8:03 AM Mar 14, 1996

INFORMAL HOD MEET MONDAY ON SINGAPORE AGENDA

Geneva 14 Mar (Chakravarthi Raghavan) -- The heads of delegations to the World Trade Organization are meeting informally Monday under the Chairmanship of the WTO head, Mr. Renato Ruggiero, to exchange views on the substantive and organizational preparations for the Singapore Ministerial Meeting in December.

This will be the first meeting under a preparatory process that was agreed upon on 5 March at an informal meeting of the WTO General Council.

The four or five new issues that have been raised and pushed by the EU and the United States, and virtually embraced by the head of the WTO in his speeches over the last several months have been investment, competition policy, the social clause and the so-called corruption in trade and public procurement.

The EU has been in the forefront of pushing the 'trade and investment' issue and for negotiations to draw up rules in an agreement as an integral part of the WTO agreements and its single undertaking concept and to bring any disputes under the WTO Dispute Settlement Mechanism (enabling cross retaliation). The EU proposal calls for WTO rules to provide for 'right of establishment' for foreign investors -- the right to invest in any country without needing prior government approval except on a narrow range of security related exceptions, the right of most-favoured-nation treatment to ensure that any favourable rights of investment given by one countries bilaterally to investors from another should be extended to all WTO members, and the right to equality of treatment in all matters with domestic investors.

While the EU has made clear that the home governments would thus acquire a right to agitate in the WTO the interests of their investors and corporations, it has not so far spelt out what, if any, would be the obligations that the home governments of the foreign investors would undertake in the WTO terms as the counterpart of the obligations that the host countries would have.

While a few developing countries like India, Indonesia and Malaysia have said they would be unable to accept a right of investment, many others are supporting the idea of a WTO agreement, believing that this would promote investments into their countries and could help reduce the competition among developing countries to offer incentives.

However, there is considerable economic literature to show that when there are 'level playing fields' and foreign investors would have an automatic right of investment, countries trying to attract investments would find themselves forced to offer more inducements than now.

Though the EU has also mentioned competition policy, its pronouncements, public and private, have been such that the impression has been left it would seek a plurilateral accord.

The US has been prominent in raising the trade-labour standards link and the WTO rules on the subject, and also more recently the so-called corruption issue in trade.

On investment, the US whose immediate target appears to be the EU members and Japan, which the US believes place many practical impediments for US investors, while the US market is fully open to EU and Japanese investors, has left the impression that it is more keen on concluding an accord, with much higher level of commitments through the OECD than might be possible at the WTO.

However, in a testimony before a Congressional panel Wednesday, the US Trade Representative, Mr. Mickey Kantor has said that the US would four new issues at Singapore and mentioned them as -- labour standards, measures to stop bribery and corruption in government procurement, protection of foreign direct investment (which as worded by him might be less than the 'right of establishment' sought by the EU) and competition policy. On this last the US seems to be more keen.

While the new trade agenda issues has been figuring prominently in the media, in talks among the key trading nations, and in public pronouncements of the US, the EU and the WTO head himself, and there is also considerable pressure from the last three to quickly agree on the new issues, this will be the first opportunity for the WTO general membership to address themselves to the entire substantive and organizational issues.

Over the last several months, these have been discussed elsewhere, mostly outside Geneva, in small conclaves of countries at Ministerial or senior official levels.

However the first HOD meeting is expected to focus on the how of these discussions.

Some trade diplomats said that it was not clear how the consultations would continue. Much would depend upon Ruggiero and his preferred style of functioning -- whether he would use the informal HOD meetings as a forum for wide-ranging discussions, or would quietly move to 'consultations' within smaller groups -- and how others accept it and whether they see themselves as 'negotiating' at the WTO with other contracting parties or Mr. Ruggiero as a contracted party.

During the Tokyo Round, when Mr. Olivier Long was the GATT Director-General, and subsequently in the GATT under Mr. Arthur Dunkel, both in the runup to the launching of the Uruguay Round and through its major course, negotiations among the key protagonists of both the industrial and leading developing countries were in the 'green room' format -- chaired by Dunkel as a facilitator, but involving negotiations among the contracting parties.

But in December 1991, when a draft final act text was tabled by him, on some key questions, Dunkel's role became more than one of facilitation, and one involving a kind of 'arbiter' -- providing an arbitrated text wherever no compromise was reached in difficult negotiations. Wherever the US and EU had a common or similar positions, the Dunkel text came down against the developing countries. And Dunkel also stood the GATT concept of agreements needing consensus on its head by saying that any changes in his draft would need a consensus. This applied to everyone excepting where there were US-EU differences where his arbitral text proved to be no more than another stage in negotiations between the two.

But when this text was unable to help a compromise between the EU and US and the talks remained deadlocked, ultimately the two brought in Peter Sutherland to conclude the Round.

Sutherland also adopted the change needing consensus view (insofar as others were concerned), but prodded the US and EU publicly to compromise, and then opted for the Heads of Delegations meetings where the texts and compromises agreed upon by the US and EU were pushed on the others. But with his innate Irishman's feel for the underdog, Sutherland was able to take up the case of the developing countries on various questions and atleast helped them to avoid an even more asymmetric and iniquitous outcome than the final accords.

In the only key negotiations he had to take a hand, the negotiations on financial services, Ruggiero appeared to prefer smaller consultations, with groups of developing countries but with the two demandeurs (US and EU) -- the Asians and Latins separately -- to promote an agreement.

There are some hints that in the discussions on a new agenda, he might prefer such an approach, in an attempt to break down the opposition to the investment issue at the WTO, by meeting groups separately.

Ruggiero in his several speeches has in effect embraced all the four issues mentioned by the US or EU.

The corruption issue, as spelt out by the US, is aimed at hitting payment of bribes by corporations to secure public procurement contracts and both the US and Ruggiero have suggested that a start could be by converting the present voluntary government procurement plurilateral agreement into a multilateral one to ensure transparency of such procurement.

But as worded, it would leave out the influence brought to bear on procurement contracts by governmental interventions on behalf of their corporations, by telephone calls or Presidents, Prime Ministers and high trade officials leading a group of the chief executives of their corporations to other countries -- often in return for support on other fronts, whether security, human rights debates, support to beleaguered regimes against domestic revolutionary upsurges or others.

Hanging behind all these is the argument that if the new issues are not brought on the WTO trade agenda, the major trading nations would seek to achieve their aims through regional accords and threat of unilateral actions and trade sanctions and/or conditionalities pushed through the World Bank and the IMF, bilateral aid etc.

When the WTO agreement and the comprehensive dispute settlement mechanism under it was negotiated and concluded, one of the major arguments that the Third World negotiators used to sell the highly imbalanced accord to their own public was that it would end unilateral trade sanctions and threats to use them illegal.

The US though has not given up its threats to use S. 301, and has been repeatedly asserting that it could use this path in sectors of economic activity not covered by the WTO.

However, a simple reading of the WTO and its DSU could leave little doubt that except through winning a case before a panel and getting WTO approval for retaliation, the US cannot take away any right of any WTO members on trade in goods, trade in services or under TRIPs. The right includes not only the right to the market opening commitments accepted by the US in its schedules, but the right to demand that the US treat others in a non-discriminatory way.

In all his trips and speeches around the world to promote the WTO and the new agenda, Ruggiero has not used any of these opportunities to decry this constant threat of blatantly illegal threats.

Perhaps developing countries and the media may have to share the blame. Developing country heads and ministers have not shot off letters to Ruggiero voicing their demands and releasing it to the western media.

And western media have not pursued Ruggiero around the globe to get his reactions -- for e.g. to a Suharto's 'NO' to the investment accord at the Asia-EU summit -- as assiduously as they seek the WTO reactions to a Micky Kantor or Leon Brittan demands and statements.