The Haberler report was followed by another study, prepared in 1961 by the U. N. Commission on Europe entitled Europe and the Trade Needs of the Less Developed Countries. Looking forward to the 1980s, it predicted that the combination of official aid flows and exports of primary products would meet only two-thirds of developing world import requirements, leaving a gap of at least $15 billion. “The report concluded that this amount would have "to be filled by exports of manufactures" and proposed the establishment of a "generalized system of preferences" (GSPs) for the purpose of encouraging exports from developing countries”.
(Hoekman, 241) That same year, the United Nations launched its Development Decade, which set targets for developing country growth rates. The trade gap was a major subject of debate within the General Assembly, where representatives from the developing world–now joined as the Group of 77 (G-77)–pointed to shortcomings within the GATT structure which, they asserted, were antagonistic to their interests.
“They went so far as to propose the establishment of a new organization more closely attuned to their special needs, and, in response, the United Nations Conference on Trade and Development (UNCTAD) began operations in 1964. Lobbying on behalf of the GSP scheme was high on the UNCTAD agenda and indeed the GATT played only a limited role in the negotiations and implementation of the GSP. The EEC adopted the GSP in 1971 and the United States in 1976. In 1979, as part of the Tokyo Round trade negotiations, a so-called Enabling Clause was included in the Framework Agreements…
[giving] the GSP scheme a permanent legal basis. ”(Grimwade, p, 7-8) Under this new scheme, developed countries were given the right to offer preferential treatment for imports of specified goods from the South, meaning that “"developing countries' imports could enter developed country markets at a lower rate of duty than could comparable commodities imported from developed country sources”. (Grimwade, p, 7-8) In essence, the GSP amounted to a redistributive income transfer from industrial to developing countries.
Nonetheless, that this transfer might ultimately be used by the South to purchase imports from the North meant that the GSP scheme could be sold domestically as a boon to the North's export sector. From a normative perspective relating to justice, the adoption of the GSP represented a major shift in trade policy. By emphasizing the special needs of developing countries, the North purposely sought to improve the chances of the least-advantaged countries beyond those supplied by the existing structure of a trade regime that insisted on reciprocity as equivalent exchange.
To be sure, the developing countries would have enjoyed even greater benefits had the North unilaterally dismantled tariffs on such products as textiles, apparel and tropical agriculture; in that sense the GSP represented a second-best policy Still, given the domestic political constraints on liberalization, the GSP represented a useful device for promoting the South's export sector at a time when levels of protectionism remained high in the industrial countries.
Over time, however, doubts began to surface regarding the benefits of the GSP strategy, with its "special and differential" treatment for self-proclaimed developing countries. By the early 1990s there was increasing divergence in trade policy among the states that made up the G-77. Several of its most influential members were opening their economies and wanted greater liberalization from the North in heavily protected sectors like textiles, apparel and agriculture.
“They believed that the only way to win tariff reductions in these areas would be through full participation in the GATT framework, thereby accepting the notion of reciprocity as equivalent exchange. Still, as Stephan Haggard points out, their positions were hardly consistent, and in some issue-areas, such as intellectual property rights, most developing countries continued to seek "special and differential" treatment. (Haggard, p, 44) With the opening of the Uruguay Round of trade negotiations in 1986, the developing world engaged on a relatively equal basis in the process of multilateral agenda-setting and reciprocal bargaining.
“The negotiations involved 125 countries, which over an eight-year period debated the fate of everything "from toothbrushes to pleasure boats, from banking to telecommunications, from the genes of wild rice to AIDS treatments”. (Haggard, p, 44) The final agreement, signed at Marrakesh on 15 April 1994, produced a profound change in the world trade regime, including the transformation of the GATT into the WTO. (Haggard, 44) Four issues were of particular importance to the developing countries participating in the Uruguay Round: agriculture, textiles, intellectual property rights and dispute settlement.
In agriculture and intellectual property, it looked as if many developing nations might end up transferring income to the North, while in textiles and dispute settlement they hoped to extract some economic gains. Overall, most projections of the Uruguay Round's income effects came to similar conclusions regarding how the gains would be distributed across countries and regions. A World Bank study, for example, found that "the gains are concentrated in developed countries, especially the United States, the European Union, and Japan… In fact… a number of LDCs [less developed countries] are estimated to lose on balance. "(Haggard, 44)