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LOST IN CYBERSPACE

by Chakravarthi Raghavan


Geneva, 27 April 2000 -- The General Council of the World Trade Organization seems now unlikely to agree next week on any package of confidence-building measures or even many individual parts of it, but at best could agree on a procedural decision for Special Sessions of the General Council to address the implementation issues.

The Council has ended two days of informal consultations without consensus on a market access package for least developed countries, on the issue of extension of transition periods including on Trade-Related Investment Measures, on the issues of internal transparency and inclusive participation of members in decision-making, on the work programme on Electronic Commerce and the status of the 'political' commitment at the Geneva Ministerial Conference of 1998 on a moratorium on tariffs on E-Commerce transactions.

Though the TRIMS extensions has been engaging much attention, there are also other agreements where the transition periods have come to an end -- customs valuation, technical barriers to trade, TRIPS (where a number of developing countries are still to enact implementation legislation and put in placing the administrative machinery for enforcement of rights) and some of the permissible subsidies (regional, environmental etc) that benefit the industrialized countries.

The US attempts to separate the issues of transition periods (that have expired) in agreements from the E-Commerce issues, with some disingenuous arguments on the Geneva mandate and its status, did not get very far. Pakistan and the Dominican Republic, and to some extent Mexico, linked any decision on E-Commerce tariff moratorium continuance to decisions on transition periods in agreements.

And while the European Community wanted the continuance of the work programme on E-Commerce to discuss "outstanding" issues, India said any mandate for a work programme must involve all "substantive" issues. In the Indian view though the industrialized countries portrayed the E-Commerce issue as a "win-win" for everyone, it was not so clear or certain that there won't be winners and losers, with developing countries as losers, or at least not gaining anything.

On the internal transparency, while there has been some progress on a few suggestions, the basic questions remain to be resolved, and it was felt by several members that there should be no piece-meal agreement.

The General Council is also no nearer a solution on the deadlock over the chairmanships of the Committee on Agriculture and the Council on Trade-Related Intellectual Property Rights, which in turn has blocked the chairmanships of several subsidiary bodies. The EC objected to Brazil's Celso Amorim heading the Agriculture negotiations, and the Finnish nominee for TRIPS council was in turn blocked.

Some consultations among key countries are continuing on a procedural decision to set up the special mechanism on implementation and the chairmanships issue.

The consultations Friday on implementation, involving about 20 countries and chaired by WTO Director-General Mike Moore, discussed a draft (a chairman's statement to be adopted as a decision) of the elements of a decision on implementation questions. The elements for a General Council decision include:

* recognition that addressing the implementation concerns of developing countries would help build confidence among them in the multilateral trading system and the importance of continuing work on implementation concerns of developing countries, which had begun in the Seattle preparatory process in terms of paras 8 and 9 of the Geneva Ministerial Declaration and the progress in addressing these;

* the General Council in special sessions addressing these issues, and particularly those raised during the Seattle preparatory process and reflected in a revised text of 18 November, and the Council assessing the difficulties, identifying ways to resolve them and taking appropriate decisions;

* directing WTO bodies to play a reactive role and provide appropriate inputs; and

The special session process is to be without prejudice to any future decisions that the General Council might take and/or in the context of possible further multilateral trade negotiations.

The secretariat is to prepare a revised draft and this is expected to be discussed on Monday or Tuesday.

On the chairmanships issue, the GC chairman, Kare Bryn, suggested Thursday that "substitute" chairmen be named for this year for the Agriculture and TRIPS bodies and chair of the other subsidiary bodies already agreed to be elected. But this was not acceptable to some and neither was the view that the those now chairing these bodies continue. There is to be another informal meeting of the Council on 2 May to hear a report from Bryn.

On the E-Commerce, the 1998 Geneva Ministerial meeting adopted a declaration:

* mandating the General Council to establish a comprehensive work programme and produce a report on the progress of the work programme and any recommendations for action to the third ministerial,

* for members, without prejudice to the work programme or rights and obligations under WTO, to continue their current practice of not imposing customs duties on electronic transmissions, and for the General Council to review this when reporting on the work programme to the 3rd Ministerial, and

* for the 3rd Ministerial to decide by consensus the extension of the moratorium on levy of customs duties, taking into account the progress of the work programme.

After Seattle, at the General Council, in the formal discussions in February, and the informals since then, Pakistan and a few others have placed on the same footing the expiry of transition periods and the E-Commerce moratorium, and these had to be resolved as a package -- a view repeated by Pakistan again on Wednesday.

In Thursday's discussion, according to trade diplomats, the US argued that the expiry of transition periods under legal commitments and the political declaration on E-Commerce tariff moratorium could not be linked. The US also advanced the somewhat disingenuous view that the General Council had not submitted its report on the E-Commerce work programme, and the review of the moratorium declaration to the Seattle Ministerial, and hence the Geneva mandate (and with it the moratorium) continued.

The US stand on moratorium, and getting the General Council behind it, seems to be more related to the US internal problem -- where the administration is trying to persuade Congress to act to block actions or proposals of States who want to levy sales taxes on E-commerce transactions and deliveries within the US. A Congressional expert committee has been divided. In this internal fight, the US has been using the General "political commitment" on no customs duties on e-commerce to secure no state levies either.

The European Union and others, levying VAT and not sales taxes, are not affected by this controversy, and the EC as such has been muted on whether or not it supports the moratorium on e-commerce transactions.

At the informal Thursday, Pakistan made clear that the 'no customs moratorium' on e-commerce was linked to other transition issues and a package solution had to be found. The continuance of the Geneva political declaration on e-commerce moratorium, required a consensus decision of the Ministers at Seattle for its being continued. There had been no such decision at Seattle. The General Council had to decide by consensus the E-Commerce work programme, whether or not to continue it, and the moratorium on customs duties. Pakistan was not willing for a decision in isolation, but only as part of an overall package on all transition issues.

The Dominican Republic took a similar stand and repeated its view that the Council should take an overall political decision to extend all transition periods (that had ended) under the agreements.

Mexico agreed the E-Commerce moratorium was a political declaration and not legally binding. It was willing to look at it in this context, but within a General Council "package" decision for all transition periods.

The EC, Hong Kong China, Canada and Singapore wanted the continuation of the work programme on E-commerce, but did not seem to have expressed any views on the tax moratorium. Within the work programme, the EC wanted issues yet to be decided to be taken up. Hong Kong China said the E-commerce issue was an important one, and the WTO should be engaged in it and be seen to be engaged. It was not clear how customs duties could be applied on E-commerce, and this issue needs to be looked into.

India said that the US view about the General Council not having reported on the review of the work programme and declaration, and thus the Geneva mandate continued, was one view of the position.

But there were also other views of the General Council's actions in this area before Seattle. The Council in October 1999 had discussed the reports of subordinary bodies on aspects of E-commerce works programme they had dealt with. The General Council had then noted that the preparatory process for the Ministerial (and the declaration for the consideration of Ministers being considered in that process) had paragraphs relating E-Commerce. In forwarding the report of its discussions, and the report of the subordinary bodies, the General Council had said it was awaiting the further guidance from Ministers.

The annual report of the General Council to the Seattle Minister had contained reports on its work and that of the subordinate bodies, including on E-Commerce. There was nothing in the General Ministerial on any particular format or content of the report on E-commerce. It could thus be argued that the General Council had completed its mandate on the E-commerce issue.

India at this time did not want to go into the status of the Geneva mandate visavis the moratorium. Since the General Council had received no guidance from the Ministers on the moratorium or the future of the work programme, the General Council could discuss what should be the work programme. India was willing for a discussion on the substantial issues. It was not at all convinced that E-Commerce was a "win-win" for all as contended, and was prepared to study it. But any work programme had to address all the "substantive" issues relating to E-commerce, and not only some 'undecided' issues. No issue could be treated as closed.

On internal transparency, Singapore was against partial agreements on a few, while others were pending.

On the problem of chairmanships, the chairman's suggested that 'substitute' chairs be appointed for this year for the Agriculture Committee and the TRIPS Council, and the way cleared for the election of the chairmen already agreed upon for subsidiary bodies. It was pointed out that if chairs of subordinate bodies were not now named, the mandate of the current chairs would end as soon as these subordinate bodies meet, and only ad hoc decisions limited to the period till the next meeting, could be taken for each of these bodies at every meeting.

But the idea of 'substitute' chairs did not find favour with Argentina, the EC and the US.

The Chairman is to hold further consultations and is to make a report on his own responsibility to the General Council on 3 May. He is expected to circulate a draft text of his intended oral report on 2 May, but not engage in any 'drafting exercise' over that. (SUNS4657)

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

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