The "second stage" towards Seattle

The first stage of the WTO preparatory process for the 3rd Ministerial was completed in a recent General Council special session, with members setting out their positions on issues to be considered at Seattle. While the EC is pushing for a comprehensive new round of negotiations, developing countries are emphasizing the need to evaluate implementational issues. The preparatory process is now entering its second stage of compiling specific proposals for a Ministerial Declaration on the basis of proposals received from members.

by Chakravarthi Raghavan

GENEVA: The General Council of the World Trade Organization completed on 25 February what was described as the first stage of the preparatory process for the 3rd Ministerial meeting with a stocktaking of sorts, and set a schedule of meetings between now and the end of July to receive and assemble specific proposals for a Ministerial Declaration and any further trade negotiations.

This was the sixth of the General Council special sessions launched last September as mandated by the 2nd Ministerial meeting at Geneva in May 1998, with various meetings looking at the various issues covered by paragraph 9 of the Geneva Ministerial Declaration under its four indents.

But a number of developing countries laid emphasis on both para 8 of the Geneva Declaration (about implementation of the agreements and an evaluation of them at the 3rd Ministerial) and para 10, which requires a consensus decision for any recommendation to the Ministerial meeting.

In the run-up to Singapore, and the informal process chaired by the Director-General, issues that developing countries had opposed or rejected remained in square brackets in the drafts that went to the Ministers. At Singapore itself, the non- transparent consultation processes operated in such a way that on the issues mooted by the industrial world but opposed by the developing countries, the phalanx of industrial nations and host country stared down individual countries to put them all on a study programme, after the issues never considered in the preparatory process like information technology and some sectoral tariff cuts were negotiated and pushed through.

In the run-up to the Geneva meeting, announced initially as a celebratory meeting for the 50th anniversary of the multilateral trading system, the electronic-commerce issue pushed by the US dominated the discussions and decisions, and a catch-all preparatory process was set up.

Second stage

A more or less similar effort seems to be underway for Seattle. Trade officials said that this second stage (to be completed before the summer break) will receive specific proposals, and put them together in a checklist which capitals could study and give instructions on, so that the negotiators and delegates, on their return in September, could begin to hammer out and draft a Declaration.

"But the thorniest questions will remain, and perhaps can only be resolved at the meeting in Seattle," WTO spokesman Keith Rockwell said at a press briefing on 25 February.

But at the General Council itself (where the EC is pushing to put every proposal on the negotiating agenda, with developing-country proposals likely to be knocked off at the end, as in the eight GATT rounds), Egypt's ambassador, Dr. Mounir Zahran, said that things cannot be kept to be resolved at the end.

"Anything on which there is no consensus - whether labour standards, environment or investment or competition policy or anything else - should go off the table and that is the end of the matter," said Zahran, adding that the implementation of the Marrakesh agreements and its built-in agenda were already mandated.

India, like the EC, had a text of its statement that was distributed to the media. In its statement, India made the point that the issue of "Special and Differential (S&D) Treatment" of developing countries in the various WTO agreements was the cross-cutting and horizontal issue, and that should be taken up and dealt with as a standalone issue and addressed in reference to all agreements. Developing countries had paid an enormous price for the Uruguay Round, and had undertaken major obligations under the Marrakesh Agreement in the belief there would be fair implementation of S&D treatment. This issue should first be tackled, and the decisions spelt out. On this would depend the attitude of countries like India in determining their responses to various negotiating agendas and proposals.

This view, supported with some nuances by a range of developing countries - Pakistan, Egypt, the Dominican Republic, Tanzania, Uganda and Zimbabwe as also Indonesia and Malaysia for the ASEAN - in effect was a demand on the industrial world to pay the initial price for further engagement. Indonesia at the same time spoke of the need for a realistic approach, and supported industrial tariff cuts, as also Malaysia for the ASEAN (many think that the cuts in bound tariffs would need to be paid by India or Brazil).

Much of the discussions at the General Council on 25 February centred on the schedule of meetings and programmes, with two days of formal meetings followed after a break by two days of informals - devoted to each of the indents in para 9 of the Geneva Declaration.

Real transparency

Several of the developing countries used the occasion to insist on a process of consultations that will bring about real transparency in decision-making (rather than the current opaque one of deciding things at a meeting and then seeking to push them through at wider informal and formal plenaries, where the small and weak are dared to stand up and object or acquiesce).

The discussions have brought up a range of views and nuances on new negotiations that may be launched at the Seattle Ministerial meeting in November, ranging from the built-in agenda of further negotiations and reviews provided for in the Marrakesh Agreement to decisions on the new issues sought to be brought in under the "trade and..." formula to cover investments, competition policy, government procurement and so on.

A group of developing countries, a "like-minded group", while not having a monolithic view, are on one side insisting on addressing problems of implementation of existing agreements and ways to end and reverse the marginalization of peoples and countries as a result of the WTO processes, and are opposed to any of the new "trade and..." issues.

Some of their views may appear reminiscent of their stands before Punta del Este (and the launching of the Uruguay Round), but they are more nuanced, and based on a level of assessment and positions in capitals.

At the other end is the EC, which is pushing for the launch of a "comprehensive trade round" in 2000, to include the various subjects mentioned in the built-in mandates of Marrakesh, the work programme for studies set at Singapore, and the Geneva Ministerial, as well as the several subjects and items raised by members at the General Council special sessions.

The EC tactic is to put everything that anyone wants on the agenda, conduct the negotiations as a "single undertaking" to ensure that all the agreements are accepted by everyone (thus virtually negating the requirements of the WTO as an international treaty governed by the basic Vienna Law of Treaties, in respect of changes, amendments or additions) and conclude it all within a 2-3 year span - well before year 2005, when all the Marrakesh agreements (including textiles and clothing integration) kick in.

Such an undertaking would cover the issue of further liberalization of agriculture, where the US and its Cairns Group allies are the demandeurs and the EC (with Japan, Switzerland and a few others) is called upon to make concessions - in terms of import liberalization and reducing domestic support and export subsidies.

And while agriculture, subject to this "reform process", will still receive special treatment (including inbuilt defences against currency fluctuations), both the US and the EC are pushing for some type of sectoral negotiations on industrial tariffs.

In this last, some of the major developing countries, with relatively high average bound tariffs (as different from applied) and which have the potential to industrialize and compete, are to be the focus of further WTO-driven trade liberalization.

The EC proposals would also cover a new round of negotiations in services trade (where the EC is both a demandeur and the focus of demands for market access from the US in particular areas).

The EC wants to use the bait of concessions from it in agriculture to get the "trade and investment" issue onto the WTO agenda, and frame multilateral rules and disciplines on governments and expand the rights of foreigners to invest in (and exit from) countries for all kinds of capital.

It is arguing that without a comprehensive round where there could be some trade-offs, it would be politically unable to undertake the major concessions expected of it in agriculture.

A number of Cairns Group members have "bought" this EC approach, hoping and believing that this way, they could get further liberalization of European and Japanese markets for their agricultural exports.

Keeping options open

The US wants further negotiations in agriculture, in some services areas, and also in some of the built-in negotiations.

Not certain of how Congress will be reacting to the "fast- track" authority request, the US is keeping its options open. At one range, it hopes to try and use its "market power" as a large import market, and the threat or danger of protectionism, to get concessions from others, particularly the developing countries, and at the same time negotiate and ensure that its own rules become multilateralized in the WTO, thus creating new obligations for others, but none for the US that would require Congressional approval for changes in statutes.

Interestingly, the US intervention at the General Council on 25 February did not mention "labour standards" (that was raised by President Clinton at the Geneva Ministerial, and in the US document before the preparatory process) nor specifically the investment and competition issues, but mentioned agriculture, services and industrial tariff cuts.

At the other end are developing countries with large domestic markets which the US and EC corporations are coveting and seek to dominate or take over by breaking down or drastically reducing tariff and other barriers, as well as ensuring a virtually free hand for foreign investors, to be taken advantage of via mergers and acquisitions, and some new investments to expand production, which would set up captive ancillaries but close down domestic competitive producers.

There are also a range of developing economies with small domestic markets, who are providing support for the US and EC agendas, believing that the larger developing economies are the targets, but that they could gain some benefit from the US and the EC.

Comprehensive commitment

In its presentation, the EC said it remained deeply committed to the launch of a comprehensive trade round next year, and that the informal processes so far had shown that only such an approach can satisfy the extraordinarily wide range of priorities and concerns of members. This was why many members had joined the EC in calling for a comprehensive round, and for it to be conducted as a single undertaking. In the EC view, this was an indispensable negotiating tool and strategy.

The EC spoke on the implementation questions and the need for a "qualitatively different" focus on capacity-building for developing countries, particularly the LDCs.

On the built-in agenda, the EC felt that agriculture and services were basically on schedule. On the Singapore subjects (investment, competition, government procurement and trade facilitation), there had been "considerable support" for addressing them in the new round. There had also been wide support for negotiations on industrial tariffs.

The trade and environment issue should also be addressed to add clarity to the rules.

While it would be "disingenuous" to suggest that there is already a consensus on negotiating such a wide array of issues in the new round, support was widespread, but clearly far from universal. Although unreasonable or excessive ambitions should be avoided by all, said the EC, it was fully prepared to address concerns of partners, including developing countries, on market access and new rule-making.

But the Seattle meeting should also take specific decisions on the harmonization work on rules of origin (where the Marrakesh deadlines have been missed, without any new one being agreed), the DSU review and modifications arising out of it, and confirmation of some of the provisions of the Subsidies Agreement. Also to be addressed at Seattle is the acceleration of the accession process. The WTO should also address issues of transparency to build support in civil society, while on core labour standards, the conclusions of Singapore should be supported and close cooperation between the International Labour Organization (ILO) and WTO secretariats achieved.

Japan supported the comprehensive negotiations and single undertaking approach, and said there was no need for a long period of negotiations. Everything could be concluded in a 2-3 year period.

Egypt brought on record the recent communique of the G-15 developing nations (now numbering 17) issued at their Summit in Jamaica and underscored the importance of transparency (in decision-making) and a fair trading system that would effectively integrate the concerns of all countries. Labour standards should continue to be pursued only in the ILO, while the environment issues needed further analysis.

"If there is no agreement on including any issue in the new round, it should just drop off the table," declared the Egyptian ambassador, Dr. Zahran. "We don't want an omnibus round and we want the legitimacy of developing countries to be preserved. Putting all the new issues in the round will lead to further marginalization of the developing countries within the multilateral trading system. If there is no consensus, the subjects should be deleted from consideration as soon as possible."

Argentina was against any straight-jacketing or preconditions that would hinder negotiations.

India referred to its presentations and proposals at earlier meetings and asked the secretariat to have them circulated as formal documents. All proposals should be submitted before the summer break for a proper assessment, India said. Otherwise, smaller delegations would not be able to deal with them appropriately if they continue to be made up to the eleventh hour.

While structuring the work around para 9 of the Geneva Ministerial Declaration, time should be devoted to para 8 of the Declaration on assessment of implementation. Para 9 also had a hierarchy and prioritization of issues.

Some of the trading partners (in the North), while agreeing on the importance of looking at implementation issues, argued that the only subject for discussion was whether all agreements were being implemented and that even where developing countries have transition periods, they should explain to developed countries steps being taken to implement them on the due date.

But the concerns raised by developing countries could not be disposed of through seminars and training classes, nor by arguments that the developing countries were making "implementation" and "development" synonymous.

Said Mr. Khanna, an additional Secretary in the trade ministry in New Delhi: "If WTO agreements do not contribute to development of the less fortunate WTO members, these agreements are irrelevant to them.

"There are also subtle attempts to link implementation with issues like policy environment, good governance and so on," he complained. "But these attempts cannot succeed in masking the real issues.

"The WTO is a highly visible organization and almost all governments are run by elected representatives who will not be able to appreciate the arguments by some trading partners that it is almost blasphemy, in terms of the Geneva Ministerial Declaration, to place our concerns on implementation in an absolutely transparent fashion, seeking a consensus-based solution, while it is a 'holy act' on the part of a developed country member to impose 1000 percent tariff on import of agricultural products on the ground that this did not violate any provision."

"Extremely unfortunate"

When developed countries continue to provide domestic support to certain sectors much above the de minimis value prescribed for developing countries, the latter were told that this was entirely legal and within the four corners of the concerned agreements.

But when developing countries complained about the asymmetries and imbalances in some of the agreements, such as TRIMs, whose provisions did not even permit developing countries to take steps to foster domestic industrial growth, or TRIPS, which had not led to expected technology transfers, the developing countries were told they were trying to unravel already negotiated agreements.

"This is extremely unfortunate. If implementational issues are not addressed, then developing countries would feel extremely apprehensive and reluctant in taking on new commitments."

Developing countries were also being told that the Uruguay Round agreements provided a balance and any endeavour to change some provisions of agreements would upset the balance. But the mandated negotiations were also part of this balance of rights and obligations.

"Thus we find it surprising and unacceptable when certain delegations state that in order for them to constructively engage in negotiations relating to liberalization of the agricultural sector, a mandated area of negotiations, they must get satisfaction, on a quid pro quo accrual of benefits, in new areas like industrial tariffs, investments and so on.

"Negotiations in agriculture and services are already mandated and a part of the overall balance. Thus there is no justification whatsoever in asking members to accept new areas for negotiations in order to enable members with strong agricultural protectionist policies to engage themselves in the mandated negotiations in agriculture."

Receiving end

India and some other developing countries had agreed at Singapore on a study programme on some new subjects - trade and investment, trade and competition policy, trade facilitation and government procurement. The contours and understandings in that Declaration are clearly spelt out and "any effort to prematurely bring these issues to the negotiating mode without enabling the developing countries to fully understand all implications, would be tantamount to going back on a commitment in the Ministerial Declaration". Referring to the concerns expressed about the ability of developing countries to participate effectively in the dispute settlement system, India said that so far developing countries had been mostly at the receiving end. Prevention was better than cure, and developing countries should be helped in two ways so that they could avoid disputes being raised against them.

"Firstly, they should not be coerced or seduced into accepting commitments which it is obvious they cannot fulfil in their current state of development. Secondly, when agreements are negotiated and drafted, developed countries should not hide their real intentions by resorting to constructive ambiguity. If agreements are written in clear and simple language, then the scope for disputes would be significantly reduced."

India also rejected the argument for a comprehensive round, namely, that the more issues and sectors put into the basket, the better the balance of rights and obligations that developing countries could achieve. This was a logic that India was neither able to understand nor willing to accept.

Developing countries who were told they would benefit most from the new round being more comprehensive, were not responsible for introducing para 9(b) or 9(d) - the Singapore study programme issues or the catch-all para for any items raised in the preparatory process.

It is the developed countries that have made by and large all suggestions for additional sectors and issues. And if having a large number of issues on the table would provide maximum trade benefits to developing countries, this had not happened in the Uruguay Round where a large number of agreements were tilted against them. These points need to be clearly reflected upon before giving the argument that a larger round by its very definition and scope would benefit developing countries.

The US said that globalization was bringing the WTO into contact with the environment and concerns of workers. And these need to be addressed. In terms of the WTO, agriculture, services and industrial tariffs were of concern to all. But there was also a need to address mechanisms for consultation with civil society and for transparency and openness.

Pakistan said that implementation and measures to deal with them should be part of an early harvest to be agreed on at Seattle. This would enable additional discussions and negotiations to go forward smoothly. In agriculture, which had been brought under a system of international rules, many developed countries had written into the rules protective measures that developing countries were not allowed to practise. In services, attention had been focused so far on issues of benefit to the industrialized countries. In the next round, issues of benefit to the developing world like movement of natural persons, health and tourism services should be addressed.

New issues or negotiations should satisfy four criteria: they should be trade-related, must not strain existing capacities of the WTO, should be mature and should provide for a balance of benefits to developing countries.

Brazil wanted the organization of work to provide some flexibility and enable issues of implementation to be raised at any time. The promised expansion of exports of developing countries under the Uruguay Round had not been achieved. Agriculture was of critical importance to Brazil.

Colombia also spoke of the importance of agriculture and integrating developing countries into the dispute settlement system through a programme for legal assistance through a legal institute bureau. (Third World Economics No. 204, 1-15 March 1999)

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