WTO's trade and investment study to continue

The WTO Working Group set up to look at the trade and investment issue has recently agreed to recommend to the WTO General Council that its study process on this issue shall continue with no specific time limitations.

by Chakravarthi Raghavan

GENEVA: The Working Group on the Relationship between Trade and Investment (WGTI) has agreed to recommend to the General Council of the World Trade Organization that its "educational work" shall continue without any specific time limit.

The recommendation in the WGTI's draft report to the General Council was agreed on an ad referendum basis by the study group at its two-day meeting in the final week of November (on 25/26 November), trade officials explained.

The recommendation for continuance of the study process on the basis of issues raised by Members, with respect to the checklist of subjects suggested for study (by the Chair), is to be without prejudice to any future decision that may be taken by the General Council, including in the context of its existing work programme - a reference to the current preparatory process for the 3rd Ministerial Conference.

The ad referendum status of the recommendation is at the instance of India, Pakistan, Egypt and the Association of South-East Asian Nations (ASEAN), which have reservations and said they could not agree to any formal adoption of such a recommendation, until after the Working Group on the Interaction between Trade and Competition Policy (WGTC) agrees on its own recommendation about its future work.

The WGTC, which held meetings in the final week of November, was to meet again in the first week of December to finalize its report and recommendations. An initial attempt by the EC for a six-month extension of its work, so as to enable the issue to figure in the agenda for the next WTO Ministerial, has met with resistance by several developing countries.

It was said that a compromise could emerge for an extension of its mandate, without time limitation, while leaving the door open for the General Council or ministers to launch negotiations on the basis of consensus, as required by the Singapore mandate.

Trade policy instruments

But there are also the US objections to its continued work. The US has never been very enthusiastic about multilateral rules in this area, believing that its huge market power can be used to assert extraterritorially its views on competition. Apart from that, the US also has objections to the study group, and thus any future negotiations, encompassing not only issues of non-competitive behaviour of private actors, but also the effect on competition of use of trade policy instruments, like anti-dumping, by governments.

The use of anti-dumping and other trade policy instruments used by governments to limit competition and protect domestic industries, was raised in the run-up to the Singapore Ministerial meeting by Hong Kong-China and Japan. These, and some others, have been pushing for the study process to consider specifically the effects of instruments like anti- dumping on competition, particularly in the context of "globalization".

Though Japan and Hong Kong have not specifically said so, some Third World delegations have the impression that the two may be going slow on the demand that competition policy should cover anti-competitive market effects of trade policy instruments of governments.

The use of anti-dumping and other instruments is yet to be seriously addressed in the study group.

The preparatory process for the next Ministerial, being addressed in the informal sessions of the General Council, includes as part of its mandate, "recommendations concerning other possible future work on the basis of the work programme initiated at Singapore" - para 9(b) of the Geneva Ministerial Declaration.

Comprehensive new round

This last was put into the Geneva Declaration at the instance of the EC, which hopes it can use it to bring this issue of trade and investment into the comprehensive round of negotiations, the so-called "Millennium Round", that it wants to launch at the 3rd Ministerial. It has been suggesting at the two informal sessions, on every question and issue coming up, that all these should be negotiated as part of a comprehensive new round, including the mandated negotiations as in agriculture and services, and several of the issues for review of existing agreements like the Trade-Related Aspects of Intellectual Property Rights (TRIPS), Trade-Related Investment Measures (TRIMs), and the Dispute Settlement Understanding (DSU).

Some developing countries have already objected to this.

But even more, the Singapore mandate made clear that the work to be undertaken in the WGTI, and that on trade and investment, "shall be without prejudice whether negotiations will be initiated in the future."

The Singapore mandate said that the work in each of the working groups is to be kept under review by the General Council, which "shall determine after two years how the work of each body should proceed".

The Singapore mandate further added: "It is clearly understood that future negotiations, if any, regarding multilateral disciplines in these areas, will take place only after an explicit consensus decision is taken among WTO Members regarding such negotiations."

This implies that there has to be an explicit consensus decision of all WTO Members to agree to negotiate multilateral rules on investment, and such a decision should come out of the study group.

The EC effort now is to enable the General Council, in its preparatory work for the 3rd Ministerial, to decide on putting these issues too into the overall negotiating basket of the preparatory process.

The EC clearly hopes that by manipulating the process to ensure that a "single package" (for agriculture and services on which several Members are keen) can be presented (with some other issues for clarification and review) to the General Council for a consensus decision on the recommendations to the 3rd Ministerial, at that Ministerial meeting itself, it could bargain and put the investment issue as part of a comprehensive negotiating agenda for a new round to be completed within three years, and as a single undertaking - as happened in the Uruguay Round. (Third World Economics No. 199, 16-31 December 1998)

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