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Lamy for “adjustments of positions and ambitions” for new Round

by Chakravarthi Raghavan

Geneva, 21 Nov 2000 -- The European Union Trade Commissioner, Mr. Pascal Lamy reiterated Tuesday the need for a “broad, inclusive, comprehensive” new round of multilateral trade negotiations at the WTO, but conceded that “adjustments of positions and of ambitions” would be necessary on the part of all parties for the launch of a new round.

Lamy was speaking at Geneva Institute of Higher Studies on “WTO: What Next?”.

EC officials briefing media earlier left little doubt that while participating in the negotiations on agriculture, services and other issues on the WTO agenda and would remain engaged, these negotiations could not be concluded or agreements reached except in the context of the launch of a new round with these and other issues including investment, competition policy issues.

The EC officials said that while technically the preparations for a new round and negotiations had made progress, and North-North and North-South differences had narrowed, the political hurdles were perhaps bigger now than a year ago.

In his lecture, Lamy claimed that the year since Seattle failure had not been wasted, but that a first package of ‘confidence-building’ measures and a work programme to tackle implementation difficulties of developing countries had been launched, and there were real signs of progress.

However, developing country trade diplomats and negotiators engaged in this exercise, said that no concrete steps or measures have been agreed upon, beyond some vague promises and reworded best endeavour clauses, and an attempt to roll over all these issues on to the new round.

While claiming progress at the WTO since Seattle, including on China’s entry into the WTO, Lamy said at the lecture that longer things went on without a response to the systemic issues “behind the headlines of Seattle relating to globalization and development, the greater the risk of the WTO being marginalised, and of a dangerous power vacuum in international economic policy.”

Addressing the issues of globalization and development and the concerns in developing countries, Lamy trotted out the claims of the neo-liberal economists and establishments of the IMF, World Bank and the WTO (made without much empirical evidence), that those developing countries who have succeeded in putting together the right mix of liberal trade policy, inward investment and internal reforms have benefited from the WTO, and that those who have not broadly succeeded in doing this, have fared the worst.

[In the literature of these institutions, the same mixture of policies are sometimes presented as those favouring ‘open economies’ and those having ‘closed economies’, those having ‘market-friendly’ economies and those having ‘statist or command economies’, and those joining ‘globalization’ and benefiting and those opposed and losing. But whatever the name, the policies advocated are the same - opening of economies to foreign trade and foreign investment by removing barriers to both and encouraging imports of both.

[The Lamy claim is thus no different from those in studies and papers as those by D. Dollar and A. Kraay (cited and used by the World Bank in its most recent World Development Report, and also cited in the WTO’s special report for the Social Summit plus five in Geneva in June) about trade, growth and poverty and development.

[In challenging the Dollar and Kraay thesis that “globalisers” have performed better than “non-globalisers”, Harvard Academic Dani Rodrik has brought out that the authors were able to make this claim only by arbitrary decisions that bias the results in the selection of “globalisers”—choosing inappropriate policy measures and outcomes to judge countries, using different base years for calculating tariffs and trade volumes, and including in the list countries that do not fit the criteria set by the authors.

[In comments posted on his website <www.ksg.harvard.edu/rodrik>, Prof Rodrik has pointed out that by applying the same yardstick, namely the countries that had the largest tariff reductions and trade increases since 1980, the growth experience of the list of “globalizers” that emerges (Argentina, Brazil, Colombia, Haiti, Hungary, Jamaica, Korea, Mexico, Morocco, Mauritius, Malaysia, Nepal, the Philippines, Paraguay, Sierra Leone, Thailand and Uruguay) reveal “quite an undistinguished performance.

[Rodrik’s comments show that when one compared the ‘globalizers’ with the experience of China and India, whose main trade reforms took place a decade after onset of high growth, and which still have among the highest trade restrictions, quite a different conclusion could emerge.]

For the very poorest countries, said Lamy, lack of open markets elsewhere is only one of the problems generating export-led growth. So, the WTO should not be blamed for everything, but it had not however risen to the challenge.

In promoting a new round with more issues, Lamy argued that developed countries must offer more market access to developing countries in areas such as agriculture and textiles and that future rules were both relevant to their needs and could be realistically implemented. For this, developing countries must participate in designing the rules, and the industrial world must provide the technical assistance to build domestic institutions.

But absent from his presentation was why developing countries would get more market access in agriculture and textiles in a new round with more issues, when the same argument was advanced to them in the Uruguay Round and they took more obligations in WTO disciplines, in services and TRIPs, but have found markets closed in agriculture and textiles.

Globalization, he argued, had changed the nature of trade and trade policy and the first task was hence to “strengthen the WTO rule-book” to help manage the interface between trade and other policy issues such as health, consumer safety and environment. If these were not clarified there was risk of conflict between trade and other policies, and if rules were not agreed to ensure compatibility, and the rules were not negotiated by governments, “we are simply delegating the task for ongoing interpretation to WTO dispute settlement panels.”

While the dispute settlement process was “a jewel in the WTO’s crown”, that was not the place where rules should be made. But if governments conclude the issues were too difficult to decide, “we further undermine the legitimacy of the WTO by passing the buck to the judges”.

Lamy also underscored WTO’s role as “an organ of international economic governance”, and said coordinated solutions at the international level, including multilaterally agreed rules in the WTO within its area of competence were necessary. The Commission was approaching Even inside the EU, he said, there were clear signs of ‘globaphobia’.

The EC Commission and the Ministers were approaching the idea of a new trade round by showing a willingness to take account of the debates of the past year. He cited as an example, the EC’s proposal for liberalised market access for least developed countries to show how “trade policy can bring good things to the developing world.”

[However, the WTO secretariat and the EC Commission’s effort to present this package at Libreville, at a ‘workshop for African ministers’, and gain their endorsement for a new Round appears to have failed, with the Ministers unwilling to issue any ‘declaration’ for a new round, or for endorsing the idea of a new round with ‘comprehensive’ agenda, but only a communique calling for ‘balanced’ agenda]

The new round for the EC, Lamy said, had to be broad, inclusive, comprehensive or whatever it was called. But the underlying logic was important, namely that “only a broad negotiating agenda, containing everyone’s priority issues, will ultimately succeed either at launch or conclusion of the Round.”

If the alternative was to have no round at all, meaning no negotiations, it was not acceptable. If it was meant that the WTO could manage the negotiating process without a new round, he had some sympathy for this view, but the WTO did not have the institutional capacity to manage such a negotiation.

Lamy also rejected the idea of a new round confined to ‘market access’ and noted that such an idea had been recently floated by the Thai Deputy prime minister, Dr.Supachai Panitchpakdi. “This might have worked 20 years ago, but won’t do now,” commented Lamy.

Any new round must contain “four magic elements”, he said: access to markets for goods and services, and a comprehensive, rather than a sectoral approach; updating and improving WTO rules with basic rules on investment and competition, and trade facilitation; a development agenda permeating the entire approach; measures to address issues of general public concern such as on trade and environment issues (including eco-labelling, GMOs or new environmental regulations); and ensure public support by responding to fears about labour standards not being applied properly and ensuring “more transparency” to the outside world.

[EC officials privately leave little doubt that without a new round to meet their criteria, though there might be negotiations on agriculture, services and other issues, these could not be ‘concluded’. They also leave little doubt that while they support ‘external transparency’, in terms of internal transparency they want a more ‘efficient’ decision-making process that would not involve all the membership, though they are unable to answer the view of smaller countries that if everyone had to have the same level of obligations, then they had a right to participate equally in the negotiations and decision-making.]

In this background, Lamy said, in order to launch a new round, rather than seek to remove issues entirely from the negotiating agenda, which would not work, there would be more chances of launching one if everyone reviews the precise aims and level of ambition within each possible area of negotiation, and whether the proposals fit the development agenda and would help steer globalization in the right direction.

In effect Lamy appears to be promoting the “incremental approach” to the agenda and issues—put issues on the agenda and bring them into the WTO in a very small way or step, and then expand their scope and rules and disciplines, in the same way that many issues and disciplines and rules were brought into the WTO during the Uruguay Round in various ministerial meetings over its life.

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

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