Info Service on WTO and Trade Issues (Dec11/05)
20 December 2011
Third World Network
WTO D-G issues report for ministers at MC8
Published in SUNS #7266 dated 23 November 2011
Geneva, 22 Nov (Kanaga Raja) - The Director-General of the World Trade
Organisation (WTO), Pascal Lamy, has issued a report to trade ministers
who will be attending the eighth Ministerial Conference (MC8) taking
place in Geneva on 15-17 December.
In a cover note addressed to trade ministers, Lamy said that the report,
prepared under his own responsibility, provides the ministers with an
overview of work across the WTO, focusing on those areas which he believed
deserves the ministers' particular attention.
According to the Director-General's report, these are not ordinary times
and the ministerial conference will not be "business as usual".
"The world is experiencing the worst economic crisis since WWII.
Developed economies have been buffeted by strong headwinds. Disappointing
output, employment data and turmoil in financial markets have damaged
business and consumer confidence," Lamy said.
He added: "While the outlook is more positive for developing countries,
even those economies with strong fundamentals are finding themselves
under strain as the global economy continues to show signs of weakness.
Economies are not de-coupled. As long as growth remains sluggish and
unemployment at unacceptably high levels, the risks of turning inward
will be on the rise."
"In times of global economic uncertainty, the WTO's role is ever
more important: not only as an insurance policy against protectionism,
but also as an active instrument of international cooperation to create
confidence by promoting growth and development."
Lamy said that "Ministers gathered for MC8 can contribute to the
improvement of the global economic outlook to the benefit of all, provided
you are ready to invest in the strengthening of the multilateral trading
system, and provided you are prepared to see this as an opportunity.
As the Director-General of the WTO, I am proposing to you that we work
to ensure the WTO is seen as an organisation which moves forward."
"At MC8 we will need to review how the WTO has performed across
the entire breadth of its work since we last met two years ago. Inputs
for this will come from the regular reporting of WTO bodies, and from
the preparatory consultations. Most importantly, MC8 will be the opportunity
to chart a pathway for our work over the next two years," the Director-General
Noting that the WTO is often seen in a segmented way, focusing on one
or other aspect of its mandate, to the detriment of others, Lamy said
that his aim is to restore a holistic view of the WTO as an integrated
system where negotiations, implementation of agreements, dispute settlement,
monitoring and surveillance, capacity building, accessions and other
activities all have their mutually supportive place.
"The WTO has a significant role in contributing to greater coherence
in a world where economic integration is not matched by the same level
of policy cooperation. To live up to this role, it must itself function
in a coordinated way, bearing in mind that coherence begins at home,"
said Lamy, adding that Ministers are uniquely placed to contribute to
this integrated perspective, which is all too easily lost in the more
narrowly-focused concerns of the day-to-day in Geneva.
On the Doha Development Agenda (DDA) negotiations, Lamy said: "There
is no beating around the bush: the Doha negotiations are at an impasse.
Despite numerous pronouncements and commitments, Members have not been
able to finalise the negotiations as originally envisaged."
Noting that on 21 April 2011, that he and the Chairs of the Negotiating
Groups had unveiled the "Easter Package", Lamy said that in
sum, the documents leave no-one in doubt about the value of what is
on the table, but also reveals the issues that still divide Members.
He stressed that the area where this divide is most evident is market
access for industrial products. "There are fundamentally different
views on the ambition provided by the cuts to these tariffs under the
agreed formula, on whether the contributions amongst different Members
are proportionate and balanced."
Without specifying other areas of major differences such as in Agriculture,
Rules and Services, Lamy said that although "there are other issues
than industrial tariffs which are outstanding, and the Round cannot
be completed without these being resolved, the key differences which
have blocked progress in the Round are at present in the industrial
"Following the realization that the full DDA would not be possible
by the end of the year", Lamy reported to ministers that "we
embarked on a process aimed at delivering a smaller package by the Eighth
It was understood that this was not going to be the final package, but
rather a step forward to demonstrate with facts that "we could
deliver on the entire DDA at a later stage."
From the start, he said, it was clear that Least-Developed Countries
(LDCs) issues were a priority. But some Members felt that this component
alone would not address their constituencies' requirements and that
there had to be a "plus" element.
"We therefore explored the possibility of building an ‘LDC Plus'
package which could include trade facilitation, a special and differential
treatment monitoring mechanism, export competition in agriculture, a
step forward on environmental goods and services, and a step forward
on fisheries subsidies."
In July, Lamy said, it became clear that the "LDC Plus" package
as Members had framed it was not taking shape.
He added that since September, he has been consulting with Members on
"what next" for the DDA during and after MC8.
So far, Lamy said that his consultations have shown that while no Member
is ready to give up on the objectives in the Doha mandate, "there
is a collective sense that we need to explore different approaches from
the ones already used."
In particular, Lamy said that Members wish to advance negotiations pragmatically
in areas where progress can be achieved whether on a provisional or
definitive basis, as a step towards delivering the entire Doha agenda.
This possibility is already provided in paragraph 47 of the Doha Declaration.
In addition, Members believe efforts need to be intensified to address
areas where substantial differences remain.
"What is needed now is to operationalise these principles. Ministerial
guidance is therefore essential to ensure that real progress can be
achieved in 2012," Lamy said.
"In doing so, Ministers need to address the essential question
behind the current impasse: different views as to what constitutes a
fair distribution of rights and obligations within the trading system,
among Members with different levels of development. For some, emerging
economies have attained a level of competitiveness and efficiency in
key sectors that warrants treating reciprocity as parity in obligations."
Others, said Lamy, emphasize that emerging economies still face formidable
development challenges in many areas of their economies and are still
far from enjoying the per capita income levels and standard of living
of those in industrialised economies. In this world, it is argued, treating
reciprocity as equality of obligations is not appropriate.
"It is clear that progress in multilateral trade negotiations,
as is the case in climate change negotiations, will require a political
response to this political question."
In addressing this question, Lamy said that it would be important to
verify that all Members remain committed to the objectives enshrined
in the Doha Development Agenda and more broadly in the World Trade Organisation.
Lamy went on to summarize these objectives as he saw them: keep opening
trade; keep trade open; keep updating the rules that govern global trade
to ensure these remain relevant to evolving trading patterns; and take
measures to facilitate the integration of the world's poorest countries
into the world economy.
"These global objectives stem from one belief that binds all WTO
Members, namely that a more open and rules-based multilateral trading
system is a useful tool in the hands of countries to generate growth,
to help maintain and create jobs, reduce poverty and ultimately to help
countries develop sustainably."
The Director-General also mentioned four other negotiating areas that
are not part of the DDA, which in his view, deserve Ministerial attention:
the Dispute Settlement Understanding (DSU) negotiations, Rules of Origin,
the Information Technology Agreement (ITA) and the Plurilateral Agreement
on Government Procurement (GPA).
On the DSU negotiations, noting that since the Seventh Ministerial Conference
in 2009, Members have continued negotiations to improve and clarify
the DSU, Lamy said that his sense is that Members are satisfied with
the overall functioning of the dispute settlement system and recognise
that the system is widely regarded as an example to follow elsewhere.
According to the Director-General, Members are not looking to make fundamental
changes to the DSU; rather, they are seeking to make discrete improvements
to the existing system.
His sense is also that the experts have worked long and hard to identify
possible landing zones to the questions that remain open.
"The question in front of Ministers today is whether you believe
the time has come for ringing the bell signalling the final lap in these
negotiations, i.e. if Ministers wish to call now for a prompt conclusion
of these negotiations."
On Rules of Origin, Lamy said that negotiations to harmonize non-preferential
Rules of Origin for around 2,700 products in the nomenclature were launched
16 years ago, based on the belief that simple and clear rules of origin
can help to improve the international trade environment and reduce costs
for trade and economic operators.
So far, Members have reached an understanding on rules for some 1,500
products. Completion of the remaining ones is closely linked to the
issue of whether these rules apply to trade remedies or whether trade
remedies will follow a different set of rules.
"The question in front of Ministers is whether they believe that,
after 16 years of negotiations, the time has come to reach agreement
on the non-preferential rules of origin for the remaining products."
Beyond the non-preferential rules of origin also lie those applied to
preferential trade. "We have seen some progress in the simplification
of rules relating to preferential schemes for LDCs. But despite this
positive sign, the proliferation and complication of different regimes
- national, bilateral, regional or unilateral - need, in my view, to
be seriously examined."
In recent months, Lamy noted, some ITA participants have begun reflecting
on a possible new ITA negotiation to inter-alia expand the current product
coverage and membership and to address non-tariff barriers. In parallel,
there has been suggestion to transform the ITA into an International
Digital Economy Agreement.
"These are interesting developments aimed at keeping the ITA rule
book up to date with rapidly developing technological developments.
This is in my view a promising area for future work. The question ahead
of Ministers is whether the ITA can serve as an example to be emulated
in other sectors."
With regards to the GPA negotiations, the Director-General said that
for over 10 years the Members of the GPA have been negotiating an improvement
in its rules, as well as an expansion in the market access it provides.
A "GPA Package" is now within reach.
He added that a conclusion to the on-going negotiations would also facilitate
a further round of accessions to the Agreement, including by Members
currently negotiating joining the GPA such as China.
"In my view, the question ahead is whether you believe this is
the time to step up efforts to conclude all aspects of the on-going
negotiations and to turn the focus to the pending accession negotiations."
Lamy also addressed the issue of Regional Trade Agreements (RTAs), saying
that RTAs are an increasing feature of Members' trade policies and it
is therefore important that the multilateral trading system improves
its understanding of these agreements.
For the moment, Members have pragmatically put aside the question of
the legal relationship between multilateral and preferential trading
systems and instead have focused on using the WTO Transparency Mechanism
to seek to better understand the features of RTAs notified to the WTO.
"Overall, I believe that the transparency mechanism has allowed
us to gain useful insights into each agreement. I nevertheless believe
that there is much scope for a more in-depth look into issues across
Regional Trade Agreements. This would help us further understand the
extent of regulatory convergence and divergence in these agreements,
as well as the scope for market segmentation. The question for Ministers
is whether MC8 could be a good occasion to launch an enhanced dialogue
about Regional Trade Agreements."
Lamy also went on to report in the areas of building trade capacity
in developing and least-developed countries, accessions to the WTO,
WTO outreach, coherence in global economic policy-making, and the work
of the Secretariat.
Meanwhile, in a separate annual report on developments in the international
trading environment, released on Monday, the Director-General said that
the outlook for the global economy has worsened considerably in recent
months. Risks and uncertainties are increasing, after the encouraging
signals of recovery seen at the end of 2010.
"Global activity is slowing down, economic performance continues
to be uneven across countries, debt levels and financial volatility
are rising, high unemployment levels persist in many countries, and
confidence has recently fallen sharply. These risks are aggravated by
perceptions in markets that governments' responses to these challenges
have so far been inadequate."
The report, which reviews trade and trade-related developments during
the period mid-October 2010 to mid-October 2011, said that world trade
has grown more slowly than expected in recent months. Developed economies
have been hit by a number of problems ranging from shrinking global
demand, to the impact of natural disasters, to issues related to national
budgets, credit conditions, and the sovereign debt crisis.
Trade growth in developing countries has also been adversely affected
by global developments, including signs of overheating in some major
emerging markets. In light of the deteriorating economic situation,
the forecast for world export growth in 2011 was revised to 5.8%, down
from the earlier estimate of 6.5%. Developed economies' exports are
expected to rise by 3.7% and those from developing countries by 8.5%.
The Trade Policy Review Body (TPRB) monitoring exercise and individual
Trade Policy Reviews undertaken in 2011 show that on the whole governments
have largely continued to resist protectionist pressures, although an
upward trend was observed this year in the imposition of new trade restrictions,
said the report.
During the period under review, 339 new trade restrictive measures (and
those that have the potential to restrict or distort trade) were recorded,
which is 53% more than in the previous period. In particular, the number
of new export restrictions has increased sharply; although accounting
for only 19% of total restrictions during the monitoring period, export
measures were the fastest-growing component.
Moreover, said the report, there is a growing perception that trade
protectionism is gaining ground in some parts of the world as a political
reaction to current local economic difficulties - difficulties that
trade restrictions are very poorly equipped to resolve.
"There are various signs of a revival in the use of industrial
policy to promote national champions and of import substitution measures
to back up that policy. Unilateral actions to shield domestic industries,
although appealing from a narrow short-term perspective, will not solve
global problems; on the contrary, they may make things worse by triggering
a spiral of tit-for-tat reactions in which every country will lose.
These developments are adding to the downside risks to the global economy."
The report said that the multilateral trading system has been instrumental
in maintaining trade openness during the global financial and economic
crisis. "WTO Members need to preserve and strengthen this system
so that it keeps performing this vital function in the future. The best
way to further open trade in a global, predictable and transparent manner
remains the multilateral route. The multilateral trading system has
helped countries navigate the crisis so far and resist protectionism."
According to the report, in a context of greater economic uncertainty
and rising global risks, it is all the more important that the process
of global trade opening continues; not only by WTO Members showing pragmatism
and determination to find a way out of the current impasse in the Doha
Round, but also through accession to the WTO of the Russian Federation,
Samoa, Vanuatu, and other acceding countries, as well as through the
prompt conclusion of the Government Procurement Agreement negotiations.
The forthcoming eighth Ministerial Conference provides a possibility
to find a way forward, the report said.
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