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This paper was written for a class on the International Political Economy of Development.

Question: At the same time as the international trading regime has come to impose greater restrictions on national policy and has become increasingly biased in favour of developed countries, more and more developing countries have sought to join the WTO; and they participate actively inside the organization. Why? What factors explain this paradox?

Paradox of Trade Participation

The latest accessions to the World Trade Organisation, which brought Nepal and Cambodia into the purview of the world's largest trading body, clearly indicate that developing countries are increasingly interested in participating in the global economy. With 148 members and a plethora of new developing countries looking to join, WTO membership is in high demand. However, given realist theories of international relations – that states participate in international organisations out of self-interest, and that such organisations will be tailored to meet the needs of their most powerful members (Abbott and Snidal 1998) – it does not seem obvious that weak, poor, or small states should be scrambling to participate.

The international trade regime has an inherent slant towards developed nations' interests, especially since the Uruguay Round of the General Agreement of Tariffs and Trade. Under the previous rounds of the GATT, many of the most controversial rules were voluntary. However, the Uruguay Round, which created the WTO, brought in the single undertaking, meaning that all signatories to the WTO had to abide by all of the rules and regulations (UNCTAD 2002; UNDP 2003). This commitment required all developing countries to undertake deep integration – making their domestic, behind-the-border regulatory regimes conform more closely to the standards in the developed world – while developed countries promised little of economic interest to the South (Chadha et al 2001). Thus, the WTO has imposed disproportionately large costs on developing countries through restrictions on trade-related investment measures, liberalisation of trade in services, and requirements for stronger protection of intellectual property (UNDP 2003).

In figuring out why developing countries seem to be clamouring to accede to such demands, a careful examination must be made of the benefits of WTO membership and participation. The standard analysis explains that they participate because freer trade is a global public good and the WTO allows them to control opportunism by rich countries, restrain domestic lobbies asking for protection, attain scale economies in their production, reduce global anticompetitive practices, import best-practice institutions, reinforce domestic reforms, and promote democracy (Finger and Winters 1998; Birdsall and Lawrence 1999).

However, when comparing this narrative to the actual situation of developing countries, the supposed benefits of deep integration seem little more than abstractions. A more cogent analysis shows that participation stems from the power, or lack of it, that developing countries have in the global economy. First, this paper will explore South-South trade and how the larger developing countries benefit from the system. Then, a look at the external environment at the time of increasing participation will show that there were large benefits to be gained in exchange for trade-offs that most countries would have been forced to make anyway. Finally, a look into the general incentives for WTO participation will show that it is better to be inside the system and influencing the process than totally excluded or facing negotiation in bilateral arenas.

Non-uniform involvement

The WTO system clearly benefits developed countries, who, for example, have more stringent rules on intellectual property already in place. For countries that already have the most advanced productive capacities, advocating for liberalised trade makes sense because their industries will be at the greatest advantage (Shafaeddin 2000). But the WTO system, through its most-favoured-nation clause, benefits not only the wealthiest countries, but also developing country investors and exporters who enjoy lower tariffs and more liberalised trade.

South-South trade

Manufactures exporter is increasingly a term used to describe many developing countries, as they are now more industrialised than ever. Many developing countries have surpassed the developed countries in terms of the percentage of their GDP devoted to manufacturing, with very few countries not closing the manufacturing gap between 1960 and 1980 (Arrighi et al. 2003). While this may not have led to an increasing share of global value-added in manufacturing, it has meant an increase in the share of manufactures out of total developing country exports (Akyuz 2003).

However, the products of this industrialization trend are not only being exported to high-income countries. With the share of intra-developing country trade out of total global merchandise trade moving from 6.5 percent in 1990 to 10.7 percent by 20011, South-South trade is increasing as developing countries diversify their export markets (WTO 2003). With developing country exports to both the developed and developing world rising, the importance of having consistent and enforceable trade rules has grown for developing countries (Krasner 1999).

With a proliferation of trading partners, the costs of negotiating and monitoring bilateral trade agreements with a large number of countries could be onerous for a developing country with lower administrative capacity. While the volume of South-South trade is increasing, it still is not large enough for either of the partners to have a very strong bargaining position vis-a-vis the other, because for neither party would the other's market be as important as developed country markets. To avoid the high transaction costs of negotiating, an efficient solution would be a multilateral trading system, which grants exporting countries lower tariffs and better market access without the costs associated with repeated bilateral negotiations. This explains some of the enthusiasm for the WTO among developing countries.

However, growth in intra-developing country trade is concentrated in the Asian region. Over 50% of South-South exports come from the top-five developing country exporters: China, Korea, Singapore, Taiwan and Malaysia2 (WTO 2003). South-South trade is matched by a new level in intra-developing country investment, with current estimates showing that over one-third of inward FDI in developing countries originated in other developing countries (Akyut and Ratha 2003). The implication is that certain developing countries benefit more from WTO expansion because their larger stake in the international economy means that the WTO negotiations affect them more than other developing countries. The seeming increase in participation within the WTO may just be that the developing countries with the most at stake have decidedly stepped up their level of activity.

Involvement in negotiations

Quantifying participation is difficult, as metrics for assessing trade delegation activity in Geneva are not available. There are certainly discrepancies in the sizes of missions available to conduct negotiations, with some developing countries having no representation in Geneva, while others, such as Brazil and India, have large, active missions (Michalopoulos 2001; Hoekman and Kostecki 2001). Because negotiations are ongoing, and often conducted in less-than-transparent conditions, it is nearly impossible to objectively assess what level of involvement each country has in the discussions.

One possible measurement to test the level of active involvement is counting the number proposals or communications put forward regarding ongoing negotiations. A close examination of the submissions and proposals between January 1, 2005 and April 10, 2005 shows that only 17.3% of them came from low- or lower-middle-income countries.3 That figure includes giant countries such as India, Brazil and China as well as historically active countries with high trade dependence such as Colombia and Thailand. Excluding those five countries, the record of negotiation participation by countries on the periphery of the global economy drops to a mere 6.2%.

Of course, this figure is not a comprehensive measurement of developing nation participation, but it indicates the lopsided nature of cooperation. In fact, of the proposals and submissions from non-OECD countries classified as either middle income (both upper-middle income and lower-middle income) or low income, 82% of them came from just 5 countries.4 The conclusion is that participation is neither as heavy as indicated by mere accession to the WTO, and that it is widely skewed towards a few developing countries that are heavyweights in the global trade regime.

Uneven DSM usage

Asymmetrical participation by developing countries is also seen when examining use of the WTO's dispute settlement mechanism. While pursuing a case via the DSM, instead of through a negotiated bilateral agreement, may not be the most effective way to settle disputes (Busch and Reinhardt 2003); willingness to use the DSM is another sign of how actively countries are involved in the WTO. Table 1 shows the number of times a request for consultations under the DSM has been filed from a country within the specified income category. OECD countries are the most frequent users of the DSM, though their use of it has declined; while use has increased significantly for countries in the lower-middle- and low-income groups. This points to increased participation by developing countries.

Table 1: Request for consultations at the WTO DSM5

Country Group6




157 (77%)

78 (54.9%)

Non-OECD High Income

2 (1%)

2 (1.4%)

Upper-Middle Income

11 (5.4%)

16 (11.3%)

Lower-Middle Income

24 (11.8%)

36 (25.4%)

Low Income

10 (4.9%)

10 (7%)




However, a deeper look into DSM usage again points to certain countries being the predominant users. As expected, outside the OECD these are generally the largest countries or those with high dependence on manufactured exports. Argentina was responsible for one-third of the disputes from upper-middle-income countries. Likewise, Brazil and Thailand account for 36.7% and 16.7%, respectively, of requests in the lower-middle-income category; and India, with 80% of the filings, is the chief low-income user. So, while more developing countries are resorting to the DSM, the shift resulted from the largest developing countries exploiting the system, and not from smaller countries being very active.

Any observed increase in WTO participation is skewed towards larger, more active developing countries. The participation that has been engendered can be attributed to self-interest, in that these countries, because of their export orientation and stake in the international economy in sectors aside from commodity exports, have much to gain by being involved in the WTO and attempting to influence its direction. Additionally, by reducing the costs associated with negotiating trade agreements with a myriad of smaller trading partners, the lower levels of tariffs under the WTO's MFN clause are very attractive to exporters. Not everything in the WTO is about pitting developing countries against developed country adversaries; a robust, multilateral trade system brings great efficiencies to trade within the Third World, particularly benefiting heavy exporters.

Distress of unilateral liberalisation

While the explanation of developing countries enjoying the benefits of multilateral discipline is compelling, it cannot fully account for their behaviour because it does not address the crucial North-South power struggle. The context of the international economy at the time of increasing participation is particularly important in determining how developing country decisions were influenced, or perhaps forced. The debt crises of the 1980s and 1990s and the concomitant structural adjustment programmes from international financial institutions began forcing trade liberalisation in many developing countries. As the WTO bargain was generally to exchange market access for economic and trade reform, WTO participation for developing countries had significant positive aspects, in terms of exports, but few unique costs as the South was already being forced to reform their markets. Beyond that, those liberalisations increased developing countries' dependence on foreign investment, trade and the global economy, such that the benefits of WTO membership became even more attractive.

Debt crises and structural adjustment

The first debt crisis exploded in 1982 when Mexico declared that it could not make its debt payments. Though a few defaults had already occurred, this is the episode that really triggered the crisis (Shadlen 2004). While default did not directly lead countries to active participation in the WTO, the debt crises planted the seeds of a sea change in the international political economy, helping to trigger the rise of the Washington Consensus and neoliberal economics. Symptomatic of default in developing countries was a foreign currency liquidity crisis, and the natural response was an immediate promotion of exports to earn hard currency (Glover and Tussie 1993). This prompted some unilateral trade liberalisation via shifts to export-oriented economic strategies, adopted to try to stave off default.

More importantly, remedies for debt crises often came in the form of lending from the IFIs for structural adjustment programs, which had strong conditionalities on trade liberalisation (Haggard 1995; Milner 1999). The International Monetary Fund and World Bank loan conditions generally wiped out most industrial policy implements, particularly targeting trade restrictions, state-run enterprises, marketing boards, and African governments (Haggard 1995). This kind of linkage between issues that are not directly related – in this case between trade and the debt crises – is a standard mechanism under which hegemonic powers like the US can get their agendas fulfilled (Martin 1993). The immediate conditions imposed by SAPs were compounded by later provisions under the Brady Plan, which was to supposed to clean up the debt overhang that had engulfed the developing world. That plan further dismantled trade barriers and liberalised trading systems in the swath of developing countries that had been subsumed by the debt crises (Tussie and Woods 2000).

Greater economic integration

With these forced openings of developing country economies, came their integration into the international economy making them even more dependent on trade and investment flows. Foreign direct investment began to be ardently sought, and manufactured export promotion took on new prominence as a way to earn the foreign currency needed to deal with the crushing loads of debt that most of these countries were under (UNCTAD 1999). The simple fallout was that movements in the world trading system and the GATT/WTO regulations became more important to the economies of the South because they had more at stake due to the now broader linkages with developed country economies (Page 2003).

As these financial rumblings were foisting trade liberalisation onto developing countries, bargaining in the Uruguay Round of the GATT negotiations continued (Glover and Tussie 1993). This presented an opportunity for developing countries who were embroiled in debt crises. Under the watchful eyes of the IFIs, they were opening their borders, dropping tariffs and privatising state-owned enterprises. They already had to forgo many of their industrial policy implements, regardless of the Uruguay Round negotiations. In fact, they may even have adopted and internalized the IFIs orthodox views regarding outward orientation and freer markets; sometimes unilaterally going beyond Bank and Fund requirements in opening their economies (Ford 2003) .

The next logical step was to bargain away industrial policy instruments, which they were already forbidden from using, in exchange for better access to developed country markets for manufactured goods and side deals promising progress on textiles and agriculture. So the developing countries bound their previous unilateral concessions in an enforceable international agreement in exchange for valuable market access (Finger and Winters 1998). The developing countries that had unilaterally liberalised their protectionist trade regimes got something for nearly nothing, as their hopes for using TRIMs or IPR to their advantage had already largely dissipated. This goes a long way towards explaining their interest in signing onto the Uruguay Round and joining the WTO.

Paradox or Orthodox?

As alluded to, developing countries may simply have an economic interest in active participation in the WTO, making it more of an orthodox strategy than a paradoxical one. Even if the regime is biased against developing countries, there are few genuine alternatives to the multilateral trade system that are attractive for them. Not only do developing countries directly benefit from market access, but also the consequences of being outside the system are worse than being inside it. A country has little recourse if its large trading partners decide to be protectionist. The only real option is to negotiate bilateral trade agreements. Leaving aside the earlier discussion on high transaction costs, in negotiations with the Quad countries, developing nations are likely to face very difficult bargaining because of their weak structural power. Finally, developing countries are now exercising more influence on the agenda than under GATT, perhaps improving the attitude of the South towards the WTO. Bad agreements are certainly better than a lack of, or bilateral, agreements and the orthodox strategy of the South could be predicted to be greater involvement in the WTO.

Valuable market access

Market access is simply valuable to developing countries. As their economies become more dependent on international trade, the benefits of improved access to the largest markets – the US, Japan, and the European Union – are significant (Akyuz 2003). Market access enjoys high levels of domestic support, notably from exporters, who stand to gain significantly from increased sales. Without WTO privileges on tariff levels and non-tariff barriers, these exporters will be at a significant disadvantage in those markets compared to other WTO-member countries. The incentive of export revenue and stronger local industrial enterprises is large and can easily explain why some countries seek WTO accession.

The option of being outside the WTO is altogether untenable for most countries. With higher tariffs and NTBs their exports will become significantly less competitive, meaning weaker domestic economies. The fate of countries that are not part of the WTO is also telling, with their products facing discrimination. For example, the United States has been embroiled in a trade dispute with Vietnam over the sale of catfish into the US market. Thanks to a catfish producers lobby in the US, first the name “catfish” was disallowed for use on the Vietnamese imports. Then, when that NTB was not sufficient to stop the rising level of imports which threatened domestic producers, the industry sought to have anti-dumping duties and countervailing tariffs put onto the imports (Economist 2002; Sengupta 2003). With such high barriers, the market for Vietnamese catfish in the US has been destroyed, and now similar threats are facing the Vietnamese shrimp industry (Economist 2004). However, as Vietnam is not a WTO member, they can not have the dispute adjudicated by an impartial tribunal, instead having to fight in US courts, no easy task for a small, poor developing nation.

Bilateral nightmares

The Vietnam example is a case in point of what faces countries outside the multilateral trading regime. The US simply ignored Vietnamese complaints about unfair trade practices, entirely brushing aside their concerns (Sengupta 2003). Bilateral trade relations, or indeed bilateral accords of any kind, are fraught with difficulties for the developing country partners.

Most bilateral trade arrangements start off with the signing of a bilateral investment treaty, yet BITs themselves are often invasive agreements forcing commitments by the developing countries to not use industrial policy measures to make FDI more beneficial to the host country (Shadlen 2005). The standard BIT is likely to reduce the overall welfare of the developing country that signs it, yet they continue to do so because of weak bargaining positions and the desire to gain more FDI (Guzman 1997-8). The same seems to be true of bilateral or regional free trade agreements such as NAFTA, which include not only restrictions on investment restrictions, but also requirements for deep integration on intellectual property protections and trade in services (Shadlen 2005).

Free trade agreements are generally not preferred by developing countries because of the deep integration requirements, but they seem to be better than being left out of trade networks (Gruber 2001). This seems to particularly be the case for Mexico in entering NAFTA, as Mexico's “decision to seek a free trade agreement was made freely—the product of voluntary, albeit constrained, choice (Gruber 2001: 722).7 The largest countries have the power to negotiate agreements that benefit them, and the “go-it-alone” power to walk away from negotiations that are not to their benefit. Thus smaller and developing countries end up with bilateral agreements that are heavily weighted against them (Gruber 2001). The problem is compounded by developed country use of trade sanction threats in the bilateral sphere, such as the United States' use of Special 301 to pressure developing countries on intellectual property protections (Sell 1999).

Therefore, multilateral cooperation is seen as much better than the bilateral sphere, where the power discrepancies are much greater (Kahler 1993). This follows standard negotiation theory when examining the likelihood of a certain outcome. The resistance point is defined as the point at which an agreement is no longer beneficial to a country; and it is determined by the costs of an agreement. The resistance point is related to the concept of the best alternative to a negotiated agreement, or batna (Odell 2000). The alternatives to participation in the WTO are either non-engagement with the world economy or trading under bilateral agreements. Neither of those prospects is very appealing, meaning that developing countries have an unattractive batna, and thus a low resistance point in negotiations within the WTO.

Rule-breaking power

Because of their weak bargaining positions and the go-it-alone power of the Quad countries, developing countries do not make the rules of the international trading regime. Yet, over the course of the last two decades they have become more active and more influential in WTO negotiations. Their increasing success in setting the agenda may encourage more developing countries to join and participate actively.

The story of developing countries having more power to break rules, or negotiations, as opposed to just taking them, starts with developed nations' desire to ensure wider compliance (Kahler 1993). Developed countries decided that they would no longer allow developing countries to free-ride on the GATT system as they had in previous rounds because of the increasing share of world trade that was emanating from the South (Rajapatirana 2001). But bringing developing countries on board also meant a shift the Quad countries' resistance points to prevent a mass defection. Thus, the South partially succeeded in using the Uruguay Round to protect their economic interests and put their own issues on the agenda (Jara 1993). This was highlighted in Seattle and Cancún, where developing country coalitions blocked negotiation progress because of insufficient attention to the implementation issues that were of concern to the South (Wolfe 2004). While some critics say that small concessions, for example on the clarification of TRIPs flexibilities, are not victories for developing countries (Bello 2002), they still show that the South is starting to wield more influence, which potentially attracts other countries to participate more actively (Page 2004).


Developing countries are clearly flocking to the WTO, with more than 75% of UN members now signatories, meaning at the most basic level, developing country participation within the WTO is growing. However, membership does not necessarily equate with active participation. Most of the poorest WTO members barely involve themselves in the organization. The most active participants from developing countries are those with very large economies or with high dependence on manufactures export. So, the paradox of participation is already partly solved, because the most active participants are also the ones with the most to gain, even under terms dictated by the Quad. Developing country exporters who have significant trade with and investments in other developing countries, also benefit from deep integration rules that protect their investment and intellectual property. Those protections and the lowered tariffs and removal of NTBs help exporters of all stripes, not just OECD multinational companies.

But how to account for the participation of those developing countries that are not heavy exporters to other developing nations? The historical economic environment was a heavy influence, as many developing countries in the throes of debt crises, particularly those in Latin America and Africa, were forced to unilaterally liberalise their trade regimes. Facing a situation with no reciprocal liberalisation from the developed world otherwise, these developing countries joined the Uruguay Round bargain to get market access in exchange for binding the reforms that had been forced upon them.

Finally, given their relative lack of power in the global economy, developing countries have no viable alternative to the WTO system. Non-membership is hardly an option, given the opportunism of developed-market lobbies and the imbalanced negotiating positions in the bilateral sphere. Indeed, WTO membership could be seen as a defensive strategy to avoid being bullied in the bilateral realm.

While there can be no single causal explanation for why more than 100 developing countries participate in the WTO, a combination of benefit derived, external pressure, and an absence of alternatives can elucidate their actions. These factors seem to be a much more compelling explanation, one that closer matches observed experience, than the theories of leaders wanting to consolidate domestic reforms. While those supposed “benefits” might accrue, they alone are unlikely to provide the necessary motivation for WTO involvement. Generally, the WTO is the least bad option for a developing country looking to have any sort of involvement with the world economy.


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1These figures include intra-EU trade. With EU trade excluded the change from 1990 to 2001 is from 9 percent of the global total to 14 percent, still a large jump. (WTO 2003)

2Many analysts do not label Korea, Taiwan, and Singapore as developing countries because of their high incomes. However, the WTO report considered them as such.

3Author's calculation based on WTO submissions and proposals coded as part of trade negotiations and found via the WTO Documents Online facility ( accessed on April 10, 2005. Income classifications as per World Bank 2004, with middle-income OECD countries included in the OECD category.

4This excludes middle-income OECD countries, namely heavy participants South Korea and Mexico. In the period under consideration the most active countries in the middle- and low-income group were Chile, Costa Rica, Colombia, Thailand, and Brazil, who filed 41 of the 50 documents from nations in those categories.

5Author's calculations based on comprehensive dispute list through October 31, 2004 (WTO 2004).

6Income classifications from World Bank 2004. Middle-income OECD countries are listed under OECD.

7Emphasis added


copyright 2005 Peter Chowla