TWN Info Service on WTO and Trade Issues (Apr13/06)
26 April 2013
Third World Network

Trade: Lamy panel on future of trade issues its report

Geneva, 25 Apr (Kanaga Raja) -- A panel of so-called stakeholders of the World Trade Organisation (WTO) on "Defining the Future of Trade", constituted by Director-General Pascal Lamy last April, finally presented its report on Wednesday, and which was immediately rejected by civil society groups both on its contents and the process.

A report in the Times of India also cited Indian officials as pointing to the report being that of a panel of Lamy consultants, and not a WTO panel, and indicating that India would oppose and reject the report.

The report by the panel came with a disclaimer, which said: "There remain elements regarding the relationship between trade opening and social and industrial policies, investment and the scope of convergence, in respect of which different views were expressed."

Among the main recommendations of the report are "a new approach to managing reciprocity and flexibility which fully respects the different realities and needs of members at different levels of development," but one that embraces a "more granulated and dynamic process" leading progressively to convergence.

The panel report claimed that in saying that it is time to embrace a new perspective on managing reciprocity and flexibility, the panel does not question differentiation and consider it an essential feature of a fair and effective trading system.

"We are aware that the least-developed countries and other low-income developing countries, as well as developing countries facing particular difficulties, cannot be expected to aspire to the same degree of trade opening as more developed countries while these challenges persist. But in recognising the legitimacy of differentiation, we consider that policy effectiveness is crucial."

This though, seemed to imply that differentiation must give way to effectiveness of policy. It also came as a surprise that the head of the UNDP seemed to be endorsing a view that is different from that of the UN on issues of LDC graduation or differential treatment.

"We need a dynamic approach to flexibility, tailor-made for specific needs and supported by appropriate capacity-building programmes," the panel further said, adding that this approach should be based on four guiding principles.

These principles are: flexibilities should be based on needs and capacities; they should target specific challenges, and not focus only on categories of countries; flexibilities should be time-specific to advance progressively towards convergence; and we need dynamic monitoring of the manner in which flexibilities are helping countries converge.

The report resurrects the "Singapore issues" of competition policy and investment, which the EU (with Pascal Lamy as trade commissioner) gave up at the Cancun ministerial in 2003.

On competition policy, it believes that members should engage in the quest for a more trade-supportive international competition policy framework, building on the work of other international organisations such as UNCTAD, the OECD and the International Competition Network.

As in the area of competition policy, on investment, it sees the absence of multilateral rules on investment as a gap in cooperation. "Current bilateral arrangements are not, in our view, a satisfactory substitute for a comprehensive international investment agreement."

On trade facilitation (which is being aggressively pushed by Lamy and the US, EU and some other developed countries as a possible deliverable at the Bali ministerial conference this December), the Lamy panel was of the view that effective international action on trade facilitation would generate "win-win" outcomes for the international community.

"We strongly encourage members to complete the trade facilitation negotiations by the Ninth Ministerial Conference in Bali in December 2013."

Amongst other recommendations, the report calls for a stronger Secretariat and for it to be permitted to table proposals in order to speed up the deliberative process and facilitate consensus by providing technical information and fresh ideas. It claimed that this would in no way compromise the exclusive right of members to decide.

Only five of the 12 panellists attended the launch of the report at the WTO on Wednesday: Mr Talal Abu-Ghazaleh (Jordanian businessman and chair of his overseas corporation), Ms Sharan Burrow (Secretary-General of ITUC), Mr Pradeep Singh Mehta (CUTS, an NGO promoting competition policy in developing countries), Mr Fetus Gontebanye Mogae (former President of Botswana) and Mr Jurgen R. Thumann (President of BUSINESSEUROPE).

In his opening remarks at the launch of the report of his panel, Lamy said that the panellists had looked at three basic elements: how trade works for welfare and under which conditions; what are the transformational factors shaping international trade in the medium to long term; and recommendations to address these challenges.

This report offers "food for thought" to the members and to many other stakeholders of the multilateral trading system as they think medium (to) long-term on trade policies and as a consequence of that, for the prospects for this organisation, he added.

Lamy said this was a different exercise from members organising themselves for next week, next month or six months or sometimes a year ahead, and "an exercise that looks at medium, long-term.... and not about short-term," nor about "quick-fix" to conclude the Doha Round.

"What it says about the Doha Round.... is that there is a political imperative as well as an economic rationale to conclude it..." However, many of the issues addressed in the report are of direct relevance to unlocking the Doha Round, said Lamy.

Pointing to the "most salient points" of the report, he said Chapter 1 looked at how trade can work for growth, for development, for jobs, and for sustainable development. ".... the panel felt it was important to start with placing trade in a broader context, in a broader set of domestic or international policies that need to be in place for trade to work ‘as a means to growth welfare and not as an end in itself'."

The second part looked into the factors shaping trade for the future: the continuous technological progress... at the heart of globalisation, the rise of investment on par with the growth of trade, and the expansion of value chains."

He also pointed to the rise of ‘emerging countries' in trade - South-South trade - from 10 per cent of world trade 20 years ago to one-third of world trade, "a manifestation of this centre of gravity of trade moving very rapidly Southwards."

He further highlighted the increase in preferential trade agreements and bilateral investment treaties, and non-tariff measures as "the" main obstacle to trade in the future.

Against this background, Chapter 3 of the report has a set of suggestions that members of the panel "freely offer" to the WTO members. The essence of the suggestions is "convergence."

Lamy spoke about convergence of the trade regimes of the WTO members, reflective of their progressive economic and social development; convergence between the non-multilateral regimes and the multilateral trading system; between trade and other public policies, about greater coherence specifically in non-tariff measures; and finally, convergence of trade and other domestic policies, such as education, innovation and social safety nets.

Speaking at the presentation, Mr Mogae said: "We (the panellists) said trade can support more jobs, [and] trade can be made to work for greater equality... We want inclusive development, and .... acknowledge that even as we say trade is good, that it is contextual. It ‘can' but not necessarily."

On the permissive language, Mr Mogae said that on the whole, "we believe that trade is good and that it should be promoted. We, however, acknowledge that certain conditions have to be met and I think that is at the root of what you have been negotiating all along. And we urge that there has to be mutual accommodation, that no principle, no practice, no rule is absolutely correct in itself and that therefore it has to be accommodative of other legitimate considerations."

Mr Abu-Ghazaleh, Chairman of Talal Abu-Ghazaleh Overseas Corporation, said that he is concerned about "what next", adding that he thinks that this report deserves a critical look by the decision-makers, meaning, the ministers. He proposed a ministerial to look at this report. "I think the future of trade deserves a ministerial."

He further said that a ministerial is also needed on the reform of the WTO. "I don't think a report like this can be implemented without reforming the WTO."

He was of the view that the WTO should have a place for the trader, not just the annual public forum. He wanted the report to be sent directly to ministers for their comments.

In a strong dissenting view on the report, in her remarks, Ms Sharan Burrow of ITUC said that in agreeing to join the panel, she had articulated four ambitions to her constituency.

"One is to make sure that the dominant context of inequality and unemployment was recognised and that the trade regime was located in the context of what we believe is a failed model of globalisation. We are not opposed to globalisation. We want reform of the system generally both within and beyond the WTO but nevertheless you can't look at what is probably the advent of stagnation - certainly recession in many countries, but stagnation in others - and not say that we need some reform."

The second was to reaffirm the case for development through industrialisation and structural transformation, the third was to argue the case for public policy interventions and a floor of global rights and standards for labour and environment, and the fourth was to consider and qualify where "we believe necessary" the 21st century issues.

".... The report does carry a disclaimer ... Not everybody has total agreement, but this has been ... a model for discussion where you need to settle some very big questions and the debate will go on. This is the start of the debate, not the end of the debate," she said.

Stressing the ITUC support to multilateralism, Ms Burrow said: "We are disturbed about governments who can't sort agreement within a global framework, who then look to their own political interests elsewhere" because of the proliferation of confusion, of discrimination - the potential for all of that is there.

"So while I understand and ... put it in this context that .... convergence is a noble ambition, we also say ‘not at any cost'... the WTO constituency must recognise that because of their inability to negotiate settlements in terms of trade justice, other parties will go elsewhere, and to some extent for the world of labour which you have failed to recognise with any real strength in here as a fundamental set of rights to underpin a trading floor, then in fact there are better deals to be had elsewhere."

Ms Burrow further said: "For us, development is absolutely critical. You can't have a just world if the policy space is not there to allow people to converge at their own pace. But it needs more than just recognition, and I think we could have done a better job on this. It actually needs to acknowledge the support that is required in terms of technology sharing which we have to get to in terms of investment, in terms of infrastructure support and so on to make this a reality or you won't see global re-balancing or inclusive growth."

The report makes the case for trade having contributed to specialisation, but "we need to do much more work because that's not the reality in countries where low value-added production is still the reality of their daily circumstances and indeed is probably preventing the transformation in some ways necessary."

On the critical issue of subsidies, raised in several points, she said that on agriculture, "while .... we recognise absolutely the ambitions for an end to trade-distorting subsidies, there is a reality here that is linked to the global supply chains that is not acknowledged."

"You have to actually end the oligopsonies; you have to put some control and that goes to some of the positive elements of competition policy on buying power when there are a very few global conglomerates who control the purchasing, the contract base for farmers, and [that] simply saying, in our view, that ‘you can decouple the costs of production with support programmes', ... is not something that most countries would necessarily accept."

Competition policy, she said, "needs more thought from us." There are positive and negative arguments but the policy must deal with the pressures of buying power on producers as well as the issues for consumers.

"Otherwise, it's simply again resorting to the notion that everything is at the most cheapest production cost and the maximum profit."

On investment, she remains unconvinced. "I do wish that we had more debate on this in the context of the report. It will come but I think we have to be very careful about simply assuming the consolidation of plurilateral or bilateral trade agreements around investment because the responsibilities issue is frankly not there in most of them. And you can't just have rights of investors. You have to have a look at responsibilities."

On convergence, she said that "nobody would argue more strongly than labour that you have to have global coherence if you're going to have a globalised environment. But you can't have convergence at any cost and .... we have to get the elements of convergence that are about trade and social justice and the framework of convergence right to allow everybody to have a stake and therefore trust in a more visionary trade system."

During the question and answer session, she said on investment that she is "absolutely appalled [over] governments signing off on investor-state dispute settlement clauses which actually are not about equal treatment."

"Am I convinced that we should consolidate those plurilateral or bilateral deals in the WTO, ‘No, No I am not' and we've said we remain unconvinced."

She was also critical that there is no empirical data source in the world to actually predict the impact of trade agreements on jobs.

In his remarks at the launch, Mr Pradeep Singh Mehta of CUTS pointed to two caveats: "... any such report which comes out from a bunch of heterogeneous interests is not bound to be a unanimous report. What we have tried to do is to agree on a consensus on a very large number of issues, as well as understanding the fact that any sentence can be interpreted in two different ways", as the reader perceives it.

Mr Jurgen Thumann of BUSINESSEUROPE, representing 35 federations and over 20 million companies, said "one may think I am sitting here a little bit in a defensive position trying to defend the old economies from old Europe and trying only to protect. ‘No', the reverse is correct."

" I am totally convinced in open markets," he said, and aware of the sensitivity that this brings with it when he talks about open markets and how much he believes in it. "When we look a little bit back, then history will tell us quickly that open markets have brought prosperity to the societies and also at the end, jobs."

Two civil society representatives from the Our World is Not for Sale (OWINFS) network spoke during the question and answer session.

Deborah James of the OWINFS network (a global network of NGOs and social movements) said that in spite of the fact of WTO membership, there were not any Least Developed Countries (LDCs) on this panel, and that there was only one African, one Latin American, and many people from developed countries and the business sector, but only one worker representative.

It seemed to her that this report was actually drafted in large part by the Secretariat, and according to several of the panellists many of their comments were not well reflected.

"It is no surprise to me that even though you have stated several times that this report is not about the immediate negotiations but about the future, the report then does emphasise and endorse issues like trade facilitation, which is the current demand of developed countries for the proposed Bali package, and doesn't, on the other hand, include an emphasis on issues like the LDC policy demands or the problem of the emergence of the food crisis and the need for more policy space for developing countries to feed their poor, which is obviously the emphasis of the G-33 proposal [on public stockholding for food security] towards Bali."

And these issues, along with the fundamental one of taking up again the implementation issues, "would obviously be the first steps of the future of changes needed to be made for the global trading system to address historical inequities in the WTO between developed and developing countries," she added.

"I am a little bit aghast that the report even goes so far as to endorse long-term developed country proposals that were explicitly rejected by developing countries in Cancun, and of course, I'm talking about the Singapore issues of competition policy and investment."

She said she failed to see the legitimacy of this report from the point of view that it does not reflect the membership of the WTO, and therefore believed, with all due respect to the panellists and their hard work throughout the year, that it does not have a role in the future negotiations. She noted that this point was already made by several members at the last General Council meeting.

Ms. James also pointed out that she failed to see any way that this report reflects a future pathway of using trade for development, which doesn't even appear to be the goal of the report.

She concluded that it is more a reflection of the Secretariat's continued emphasis on helping developed countries achieve their negotiating goals of simply expanding trade liberalisation for the benefit of their corporations, rather than addressing the serious issues confronting the multilateral trading system today to change the system for countries to be able to use trade for development and job creation.

Another member of the OWINFS network, Sanya Reid Smith of the Third World Network said that the report says that trade is a means, not an end, so presumably for developing countries, development is the end goal. So, it is interesting then that the report explicitly says in a number of places that there should be "convergence of trade regimes, but it does not talk about convergence of levels of development."

"Usually in development, we talk about developing countries reaching the developed countries' levels of development, i. e. a convergence of development levels. But the report seems to say ‘let's converge our trade regimes regardless of your levels of development'," she said, adding that it says there should be a fixed time-specific end to special and differential treatment rather than based on the actual level of development of the country, not even some objective standard like the UN LDC indicators.

"And we've seen because of the financial crisis or HIV/AIDS that many countries actually go backwards in development indicators over time, for example, their life expectancy falls as the years go by. So despite this, the proposals in the report say that they should nevertheless converge their trade regimes and their levels of liberalisation, presumably of goods, services, investment, government procurement, and the Singapore issues."

This is despite the commitment in the WTO rules to special and differential treatment throughout the WTO agreements, stressed Reid Smith, adding that she recognised comments of some panellists who said that they personally don't believe in convergence at any cost, but the report itself appears to recommend that WTO members violate or amend current WTO rules on special and differential treatment.

"I was also shocked to see that the proposal by one developed country WTO Member to multilateralise free trade agreements appears to be taken up as a recommendation by the panel despite the lack of support for this by WTO members generally."

As for the future of this report, she said that she understands that this panel was established by the Director-General, on his own responsibility, and that WTO Members did not choose the panel members nor set the criteria for choosing the panel members. They also did not set the terms of reference, and they did not draft the report, review the report before it was published or agree to the text of the report.

So, as raised by WTO members earlier, this report does not seem to be grounds for a basis for a ministerial conference or any further work, she said.

Following the comments by the two civil society representatives during the question and answer session, Mr Thumann of BUSINESSEUROPE responded: "... I think you were able here to get a pretty good impression and understanding how we were talking and discussing with each other. And these two young ladies - blonde and black hair, I see from here - I would like to ask you ‘be a little bit more tolerant in the future and show a little bit more respect.' I do appreciate what you say and I do take you serious. So that's from my point of view, but I'm of course a little bit in an advanced age so therefore I'm expressing myself in this way."

Several of the participants at the launch, later said privately that they were shocked at Thumann's reference to the two NGO representatives as with ‘blonde and black hair', and Mr. Lamy not intervening, noting that for much less, US President Barack Obama had to issue an apology for complimenting a law officer in California.

The Lamy panel was composed of 12 members: Mr Talal Abu-Ghazaleh, Chairman and Founder of Talal Abu-Ghazaleh Overseas Corporation, Jordan; Ms Sharan Burrow, Secretary-General of the International Trade Union Confederation (ITUC); Ms Helen Clark, UNDP Administrator; Mr Thomas J Donohue, President and CEO of the US Chamber of Commerce; Mr Frederico Fleury Curado, President and CEO, Embraer S. A; Mr Victor K. Fung, Chairman of Fung Global Institute and Honorary Chairman of the International Chamber of Commerce; Mr Pradeep Singh Mehta, Secretary-General of CUTS International; Mr Fetus Gontebanye Mogae, Former President of Botswana; Ms Josette Sheeran, Vice Chairman of World Economic Forum; Mr Jurgen R. Thumann, President of BUSINESSEUROPE; Mr George Yeo, Former Foreign Minister of Singapore and Vice Chairman of Kerry Group Limited; and Mr Fujimori Yoshiaki, President and CEO of JS Group Corporation.