TWN Info Service on WTO and Trade Issues (Sep06/1)

1 September 2006

Raghavan's review of current WTO situation

Below please find an extended article by Chakravarthi Raghavan on the current impase in the WTO's Doha negotiations, which he reviews in light of the past developments.

C. Raghavan was for many years chief editor and currently is the editor emeritus of the SUNS (South-North Development Monitor).

This article was published in the SUNS on 18 August 2006.

With best wishes
Martin Khor


Hoist with their own petard?

Reviewing the current WTO situation in light of the past developments

Chakravarthi Raghavan
Editor Emeritus of SUNS (South North Development Monitor)
Geneva, 17 August 2006

In September 2001, within days of the terrorist attacks on New York (World Trade Centre) and Washington DC (Pentagon), US Trade Representative Robert Zoellick jumped in and called on the US Congress (as a response) to give the administration the Fast Track authority to negotiate trade agreements.

Zoellick was rebuked in the US by some Senators and Congressmen; but his marathon running partner and friend, EC Trade Commissioner, Pascal Lamy, jumped in with speed and called for the launch of a new round of multilateral trade negotiations at the WTO - presenting it as a response to the terrorist attacks.

Though many countries had security concerns about holding the ministerial at Doha (in the light of the US preparations in that region to launch a strike against the Taliban regime in Afghanistan) Lamy and several others also promoted the idea of holding the meeting at Doha, Qatar as the international community's response to the terrorists' attacks on the World Trade Centre at New York.

At Seattle in 1999, Qatar had offered to host the next ministerial at Doha - as its then foreign minister explained it to a civil society meeting then, Qatar had made the offer so that the Gulf state could be put on the world (convention centre) map, just as Uruguay had done by hosting (at Punta del Este) the GATT Ministerial meeting that launched the Uruguay Round!

After the WTO had attempted but failed to get others like Chile to offer to host the meeting, the WTO General Council in February 2001 had accepted the Qatari invitation and set the conference dates for 9-13 November 2001. After the 11 September terrorist attacks, there were some renewed, but Unsuccessful efforts, to shift the meeting away from the region.

The Seattle meeting, where Lamy had come with an elaborate agenda for multilateral negotiations (including on the four 'Singapore' issues as it later became known), had collapsed - not so much because of the civil society demonstrations outside, but because a large number of developing countries refused to be manipulated by a small group called together by the WTO Director-General Mike Moore.

After the collapse of that meeting, a shell-shocked Moore and the US and EU and other developed countries, agreed in May 2000 at the General Council (chaired by Norway) to have a series of confidence-building measures (SUNS #4657 of 1/5/2000, SUNS #4660 of 4/5/2000 and SUNS #4664 of 10/5/2000).

But before anything serious could be done on the basis of that decision, the US and EC with Mike Moore, orchestrated a demand for a new round of negotiations, and for preparatory work at the General Council. This though got stymied.

It was against this background that in the wake of the September 11 terrorist attacks, Lamy called for the new round of negotiations and holding it in Doha.

Zoellick himself did not get the fast track authority from the US Congress, until after Doha; at Doha he had explained to some of his key interlocutors that Congress would give the US administration the fast track authority only when it thought that there was some market access to be gained through such multilateral negotiations. (In fact, Zoellick had been pushing (before and after September 11, 2001) for a 'market access round'.)

But with the United States set to launch the attack on the Taliban in Afghanistan, there were many doubts on security and other arrangements for holding the WTO meeting at Doha.

Ultimately, the WTO ministerial conference was held in Doha under very controlled conditions.

In terms of the preparatory work, on the basis of various proposals that went to Seattle, a series of mini-ministerials were being held around the world. However, not much was done at Geneva itself, in an inclusive manner at the General Council - despite the decisions taken in 2000 as part of the post-Seattle confidence-building measures among the membership.

The General Council was then chaired by Hong Kong China's Stuart Harbinson (who attended the many mini-ministerials outside, and brought their ideas and decisions informally into the General Council consultation processes - ignoring often the protests from the broader membership).

Harbinson prepared and put forward, on his own authority, a draft for Doha. At Doha itself, the agenda of the Conference and Harbinson's draft were brought onto the agenda at the opening ceremonial session - with the Emir of Qatar in the Chair (and protocol prevented anyone from objecting).

The subsequent ministerial plenary too was run in the 'Qatari democratic style'. The entire processes running up to, and the decision-making at Doha, were manipulated. (see reports in SUNS Nos. #4998, 4999, 5000, 5001, 5002, 5004, 5006, 5007, 5008, 5009, 5010, 5011, 5012, 5013 and 5016 - November, December 2001.)

At Doha, there was an official series of meetings in clusters, but there was also another series of unofficial meetings where the real decisions were being made. These unofficial meetings were directed from behind the scenes in complete non-transparent ways by "facilitators" named by the Qatar minister-chairman of that meeting, and the WTO Director-General Mike Moore.

They were drafting a work programme and declaration, whose main component was Lamy's four Singapore issues. These were pushed through and brought on the agenda through a green-room process and all night sittings.

From the beginning, as EC Trade Commissioner (in the run-up to and at Seattle, as well as in the run-up to and at Doha and on to Cancun) Lamy pursued the neo-mercantilist objectives of the EC and its corporations, and left little doubt that the EC domestic support to its farmers could not be reduced.

Soon after Doha, he visited New Delhi, and as Devinder Sharma puts it in a comment in the Deccan Herald (India), made clear that Europe will not reduce its financial support for agriculture. Sharma quotes him as saying in New Delhi: "We need to keep our seven million farmers on the farm. It is a political compulsion for us. So let us not be under any illusion that we will be doing away with agricultural subsidies."

Later, after the collapse of Cancun (where Lamy attempted, but failed completely, to get going negotiations on three of the Singapore issues, i. e. investment, competition and transparency in government procurement), Michael Finger said at an UNCTAD meeting that from the beginning, the US and EC attempts at Doha and in launching negotiations with a complicated agenda had been to ensure that nothing need be done by them on domestic agricultural subsidies.

Finger (who was formerly the chief of trade policy at the World Bank and in 2004 was a resident scholar at the American Enterprise Institute), speaking at an UNCTAD panel discussion (along with US, EC, and key developing country ambassadors) had said that the whole exercise at Doha and at Cancun, and with the inclusion of many trade and non-trade issues in the new round, had been intended by the EC (and perhaps subsequently by the US) merely to ensure that they did not have to cut domestic agricultural subsidies or provide market access. (See SUNS #5509 of 11 February 2004 for report on panel discussions and Finger's views.)

At Doha itself, and immediately after, to persuade the developing countries to go along with the work programme and start negotiations, the US and the EC promised that they would do their utmost in the round and negotiations to enable developing countries to trade, export and earn and thus reach the Valhalla of liberalization, growth and poverty reduction.

That there was no empirical and conclusive evidence on this thesis did not seem to concern much the trade ministers and their establishments that had been sold on the merits and benefits to all of globalisation and free trade.

While it is generally accepted that 'good faith' negotiations bilaterally, plurilaterally or multilaterally, means that no party should attempt to improve its negotiating position after agreeing to negotiate an agreement with others, the United States did precisely that: it increased its agricultural domestic support (to reach now about $20 billion)!

In the run-up to Cancun, Zoellick and Lamy reached an understanding on agriculture, and sought to force it upon others; however, Brazil, India and a few others formed the Group of 20 to block it, declining to take the US-EC proposals as the basis for continuing and concluding the Doha negotiations. The G20 formulated its own position in agriculture.

A major sticking point in the agriculture negotiations is the inability or unwillingness of the US and the EC to cut their domestic subsidies (and to agree to clear rules on 'green box' or non-trade distorting subsidies, to prevent "box shifting" in subsidising their farmers), and open up their domestic markets to exports of developing countries (which is what they had promised at Doha).

While both the EC and the US were blocked, and seemed surprised that the Cancun ministerial could fail as it did, they soon regrouped, and came back to Geneva for negotiations. This resulted in the July-August 2004 framework accord, which in fact resulted in the developing countries agreeing to a framework and process in agriculture that provided the US and EC much leeway in terms of agriculture support.

When Lamy found himself unable to continue as EC Trade Commissioner, and decided to run for the WTO top job, during his election campaign, and at a meeting in Geneva with civil society groups (where he sought to present himself as one wanting to promote the development agenda for developing countries), he blamed all the wrong elements on the Doha agenda on the EC member states, and took credit for what he believed could be 'sold' as pro-developing world.

Before actually taking over at the WTO in 2005, Mr. Lamy had talked to former GATT Director-General Arthur Dunkel about Dunkel's post-Brussels (1990) efforts to conclude the Uruguay Round, and in particular about the 1991 Dunkel text, leading to the final Uruguay Round agreements.

(Mr. Lamy disclosed this at a press conference in Geneva after the Hong Kong Ministerial, when he had been asked whether he would follow the Dunkel Precedent and table his own package text).

This Lamy discussion with Dunkel was presumably with a view to Lamy adopting a similar approach to enable the conclusion of the Doha talks. However, Lamy has also been saying at some of his media briefings that the Dunkel precedent is now more difficult.

However, since taking over as WTO head, Lamy has subtly shifted the Doha 'development agenda' negotiations and has been trying to convert it into one with the main focus on market access (in agriculture, NAMA and services).

When the Marrakesh treaty was concluded in 1994, then GATT Director-General Peter Sutherland had announced with a great deal of fanfare that the WTO was a "Rules-based" organization (unlike the old GATT, a provisional treaty). If this name implies anything, it means that members or the WTO must base any of their actions or measures on specific trade rules. In any event, it also means that the WTO head and the WTO secretariat can do only what the rules allow or permit.

At the WTO, under Lamy (and his predecessors, Renato Ruggiero, Mike Moore and Supachai Panitchpakdi), there has been more rule-lessness than in the old GATT.

For example, when the Montreal ministerial mid-term review meeting collapsed in 1988, the GATT Director-General as chair of the Trade Negotiations Committee, did not claim any inherent powers to continue or suspend negotiations for consultations.

The TNC specifically authorized him at Montreal, to continue consultations and facilitate an agreement. He used such an authorization, to promote and force down the infamous mid-term agreement of April 1989, where a decision to negotiate TRIPS norms etc was forced down on developing countries.

Learning from this experience, at the December 1990 Brussels Ministerial meeting which collapsed without any agreement (and where again he had to get an authorization or mandate from the TNC for continuing the negotiations and to hold consultations to promote accords), Dunkel was given a specific mandate by the TNC, but to act in consultation with the Ministerial Chair of the TNC (the Uruguay Trade Minister).

After year-long consultations and talks in clusters, in December 1991, Dunkel used the agreed texts in various areas, and supplied his compromises in areas of deadlock, and presented a text (as a package), and in effect more or less got the TNC to agree that it should be dealt with as a package, and any part of it could be reopened only by consensus.

In fact when he tabled the draft text at the TNC in December 1991 and asked members not to comment immediately but come back in January after studying it (and gaveled it as a decision), the members inside did not even have a text. It was distributed to them only later in the night.

Though he sought to ensure its adoption as a package, with changes made only by reopening texts by consensus, and used it to prevent developing countries seeking changes, in fact, the final agreement was reached only by the US and the EC being enabled to open up all those drafts (like agriculture, anti-dumping, subsidies and countervailing measures) where they wanted changes.

In 1992, Dunkel hoped and tried to conclude the agreement, announcing that he would not continue in office beyond that term. His spokesman (David Woods) had then told the media that Dunkel had decided this to enable him to conclude the Round, without looking to anyone for a further term of office.

However, with the US and EC both determined to re-open part of the package (perhaps going back on informal encouragement to him to present a package accord), Dunkel ultimately retired, and was replaced in 1993 by Sutherland - under whom almost every part of the Dunkel text was reopened wherever the US and EC wanted to.

Nevertheless throughout these processes, the form (though not the substance) of doing things on the basis of some procedures of agreement by the membership was maintained.

After taking over as WTO Director General, and at the Hong Kong Ministerial, Lamy has subtly altered the focus of the Doha negotiations, from his original (as EC Trade Commissioner) focus and talk of a 'Development Round', into a market access round of negotiations.

He has been constantly shifting goal posts to achieve what should be described as 'Doha-lite' in agriculture (in so far as the US and EC obligation in domestic support is concerned), and 'Doha-heavy' in NAMA and in Services (in so far as the obligation by developing countries is concerned).

On NAMA and services, step by step the developing countries have given way, though they are trying to hide it from their own domestic constituencies.

Several observers have commented that in the run-up to and since Hong Kong, Lamy has been constantly setting deadlines that could not be kept, in such a way that a crisis atmosphere was being built up. Within the WTO itself, some members have been talking of there having been a "managed" crisis.

More curiously, at the July 2006 G-8 summit at St. Petersburg (dubbed the "Yo Summit" by a columnist of the London Guardian newspaper, who was ridiculing Tony Blair and his performance during that 'famous' lunch), ahead of the meeting of the G8 scheduled with leaders of selected developing countries, termed 'outreach partners' (including Brazil, China, India, South Africa), Lamy presumably briefed at least some of the G8 leaders, and the G8 gave Lamy a new deadline and asked him to continue the negotiations for evolving modalities till mid-August.

Thus the G8 leaders had already proclaimed themselves in their own statement on the Doha talks before they met with the "outreach countries". It is not clear what the heads of these "outreach countries" did or said on such pre-emption, when they met the G8.

But they all agreed to send back their trade ministers to Geneva, reportedly providing them with needed flexibility to evolve their positions and conclude the negotiations on modalities for agriculture and NAMA by mid-August.

Subsequently, at the end of July, when the G-6 (US, EU, Brazil, India, Australia and Japan) trade ministers met and found themselves unable to agree, the WTO Director General told the media that he would "suspend" the negotiations. The WTO media office also made such announcements.

It was only subsequently, at the informal Trade Negotiations Committee, that Mr. Lamy said he was recommending the suspension of the negotiations, and then at a media briefing said the TNC members had informally agreed to it.

There was no formal decision because the TNC meeting was an informal one, where minutes are not even recorded. At the official General Council meeting some days later, Lamy reported on what he had told the informal TNC meeting, and the Council only took note of his report and the comments of members. There was pointedly no decision adopted on the suspension of the Doha negotiations.

So much for the Rules-based organization and the rules-based system.

Since the 'suspension', it is now commonly agreed that the Doha talks are dead in the water; or, as the Indian Trade Minister, Mr. Kamal Nath, in a more picturesque, headline-catching sound-bite told the media, the Doha negotiations are now "between intensive care and the crematorium".

After the General Council meeting, a small item in the Financial Times reported that Mr. Lamy had gone on a visit to Lourdes in France, where a Roman Catholic shrine is located. It is a famous place to which those with serious health problems go on a pilgrimage in hope of a miracle.

As for the prospects for resumption of the Doha talks and some agreement, mercantilist logic supports the view that the business and services corporations of the US and EC have already secured so much, and developing countries have already given way so much, that there will be overwhelming pressure from them on the US administration and the EU, to "lock these concessions" into place by concluding the negotiations, in time for US Fast Track authority requirements, to get the agreements adopted by the US Congress by July 2007. This means making use of a window of opportunity to do so after the November US Congressional elections. (See SUNS #6080, article by Bhagirath Lal Das.)

However, if any concessions to the extent sought by the US and some others are expected from the EU, the political calendar suggests that nothing can be attempted until the French presidential elections are out of the way in May 2007.

In the politically tricky US situation, the November 2006 Congressional elections are likely to be viewed by the Democrats (particularly if they gain some seats from the Republicans in the Congress) as a warm-up for the

2008 Presidential elections and their hopes of winning the White House. This would have its own effects in the US - on all other agendas.

However, no one should underestimate Mr. Lamy.

He has shown, as EC Trade Commissioner, and now as WTO head, a capacity to divide the developing world and its groupings, and achieve his objectives.

Lamy is a product of the elitist of the French elite governance system - a graduate of the Ecole Nationale d'Administration (ENA), the French civil service college whose graduates end up regulating and running French institutions (public and private).

His political ambitions are also said to be aimed much higher, in France (rather than end his career as WTO Director-General). He has already demonstrated his ability to manoeuver, use the media, and pressure the developing world.

But Lamy's abilities need not be over-estimated either. The developing countries, the G-90 at Cancun (and a similar large grouping of small countries at Seattle) have shown that they can stand together and say NO to defend their vital economic and development interests. They can do so again.

Perhaps there is something to be learnt from a Parisian story:

A Parisian on a country drive stops to admire the sight of a shepherd mending his flock. He strikes up a conversation. "If I guess how many sheep you have, will you give me one of them?" he enquires. Confident that the Parisian will fail, the shepherd agrees. "I make it 342," says the visitor after a rapid calculation. The shepherd has to admit that the Parisian is absolutely correct. "Please take one," he says graciously. As the Parisian leaves, the shepherd calls after him: "If I can guess what school you went to, will give me back my sheep?"

"Fair enough," agrees the visitor. "Well, you're from Ecole Nationale d'Administration", says the shepherd. "How on earth did you guess?" demands the Parisian, crestfallen. "Easy, you were walking off with my dog."

(* Chakravarthi Raghavan, Editor Emeritus of the SUNS, contributed the above, based on his presentations at a civil society trade workshop, organised by the Consumers Association of Penang and the Third World Network in Geneva in August 2006).