Beginning the long haul to a new round?

At a recent WTO General Council meeting, which was part of the preparatory process towards the 3rd Ministerial Conference in 1999, developing countries raised issues pertaining to the implementation of the Uruguay Round agreements. They complained that not only did they face unanticipated difficulties in implementation owing to lack of resources and inherent deficiencies in the agreements, but that the industrialized countries had not faithfully honoured their commitments.

by Chakravarthi Raghavan

GENEVA: North and South have squared off against each other, staking out views and positions, on issues under the rubric of "implementation" of the Uruguay Round Agreements, in the preparations for the 3rd Ministerial Conference of the WTO that may launch a new round of trade negotiations.

The positions were spelt out at the end of October at the informal meetings of the General Council of the WTO, as it began the first of a series of meetings to set out a work programme and recommendations for the Ministerial meeting to be held in November 1999 in the US.

Preparatory process

The 2nd Ministerial meeting of the WTO in Geneva in May 1998 mandated the General Council to set up a preparatory process, under each of the four areas identified in the Ministerial Declaration, to prepare and submit recommendations to the 3rd Ministerial on the WTO work programme, including further liberalization that is sufficiently broad-based to respond to the range of interests and concerns of all Members, within the WTO framework.

The four areas specifically identified in the Declaration were:

9.(a) recommendations concerning: (i) the issues, including those brought forward by Members, relating to the implementation of existing agreements and decisions; (ii) the negotiations already mandated at Marrakesh, to ensure that such negotiations begin on schedule; (iii) future work already provided for under other existing agreements and decisions taken at Marrakesh;

(b) recommendations concerning other possible future work on the basis of the work programme initiated at Singapore;

(c) recommendations on the follow-up to the High-Level Meeting on Least Developed Countries;

(d) recommendations arising from consideration of other matters proposed and agreed to by Members concerning their multilateral trade relations.

A series of meetings have been set for these tasks, and the first of these, to address "issues, including those brought forward by Members, relating to the implementation of existing agreements and decisions", was held on 26-27 October.

With a large number of delegations outlining in oral statements (some of which were later made available to the media in written texts) the various problems faced in implementation, the two-day meeting left little time or space for comments and discussions by others, and in the end there was no consensus on how to proceed forward, except that it was recognized that further meetings and consultations were needed.

The issues relating to the already mandated negotiations - meaning further negotiations on the agricultural reform process and a new round of services negotiations - and future work envisaged under existing agreements and decisions taken at Marrakesh are to be discussed at an informal General Council meeting set for 23-24 November.

The recommendations on the follow-up to the High-Level Meeting on Least Developed Countries and the future work are scheduled for similar discussions on 14-16 December.

A meeting has also been set for the third week of January next year to discuss recommendations concerning other possible future work on the basis of the work programme initiated at Singapore (that is, studies on trade and investment, trade and competition policy, government procurement and trade facilitation), and the catch-all rubric to bring in other new issues - recommendations arising from consideration of other matters proposed and agreed to by Members concerning their multilateral trade relations.

At the meeting at the end of October, developing countries raised under implementation issues, both problems faced by them in implementing their commitments due to lack of resources, problems not envisaged when they agreed to these commitments, and deficiencies in the agreements themselves, as well as those due to lack of implementation, in letter and spirit, or derogation from commitments by the industrialized countries.

General market access issues, including tariff peaks and escalation against exports from developing countries, the Agreements on Textiles and Clothing (ATC), Agriculture, Anti- dumping, Subsidies and Countervailing Measures (SCM), Technical Barriers to Trade (TBT), Sanitary and Phytosanitary (SPS) Measures, TRIPs, TRIMs, Customs Valuation, Rules of Origin, Safeguards, GATS, LDCs, the Dispute Settlement Understanding (DSU), the cross-cutting issues of special and differential treatment (S & D) in these and other WTO agreements, and the issues of balance-of-payments (BOP) provisions of GATT and regional agreements and arrangements, were raised in some detail by delegations.

The Cairns Group of agricultural exporters, anxious to set in motion new negotiations on continuation of the reform process in agriculture, while voicing their own grievances under implementation, also suggested that implementation and the built-in agenda of further negotiations were just two sides of the same coin.

The industrialized countries, with the US making a detailed presentation and the EC contenting itself with some initial oral comments, insisted that the transition period under the WTO for various agreements would be coming to an end by end- 1999 and all countries would be expected by 2000 to put in place the legislation and administrative processes for full implementation of their obligations.

In effect, they served notice that developing countries could not, and would not, be able to "escape" their time-bound implementation obligations, and that any changes or extensions would need to be part of future negotiations. This last aspect was alluded to by the EC and others to underscore the need for a new round of negotiations embracing a number of subjects.

Developing countries on their part insisted that the balanced outcome and benefits that were envisaged as part of the Uruguay Round package had eluded them, and they were looking now to set things right.

They also insisted that having paid the "price" in the form of onerous rules in traditional and new areas of "trade", they were not going to pay a price once again merely to obtain the implementation in letter and spirit of what had been agreed.

Addressing implementation issues

At the end of the two days of discussions, it was clear that there were fundamental differences between the industrialized and the developing world on the "implementation issues", and that drawing up a work programme and recommendations on them for Ministers will not be an easy task.

These issues cannot be brushed aside or treated pro forma as the industrialized world and the WTO did at the 1st Ministerial Conference at Singapore - with the WTO Director-General initially taking the position that the implementation issues had been covered in plenary meetings where Ministers had spoken - but need to be addressed and remedied.

At the same time, it was also clear that the "implementation" rubric would not provide easy solutions to the various problems faced by developing countries, both on account of their lack of resources and capabilities in implementation, as well as due to the inherent vagueness and deficiencies in the wording of the agreements themselves.

But at this point in the game, while developing countries seem slightly more prepared than they were in the Uruguay Round, and the WTO has very many more developing countries as Members, not many attend all the meetings and are willing to make their views known and felt by withholding consensus if needed. It was also clear that those present and active would need to undertake more detailed work, individually (here and in their capitals) and collectively, to prepare detailed papers and proposals, coordinate and cooperate better with each other, and be prepared for tough negotiations where they are willing to use not the polite diplomatic language of "yes, but", but the same language as used by the US and the EC to defend their interests - "No, No, No...." At a general level, one participant said, developing countries were more united now and gave broad support to each other's positions. But the challenge would appear to be how to keep up the unity and support at the level of details, the participant added.

Another noted that even if the major trading nations ultimately agree to take on as part of a wider set of negotiations in a new round, some of the implementation problems and concerns raised by the developing world, unless the developing world is vigilant and constantly on its toes, the chances are that as in earlier trade negotiations under the GATT, in the rush to conclude negotiations, all the issues of concern to the developing world will remain unaddressed and be pushed into a post-negotiation work programme.

Implementation problems

A number of countries spoke, raising a wide range of questions under implementation.

Amb. Celso Lafer for Brazil: There are serious implementation problems and discussion on them cannot be limited to technical matters or to a compilation of complaints. Our expectations of the overall balance struck in the Uruguay Round as a single undertaking have been frustrated in several areas, despite our good-faith efforts to fully implement the provisions of all agreements. This perception will play an important role in our evaluation of the alternative paths to the 3rd Ministerial Conference. We must not allow the lack of implementation or non-compliance by developed countries of commitments such as on the ATC to be utilized as bargaining instruments to achieve concessions from developing countries in the so-called "new issues".

Amb. Mounir Zahran of Egypt (for Africa, and separately for Egypt): The context for the present process is one of millions of people suffering from the financial crisis, threatening global growth and development. Africa's share in world trade is steadily declining, and this message should reach the trading partners, and the IMF and World Bank too. As World Bank Vice-President Joseph Stiglitz admitted recently, the more developed countries preach that countries must undertake painful liberalization measures, which may entail loss of jobs and industries, even as they use anti-dumping and safeguard measures to protect their own industries. Our objective is not to unravel the URAs [Uruguay Round Agreements] or go back on liberalization commitments. But there are fundamental problems in various agreements and if they are not adequately addressed, it would be extremely difficult to convince our public of justification of further liberalization commitments.

The implementation problems of the URAs arise from: unanticipated difficulties discovered in the process of implementation; deficiencies in agreements that have become apparent during implementation; agreements implemented in letter but not in spirit such as the ATC, or abused or used as a tool for disguised protection such as the Agreement on Anti- dumping; expected benefits of decisions and agreements not ensuing as in the case of the declaration on net food-importing developing countries (NFIDCs); and the cross-cutting issues of S&D which need to be addressed to ensure effective integration of developing countries into the MTS [multilateral trading system] and the reasons hindering their participation in the WTO dispute settlement mechanism. There should be effective implementation of the S&D provisions, linked to measurable development parameters, in various agreements (Agriculture, decision on NFIDCs, TBT and SPS accords, Anti-dumping, ATC, TRIPs, GATS, DSU, LDCs) so as to increase the trading opportunities of developing countries, and the provision of technical assistance.

New protectionism

Amb. S. Narayanan for India: More knowledge and insight has been gained about the workings of the world trading system since the signature of the Marrakesh Agreement, and it has to be recognized that the Uruguay Round Agreements have not provided the expected benefits to developing countries including the LDCs.

Narayanan noted that Stiglitz, who is also the Chief Economist of the World Bank, had, at the UNCTAD Prebisch lecture, listed some deficiencies: "For all the benefits [they] brought to the world's consumers, the UR Agreements did too little to ensure opening of markets for developing-country exports. There is also a need to stem the tide of new protectionism in the North through use of creative new measures, such as nuisance anti-dumping claims; international protection of IPRs should strike a balance between interests of producers and users. 'Excessive protection' of IPRs may end the virtuous circle of knowledge transmission and regeneration in the developing world. And it is not enough to construct good policies but the processes by which policies are made should themselves be fair and open...."

There are two categories of implementation issues and concerns. The first set comprises problems encountered in the process of implementation, where we had not anticipated these problems when accepting the agreements nor could developed trading partners have visualized the enormity of problems facing developing countries in this. The second category relates to agreements where developing countries had expected benefits, but anticipated benefits had not materialized because of the manner of their implementation by developed countries without regard to the object and purpose of the agreements.

Implementation issues and concerns need to be handled with some political sensitivity, especially in the light of current perceptions about the MTS. The implementation issues and concerns should not be approached as mere ritual or opportunity to force the pace of implementation even faster than visualized in the agreements or as a process through which the balance of rights and obligations could be further distorted against the interests of developing countries. The implementation issues relate to the asymmetries and imbalances in the agreements, and a review of the empty platitudes of S & D treatment of developing countries substantiates them.

Amb. Halida Miljani of Indonesia (for ASEAN): The URAs have not been implemented fully and faithfully in letter and spirit, and there is room for improvement if the political will is there. The issues should be approached with an open mind, for an objective assessment, rather than a rhetorical approach. Implementation problems arise from shortcomings in agreements themselves, and the failure of Members to implement them in letter and spirit. The URAs sought to achieve a careful balance between varying interests, but in the process and in the context of negotiating dynamics, some issues were left vague and remain subject to differing interpretations; and in some cases issues of vital importance to developing countries were simply not addressed. The preparations for the 3rd Ministerial should address these and improve the agreements to provide tangible economic benefits to Members commensurate with the obligations imposed on them.

As for implementation problems because of the inability of Members, particularly the developing countries, to implement the agreements due to substantive and procedural obligations beyond their means, the overriding developmental concerns should be recognized and S&D treatment made more prevalent and crucial. As for derogation from commitments in implementation, such as on the SPS and Subsidies Agreements, where there is implementation inconsistent with underlying objectives, or the ATC, where there is non-realization of meaningful market access, no prescription is more potent than political willingness to take actions.

Art. I of GATT sets out the most-favoured-nation treatment obligation, and the "Enabling Clause" (of 1949) authorized exceptions of preferential treatment by developed countries favouring developing countries on a "generalized, non- discriminatory and non-reciprocal basis." This is being violated by conditional preferences to promote policies relating to workers' rights, the environment and illicit drugs. The contractual MTS does not authorize such departures, and developed countries should desist from these.

Agreement on Textiles and Clothing

Colombia's Amb. Nestor Osorio (as Chairman of the International Textiles and Clothing Bureau): The central objective of the ATC was integration of the textiles and clothing sector, one of the most important sectors of world trade and accounting for 19% of the manufactured export earnings of developing countries, into the normal GATT through the progressive phasing-out of quota restrictions under the former Multi-Fibre Arrangement. After four years of implementation, and two stages of implementation put in place, these programmes cover 70% of the implementation period. But little has been accomplished in fact: 2 out of 750 Quantitative Restrictions (QRs) of the US, 14 out of 219 by the EU, 29 out of 205 of Canada's, have been integrated. And though 33% of import trade has been integrated, only 4% of the value of trade actually under QRs has been freed of quotas in the EU, and only 6% in the US. The manner of implementation of the ATC by importing countries has contributed little to the central objective of the progressive phase-out of QRs. Even in terms of increased growth rates of 16% by volume in the first phase, and 25% in the second, since the pre-existing growth rates were small, the total additional access in the first three years of the ATC was only 2% in each of the three importing markets.

Not only has implementation not resulted in meaningful trade liberalization, but one importing Member (the US) has invoked a series of safeguard actions affecting about $1 billion of exports of developing countries, and has effected far-reaching changes in rules of origin, impairing utilization of access under the ATC. The legislative amendments tabled by the US to revert to previous rules were only in respect of some products of special interest to another developed WTO Member which had challenged the rules under the DSU. A second importing Member (the EC) has repeatedly invoked anti-dumping actions on products already subject to QRs. As a result, combined imports from six affected countries declined by over 33% in 1997 compared to 1996, and imports from these countries declined at an annual 7%.

Amb. Rita Hayes for the US raised under implementation her country's concerns in relation to the Agreement on Agriculture (including tariff quotas, export subsidies, food aid and export credit guarantees), Agreements on SPS and TBT, GATS and mandated new negotiations, the urgency of early ratification by Members of the Financial Services Agreement, full TRIPs implementation within the transition period that extends to 2000 allowed for developing countries, Customs Valuation, Harmonization of Rules of Origin (where work could not be completed on time because of the complexity of technical work and the need for further consultations among Members to reconcile divergent views on the scope of application of this work), Agreement on Preshipment Inspection, general issues of market access, TRIMs Agreement and many countries not providing information on how they will be complying, and the Subsidies agreement. On the ATC, she noted that the Council debates had revealed strong differences of view on the implementation, with developing countries voicing complaints that implementation has not resulted in a substantial increase in commercial opportunities. She claimed that the US compliance has been in accord with the terms of the agreement and has resulted in improved market access to its markets, but that the commitment of "all Members" under Art. 7 to achieve improved access has not materialized, and as a result of high tariffs, even after 2004 (when the ATC expires), improved market access would not be achieved in all countries. There was also the ongoing problem of illegal transshipment which needed to be addressed.

The challenges of implementation, in the US view, were "within the realm of the manageable" and did not stand as an impediment to pursuing additional work and liberalization. There were areas of implementation needing more attention from governments for compliance, others with problems where further clarification of provisions in agreements may be needed, and a number of areas where further technical assistance is required. (Third World Economics No. 197, 16-30 November 1998)

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