G-77 High Level Advisory Group against new issues at WTO

by Chakravarthi Raghavan

Geneva, 24 Sep 2001 - A High Level Advisory Group (HLAG) of the Group of 77 has recommended against including new issues in the agenda or work programme of the WTO Ministerial Conference at Doha, and against further expanding the frontiers of the WTO trade system to new and unchartered areas.

The High Level Advisory Group of Eminent Personalities and Intellectuals on Globalization and its Impact on Developing Countries had been convened pursuant to the decision of the South Summit at Havana, Cuba (10-14 April 2000), and held a three-day meeting (12-14 September 2001) in Geneva.. The report and recommendations of the HLAG are to go before the annual meeting of foreign ministers of the Group of 77. The scheduled meeting in September has been postponed, along with the General Assembly’s general debate segment.

The conclusions and recommendations of the HLAG, chaired by Amb. Bagher Asadi, Permanent Representative of Iran to the United Nations and chair of the G-77, cover a wide range of trade and finance issues and their interface, and will be an input for the ministerial meetings of the G-77. The conclusions and recommendations on trade include those with an immediate focus on the 4th Ministerial Conference of the WTO and next year’s High Level meeting in Mexico of the UN Conference on Financing for Development, and looking beyond.

The first priority in the substantive content of any WTO work programme, the HLAG has recommended, must be the development agenda of the developing countries and this must be the main focus of the WTO’s work in the next several years.

The current work programme of the built-in agenda, including mandated negotiations on agriculture and services and mandated reviews of TRIMS and TRIPS already involve a heavy schedule and new issues should not be brought in, the HLAG recommended.

The HLAG dismissed as “misleading” the claim that the WTO requires negotiations in new areas to maintain the WTO’s relevance, and pointed to the re-thinking among trade experts and public interest groups as to the wisdom of having extended the mandate of the multilateral trade system to non-trade areas such as intellectual property rights, as this has threatened to distort the role of the trading system.

“The proposed new issues of investment, competition and government procurement (as well as labour and environmental standards) if accepted into the WTO, would extend the frontiers of the trading system to new and unchartered areas... and such an extension of the frontiers is not advisable for several reasons,” the HLAG said.

In the immediate context of the ongoing negotiations at the World Trade Organization and preparations for the next ministerial conference, the HLAG recommended that in terms of the Development Agenda to be pursued at the WTO, there should be a review of the various WTO agreements to rectify the imbalances and deficiencies in them, the problems of implementation faced by developing countries, focus on mechanisms of developed countries to fulfil their commitments (in textiles and clothing, agriculture, tariff peaks and escalation, dumping and other protectionist measures), on strengthening and operationalising special and differential treatment, mainstreaming of development into operational principles and rules of the WTO, special needs of the WTO, and transforming the system and culture of decision-making at WTO to make them transparent and participatory, discontinuing the ‘Green Room processes’ and inviting all WTO members to attend and take part in decision-making.

In an assessment of the multi-faceted issues of globalization, the HLAG agreed that the present processes of globalization have led to widening inequities between North and South as well as within countries, and the developing countries and the poor people within countries are becoming ever more marginalised. Moreover the global economy has become more unstable, due to the volatility of financial flows and currency exchange rates and their effects on the real economy. The current global economic crisis is a reflection of this instability and the lack of global policy coordination. People across the world are also feeling more and more insecure as they perceive an increasing inability to exercise control over their lives.

Whilst economic policies and relations are greatly influenced by technological developments, the Group believes that ‘globalization’ should not be seen as an inevitable force beyond the control of human beings or of countries. Instead, the type of globalization process taking place is to a large extent the result of policy choices, and thus determined by human decisions, values and culture.

“Thus, the globalization process itself can and should be given a proper direction. It can be changed through the selection of different policies, and these policies should be based on the shared positive values of humanity, especially justice, equity and the well-being of all people. Since many aspects of the present type of globalization have produced negative effects, especially on developing countries, the globalization process can and should be re-shaped to make it more inclusive, more equitable and beneficial to people in the developing world.”

The High-level Group was of the view that the central concept of interdependence should be restored to the phenomenon of globalization.

“Globalization without real interdependence is unmanageable and may result in confrontation, suffering and social chaos,” and there is a “need for revitalizing the spirit and central role of multilateral cooperation in all fields.” The Group stressed the need for an alternative and more inclusive economic paradigm to guide international economic relations as well as national development strategies.

Given the need for interdependence and multilateralism, the Group agreed that developing countries have to “actively prepare for and participate in meetings, gatherings and global negotiations that will shape globalization.” It is critical that developing countries carefully prepare for and take advantage of the forthcoming major global events, including the Ministerial Conference of WTO, International Conference on Financing for Development, and the World Summit on Sustainable Development, in order to promote the interests of the South and attain a more balanced agenda for globalization. These global conferences should be taken “not as once-and-for-all events, but as important milestones for on-going processes of reforming aspects of the international order to make it more balanced and equitable,” the HLAG advised.

The G-77, the HLAG said, should build upon the momentum emanating from the Havana Summit by deepening the coherence between domestic and external policy approaches. This coherence should be based on a realistic understanding of the process of globalization and appropriate responses to it, in order to make globalization more inclusive. In this context the Group recognized that the concept and approach of “decent work” constitutes a positive direct response to globalization, as it puts quality employment at the centre of economic and social policies and is an important component of the development agenda.

On the general issues of Trade and Development, the HLAG recognized that trade has an important role to play in development, and that in the trade-development nexus, “trade is a means whilst development is the objective.”

Trade liberalization, the HLAG underscored, has led to mixed results in developing countries. Some countries that paced their liberalization in line with the development of their industries were able to improve their competitiveness and to also expand the range and volume of their exports.  However, many developing counties, often under structural adjustment programmes, engaged in rapid liberalization before their domestic firms were sufficiently competitive, thus resulting in deindustrialisation or a closure of firms and loss of manufacturing jobs. In the agriculture sector, the viability of small farms in some sectors in many developing countries continue to be affected by cheap imports (some of which are heavily subsidized). Recent UNCTAD data, the HLAG said, show that whilst imports surged, exports did not increase at a corresponding rate, and the trade deficits of developing countries (excluding China) on average increased by three percentage points of GNP between the 1970s and the 1990s, “and inappropriate trade liberalization was a contributory factor.” Whilst imports were liberalized, developing countries’ exports have been constrained by the fall in commodity prices, continued lack of access to developed countries’ markets in sectors such as agriculture and textiles, and by supply constraints.

The HLAG recommended that the “dominant trade policy model that stresses maximum liberalization be reviewed and modified.” Instead, a policy of “appropriate liberalization” should be adopted, in which “the pace, scope and sectors for liberalization are matched with the preparedness of the country concerned, the existence of necessary conditions and of adequate export opportunities and earnings.”

Appropriate lessons should be drawn from the trade experience (positive and negative) of developing countries so as to enable the evolution of more appropriate approaches to trade strategy and policy. The trade policy conditionalities of the Bretton Woods institutions, and the rules and operational principles of the WTO, should be reassessed and reconsidered in light of this, the HLAG added.

Focussing on issues relating to the WTO, the HLAG said that despite the establishment of the WTO, the benefits of global trade “have continued to be unevenly distributed,” and marked by “the increased marginalization of developing countries, particularly the LDCs.”

It was recognized that the present WTO structure and rules have not been designed to sufficiently take into account the capacities, needs and interests of developing country Members. As a result, the developing counties face several types of problems in the WTO system: First, some important structural features of the system and many agreements are imbalanced against their interests.  Second, the anticipated benefits from the Uruguay Round to developing countries have not materialized (a significant reason being that developed countries’ markets are still restricted in textiles and agriculture and through tariff peaks, tariff escalation and anti-dumping measures). Third, developing countries face problems when implementing their obligations under the rules, including on intellectual property, investment measures, subsidies and agriculture.

The HLAG noted that many of the serious implementation problems arose from the then ‘new issues’ added to the trading system through the Uruguay Round.

Fourth, developing countries are facing intense pressures to accept more obligations in ‘new issues’ such as investment, competition, government procurement and labour and environment standards, proposed by developed countries for negotiations toward new agreements. Fifth, the decision-making process is often untransparent (especially in the process of preparing for and at Ministerial conferences), adding to the difficulties already faced by developing countries to participate, due to their inadequate capacity.

The HLAG made recommendations concerning two kinds of needs: the immediate requirements raised by the ongoing negotiations at the WTO, and the underlying needs related with the capacity to formulate trade policies and rules in accordance with the developing countries’ development requirements and objectives.

On the immediate requirements, the HLAG said that in view of the forthcoming 4th Ministerial Meeting of the WTO, immediate attention needs to be given to ensure that developing countries’ interests and concerns are fully reflected in the WTO’s future work programme. Thus the process of drafting and the substance of the Ministerial Declaration is of utmost importance. The processes of formulating the Declaration and the preparation of the work programme must be inclusive and transparent, allowing for the full participation of developing countries and avoiding exclusive “green room” meetings.

While the specific interests of the G-77 members are diverse, there is a shared concern on the need for the WTO work programme to address their development needs and to facilitate the effective participation of developing countries in the development and execution of this work programme. Developing countries need to continue to bring forward concrete proposals on the full range of WTO issues of concern to them. Adequate support should be provided (including by UN agencies and by institutions of the developing world) to the developing countries to develop and defend their positions and to participate in negotiations and other discussions.

On the substantive content of the WTO work programme, the HLAG said, “the first priority must be to address the development agenda of the developing countries.” In fact, this must be the main focus of the WTO’s work in the next several years. This Development Agenda should deal with the problems facing developing countries.

“First, there should be a review of the various WTO agreements in order to rectify the imbalances and deficiencies contained in them, and thus improve them. Second (and related to the first), the problems of implementation faced by developing countries when fulfilling their obligations have to be addressed.  Third, focus should be put on the need for and mechanisms of developed countries to fulfil their commitments in reducing and removing trade restrictions in areas of interest to developing countries (including liberalization of textiles and agriculture, tariff peaks and escalation, anti-dumping and other protectionist measures, etc). Fourth, the special and differential treatment principle should be strengthened and operationalized (including in making it legally binding in various rules). Fifth, there should be the mainstreaming of development and the development principle into the operational principles, policies and rules of the WTO. Sixth, the special needs of LDCs have to be addressed. Seventh, the system and culture of decision making should be transformed to become transparent and participatory to enable full participation by developing countries; the restricted “Green Room processes” in which only some countries are invited should be discontinued, and all Members must be allowed to attend all the meetings of WTO and take part in decision-making.”

The WTO’s work programme, the HLAG noted, will also be occupied with the built-in agenda, including negotiations in agriculture and services, and the mandated reviews of TRIMS and TRIPS.

“With the above agenda, the WTO will already have a heavy schedule of work. The claim that the WTO requires negotiations in new areas to maintain the institution’s relevance is thus misleading. Indeed, there is now rethinking among trade experts and the public interest groups as to the wisdom of having extended the mandate of the multilateral trading system to non-trade areas such as intellectual property rights, as this has threatened to distort the role of the trading system. The proposed new issues of investment, competition and government procurement (as well as labour and environmental standards), if accepted into the WTO, would further extend the frontiers of the trading system to new and unchartered areas. The Group is of the view that such an extension of the frontiers is not advisable for several reasons. The proposed issues, if accepted for negotiations, could lead to new agreements that further restrict the national policy space of developing counties and constrain their development options, with adverse development consequences. They would overload the WTO system, or even distort it, as most of the issues do not directly involve trade nor are they suitable subjects on which trade or WTO rules should apply.

“If negotiations were to start on these new issues, the critically important development agenda of developing countries (or issues of vital importance to developing countries) would not be able to command the attention it deserves.  Therefore, the Group suggests that the proposed new issues should not be included on the agenda or the work programme of the WTO Ministerial Conference in Doha.”

Looking beyond the next ministerial conference, and to the nature of the multilateral trading system and the development imperatives, the HLAG said that the “basic design” of the trading system should be reviewed and improved on.

“The basic principle of reciprocity among Members should be reviewed, particularly as developing countries (with less capacity) would not be able to benefit equitably from the operation of this principle. Instead, the WTO system and its rules should recognize that Members have different levels of capacity and are at different levels of development, and that in order for there to be equitable benefits in the outcome, the rules have to be designed in such a manner that there are correspondingly different levels of obligations.

“The development principle (as reflected in the objectives of the Marrakech Agreement) should also be accorded the highest priority. Therefore, the existing rules should be reviewed and appropriate changes made, so that measures and policies required for the development of developing countries could be permitted in the rules.

“The appropriate scope and mandate of the WTO could also be examined, in light of the experience to date of the WTO. For example, the appropriateness of the issues currently in WTO or are presently being proposed for entry into the WTO system should be objectively assessed and those issues that are inappropriate for rule making in the WTO should be dealt with in other fora.”

The HLAG noted that there are some issues that are not covered by the WTO but which are critical to the trade performance of developing countries, and these issues should be given the importance they deserve.

In the area of commodities, the decline in terms of trade for commodities, and for commodity-dependent developing countries, remains one of the most important trade problems for many developing countries, which have suffered serious income losses resulting from this terms-of-trade decline. Since the early 1970s, developing countries have also suffered losses of market shares in world commodity export markets, caused by their loss of competitiveness in production and marketing and to protectionism and high subsidies in developed countries.

The commodity problem of developing countries should be on the agenda of international processes such as the Financing for Development Conference. Where feasible, the international community should encourage international schemes aimed at voluntary supply management to achieve a better balance between supply and demand in commodities, thus avoiding waste of investment, depletion of natural resources and excessive price volatility. In their financing of projects that increase the production of a specific commodity, the international and regional financial institutions should take into account the effect of the production increases on the price level and export earnings of other developing countries exporting the same commodity. Developed countries should eliminate or drastically reduce their tariff peaks, tariff escalation and trade-distorting subsidies in agriculture.

UNCTAD should act more effectively on the commodity issue and resources should be provided to enable this. All developed countries should join the Common Fund for Commodities and provide it adequate resources to assist developing countries.

A major reason why many developing countries have been unable to adequately benefit from the trading system is their lack of supply capacity, due to the low levels of infrastructure, technology, enterprise management, labour skills, marketing and distribution systems. For developing countries to benefit from the trading system, they should be assisted in removing these obstacles and in building their domestic production, technological and marketing capacities.  These issues should be taken up by relevant institutions, particularly in the UN system.

The members of the HLAG, who participated in their individual capacities were:

Amb. Bagher Asadi (Permanent Representative of Iran to UN), Roberto Bissio (Instituto del Tercer Mundo, Uruguay), Amb. Jorge Ivan Mora Godoy (Dy Permanent Representative of Cuba to UNOG), Martin Khor (Director of Third World Network), Bhagirath Lal Das (former Indian ambassador to GATT and Director of UNCTAD’s Trade Programmes), Alister McIntyre (former Deputy Secretary-General of UNCTAD), Prof. Deepak Nayyar (Indian Economist and Vice-Chancellor of Delhi University), Amb. Mubarak Hussein Rahmtala (Dy P.R.of Sudan to UN), Chakravarthi Raghavan (Chief Editor of South-North Development Monitor), Rubens Ricupero (Secretary-General of UNCTAD), Delphin Rwegasira (Executive Director of African Economic Research Consortium), Enrique ter Horst (former Asst UN secretary-general) and Layachi Yaker (former Algerian Minister and Executive Director of the Economic Commission for Africa). Two other members of the HLAG, Dr. Supachai Panitchpakdi and Ms Catherine Mwanamwambwa could not attend due to the disruptions in air transport caused by the terrorist attacks on New York and Washington. Among the resource persons assisting the group were Mr. Yilmaz Akyuz (in charge of UNCTAD’s division on Global Development Strategies), Mme Safiatou Ba-N’Dow, Director of UNDP’s TCDC and Robert Hamwey of the UNEP.

[A report on the HLAG’s recommendations on Finance and Development, Environment and Global Governance will be in a future issue of SUNS.] – SUNS4973

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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