EC-Japan claim momentum for new round

by Chakravarthi Raghavan

Geneva, 27 March 2001 - - Senior officials from the European Community and Japan claimed Tuesday evening that the momentum for a new Trade Round was growing and that on the new issues of investment and competition promoted by the two the question was no longer whether there should be negotiations on these at the WTO, but how.

This upbeat view of the outlook for a new round with new issues was presented by the EU Commission’s Director-General of Trade, Mr Morgens Peter Carl and Japan’s deputy foreign minister, Mr. Yoshiji Nogami at a press “debriefing” session they held Tuesday evening at the end of a day-long meeting of senior officials from 20 countries and the WTO secretariat, a meeting they had convened and co-hosted “to assess prospects for a successful 4th Ministerial Conference at Doha and the question of a new Round.”.

Some of the participants at the meeting however said later that the EC and Japan were putting a ‘positive spin’ on the divided views that emerged at the meeting, and that even some of those who in the past have been supportive of the EC-Japan thrust for investment and competition negotiations at the WTO seem to be having second thoughts, and not so enthusiastic now.

The absence of the United States from the meeting, with  not even an observer to take note of various views  seemed to devalue the meeting even more..Peter Carl said the  reason for US absence was the fact of a new administration, and its senior officials (below the USTR level) still awaiting Senate confirmation. He referred the  media to the joint press conference by the USTR and EC Trade Commissioner, after the latter’s recent visit to Washington and meetings with Mr. Zoellick.

One participant at the Coppet meeting said no new views or nuances in views or change of positions, from those expressed by countries at the WTO informal consultations had emerged at the Tuesday meeting, held at Coppet a town in Switzerland outside of Geneva and, participants in fact restated their positions.

The comments and views of Carl and Nogami at the press ‘de-briefing’ on implementation suggested that either the two have still not realised the extent of disillusionment and dissatisfaction in developing countries on these questions and the WTO itself or think they can play the old game (of the Tokyo and Uruguay Round) and get countries to launch negotiations and take on more commitments.

Another participant said that his government, in bilateral and other consultations, here and in the capitals, had cautioned and conveyed their concerns to Japan and the EC over their tactics and attempts and warned  that by these tactics and attempts to bring new issues, they could risk at Doha another fiasco as at Seattle. The dissatisfaction with the outcome and benefits of the WTO, and reluctance and resistance to new commitments in new negotiations, was now much more widespread across a broader range of countries than when these were raised by a few countries at the Singapore and Geneva Ministerial meetings, and in the runup to Seattle.

And talk of ‘doables’ and non-doables, or attempts to use these as a leverage for new negotiations in a new round, or to take a highly legalistic position and argue that perceived inequities and deficiencies cannot be cured to restore confidence in the system, without new negotiations on new issues and more commitments, no longer carried much weight in developing countries.

Several participants were also unhappy that the accepted ground-rules for such meetings of officials  had been broken by the EC and Japan in issuing a press release and holding a media ‘debriefing’, and said they would reassess their positions before future such meetings, and the ground rules they would observe.

Carl and Nogami, in their joint statement, claimed that “many participants favour new negotiations”, and that many were concerned about a global economic downturn and a return to bilateralism, and saw “a relaunch of the multilateral process in the WTO as all the more necessary in this context.”

The two also claimed that several developing countries seek better market access and new or revised WTO rules that would “directly serve their growth and development” and that “there was a general sense that we should try to launch negotiations at Qatar later this year, and certainly we are all better prepared for this than at the same point before Seattle.”

“Our discussions were practical and forward looking. The momentum is definitely picking up,” the two insisted in trying to play down reports that the WTO preparatory processes for Doha may not result in the launching of a new round of negotiations with the new issues favoured by them, not even any ringing call for a new round.

The discussions among the participants, Carl and Nogami said, took stock of the thornier issues on the WTO agenda including implementation related issues, market access, trade defence like anti-dumping, investment, competition and environment.

While in the press release Carl and Nogami said all participants wanted the ‘implementation’ issue to be tackled through a ‘more pragmatic approach’, and of their own serious desire to deal with them, separating the ‘doables’ from those needing ‘negotiations’, their answers to some sharp questions at the press briefing showed that in fact there is no basic change in their position that ‘implementation’ issues could be resolved only through new negotiations in a new round with new issues.

It was also apparent that, if any thing, Japan and the EC were trying to divide the developing world, which from the initial position of a few countries pressing the issue in 1999 (when they tabled proposals and had them included in the chairman’s draft text for Seattle (paras 21 and 22 of the Mchumo text) now has many more raising issues of imbalance, inequities and ‘development deficit’ as Brazil described it recently.

On ‘market access’, Carl and Nogami said, the EU and others indicated an openness to negotiations provided “other areas of priority were also addressed.” On anti-dumping, the press statement said, Japan and others made clear the priority they attached to this in a new trade round. The EU and some others, it added, while open to negotiations, “cautioned they should be manageable.”

The two officials also said that it was “widely recognized” that implementation, market access and WTO rules were closely related to each other and that a “forward looking solution should be sought.”

As for investment and competition, Carl and Nogami said, the members advocating negotiations on these had considerably modified their agenda to reflect the interests of some developing countries (a reference presumably to the EC proposal for negotiations confined to FDI and a possible plurilateral agreement).

“As a result,” said Carl, “some people are no longer saying ‘should we negotiate these issues?’, but ‘how should we tackle them in WTO?’. Our willingness has been recognized and we agree that basic rules in these two areas would be pro-development.”

At the briefing, Carl said that developing country finance and trade ministers were travelling around the world to attract foreign investments and the EC proposals for investment negotiations were aimed at this.

Participants at the meeting however said that even some old enthusiasts for negotiations on these two issues, like New Zealand and Canada seemed to have some second thoughts, pointing to the concerns and disquiet raised in their civil society and the opposition of NGOs.  Japan and the EC tried to promote the issues at the consultations by talking about the needs of developing countries for foreign investment, and the fact that at the moment these were flowing in such large quantities to the United States.

But challenged as to whether a WTO investment negotiations and agreement would result in investments going to developing countries, the two had to concede that there was no such assurance possible..

Both the EC and Japan, who are the main ‘demandeurs’ for negotiations and rules on these new issues, and who in the past had said that they needed these negotiations and rules in order to enable them to undertake more reforms in agriculture and open their markets for developing country exports, now present the negotiations at the WTO on investment as intended to help development, and as part of a ‘development agenda for a development round.’

However, said several participants, the country pushing investment most is Japan, and behind it the EC, whose former Trade Commissioner Leon Brittan pushed it in a neo-liberal globalization context, but on which not all EU member states seem to be of the same mind. Japan finds it has less leverage to ensure for its capital exports, assurances of most-favoured-nation and national treatment that the US is able to get.

Also, in macro-economic terms, Japan’s private sector is export oriented, rather than an output for the domestic market and consumption; it has also huge financial surpluses of 10.15 percent of GDP, now absorbed by the government’s fiscal deficits. If the government were to revert to balanced budget or fiscal surplus, the private savings have to find an outlet abroad.

This was why Japan even at Punta del Este brought up the investment question, and the negotiations finally ended up with the TRIMS agreement which., developing countries, saw as no more than clarification of the existing situation in GATT, but extended by the dispute system. Hence the resistance of several developing countries with vast domestic markets to WTO rules that would come in the way of their control and direction of foreign investment and measures for maximising its benefits and minimising its negative elements.

Even the trade facilitation issue, generally receiving more support at the WTO, is no more than an attempt on the part of major corporations and their home countries (the EU, Japan and the US) to get what they failed to achieve either in the Tokyo Round or the Uruguay Round Customs agreement - - namely, to facilitate transfer pricing and enable the declared valuations for imports and exports of their corporations to be accepted without question by the customs authorities.

Carl and Nogami said that the senior officials had also discussed trade, environment and consumer health issues and that some WTO members - ‘but by no means all’ - recognized a need to clarify rules rater than leave this in the hands of WTO panels or unilateral measures. However, the statement said,  there was concern over opening the doors to protectionism, and need for strong assurances that any clarification of trade and related environment or health rules would not be discriminatory and would not allow unnecessary trade restrictions.

Also discussed were the issues of trade and social development, and with participants having various views on how these should be treated at an international level, while everyone rejected any sanctions-based approach. The EC has recently been promoting the idea of a joint meeting of ‘trade and labour ministers’, and of a wider forum with participation of ILO, WTO, UN, UNCTAD, World Bank etc.

However most developing countries are opposed to bringing in the labour and social issues in any form into the trade system or even provide an opening for the issue that could subsequently be brought up at the WTO either through the secretariat participation or by others.

On the implementation issues, at the press briefing, both the EC and Japan conceded that there was need for a breakthrough on this before any new negotiations could be launched.

Nogami tried to present the problem as one of ‘technical assistance’ and ‘capacity building’ for the developing countries, particularly the LDCs which must be addressed, and of other issues which needed renegotiation of existing agreements and possible only in the context of a new round with new issues. The situation on implementation, Nogami said, had been exasperated by the Seattle fiasco and Japan recognized the “need for a breakthrough on this crucial issue.” But these could only be achieved through changes and modifications of existing instruments, and that was feasible only in the context of new negotiations.

Both Nogami and Carl tried to present their market access openings for least developed countries as examples of unilateral steps they had taken as part of confidence building measures.

Challenged on the nature of the LDC preferences - favouring one group of developing countries against another, while maintaining domestic protection - rice, sugar and bananas in the case of the EC, and similar agricultural products, in Japan, and with every prospect of rice continuing to be highly protected even in a new round with new issues - Nogami had no answer. Carl, argued that the LDC preferences - ‘everything but arms’ - was something everyone had agreed at Singapore, and that developing countries complaining about loss of preferences were in effect going back on Singapore.

Neither Nogami nor Carl had an answer as to why the non-LDC developing countries, who were not opposing the LDC preferences, had to pay a price for the LDC preferences by agreeing to a new round with new issues.

Carl also justified bringing in competition rules, by pointing to the demand of developing countries for several years about UN Restrictive Business Practices code.

However, the demand of the developing countries on the RBP code at UNCTAD, has been one of the EC and others cooperating with developing countries, under the RBP code, in investigating and providing information to the developing countries on the RBPs of their corporations in abusive anti-competitive practices in developing countries and their markets and/or impeding their exports.

The new competition rules mooted by the EC would not tackle these, but would seek to put their TNCs and their ability to compete in developing country markets on a par with domestic enterprises.

Present at the consultations convened by the EC and Japan were: Australia, Brazil, Canada, Chile, Egypt, EC, Hong Kong, Hungary, India, Japan, Korea, Malaysia, Mexico, Morocco, New Zealand, Singapore, South Africa, Switzerland, Thailand, Turkey and the WTO Secretariat.-SUNS4865

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

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