EC ‘trial balloon’ on investment, competition in new round

by Chakravarthi Raghavan

Geneva, 30 Jan 2001 -- The director-general for trade of the European Commission (the executive arm of the European Union), Mr.M.P.Carl was meeting Tuesday with a group of WTO members where he was due to float, as EC sources described it, a “trial balloon” on starting a new trade round with the highly controversial investment and competition issues on the agenda, but to be described at the start of negotiations as not involving everyone having to sign on, ending instead as a plurilateral agreement.

EC officials explain that after a year of internal assessments and discussions with trade partners, the EC has  “learnt the lessons” of Seattle and the fiasco there at the time of the WTO’s 3rd ministerial, both in terms of process and substance, and wants to ensure that from now to Doha, and at Doha itself, the discussions and negotiations for a new round should be an inclusive and transparent process - transparent internally and externally - and that the EC ideas would be presented at a meeting Tuesday.

The EC has reportedly invited (for this meeting with Carl) Australia, Brazil, Japan, Switzerland, Chile, Hungary, South Africa, Thailand, South Korea, Mexico, Morocco, Egypt, Hong Kong China, Singapore, Turkey and India.

There is no particular explanation for the choice of countries, but from the list it is clear that the invitations and discussions are so arranged as to force some who are opposed to the EC’s “investment, competition” agenda to face others who are willing to accept it enthusiastically.

The EC meeting in Geneva has been preceded by a meeting at Frankfurt last week (at the instance of Japan) of some countries, and the apparently subsequent meeting at the World Economic Forum in Davos (where the WTO head Mike Moore and some delegations present there at ministerial or senior official level had a breakfast meeting), where the need to launch a new round was canvassed. After these meetings, western media reports said that Moore has now been asked to ensure that a new round is launched at Doha.

The EC’s idea of bringing these questions into the WTO agenda for ‘plurilateral negotiations’ is said to be controversial within the EU itself (where some of the leading countries want it to be a full-fledged negotiating item, as part of the next round), but is being presented to the WTO members, particularly the developing countries, as a way of enabling them, politically, to overcome domestic opposition to the start of a new round.

However, explanations and clarifications that EC officials are offering at various places, leave little room for doubt that while using this approach of a possible plurilateral agreement (meaning that not every member need subscribe to it), the EC is clearly hoping to repeat the Uruguay Round process, and at the end, ensure an outcome of multilateral rules that everyone would be forced to subscribe to.

It is clear that the EC’s tactics will evolve. Once the issues are brought on to the WTO agenda, and the objections to a consensus on the agenda for a new round is got around, as in the 7-1/2 year history of the Uruguay Round, gradually at the meetings of the ministerial conference, there will be an incremental approach to adding on new mandates, and a momentum be developed to force everyone to join.

The single-undertaking concept at Punta del Este, did not envisage everyone accepting everything, merely that all negotiations will start and end at the same time - and the questions of the various agreements in goods and that on services and how they are to be administered was left wide open. But at Montreal and subsequently, the agenda of negotiations on intellectual property was enhanced, and after Brussels, negotiations (in a very secretive way) were conducted; despite the claims now, at Davos, of then GATT Director-General Arthur Dunkel and his successor Peter Sutherland, non-transparent and non-democratically negotiated accords among a few were forced down on others.

Just as trade negotiators and diplomats from the developing countries presented the Uruguay Round outcome to their capitals in terms of ‘there is no alternative’, joining the investment and competition agreement that  would emerge from any new round would be presented by trade diplomats to their capitals, and the governments to their parliament and domestic constituencies in terms of a need to send “a positive signal” to foreign investors in order to attract them.

There has been a bankruptcy of economic thinking (under neo-liberal tutelage) that has now come to dominate the outpourings of the Bretton Woods-WTO institutions (about liberalization of trade and foreign investment as always being beneficial to the liberalizing country and pushed at any cost).

Within the UN system too, there is very little of objective economic analysis based on empirical evidence (and not merely one set of neo-liberal ideologues quoting another set), and governments being presented on trade policy or on investment policy, with a clear picture of the costs and benefits and options on policies and measures, nationally and multilaterally. Corporate interests are frequently presented as being in the public interest.

And the behaviour of governments and corporations going to bed with each other, has resulted in the public having greater confidence in NGOs than in governments or international institutions and corporations.

Currently, the debate has been between two extremes,  big business, and their home governments and intergovernmental institutions (not only the WTO, but the UN too, which has embraced the global compact with the international chamber of commerce), and fora like the World Economic Forum (of big corporations and major governments, with some token NGO presence for legitimization) at one end,  and the non-governmental groups, who are able to marshal with equal strength, the facts and arguments against any such approach, and have taken the high ground of promoting the public interest.

And while publicly, the international institutions and their executive heads talk about ‘civil society’ and the role of NGOs etc, in private conclaves they are unable to conceal their anger over the NGOs and their influence, and jibe at them by posing questions such as ‘who do they think they represent?’ - but don’t consider such questions as legitimate when they themselves concert with Chief Executive Officers of big business corporations or the World Economic Forum at Davos, or when GATT, and later the WTO heads, go to such meetings and speak of the CEOs and corporations being their real constituencies.

In the result, the middle ground has been eliminated, with consequences that will be very visible soon.

Whether the EC’s efforts to get the investment and competition issues on to the agenda of the next round, to start with by talking of it resulting in plurilateral agreements, and wins over those members now opposing these issues, it will undoubtedly unite and galvanize NGOs campaigning outside against the WTO (and the neo-mercantalist, neo-liberal corporate agenda), and heighten the opposition to the trading system.

While the EU has not so far formally presented its idea on paper at the WTO, a Commission proposal sent to its member countries in December last presents the pros and cons and the arguments and objections of the developing countries to a new comprehensive round with new issues like investment and competition and non- trade issues like trade and labour and trade and environment, which are seen as having wrecked the Seattle meeting. The EC’s ideas were sent out in December to the 133 Committee (the article of the Rome treaty, after which it is named, and constituting ambassadors/representatives of the EU members whom the Commission consults on trade matters at every stage).

EC sources say that the EU and the Commission have drawn conclusions from the Seattle experience and that the whole procedures and mechanisms and preparatory process leading to the Ministerial Conference, and the Conference itself had to be ‘much more inclusive’ and ensure that “all the members are there or their interests are represented by someone else”. Both inside the organization and outside, there should be openness and transparency.

As for the agenda for future negotiations, in the run-up to Seattle and at Seattle itself, there was a collective effort to pre-negotiate the final outcome through the agenda and this led to the eventual breakdown. The text for a declaration at Seattle was too long and cumbersome.

For the new round to be launched at Doha, the EC would like a brief and succinct agenda.

While the EC had its own negotiating objectives, it professes now to have a more positive approach in terms of the agenda and conclusion of the round in terms of issues of importance to the developing countries, including the classical issues of market access in the manufacturing sector, agriculture and services, but also on the WTO rules where the views of developing countries had been put forward in the ‘implementation debate’. The visiting of these rules seemed to be very important for developing countries and it was hence necessary to revisit them, EC sources say.

It is not clear how this is different from the stand of the EC in the run-up to Seattle, where it spoke of every issue anyone raised being put on the agenda of future negotiations. And considering how the year-long consideration of the ‘implementation’ issues have ended up with nothing, it is now clear how the EC hopes to help developing-country diplomats to convince their parliaments and business and civil society that these issues will be resolved in the new round and that more implementation problems would not be added.

While the EC thinks it is for developing countries to put forward their own proposals in the revisiting of the Uruguay Round rules, the EC feels that trade-instrument questions like anti-dumping rules would need to be looked into. The other trade instruments are safeguards, subsidies and countervailing duties.

The EC now professes to be desirous of paying much greater emphasis and attention in the new round to the concerns of developing countries.

On the question of competition and investment rules at the WTO, the EC is going to “fly a trial balloon” and explore with developing countries whether they would be more inclined to accept these two items on the agenda if it was agreed before hand that when the negotiations are concluded there would be no obligation for them to sign up to the results, and the outcome could well be a plurilateral agreement.

For the EC, and several of its members, this would be a retrogression from the Uruguay Round approach of a ‘single undertaking’, EC sources say, But if it would help those developing countries having a political difficulty at home to agree to a new round with these new issues, the EC would be willing to explore this. But it would make a major effort to ensure that the resulting accord would be of such a character that at the end of the negotiations, all WTO members would be willing to subscribe to it, and it would be a multilateral agreement.

However, in talking about having negotiations on these issues as part of a new round, but not requiring everyone at the end to sign on to each one as a single undertaking unlike in the Uruguay Round, but hoping everyone would join, the EC officials are in fact misrepresenting the ‘single undertaking’ concept when the Round was launched; the misuse of that concept at the end of the Uruguay Round to force everyone to sign everything, and the subsequent abuse of that concept by the panels and the WTO’s Appellate Body in creating new obligations for developing countries.

On the two other controversial questions, about trade and labour and trade and environment, EC officials say that on trade and labour, the EC is opposed to any protectionist trade sanctions to enforce labour rights. But the EC would want a forum of the WTO, IMF, World Bank, ILO and other UN organizations, and non-governmental organizations, as well as representatives of employers and workers to be set up to consider these questions.

As for trade and environment, the EC did not have a ‘protectionist’ view of trade and environment, but all future trade agreements should have the notion of ‘sustainable development’.

The EC does not know at the moment what the position of the Bush administration and its priorities would be -  whether it would favour and give priority to a new multilateral round at the WTO, or the objective of the Free Trade for the Americas. But the underlying economic and political objectives of the US and EU are seen  as so similar that the EC believes there would be ‘constructive’ working relationships.

The US administration getting fast-track authority would not be a ‘pre-requisite’ for launching a round, but the negotiations cannot be concluded with agreements without such authority from Congress. – SUNS4825

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

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