WTO has to resolve implementation problems first

The failure of the WTO to address the problem of the difficulties faced by the developing nations in discharging their obligations under the WTO agreements has been a cause for persistent complaint. Despite the complete lack of response from the major trading nations on this ‘implementation’ issue, developing nations have to unite to secure this demand.

Martin Khor

THE World Trade Organisation has to resolve the problems of implementation facing developing countries in order to restore the credibility that has been lost by the lack of benefits and the problems arising from the Uruguay Round agreements.

Although the major trading countries have shown little or no interest in this issue, developing countries have to unite to make clear their demands.

These were among the conclusions arising from a panel discussion on ‘Implementation Issues’ during the Third World Network seminar on ‘Current Developments in the WTO: Perspective of Developing Countries’.

Egypt’s Permanent Representative to the WTO, Ambassador Fayza Aboulnaga, said in the run-up to the Seattle WTO Ministerial Conference last year, the implementation issue was the subject of major division between developing and developed countries.

Developing countries had expected benefits arising from market access in the Uruguay Round, but in reality very few countries had benefitted. Even these few countries benefitted only a little, and some of them suffered a financial crisis, she said.

A like-minded group of developing countries had placed their concerns on implementation problems in the draft Ministerial text before Seattle (in paragraphs 21 and 22). But the major countries had responded that there could be no solution now as the implementation issues had to be addressed in a new round of multilateral trade negotiations. ‘This would mean that we would have to pay twice,’ said Amb. Aboulnaga.

She added that developing countries had prepared among themselves the negotiating platform in order to have concrete results. After Seattle, the WTO decided to have two special sessions (in June and October) of its General Council to act on the implementation issues. However, at the June session, ‘we felt there was no seriousness on the part of our major trading partners; it was a one-way street, developing countries had to reiterate our positions. But it fell on deaf ears, there was no courtesy on the part of our major partners to even react.’

Amb. Aboulnaga said it would be difficult to expect any different attitude in the October special session. However, the situation, though very pessimistic, is not hopeless, provided there is solidarity among the developing countries. The major countries are linking action on implementation issues to a new round, whilst developing countries have said they cannot go for a new round unless implementation issues are resolved.

She provided examples of difficulties facing developing countries in implementation, including in the TRIPS (trade-related aspects of intellectual property rights), SPS (sanitary and phytosanitary measures) and textiles agreements. There are some issues that should be resolved immediately, and other issues required interpretation of provisions.

Not just a legal issue

Munir Ahmad, executive director of the International Textiles and Clothing Bureau (an intergovernmental body of developing-country exporters of textiles and clothing products), said whilst the developed countries claim there are no implementation problems but only legal problems that can be taken to the WTO dispute settlement mechanism, developing countries have a broader perspective, asking: (a) have the aims of a particular agreement been realised and gains forthcoming? (b) on some obligations accepted by developing countries in the Uruguay Round, is there capacity to absorb the pain?

He said that implementation was not just a legal issue but a real problem that developing countries had fought hard to get the WTO to recognise, from the 1996 Singapore Ministerial Declaration to the 1998 Geneva Declaration and the run-up to Seattle.

Munir said that in the cases of some agreements to which developing countries are unable to adjust, what is needed is a modification of those agreements. The process taking place now (the special General Council sessions) is the proper occasion to ask for these modifications. The assistance of NGOs can be very helpful in this regard.

T T Chifamba of the Zimbabwe Mission said that when the bicycle theory (that the trade system, like a bicycle, has to keep going forward - with new issues or a new round - otherwise it would fall) was cited at Seattle, an NGO representative had a good reply: ‘To stop a bicycle from falling, you can put your foot down.’ He said putting their foot down was what developing countries were doing when they insisted on redressing the issues arising from implementation problems.

He said it was a wrong start for developed countries to dismiss the genuine concerns of developing countries as unrealistic or to say that these issues cannot be discussed outside a new round. ‘For this system to work and for people to have confidence in it, we all should derive benefits,’ he said.

Chifamba also criticised the developed countries for trying to take a legalistic  approach (such as taking TRIPS cases to dispute settlement to get compliance) as this ignores the genuineness of the problems faced by developing countries.

He said the like-minded group of  developing countries had already shown flexibility by not demanding that all problems be resolved immediately but instead categorising them according to different deadlines for resolution. In contrast, there had not been flexibility on the part of developed countries in their lack of operationalisation of the special and differential treatment provisions in the WTO agreements.

In terms of willingness for engagement, the attitude of the developed countries had been terrible, to say the least.

Yilmaz Akyuz, Chief of Macroeconomics and Development Policies at the United Nations Conference on Trade and Development (UNCTAD), said that UNCTADÕs Trade and Development Report 1999 had found that developing countries were sucking in a lot more imports than in the past whereas their exports are hitting stagnant or protected markets.

Also, since there are now more developing countries exporting manufactures, the prices or terms of trade for these countries in their exported manufactures have gone down, just as in the case of commodity prices. As a result of these factors, developing countries are running higher trade deficits whilst having less growth.

The UNCTAD report had shown that if the North gave better market access, the South could obtain hundreds of billions of dollars more in export earnings, which is three to four times the average capital flows to the South.

Akyuz said in the WTO, the balance-of-payments (BOP) safeguard provision caters only to temporary BOP problems faced by a country and is seen as an exception or a temporary measure. However, what many developing countries are now facing is a structural BOP deficit that the WTO provision does not take account of. If developing countries are running structural deficits (irrespective of their currency policies), then how should the BOP question be approached at the WTO?

Akyuz said there were economic grounds to question the existing trade arrangement, as developing countries are facing not a temporary BOP problem but a structural deficit that makes growth non-viable.

The existing BOP provision in the WTO does not recognise a world of free capital flows. Whilst the Washington institutions have a notion that developing countries need reserves adequate to cover one year’s import bill due to capital-account risks, at the WTO consideration on the BOP provision is only linked to current-account needs.

Developing countries today do not have a trade system that promises them 5-6% growth with stability. This provides a legitimate reason to review the existing arrangement.

Lack of confidence in system

During the discussion period, S.I.M. Nayyar of the Pakistan Mission said the mechanism of special sessions to deal with implementation issues had so far not given cause for optimism. There was no willingness on the part of the developed countries to engage in negotiations. Such a response is disappointing and adds to the lack of confidence in the system.

Ambassador S Narayanan of India, referring to Amb. Aboulnaga’s earlier remarks (that although the situation is pessimistic, there is no reason to lose heart), said that most developing countries do not comprehend their own power. If developing countries press ahead, the developed countries cannot ignore their concerns forever.

The implementation issues had to be looked at politically as well, he said. To ensure that the WTO is seen positively at least a little in the developing countries, implementation problems need to be resolved. This should be made known to the developed countries.

He agreed with previous speakers that resolution of the implementation issues should not be linked to a new round. Instead, if implementation is not dealt with, many other issues (and not only the question of a new round) cannot be taken up by developing countries in a serious manner.

Narayanan concluded that if developing countries are determined to achieve their objectives on implementation, they can  succeed. What  is  important  is for as many developing countries as possible to speak up at the special session so that they send out a clear signal.