TWN Info Service on WTO Issues (Jun03/7)

Third World Network

18 June 2003

www.twnside.org.sg

Dear friends and colleagues

REPORT ON EUROPEAN PARLIAMENT HEARING ON WTO

Below is a report on the European Parliament hearing on WTO issues, focusing on one of the issues discussed, i.e. the Singapore issues.

with best wishes

Martin Khor

Third World Network

EUROPEAN PARLIAMENT HEARING DISCUSSES SINGAPORE ISSUES

Brussels 12 June 2003 (TWN Service):

European Trade Commissioner Mr. Pascal Lamy has insisted that the Singapore issues is part of the single undertaking agreed to at the WTO’s Doha Ministerial Conference.

He also confirmed that the EC and the US do not agree on the scope of a possible WTO investment agreement, with the EC wanting to limit it to foreign direct investment and the US wanting to also include portfolio investment.  Commenting that such differences are not unusual, he admitted:

“What the final result will be I can’t say.”

Mr. Lamy was speaking on Wednesday at a public hearing at the European Parliament on “WTO: Agriculture, TRIPS, Singapore Issues”, organized by its Committee on Industry, External Trade, Research and Energy.

The hearing saw lively debates on the EC position on the Singapore issues, intellectual property and agriculture.

Several participants expressed concerns about the negative effects on developing countries of the proposed new rules, especially investment and competition, being put forward by the EC.  They were also concerned about the untransparent decision-making practices at previous Ministerial Conferences and worried that similar tactics may be used at or before Cancun to artificially create a “consensus” to begin negotiations.

Mr Lamy initially said he would not like to enter the controversy whether the Singapore issues are part of the single undertaking.  However, when asked by Euopean Parliamentarian Harlem Desir to clarify whether the European Commission could revise its position on the Singapore issues and whether they were really part of the single undertaking agreed to, Lamy said:  “Yes it is part of the list of issues and is part of the single undertaking.”

Lamy said multilateral rules on the Singapore issues are needed as they give a multilateral dimension to bilateral and regional rules.  The multilateral rules will enable developing countries to “better master their integration in the world economy and can protect the weak against the strong,” he said, adding that in each area the developing countries should be able to keep the room for manouvre they desire to have their own development policies.

Desir however pointed out to Lamy that more than 20 developing countries had stated the previous day in Geneva that there were still many differences among Members on the Singapore issues, indicating their lack of interest in negotiating these issues.  “We are looking here at issues that the EC is pushing for but in which the developing countries are not interested.  Could this lead the EC to revise its position on these issues, and do you still think it is part of the single undertaking?”

Desir also said that although in Lamy’s view a WTO investment agreement would only cover foreign direct investment, the United States wanted to also include portfolio investment.  He asked Lamy how he could then be sure that the agreement would be restricted to FDI.

Replying, Lamy said that the Doha process was quite tricky, the Singapore issues were an important point in the negotiations and that they are part of the list and part of the single undertaking.

Regarding the scope of investment, Lamy said it was true the EU position is different from the US position, but this was not unusual.  “What the final result will be I cannot say.  If the EU and US don’t agree, it is not my way of seeing it that the EU will give in to the US.”

To another question whether the EC would support the proposal by Burkino Faso and other African countries that the Cancun Ministerial resolve to eliminate cotton subsidies, Lamy said there was no problem with the EU position on cotton as it did not have export subsidies and its support to cotton was only 100 million euro a year.  “Our proposals on agriculture provide for increase in market access and reduction in domestic support.  It’s the Americans who are in the front line (in relation to cotton).”

Another European Parliamentarian asked Lamy why the EC was demanding developing countries to liberalize water supply through the services negotiations, and whether he knew that these countries were facing heavy pressures to liberalise from both the Bretton Woods institutions and the WTO.

Lamy said in the EC demands on water to developing countries, “we leave them a margin of sovereignty to decide on prices to charge, and whether services are universally provided, and so on.”    He believed the objectives of increasing public access to water cannot be met except through the private sector’s installation of water supply facilities in developing countries, as it was not possible for the public sector to do it.

He also criticized the World Bank and IMF for having used conditionality for loans to impose trade liberalization on developing countries, which is not necessarily consistent with the organisations’ job descriptions.  “Some developing countries went through traumatic experiences as this opening was imposed on them as part of a financial deal.”

Lamy’s statement on the status of the Singapore issues merely reiterates the EC position in the WTO.  The European Communities paper to the General Council on the Singapore Issues - The Question of Modalities (27 February 2003) states that the Singapore issues “are a key element of the Doha Development Agenda and part and parcel of the Single Undertaking.”

This however is disputed by delegations from developing countries.  For example, at a seminar on investment in Geneva in March, India’s permanent representative to the WTO, Amb. K.M. Chandrasekhar,  said the EC interpretation “is not legally correct.  Paragraph 47 of the Doha Ministerial Declaration says, “With the exception of the improvements and clarifications of the Dispute Settlement Understanding, the conduct, conclusion and entry into force of the negotiations shall be treated as parts of a single undertaking.”  Thus, only the outcome of negotiations can form part of the single undertaking.

“Paragraph 20 of the Singapore Ministerial Declaration of 13 December 1996 clearly stipulates as follows: “It is clearly understood that future negotiations, if any, regarding multilateral disciplines in these areas, will take place only after an explicit consensus decision is taken among WTO Members regarding such negotiations.”

“As we are all aware, no decision of any kind has been taken on the basis of explicit consensus at subsequent Ministerial Conferences at Geneva (1998), Seattle (1999) and Doha (2001).  Thus, the status of the discussion remains exactly the same as was decided at the Singapore Ministerial Conference.  This position was reiterated in the Chairman’s concluding statement at Doha which recognises the right of each Member to “take a position on modalities that would prevent negotiations from proceeding after the Fifth Ministerial Conference, until that Member is prepared to join in an explicit consensus.”

Earlier, in a session on Singapore issues at the hearing, James Howard, director of ICFTU (International Confederation of Free Trade Unions), said the international trade union movement opposed the proposal for Cancun to give a green light to WTO investment negotiations.

“We are concerned by the proposal to include national treatment provisions, which would eliminate governments’ autonomy to pursue their chosen economic and social strategies,” he said.  “We believe that investment agreements must exclude any National Treatment provisions, whether pre or post establishment.

“It appears clear the current proposals would not aim to replace bilateral investment agreements but merely add one further layer of investor protections.  It would not deprive multinational companies of their rights to use the existing bilateral treaties to their advantage nor introduce a single obligation to regulate the behaviour of those companies.”

Howard also said the ICFTU believed a convincing case has not been made for negotiating a competition agreement in the WTO, with its focus on dispute resolutions and trade liberalisation, not consumer protection.  “We are particularly concerned about the current proposals to base competition policy discussions at the WTO on the principle of non-discrimination, which would prevent governments from applying different treatment to their domestic companies.

“We are also opposed to the proposal to require all WTO members to legislate and implement a competition policy-something which in our view should be left to any WTO member to decide upon, depending on their own choices.”

Martin Khor, director of the Third World Network, said that many developing countries had for many years been against the entry of the Singapore issues into the WTO and it was only because of manipulative practices and the lack of transparency and proper procedures that the Doha decision was made on negotiating these issues on the basis of an explicit consensus on the modalities.

He said if all WTO Members were allowed to properly participate in the Cancun Ministerial and the process leading to it, it was unlikely that negotiations would be launched, as most developing countries were against this.  He criticized the EC approach to “modalities” as an attempt to trivialise the concept by defining it as procedures and a categorization of issues.

By ignoring the need for substantive agreement on the issues and obligations, which are required in any consensus on “modalities”, as seen in the agriculture negotiations,  Khor said the EC approach was aimed at making it easier for it to claim that there was a consensus on the Singapore issues when in fact that was none.

He warned that if negotiations began, the WTO would become overloaded with new agreements that were not part of its trade mandate, and the organisation’s work and rules would become distorted and more imbalanced.  Developing countries would also take on heavier obligations which would severely limit their ability to forumulate the policies they require for development.

Claus-Dieter Ehlermann, former Chairman of the WTO’s Appellate Body and a former Director General of the EC’s Competition division, said the initial EC proposals for a WTO competition agreement had been strongly opposed by the US anti-trust community for being counter-productive and a  threat to the organic development of domestic antitrust policies, as well as the WTO being the wrong forum for antitrust implementation.

He added that most developing countries had also expressed concerns that this proposal was another pretext to help multinationals break into their economies.

However, the positions of the parties now show a growing degree of convergence as in particular the EU has abandoned its initial stance for a broad competition agreement and now has limited its requests to a few fairly modest points.

He said although some degree of convergence has been achieved, “no consensus has been reached on the launching of negotiations in Cancun. Several issues are still open to debate. In particular, many developing countries remain to be convinced of the benefits that a WTO Competition Law Agreement would bring for their development.

“Moreover some developing countries ask for adequate and effective special and differential treatment.  Thailand for instance has proposed that developing countries should be allowed to exempt national and international export cartels, a request that industrialised countries do not seem willing to accept.”

Ehlermann said there was however room for optimism, but whether competition negotiations start in WTO will depend not on competition questions alone as more will depend on other issues, especially agriculture.

In response to the presentations, a parliamentarian said he was concerned at how the European Commission was overloading the WTO agenda and system.  The Uruguay Round promises made by developed countries to developing countries were not kept, the Singapore issues went beyond the mandate of the WTO and are generating new risks for developing countries.

Another parliamentarian said she was concerned that the process of decision-making at WTO Ministerial Conferences was not fair or transparent, as she had personally witnessed at Doha.  She asked what would happen in Cancun if the developing countries could participate more fairly in the decision making?

Khor replied that he believed most developing countries were either opposed to or not prepared to begin negotiations.  This is evident from the position taken at the LDC Trade Ministers’ Conference earlier this month, that the LDCs were not able to take part effectively in the discussions so far, and that further discussion is necessary on the Singapore issues.

He said that developing countries were upset at the lack of transparency and procedures at Ministerial Conferences, and a large number of them had proposed some simple and basic rules, for instance that proposals made by them should be included in drafts of declarations or decisions, that all Ministers or delegations be allowed to attend meetings, and that any proposal to extend the Conference should be put to all members.

However even such simple procedures had not been accepted by the developed countries, he said.  This was a sign that they wanted the flexibility to use unfair tactics and procedures and thus to have their way at the forthcoming Ministerial Conference at the expense of those countries that do not agree with their views.

Unless these undemocratic and untransparent methods of running meetings and making decisions were reformed, any decisions taken to negotiate the Singapore issues would lack public legitimacy, he concluded.