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CIRCULAR TALK FROM NORTH ON ‘IMPLEMENTATION’ QUESTIONS

by Chakravarthi Raghavan

Geneva, 4 July 2000 -- The grievances of developing countries about the imbalances and inequities of the WTO trading system and its agreements were discussed further Monday, as part of the post-Seattle ‘confidence-building exercise’ at a Special Session of the General Council under the rubric of “implementation issues”.

Under this heading of ‘implementation issues’, developing countries have been complaining that there are serious imbalances and inequities visited on them in the Uruguay Round agreements, and the way they were being implemented, and that developing countries had not received benefits that they were expected to or led to believe they would get under the Marrakesh Agreement of the WTO and the multilateral agreements annexed to it.

In the preparatory process before Seattle, and since then, the developing countries stated that unless these imbalances are addressed and rectified, they would find themselves unable to undertake more obligations, whether under existing agreements, or by negotiating new agreements on new issues in a new round.

The industrialized countries, while using different language, in essence have been arguing that the ‘implementation problems’ of developing countries have to be addressed through technical assistance to enable implementation, and that other difficulties and grievances raised by them would involve changes to existing agreements, that could only be considered in the context of a new round of trade negotiations.

This last is on the view that any changes would involve changing the balance of rights and obligations struck at Marrakesh, and that any changes sought by developing countries could only be on the basis of concessions elsewhere, within the existing agreements, or in new areas.

While the trade officials of developing-country governments have not challenged these arguments in a frontal way, few in the developing world—among their enterprises or public interest groups, or even legislators—have accepted it. In effect they have been arguing that the imbalances and lack of benefits have to be redressed to restore public confidence in their countries, and that these could be done autonomously by the industrialized countries and/or through agreed understandings and interpretations of the General Council.

In terms of the work programme set at the 22 June meeting, the issues and proposals in paragraph 21 of the Mchumo text, raised and discussed at the Special Session of the General Council, are to be pursued further in ‘consultations’ to be held by the Chairman of the General Council and the Director-General.

But at Monday’s resumed meeting, Pakistan and a number of other developing countries said that the proposals were not something new, but had been before the General Council for some months even before Seattle but that there had been no serious discussion in the General Council on the proposals, and the major trading partners had not reacted beyond vague statements about considering them.

Pakistan, India and several developing countries were particularly dissatisfied with the way the issues relating to the textiles and clothing trade and the lack of meaningful liberalization promised under the agreement on textiles and clothing had been done, and wanted the question to be addressed and discussed multilaterally at the General Council, if necessary through a special session, and more so since there was no WTO body dealing with the overall issues of this trade.

The US and the other majors have been trying to push the implementation issues for technical inputs to subordinate bodies (where the issues could easily be bottled up in non-transparent discussions), and postponing their own reactions to proposals to the envisaged consultation process of the Director-General and the General Council chair, to be conducted between now and the October meeting of the General Council.

The call of Pakistan and others for a special session of the General Council in July to be devoted to the textiles and clothing issue is now expected to be subject to the ‘consultations’ of the Director-General and General Council chairman.

The developing countries argued Monday that the issues raised by them under “implementation” did not really need any changes in the agreements, but merely “understandings” that could be reached in the General Council itself. In any event, they had to be addressed in the Council, and the reactions of the major trading partners could not be left to be advanced in the consultations to be conducted by the Director-General and the General Council chair.

Among the implementation issues and proposals discussed were those raised by developing countries in relation to the Agreement on Textiles and Clothing (ATC), Technical Barriers to Trade, Customs valuation, TRIMs, TRIPS, Services, Rules of Origin, Subsidies and Anti-Dumping.

The General Council special session had began consideration of these issues on 22 June, and continued the process Monday, taking up the various proposals under each of the agreements that developing countries had put forward in the preparatory process for the Seattle Ministerial Meeting.

These proposals, in particular several detailed ones from the like-minded group (LMG) of developing countries, some calling for actions by the Seattle Ministerial meeting, and others to be taken and decided by end 2000, were grouped and put in paras 21 and 22 of the informal chairman’s text (of General Council Chairman, Amb. Ali Mchumo of Tanzania) that was before the Seattle meeting.

Under a decision and work programme of the General Council, the detailed proposals under para 21 of the Mchumo text were taken up for consideration at the Special Session of the General Council on 22 June and on 3 July. The proposals of the developing countries in para 22, where before Seattle, the General Council was asked to take decisions in the first year of a work programme, are now to be taken up in October at the General Council.

The few comments and remarks of the industrialized countries on 22 June and 3 July suggest that having been forced to consider these questions, the industrialized countries are still trying to fob off the developing countries with some bilateral and multilateral technical assistance, yielding nothing on substance beyond talk of considering them during negotiations in a new round.

A trade official said that the ‘implementation’ discussion had become the most crucial one for developing countries, and under this head they were addressing the issue of redressing the imbalance in benefits, and failure to operationalise the Special and Differential treatment (S&D) provisions of various agreements. These complaints related to the ATC, and to the Subsidies Agreement (where there was imbalance in the practices of developed countries being put in a ‘green’ box, while those needed by developing countries were prohibited). Adopting unconsciously the language of the industrial world to reject such proposals, the trade official spoke of the proposals as involving “a rebalancing” of the agreements - a phrase used in GATT for more concessions in another area to offset something being reduced in one area.

The industrialized countries, on the other hand, viewed the problem as essentially one for providing technical assistance, and on a case-by-case basis extension of time-periods.

There were also questions about whether the various issues should be taken up in the General Council Special Session or in subsidiary bodies as the industrial countries wanted.

The trade official cited in this regard the difficulties of ambassadors at the General Council even understanding the technical questions involved in such agreements as that on Customs Valuation, and that few trade officials even could understand or explain these.

This raised the question, how the WTO officials conduct training programmes for developing countries, when they themselves do not understand these rules clearly.

But a major proposal of the developing countries, and one that produced some sharp debate Monday, is one proposing that an importing country which is provided an invoice and expected (unless there is cause to the contrary of false valuations) to accept the ‘transaction value’ as the import value, could ask for and get the export price declared in the exporting country to compute the value and or take account of commissions and other costs. These are usually the ways by which there is transfer pricing or illegal movement of capital out of an importing country.

The Quad countries, supported by Switzerland and a few other industrialized countries favoured the use of the transaction value approach.

India challenged these positions and pointed out that the proposals were aimed at preventing customs fraud, an objective with which the industrialized countries wanting to battle corruption and good governance should agree. India’s own experience was of a great difference between the value declared for imports and that declared to the exporting country customs administration. India was amazed that major developed countries should oppose proposals aimed at combating customs and other fraudulent and corrupt practices.

Under other heads, on TRIPS, India and other developing countries reiterated their demand, supported by some developed countries, for extension of the scope of additional protection for geographical indications of origin to products other than wines and spirits.

This was an area, these countries said, where they expect to see positive benefits. The debate on this issue in the TRIPS council had not led to any positive results so far, and the subject should be addressed at the Special Session.

Bulgaria had raised this issue also at the agriculture committee, and said that if too narrow an interpretation of the mandate for further negotiations were to be taken, by rejecting a priori any proposals not specifically mentioned, then the same logic would apply in other agreements and mandated negotiations too.

India and several others also raised the question of relationship between the TRIPS and the Convention on Biological Diversity, and the need to harmonize the two treaties, an issue that had also been raised at the TRIPS Council but without any progress.

At the TRIPS Council Brazil had made a detailed presentation of the provisions of the TRIPS and CBD that need to be reconciled and harmonized.

At the Special Session Monday, India pointed out that while TRIPS recognized IPRs to be private rights, the CBD had categorically reaffirmed that nation states had sovereign rights over their biological resources, and recognized the desirability of sharing equitably the benefits arising from use of these resources, as well as traditional knowledge, innovations and practices relevant to the conservation of biological diversity and its sustainable use. The CBD acknowledged that special provisions were required to meet the needs of developing countries.

The CBD and TRIPS were thus intrinsically linked and it was important to study this relationship and means found to reconcile any contradictions in TRIPS within the overall objective of conservation of biological resources with sustainable development.

Under the CBD, the authority to determine access to genetic resources rested with national governments and subject to national legislation.  The CBD also stated categorically that access where granted shall be on mutually agreed terms and subject to prior informed consent of the resource provider. It enjoined the international community to respect, preserve and maintain knowledge innovations and practices of indigenous and local communities and encourage the equitable sharing of benefits.

But despite these, patents were being granted under TRIPS to biological and genetic resources either completely without the knowledge of the legitimate owners, or worse still, patents were being granted against the very criteria of patentability.

As examples of such bad patents, India mentioned patents granted on turmeric and neem which had been revoked—patents granted totally in violation of Art 15 of the CBD which listed the conditions for access.

This was the background for the proposal that pending an examination of the relationship between TRIPS and the CBD, and finding ways to harmonize the two, patents inconsistent with Art 15 should not be granted.

India also raised the issue of non-violation provision of disputes in relation to TRIPS and said that the TRIPS Council was yet to fulfil its mandate to examine the scope and modalities of the issue. The TRIPS Council should fulfil this mandate under Art. 64.3 of TRIPS, before any decision could be taken on applicability or otherwise of the non-violation provisions of GATT 1994.

On the issue of review of Art. 27.3(b) of TRIPS, India and other developing countries attached considerable importance to this mandated review - a review which in the plain language of that para was to be a substantive one. Nevertheless some developed countries (like the US) had believed that the review was only to be a review of implementation of this provision by countries, while some others view the review in a very restrictive way - something not borne out by the language of Art.27.3(b) or by the fact that the review was to have begun four years after entry into force of the WTO, whereas developing country implementation was only to take place 5 years after the entry into force of WTO.

There was currently a deadlock on this issue in the TRIPS Council, and the Special Session of the General Council should look into this matter.

Also to be addressed meaningfully as an implementation issue is the link between Art.27.3(b) and development, the patentability of life forms, the sui generis issue, relationship to conservation and sustainable use of genetic material and issues of traditional knowledge and farmers’ rights.

Until this was done, the period of implementation for Art. 27.3 (b) should be five years from the date when the review is completed.

Another proposal is for including the list of essential drugs of the WHO to the list of exceptions to patentability in Art. 27.3 (b), and this had to do with the public policy objectives of protection of public health and nutrition—explicitly mentioned in Art. 8 of the TRIPS.

The proposal under implementation on Art. 66.2, related to the obligation of developed countries to provide incentives to their enterprises for promoting the transfer of technology to the least developed countries.

India, Pakistan, Dominican Republic and several others also raised the issue of implementation by industrialized countries of the Services Agreement on supply of services by movement of natural persons. Though the commitments of the industrialized countries were quite modest under Mode 4 for supply of services, even these were not being fulfilled.

Japan argued that it could not even understand this request, when India came back to point out that even applications for ‘business visas’ from service suppliers of developing countries took 3-6 months to be processed, defeating the very purpose of the visit.

On the TRIMs agreement, India and other members of the LMG group argued for the extension of the 5-year transition period under the TRIMs, and for developing countries being given new opportunities to notify their existing TRIMs.

India also stressed the importance to development of the local content requirement on investors, and said this was even more important to enable developing countries to channel adequate investments to sectors and regions to facilitate development. Developing countries should not be required to remove TRIMs immediately.

Brazil noted that the issue was also to be addressed in the General Council and the Council on Goods, but it was also willing to go along with India’s proposal to consider the issue here and take decisions.  A number of countries - Egypt, the Philippines, Indonesia, Colombia, Guatemala, the Dominican Republic, Bolivia, Pakistan, Brazil, India— all raised their concerns over the way the anti-dumping agreement was being implemented resulting in trade harassment. A number of them also raised the issue whereby there were repeated cases of starting investigations, within days of the end to the previous investigation (when no dumping or injury had been found).

The proposal for immediate action calls for a decision that no second investigation on the same product should be started for at least 365 days after an earlier one is closed.

The US and EC raised their concern that the Anti-dumping (AD) agreement was sought to be renegotiated, and this could only be done in the context of a new round. But India repudiated this and said the issue could be dealt with through an agreed interpretation or understanding.

A number of industrialized countries also argued for the issue to be dealt with in the Committee on Anti-dumping, on the ground that highly technical issues were involved. But several developing countries pointed out that the AD Committee had been unable to deal with these issues, and the General Council must take up this responsibility. Chile said the issue of anti-dumping was one of “over-implementation” and it was distorting the effects of what had been negotiated in terms of market access. The entire discussion needed a new approach and it was necessary to approach with a political perspective.

On the Rules of Origin, where the committee has a new deadline of 31 July to complete its work of harmonization (which under Art.9.2. of the agreement was to have been taken up and completed by 1998), little progress has been made.

A number of developing countries said the problem was not a technical one but the lack of political will on the part of the developed countries who are using the rules of origin to protect their domestic industries.

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

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