by Chakravarthi Raghavan

Geneva, 29 Oct 99 -- Consideration of the four "Singapore issues" at the informal Heads of Delegation (HOD) meeting Friday brought out that a larger number of countries are opposed to these issues being slotted into subjects for negotiations in the 'next round', and the divisions are so sharp and basic that 'consensus' cannot be reached.

In two sessions Thursday, the informal HOD discussed the paragraphs of the revised draft ministerial text dealing with the questions of trade and investment, trade and competition, transparency in government procurement, and trade facilitation.

On investment and competition, the formulations in the draft in two different places pose the alternative of putting them, at whatever pace, as subjects for negotiations or continuing the work programme for study initiated at Singapore. The discussions showed some sharp differences.

On transparency in government procurement and trade facilitation, again the attempt appears to be to reach some agreement in Seattle (the US has even been conducting consultations on an agreement for transparency in government procurement, and has drawn up an agreement that would require developing countries to undertake more obligations of notifications and answering questions from would-be foreign suppliers etc).

But others want only to continue the study programme. Here too, there is a hard core of opposition to a WTO accord and obligation on 'transparency in government procurement', even from those who want national policies of transparency. And surprisingly, the opposition to the US-EC demands under 'trade facilitation' has been much wider and sharper.

The two sessions were followed by a "Green Room" consultation among a smaller group of  key countries, but did not see any narrowing of differences. A small clutch of countries (mostly supporters of the EC and US views) are trying to do a drafting exercise, one for a compromise, to get a formulation that could get a consensus -- essentially to take the subjects off the agenda of a new round to be launched at Seattle, put investment and competition issues into a work programme, with a 'higher status' than the current study/education process, and holding out the prospect of an 'early sowing' at the 4th ministerial meeting (the one after Seattle) that the US and the Cairns Group of agricultural exporters want as an 'early harvest'.

However, to the surprise of many, the stronger opposition to the Singapore issues that have been voiced by a much larger range of countries, appears to have come as a surprise to many of the proponents, who till now presented the opposition as coming from just a handful of countries, who can be isolated and pressured to yield through 'Green Room' consultations.

For one thing, the 'implementation' issues and the mandated negotiations in 'agriculture' are very hard issues that concern a number of developing countries who refuse to yield on anything until they know how implementation is going to be dealt with.

In fact, in an informal HOD on implementation questions on Friday, these issues were a "deal-maker" or a "deal-breaker", and they are not ready to be fobbed off with talk of no upsetting the balance or of all these are issues to be in a new comprehensive Round. Almost every developing country (except odd men out like Singapore) spoke up and made clear they want some decisions (including on extension of transition periods in TRIMs, TRIPS, and Customs Valuation) to be taken at Seattle, and others to be addressed and resolved in the first year, and not as part of negotiations in the new round (as the US and EC are arguing).

India, perhaps, summed it up by saying that merely talking of not being willing to change the balance or not ready to negotiate what had been agreed in the Uruguay Round would not result in the implementation issues going away. There would be no progress on any other issue, without progress and solutions on correcting the imbalances in the Uruguay Round by tackling implementation, which had been the subject of several detailed proposals for the last 15 months. For India and several other countries, implementation issues were as important as the built-in agenda of agriculture.

As one Third World trade diplomat put it later, the basic issues of 'implementation' and correcting the imbalances and lack of benefits to developing countries under the Uruguay Round accords is not going to be addressed, with the argument that any solutions would change the "balance of rights and obligations" in the agreements, and developing countries are sought to be fobbed off by talking of technical assistance and capacity building or case-by-case approach.

In that case, said the diplomat, the public and domestic constituencies of developing countries are bound to ask their governments why they take on more obligations in the WTO, thus upsetting and skewing the imbalance of existing rights and obligations and benefits and costs, through new issues or even of more trade liberalisation under existing accords (whether agriculture or services).

And the United States, which just a year or more before, told India and others that their domestic political problems, whether in TRIPS or other agreements, had to be tackled by the governments domestically, now is moving on the Seattle process and beyond, seeking help from others to deal with the domestic political problems and constituencies of the United States - and seeking to put more baggage on the WTO in the shape of labour and environment issues, the diplomat noted.

Some trade diplomats with long experience of the pre- and post-Uruguay Round processes were privately sceptic that any 'Green Room' process could resolve the problems and differences in a trading system that now has a sweep far beyond trade in goods across frontiers and ancillary questions. One of them said that things have been so mishandled by the US and the EC and majors that a long cooling off period may be needed.

Firstly, said this diplomat, there are some institutional clashes -- where the role of the highest WTO body, the General Council and its chairman, is being sought to be pushed aside in favour of a secretariat-led process, and the revival of the 'Green Room' which after Singapore, the then Director-General, Renato Ruggiero promised would never happen again. Every WTO consultation, Ruggiero had said, would be open-ended.

Though this resulted in some of these small consultations shifting to missions outside and enabled frank exchanges of views, it did not have the same dynamic as a WTO process of decision-making.

Director-General Mike Moore has been elected after a bruising, year-long fight, and is seen as beholden to the US for the office, with the pay-offs still in the pipe-line. It would take him a while to be accepted as a viable 'good offices' person among a sharply divided membership.

There was an initial effort by the secretariat to take over the process, taking advantage of the fact that with a very small mission, the Tanzanian chair, Amb. Ali Mchumo, had very little assistance of his own, and had initially 'stumbled' at the start line, offending and creating suspicions both among many developing countries and some Europeans. And then he corrected himself, by putting back the 'implementation' issues (which neither the US nor EC want) into the draft and began a more open process of discussions.

But taking advantage of Mchumo's 'non-availability' for a few days, Moore not only took over the informal HOD process, but revived the 'Green Room' process.

The 'Green Room' meetings chaired by Moore are being held every day after a transparency exercise of members expressing their positions and views on various items in the draft ministerial text, and there is thus more of a hardening of positions. On top of it, people attending these 'Green Room' meetings are yet to get accustomed to Moore's New Zealand accents and sense of humour - so much so that at one meeting this week, a leading ambassador told Moore that he did not understand what Moore was saying, and would he please explain things plainly.

But some of the differences on the Singapore issues are also fundamental - for e.g. whether host country obligations to foreign investors should be balanced by investor obligations to host countries and home country obligations on behalf of their investors as a balance to right of home countries to take up disputes of their investors; and whether and how anti-competitive policy issues could be confined merely to competition law and policies (as between foreign and domestic enterprises), or also address both the transnational corporate restrictive business practices and government trade measures like anti-dumping and other instruments used to target individual exporters.

These differences make even 'formulations' of further study/work programmes controversial and divisive.

For e.g. on investment, where the US does not want any negotiations to be launched at Seattle, or even figure in the agenda of possible negotiations - that may complicate its domestic politics and the democratic presidential primaries, and campaigns (and fund-raising of soft and hard money) - the US put forward a formulation for the study process of the Trade and Investment group that was spurned by those willing to have a further study and report process.

Apart from some new wordings,the US sought to introduce a study of possible disciplines on host country obligations to investors, and proposed the elimination from the study of "issues of interest to developing countries in particular", as well as wording on "the obligations of foreign investors to host countries, and the obligations of home countries in respect of disciplines on their investors."

This brought a swift reaction from India and others, who are opposed to negotiations, but are willing to tolerate further study (without any negotiation commitments). They said that they would oppose even continuation of the Singapore study programme at WTO under such conditions as proposed by the US.

"If we can't study these issues of concern to developing countries, and the obligations on investors and that of home countries of investors, there is no reason to study these at the WTO," India said.

And a Hong Kong China formulation for further study on competition that removed any specific references to anti-dumping and other trade policy instruments only furthered suspicions among other developing countries about the Hong Kong China role which, except on textiles and clothing, is nearer to those of the US.

At the informal HOD on the Singapore agenda, Bolivia speaking for the GRULAC (Group of Latin American and Caribbean countries) was critical of the topic itself, arguing that it was not proper to take up the Singapore agenda issues. Rather, the discussion should have been continued on agriculture and implementation questions. Uruguay and Argentina supported this view, while the EU supported discussion of the Singapore agenda issues.

On investment, while making some comments and proposals for change on the details of questions to be addressed in negotiations, supporters of negotiations included Hungary, Costa Rica, EC, Japan, Korea, Venezuela, South Africa, New Zealand, Switzerland, Norway, the Czech Republic, and Hong Kong China.

A number of other countries said they were not prepared to take up negotiations and were not convinced of any need for WTO rules. While some qualified it with opposition to 'negotiations at this stage', seemingly leaving the door open for the future, the others were unequivocal in their opposition. All of them were prepared for continuing the study.

These countries included Indonesia, Haiti, Malaysia, India, Kenya, Pakistan, Argentina, Cuba, Australia, Egypt, the Dominican Republic, Barbados, Sri Lanka, Jamaica, Uganda, Singapore, Thailand, El Salvador, Rumania. Some of them argued against negotiations on the ground there was no consensus, and others on more fundamental grounds against WTO rules in these areas.

Brazil and a few others said they could not agree to reopen investment issues decided in the Uruguay Round, and wanted further study to focus on the problems of developing countries.

The United States was concerned over the 'wisdom' of taking up negotiations on investment at Seattle and said the time was not ripe. On the negotiating parameters it sought to know whether financial transfers would be covered and why only FDI was being sought to be addressed, and not all foreign investments. Also, its domestic (investor) lobbies did not want the GATS approach (of a positive list approach to commitments) since in their view this mitigated against transparency of a country's policy.

Supporting the idea of continuing the study further, the United States proposed a change to the text asking the working group on trade and investment (WGTI) to pursue its present mandate, but eliminating the focus on 'issues of interest to developing countries', as also the 'obligations of foreign investors to host countries, and the obligations of home countries in respect of disciplines on their investors.'

[US, European and Japanese TNCs, and their organization, the International Chamber of Commerce, have publicly come out against any rules on investor obligations to host countries, preferring their own voluntary codes and without any oversight. And over the years while seeking 'rights' for their investors, including the right to take up the investors grievances with host countries or multilaterally in raising disputes at the WTO, the US, EC, and Japan among others have been steadfastly opposed to obligations to police their TNCs]

The US formulation also wanted that the further study focus on "possible disciplines with respect to host countries' obligations to provide a stable and secure, investment climate, transparent regulatory conditions, and non-discriminatory treatment of foreign investors, including the freedom from investment- distorting and trade-distorting performance requirements; and the relationship between disciplines on a host country's treatment of foreign investment and the need to regulate for public purposes, including health, safety and environment.

The US proposal retained the formulation in the draft that the WGTI report to the 4th session of the Ministerial Conference on the results of its work [with its findings and recommendations].

The US, publicly and in some private talks, has said that by the time of the 4th Ministerial, it might be feasible to conclude this study programme, and enable Ministers to decide on negotiations.

A number of members of the Like-Minded Group of developing countries wanted the formulation for a study programme to incorporate the text of their own proposals, and not the version formulated by the secretariat of their proposals.

Indonesia wanted the formulation for study to reflect fully the proposals it had made at an earlier stage.

Haiti said it was not even convinced on need for a new round, when they had gained no benefit from the Uruguay Round. Any new round, if at all, should be confined to the built-in agenda of agriculture and services, and perhaps non-agricultural products. There should be no Singapore issues.

Malaysia said there was no consensus to take up for negotiations any of the Singapore issues, and the study process should continue, with the mandate re-formulated to reflect their specific proposals.

India was not ready to agree to any rules on investment. It was not crucial to have multilateral rules to get investment, and investment rules would not guarantee any investment flows.

New Zealand shared the EC view that it was appropriate to take up investment negotiations.

The EC argued that the time was ripe to take up negotiations on investment and, unlike the US investors, the European investors had been quite happy with the GATS approach.

Kenya recognized that investment and FDI played a crucial role in the global economy, but the Singapore study process was not yet complete. And it was too early to think of negotiations.

Pakistan did not find investment to be ripe for negotiations and rules in this area were not feasible. But it was prepared to continue the discussions and study process, but on the basis of the formulations put forward by it, along with other LMG members.

Brazil also favoured the formulation on continuing the study, but wanted the study process to focus on some issues of interest to the developing countries. It did not favour the formulation on negotiations, and could not agree to reopen the work done in the Uruguay Round on investment. The scope and definition should be confined to FDI and should not include portfolio investments. Brazil could not also accept the FDI rules being brought under the DSU.

Korea, which supported negotiations, however made clear that the scope under the DSU should be confined to disputes between governments, and not between private investors and governments.

Norway recalled the problems that arose in respect of the OECD Multilateral Agreement on Investment which, it said, failed because of political differences. It did not want to include too many details on negotiations, since the draft was a 'political declaration' of ministers. But they would like to see some references to investors responsibilities to civil society. Social and environment issues should also be taken into account.

Argentina saw no necessity for investment negotiations. And what Norway had just said made Argentina more opposed to any negotiations.

Cuba wanted the study to continue, with the specifics proposed by a number of developing countries including Cuba. And any future negotiations should be in the WTO, and not in any smaller groups.

Hong Kong China saw an "interesting" approach in the formulation for negotiations, and though negotiating investment would complement existing rules in the WTO on investment in services, and thus cover goods.

[Several critical observers note that when services were brought into the Uruguay Round, one of the arguments that unlike goods which could be supplied across borders, services had to be supplied at the place of production, and hence it should cover investment in services sectors. Now Hong Kong China was using the argument of complementarity to services rules to get investment in production of goods also into the trading system.]

Australia had no particular problem about negotiations on investments, but found the discussions "unreal". The negotiations had not been mandated under the Marrakesh accord, and there was not much support for negotiations. Instead of spending time discussing this, they should be focusing on the mandated negotiations where there were many problems.

And of some of the countries wanting investment negotiations, Australia said, without naming the countries, they did not even have any data on investments or of any outward flows from them. The present formulation for negotiations was too ambitious and would not command any consensus. More discussions would not change any positions.

Egypt said that none of the four Singapore issues were ripe for any negotiations and had no place on the negotiating agenda. The study process could continue, but the mandate for that should incorporate what the developing countries had clearly formulated.

The Dominican Republic said that protection of FDI and rights of investors would create a problem as it would reduce the scope of development policies of countries. They also had problems with the US formulation for the study.

Sri Lanka opposed any negotiations, and said even the study or other work should be shifted to UNCTAD.

South Africa supported negotiations, but after a further two years of study.

Honduras and Uganda, on the other hand, were not ready for negotiations. While Colombia was ready, with changes, to support the formulation for negotiations, Chile argued that though FDI had a contribution to make for development, the issue had not been studied enough at the WTO.

Hungary argued that as between a bilateral and multilateral approach to investment negotiations, they preferred the multilateral approach.

Jamaica said the issue should be studied further, but did not see FDI flows as influenced by investment agreements.

Singapore said the discussions had showed differences and no consensus, and supported the continuation of the study, a view that was later supported by Thailand. El Salvador said there was no consensus for negotiations on any of the Singapore issues.

Turkey supported investment negotiations, but wanted the rights of investors to be balanced by the rights of countries. Romania argued for more work on study.

Japan still felt there was scope for consensus by continuing the discussions. The EC recognized there was no consensus now, but thought one was feasible. (SUNS4541)

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

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