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WTO and its broken development promise
The recent WTO decision favoring the EU in the dispute over Indonesia's ban on nickel exports shows that the organization still has work to do to embrace multilateralism and truly be a ladder of development for all.
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Adding value: A nickel smelter operates at PT Virtue Dragon Nickel Industry (VDNI) in Konawe, Southeast Sulawesi on Sept. 21, 2022. Indonesia has vowed to carry on its downstreaming program to add value to its nickel exports, despite its loss in a dispute over its ore export ban heard at the World Trade Organization. (AFP/Andry Denisah)
“There is need for positive efforts designed to ensure that developing countries […] secure a share in the growth in international trade commensurate with the needs of their economic development.”
These words are emblazoned in the preamble of the agreement that established the World Trade Organization (WTO). This lofty commitment has all but evaporated as the WTO Dispute Settlement Body (DSB) recently decided in favor of the European Union in its dispute with Indonesia over the country’s ban on nickel ore exports.
It takes a lot of intellectual gymnastics to see how depriving Indonesia of its right to add value to its resources somehow aligns with “positive efforts” to support developing countries to “meet the needs of their economic development”.
President Joko “Jokowi” Widodo defiantly said that Indonesia would appeal the ruling with the WTO Appellate Body. Appealing is clearly the right call to defend the policy, which has bolstered Indonesia’s economic transformation, particularly in the nickel-rich regions outside Java.
As the government is determined to enhance its “downstreaming” strategy for other natural resources, we should brace for more fervent international litigations. Thus, we should scrutinize the WTO ruling, which runs against the principle of optimizing value-added from natural resources.
At a glance, the WTO seems to be a force for good, as it promotes free trade that allegedly unleashes unprecedented prosperity. International trade is unassailably pivotal, as export-driven growth has propelled rapid economic development in many countries. Nevertheless, what many free trade enthusiasts conveniently gloss over is the historical fact that the countries that have gained the most from international trade often did so by resorting to policies that the WTO repudiates.
The assumption that free trade is unambiguously beneficial for all countries regardless of their stage of development is not bulletproof. Several empirical studies have confirmed that technologically superior countries with greater economic complexity tend to benefit more from trade liberalization.
