Stiglitz, J.E. and Charlton, A. Fair Trade for All.

Stiglitz, J.E. and Charlton, A. Fair Trade for All. New York: Oxford University Press, 2005, 315 pp., $30.

Joseph Stiglitz is a Nobel Prize-winning economist who served on, and subsequently chaired the U. S. Council of Economic Advisers and was the chief economist at the World Bank. Andrew Charlton is a researcher at the London School of Economics. Their book is based on a report prepared for the Commonwealth Secretariat through a project involving roughly two hundred economists and development researchers. The book went to press shortly before the 6th Ministerial Meeting of the World Trade Organization (WTO) in Hong Kong in December 2005. Its focus is on how to make the world trading system more development-friendly, which is the avowed aim of the current Doha Development Round of WTO negotiations. The difficulty of actually achieving this is reflected by the lack of progress in reaching a deal since the Hong Kong meeting, and by the analysis contained in the book.

The authors state at the outset that their purpose is to "describe how trade policies can be designed in developed and developing countries with a view to integrating countries into the world trading system and to help them to benefit from their participation" (p. 1). They review recent empirical evidence on a range of trade issues affecting developing countries. Rather than taking a strict neo-classical view that all that is needed is to eliminate trade distorting measures such as tariffs and export subsidies, the authors argue that liberalization needs to be managed carefully if poorer countries are to benefit. Stiglitz and Charlton are highly critical of the impact of the current trading system and the lack of focus on developing country issues in the WTO.

The book begins by reviewing evidence on the contribution that trade can make to development. It comes to the conclusion that trade liberalization can be a positive force in poor countries, but that complementary domestic reforms are needed if gains from trade are to be realized. The authors indicate clearly that they do not support the view that developing countries should be exempt from reforms in the current round nor that needed reforms are impossible because most governments are simply not up to the task. Many trade analysts would agree that both international and domestic reforms are critical to the future economic success of developing countries. The book could be criticized for its overwhelming emphasis on the international part of the reform package, but that part is perhaps easier to address.

Stiglitz and Chartlon are justly critical of the limited progress made in the WTO negotiations on several key issues, such as agricultural protection, that are of greatest concern to developing countries. Their skepticism reflects the view of many that the "development" title is mere window dressing. They argue that the round should focus squarely on being development-friendly and be predicated on fairness, both in the way that negotiations are conducted and their outcome. This would be quite a departure from recent practice in which a mercantilist approach has served the interests of large and more powerful countries. Given the tortuous path of recent WTO negotiations and global realpolitik, it is also likely to be unachievable.

To promote fairness in the round the authors present the case for a specific market access proposal. Under this proposal all WTO members would undertake to provide free access for all goods from developing countries that are poorer and smaller than themselves, i.e., with a lower total and per capita gross domestic product (GDP). This would provide an extremely broad implementation of special and differential treatment (S&D)--a concept accepted in world trade law since the late 1970s. The proposal has the advantage that all countries, including wealthier developing nations such as Brazil, China and India, would liberalize their import regimes for the benefit of smaller and poorer countries. Much of the focus on S&D in the WTO to date has been on providing special treatment for developing countries as a bloc to limit the impact of trade liberalization on sensitive industries or to increase access to markets in developed countries. The disadvantage of that approach is that it does little to promote the expansion of trade among the developing countries.

As with any apparently simple proposal "the devil is in the detail." For example, how would GDP be measured (in U.S. dollars at current exchange rates or on a purchasing power parity basis) to determine eligibility for duty free access and who would do the measuring? How would switches in status be managed as economic growth causes countries to graduate from free access to less than free access in certain markets? In reviewing the impact of existing tariff preference schemes, the authors conclude that implementation issues, such as the application of rules of origin, have played a major role in limiting gains for developing countries. Such issues are likely to be even more important for the broader system of preferences proposed. One might seriously question both the practical and political feasibility of the general application of the approach, but it might be used to increase market access for the poorest countries.

The authors suggest that S&D should be applied more broadly in existing WTO rules. For example, they argue that exemptions should be provided from several existing agreements, such as the Agreement on Subsidies, Trade Related Investment Measures and Trade Related Aspects of Intellectual Property Rights, since they view these to be particularly disadvantageous for developing countries. Some concessions have already been made, for example, a relaxation of the prohibition on imports of generic drugs manufactured by non-patent holders in developing countries and a general exemption from agricultural concessions for least developed countries in the current round. Similar adjustments might be possible in the future, but there are considerable practical difficulties in implementing a more extensive S&D approach for existing rules, particularly if differences in the level of development are to be reflected as suggested for market access. Such a broad and complex application of S&D would probably make current international trade law unworkable.

Stiglitz and Charlton are highly critical of the implications of several initiatives promoted by developed countries in the current negotiations, particularly those that surfaced at the 1996 WTO ministerial meeting in Singapore. These focus on intellectual property rights, competition, and investment policies. The authors argue that new rules relating to these issues should not form part of a final agreement--a view that would be shared by many countries that have vigorously resisted the inclusion of these items.

Some developing countries could face significant adjustment costs from trade liberalization. The authors argue that those most affected should be provided special assistance, both technical and financial. Some strides have been made since the Uruguay Round in improving trade technical assistance for developing countries, but mechanisms for providing trade financial assistance are underdeveloped. It is difficult to be optimistic that this situation will improve any time soon.

The book makes a number of useful suggestions about the future role of the WTO, for example, simplifying the accession process for new members and using a sort of "security council approach" in which representatives from key country constituencies would play an enhanced role in governance. During a time when many suggest that international organizations should be reduced in size, the authors argue that the WTO secretariat should be expanded and its analytical capabilities strengthened. Overall, Stiglitz is far less negative in this book about the potential role of the WTO in the development process than he was in his earlier work about the role of the IMF in Globalization and Its Discontents.

Some of the supporting technical material is contained in appendices. One provides a review of empirical research on market access issues; a second contains a similar review of the Singapore issues. Curiously some quite technical material on preference erosion and adjustment costs is included in the main text. In a work that aims to be digestible to the general reader that material should have been included in an appendix.

Overall the book is a readable and useful contribution to the debate on the future position of developing countries in the world trading system. It contains valuable surveys of recent research on several key issues. It would be a good addition to the reading list for courses dealing with international development and trade policy. It is certainly recommended reading for those who want to know more about current thinking on trade and development issues, and the difficulties of actually addressing these through the WTO.

David Blandford

Pennsylvania State University