Why the smallest states fail to secure special treatment in global trade politics

Courtney Lindsay - independent trade consultant and former doctoral researcher at the University of the West Indies

At the Commonwealth Heads of Government Meeting held in April in London, issues surrounding the economic development of SIDS and SVEs, and steps to address them, were prominent on the agenda. Heads of Governments pledged their support toward practical measures to help address the myriad of problems affecting their involvement in international trade. These included, among other initiatives, the operationalisation of the Commonwealth Small States Centre of Excellence that will impart targeted capacity programmes and interventions for small states in the areas of democracy and development, and the operationalization of the Small State Trade Financing Facility to allow small island developing states to obtain easier access to international trade finance.

Interestingly, other aspects of the Commonwealth meeting were geared toward raising awareness of the economic and environmental plight of SVEs and SIDs specifically, and their need for special requirements. This highlights a bigger, seemingly intractable problem: the continued inadequate buy-in for special treatment for SIDS and SVEs from the wider group of states in the international political trade arena. What this signifies is that these sub-groups of small states are failing, despite continued efforts, to secure SDT and Preferences as taken-for-granted norms in global trade politics.

SIDS and SVEs continue to fail in their attempts to get other states in the international system, especially large industrial economies, to i) grant them permanent and universally recognized status as a unique set of countries in need of special attention, and thereby allowing for exceptions to be given in how they conduct international trade that is on a permanent, taken-for-granted basis given the unique characteristics they have; and ii), to be granted enhanced permanent and binding preferential access to the markets of especially developed economies, the target of much of their primary exports. Preferential treatment should be modifiable only to enhance those markets, rather than reduce them; should not granted to other countries, especially stronger economies as this will nullify their value; and they ought not to be reciprocated. The purpose of these trade preferences is to give their exports a price competitive advantage in the export markets of large industrial economies.

That the need for these carve-outs continues to be a main feature on the agenda of international discussions involving SIDS and SVEs is a reflection of their continued concern regarding their economic wellbeing, especially at a time of extreme weather climatic conditions which are negatively affecting their already fragile and disadvantaged economies. Yet, advanced economies are seeking more reciprocal trade relationships with them, as demonstrated by the CARICOM-EU Economic Partnership Agreement (EPA). Furthermore, the signing of free trade agreements (FTAs) with other developing countries is causing those preferences that have not been subjected to phase-out periods to be eroded. Years of diplomatic push by SIDS and SVEs for the enhancement of special treatment toward them, and for such to become permanent and universally recognized and accepted normative fixtures in global trade politics is not bearing fruit. In theory, they can reasonably be expected to affect and impact norms in global trade politics given that they are members of neutral international trade-oriented organizations and have formed themselves into regional and international groupings, thus gaining strength in numbers. Below I use the ‘Norm Life Cycle theory’ to explain why this is the case.

First, new norms that do not augment the dominant neoliberal economic order, and which depart fundamentally from the tenets of open markets are less likely to become permanent. This is because, theoretically, a new norm must play well with the established ones in the norm environment.  Giving SDT and preferences to SIDS and SVEs outside of the Least Developed Countries (LDC) group would contradict the norm of intensified liberalization and trade opening in global trade politics. This explains why many are expected to, and are being weaned off existing SDT and preferential treatment multilaterally through the ending of such provisions as export subsidies. We also see this occurring bilaterally through more reciprocal Free Trade Agreements (FTA) pushed by industrialized countries wishing to develop more commercial trade relationships with their traditional trading partners, for example the European Union and the Africa, Caribbean and Pacific (ACP) countries in the EPAs. Furthermore, many SIDS and SVEs are in the middle and upper-middle to high-income bracket. From an international trade standpoint this disqualifies them from SDT and preferences.

Second, for a norm to be successful it must be clear and specific. Indeed, the complexity of a norm can affect whether other states in the system accept and conform to it.  One of the issues affecting SIDS and SVEs is that framing and articulating their issues clearly is made complicated by the lack of definition of what exactly is a small state, and an inadequate conceptualization of the issues they supposedly face. With no agreed definition and conceptualization of ‘small’, and no demarcation of SIDS and SVEs from other economies using established criteria, almost any economy can be termed ‘small’. Indeed, in international forums where SIDS and SVEs have put forward their proposals for SDT and preferences, delegates are known to outline that it is unclear what kind of problems should be addressed and which kind of countries are affected by these problems. This lack of clarity contributes to a lack of uptake required to make SDT and preferences permanent, taken-for-granted norms in global trade politics.

Third, SIDS and SVEs are inadequately unified. They are dependent on memberships in regional and international organisations and integration arrangements. However, outside of specific episodes of multilateral negotiations, such as the Doha round of trade talks, they tend to be dispersed, engaging with global trade politics based on their unique interests, hence creating divisions with the wider groups. For example, during the EPA negotiations Caribbean countries within the ACP group signed the Agreement in 2008, breaking away from not only other ACP countries, but other SIDS in the Pacific region. In other cases of bilateral negotiations this is also manifested; for example, during the negotiations of the now-defunct Free Trade Area of the Americas Caribbean Community (CARICOM) countries were not supportive of their neighbour, the Dominican Republic, in their collective attempt to introduce the concept of SDT for small economies for base tariffs. Even at the intra-regional level divisions occur which hamper their greater efforts. For example, CARICOM SIDS have no supranational structure, and even in the purely economic arena, differences in national circumstances continue to generate serious arguments and divisions.

Fourth, and finally, SIDS and SVEs are trying to establish their norm in a neoliberal environment that is inimical to it, but, paradoxically, one upon which they disproportionately depend economically, financial and ideologically. Some SIDS and SVEs, for example several of those in the Caribbean, are some of the most indebted countries in the world. Those that are indebted to such international financial institutions as the IMF, for example, Jamaica, are pressured into accepting and implementing economic policies and programmes that are counterproductive to their pursuit of SDT and preferences as norms. Additionally, ideologies involving SDT and preferences tend to be  subordinated to the power of the neoliberal ideology of economic liberalization and open markets, as many SIDS and SVEs depend upon advanced countries pushing neoliberal policies for their development ideas. Ideas about national development that were endogenous to SIDS were replaced with ideas of integration into the global economy and the idea of inter-dependence. Both served to disenfranchise the argument of SIDS and SVEs as special cases in global trade politics, making the normative status for SDT and preferences more difficult to argue and achieve. Finally, the dependence of SIDS and SVEs upon a neoliberal economy and especially upon neo-liberally inclined states for their export-markets work against their push for a norm that is not neoliberal in character.

SIDS and SVEs have failed to make SDT and preferences international norms benefiting their categories of states primarily because of these four reasons. By way of a recommendation, because the definition of small is vague, and small states have a difficult time making their argument for SDT and preferences coherently, they should focus their diplomatic and bureaucratic efforts on outlining their similarities with LDCs. Since aligning an emerging norm with that of an existing one may create greater resonance, aligning norms for SDT and preferences for SVEs and SIDS with established SDT and preferences already granted to LDCs increases the chances of the former reaching a tipping point.