November 2000

LAUNCHING A NEW W.T.O. ROUND OR FIXING AN AGENDA FIRST?

The recent APEC meetings in Brunei saw a dramatic debate between the developed countries and some developing countries on how soon to launch a new round of trade talks at the World Trade Organisation. Malaysia insisted that agreement on the content of such a round should precede a move to launch the round. The final outcome could make all the difference to the future economic and social prospects of developing countries.

By Martin Khor

Penang: What’s the difference between launching a new round of trade talks at the World Trade Organisation, and fixing an agenda first before committing to such a launch?

Lots, judging from the controversy that erupted and then stayed on the boil at the series of high-level meetings of the Asia Pacific Economic Cooperation (APEC) forum held in Brunei in mid-November.

The battle began at the APEC Economic Ministers’ meeting on 12-13 November. When APEC members from developed countries like the United States and Australia pressed for an agreement to launch a new WTO round in 2001, Malaysia led a fight against putting a deadline.

Malaysian Minister for International Trade and Industry, Rafidah Aziz, had insisted that there could not be a mention of a date until an agenda for a round is first agreed to. ‘If there is no agenda, then what are countries going to talk about?’ She said Malaysia’s views were shared by many other countries that were just not so vocal.

However, when the APEC leaders’ meeting ended on 16 November, the mention of a date for launching a new round had appeared. The leaders’ Declaration stated that: ‘We agree that a balanced and sufficiently broad-based agenda that responds to the interests and concerns of all WTO members should be formulated and finalised as soon as possible in 2001 and that a round be launched in 2001.’

There were, however, differing interpretations among the leaders as to the meaning and the points of emphasis to be placed on this part of the Declaration.

Malaysian Prime Minister Dr Mahathir Mohamad said the Declaration did not mean that APEC had backtracked on Malaysia’s earlier proposal to set a deadline for the agenda first before deciding on a launch date for a WTO round.

‘The general opinion is that we should have the launch in 2001, but it must be preceded by an agreement on the agenda. If there is no agenda, how can we have a meeting? It (the launch) is conditional on having an agenda. And this is not just Malaysia, others speak in the same way.’

Dr Mahathir reiterated that if an agenda cannot be finalised, then there is no way that a new round of WTO talks can be launched. ‘I hope that they (trade officials in Geneva) can have an agenda. If they purposely do not come up with an agenda, then it will be difficult to have a new round. What are we going to talk about?’

The different opinions at the APEC meeting reflect the ongoing battles at the WTO between developed countries, led by the US, the European Union, Japan and Australia (that want to expand the powers of the WTO through a new round), and developing countries like Malaysia, India, Pakistan, Egypt and Zimbabwe (which want the WTO to first resolve problems faced by developing countries arising from implementation of the WTO’s existing agreements).

The sharp differences came to a head at the WTO’s Ministerial Conference at Seattle in December last year. When the rich countries used manipulative methods in an attempt to push developing countries into agreeing to a new round, the latter revolted and refused to sign on to a Declaration they had no hand in drafting.

The collapse of the Seattle talks sent shockwaves through the trading system. Developing countries seemed to be standing up for their rights. Their representatives thought that perhaps the rich countries would now pay attention to their demands.

But when discussions continued in Geneva, the same ‘dialogue of the deaf’ was played out. Diplomats from developing countries have been forcefully putting forward proposals on how the presently unequal and unfair rules in the WTO  have to be reviewed so that the trading system can regain its credibility.

Dozens of suggestions on how to resolve the ‘problems of implementation’ (the code term for all the present difficulties facing developing countries) have been formally put on the table. These problems include the threat to farmers’ livelihoods resulting from the influx of cheap imported food (caused by the WTO’s agriculture agreement); high prices of essential medicines and the high cost of using technology (caused by the agreement on intellectual property); and problems faced by local industries which can no longer rely on government policies that require projects or firms to use local materials (as this is prohibited by the WTO’s treaty on investment measures).

If unresolved, these and other problems will hinder and even stop prospects of future development. Developing countries are thus insisting that future talks must focus on solving these ‘implementation problems’ and thus restore balance to the trading system’s rules.

Unfortunately, these requests have met with a cold response from the developed countries. They have taken a ‘legalistic’ approach, namely, whatever has already been signed in the previous talks (the Uruguay Round of 1986-93) is legally binding; if poor countries want to revise some of these, they have to give new concessions to the rich countries.

This is where the new round comes in. What the rich countries want is the agreement of the developing countries to launch such a round to introduce yet more issues into the WTO system and thus multiply its power, to the further advantage of the former.

The ‘new issues’ (which eventually, through negotiations, would become new agreements in the WTO) include:

·        investment rules, aimed at granting freedom from rules for foreign investors and foreign funds);

·        government procurement, aimed at eventually ending preferences that governments now give to local firms in their purchasing practice and policy;

·        competition policy, aimed at prohibiting advantages enjoyed by or given to local firms, so that foreign firms can ‘compete on equal terms’ in the domestic environment;

·        labour standards, aimed at introducing labour-related standards (starting with the right of  association but  which will  likely  proceed  to other issues  such as minimum wages, employment and social security) that could eventually lead to trade sanctions against products of developing countries;

·        environmental standards, aimed at allowing trade rules such as extra import duties to be applied to products that do not meet acceptable environmental standards;

·        electronic commerce, starting with a permanent ban on customs duties on products purchased and delivered electronically, and leading to other rules that would probably favour countries that are already more advanced in making use of e-commerce.

Many developing countries, including Malaysia, have been very reluctant to allow the WTO to acquire the mandate to create new multilateral rules or treaties on these and other new issues.

These are not trade issues and do not belong in the WTO. If absorbed into the WTO system, it is likely that they will be interpreted in ways that benefit the powerful Members at the expense of the developing countries.

This is especially so because the decision-making process is such that developing countries have little bargaining power compared with the major countries. Until this is changed, the will of the powerful is very likely to prevail over the interests of the many.

If a new round in the WTO leads to the entry of this range of new issues, the trade and development prospects of developing countries would be bleak.

The smaller firms and farms of the developing countries would be too weak to withstand the might of the big firms of the rich countries, which would have much more freedom to enter and compete in the markets of the poorer countries, should the new issues be accepted into the WTO.

Further, the road would be opened to allow new trade sanctions to be placed on developing countries whose products are said not to meet the acceptable social or environmental standards.

This is where the issue of the agenda comes in. Whilst countries can all agree to have a new round, it is far from clear what are the issues that will feature in this round.

If the agenda of the new round is the review (and, where needed, the amendment) of existing agreements, rules and procedures in the WTO so that there will be better balance in the system to benefit developing countries, then it would be to the benefit of developing countries.

It would be a totally different matter if a new round would include negotiations to conclude new treaties on investment rules, government procurement, competition policy, and labour and environmental standards. For then the trade system, already having lost a lot of credibility after the Seattle debacle, would be even more overloaded with non-trade issues and even more loaded against the developing countries’ interests.

Malaysia had thus been right to insist at the APEC meetings that the first order of priority is to get the proper agenda for future negotiations at the WTO. Only if the right agenda is agreed to should there be moves to launch a ‘new round’.

Ensuring the correct content and really beneficial outcome of future talks is certainly more important than blindly agreeing to launch something called a ‘new round’ in the false belief that it would somehow benefit everybody.

Given the record of the WTO, which the developed countries have so far been able to dominate, developing countries should not agree to walk onto uncharted territory on the basis of blind faith or the sweet promises made by the major trading powers.

The lesson of the past is clear: Do not tread lightly onto new areas and certainly onto a new round until and unless you have very carefully and thoroughly studied all the aims of the proponents who are trying to attract you, and all the effects it will have on your economy, society and future.

Since the APEC Summit Declaration eventually did mention the date (2001) for launching a new round, the major trading countries will try to make use of it as a springboard to pile on the pressure in the coming months to prepare the ground for their version of a new round.

The fight over the agenda, which had been intensely waged in the months before Seattle, will thus resume soon. - Third World Network Features

About the writer: Martin Khor is Director of the Third World Network.

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