Earth Trends by Martin Khor

13 August 2001

DEBATE CONTINUES ON WTO "NEW ROUND"

A visiting Australian economist warned last week that failure to launch a new WTO Round would threaten the world with more protectionism and a retreat from multilaterism, echoing the arguments put forward by the major developed countries.  However, trade and development experts have refuted the inducements for a new Round and instead pointed to its dangers.  Meanwhile, at the WTO,  Malaysia has put up a spirited call for not including controversial new issues but instead focus on development issues in the WTO's agenda.

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Do we need a new round of negotiations at the World Trade Organisation to save the global economy from protectionism and recession?

Yes, says economist Prof Peter Lloyd of the University of Melbourne, at a talk last Friday at the Economic Planning Unit office in Putrajaya.

According to press reports, Lloyd said if the WTO fails to launch a new round at its Ministerial conference in Doha (Qatar) in November, new trade restrictions could emerge, there will be a slowdown in trade growth, greater likelihood of recession in some countries and the proliferation of regional trading arrangements.

"The differences over the scope of trade negotiations between developed and developing countries are wide with no clear agenda," he also said.

Lloyd's arguments sound similar to the line advocated by the WTO director-general Mike Moore, who has campaigned, together with developed countries led by the European Union, for a new Round, warning that protectionism, recession and a retreat from multilaterism would otherwise take place.

The trade expert, Bhagirath Lal Das, a former chairman of the GATT Council and also former director of trade in UNCTAD, has refuted these arguments in his paper, "New issues and new Round in the WTO."

Whether or not there is a new round does not influence the degree of protectionism, he says, adding:   "A multilateral round of trade negotiations does not dampen pressures for protectionism in the developed countries. 

"We should remember that protectionism in textiles, jute and leather got started and intensified during the course of the Tokyo Round (1973-79).  Also, neo-protectionism through frequent anti-dumping measures and on the pretext of environment protection became a much used practice while the Uruguay Round (1986-94) was on."

On the inducement given that the developed countries will give better market access to poorer countries (especially in agriculture and textiles) if there is a Round, Das points out that the developed countries already undertook to end all special restrictions in textiles by January 2005.  Thus developing countries do not need to make further concessions by agreeing to launch a new round, to ensure they get better market access for textiles.

As for agriculture, the developed countries make decisions whether and how much to open up in response to internal pressures from their farmers, and pressures between themselves.  Concessions from developing countries is unlikely to influence their decisions, as the Uruguay Round showed and there will be no difference if there is now a new round.

As for regionalism taking over from multilateralism, Das says regional trade arrangements have their own dynamics and momentum which is not influenced by whether there is a new Round.

In fact some major regional arrangements emerged or strengthened whilst major negotiating rounds were in progress in GATT.  For example, the European Economic Community was strengthened while the Tokyo Round was in progress and the North America Free Trade Agreement (NAFTA) was finalised during the Uruguay Round period. 

"Hence it is unlikely that the launch of a new round will dampen the enthusiasm for future regional arrangements."

Das concludes that the inducements and scare stories used to lure developing countries into a new Round are thus "totally unconvincing."   On the other hand, if a Round is launched of the type desired by developed countries, the developing countries would be in danger of having to accept new obligations.

"The negotiations and agreements in the new areas of investment, competition policy and government procurement in the WTO will be very damaging for the developing countries," he says.  The reasons are as follows:

** An agreement on investment in the WTO is not likely to bring higher investment to developing countries but is almost certainly going to curtail their rols in using foreign investment in support of their development process.

**  Drawing up uniform multilateral standards in competition policy is not needed but will in fact curtail the options of developing countries in evolving their own appropriate competition policies.

** Opening up government procurement to foreign companies through WTO rules would not benefit developing countries (as they have low supply capacity) but will curtail the current rights and options of developing countries to give preference to local producers and suppliers.

Concludes Das:  "Developed countries' aggressive championing of rounds in GATT/WTO is a familiar experience by now.  A very attractive picture of benefits  was painted before the start of the Uruguay Round and also during the round.

"Almost all the professed benefits have proved to be illusory. Some tactics of persuasive charm are being tried again.  It is necessary for developing countries to remain careful and vigilant against pressures to launch a new round for starting negotiations in the new areas in the WTO."

The main warning of Das and other experts who look at trade from a development perspective, is that the dangerous aspect of the proposals for launching a Round is the injection of the "new issues" into the WTO.

If these new issues (investment, competition, transparency in government procurement, trade facilitation, labour and environment standards) are not included in the agenda for future negotiations, then a "new round" would not be so threatening.  In fact, it could then be possible to accept a Round, without these issues.

But then, the developed countries would no longer consider it a new Round.  What makes the Round new, is the presence of the new issues in the agenda.

Disagreement between developed and developing countries has focused on the contents of the negotiating agenda that the WTO ministerial conference should adopt.

At a special meeting of the WTO on 30 July to review the status of preparations for the Ministerial Conference, the Malaysian Ambassador, Mr. Superamaniam, said there remains wide and substantive divergence on a host of issues.

On the new issues of investment, competition and transparency in government procurement, "the positions are polarised; it is either having negotiations or not initiating them," he said.

"On investment, our concerns stem from the fact that, apart from reducing the policy options, WTO rules and disciplines on investment would seriously impede the current flexibility that developing countries have in pursuit of their development goals."

Superamaniam also warned the WTO General Council that the problem is the "all or nothing" approach being taken by some Members to the Ministerial Conference.

"To put it frankly, it is an approach that does not want to take into account the reality on the ground; it places Members with undue and unnecessary pressures; and it forsakes other approaches that may secure success.

"Let us be candid that the situation we are in currently is no different than where we were at, in the run-up to Seattle.  We run the risk of a "SEATTLE II" if we are to continue with the "all or nothing" course of action."

He urged the WTO members to judge whether this all-or-nothing approach would realise the ambition of those who want a new comprehensive round.

"Malaysia's judgment call is that it will not, given the enormous obstancles for many developing countries to agree to start negotiations on the many new issues confronting them.  Not to initiate negotiations on these issues does not imply failure on the part of anyone.

"Rather it will be a judgment call that will be appreciated by man y Members, including many in our civil society. It will send the message that no country or countries have the monopoly over certain issues.

"The way forward is to agree to work on those issues that seem to have a reasonably good chance for consensus.  These include resolving the implementation concerns, bridging the development deficit, non-agricultural market access and an enhanced work programme on trade facilitation and e-commerce.

"If we remain intransigent that only a comprehensive round has to be agreed to, then we are getting closer to making Doha a replay of Seattle. The Seattle debacle is still very much in our minds and it provided a lesson in terms of mistakes made that should be avoided."

This is a spirited and frank call for greater realism that, if accepted by others, can put the WTO on the right track to restore its reputation and role as a trade organisation which benefits all Members and not only the small number of powerful countries.  This call by the Malaysian Ambassador was supported by the statements of many other developing countries.

Whether the developed countries will heed the call remains to be seen in the weeks ahead.