TWN Info Service on WTO and Trade Issues (Feb13/04)
19 February 2013
Third World Network

South experts discuss WTO Doha Round and Bali Ministerial
Published in SUNS #7522 dated 11 February 2013

Geneva, 8 Feb (Kinda Mohamadieh*) - The fate of the WTO Doha Round and the agenda of the forthcoming ministerial conference in Bali were discussed during a two-day conference organised by the South Centre from 31 January to 1 February 2013 in Geneva.

The South Centre conference on "The South in the global economic crisis and reviewing multilateral negotiations" convened a panel session on 1 February entitled "WTO and the multilateral trading system: The fate of Doha, the agenda of the Bali ministerial and beyond".

Speakers in the session included Dr. Rubens Ricupero, a member of the South Centre Board (and a former UNCTAD Secretary-General), Ambassador Srinivasan Narayanan, former Indian Ambassador to the WTO, Ambassador Faizel Ismail, permanent representative of South Africa to the WTO, and Mr. Lucas Saronga, acting permanent representative of Tanzania to the WTO.

The session was moderated by Mr. Martin Khor, Executive Director of the South Centre.

Mr. Khor began the session by stressing the need to make the existing global trading system "more fair and more effective". He noted that developing countries are trying to reform the existing rules, while developed countries have been making excessive demands on developing countries in the Doha negotiations despite its being supposed to be a "development round", and are also preparing to propose new rules that would make the system more imbalanced.

Dr. Rubens Ricupero reminded the conference that each time the trade negotiations "hit the rock", a flurry of books and essays emerge with anguished calls for initiatives to save the world's trading system. These calls are usually supported by deliberate recipes imagining the future of the world trading system.

He noted that today, we witness a repetition of such a trend, similar to that during the 1990s when the Uruguay Round was increasingly seen as a hopeless proposition. It is surprising how similar the books and ideas that were advanced in that period are to those of the present day, he added.

Dr. Ricupero stressed the need to assess the propositions put forward around the future of the world trading system based on two criteria; (1) the macroeconomics of the proposals put forward, and (2) the accuracy of the narrative in terms of diagnosing and explaining the stalemate in the trade negotiations.

He stressed that the reactivation of the Doha Round should consider the macroeconomic framework defining the trade negotiations. He highlighted the role of countries with a trade surplus in providing the necessary increase in world demand, which could allow international trade to pick up.

Dr. Ricupero highlighted that Germany's current account surplus stands at three times that of Japan and twice that of China. He added that most developing countries have larger deficits and smaller surpluses compared to the pre-crisis period. He expressed amazement at the lack of calls upon Germany to do its part in contributing to world demand, particularly because most developing countries have fulfilled their duties by increasing their imports of goods and services.

Dr. Ricupero said that free trade is not a benefit per se, but should be an active instrument in promoting development. According to him, trade negotiations should be exclusively judged based on the extent to which they contribute to development prospects in developing countries.

He added that the development dimension was the basic argument used to sell the WTO Doha Round back in 2001. Currently, the reasons behind the deadlock in the negotiations stem from the decision of advanced economies to retract on their promises given in Doha.

They are also aggressively pushing to extract additional concessions from other WTO members, irrespective of its negative impacts on development prospects, he said further.

Dr. Ricupero stressed that if the promises made in the Doha Ministerial Conference (2001) are not followed up, then "we need to be worried about the current state of trade negotiations".

Ambassador Narayanan of India commenced his presentation by reminding the conference that developing countries were initially skeptical about starting a new round of negotiations in the Doha ministerial back in 2001.

He explained that seven major assurances were given and built into the Doha Ministerial Declaration, based on which developing countries, including India, joined the consensus for a new Round.

Naryanan said that the assurances given to developing countries included: (1) that the needs and interests of the developing countries will be placed at the heart of the Doha work programme (i.e. paragraph 2 of the Doha Ministerial Declaration); (2) that negotiations on all outstanding "implementation issues" would be an integral part of the Doha work programme (i.e. paragraph 12 of Doha Ministerial Declaration); (3) that a clear mandate for the implementation of Article 20 of the Agreement on Agriculture for further liberalisation of trade in agriculture will be developed; (4) that the "less than full reciprocity" principle will be incorporated in negotiations around non-agricultural market access (NAMA); (5) that the liberalisation of trade in services will be pursued according to Article XIX of GATS, upholding respect for the level of development of individual members and flexibility for developing countries; (6) that a commitment to the objective of duty-free quota-free (DFQF) market access for LDCs will be upheld; and (7) that a decision on commencement of negotiations on the "Singapore issues" (i.e. investment, competition, government procurement, and trade facilitation) will be postponed.

Of the seven assurances, only the assurance about the Singapore issues was fulfilled, apart from trade facilitation, along with partial fulfillment of DFQF for LDCs, said Narayanan.

Writings and analysis have proliferated during the last two years discussing the reasons for the impasse in the WTO negotiations. Narayanan noted that the reasons behind the impasse include the impacts of the global economic crisis, and the slowdown of developed economies associated with high rates of unemployment, limiting their ability to offer concessions.

He also indicated the unreasonable demands made on the so-called "emerging countries" like China, India, and Brazil to make concessions mainly for the benefit of developed countries.

He added that unlike the Uruguay Round, developing countries have increasingly garnered awareness and sensitisation of the implications resulting from accepting binding commitments. Developing country coalitions like the G33, NAMA-11, small and vulnerable economies (SVEs), LDCs, etc. have helped in collectively resisting the unreasonable demands, he said.

Moreover, they realised that it is better to ensure that the commitments they undertake are ones that could be implemented. Like-minded developing countries have recognised the added value of unity behind their demands, Narayanan said further.

He explained further that in counter-argument, developed countries claim that the reasons behind the stalemate were lack of enough offers on the table of negotiations. As part of their narrative, developed countries note that the world has changed and the mandate needs to be "re-balanced". They claim that "emerging countries" have benefited from the liberalisation undertaken by developed countries since 1948 and should pay back, he added.

Narayanan highlighted that unlike the claims that "emerging economies" are achieving convergence with OECD countries in terms of economic achievement, the World Bank figures (2012) show that the gap between "emerging economies" and the OECD countries persist in terms of per-capita GDP. While average per capita GDP of OECD countries was $41,225 in 2011, it was $12,594 in Brazil, $8,070 in South Africa, $5,445 in China, $9,977 in Malaysia, and $1,489 in India.

Moreover, "emerging economies" are home to large numbers of the poor of the world, living below US$1.25 per day, he said further.

As regards the outcomes of the upcoming Bali Ministerial Conference, Narayanan stressed that the credibility of the global trading system necessitates a balanced outcome at Bali that is in the interest of developing countries.

He underlined that the Bali Ministerial should not become "the farewell ministerial for the Doha mandate". He added that the "Doha Round must be completed with the development mandate intact and on the basis of the single undertaking".

He noted that the developed countries are strongly pursuing the initiative on trade facilitation as "early harvest", while marginalising the rest of the Doha mandate. A trade facilitation agreement would be binding on even small and vulnerable economies and LDCs. Under the present form, he said, the trade facilitation rules are basically an import facilitation agreement.

Narayanan explained that early harvest is only a sub-clause of Paragraph 47 of the Doha Declaration. The main point of that paragraph is that all negotiations should be carried on a single undertaking basis. He added that a consensus decision on early harvest should not upset the overall "single undertaking" nature of the negotiations.

He called upon developing countries to resist attempts and proposals aimed at changing the basic structure and modality of decision-making in the WTO.

He further stressed that the outcome from the Bali Ministerial should necessarily include the core LDC issues, including DFQF and cotton, as well as the G33 proposal on food security.

Adding that agriculture has been the most important sector in the current round from developing countries' perspective, he underlined that "abandoning the agriculture negotiations (built in Article 20 of the Agreement on Agriculture) will upset the rights and obligations arrived at, at the end of the Uruguay Round, to the disadvantage of developing countries".

He also reminded the conference that agriculture has been kept out of the negotiating agenda for 60 years to the benefit of developed economies. He added that the December 2008 draft negotiations' texts are the products of seven years of negotiations, and should not be jettisoned.

Narayanan called upon developing countries to resist the pressures to add new issues like investment, competition, and energy security to the negotiations agenda, at the cost of the Doha Round.

Narayanan added that a plurilateral services agreement applicable only to its members would not be WTO- consistent. He explained that Article V of the General Agreement on Trade in Services (GATS), dealing with the compatibility of economic integration arrangements outside the WTO, necessitates fulfilling the "substantial sectoral coverage" criterion.

Moreover, adding such an agreement as a WTO plurilateral agreement (i.e. as an Annex IV WTO agreement) has to be approved by WTO members exclusively on a consensus basis (based on Article X.9 of the WTO Agreement), he added.

Narayanan cautioned that powerful WTO members are hoping for divisions among emerging economies. They try to promote suspicion between "emerging economies" as a strategy to attract them to join the negotiations on a plurilateral agreement. He noted a heavy responsibility on "emerging economies" towards other less-developed countries in order to ensure that the idea of a plurilateral agreement does not succeed.

He concluded by underlining that "the long term interest of developed countries is in the development of the developing countries".

Ambassador Faizel Ismail of South Africa commenced his presentation by calling upon developing countries to prepare for Bali and what lies ahead in the post-Bali period, based on a longer-term approach to the global trading system.

He highlighted that three major trends have emerged during the Doha Round impasse since 2008.

First, a large number of commentators and academics declared the Doha Round effectively dead; second, a large number of writers argued that one of the reasons behind the impasse is that "emerging economies" are not offering enough and should be graduated out of the current developing country status; and third, a new narrative on trade is emerging, revolving around "global value chains" (GVCs), and linked to promotion of "new pathways" for the WTO, said Ismail.

He explained that the policy prescriptions passed to developing countries within this context focus on reducing barriers to these supply chains, including barriers to movement of goods and services. They include as well an argument in support of the trade facilitation agreement.

He added that the approach to "new pathways" is reflected in attempts to promote changes in the WTO negotiations away from the principles of single undertaking and consensus-based decisions, towards majority voting, issue-by-issue negotiations, request-and-offer approach, and plurilateral agreements (i.e. agreements that have narrower group of signatories than the full WTO membership, and that apply only to those signatory member states).

Ismail critiqued a report entitled "Enabling Trade: Valuing Growth Opportunities", which was released by the World Economic Forum in collaboration with Bain & Company and the World Bank (January 2013). The report claims that "reducing supply chain barriers to trade could increase global GDP up to six times more than removing tariffs". He challenged the statistical background behind this analysis, including how barriers to GVCs are quantified. He also questioned the impacts of reducing barriers to GVCs on growth and welfare.

Ismail argued that such analysis makes simplistic assumptions that imports create exports. This kind of simplicity pushes aside the debate on the need for active policies on national and international levels to address beneficiation, diversification, building capacity, and assisting developing countries to make real gains from trade and to move up the value chain.

He added that the arguments for a self-regulating market remain divorced from concerns around unemployment, inequalities, and poverty. It does not consider the asymmetries of global power that define the global economy, he said further.

As a strategy towards the Bali Ministerial Conference, developing countries should put LDC issues, including agriculture, as a priority, noted Ismail. He concluded by calling upon developing countries to "build their own narrative about what they want from the current Doha Round, and how they view the multilateral trading system and the key elements and principles underpinning it".

He added that developing countries have articulated many of these principles, including inclusiveness, participation, special and differential treatment, and equity. Still, there is urgency for developing countries to articulate their vision on how the WTO needs to be reconstituted and redefined, said Ismail.

Mr. Lucas Saronga of Tanzania stressed that "MC9 should not be an end of the line but a stepping stone on a longer term roadmap leading to the conclusion of the Doha Development Round" and that the "Doha Development mandate should be respected and not eroded".

He added that "the outcomes of MC8 should be respected and should be a basis for MC9", while "full participation of all members, inclusiveness, and transparency should be maintained".

Saronga noted that the LDC issues should be top priority to resolve despite the current impasse in the negotiations. He added that "no balance is required for LDCs because of their negligible weight in the world economy". LDCs have put forward the proposal of DFQF market access for their exports in the first WTO Ministerial Conference back in Singapore (1996), he said.

He said that in the Millennium Declaration (2000), the international community pledged to adopt a policy of DFQF market access. Currently, most developed countries are implementing DFQF schemes while developing countries are increasingly taking steps in this regard. On cotton, WTO members reaffirmed their commitment at the Hong Kong Ministerial Conference towards having an explicit decision. These issues have still not been resolved, he added.

On plurilateral agreements, Saronga said that such arrangements would lead developing countries and LDCs to lose their special and differential treatment flexibilities under the WTO.

He added that while LDCs may not be targeted to join such agreements, creating more plurilateral agreements, such as the International Services Agreement, would eventually lead to a "club" within a "club". Such developments, he underlined, would have "systemic implications for the WTO and will erode the multilateral nature of the institution", while undermining the single undertaking principle.

With regards to the trade facilitation negotiations, Saronga noted that "LDCs do not agree with ‘cherry picking' of the agreement in its current form". He stressed that "any outcome on trade facilitation must ensure both internal and external development balance".

As he noted, this would include "acquisition of capacity to implement the trade facilitation rules and obligations, and safeguards such as periodic implementation review mechanism to assess the extent to which the implementation of the new rules and obligations are contributing to the overall sustainable economic development of developing and least-developed countries".

As regards early harvest, Saronga said that "if early harvest takes place, then it should include LDCs' issues that integrate them into the multilateral trading system", including duty-free quota-free market access and cotton.

He stressed that implementation and special and differential treatment issues should be resolved as well. He cautioned that most of the 28 special and differential treatment provisions and the monitoring mechanism as currently on the table "have little or no value... and need to be improved".

Saronga noted the attempts of developed countries to introduce new issues (i.e. investment, competition, energy security, climate change, etc.) as replacement for completing the Doha Round. However, he stressed that 20th century issues, including implementation, special and differential treatment, as well as the LDC package issues, should be resolved first.

On the LDCs' extension under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), Saronga explained that the extension of the transition period for LDCs under Article 66.1 of TRIPS ends on 1st of July 2013. However, the economic situation of LDCs has not significantly changed in terms of technological base and the overall constraints they face. LDCs are asking for maintaining the flexibilities in accordance with Article 66.1 of TRIPS as long as those constraints remain.

He said that Article 66.1 of TRIPS provides that the Council for TRIPS "shall, upon duly motivated request by a least developed country Member, accord extensions of this period". The LDC group has tabled a draft proposal of a "duly motivated' request to the TRIPS Council.

Accordingly, Saronga underlined, the extension is supposed to be automatic. He recalled that MC8 invited the TRIPS Council "to give full consideration to a duly motivated request from LDCs". He called on the support of developing countries and other member states when the proposal will be discussed in March 2013.

Following the presentations by the panellists, during the question-and-answer session, Dr. Yilmaz Akyuz, chief economist of the South Centre, explained that today's global production chains are organised and controlled by multinational companies from the industrial countries. He added that the global value chain agenda is focused on pushing free trade, but holds much more dangers. The integration in these networks of global production is not governed by a country's development strategy, but rather by the profit strategies of the multinational companies.

Dr. Akyuz cautioned that the global value chain narrative represents a nexus of trade, investment, and services issues. Through this narrative, he noted, developing countries are being presented with a bundle of negotiation agendas including on NAMA, services and the Singapore issues, all in a single package.

Ambassador Marion Williams, permanent representative of Barbados to the WTO, cautioned that the trade facilitation agenda as it stands facilitates imports and not exports. She refuted the assumption that technical assistance on trade facilitation will solve the problems facing developing countries.

Often, she noted, the difficulty arises from the impact of trade facilitation measures on the economies of net-importing developing countries. The proposed trade facilitation text does not deal with how to stimulate their exports or how to address the resulting increase in their imports.

The trade facilitation agenda as it stands will benefit net exporters. Net importers, on the other hand, could face the risk of dispute settlement challenges if they fail to implement the many trade facilitation measures that they would have to agree to as part of the agreement. Many developing countries have not implemented any yet.

Williams stressed that special and differential treatment under the trade facilitation agenda should not be limited to longer implementation periods. She called for a different approach to trade facilitation negotiations, which includes safeguards for developing countries, especially net importers, as well as impact assessments, especially for LDCs and small and vulnerable economies.

Mr. Chakravarthi Raghavan, editor emeritus of the SUNS Bulletin, said if there is an attempt to incorporate a plurilateral services agreement in the WTO (the proposed International Services Agreement, with conditional benefits to signatories only), it would be a fraud on the Marrakesh Treaty and international public law, and developing countries should continue to say NO. Developing countries should refuse to accept it, he said.

He also said that the "black-box" in the global value chain (the nexus of trade, investment and services issues, a bundle of negotiation agendas including on NAMA, services and the Singapore issues) to which Mr. Akyuz alluded to contained within them another black box, namely, the ability of TNCs involved in so-called "global chains" to allocate their incomes and profits to jurisdictions like the Cayman Islands where there is no taxation, so that they avoid all taxes in all countries incurring expenditures on infrastructures and where production and sale take place.

(* Kinda Mohamadieh is a senior researcher associated with the Arab NGO Network for Development.)