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The Threat of a Cold Trade War and the Developing Countries

1991; Johns Hopkins University Press; Volume: 11; Issue: 2 Linguagem: Inglês

10.1353/sais.1991.0028

1946-4444

Carlos A. Primo Braga,

International Development and Aid

THE THREAT OF A COLD _ TRADE WAR AND THE DEVELOPING COUNTRIES Carlos Alberto Primo Braga T,he concept of a "New World Order" has received a lot of attention lately, particularly in the context of rationalizing Western military intervention in the Persian Gulf. Although the exact definition of the concept remains an open question, the conventional interpretation is that it signifies a world order based on the rule of law, as specified in multilateral agreements, in which aggressive unilateral action is effectively curbed. Ironically, at the very moment that concern for international law seems to have ascended to the highest rank of the industrialized world's political agenda, the Uruguay Round ofthe General Agreement on Tariffs and Trade (GATT) is once more in trouble. The negotiations stalled in Brussels last December, mainly because ofdisagreements with respect to the pace and format of agricultural reform. After tortuous talks, a compromise solution was reached and the decision to continue the round was officially announced on February 26, 1991. CA. Primo Braga is an assistant professor of economics at the University of Sao Paulo and a senior researcher at the Fundacao Instituto de Pesquisas Económicas, Sao Paulo, Brazil. Since 1988, he has also been a visiting professor at SAIS. The author would like to thank Megan Bowman and Todd Eisenstadt for comments. The views and interpretations in this paper are those of the author. 53 54 SAISREVIEW Yet, concern for the fate of the multilateral trade system remains as valid as ever.1 The GATT contracting-parties will remain engaged in tough negotiations in the months ahead. And the possibility of a "cold trade war" is quite real at this point in time. In other words, threats of unilateral action and the search for minilateral, discriminatory trade agreements—instead of respect for GATT disciplines—will be the main forces shaping international trade relations in the near future. Accordingly , the economic foundations for the "New World Order" seem to be shaky at best. For developing countries, the implications of a cold trade war are particularly disturbing.2 These are the countries in the worst position to exercise power-diplomacy—i.e., to negotiate while maintaining a credible threat of applying unilateral measures—in any sphere of international relations. In addition, most of them will be excluded from the most dynamic emerging trading blocs. Yet, one cannot help but wonder: From a developing country perspective, is the GATT system worth defending? Developing Countries and the GATT3 The history ofdeveloping countries' role in the GATT legal system has already been told many times. The quest for an open and nondiscrimina1 .As J.H. Jackson has pointed out, one can envision a multilateral trade system that does not rely on the mosWavored-nation (MFN) principle or on GATT as an international agreement. Nonetheless, in this paper I will be using the expression multilateral system as synonymous with the GATT system. Minilateral arrangements, in turn, refer to regional or other non-multilateral trade agreements—e.g., bilateral treaties—which do entail discriminatory trade preferences. See J.H. Jackson, "Multilateral and Bilateral Negotiating Approaches for the Conduct of U.S. Trade Policies," in R.M. Stern, ed., U.S. Trade Policies in a Changing World Economy (Cambridge, MA: The MIT Press, 1987). 2.For the sake of simplicity, I will be using the expression "developing countries" without going into the numerous subdivisions that such a broad category harbors. This should by no means be interpreted as a suggestion that developing countries form a coherent coalition with respect to GATT issues. Although countries like Brazil and India have attempted to organize such a coalition in several circumstances, the heterogeneity of the countries involved has always limited its consistency. 3.This section relies extensively on CA. Primo Braga and G.M. Vasconcellos, "Agricultural Trade, the GATT, and LDCs," in D. Greenaway, ed., Global Protectionism (New York: Macmillan, 1991), forthcoming; CA. Primo Braga, "Brazil," in P.A. Messerlin and K.P. Sauvant, eds.,7%e Uruguay Round: Services in the World Economy (Washington, D.C: The World Bank and UNCTC, 1990). One of the best historical analyses is provided in R.E. Hudec, Developing Countries in the GATT Legal System...