Making of the new world order

The global financial crisis has underminded the ambitions of the World Trade Organisation (WTO). After the liberalisation of commodities, particularly readymade garments, and its impact on some Arab economies who failed to compete with Asian manufacturers, opening up the service sector has become uncertain.

A decade ago, the WTO was the third side of the "New World Order" triangle, after the International Monetary Fund and the World Bank. However, the global financial crisis has placed the whole World Order in a corner. This has prompted most countries, including the European Union, to call for reassessing the current financial order.

The WTO is now in an unenviable position for many reasons: First, it is a new organisation that has not established its fundamentals or ambitious projects yet. Second, it was the first of the three organisations to fall victim to the financial crisis.

As the financial meltdown spread, several countries resorted to protect their markets apart from their commitments towards WTO, whose future is at stake. Developed countries that were enthusiastic about the liberalisation of trade and free markets during the last 10 years were the first to resort to old protectionist methods under the pretext of the financial crisis and the increase in unemployment rates.

On the other hand, some of the developing countries have not been affected by the crisis because they were not members of the WTO in the first place and were not part of the trade liberalisation. Yet other developing countries remained committed to liberalisation because it is in line with their policies.

The question is how to tackle the issue of establishing a new global financial and economic order. Another question is: what is the condition of the three organisations, which seem to be suffering from structural and organisational problems? And will countries around the world abide by the new decisions?

It is obvious that the rules of the current international institutions have been overcome. Although developed countries called for abiding by WTO's decisions on liberalisation, they took strong protectionist measures after the financial crisis hit.

They also imposed new restrictions on foreign imports to help support their domestic products and curb the bankruptcy of their companies. Within the same context, Britain's Prime Minister, Gordon Brown, warned that the world is about to face great economic challenges, according to a report published in the Times newspaper last January.

He also called for replacing the concept of absolute free economy, adopted by the UK over the last three decades, with a better philosophy. He also said that the gravity of the crisis demands swift action.

My suggestion here is to allow developing countries to take part in laying down the foundations of a new world order in line with the last G-20 summit, which called for giving developed countries a bigger say in this matter.

As the next G-20 summit is to be held in London next month, it would be an important occasion to re-draw the map of the world's economic power centres, especially with a number of developing countries such as Saudi Arabia, Indonesia, Argentina, Brazil and India participating in this conference. These countries adopt the agenda of developing countries, which aim at increasing their contribution to laying the ground for new international economic relations.

Therefore, absolute free trade is not an option at present, especially in the area of service trade. Financial establishments in developing countries are currently unable to compete with those in developed countries, neither financially, technologically, nor in the marketing sector.

In short, this simply means that the principals on which the WTO was set up in 1995 may not suit many developing countries. Fair competition is demanded, but appropriate circumstances have to be available to achieve this goal.

The writer is a UAE economic expert.