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UNCERTAINTY OR "... ON EARTH PEACE AND GOODWILL TOWARD MEN"?

by Chakravarthi Raghavan


Geneva, 22 Dec 99 -- In the third or fourth century, unable to persuade and ban "christians" from celebrating the pagan revelries associated with the winter solstice, the church in Rome decreed that the birth of Christ (which took place either in early spring or autumn) be observed on 25 December.

For the church it was a case of "if you can't beat them, join them," a pragmatic view that most politicians have adopted to run for and remain in office in the late 20th century.

And from about the late 19th century Victorian era in England, and the early 20th century, as Xmas and its observance became commercialised - with exchange of cards, gifts (not only within families) drinking and gluttonous eating -- and "secularised" in the post-war world, it has been the time of the year when "peace and goodwill to all" is marked by office parties and drinking sprees, long holiday breaks and little work at public and private institutions and international organizations.

But whether religious or secular, the prevailing sentiment for Xmas, as per the gospel (St. Luke), "Glory to God, and on Earth Peace and Goodwill toward Men" is unlikely to be fulfilled at the trade body.

While the World Trade Organization and its secretariat, and trade diplomats and negotiators agreed, in the "WTO consensus mode" on 17 December, to follow this hallowed custom this year too, they have left behind for themselves and their capitals, and even more, the enterprises in most countries, an unparalleled state of uncertainty that may give them little peace of mind during the holiday season ,which this year, coincides with religious observances of the Jewish, Christian and Moslem faiths.

A summing up by the Chair of the General Council that any "Seattle Follow-up" and, as a part of it, questions about provisions of the WTO and its agreements that lapse and deadlines that expire on 31 December, would be taken up after consultations in the New Year, and that meantime members would exercise restraint so as not to prejudice the position of other members, does not appear to have "suspended" uncertainties.

At least two areas of key interest to the industrial world, the various permitted or non-actionable subsidies or actions only on those causing 'serious prejudice' to other members, and the "moratorium" on customs duties on e-commerce, are now in as similar a state of uncertainty as the problems of the developing world.

Since the Singapore Ministerial Conference, and in the run-up to the Seattle Ministerial Conference, developing countries gave a high profile to their concerns and problems over the existing agreements, their deficiencies and inequities and formulated specific proposals under the rubric of "implementation" and tried to use it to get some leverage in the negotiations and discussions.

At Seattle, despite one or two meetings of the Working Groups (mainly to hear views, and not negotiate), as well as 'informal' green room meetings (where there were motions of negotiations), there was little evidence that the major industrialized countries were seriously looking at these problems and were willing to seek solutions. And if discussions there lacked clarity, there appears to be even less of it now.

Only a part of this is due to the "confusion" whether the Seattle process has ended or remains "suspended", and whether anything has been "frozen" or has become even more fluid, and would this eventually result in more disputes, more panels, and more leeway to the secretariat and the Appellate Body to play havoc with developing country rights and obligations?

But perhaps the developing countries themselves share the blame, for not trying to come to grips with the Seattle failure and what it implies for them, and how to act in concert, rather than try to see whether individual nations can cut deals (on trade or other issues) with the US administration (which any way, can't deliver anything any time soon).

A chart of some sort floating among some of the developing country delegations about the status of various rights and obligations in the WTO and its agreements, as of 1 January 2000, identify a score or more areas, covered by specific annexed multilateral agreements or by the WTO itself, involving reviews, lapse of rights subject to review and extension, obligations that kick in unless time for implementation or compliance is specifically extended by a relevant WTO body.

The time period for review of the Dispute Settlement Understanding, which was by a decision of the Ministers at Marrakech (and thus technically, not part of a WTO agreement and not binding) in fact ended in July, though informally it has been kept going in the view that any consensus view could be adopted as a decision at Seattle.

A view, clearly now , that of a large majority of countries, and likely to be one of near-consensus, is that the Seattle Ministerial Conference has ended and the conference is not in a state of suspension and cannot be resurrected or resumed.

In the consultations after Seattle here at Geneva, preceding the 17 December General Council meeting, the United States was seen by some delegations as adopting both the view that the Ministerial Conference was in suspension and all issues and papers before it "frozen" (thus enabling continuance of consultations to find consensus on the DSU review, for example or keeping alive the e-commerce moratorium on customs duties or the labour and trade rights issue), and also ended, in the sense that the General Council could act and decide issues.

In terms of the so-called "implementation" issues, and the legal provisions of the WTO and its agreements that kick in on 1 January 2000, there has been a perception that this is a matter of concern only to the developing world, and the developed world could ignore them, buying off a few members or groups with some minor concessions.

In nearly three years of activities, since the Singapore Ministerial Conference, and the 18 months of preparations for Seattle kicked off by the Geneva Ministerial Conference, the developing world raised the profile on the implementation questions, and brought up the issues to the General Council, for recommendations to the Ministerial conference, by specifically identifying problems concerning them, and seeking some decisions or understanding or agreed interpretations.

The Seattle meeting was called upon to act on issues facing a 31 December deadline, and set a time-bound programme for consideration and action by the General Council in 2000.

Though the industrial world too had some concerns about implementation or extensions of deadlines, they kept them in a low profile, and tried to get action at the level of subsidiary bodies (where all WTO members may or may not be present) and bring them to the General Council as an agreed recommendation that generally sails through the Council by the gavelling of the chair in noting and adopting the reports. They even suggested, and some countries seem to have swallowed it, that while the industrial world would like some actions, they could live with no action too.

This gave rise to the slightly misleading view that the implementation and deadlines issue is only a "developing country" problem, and could be "decided" by not taking actions or putting them on a new round, and used to extract more concessions.

But at least two issues are now seen as involving the interests of the developed world and on which, if developing countries or at least a number of them join forces to withhold consensus, they could get some leverage to get action on their own problems and demands.

One issue relates to the Agreement on Subsidies and Countervailing duties whereby the provisional application of para 1 of Article 6 (which defines the 'subsidies' said to cause 'serious prejudice' to other members, and thus prohibited and actionable); Article 8 which defines a number of research and development activities of enterprises that could be subsidised up to 75 percent of several elements of cost of research and up to 50 percent of costs of pre-competitive activity as well as environmental and regional development subsidies (at the federal, state and local authority or community levels); and provisions of Art. 9 relating to consultations and authorized remedies.

There has been little close monitoring, and even less of a reporting requirement of countries, on various subsidies they provide to their industrial and service enterprises and universities engaged in research and development work. In the case of the US the problem is compounded by the activities undertaken for defense purposes, with a civilian application, and the way despite the transparency of their budget processes, expenses could be hidden under one budget line or another.

Even less is known about the Japanese activities and budgeting practices.

In the case of the EU, member state subsidies notified suggest that at community level it has been just about 2 billion ECUs annually on the average of 1994-1998, and at about 9.3 billion ECU in 1996 at country level.

All these will easily fall into the prohibited or actionable subsidies, rather than "green box" subsidies on 1 January 2000.

The original proposal (before Seattle) of the EC before the Committee was to extend (and make more or less permanent) these provisions, but developing countries linked this to expanding the "green box" and other subsidy provisions to cover those that they generally use for development.

The EC, Norway and Switzerland, as also the US and Japan, tried at the level of the Committee on Subsidies this week to extend the period of "provisional application" to cover the consultation and decision process of the Seattle Follow-up at the General Council.

However a range of developing countries blocked it, insisting that it have the same fate as other provisions which have been left in a limbo by the General Council actions and non-actions on 17 December.

Another issue, whether or not of legal importance, but one of political importance, particularly to the United States, is the one relating to electronic commerce, and the so-called moratorium on levy of customs duties by countries on electronic commerce.

The 2nd Geneva Ministerial Conference (on which the US sprung the e-commerce issue) adopted a declaration setting out a work programme for the General Council and WTO subordinate bodies, and asked the General Council to submit a report and recommendations to the 3rd Ministerial Session (the one that met at Seattle).

The declaration of the 2nd ministerial conference also had a paragraph that without prejudice to the outcome of the work programme and the rights and obligations of members under the WTO agreement, members would continue the current practice of not imposing customs duties on electronic commerce transactions. The General Council was also mandated to review the declaration (on the moratorium) and make recommendations to the Ministerial and that the extension would be decided at the Ministerial by consensus taking into account progress on the work programme.

The E-Commerce questions, including to the extent applicable the moratorium on customs duties, have figured at the General Council, and in subsidiary bodies since the Geneva ministerial, but the reports of the subsidiary bodies show there was no "decision" from any of them. The reports of these bodies show they recorded differing views, but had no consensus recommendations.

The mandate to the General Council required the Council to produce a report on the progress of the work programme and any recommendations.

At the General Council consideration of the e-commerce issue in October, Brazil, supported by India, posed the question about the various reports of subordinate bodies, and the requirement that the General Council produce a report on the work programme to the Ministerial conference and asked how it was proposed to organize the work of the Council on this. Various suggestions came from various members, but no decision was taken nor did the chair provide a clear guidance.

Separately, as part of the Seattle preparatory process in the General Council, the US made some proposals, and so did a number of others. But there was no real discussion, and in any event no decision or recommendation.

But the chair's remarks at the end of the October General Council (as presented in the draft reports) suggested that the General Council would just forward, as part of its report, a report on the discussions in the Council and the reports of subordinate bodies (taking note of them, but not acting on them).

The report of the General Council to the Seattle Ministerial Conference also suggested that the chairman had recorded as his summing up and decision that since this matter of electronic commerce would be presented to the ministers and decisions taken by them, the General Council would revert to the subject and proceed on the basis of the guidance provided by the Ministers.

There was neither a working group nor green room negotiations at Seattle on electronic commerce. A technical level meeting, chaired by a secretariat official, Mr.David Hartridge, director of the WTO services division alone was held. But there was neither a proposal of the General Council before the Seattle Ministerial, nor any other consensus recommendation of any of the subordinate bodies.

As a result, the Seattle Conference has neither extended by consensus the moratorium on customs duties suggested as a political commitment of members in the Geneva Ministerial, nor taken any decision.

When at Seattle, the Chairperson, Mrs.Barshefsky announced the "suspension" of that meeting, the immediate reaction of some members was that it was just a move to continue the electronic commerce moratorium, which was no legal commitment, but only a political one. They did not also appear to have objected, because of the chaotic way the final meeting of the Committee of the Whole was run, and any event since many countries (and their tax authorities) have not yet found a practical way of levying customs duties.

The US administration, pushed by major e-commerce enterprises that have contributed heavily to party funds (of both parties), has been trying to use the WTO "moratorium" to fend off attempts of the states in the US to levy sales tax, and the domestic moratorium on such taxes that Congress has been considering to hold the line on the international moratorium.

Now both the pillars of the US strategy are collapsing - one by the end of the moratorium at the WTO, since the Seattle meeting has not taken a consensus decision to extend it, and the Council agreeing that the Conference has ended (and not suspended). Many important states in the US are now joining hands to ensure levy of sales tax on e-commerce goods and transactions.

If developing countries don't allow themselves to be hussled, including by some "agents" of TNCs involved in electronic commerce "transactions" in their own countries, and if they play their cards on the subsidies issue, they still have some hopes of righting the inequities of Marrakech.

The remark of Mrs.Barshefsky at the COW about "freezing" of proposals on the table, and she confirmed it in a way by her own statements at the final plenary and subsequent press conference, was also seen as trying to find a face-saving way for the administration on its "labour rights" issue.

And the labour issue, if the US and the EC push it forward at the General Council or future work, is unlikely to produce results, and may even result in a setback for the attempts at the International Labour Organization or the Geneva "Social Summit plus 5" meeting this summer.

By going to Seattle, and being seen at the Conference related meetings, and speaking there in support of a forum to discuss "globalization" issues as including trade, labour rights, finance, coherence, environment etc -- all proposals of the US or the EC -- while making clear it was his personal view and not of the governing body, the ILO head may have eroded his support from the developing country governments. (SUNS4579)

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

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