South wants Ministerial to focus on implementation
Problems of implementation of the existing WTO agreements, and not new issues, should be accorded priority at the 2nd WTO Ministerial Conference in Geneva. This view emerged from a recent Third World Network-organized seminar on trade issues facing developing countries in the WTO. Cooperation and coordination among developing countries are also imperative in order to secure a more assertive presence in international trade.
by Martin Khor
GENEVA: Developing countries are facing a long list of serious problems arising from the implementation of the WTO agreements, and the Second WTO Ministerial Conference should agree on a process to rectify these, instead of endorsing the start of negotiations on new areas.
This was among the several common concerns raised by a panel of leading Third World trade diplomats and negotiators at a seminar on Current Issues on Trade, the WTO and Developing Countries organized by the Third World Network (29- 30 April).
Speaking at the panel discussion on "Developing Countries and the Second Ministerial Conference" were Ambassadors Munir Akram of Pakistan, Dr. Mounir Zahran of Egypt, Mr. Anthony Hill of Jamaica, Ali Said Mchumo of Tanzania and Ambassador S. Narayanan of India. The seminar was chaired and panel discussions moderated by Chakravarthi Raghavan, Chief Editor of the South-North Development Monitor (SUNS).
The speakers shared the concern that although the WTO Conference (to be held here on 18-20 May) had initially been expected to be more a ceremonial and procedural one in nature, pressures have been building up from major trading countries to use the Conference to push for a "comprehensive agenda" or a "Millennium Round" in which new issues would be negotiated.
The occasion of the Conference is also being used by the United States to push through an agreement on duty-free trade through electronic commerce, even though this had not been agreed to at the WTO General Council.
Ambassador Munir Akram said the Conference was being sought to be used as an occasion in which a future agenda of negotiations, assumed to start in 1999 or 2000, would be shaped. This was apparent from the draft Ministerial Declaration (put forward in the informal heads of delegation meeting by the WTO head, Renato Ruggiero).
Akram commented that on one hand, the draft Declaration indicated there were no problems in handling problems of implementation and thus did not allow for changes to be made to the existing agreements.
On the other hand, the paragraph on future work linked the built-in agenda with decisions made at the Singapore Ministerial Conference in 1996.
The Singapore decisions included studies on the issues of investment, competition and government procurement - on which there were different degrees of commitment by Members.
But on the built-in agenda, there had been an agreed commitment at Singapore. Also, the Declaration envisaged a future agenda that would include "any additional subject matter" proposed by Members.
Parity of issues
Akram said all these issues (implementation, built-in agenda, the new issues decided in Singapore and additional subject matters) had been given the same level of parity.
He added that the agreements signed at the Marrakesh Conference were as a single undertaking. From both a substantive and a negotiating viewpoint, developing countries must preserve the package and balance of rights and obligations in the agreements and the built-in issues.
The Singapore issues and other proposed new issues would need a new consensus if they are to be negotiated.
A distinction therefore must be made between issues where there already was a commitment (implementation and built-in agenda) and those where there was no commitment.
Akram added there was a lot of work to be done on implementation and the built-in agenda.
On implementation, he noted that after four years, things were not proceeding as anticipated.
In textiles, which, at the time of Marrakesh, had been seen as the area of greatest gain for developing countries, the benefits have not been forthcoming as expected and developing countries should hence insist on having these benefits realised.
In agriculture, many commitments (such as compensation to net food- importing countries) have not been implemented.
Akram also cited as further examples the use of anti- dumping measures, non-implementation of special and differential treatment for developing countries, and the use of the Dispute Settlement Body. There are thus many implementation problems for which redress is needed.
On the built-in agenda, there is a need for analysis of the implementation problems before the built-in agenda (including on agriculture, TRIPs and TRIMs) can be handled.
As a positive agenda for developing countries, Ambassador Akram suggested three issues: a revised agreement on movement of natural persons, a broader and more comprehensive insertion of special and differential treatment for developing countries, and elimination of tariff peaks.
In his presentation, Ambassador Mounir Zahran of Egypt said the main issue in the WTO is the marginalization of developing countries and this is closely related to implementation problems. After over three years of implementation, a lot of difficulties and imbalances have been seen, but these have not been redressed.
Despite this, he added, the draft Declaration put before the informal HOD meeting said that implementation is being "closely and effectively monitored". This assessment could not be accepted by Egypt. Many difficulties had been raised, but they have not been resolved.
Zahran presented a long list of difficulties associated with implementation. These included: difficulties in notification of obligations; imbalances in agreements that are implemented in letter but not in spirit or that have a negative impact on developing countries (for example, anti- dumping, use of standards in the TBT Agreement, SPS Agreement and Textiles Agreement); lack of implementation by developed countries (for example, Ministerial decision on negative effect on LDCs and net food-importing developing countries); market access problems for developing country products; inadequacy of technical assistance; and inability to ensure equitable distribution of benefits.
To be honest, the Egyptian Ambassador said, the Ministerial statement should reflect these difficulties and the grievances and complaints of developing countries, and direct how to redress them.
Zahran said that in practice, most developing countries are not integrating into the trading system. He said that the high-level meeting for LDCs last October had produced meagre results, even for the 12 selected countries which were involved in roundtable sessions. And it was evident that the developing countries had provided more benefits to the LDCs than the developed countries.
Not only the LDCs but other developing countries were also facing problems; even the emerging economies such as the "Asian Tiger" economies have found their gains evaporating due to greedy financial speculators. The WTO should fully address this crisis as there are trade implications.
On the Ministerial Conference, Zahran said for months the preparation has gone on, and the developing countries are still marginalized.
It had been originally agreed that the Conference would be separate from the event relating to the 50th anniversary of GATT. The old GATT was different from the WTO and whilst the anniversary could be commemorated, there was nothing for developing countries to celebrate. Drawing an analogy, Ambassador Zahran said if there was a natural disaster, this could be commemorated but not celebrated.
Originally, the 50th anniversary meeting was to have taken place on 20 May after the conclusion of the WTO Ministerial. But now the programme has been changed and calls for a 'celebration' sandwiched on 19 May in between the Conference sessions. This was done to suit the convenience of one or two of the Western heads of state or government whose calendar did not fit into the 'celebrations' fixed for 20 May.
It had been originally agreed that the first day of the Ministerial, starting in the morning of 18 May, would focus on implementation problems. But later, to accommodate the late arrival of European Ministers (who wanted to have their bilateral meetings with the US in Birmingham on the fringes of the G-7 summit), the discussion on implementation would only start in the afternoon.
This, said Ambassador Zahran, is an example of the marginalization of developing countries, whose Ministers and officials have to wait for Ministers of the North. Thus, only on 18 May afternoon would implementation be discussed as 19 May would be occupied by the celebrations and 20 May by the WTO's future work.
Another Ambassador from a developing country present at the seminar, who did not want to be identified, later complained that since the celebrations would now look like an ingathering of the white and the rich, the WTO secretariat was trying to apply pressure on and influence sub-Saharan African countries to send their heads to Geneva for a 2-4 hour visit. So far, none of them, nor any prominent Asians (except for Singapore, as the host of the first Ministerial) have agreed, he said.
Zahran added that for future work, the most important issue was dealing with implementation problems, and the agreed built-in agenda. On investment, competition and government procurement, developing countries have not agreed to negotiations.
Speaking up at the Ministerial
Ambassador Ali Mchumo of Tanzania said he expected and hoped that Ministers from developing countries would speak up at the Conference on implementation problems. These include the non-fulfilment of agreements by the North (for example, on compensating net food-importing countries), the Technical Barriers to Trade (TBT) and Sanitary and Phytosanitary (SPS) agreements implemented in a way not to the liking of the South, difficulties in notification, erosion of the spirit of special and differential treatment, incapacity of developing countries to implement agreements that require sophisticated machinery (for example, the imposition of anti-dumping measures), and the benefits, if any, of the Uruguay Round overall.
He said the draft statement talked about the trading system's outstanding contribution over the past 50 years, but in reality many developing countries have not benefited. In some cases, for instance, deindustrialisation has taken place.
Mchumo added that what was important was that whatever the developing countries' Ministers say at the Conference should be used for a follow-up process. The Conference should thus be a working session and not be an "informal meeting".
The Ministers must boldly say what problems are faced by developing countries, and what the WTO must do, and these should be included in a paragraph in the statement, so that there would be a follow-up in the General Council.
On the WTO's future work, Mchumo suggested the following issues for consideration: measures to enhance market access for developing countries' products; problems of implementation should be highlighted; issues in the built-in agenda that can increase the supply-side capacity of developing countries (for many of them, this, rather than market access, is the problem), and areas that stress special and differential treatment for developing countries.
He added that the built-in agenda was enough to occupy the future work programme, and that developing countries are generally against new issues. But, he asked, could they hold their ground on this?
Mchumo pointed out that para 9 of the draft statement referring to "a more comprehensive agenda" could be used by some major countries as a gateway to use the Ministerial to start a new Round or to bring the new issues of Singapore up for negotiation.
He asked whether developing countries could stand their ground so as to prevent a new Round, and noted that the big powers are at present really pushing. For example, a draft agreement on electronic commerce is already circulating.
The experience of the Singapore Conference showed that major countries could push their issues when they really want to. Although the WTO is said to be rules-based, when it comes to decision-making, it is still a power-based organization. When some developing countries say "no", a way is found to roll the issue through, whereas when a big country says "no", it is said there is no consensus.
Perhaps if a developing country were outspoken, it could get invited to the informal small group where decisions are made. However, even if the countries get invited, could they make a difference, asked Ambassador Mchumo. He said they could, but only if they are united enough through to the end.
On the least developed countries, he agreed with Ambassador Zahran on the lack of results of the high-level meeting, despite the report that everything went well and that a follow-up mechanism had been established. But that mechanism excluded the LDCs themselves from the driving seat, and they were now in the passenger's seat. Also, he asked, would there be finance for the follow-up?
Ambassador S. Narayanan of India said it was agreed by all that the Conference would have two agenda items, implementation and future agenda. Also, the operative part of the Conference is authorization of the process of the next Ministerial Conference.
On implementation, he said there were two categories of issues. Firstly, there were the issues that arose in the implementation of agreements, and where developing countries had accepted obligations but experienced difficulties and problems they had not foreseen in implementation. For example, the TRIMs Agreement got in the way of establishing local industries such as automobile plants - and, in effect, developing countries were being told that those in the North who had set these up early were fine, but the latecomer developing countries could not set them up. There were also problems in implementing the TRIPs Agreement.
Secondly, there were issues involving the non-realization of expected benefits from certain agreements. For example, developing countries had thought there would be an improvement for them in textiles, or in procedural improvements in anti-dumping, but in reality, the situation had not improved but had worsened.
Narayanan said it was important to get appropriate language in the Declaration to reflect the views of developing countries on the process of dealing with the issues of implementation.
Developing countries have to give concrete examples of difficulties arising from implementation and how they would like to deal with these difficulties. Ministers would have to voice their concerns. Developing countries had to say specifically what problems they face and how they would like them to be tackled.
As for future activities, said Ambassador Narayanan, these could be in three categories: some areas where negotiations are going on (for example, services, safeguards); the built-in agenda containing mandated areas of further negotiations; and areas with a review process in the built-in agenda.
But the draft Declaration, he said, had also included the subjects raised in Singapore and additional subject areas that may be mentioned, and such mention would prejudice the position of countries like India.
For example, electronic commerce or other new issues should not be included, since they were not part of the Marrakesh agreements. New proposed issues should be discussed and agreed upon at the General Council.
As for the issues decided in Singapore, the working groups on these issues would give their reports, and the General Council had to decide by consensus on what further could be done. The Singapore decision provided expressly that any negotiations could only be through a specific consensus decision.
Narayanan said developing countries should support one another as far as possible. If a developing country had no antagonistic interest on a subject raised by another developing country, it should try and support the developing country raising it, or at least remain neutral and not side with the developed countries.
As for the WTO being a power-based system, this should not deter developing countries from trying their best as it was better to try and fail than not try at all.
Lack of unity
Earlier, Ambassador Anthony Hill of Jamaica, in his presentation, gave a historical overview of the key developments in the organizations and groupings of the South and in North-South relations over the past three decades, and the various phases of the groupings of the South and their lack of unity or even a continuous memory, through a secretariat, to be able to formulate positions or understand what had taken place before.
He remarked that although he had always maintained a sense of optimism, he had never felt such unease as now over the balance of benefits in international relations and the systems. The South at the moment was weak in terms of alliances among themselves, and there was little institutional memory.
He said there were now several categories of developing countries and stressed the need for developing countries to have an institutional mechanism of their own that could carry the institutional memory of the South and foster stronger alliances among them.
He referred to the financial and monetary crisis in Asia and noted that recently in Washington, at the time of the Interim Committee meetings, the finance ministers of the G15 and other interested countries could not meet to consider the situation arising out of the mandate given to them by their heads at Kuala Lumpur. But the same, or most of the same, ministers could easily be convoked and could meet with the US Treasury Secretary to formulate a new architecture for the international financial system.
The MAI at the WTO?
In response to a question about the failure of the proposed Multilateral Agreement on Investment at the OECD, and the suggestions of the Dutch and others there to take the draft, as so far settled, and introduce it in the WTO in order to involve the developing countries, Ambassador Hill said such an MAI could not be introduced under the working group on trade and investment as a separate item but would have to be taken up, if at all, only in the review of the TRIMs Agreement.
Hill also said that the extension of the national treatment principle in GATT and the WTO had enlarged the space in which transnational companies could secure an advantage in the domestic market. He added although international organizations had a lot of statistics and data, they often did not disaggregate them. For example, it is often said that trade growth exceeded output growth. But disaggregated data from an investment bank showed that at the end of 1996, US firms abroad controlled 85% more assets than in 1990. Given this information, he asked whether an MAI was needed to increase this growth. Foreign capital is already spreading through the existing regimes. Hill added that there was a need to look at the interface of trade and competition policy, due to the exponential growth in the size of market actors, which made it beyond the capacity of any national government to regulate.
The WTO had established a balance of rights and obligations among Members and across the agreements. A particular country or group of countries may feel it is to its advantage to allow a new subject to be brought up by another or an existing right-and-obligation balance to be upset because it would enable the country or group concerned to gain some advantage in an area of its own interest.
But he did not see any reason why Jamaica should be asked to pay a price for undertaking obligations in some new areas because another country wants to gain some more advantage or rights in an existing agreement.
He said it was important for developing countries to be present when issues are put forth in the WTO and for them to also remain firm on areas that are against their interests.
Narayanan noted that developing countries, with few bodies to field, were not paying adequate attention, for example, to the study groups on investment and competition policy. His own delegation was not an exception either. But at the investment study group, he noted, efforts were being made, through the definition of investments, to bring in not only foreign direct investment but also short-term funds and portfolio flows. His own country would find it difficult to allow the scope to be expanded like this.
In response to questions, Ambassador Zahran said the major countries were now of one mind to have agreements that are in their interests but at the expense of the South. They would like "to conquer our markets," he said, and they make use of tactics and gimmicks as well as international civil servants "to tell us it is in our interest."
He added that the attitude (of developed countries) seems to be that the poor should go to hell, and that poverty is a crime for which one should be punished.
Zahran said that the MAI is a framework to protect the reverse flow of capital, as it covers long-and short-term capital and portfolio investments. Speculators who want to "hit and run" would be protected by the MAI. Many developing countries are not interested in attracting short-term capital, which can be damaging, and this was an added reason to resist the MAI.
He also agreed that competition policy and investment should be discussed through the review of the TRIMs Agreement and therefore should not constitute a new issue.
He said the prohibition of local-content policy in the TRIMs Agreement was damaging as it prevented the promotion of local industry, and it should be reviewed.
Mchumo said although developing countries are in the majority in the WTO, a few countries could have their way because the system was power-based, even though it is claimed to be rules-based. Given this, if developing countries are better organized and stand firm, they too could have their way.
In his concluding remarks as chairman, Mr Raghavan said the seminar and the session had been a very good beginning. He recalled the wise advice of UNCTAD Secretary-General Rubens Ricupero in the opening session for negotiators to realize that international negotiations were based on power, and the WTO would be no exception, and that they would be better able to defend their interests on the basis of determining what these interests were and where they lay, formulating a positive agenda of demands and taking their position on that.
This did not mean, Raghavan said, that only power - be it military or economic or trade power - counted. In the Vietnam War, US power was brought to a standstill by a guerilla war.
And a columnist in a financial paper who had so far seen nothing wrong in all these years of negotiations, with business lobbies lobbying governments for particular agreements, now bemoaned that NGOs had taken to the Internet and guerilla warfare tactics to sink the MAI, and could create problems for the negotiations in the WTO (which are held in private, making success possible).
Developing countries and negotiators should be aware of the power ranged against them, but even a handful of them could bring that power to nought at the trade negotiations, as had happened before. And, as he had mentioned at the opening of the seminar, if developing countries make it a point to support each other when their own vital interests are not affected, and even merely say that the problems raised by another country merit attention and that a decision should not be taken, they would move in the direction of restoring symmetry and equity in the system.
Raghavan agreed with the views expressed that there was an urgent need for more coordination and information exchange among developing countries and said people like him, and the organizers, the Third World Network, stood ready to help developing countries in making technical preparations based on their perceived needs. (Third World Economics No. 184/185, 1-31 May 1998)
Martin Khor is the Director of Third World Network.