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TWN Info Service on WTO Issues (May 03/1)

Geneva 6 May 2003

Dear friends and colleagues

ANALYSIS OF THE EC PROPOSAL ON MODALITIES FOR THE FOUR SINGAPORE ISSUES AND AN ALTERNATIVE APPROACH

Probably the most important decision that the Minsiters will make at the WTO’s Cancun Ministerial Conference in September is whether to launch negotiations on the “Singapore Issues”  (investment, competition, transparency in government procurement, trade facilitation).  Most developing countries remain reluctant or opposed to launching negotiations as this is perceived as giving the green light to establishing new agreements that will impose more obligations on them, restrict their space to have development policies of their choice, and damage their development prospects.

Negotiations cannot be launched in Cancun unless there is an “explicit consensus” on the modalities of negotiations.  Since there are so many disagreements among WTO Members on the Singapore issues, and the Cancun meeting is now so close, many participants and observers of the discussions believe it is not possible to reach an “explicit consensus” on the modalities of negotiations on these issues.

However, the European Communities, which are the main proponents of launching negotiations, has submitted a proposal to the WTO General Council (dated 27 February) on how to deal with the question of modalities. It has chosen a strategy to simplify and trivialise the meaning and concept of “modalities” by defining them to mean only procedures and a mere listing of topics.  In this EC approach to modalities,  the substance of the issues and the nature and direction of the obligations that Members have to meet are ignored.  This approach is designed to usher in an “explicit consensus on modalities” so that negotiations can be launched in Cancun.

Below is a paper by the Third World Network which provides a basic criticism of the EC approach.  It points out that the Doha Ministerial Declaration clearly meant that consensus is required on the substance of the modalities and not just the superficial procedures.  The paper also offers an alternative approach.  Also provided below as an Annex is a copy of the EC communication.

This issue can be expected to feature prominently at the next WTO General Council meeting on 15-16 May.  The EC is expected to present its case for “procedural modalities” whilst some developing countries may argue that what is needed is a consensus on “substantive modalities”, otherwise the negotiations cannot be launched.

We hope you will pay close attention to this issue, as it will have great significance for the future of the WTO and the development prospects of developing countries.

With best wishes

Martin Khor

Director, TWN

Please check out the Third World Network website at www.twnside.org.sg for previous issues of the TWN Info Service on WTO Issues and many more documents on the WTO and other matters.

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COMMENTS ON THE EC PROPOSAL ON MODALITIES FOR THE SINGAPORE ISSUES AND AN ALTERNATIVE APPROACH

A Third World Network Paper

1.      Background

The Doha Ministerial Declaration paragraphs 20, 23, 26 and 27 state negotiations will take place on the ‘Singapore issues’ of investment, competition, transparency in government procurement and trade facilitation after the 5th Ministerial on the basis of a decision, to be taken, by explicit consensus, on the ‘modalities’ of negotiations.

“We agree that negotiations will take place after the Fifth Ministerial Conference on the basis of a decision to be taken, by explicit consensus, at that session on modalities of negotiations.”

This is conscientiously clarified by the Chair in Doha in his final statement to mean that the explicit consensus referred to would be a pre-condition for negotiations to begin and that this gives each Member the right to prevent negotiations from proceeding after the Fifth Ministerial.

The chair’s statement in Doha states:

“I would like to note that some delegations have requested clarification concerning paragraphs 20, 23, 26 and 27 of the draft declaration.  Let me say that with respect to the reference to an explicit consensus being needed in these paragraphs, for a decision to be taken at the Fifth Session of the Ministerial Conference, my understanding is that at that session a decision would indeed need to be taken by explicit consensus, before negotiations on trade and investment and trade in competition policy, transparency in government procurement, and trade facilitation could proceed.  In my view, this would also give each Member the right to take a position on modalities that would prevent negotiations from proceeding after the Fifth Ministerial conference, until that Member is prepared to join in an explicit consensus.”

Since explicit consensus on modalities is a precondition for commencing negotiations, it is very important to clarify the meaning and issue of modalities.  The Doha Declaration itself does not define the term “modalities.”  It would thus be logical to define it from current WTO practice, for example in the current negotiations on agriculture.  It is clear that the “modalities” on negotiations on an issue contains the aspects of the issue that are agreed on and the nature and direction of obligations to be undertaken.  Consensus on modalities would therefore require agreement by all Members on the specific issues to be covered, and the substantive treatment of these issues, including the nature and direction of obligations and commitments arising from them.

2.   EC Communication of 27 Feb 2003 (WT/GC/W/491)

The EC communication on “Singapore Issues - the Question of Modalities” that was submitted to the WTO is inaccurate on the status of the Singapore issues in two ways.

Firstly, in the introduction section, it asserts that negotiations will begin after Cancun as fait accompli, and the member states are in the interim engaged in a process of ‘clarification.’ It is clear however that the commencement of negotiations on the Singapore Issues is entirely dependent on explicit consensus by all member states to do so.   It is by no means certain that such a consensus will be agreed on in Cancun.  The clarification of the four issues is still on going and there are many areas in the discussion, including basic issues such as scope, definition, principles, obligations, structure, forum for and nature of further discussions, where there are deep differences of opinion.  It cannot be assumed that consensus can be reached by Cancun, especially given the short time left.

The paper also states that the Singapore issues are “part and parcel of the Single Undertaking.” However the Doha Ministerial Declaration does not state this.  Negotiations on the issues have not commenced, neither is there an explicit consensus to begin negotiations.  In the present discussions at the WTO, the four issues are not treated as part of negotiations in the Doha work programme, and thus do not come under the TNC.   It is thus  misleading to state that these issues are part of the Single Undertaking.  There was no commitment made in Doha that they are part of the single undertaking.

Second, the EC paper offers a trivialised approach to and an extremely superficial consideration of ‘modalities’.  It does this by:

(i)   Taking all the four issues together (instead of each issue by itself) and proposing to develop a “common set of options for modalities.” According to the EC, the “options” should be “sufficiently broad and flexible” to take into account the obvious differences between the four issues, while ensuring that a “positive decision” is taken for the four issues in Cancun.

(ii)            Framing the question of modalities in terms of listing the “elements of modalities” while avoiding the substantive aspects ands content of the modalities.   Under a section on “elements of modalities”, the paper simply provides three subject matters, namely procedural issues (number of meetings, etc), scope and coverage of negotiating agenda, and special and differential treatment.   This short and superficial listing of “elements of modalities” fails to capture the breadth and the substance of the discussions on the Singapore issues.   Implicit in the EC paper is that explicit consensus on the modalities themselves is not required, only a superficial listing of  ‘elements’.

This approach is inappropriate, and a different approach needs to be taken.

3.   The modalities for each Singapore issue should be taken up within its own discussion

Each of the Singapore issues has its own particular aspects, each of them has their own complexities, and each issue is at its own level or stage of discussion.   It would thus not be feasible or appropriate to put the four issues into a single basket to consider the question of modalities.   The modalities should be taken up within the discussion of each issue itself.

4.   The treatment of “modalities.”

‘Modalities’ of negotiations is not defined in the Doha Declaration and the EC approach of simply listing the very broad areas for negotiation is woefully inadequate. Since the declaration has not defined ‘modalities’, it is therefore rational to understand this in the context of WTO practice. A proper and fuller understanding can be found in the way ‘modalities’ are treated in the previous and current negotiations in agriculture.

In agriculture, the ‘modalities’ comprise both (i) the subjects for negotiations, such as market access, export subsidies and domestic support; and (ii) the nature and direction of obligations in those subjects, such as reduction of subsidies and support, reduction of tariffs, and exemptions, etc.   In the discussions on modalities in agriculture, Members have put and are putting forward detailed positions on each of the subjects, as well as detailed proposals on the nature, type and specificities of the obligations on each of the subjects.

Thus, in defining the meaning of “modalities”, it is clear that a mere classification of issues and a mere listing of some of the elements is not enough. The substance of those subjects and the nature and direction of obligations form a fundamental and intrinsic part of the modalities.

In this context, the EC’s paper falls short.  It seeks to divert the decision needed on modalities, to a decision on “elements of modalities” or on the classification of issues (rather than on agreement on the listing and substance of the issues).  It does not provide the contents and substance of the negotiations and merely seeks a classification of the subjects and tries to seek agreement on that classification. On the substance and content of these subjects, it is silent. The EC’s ‘elements of modalities’ therefore do not constitute ‘modalities’.

Explicit consensus on the modalities is required for negotiations to commence not consensus on how to classify and group the different aspects  of the Singapore issues

Modalities for an issue should be constituted, inter alia, by:

(i)   a detailed list of the subjects that should constitute the discussion or further discussions, or negotiations;

(ii)  on each of the subjects listed, the substantive conclusions of what the subject means and how it should be treated; and

(iii) on each subject, the conclusions on the nature and direction of the obligations.

Following this approach on modalities, there is need in each of the Singapore issues to reach a consensus, among other items, on:

·        the listing of subjects (that includes the issues for clarification decided on in Doha;  since that is not an exhaustive list, it can also include other issues proposed by Members);

·        the substantive meaning of each subject, and how it should be treated in the further discussion or negotiation; and

·        on each subject, the content and scope and depth of obligations, as well as the nature and direction of obligations and exemptions.

ANNEX:   THE EC COMMUNICATION ON MODALITIES FOR THE SINGAPORE ISSUES

WORLD TRADE ORGANIZATION

WT/GC/W/491

27 February 2003

General Council

SINGAPORE ISSUES - THE QUESTION OF MODALITIES

Communication from the European Communities

The following communication, dated 24 February, has been received by the Chairman of the General Council from the Permanent Delegation of the European Communities with the request that it be circulated to Members.

1.      Introduction

The Singapore issues, which until the WTO Fifth Ministerial are in the stage of “clarification”, but for which negotiations will commence after Cancún, are a key element of the DDA and part and parcel of the Single Undertaking.

The purpose of this paper is to put forward considerations on the term “modalities” in relation to the Singapore issues, with the aim of ensuring that a positive decision will be taken at Cancún.

2.   The Doha Ministerial Declaration

The Doha Ministerial declaration decided that negotiations on the Singapore issues (trade and competition, trade facilitation, trade and investment and transparency in Government procurement) would commence after the 5th Ministerial Conference, in the following terms:

“We agree that negotiations will take place after the Fifth Ministerial Conference on the basis of a decision to be taken, by explicit consensus, at that session on modalities of negotiations”.

In addition to this, the Chair in Doha made a final statement, with the aim of clarifying the language in the Ministerial Declaration on the Singapore issues, which states that this wording would, in the view of the Chair of the conference:

“give each Member the right to take a position on modalities that would prevent negotiations from proceeding after the Fifth Ministerial conference, until that Member is prepared to join in an explicit consensus”.

WTO Members also agreed that, until the 5th Ministerial, WTO Members would engage in preparatory work to further clarify various substantive aspects of the Singapore issues.

3.   Preparation of Cancún

The clarification phase of the work on the Singapore issues has progressed in a reasonably smooth manner until now and can be expected to make  further progress by the time WTO Members gather in Cancún. It is now timely to develop a common set of options for modalities, so as to facilitate the decisions to be taken in Cancún. These options for modalities should be sufficiently broad and flexible to take into account the obvious differences between the four issues, while ensuring that a positive decision is taken for the four issues, which all constitute a priority for the EC and its member States.

4.   Elements of Modalities

The elements of “modalities” could be as follows:

·        Procedural issues pertaining to the negotiating phase: number of meetings, timing, internal deadlines for tabling proposals, legal texts, etc.

·        The scope and coverage of the negotiating agenda: through setting the agenda for the negotiating phase, WTO members have an opportunity to identify key elements that should be addressed in the course of those negotiations, and the possible parameters of the work. Examples of issues that could be taken up in the negotiations could be:

·        The choice of which concrete issues should be the object of negotiations.

With regard to trade facilitation, for example, this could include developing commitments to simplify trade procedures based inter alia on Articles V, VIII and X of the GATT, similar to the mandate agreed at Doha (paragraph 27 of the Declaration). On trade and investment, for instance, it could reproduce the list of issues included in the Doha Declaration (paragraph 22) on the basis of the clarification exercise carried out in the Working Group. Or with regard to trade and competition, for example, the negotiating agenda could identify the objective of establishing obligations only on hard core cartels (excluding, therefore, other issues such as monopolies, dominance or mergers). In the area of government  procurement, negotiations on a multilateral transparency agreement should comprise as a starting point the key issues elaborated in a comprehensive manner during the seven year-long study phase of the Working Group and compiled in the chair’s checklist of issues.

·        Questions relating to how to structure the obligations resulting from an eventual agreement. With regard to trade and investment, for instance, this could cover the possible exclusions or exemptions to horizontal obligations, such as the MFN principle. With regard to trade and competition, this could concern sectoral exclusions or exemptions from some of the “process  related” obligations of a competition agreement (the “core” principle of non-discrimination, for instance), and the conditions for such exclusions or exemptions, and identifying possible commitments that would not be enforceable e.g. provisions for voluntary co-operation. In government procurement, the issue of thresholds, for example, could be examined with a view to allowing for a pragmatic and little burdensome approach towards the application of transparency disciplines.

·        Special and differential treatment: Modalities of the negotiations could include a number of issues related to special and differential treatment. Examples of such elements, to be explored in the negotiations, could be:

·        Differentiation in commitments between WTO Members, expressed for  example in terms of different levels of commitment for different categories of Members, or possible exemptions from certain commitments, particularly for LDCs.

·        Differentiation in implementation periods between WTO Members,  including country-specific provisions.

·        Provision of trade related assistance to WTO Members better tailored to their individual needs, in particular to put TRA on a more stable footing, more targeted to the WTO provisions agreed and better co-ordinated among donors and recipients.

·        How and in what timeframe (or even whether) WTO Members or certain categories of WTO Members would assume some or all of the obligations resulting from these agreements.

 


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