EC pushes comprehensive agenda, millennium round

GENEVA: On the eve of the Special Session of the WTO General
Council on 24 September, the European Commission set out on 23
September its "wish list" while pushing for a comprehensive
agenda of trade negotiations, covering all old and new issues,
to be launched by the 3rd Ministerial meeting in the US in the
first week of December next year.
The US is "cool" to a new round - both because it is not
sure whether its own trade agenda (agriculture and services)
would be best advanced by sectoral negotiations or in a new
round taking on an agenda that might attract internal
opposition too and slow down accords, and also because of the
domestic political preoccupations (even apart from President
Clinton's problems over his sex life) that would inhibit any
administration until the next Presidential elections in 2000.

Mandate to General Council

The General Council meeting on 24-25 September had been
mandated to set in motion a preparatory process and a work
programme for next year's Ministerial meeting.
The Geneva Ministerial meeting of the WTO in May set out an
agenda for the Council to draw up a process for recommendations
on a work programme of further liberalization, sufficiently
broad-based to respond to the interests of all members. The
mandate to the General Council identifies a preparatory process
and work under four indents and sub-indents:
* issues including those brought up by members over
implementation of WTO agreements and decisions, negotiations
already mandated at Marrakesh (services and agriculture),
future work mandated under existing agreements;
* other possible future work on basis of work programme
initiated at Singapore (a reference to investment, competition
policy and trade facilitation studies);
* follow-up to the High-Level meeting on LDCs; and
* other matters proposed by members on their multilateral
trade relations.
At a press briefing on 23 September, Peter Carl, a senior
official of the EU Commission, the main demandeur for a
"millennium round", said the Council should agree on a
"comprehensive" agenda, covering not only traditional market
access questions in agriculture, services and industrial
tariffs, but also new issues including international rules on
investment, competition policy and trade facilitation, so as to
enable Ministers to agree on the launch of the negotiations,
beginning 2000.
The Asian economic crisis that is now spreading across to
other parts of the world was an added reason for comprehensive
negotiations for trade liberalization, Carl argued, citing data
to show that the EU's exports to the Asian region had sharply
fallen, while its imports had increased.
Carl laid special emphasis both on industrial tariff cuts as
well as on opening up all markets for "services". Over the last
year or more, he said, capital flows to the countries most
affected by the crisis had slowed down, and the way to reverse
this development would be through WTO investment rules.
The OECD negotiations for a Multilateral Agreement on
Investment (MAI) would be concluded in 1999, but the EC did not
envisage bringing it and putting it into the WTO. Rather, the
EC envisaged WTO negotiations that would take account of the
interests of all parties.
Earlier in the week, at an UNCTAD-convened meeting of an ad
hoc group of experts on a positive agenda for developing
countries and research priorities, several participants,
including some UNCTAD officials, questioned the need for
separate negotiations at the WTO on investment, and said any
trade issues relating to investments and competition policy
could be addressed in relation to the Agreement on Trade-
Related Investment Measures (TRIMs) and the services
negotiations (where commercial presence or investment is a mode
of delivery).
Investment rules as in the North American Free Trade
Agreement (NAFTA) and related rules of origin, have only
distorted and diverted trade and investment flows, with US as
well as other TNC investments being diverted to Mexico, a
participant from the Dominican Republic said.
The MAI negotiations at the OECD have been in trouble
because of their over-ambition, said Mr. Edward Graham of the
Washington-based Institute of International Economics (IIE).
The Washington-based think-tank (which is close to the Clinton
administration) has been a prominent exponent of the so-called
"Washington Consensus" and pushing for trade liberalization
through multilateral and regional accords.
The extensive literature on foreign investments, Graham
said, had much data about investment flows and sales by TNCs.
The literature also had much to say from the perspective of
economic theory and policy on the benefits of investment
liberalization. But there was little or no empirical evidence
in the literature of benefits to host countries. The WTO and
other international negotiations on investment could have a
less ambitious agenda, but the rules must ensure, among others,
"national treatment" for foreign investors.
The Asian financial crisis was having its impact on other
regions too, Carl said at the EC briefing. Over the past few
months, he said, there has been a sharp change in patterns of
trade, and certainly between the EC and the Asian countries
affected. EC exports (in European Currency Unit (ECU) value
terms) had dropped by 30%, while imports had gone up by 20% -
a cumulative change in trade of 50%. All this will lead to an
increase in protectionist pressures in both developing and
industrial countries.
The financial crisis was all the more reason why WTO
negotiations should be brought forward, he argued.


But despite such statements from the WTO head, the EC and
trade diplomats of all regions at the WTO, it is clear that the
crisis has forced some rethinking in all countries, including
in government ministries and departments other than the trade
Some trade observers say that unlike in the Uruguay Round -
where under the rubric of trade, many other issues were
negotiated in private and trade officials presented the outcome
in their countries as a "package" that had to be accepted -
reaching accords in new WTO negotiations and getting local
businesses and parliaments to swallow and accept everything is
going to be very difficult.
A participant from the World Bank at the UNCTAD
consultations said the old GATT was like the Catholic church,
where wisdom came from the top, while the WTO was more like the
Protestant churches. He said that in the old GATT negotiations,
agreements were reached at the top and pushed in countries by
trade officials. But under the WTO, and its transparency,
business lobbies and domestic enterprises were using it for
protectionist purposes and this made negotiations difficult.
On making the WTO processes transparent, the EC official
said the EU favoured quickly making public documents, but the
negotiating process should not be thrown open to the press and
And while the US, the WTO head and the EC are trying to
promote this version of transparency to the NGOs, along with
the latter's ability to file "amicus curie" briefs before
panels and meet periodically with WTO officials - which some
Northern environmental groups have been promoting - other NGOs
from the North and the South have rejected such a narrow
approach and insisted on the right of civil society, including
business, in their respective countries to know clearly and
sufficiently in advance what was being negotiated and the
proposals on the table, in order to be able to hold "dialogue"
with and influence their governments.
While trade, in the old narrow sense of exchange of goods
across frontiers, is not responsible for the crisis, the "WTO
trade remit" now involves a whole range of non-trade issues,
including WTO rules on domestic policies of countries, and the
ability of countries to use a variety of other instruments to
cope with the crisis.

Collapse of globalization drive?

Political economists point out that the 19th-century
"globalization" drive collapsed early in this century - when it
lost social support because of the iniquitous distribution of
benefits. A similar situation has arisen now in respect of the
current globalization models where there is emphasis on
property rights of all kinds of owners and IMF-led
international efforts to rescue foreign owners, while local
enterprises are asked to be made bankrupt, with only a modicum
of payments on local property rights - whether arrears of wages
and earnings and pension benefits of workers or small savings
of domestic investors.
The Asian firestorm was already raging in May this year,
when the Geneva Ministerial took place. But it has now
enveloped most of the developing world and is threatening the
industrial world too - as evidenced by the US Federal Reserve's
attempts to rescue the Long-Term Capital Management Fund, a
hedge fund which was hitherto considered a well-managed
arbitrage fund using derivatives and swaps, and credit lines
from banks to put up the margins on such transactions.
While the consequences and problems of the Asian crisis have
originated outside the trading system, notwithstanding
exhortations on further liberalization and globalization,
governments and legislatures everywhere are unable to ignore
the varying pressures from not only their domestic business
sectors, but also the politically active public.
Asked about the second thoughts among many mainstream
economists on capital liberalization, international trade rules
on investment and so on, in the light of the Asian crisis, and
the growing public opposition to negotiations on new issues,
including on investment, in developing and developed countries,
Carl said that those working for industry supported trade
liberalization negotiations.
The WTO and EC drives for trade liberalization negotiations
received support on 23 September at a "dialogue" organized by
the Paris-based big business lobby, the International Chamber
of Commerce (ICC). Heads of international organizations and
agencies attended the meeting.
But the participation of UN heads, and particularly the
proclaimed policy of the UN Secretary-General Kofi Annan for
partnership with the business sector, came under sharp
criticism from a Swiss non-governmental group, part of the
global NGO movement against investment rules. The group, which
organized and held demonstrations before the UN in Geneva on 23
September, said they were launching a big signature campaign in
all countries, and that their aim to present it at this time
had been frustrated by the Swiss police, who had raided one of
their meetings and seized their e-mail lists, but had now
agreed to return them.
They complained that the UN head and the UN system were
yielding to the ICC, and promoting "voluntary" codes and self-
regulation and monitoring by TNCs - a line promoted by the ICC
to prevent WTO and other rules from placing obligations on

EC wish list

Carl, who is the Deputy Director-General for External
Relations, said comprehensive negotiations were needed at the
WTO as there were signs of "back-tracking" by some WTO members.
The EC wish list, characterized as illustrative, calls for:
* across-the-board negotiations for "significant reductions"
in industrial tariffs, with no sector excluded (as against the
sectoral approach favoured by the US), to start in the new
* a new round of negotiations on trade in services covering
all sectors and all "modes of delivery" (implying delivery via
investments) and including maritime transport; and
* new international rule-making to address questions on
international investments, competition policy and trade
Asked about the negotiations on agriculture tariffs, which
did not figure in his illustrative list, Carl said that in
1999, the EU member-states, under German presidency (January-
June 1999), are to agree on further reforms to their own Common
Agriculture Policy, and the EC would formulate its position
after that.
While, under the Agriculture agreement, the review of the
first stage of reform and further reforms are to be taken up in
1999, realistically, the negotiations could be in 2000. And
along with agriculture, the Sanitary and Phytosanitary Measures
agreement as well as the Technical Barriers to Trade agreement
would need to be taken up to cover issues of food safety and
consumer problems.
There should also be a high-level meeting of Environment and
Trade Ministers early in 1999, and this, the EC hoped, could
lead to negotiations in the new Round on some of the
environment issues, like eco-labelling and trade measures under
multilateral environment agreements. The work at the WTO in the
Committee on Trade and Environment was showing no progress,
despite considerable preparations, and the EC-proposed meeting
of Environment and Trade Ministers should help in nudging the
process forward.
With the launch of new negotiations at the 3rd Ministerial,
there should be a standstill commitment by all WTO members to
refrain from protectionism and protectionist actions, the EC
official said.
Negotiating a range of issues, but concluding negotiations
only in areas where agreement could be reached, looks
attractive on paper, but would be extremely difficult in
practice, and the EC therefore supported the idea of a single
undertaking, he said. (Third World Economics No. 194,
1-15 October 1998)

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