Centre for Global Negotiations

The Brandt Equation: 21st Century Blueprint for a New Global Economy

The Brandt Proposals: A Report Card


The Brandt Reports noted that world trade was stagnating in the early 80s and proposed a more open, rule-based trading system which could promote competition without encouraging protectionism. Since then, world trade has expanded dramatically, but is still hampered by a bewildering maze of:

• Tariffs
• Quotas
• National laws
• Taxes
• Domestic policies

Labor and environmental regulations
• Competitive practices
• Corporate procedures

The Brandt Commission noted that major increases in financial aid to developing nations would enable them to improve trade prices, boost exports, and improve economic growth, thereby allowing developing nations to buy more foreign goods and stimulate production and trade in developed nations. The large transfers of resources the commission proposed "are seen therefore as measures both to support growth in developing countries directly, and to permit a significant expansion of world trade. It is in this sense that we view them as contributing to growth and employment creation in the North as well as the South" (N-S, 68).

The Brandt Reports proposed that developing nations gain more control of the processing, marketing, and distribution of their commodities.

Brandt also called for stabilization of commodity prices, new financing arrangements, greater sharing of technology, and removal of trade barriers. The commission was well aware that such policies might sting developed nations in the short-run, but would lay the basis for enhanced propsetity in the future through greater equilibrium in international trade. Like John Maynard Keynes' earlier plan for an International Clearing Union (1944), the Brandt Commission called on trade surplus nations to transfer their excess resources to trade deficit nations.

"The great challenge for the North therefore is to cope with the difficulties of adjustment so that world trade can expand; to see its trade with the South not as a threat but as an opportunity; to see it not only as part of the problem but as part of the solution. In the end, failure of the mature industrial economies to adjust to the realities of international competitiveness may deprive them of their prosperity and impose far costlier and more disruptive adjustments than those which their current measures of protection attempt to postpone. The industrialized countries cannot expect their valuable exports to developing countries to continue (and the large loans by commercial banks to several of them to be repaid) if they do not permit them to earn their way by selling their manufactures in return" (N-S, 70-71).

Little headway was made on the Brandt Commission's proposals under the world's former trading system. Nevertheless, the General Agreement on Tariffs and Trade had done much to encourage the liberalization of global commerce since its creation in the late 1940s. New standards for international trade and tariffs ushered in an era of unprecedented trade growth in the decades following World War II. In nearly forty years of trade talks, GATT lowered international industrial tariffs from an average of 40% to 4%. No one should underestimate the phenomenal impact that this reduction of tariffs had on increasing the living standards and prosperity of much of the world. It allowed the former colonial nations more direct access to the international financial community and the ability to grow their economies.

GATT had many problems, however. It was mostly a negotiating forum on tariffs. The terms of GATT were set by the world's major nations. It did not apply to raw materials and services. Labor and environmental groups had no input in trade policy. Many countries were not represented in the agreement.

Instead of maintaining multilateral trade for the benefit of all partners, the GATT years were riddled with acrimonious negotiations and inequitably resolved disputes.

It was hoped that the 142-member World Trade Organization, created in 1995, would be broader, less cumbersome, and fairer to developing countries than its predecessor. Access to fair trade is more crucial than ever, but so far the WTO has not closed the gap. Trade rules and regulations are often not enforced. Though the WTO acts as a commercial court to hear disputes and impose penalties, its legally binding agreements are routinely violated by nations and multinational corporations. Trade disputes are resolved instead through threat of retaliation – the dreaded club of higher tariffs.

Instead of opposing government subsidies for industries and eliminating nationalist trade restrictions, the World Trade Organization seems to consider local development, social, environmental, and health regulations as more serious barriers to world trade. By allowing lower tariffs in rich than in poor nations, the WTO has effectively forced developing nations to dismantle the subsidies and tax barriers they'd set up to protect domestic farmers and producers from the destabilizing impact of multinational conglomerates.

The result is that developing nations have been flooded with subsidized agricultural imports, which has uprooted rural farmers and helped create a national dependence on foreign food products. At the same time, developed nations keep their markets closed to clothing, textile, and agricultural imports – the developing nations' most competitive products.

This forces poor countries to keep wages low and ignore environmental standards just to stay competitive, while the increased competition among developing countries drives down export prices.

This situation gives developed nations a distinct edge in world trade, enabling them to pay less for imports than they charge for exports. While developed nations maintain their entrenched advantage, the Brandt Reports noted, the grip of corporations is also firm.

"People in the industrialized countries will have to realize faster and more comprehensively that the division of labor that was imposed or structured in colonial times cannot be cemented. The interrelationship between exports and imports will become much stronger than people are aware of. Only if the North provides better access to its own markets can it expect to export more" (N-S, 21).

Although $57 billion in aid is granted to developing countries each year, the trade barriers of rich nations end up costing poor nations more than twice that amount in lost business, according to data from the United Nations Conference on Trade and Development. Protectionism, which is ultimately bad for both importers and exporters, continues to work against the interests of global economic expansion. It is in everyone's interest to export, particularly now that much of the world is in recession – but exporting nations must also find ways to stop building up their domestic supplies and accept equal amounts of imports, becoming better consumers of global production.

Under current market conditions, high-wage labor is driven out by cheap labor. There is no international protection for one region's workers who are displaced by workers in other locations willing to work for less. Trade agreements – which have been used to lower trade barriers between neighboring countries and within regional blocs – could also be used to raise the universal standard for wages, labor rights, and working conditions, along with legal means of enforcing those measures.

This would increase income, purchasing power, and consumption, allowing poor nations to rely less on exports, and more on domestic savings, investment, and growth.

There is no more powerful engine for economic growth and progress than open markets. But in an era of velocity-finance, fair access to the market is slowed by a trading-machinery encumbered with veils of national and corporate regulation. Moreover, trade must be joined with policies for the protection of the environment, consumer rights, labor standards, and human rights, if a truly integrated trading system is to be realized. Environmental protection is a sensitive issue, however. There is a popular assumption that expansion of trade bolsters corporations, harms developing nations, and degrades the environment; but many developing nations now find themselves in agreement with corporations that environmental standards which are built into trade agreements amount to a new form of protectionism.

New thinking is also needed in other aspects of global trade. Clear lines need to be drawn among the roles and responsibilities of existing agencies – and potential agencies  – involved in international finance and commerce, in order to increase their effectiveness and avoid conflicts of interest. Perhaps a Global Securities and Exchange Commission, a new multilateral agency independent of the WTO, could be created to oversee international mergers and guard against international capital flight, money laundering, fraud, and insider trading. Likewise, an independent Global Foreign Exchange Ministry could be created to regulate international investment, and a new Global Food and Drug Agency could be setting safety standards for trade in international health care, food, and drugs.

As it is, the WTO has complete authority over the protective standards on patents, DNA, investment, health care, food, and pharmaceuticals at the global level, and it is also proposing to deregulate and help privatize welfare, pensions, education, and water systems in developing nations through a new General Agreement on Trade in Services.

The rules for intellectual property  – on items from computer software to drugs – already discriminate against developing countries and greatly benefit the multinational corporations.

Thanks to heavy lobbying from the developing world in 2001 for access to some life-saving generic drugs, the WTO has indicated that it will end the monopoly on a few major patents for essential medicines held by large pharmaceutical companies, but, given the enormity of WTO regulatory bias, this is a tiny victory for developing nations.

There have been eight rounds of trade talks since 1947 and a new set of negotiations – the Doha Round – is beginning. Increased world trade has the potential of boosting living standards and bringing about a freer and more peaceful world – or destabilizing societies, creating poverty, oppression, and chaos. Clearly, the rules and regulations for international commerce need vast restructuring, with greater attention focused on the needs of developing nations. New codes of conduct for global corporations are essential in this process.

Still, the WTO continues to act in secret, conducting its deliberations without public oversight, while procedural breakdowns in the negotiating process continue to sabotage developing nations.

Why has the WTO not pushed harder to eliminate trade barriers in the US, the EU, and Japan? As noted, trade barriers end up costing developing nations far more than the amount of aid they receive each year, effectively canceling out the benefits of official development assistance. Why not allow developing nations to increase their exports beyond these levels?

In 2000, international trade rose to $6.3 trillion. In spite of the spectacular growth in world trade during the past twenty years, its inequitable rules have encouraged a modern version of piracy by corporations and wealthy nations. There is need for balance and vision on the tides of world commerce. It is time to leave free trade in our wake and set our sights on fair trade. Those at the helm of the World Trade Organization must chart a far more democratic and sustainable course if they claim to represent the interests of the world's people. Until recently, the trade deficits of richer nations have been keeping the global system afloat. If they take on much more red ink, the great ship could sink.


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