Revised Doha draft texts ignore developing-country concerns
As the following analysis by a leading trade expert of the revised draft Ministerial Declaration and the revised draft ‘Decision on Implementation-Related Issues and Concerns’ - two of the key documents for the Doha Ministerial - reveal, they fail to take into account the interests of the developing countries.
by Bhagirath Lal Das
Overall nature of draft declaration
THE revised draft Ministerial Declaration brought out by the Chairman of the WTO General Council (henceforth called ‘the Chairman’s revised text’ in this article) on 27 October 2001 accommodates almost fully the agenda of the major developed countries, but it does not take into account the interests of the developing countries. It is a definitive expression of what the 2001 Ministerial Conference is expected to consider and perhaps adopt.
There are no alternatives to various specific proposals and there is no indication that there are differences among the Members on many proposals in the text. Such texts without alternative formulations or brackets are generally presented by the chairmen when the differences among the Members have been patched up. This is far from the position in the present case, however.
This draft is a revision of the first text presented by the Chairman on 26 September 2001. Informal sessions of the General Council were held to consider that first text. A large number of the developing countries opposed various specific proposals of the text. The whole group of least developed countries and about a dozen of the other developing countries specifically opposed the proposals about negotiations on the ‘Singapore issues’, i.e., investment, competition policy, transparency in government procurement and trade facilitation. They also clearly opposed the provisions on ‘organisation and management of the work programme’ which had signalled the launch of a new round in the WTO. Then there was opposition from a large number of developing countries to negotiations on non-agricultural products. There was also opposition from several developing countries to a number of other provisions.
It was expected that the Chairman would take into account all this while revising the text. But he has ignored all these statements of the developing countries. Considering that there are serious differences on several paragraphs, the revised text is thus not a truthful representation of the situation and it also gives a wrong impression that the differences have been patched up.
The following sections discuss the areas where there are severe problems in the revised text and give some suggestions for an alternative approach.
A round without a name (paragraphs 38-45)
The revised text launches a new round of negotiations in the WTO without mentioning the word ‘round’. It is contained in the section ‘organisation and management of the work programme’ in paragraphs 38-45. This topic has four elements mentioned below which are characteristic of a round:
(i) A single date is specified for the conclusion of the various negotiations (para 38);
(ii) A special session of the Ministerial Conference, and not a regular periodic Ministerial Conference, will consider the results of the negotiations (para 38);
(iii) A Trade Negotiating Committee will be formed to supervise the overall conduct of the negotiations (para 39); and
(iv) There is a special provision about who would participate in these negotiations (para 41). In a normal WTO negotiation, it is presumed that the Members of the WTO will participate in the work.
There is grave risk in starting a new ‘round’ even with a shorter and more limited agenda than what is included in the revised text. The harmful consequences for the developing countries are the following:
(i) The ‘round’ is proposed to include the new issues, like investment, competition policy, transparency in government procurement and trade facilitation. There is also an indication of negotiation in the area of environment. It will be extremely dangerous for the developing countries as they are likely to lose their options for development in these negotiations.
The dangers in these new areas will be explained further while discussing these specific subjects. Even if the ‘round’ is started on a limited number of issues, it is not safe.
Past experience, particularly of the Uruguay Round, has shown that the agenda gets expanded midway at the instance of the major developed countries. Hence, even if the agenda is limited in the beginning, it should not give us any comfort that new issues will not come in later. Once a new ‘round’ gets started in the WTO, the subjects covered there will take centrestage. The subjects of interest to the developing countries will not get attention, as has been the experience in the past.
(ii) The revised text says that the negotiations ‘shall be conducted with a view to...achieving an overall balance in the outcome of the negotiations’ (para 42), which means that there will be balance in the results of the work programme. This leaves out the existing imbalances, which will continue to exist. This approach is certainly not satisfactory and fair from the angle of the developing countries. They have been pointing out the imbalances and inequities in the current agreements and asking for their removal.
(iii) The subjects that have been currently selected for negotiations in the Chairman’s text and the way they have been formulated are more in the interest of the major developed countries, rather than serving the interests of the developing countries. In this manner it is likely that the developing countries will end up undertaking more obligations without getting adequate benefit from the negotiations in the ‘round’.
(iv) New bodies like the Trade Negotiating Committee, as envisaged in the Chairman’s text, and a number of other subsidiary bodies will be established to carry on the negotiations in the ‘round’. Developing countries do not have the resources to participate in all these new bodies as well as in the existing bodies. Hence, they will be further marginalised in the WTO and will be loaded with more obligations.
The provision that the principles of special and differential treatment for the developing countries should be taken into account in the proposed negotiations (para 43) does not improve the situation at all. It is as usual in the nature of a best-endeavour clause, and such references in the past, particularly in the Uruguay Round, have not brought significant benefits to the developing countries.
New subjects should not be added on to the WTO; and for conducting negotiations on the existing subjects, a ‘round’ is not necessary at all. The negotiations can be conducted in the respective bodies under the supervision of the General Council and the results of the negotiations can be presented to the Fifth Ministerial Conference. Thus, what should be done in the interest of the developing countries is the following:
(i) Paragraphs 38 to 45 in the Chairman’s text should be completely deleted.
(ii) In place of these paragraphs, there should be a simple text saying that the negotiations and the other work envisaged in the work programme will be conducted in the respective existing bodies in the WTO under the overall supervision of the General Council.
(iii) The General Council will place the results of the negotiations and the other work before the Fifth Ministerial Conference.
(iv) In considering the balance in the results of the work programme, existing imbalances should also be taken into account, so that the final results ensure overall balance, taking into account both the existing obligations (which are grossly imbalanced against the developing countries) and the new obligations emerging out of the work programme.
Investment (para 20)
The Chairman’s first text had two alternatives on investment, viz., one, starting negotiation, and two, continuing with the study process. The revised text has removed the second alternative. Thus the only option in the revised text is to have negotiation in this area. In the initial stage, the revised text calls for focussing the work on clarification of elements of a possible multilateral framework in this area, including the negotiation modalities. Then in the Fifth Ministerial Conference, a decision will be taken on the modalities of negotiation. The elements for clarification have been listed in detail.
The elaborate and complex language in this paragraph does not hide the clear content that it aims at starting negotiation in this area. Some elements have been included perhaps with the hope that the developing countries will be attracted by them. For example, it is said that there will be a GATS-type approach in pre-establishment commitments. Also it is said that special development, trade and financial needs of developing countries shall be taken into account as an integral part of the framework.
The experience of the GATS (General Agreement on Trade in Services) has shown to the developing countries that the positive-list commitment approach, though somewhat less harmful, has not proved to be a safeguard against pressures on liberalisation in areas of interest to the major developed countries. Also the stipulation of the development needs has not saved them from extreme pressures in several sectors where the major developed countries have deep interest. With such experience as the background, the developing countries are not likely to be reassured about the negotiation in the area of investment even if the entry commitment is on the pattern of GATS and development, trade and finance needs are stipulated to be taken into account.
A large number of developing countries, including the group of least developed countries and nearly a dozen others, had strongly and unambiguously opposed the start of negotiation, when the first text was taken up for consideration in an informal meeting of the General Council. As mentioned in the beginning, the Chairman has ignored all that. He has not only retained the proposal of negotiation in this area, but he has simultaneously removed the other alternative, i.e., that of continuing the study process. It is a very unusual and strange step. The only alternative left now is the start of negotiation in this area. The revised text mentions ‘cross-border investment, particularly foreign direct investment’, which means that it aims at including investments of types other than foreign direct investment.
Besides, among the elements listed in the revised text, there is nothing on the obligations of the investor and the obligations of the home country of the investor. These elements are very relevant.
There is grave risk for the developing countries if this proposal in para 20 is approved. An agreement in this area is bound to put constraints on the developing countries in their policies and measures for guiding foreign investment to serve their development needs and priorities. It will put serious constraint on their policy options for development. At the same time, it is not likely to give them any benefit, as a multilateral agreement will not add to foreign investment in their countries.
Besides, initiating negotiation in this area in the WTO has serious and harmful implications for the future. According to Article III of the WTO Agreement (Marrakesh Agreement), the WTO can only undertake negotiations concerning multilateral trade relations. Investment is not within the fold of ‘multilateral trade relations’ and, as such, negotiation in this area can only be started in the WTO if Article III is amended. If it is agreed nevertheless to start negotiation in this area in the WTO, it will be presumed that investment falls within multilateral trade relations. This will open the floodgates to many other negotiations in the WTO in future. If investment enters at this stage, subjects like domestic taxation, many aspects of macroeconomic policy, labour policy, and even social policies may not remain far behind. All this will be extremely dangerous for the developing countries.
The proposal contained in para 20 has to be removed altogether. It will be extremely risky for the developing countries to let negotiation on investment start in the WTO in any form.
To make the proposal more acceptable to the developing countries, many forms of negotiation have been suggested in recent consultations. It has been proposed that there should be a plurilateral agreement in this area, meaning thereby that only those countries that are willing need join the agreement. Then a complex alternative was discussed recently, i.e., an ‘opt-in-opt-out’ approach, which meant that a country could decide to join the negotiation or to leave it; and even if it joined the negotiation, it could opt out of the agreement when it was finalised.
There is still a possibility that these alternatives may be floated at the Ministerial Conference as compromise formulations. But all these variations will be dangerous. The countries which opt out will find it difficult to remain out for a long time. The financiers of the developed countries will start charging higher interest rates on lending for investment into the countries that have opted out. It will make investment in these countries more costly, which will naturally depress the flow of investment into these countries.
Any formulation which implies, directly or indirectly, that this subject will be considered for negotiation should be totally rejected. It should be remembered that the Singapore Ministerial Conference in 1996 had taken a solemn decision that any negotiation in this area should be started only with the explicit consensus of the Members; and a large number of the developing countries are in fact opposed to it.
Competition policy (para 21)
Here again there were two alternatives in the Chairman’s first text: one, to start negotiations on competition policy, and two, to continue with the study process already going on in the WTO. In the revised text, the second alternative has been deleted. As in case of investment, the long and complex text in this paragraph does not hide the fact that it is a clear proposal for starting negotiation in this area. Again as in the case of investment, a large number of developing countries had strongly and clearly opposed the proposal for negotiation during the informal meeting of the General Council. But the Chairman has ignored all that. He has not only continued with the proposal of negotiation, he has also removed the alternative option of continuing the study process. The revised text lists out elements for clarification. But many relevant elements are not included. For example, it does not contain some important elements like:
(i) the obligations of firms;
(ii) the obligations of the home government regarding the conduct of foreign firms;
(iii) need for multilateral surveillance on mergers and acquisitions, which by their very nature inhibit competition; and
(iv) effect of government policies and measures on competition; e.g., imposition of anti-dumping duties, etc.
Starting negotiation in this area is fraught with risks for the developing countries. The main objective of the major developed countries is to have a certain uniform level of competition policy in all countries, including the developing countries. This may not be in the development interest of the developing countries, as having an appropriate competition policy is a dynamic process and it depends on the level of development and the development objectives of the country. An exercise of working out a common minimum for competition policy, which will naturally be the burden of the negotiation, will not serve this purpose.
Besides, the developing countries are not quite prepared for a negotiation on this subject, as has been said repeatedly by a large number of them.
The start of this complex process is likely to divert attention from solving the problems of the developing countries in the WTO.
The proposal contained in para 21 should be totally rejected. Here again, some compromise formulations may emerge later as has been explained above in the case of investment. Any alternative idea of the plurilateral approach or the ‘opt-in-opt-out’ approach should not bring any comfort to the developing countries, for reasons similar to those explained in the case of investment. There is a slight difference compared to investment, as competition is not outside the purview of international trade. But that is no reason to start negotiation in the area of competition, when there are severe risks for the developing countries and a large number of them are opposed to starting negotiation at this stage. The study process has not been completed; and a large number of the developing countries feel that it is premature to start negotiation at present. It should be remembered that the Singapore Ministerial Conference had taken a solemn decision in 1996 that any negotiation in this area would be started only with the explicit consensus of the Members.
Transparency in government procurement, trade facilitation (paras 22-23)
These two subjects coming on from the Singapore Ministerial Conference have been placed in the Chairman’s text as subjects for starting negotiations. The decision in the Singapore Ministerial Conference was that negotiations will be started in these areas only when there is explicit consensus of the Members. Many developing countries have been expressing strong opinion against starting negotiations in these areas at present.
In respect of transparency in government procurement, the exercise of working out the elements of an agreement on transparency has not yet been completed. To start negotiations appears premature. Similarly in respect of trade facilitation, a large number of the developing countries have been arguing that the exercise of facilitating trade should be undertaken by examining the appropriate provisions in the current relevant agreements, rather than by starting a new negotiation.
As the elements of an agreement have not been finalised in the current exercise, the developing countries are not quite prepared for participating in negotiations in the area of transparency in government procurement. A further risk is that the negotiation may not remain limited to the elements of transparency and may transgress into the area of market access in government procurement. Such fear arises because very high officials of the major developed countries have implied on several occasions that transparency is only an interim step; the real aim is the expansion of market access. Also, the proposals given by some major developed countries in the course of working out the elements of an agreement go much beyond transparency. The formulation in the Chairman’s text regarding the negotiation being limited to transparency can hardly give much comfort in this background of statements and actions of the major developed countries.
In the case of trade facilitation, the fear is that a new agreement may put constraints on the developing countries in respect of the discretion and flexibility which they have in the existing agreements.
The provisions in the Chairman’s text for starting negotiations for agreements in these areas should not be accepted. The current process of working out the elements of an agreement in the area of transparency in government procurement and of studying the issue of trade facilitation should continue.
Bhagirath Lal Das was formerly India’s Ambassador and Permanent Representative to GATT and Director of International Trade Programmes at the United Nations Conference on Trade and Development (UNCTAD).