by Chakravarthi Raghavan

Geneva, 25 May 2000 -- The vote in the US Congress for grant of Permanent Normal Trading Relations (PNTR) status to China, and the setback it gave to the US labour, is likely to be used by the EU and Japan to persuade the US to agree to setting the agenda and the launch of a new round before China actually becomes a member, according to some trade diplomats.

Paradoxically, the reverses of US labour (and particularly the AFL-CIO and their 'environment allies') will result in increased pressures on the developing countries to politically accommodate the United States administration by compromises on the trade-labour links.

And at the forthcoming ILO General Conference in June, as well as the UN 'Social Summit plus 5', some well-meaning NGOs (of the South and North) who think they can help to use the occasion to improve the social conditions of the developing countries, may see occasion used for attempts to accommodate the US and organized labour's interests - clothed in some high-sounding phrases about fundamental human rights.

While the US vote in the House of Representatives, and a similar vote in the Senate soon, as well as the agreement between China and the EC, removes some major roadblocks to China's accession, China has still to complete negotiations with, among others, Costa Rica, Ecuador, Guatemala, Mexico and Switzerland.

After this, the WTO secretariat and the working party, have still to put together into a protocol all the agreements -- they are not only market access concessions in goods and services, but also special trade regimes and provisions China has agreed to -- and figure out a way of how these could all be 'multilateralised'.

The last has become complicated because the bilateral agreements with the US and EC have spelt out some 'Chinese commitments' -- rather than for e.g. China agreeing bilaterally merely to 'grandfather' in its protocol some of the existing provisions in US or EC restricting trade with China and setting a period for its partners to remove these bilateral conditions.

After this is all over, the working party has to agree on a protocol and the General Council has then to approve it. China would then have to make the necessary changes in its own domestic laws - and even in a system like China's, this can't be done overnight - and then sign the protocol of accession. China would then become a member 30 days thereafter. This process could take several months.

But as announced by the EC Commissioner Pascal Lamy in Beijing, the EC is expected to use its forthcoming US-EC summit meeting to persuade the United States to agree to launch a new round with new issues, even if negotiations on new issues will be taken up only after 2-3 years (the famous compromise that the South African Trade Minister Erwin tried, but failed, to get other developing countries to accept at Seattle).

And the EC and Japan will also use the forthcoming G-8 summit in Japan to get the US to endorse the idea in the communique.

And as in the past, the developing world would be asked to pay the price, both in taking on the new issues that the EC and Japan want -- in return for promise of serious talks on agriculture that the US and Cairns group want -- and to accommodate the concerns of organized labour in US and Europe visavis the WTO trading system by setting up a WTO-ILO-UN forum to deal with labour and trade linkages.

In private talks in Geneva, Japan and the EU have been telling key developing countries that after the US elections, and a new incumbent in the White House and probably a Congress with greater Democratic voice, they would be forced to yield more to the United States.

The US administration, which is keen to obliterate the image linking the Clinton White House and the failure of the Seattle meeting, is being canvassed that now is the time to set the agenda for the new Round and launch it, and create a forum to accommodate concerns of US (and European) labour and environmental groups, and push through new rules in new areas.

There is a view, and it was voiced by the UN Secretary-General Kofi Annan when the US signed its agreement with China in 1999, that China's entry will strengthen the developing countries at the WTO.

This may be true in that if China is a member thus has a voice in discussions about the agenda for a new Round, it most probably will be opposed to bringing on the WTO agenda labour standards or investment issues. But in most other matters, China has given away so much in the negotiations with the US and EU -- whether on market access, textiles and clothing, special safeguards, anti-dumping, intellectual property, services and others -- that it is simply not rational to think that China would nevertheless help other developing countries to resist the US and EC on these very issues, and have less WTO obligations.

The WTO, for all its public evocation of 'free trade' principles, is a mercantalist organization, where each member strives to advance its mercantalist interests and defend its rights, and the major industrialized countries are following a neo-mercantalist policy of promoting the interests of their major corporations for access to developing country markets through trade and investments.

No developing country, not even some of the close allies of China, should or could expect China to do otherwise than to promote its mercantalist interests and defend its rights (and ensure that other developing countries do not secure a more competitive advantage).

No developing country, big or small, does otherwise either.

Japan and the EU have been for some time talking in private to some developing countries that they want to set the agenda for a new round and launch it before China enters the WTO - a view that the EC Trade Commissioner Pascal Lamy has publicly voiced in Beijing (soon after concluding the accord with China), and one which Japan and the EU are pushing on the United States.

And at the same time, the EU is trying to "soften up" the developing countries who have been cool to the idea of a new round with new issues, and had also strongly objected at Seattle to the efforts of the US administration (President Clinton and USTR Charlene Barshefsky) to bring labour issues on to the WTO agenda, and use the new round to empower the industrial world to use labour and environment conditionalities for market access.

The idea was floated by the EU at Seattle -- after the US proposal was rejected by developing countries in the ad hoc group chaired by the Costa Rican Minister -- for the creation of a forum involving among others the WTO, ILO to deal with 'globalization' issues and bring some coherence into the global system.

The ILO director-general, Juan Somavia -- at a forum organized by the business groups in Seattle during the WTO meeting in December 1999 -- in fact the aired the idea, but (in response to an Indian corporate representative, now named to the appellate body, Mr.S.Ganesan) made clear that he was only giving his own views and not that of his governing body.

Since then, Somavia has been making references to the need for a global forum to manage the 'globalization' -- distinguishing between the information and technological revolution and advance that is irreversible, and governmental policies and rules promoting globalization that can be fine-tuned.

Ambassadors of some developing countries, who vehemently rejected the US approach, before and at Seattle, but were muted on the EC proposal are privately canvassing the views of other developing countries for a UN forum -- with the argument that there is a need to find some political compromise for the United States.

This would also no doubt help the bilateral relations of these countries with the US and the EU -- something that has not escaped others.

There have also been some informal talks on these matters involving among others the UN Secretary-General and the various UN bodies, as well as UN agencies.

Even in the founding of the UN, the charter envisaged the need for some coordination, and provided for the UN having arrangements with Specialized Agencies under Article 57 (which uses the mandatory 'shall') and for the establishment of the Economic and Social Council. But the US scuttled such a role in the very early days (when it insisted on a different specialized agency agreement for the IMF and the World Bank in effect insulating them from the UN).

And the WTO members, using the specious plea of their contractual relationships, refused even to enter into a specialized agency agreement with the UN. But later, when the WTO (under Ruggiero) found that this would mean the WTO staff would not be able to use even the UN laissez passe on their travels, an agreement was entered into by exchange of letters between Ruggiero and then UN Secretary-General Boutros Boutros-Ghali for continuance of the arrangements between the UN and the old GATT (the GATT secretariat in law was a UN secretariat, being the secretariat of the UN body, the Interim Committee for the International Trade Organization). This agreement between WTO and the UN was circulated to the WTO General Council and taken note of by the General Council, but apparently not at the UN. One developing country delegation which sought copies of the agreement at New York was told that it was not entitled to get these copies!)

But, while UN member governments can conveniently forget their charter obligations, why the UN Secretary-General (on whom the Charter is binding) does not insist on ECOSOC's role is not adequately explained, though UN officials privately say it is a 'non-starter' since the US does not favour it. This is also a view of some ILO officials.

Nevertheless, the move for an outside forum to discuss trade-labour linkages amongst governments, NGOs, etc etc is being presented as one for coherence at international level on policies of trade, finance, money, labour etc, and in a forum outside the WTO. There is some sugar-coating that the 'labour rights' being pushed are universally recognized human rights (in the 'core labour standards') and that there is no intention to take away the 'comparative advantage' of developing countries in international trade terms of their cheaper labour.

There can however be little doubt that this is just the thin end of the wedge and that down the road, after two or three years, the WTO and its 'trade enforcement' will be sought to be used to 'sanction' the Third World countries, without any way helping to better conditions of millions of unemployed in the Third World.

Just before arriving at Seattle to push his 'labour agenda', the US President Bill Clinton in a newspaper interview had hinted that at some stage, the US did envisage using the WTO trade sanctions machinery to enforce the standards, though this was later sought to be explained away.

The experience of Cambodia that agreed to special labour provisions in its trade agreement for textiles and clothing with the USA shows that US unions (and textile industry capital, supported by the Republicans from the Southern states including the Senate majority leader) would use them to deny the market access promised.

The just enacted US Trade and Development Act 2000 shows that the 'standards' would not remain in terms of the oft-repeated statements that they are universally accepted core labour standards, which are in effect standards of universal human rights and democracy, but will usher in wage standards and other yardsticks.

The 'duty-free and quota-free' preferential access to the US market covers not only the Least Developed Countries of sub-Saharan Africa, but includes Kenya, Mauritius, South Africa, Zimbabwe (but not Egypt).

But the sub-Saharan African countries to benefit have to be designated as beneficiaries by the US President. The Act provides that the US before designating a country as beneficiary has to determine that "the country has established or is making continual progress towards establishing a market-based economy, rule of law elimination of barriers to US trade and investment, system to combat corruption and protection of internationally recognized workers rights."

The list of workers rights set out in the law includes "the right of association, right to organize and bargain collectively, prohibition of forced labour, minimum age for employment of children and acceptable conditions of work with respect to MINIMUM WAGES, HOURS OF WORK AND OCCUPATIONAL SAFETY AND HEALTH" (emphasis added). The US is not a party to any of the ILO conventions on these norms.

And in relation to the sub-Saharan beneficiaries, the law also provides that if the President determines that a designated country is not making continual progress towards meeting the above requirements, he is required to terminate the designation of the country for the benefits.

In the case of the Caribbean and Central American countries, the President may designate a beneficiary country taking into account several criteria including whether the country has demonstrated commitment to undertake its WTO obligations on or ahead of schedule AND TO PARTICIPATE IN NEGOTIATIONS TOWARDS THE COMPLETION OF FREE TRADE AREA OF THE AMERICAS (emphasis added).

Other criteria for designating the Caribbean and Central American for preferences include the extent to which the country provides protection of intellectual property rights in accordance with the TRIPs agreement and the "internationally recognized worker rights".

These international recognized worker rights listed are the same as in the case of the sub-Saharan African countries, and thus goes beyond the 'core labour standards' trotted out in ILO discussions.

Also, the criteria for the Caribbean and Central American countries include whether the country has implemented commitments to eliminate the worst forms of child labour, meets the criteria for counter-narcotics certification in the relevant US legislation, and contribute to efforts in international fora to develop and implement international rules in transparency in government procurement.

In effect, the US law can be used to get sub-Saharan Africans and the Caribbeans and Central Americans to agree to and support these US 'conditions' not only for their trade preferences (but later within the WTO), and by getting the WTO waiver for these preferences, indirectly get the WTO members to endorse these. And the developing countries are being told (by the EC, Japan and other trade officials) that if they do not find a compromise now, and if in the November elections the US Democrats linked to the US labour, get control of the US House of Representatives, they will be faced with tougher conditions.

With the trade agenda on a back-burner, after Seattle, in many Third World capitals, the 'game' is now in the hands of some of the Geneva-based diplomats and some power-brokers who are trying to beguile the developing world into complacency by accepting the assurances and promises of the industrial country governments -- forgetting the lessons of the Uruguay Round.

Opponents are always countered with 'what is your alternative'. Perhaps one should be, that all factors of production should be similarly subject to 'fairness' test. If 'unfair' (differential) labour costs can be used to restrict imports, why should differential capital or technology costs not be similarly judged? If trade is to be managed on the basis of labour conditions, why not management of trade for capital and other inputs. (SUNS4676)

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

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