre Arrangement was to be phased out by 1 January 2005, the clearest Southern gain.
- Binding dispute settlement with negative consensus. A small economy could now win against a large one, and Article 23 barred unilateral retaliation such as under Section 301.
- Special and differential treatment: longer transitions (India had until 2005 for pharmaceutical product patents), higher de minimis limits, and LDC exemptions.
- Services under GATS, which later underwrote India’s software exports (Mode 1).
What they conceded
- The “new issues”: TRIPS required 20-year product patents in all fields. That threatened the generic-drug model India’s Patents Act, 1970 had built, and raised fears over seed patents. TRIMS removed local-content requirements from the development toolkit.
- The single undertaking: these could not be refused separately. Rejecting TRIPS meant leaving the whole system and losing GATT rights held since 1947.
- Asymmetric agriculture: the green and blue boxes let the EU and US relabel subsidies rather than cut them. Developing members were confined to de minimis limits and a frozen 1986–88 reference price.
- Thin gains on labour mobility: commitments on Mode 4, the temporary movement of professionals, stayed minimal.
- Standards as barriers: the SPS and TBT agreements imposed testing and certification costs that small exporters of food and textiles could barely meet.
- Loss of policy space: binding tariffs and, after India — Quantitative Restrictions (1999), the end of balance-of-payments cover.
Perspectives
- Liberal economists such as Jagdish Bhagwati welcomed freer goods trade, but held that intellectual property did not belong in a trade treaty.
- Structuralist and dependency critics in the tradition of Raúl Prebisch and Samir Amin saw a reinforced core–periphery division. Ha-Joon Chang’s Kicking Away the Ladder (2002) later argued that the rich had banned the very tools they once used.
- In India the Dunkel Draft provoked farmers’ mobilisations by the Karnataka Rajya Raitha Sangha and Bharatiya Kisan Union, and parliamentary opposition. Former Foreign Secretary Muchkund Dubey called the result An Unequal Treaty (1996), arguing that developing countries yielded to bilateral pressure and abandoned their common positions. The government signed anyway, judging exclusion costlier than adverse terms.
The verdict of hindsight
The outcome was mixed:
- Services, which India had opposed, became its largest gain.
- TRIPS flexibilities (the 2001 Doha Declaration on public health, India’s Section 3(d) applied in Novartis in 2013, compulsory licensing) limited the damage.
- Agricultural asymmetry persists, and the Doha “development round” collapsed.
Conclusion
For most developing countries the 1994 treaty was an unequal but rational bargain. It traded policy autonomy for rule-based protection against the powerful, a trade the weak make because they cannot win by leverage. Its legitimacy for the South depends on the rules binding the strong too, which is why today’s disabled Appellate Body and unilateral tariffs threaten developing members most.