WTO, Global Governance and New Trade Round

Geneva, June (TWN) -- The World Trade Organization was not created to govern the globe. It was created for trade liberalisation, and the way forward lies in going back to the basics.

It was fashionable after the Uruguay Round to say that the time for traditional ‘border measures’ that ensured  protectionist trade policies was finally over and that ‘deeper integration’, fuelled by globalization, had replaced them. There may be some truth in this, but it would be naive to think that the trading system had completed its task of getting rid of ‘border measures’ and should turn to other new priorities.

Six years after the Uruguay Round, the unfinished business is still there, largely unfinished, and including measures to protect key commercial interests of advanced industrial countries, measures that continue to impact on participation of developing countries in international trade. The issue of traditional ‘border’ measures is still alive on the trade agenda. It is these measures, not the socalled new issues only indirectly related to trade, that are really preventing the system from realizing its full potential.

Giving priority to non-trade issues would have some cumulative and disastrous consequences: it would overburden the system, upset the natural order of priorities, alienate those in need of trade liberalization and make them seek solutions in bilateral and regional deals, and dangerously increase public hostility to the system which stems almost exclusively from non-traditional trade issues.

In the context of the current pre-Doha debate, it is useful to remind ourselves of the fate of a previous grand design for global governance, the still-born ITO and the Havana Charter.

Michael Hart (now Professor at Carleton University in Ottawa), in his book ‘Also Present at the Creation’, for example, does not share the conventional wisdom about the failure of the ITO, and says that the GATT negotiations succeeded “because they were built on successful experience, and ideas thoroughly discussed and widely shared,” and negotiators “were not looking for a supra-national code and organization within which countries would work together for a common good... The GATT was possible because there was sufficient coincidence among original signatories to make it work. The ITO tried to rise above this, required too many compromises to have broad appeal, and ended up satisfying no one.” The lessons learnt in the negotiations of the immediate post-war years inspired major participants to pursue “their interests conservatively... wary of schemes to expand international obligations too broadly and universally. This conservatism and caution allowed the more limited GATT to mature gradually and gain the momentum to make it work.” GATT resulted in permitting trade policy, previously a politically sensitive issue, to “recede from high to low politics”, trade became an issue preoccupying bureaucrats, and Geneva a place where “officials solved international trade problems... incrementally and cautiously.... Not until the 1980s, when new trade frictions flowing from globalization of the economy exposed new problems, did trade again begin to assume a high profile.” As a consequence, GATT members decided to shed conservatism and try once again to develop a more comprehensive code on commercial policy... the Uruguay Round and the WTO... “We will see over the next few years the extent to which the world has changed to make possible today what was impossible nearly five decades ago.”

It required a good deal of foresight and wisdom to write these words in late 1994 or early 1995, when some degree of triumphalism was fashionable in regard to globalization, the honeymoon with the recently born WTO was at its peak, and the succession of crises and disillusion of the late 1990s were still to come.

The OECD issued a new report recently that showed the Uruguay Round had an extremely limited impact on agriculture trade liberalization in the advanced countries... The world still badly needs a lasting solution to the discriminatory exclusion of entire traditional sectors from the benefits of freer trade. This should be achieved for tis own merits, because it is long overdue, not as a quid pro quo for concessions in investment, competition, intellectual property and other subjects that were not part of the trade agenda.

Contrary to these late-comers to the trade system, agriculture and textiles and clothing (and tariff peaks and escalations) had every right of participating in the progressive liberalization that characterized the history of the GATT. They were only excluded from this solution because of the formal waivers granted to the USA on agriculture and cotton textiles in the 1950s, roughly half a century ago.

Admittedly, new problems, new needs also deserve new solutions that can only gradually evolve from a cautious and patient process of confidence and consensus-building. Services is a good example of a gradual approach to liberalization that has met the test of time, allowing for additional and significant advances in telecommunications and financial services without any important negative reaction.

This approach has proved much better than the road taken by the TRIPs agreement which is now facing a widespread backlash, indicative of the dangers of imposing artificial consensus. At the international as well as at the national levels, codification of norms can only take place when time, experience and persuasion are able to generate a minimum consensus.

I am in favour of new multilateral trade negotiations, if it can be assured that such negotiations, whether or not termed “round”, effectively address the concerns of developing countries and would set, as the desired outcome,  a multilateral trading system which reflects to a greater degree than at present their needs and aspirations....

In my view it  is crucial that the new Round not simply be seen as a continuation of the Uruguay Round after a six year break. If a new Round sets out to continue the process towards imposing even deeper and wider obligations it will fail, and thus should not even be launched.

Specifically, there would seem to be no logic in seeking to impose further constraints on the development policy options of developing countries, nor to introduce alien elements into the overall balance of multilateral rights and obligations, by expanding the “frontiers” of the system. The difficulty  of the system in “digesting”  the TRIPs Agreement, for example, should provide us with a lesson in this regard.

A new round should rather address the need to make every Member feel “comfortable” within the system. It must break with the conventional wisdom which prevailed during the Uruguay Round - by formally recognising that countries at different levels of development and in peculiar geographical situations require that the multilateral obligations be more tailored to their specific needs. In this context, the validity of the S&D principle should be endorsed, to the extent that it recognises that developing countries may have problems in deriving benefits from the Multilateral Trade Agreements (MTAs) or meeting their obligations due to the inherent characteristics of underdevelopment. The negotiations should ensure that S&D provisions in favour of developing countries can be effectively applied, and address their specific needs. Many of the proposals submitted in the current negotiations on agriculture and services are consistent with this objective, and hopefully progress will continue in this direction.

This should not be interpreted as advocating an unravelling of the Uruguay Round results or the endorsement of measures inconsistent with the continuation of the process of trade liberalisation. In fact, trade liberalisation should be the central theme of any new round. Many traditional barriers and distortions to international trade, particularly that of the developing countries remain and must be addressed as a matter of priority. These obviously include peak tariffs, abusive anti-dumping actions, and export subsidies on agricultural products to name a few. Many of these barriers have been addressed as “implementation “ issues, and included in the proposals contained in paragraphs 21 and 22 of the 19 October 1999 draft “Seattle Declaration” which provides the basis for the current work in the WTO on implementation. These include measures which importers consistently identify as the main impediments to expanding their  imports from developing countries e.g. textile quotas, various aspects of anti-dumping actions, rules of origin, subsidies, sanitary regulations, stringent and non-transparent  restrictions on the movement of persons supplying services, allocation of tariff quotas  etc.

Thus, for many of the implementation issues, action could provide meaningful access for developing country exports, in addition to generating a climate of greater confidence  that  the necessary political will exists to address their interests in a future round. It should be possible for such action to be taken in many of these areas, in a manner similar to the commitments accepted by developing countries in the post-Uruguay Round negotiations on basic telecommunications and financial services, the results of which were greatly increased market opportunities for developed country suppliers of these services.

Given the peculiarity of the “end game” of the Uruguay Round, developing countries are justified in seeking improvements, not only in the implementation of the Agreements , but also in their provisions, in cases, where such provisions penalize developing countries by not taking their inherent characteristics into account. It is clear to all that there are imbalances in the rights and obligations that require correction.

Any  new round should correct the current trend under which the dispute settlement process appears to be  pre-empting the authority of the General Council and the Ministerial Conference with respect to the “interpretation”  of the MTAs.  Members could submit proposals for improved interpretations of the Agreements, this could be the solution to many of the implementation issues.

Furthermore, there should be recognition that developing countries should not be required to negotiate under duress. This would imply a standstill on  actions that could restrict the  market access of developing countries during the negotiations, e.g.  a freezing of the GSP and other preferential access, as well as a “peace clause,”  under which developed countries would exercise due restraint in initiating disputes  against developing countries during the negotiations. A new round could also serve to provide contractual status to duty free entry for the least developed countries.

Any new negotiations will have to formally recognize that the least developed countries and many other developing countries simply do not have the financial or human resources to implement their existing obligations, let alone the results of future negotiations. There is the need for the WTO to set up a financial window to assist developing countries to meet the most onerous burdens of their own implementation of the MTAs, (e.g. customs valuation, TRIPS) as well as to derive benefits from the opportunities presented (e.g. sanitary and phyto-sanitary regulations).

The differences of opinion as to whether  a future negotiation should aim at a further extension of the “frontiers” of the system would seem to reflect different perceptions as to the role of the WTO in global governance. The TRIPs Agreement arose from the concern that the responsible UN body, the World Intellectual Property Organization did not have enough “teeth” to enforce its own instruments and that the link with the dispute settlement mechanisms of the GATT were required.

A continuation of this logic into other areas could overburden the system and upset its order of priorities. Global governance is the joint responsibility of the whole UN system and efforts should be made to strengthen the ability of the Organs responsible for  the protection of the environment, furthering  the rights of workers and human rights in general.

A new round which aims at the consolidation of the WTO and its refinement and improvement to reflect to a greater extent the interests of the developing countries, and facilitate the accession of those many developing countries, including least developed countries, and economies in transition, would  result in a truly universal system. – SUNS4907

(*Mr. Rubens Ricupero is the Secretary-General of the UN Conference on Trade and Development. The above, excerpted by SUNS, is based on two recent presentations and remarks by Mr. Ricupero, one at a seminar early in May in Geneva - on Global Governance and Trade and the Way Forward - and the other in a note to the Ministerial Conference of the OECD (16-17 May) in Paris.  Copies of these had been made available at the recent Jakarta meeting of Trade and Economy Ministers of the Group of 15 developing countries, and were obtained here from the UNCTAD media office).

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