MFN becoming the exception rather than the rule, says Sutherland

Geneva, 17 Jan (Kanaga Raja) - “Our biggest concern with the trading system is that the Most-Favoured-Nation (MFN) principle has become the exception rather than the rule,” the former director-general of the GATT Peter Sutherland said Monday.

Sutherland raised this concern at a press briefing to highlight the key findings of a report ‘The Future of the WTO’ produced by an independent Consultative Board of 8 members under his chairmanship. Also present at the briefing was WTO Director General Dr. Supachai Panitchpakdi, who appointed the eight consultants and asked them to come up with a report.

“Our biggest concern lies in the erosion of the basic principles of non-discrimination in global trade conditions,” Sutherland said, adding that there was also a need to urgently bring some order and effective oversight to the continued proliferation of preferential trade agreements.

Non-discrimination is a very important principle and not one solely relevant for trade gurus. It is relevant to the whole functioning of multilateralism itself, Sutherland said. When the multilateral trading system was created, the principle of MFN and the equality of treatment between member states was the key to the development of the system.

“Now, we have the situation where in terms of the European Union, for example, out of all the trading nations in the world, only five are subject to the MFN principle. Everybody is treated differentially in one way or another through agreements of one kind or the other.”

The MFN has become the exception rather than the rule and “we are deeply concerned about this and the fact that this has happened without ostensible control mechanisms and often motivated by political considerations of a bilateral kind that are not essentially trade-related,” Sutherland stressed.

Governments have failed to show restraint in terms of creating bilateral agreements. It is often undermining the multilateral system and treating it with a degree of lack of concern as to its basic principles, Sutherland added.

The best way of undoing some of the differences that have arisen is for the reduction of MFN tariffs and non-tariff measures in multilateral trade negotiations, thus removing some of the trade difficulties that have been created.

There is also a need to bring some order and effective oversight to the continued proliferation of preferential trade agreements. The TPR mechanism could be used as a vehicle for analysis and comment on the impact of preferential trade agreements, Sutherland said, adding, the greatest benefits of the WTO membership are in danger of being severely undermined if the present drift towards politically motivated trade relationships continues.

WTO Director-General Supachai Panitchpakdi said that the kind of exercise that he had asked of Sutherland and his colleagues on the Consultative Board was meant to help strengthen the multilateral trading system and the WTO. It was up to the members to pass their judgement to carry forward the debates, discussions and analysis of this report, Supachai added.

Supachai pointed out that the report is a personal initiative and was not meant to be approved by the membership, and thus it will not be submitted to the General Council or any other meeting.

The report will be introduced to the WTO membership on 24 January when members will have the chance to enter into initial discussions with the Chair and members of the Board, he added.

“I never meant this report to get in the way of our discussions of the DDA (Doha Development Agenda). This report’s life is supposed to be much longer than any trade round. It has long-term implications for this institution and so it will not get in the way of our discussion on the DDA, but hopefully will provide the information that will enlighten the public and the debates that may result in mobilizing more support for the DDA to be completed in time,” Supachai stressed.

Sutherland said that when he and his colleagues were given the responsibility of producing the report, the Board had to decide whether they were going to do something that sought to express a utopian vision or a realizable and practical one, and they opted for the second rather than the first.

It’s the first in-depth analysis of the WTO since its creation 10 years ago, Sutherland said, adding that it is hoped that ministers, officials, business groups and civil society organizations will take the time to study the report fully and reflect carefully on its conclusion.

Sutherland provided some highlights of the report’s key findings.

There is a need for improved policy coherence among intergovernmental organizations as a key to managing globalization and ensuring that poor countries - with the political will to do so - can integrate into the global economy. The Director General has a mandate to ensure coherence in the WTO’s work with the World Bank, the IMF and other organizations and this needs reviewing and reinforcing, Sutherland said.

In terms of institutional reform, Sutherland saw the Dispute Settlement System as being a considerable success. It is the most substantial and positive result, in the Board’s opinion, of the Uruguay Round and of the WTO, he added. There are a number of things at the margin that can be done to improve the effectiveness of the dispute settlement mechanism.

On the issue of consensus, Sutherland said that the Board sees it as a strength, and not a weakness but that it could be made easier. After reviewing the operation of the consensus system, the Board has proposed a formula that should help in the search for consensus.

On the issue of high-level political engagement, the Board believes that there must be a greater, continuing, involvement of ministers in the work of the WTO.  The issues at stake are too important and politically sensitive to be left to ministerial gatherings every two years. There should be annual meetings and a heads-of-government trade summit every five years, Sutherland said.

Senior trade officials should also be more present in Geneva and the Board insists that the financial means must be made available to ensure that poor countries participate consistently at these senior officials and ministerial levels.

On strengthening the role of the Director-General, Sutherland said that the Board views the Secretariat as a key feature of the multilateral trading system.  Sutherland thought that it has not been dealt with as such by members. While the WTO is a member-driven organization, it should be recognized that the key element in acting as the guardians for the institution and for the fundamental principles that it underpins, is that the Secretariat and the Director-General should be given the responsibility and powers necessary to act in that behalf as independent agents on behalf of the world community, he added.

“The Secretariat should be seen as not merely as the secretariat but as guardians of the treaty, the institution.”

We also need to put in reality the WTO at the level in terms of resource provision that is required for it to stand as one of the major multilateral institutions in the world, he noted.

Sutherland referred to the staffing situation at the WTO, noting that 600 staff and 100-150 temporary agents is “ludicrous in the context of the fact that many of the NGOs dealing with the areas of concern to the WTO have far greater staffing resources.”

As for NGOS, Sutherland said that the secretariat’s relationships with the responsible civil society organizations should be clarified and, where appropriate, strengthened.

The WTO should feel no obligation to involve itself in debate with NGOs that would wish to destroy it, and it is for the WTO itself to determine the NGOs with whom a productive and proper debate should take place.

In response to the notion that the report comes out heavily against preferential trade agreements and the fact that the US is a leading advocate of these agreements, Sutherland said that the report was genuinely not to point the finger at the US. The example given in the report pointed to the EU where only five nations trade with the EU on an MFN basis.

There has been a proliferation of special agreements that one cannot point a finger at any one of the major trading countries as being more at fault than the others. “I think they are all at fault,” Sutherland said, adding that they have all gone too far down this road. “I am certainly not pointing the finger at Bob Zoellick who I believe was committed to the multilateral trading system.”

Asked if the report represents the views of the Board and whether he endorses the principal recommendations, Supachai said that the report was completely the ownership of the Consultative Board, “notwithstanding whatever kind of perceptions I have as to how to address the reform of the multilateral trading system. I would certainly like to discuss that kind of topic sometime after the lapse of my term here.”

Sutherland added that the report was drawn up entirely independent of the Director General as he had wished. He was convinced that there is nothing in the report with which as far as he knew, the secretariat has publicly disagreed with. “I think we are expressing a view which is right... I have no doubt that what is in the report is dead right,” Sutherland said.

As for officials at capitals being more involved, Sutherland said that the reality of what the Board was trying to suggest is something that is politically doable. “We recognize that notwithstanding the crucial role of delegates on the ground namely the ambassadors, if they are left without clear writing instructions which they often are, until the eve of deadlines, which has been the consistent pattern of trade negotiations over the years, that you talk and talk until you get to a final, deadly and dangerous deadline.”

If that persists, it will ultimately lead to a derailment of the negotiations, be it the DDA or some other. And we have seen that over all the rounds and in recent times, and we have sought to address why that happens, which is often because of insufficient engagement of the key operational figures in the member states and they leave their ambassadors to temporize without clear instructions until the last minute, Sutherland added.

The report did not deal with any area of the DDA because the Board was specifically told not to, as it would interfere with the negotiating process currently underway and bring about criticism from the members.

Asked whether development focussed issues were part of the other issues that should not contaminate the WTO, Sutherland said that in his personal view, the greatest challenge to multilateralism is likely to come from developed country protectionism. Development issues are at the core of what the WTO is about. The WTO is a key to development, he added.

As to whether the Board was unanimous on this report or was there any dissent on the issues, Sutherland said that while on some issues there was vigorous debate, members ultimately reached positions on all issues where there was complete agreement. – SUNS 5721

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