The assumption that GATT favoured rich countries at the expense of the poor arises when one considers the Prebisch and Radical school of thought, that GATT was a means of exploiting poor stated and denying them opportunity. They also believed that free trade, which GATT so passionately tries to promote, would not lead to prosperity but was a blatant effort by the developed countries to perpetuate their dependence on the developed countries.
GATT focused on the trade interests, industrial tariffs and manufactured goods of the developed countries. Such preference brought little benefits to the less developed countries, or in this context the poorer countries as they had little manufactured goods to sell. Furthermore they did not have the range of industrial products to benefit from tariff concessions. The idea of reciprocity that GATT emphasised on was useless to the less developed countries as they had little to offer. Products of special interest to them, like non-manufactures, were not involved. The Most Favoured Nation (MFN) principle ruled out preferential treatment or unilateral tariff concessions on non-reciprocal basis for less developed countries.
The developing countries were burdened disproportionately by non-tariff barriers because of their small and less diversified economies. It was important for the less developed countries to enter the markets for the developed countries because of their need for foreign exchange as they were experiencing trade deficits and declining terms of trade and in debt. Yet developed countries reduced trade barriers with other developed countries but not with less developed countries. This was definitely a case of the rich being favoured through GATT polices at the expense of the poor. With reduced trade barriers, the developed countries could export more; increase economic growth while the poorer states plunged deeper in debt.
The way GATT worked no doubt benefited the developed and richer countries. However to say that it was at the expense of the poor would be a bit too bias. In an open world economy, when one party gains, another loses. Often, the less benefits of a freer world trade received by the poorer countries were due not to the principles of GATT but the circumstances they were in, as they were undergoing the decolonisation process and were unable to ride on the success of other capitalist nations.
GATT was seen as a rich man’s club consisting of mostly developed countries, influential and powerful to protect their own interest. However, GATT did not really favour the rich at the expense of the poor. In fact, the less developed countries’ points of view were taken into consideration in many instances epically seen through the negotiation rounds that GATT initiated.
In the Kennedy Round, which stretched from 1963 to 1967, the demands from the 3rd world states for non-reciprocal tariffs cuts in their favour were first being voiced. In addition, the developing countries within GATT developed a Generalised System of Preference (GSP) for the developing countries that were allowed to enjoy trade privileges like tariff reduction in manufacturing goods without reciprocating. The GSP was instituted and became a permanent part of GATT in 1975, indication of GATT’s commitment to maintaining orderly trade around the world and not just among the developed countries. The trade privileges also served to encourage growth of the developing countries’ economies. When Afro-Asian states were decolonised and achieved independence, GATT did adapt and change to cater to their interests and needs.
The 3rd world states could be said to be responsible for failing to benefit from GATT and the international economic order and not the other way round, that because of GATT’s favouritism towards the richer countries that they loss out. These states were constrained by their own internal structures, for example over dependence on one or two primary products. These states were also reluctant to integrate into the Bretton Woods system to benefit from it because of nationalism and their anti-West colonial mentality.
It is without doubt that preference towards the more developed countries, which were members of GATT, notably the West European countries, Japan and the United States of America (USA) would be given by GATT. GATT was founded on political motivations. Due to the backdrop of worsened Cold War tensions between the USA and the Soviet Union right after World War Two, “free trade took on a new significance as a key to a prosperous West and Western Security, in the face of Soviet aggression.” Naturally, GATT’s actions were focused on helping the Western countries, which happened to the more developed and thus wealthier countries compared to the 2nd and 3rd world countries, recover economically so that they could withstand the communist threat posed by the Soviet Union. Despite GATT’s commitment to free world trade, the interests of the USA, characterised by its policy of Containment especially after World War Two were the dominant factor behind the GATT’s policies. This was evident in the way the USA sponsored free trade and gave aid through the Marshall Plan in 1947.
In conclusion, GATT favoured the rich at the expense of the poor can only be agreed to a small extent. Indeed, the rich benefited from while GATT was in place than the poor but to say it was at the expense of the poor would be too extreme. With GATT inherently bias towards the US, it was the inability of the less developed countries to integrate into the world economic order that caused them to suffer. But, it is difficult to say that the poor lost out at the expense of the rich with developing countries experiencing 5 to 6% of economic growth at least in the first 25 years after World War Two.
Bibliography
Spero, Joan E. The Politics of International Economic Relations. 3rd edn. London: Unwin Hyman, 1977
Robert S. Walter & David H. Blake The Politics of Global Economic Relations. Prentice Hall, 1992
Hobsbawn, Eric J, Age of Extremes: The Short Twentieth Century 1914-1991, Abacus, 1995
Spero, Joan E. The Politics of International Economic Relations. 3rd edn. London: Unwin Hyman, 1977