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CONFIDENCE-BUILDING OR MARKING TIME AT WTO?

by Chakravarthi Raghavan


Geneva, 27 April 2000 -- Discussions at an informal General Council meeting Wednesday on the so-called 'confidence-building' steps suggest that there is no consensus on any package and, at best, next week's meeting of the General Council may agree on a procedure, a 'special sessions' of the General Council, to look at implementation issues and concerns of developing countries.

At the General Council meeting in February, the WTO Director-General Mike Moore had identified four elements for priority action as 'confidence-building' steps in the wake of the debacle of the 3rd Ministerial Conference at Seattle.

The four areas identified by Moore were: market access measures in favour of least developed countries (LDCs), capacity-building through technical cooperation, implementation questions and concerns of developing countries, including issues relating to transition periods, and internal transparency and more effective participation of members in decision-making.

Since then there have been several informal consultations by Moore and his deputies, as well as by the General Council chairman, Amb. Kare Bryn of Norway, and informal General Council sessions where these questions have been discussed.

Discussions at Wednesday's meeting focused on the market access package for LDCs, capacity building through technical assistance, and implementation issues including extension of transition periods.

The informal meeting is to continue on Thursday to consider other issues including internal transparency and participation of members in decision-making.

The informal sessions this week are to prepare for formal meetings of the General Council on 3 May.

On LDC market access, the major industrialized countries are not prepared to do anything more than what they have offered, autonomous actions for duty-free, quota-free treatment for imports from LDCs, but subject to domestic requirements - meaning ability to exclude agricultural items, textiles and clothing and other labour-intensive manufactures (now subject to peak tariffs or quotas).

On the issue of implementation, a likely, but not certain, decision next week could be to agree on procedure: for Special Sessions of the General Council to meet and consider these, but with some 'benchmarks' or agreed work programme and deadlines (so that the issues and concerns don't get bottled up with no decisions).

According to an elements paper that has so far evolved in informal consultations, the General Council meeting in special sessions is to address outstanding implementation issues raised in the preparations for the Third Ministerial Conference, and the process should be completed by the time of the Fourth Ministerial Conference. Subsidiary bodies of the WTO might be called upon to provide inputs.

Several developing country delegates said in private later that while a mechanism was important and essential in terms of procedure, 'confidence-building' arises out of decisions of substance, and not procedural decisions.

If the procedural decisions are aimed at getting the issue out of the public, and developing country focus, and if no substantial actions and decisions are taken, and the intention of some of the majors is to "roll them" on to a new round with new issues, it would not generate much confidence in the trading system among the developing country members or their public.

On market access measures by industrialized countries favouring exports from LDCs, it was clear that the Quad countries (Canada, EC, Japan and the US) are not prepared to go beyond autonomous measures of tariff-free, quota-free treatment on imports from LDCs, but qualified by use of the phrase "essentially all products" -- an euphemism to be able to exclude agriculture, textiles and clothing and other such products that are political or otherwise 'sensitive' in these countries.

Beyond suggesting that the measures proposed by them were only "an initial step", the Quad countries left little doubt that they were not ready to change their offer, either to cover "all" products or to "bind" their concessions at the WTO. Only Haiti and Uganda made some comment, expressing dissatisfaction that the proposals did not provide any 'additional benefits', but were in fact a 'retrograde step' from 1996, when such a proposal to cover "all products" from LDCs was being considered, as an initial step. The two delegations said there were many conditionalities and uncertainties around the proposal now, such as who would determine what constituted an essential product. The General Council should not endorse or take any decision on the package, but at best merely take note of it.

Most of the other developing countries who spoke said it was for the LDCs to make an assessment of what was being offered, and that they were willing to support the LDCs. All of them also insisted that the special measures by the industrial world should be 'trade-creating' and not 'trade-diverting'. Pakistan and some others said that the General Council should have a periodic assessment of the progress. Pakistan also said there should be an assessment by UNCTAD (which is the UN lead agency on LDC programmes and measures) on the 'trade-creating' and 'trade-diverting' effects.

Surprisingly, according to several trade diplomats at the meeting, Bangladesh, the leader of the LDC group was not present. Even some other LDCs were surprised and said they had expected Bangladesh to speak. At the 10 April meeting, when the Quad proposals for LDCs, as part of early action programme, came up and was being discussed, Bangladesh had said they were "confidence-shattering" and not "confidence-building."

[Meanwhile, the US Trade Representative Mrs Charlene Barshefsky has invited some of the LDC ministers to a meeting in Washington on 3 May to discuss the LDC market access issue. Bangladesh is among them.]

When the original Quad package was presented to Moore in the first week of April, he was described as having been "under-whelmed".

At Wednesday's meeting, reporting on the consultations that he and his deputies had been holding, Moore described the proposals as "encouraging", especially if seen as a "significant step in a continuing process of improvement". Moore was encouraged that Canada, the EC, Japan and the US had proposed implementing tariff-free and quota-free treatment "consistent with domestic requirements and international agreements under their preferential schemes, for essentially all products originating" in LDCs.

[At Singapore, the words used were 'all products' and 'coming' from LDCs, rather than 'originating' which in WTO technical parlance would imply application of rules of origin about 'substantive transformation']

Moore stressed these were "autonomous and voluntary" measures, and in asking Members to inform the membership on measures they were or would take, he was not seeking to create any pressure, but that members extending benefits to the LDCs would wish them to be known. They should keep the WTO membership as a whole informed, possibly through the Committee on Trade and Development, whenever they took such actions in future.

As regards the Integrated Framework to address trade-related capacity-building for LDCs and assist their integration into the multilateral trading system, an independent review team, task-managed by the World Bank had been in Geneva meeting Geneva-based core agencies (International Trade Centre, UNCTAD and the WTO secretariat) and had also met Geneva-based LDCs. The team was due to report by the first week of June, and the six core agencies (the World Bank, the IMF, the ITC, UNCTAD and the UNDP) were due to meet on 6 July in New York. On the question of technical cooperation and capacity-building, an issue central to the interests of LDCs, but also one concerning all developing countries and economies in transition, his consultations showed a strong interest in seeing these WTO activities conducted in an effective and productive way, with adequate resources properly targeted and employed and full use of cooperation with other international agencies.

To increase confidence in WTO's ability to provide technical assistance to Members and to ensure greater stability in funding for this activity, there should be a phased-in increase in the regular budget to a level of ten million swiss franks.

On the implementation issue, Moore referred to a 'non-paper' of possible elements of a mechanism to deal with them that had been developed by the secretariat on the basis of consultations.

The consultations were held by Moore's deputy Rodriguez Mendoza, and this suggested the General Council meeting in Special Sessions should address these questions, with the first such session in June, and the process completed by the Fourth Ministerial Conference. Existing difficulties should be identified and assessed, as also measures needed to resolve them. WTO subsidiary bodies could be involved and asked to provide inputs.

On the issue of transition periods, and in particular the extensions for Trade-Related Investment Measures (TRIMS), the chairman of the WTO's Council for Trade in Goods (CTG), Amb. Carlos Perez-Castillo of Uruguay, reported on his informal consultations for extension of transition periods, and the elements of possible consensus.

Under the TRIMS agreement, requests for extension of transition in individual cases, where existing TRIMS have been notified, are to be given by the CTG. But in cases where there had been no initial notifications, on one reading this may require action by the General Council by consensus.

Some eight or nine countries have put in requests for extensions, most of them relating to the automobile industry (including use of local content), but some also involving other sectors. Extension periods sought are also varied.

While the major industrial nations all promise sympathetic consideration, but on a case-by-case basis, there are others who want a multilateral decision, either a blanket one extending all transitions or at least a multilateral guideline to be then used in deciding on individual applications.

One problem is over the Argentine request for extension of time for local content for its car industry which, if granted, would create more tensions within Mercosur and problems for Brazil, which would appear to want a similar exemption for itself. But a complication is that Brazil did not notify any TRIMS when the WTO entered into force.

Perez-Castillo reported that the draft elements he had circulated had been generally welcomed, but that reservations had been expressed by some members, and that he was not at this point in a position to present a consensus text. If members wanted he could continue the consultations to present a consensus text by the 3 May meeting or simply leave the situation as it was so that CTG could continue to consider the varying applications submitted on a case by case basis.

The draft elements reported orally by the CTG chair suggested that in respect of requests for extensions submitted under Art. 5.3 of TRIMS, the countries should describe the particular internal or external difficulties in implementation; the development, financial and trade needs of the country in question; indication of the time-frame for eliminating the TRIMS; and submission of periodic reports on progress. On this basis, and taking account of such elements, extensions should be granted on individual basis for reasonable periods of time.

[This is the approach favoured by the US, EC, Japan, Canada and other industrialized countries, but developing countries generally support a multilateral decision or a multilateral framework for decisions, with some like Pakistan and Dominican Republic arguing for a general political decision foe extending the transition periods.]

In an intervention after the reports of Moore and the CTG chairman, Pakistan noted that in February Moore had put forward a package of four issues on which he intended to consult as part of a confidence-building package. Subsequently, it appeared that these four issues would not necessarily form part of a water-tight package and that decisions and actions could be taken on individual elements.

However, Pakistan did not support such an approach and wanted positive progress on all the elements. It attached importance to the implementation issues. Redressal of implementation issues had been mentioned not only in the Marrakesh declarations, but also in the Singapore and Geneva Ministerial declarations, Pakistan reminded the informal meeting. There were some implementation issues such as those relating to textiles, repeated anti-dumping actions, evolution of international standards (in private standard setting organizations) etc that needed immediate redressal, Pakistan said. Other implementation issues could be addressed over a longer period, say of a year. Developing countries like Pakistan had given some suggestions to DDG Rodrigues during his consultations on implementation, but the Rodriguez informal text did not reflect these suggestions.

While establishing a special mechanism for redressal of implementation issues was important, Pakistan felt it was equally important to agree on a work plan and a time schedule for addressing the concerns - as had been done for Agriculture and Services. Subsidiary bodies could only have a 'reactive role' and be responsible only to respond to specific queries from the General Council.

The consultations of the chairman of the CTG on the TRIMS issues was one under the aegis of the General Council and not of the CTG. There were also other transition periods that merited consideration.

On the LDC package, Pakistan wanted an organization like UNCTAD to monitor the effect, both on LDCs and on other developing countries.

The EC argued that the LDC package was a significant first step and developed countries hoped to further build on this in future. The EC supported the informal elements proposed on TRIMS extension and on implementation, and said there should not be any significant modifications of the texts.

Brazil said it was for the LDCs to evaluate the package. Brazil also took note of the DG's suggestion for a review mechanism to examine the impact of the package on all developing countries.

Brazil wanted "a credible mechanism which would systematically and coherently address all implementation concerns". On transition periods, particularly on TRIMS, Brazil was for a multilateral decision.

The US too viewed the LDC package as a first step, to be built upon "with the cooperation of other developed and developing countries." The issue of trade diversion should be studied by the WTO committee on Trade and Development (CTD). The implementation issues, the US agreed, should be raised in the General Council but whether there should be one or more special sessions would depend on when the next Ministerial Conference would be held. The US stressed the important role of subsidiary bodies, and that the CTG had the authority to extend the transition periods for TRIMS.

Mexico said any additional market access for LDCs must be by the developed countries and developing countries could at best make some voluntary endeavours. Mexico supported the view of the DG for an appropriate review mechanism on the package.

Mexico also supported the special mechanism for implementation issues, with the first session in June and all implementation concerns ideally resolved by the next ministerial conference. Subsidiary bodies should play only a reactive role. The consultations of the CTG chairman on transition periods had been useful, but an overall decision should be taken by the General Council on the elements of a multilateral approach and criteria, after which the CTG could take appropriate decisions.

In other comments, Morocco speaking for the African group, expressed disappointment with the LDC package and said they had been hearing of the "first step" since 1996. Even today they were still talking of the "first step". Morocco hoped that there would be a positive movement on this issue quickly, along with requisite additional funding for technical assistance and capacity building. The implementation issue must remain in the hands of the General Council, with specific issues if necessary referred to subsidiary bodies. Before the next ministerial conference, they should be able at least to categorize the implementation issues and what could be dealt with immediately and those that might be need to be included in any future negotiations.

Hong Kong China while supporting the proposals for special mechanism on implementation made clear there should be no whole-sale rewriting of the agreements reached at Marrakesh.

India shared the concerns of Pakistan over implementation. Most speakers had recognized that the issues raised in the preparatory process for Seattle were important and needed to be dealt with by a credible and fair mechanism under the General Council. There seemed to be a widespread consensus on this. The process should be led, guided and controlled by the General Council, and the subsidiary bodies should only be mandated to provide such inputs as the General Council wanted. The subsidiary bodies should play only a reactive role. It was necessary to find meaningful and credible solutions to the problems and concerns raised by the developing countries, and it was not enough to suggest that appropriate actions could be taken. The implementation process should also have a time-frame for conclusion, and should not be linked in any way to a new round. The General Council should meet as often as needed to ensure expeditious redressal of these concerns. Some of the issues would need to be dealt with in a shorter time frame, in the light of the consensus emerging before Seattle.

On the LDC package, India agreed with Brazil that it was for the LDCs to evaluate and take a view and India would support any steps that the membership might take to provide additional market access, technical assistance and capacity-building measures for LDCs. But there should be a mechanism to assess the trade creation or trade diversion impact of the package. (SUNS4656)

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

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