11:25 AM Nov 4, 1996

SHARP DIFFERENCES ON DECLARATION, NEW ISSUES

Geneva 4 Nov (Chakravarthi Raghavan) -- A general discussion on a secretariat draft for a Ministerial Declaration for the Singapore Ministerial Conference of the WTO brought out sharp differences among members on a range of issues, both those in the WTO, and new issues sought to be put on the trade agenda.

Serious disagreements were voiced with the proposals for a work programme on trade and investment, with Malaysia specifically putting square brackets around the text on this in the draft declaration.

The United States said that if there was no reference to labour standards in the draft, the US would block the entire declaration. The US suggested that there had been no objections to Ruggiero's four points -- acceptance by everyone of the Universal (United Nations) Declaration on Human Rights which included the 'core labour standards', the primacy of the ILO in dealing with these questions, trade sanctions not being used as a way to address the issue, and the sacrosanctness of comparative advantage of low-wage economies. These should therefore figure in the draft.

But Pakistan promptly challenged this view that the Ruggiero points had been accepted by everyone in the earlier informal consultations.

The EU said that the labour issue needed to be addressed, but was not sure where this should be done. They welcomed the consideration being given to the issue in the ILO. At the same time, the WTO needed to be involved and provide an input.

The draft of a Ministerial Declaration for Singapore has been put forward by the WTO Director-General, Mr. Renato Ruggiero, at the informal Heads of Delegation (HOD) meet, chaired by him, to deal with "new issues" and the ministerial declaration.

The draft, which the secretariat has drawn up, purportedly on the basis of discussions at earlier HOD meetings, and some of the bilateral consultations, apparently was discussed in a "green room" consultations earlier in the week, when several developing countries made clear their opposition to one or the other of the work programme in para 21 of his draft. Nevertheless, they have been put forward by Ruggiero for the informal HOD process.

In opening the discussions, Ruggiero is reported to have noted that the draft put forward had no square brackets (meaning disagreements), but that nothing was agreed until everything was agreed.

The discussions on the draft, in which 41 delegations spoke at the rare Saturday meeting, not only showed major differences among participants on a range of questions addressed in the draft for a work programme, but also on those not covered.

Comments from the floor showed that many had serious reservations to one or the other part of his draft, including on the "world prosperity" brought about by the trading system, and the rosy view of the outcome of the Uruguay Round and its benefits to people.

The post-Singapore work programme that Ruggiero has put forward reflects the positions, and accommodates the views of the major North countries, even if that view did not gain any acceptance in the various WTO bodies reviewing the accords and preparing reports for the SMC.

Thus, the idea of separate market access negotiations on industrial products, which Australia and a few others have floated (aimed at the tariffs of developing countries) finds mention in the work programme proposed, even though this move failed in the market access committee.

But on textiles and clothing, where the US and EU have been equating and linking their commitments on integration with 'market access' in developing countries (beyond their Uruguay Round commitments) the language used is worded to support this view.

In the areas not covered by the WTO and its covered agreements, the Ruggiero work programme calls for:

* beginning examination of the trade and investment question (which Canada, Japan and the EU have been pushing) and for a report to the General Council,

* an experts group to study the relationship between competition policies and the WTO,

* and a group to develop an interim agreement on government procurement to improve transparency and due process in government procurement procedures (pushed by the United States)

Both on the investment question (included in the draft) and labour standards (not mentioned), there were some strong views expressed on both sides of the debate. But several of the participants were also critical of the secretariat for capturing some of the proposals in the informal HOD process for inclusion in the draft declaration, while omitting others.

More than one participant made the point that there can be no hierarchy of subjects for inclusion. Either only those issues that command consensus should be brought in and others dropped, or all issues should be included for consideration, some of the participants said.

Trade officials said that the discussions on investment issue brought no surprises, and the views of protagonists on either side was put forward clearly, with written papers.

Others said the discussions showed a sharp division between some developing countries who were opposed to any reference to the issue or contemplate a work programme on it after Singapore, and Canada and Japan (now joined by ten others), who are pushing a WTO process.

After the meeting, Ruggiero (who has been personally pushing for a year to bring investment issue on to the WTO agenda and write rules) told journalists that there was not such a division on the investment question: everyone agreed on the study of the investment and development questions at UNCTAD; some wanted also a study in the WTO while others were opposed.

"It should be easy to bridge this," he said.

Ranged on one side, against any WTO consideration, were eight countries (Egypt, Ghana, Haiti, India, Indonesia, Malaysia, Tanzania and Uganda) that have tabled a paper asking that there should be no further discussion on the issue in the WTO, given the lack of consensus. The Indonesian Deputy Permanent Representative, Amb. Mrs. Saodah Syaharuddin, introduced the paper and briefly summarised its points.

Amb. Syaharuddin stressed that the countries on whose behalf she had introduced the statement were not opposed to FDI, and their opposition to the consideration of the issue at the WTO should not be misrepresented. The impact of global rules for investment on ability of governments to regulate them was not clear and they considered UNCTAD as the competent body to study the whole range of these issues.

TRIMs agreement, she underlined, had struck a very careful balance and this could be upset by bringing the investment issue on the WTO agenda.

There was no consensus on the issue, and Singapore was not the appropriate forum.

Other signatories also took the floor to support the remarks of Indonesia.

Malaysia, one of the eight, noted that those who have supported the proposal on trade and investment, in other bodies have voiced their opinion that any issue which did not have a consensus should not go as a recommendation to Ministers.

"We share this view and request this formulation be also applied for trade and investment and new issues where no consensus exist...We wish to register our reservation (to the formulation in the draft) and in accordance with the usual practice, such unresolved issues or formulation be placed under square brackets."

The paper of the eight received support from the floor from Pakistan and Sri Lanka.

Thailand (which till now had been portrayed as supporting the inclusion of the investment issue) said its authorities in Bangkok were studying the question.

Hungary, a signatory to the Japan-Canada revised paper, nevertheless said that any issue where there was no consensus should be excluded from mention in the declaration. As a small country, Hungary understood the concerns of those who opposed anything being forced on them.

Mexico said, as a OECD member, it had no problem about investment discussions at the WTO. However, it strongly believed that no issue not commanding a consensus should be brought up and included.

A number of Latin American countries said they could go along with the Canadian-Japan proposal for a study/work programme.

However, most of these countries came out against the government procurement proposal -- which would result in eliminating any preferences by countries for local suppliers.

[Reports out of Harare, where the summit of the "Group of 15" developing countries opened Sunday, quoted Zimbabwe President, Robert Mugabe as saying (in opening the summit) "Of concern to us is the urgency with which new issues are being forced onto the international trading agenda. This deliberate and expansive interpretation of the WTO's remit needs to be checked... The strong arm tactics and the unrelenting pressure brought to bear on us confirm our suspicion that we are being frog-marched into internationally binding arrangements that will eventually entail the total surrender of national sovereignty."

[Malaysian Prime Minister, Dr. Mahathir Mohamad, strongly criticised the United States for blatantly undermining the WTO by enacting extra-territorial laws to be submitted to by all nations and enterprises and said: "We cannot accept, and certainly cannot submit to such unilateral measures of coercion. We should take a firm position in containing these measures which arrogantly disregard the accepted norms and principles of international trade and investment relations... Developing countries must reject this challenge to their sovereign right to be free to trade and invest wherever they wish and which also threatens the expansion of trade and development, globally". Mahathir said the social clause being promoted by the West was aimed at negating the advantage of cheap labour costs that developing countries had. Globalisation of trade, he said, was being used to disadvantage developing countries which were expected to adopt policies and criteria unilaterally determined by the industrial countries.

[Egyptian President, Hosni Mubarak, called on developing countries to consolidate their positions ahead of the Singapore Ministerial Conference of the WTO and ensure that their trade concerns are addressed. "Any arrangements that would increase the gap between the developed and developing countries we must refuse strongly. The outcome of the Singapore meeting must bring advantage to the whole of the developing world."]

The new paper by Canada and Japan has been formulated after several informal discussions among a group of some 40 countries who have been meeting on this issue. The paper has now been joined in by Switzerland and Norway, three east Europeans (the Czech and Slovak Republics and Hungary) and four developing countries (Chile, Costa Rica, Madagascar and Morocco.)

It calls for establishment of a working party on trade and investment, with specified terms of reference, and to report progress through the General Council.

An earlier Canada-Japan draft had called for a working party leading to negotiations, for study of the issues and report to the next Ministerial Conference.

The Canadian statement, accompanying the draft decision, sought to rebut the view that the issue was a North-South one, with the business interests of the "socalled north" imposing their views and agendas on the businesses and countries of the "socalled south".

The Canada statement said that the increasing competition worldwide for FDI suggested that most countries did not believe that capital importers (through FDI) would experience BOP difficulties.

The terms of reference now spelt out for the working party are to include effects of investment

* on economic structure of host and home country; on economic growth and development, including productivity increases and shift to higher-value added industries as a result of transfer of technology and management skills;

* international competition for national investment inflows, including changing patterns and determinants of investment flows, national investment policies, barriers to investment and policies designed to attract and promote investment to developing economies;

* complementarity of trade and investment, examination of investment measures affecting trade and trade measures affecting investment;

* key issues surrounding prospective rights and obligations in investment.

In other comments:

* several Latin American countries and some others said that recourse to unilateralism was already prohibited by the WTO agreements, and this should be reiterated in the declaration;

* a number of delegations insisted that in matters that are covered by existing agreements, and which have been discussed in the WTO bodies, the formulations in the reports of the bodies should be retained;

* the US and Canada wanted some references to trade creating jobs;

* India objected to the declaration expanding the scope of the WTO by speaking of it as a "dynamic" forum for negotiations -- a term which implies new issues could be brought on to the trade agenda;

* Egypt wanted improved language on the difficulties faced by developing countries in implementing the Uruguay Round commitments;

* the US wanted all language about difficulties to be dropped;

* India said if difficulties about implementation were to be eliminated, so too should the formulations about further efforts by Members to comply with and implement the agreements;

* the US was against any prominence being given in the Declaration to the implementation of the Agreement on Textiles and Clothing, and felt the language was biased in favour of the textile exporting countries;

* Pakistan felt that the language did not address the concerns of exporting countries, and had linked integration of the trade with increased market access;

* Pakistan also wanted stronger language about the Council for Trade in Goods exercising greater control over the activities of the Textiles Monitoring Body:

* Colombia supported Pakistan;

* India (whose ambassador, S. Narayanan, is chairing the Council for Trade in Goods where the textiles issue is figuring) withheld comments on the textiles and clothing para until Monday night (when the CTG is to conclude its work);

In the CTG, the developed nations, have blocked any recommendations on textiles and clothing, and the report to the SMC is only to present a summary of the discussions. The EU and others said in the CTG Friday, that nothing should go forward to Singapore which does not command consensus.

* Hong Kong was critical of the US comments on textiles and clothing, and pointed out that 2nd of November, when they were meeting, marked the 35th anniversary of the Short-term Cotton Textiles Agreement.

The short-term agreement had been intended to provide a short breathing spell for adjustment by the importing countries, but turned out to be the beginning of a long period of discriminatory accords aimed against exports of the developing countries.

* the US wanted elimination of the formulation in the paragraph on regional agreements which suggested constantly reviewing WTO rules on regional agreements and extending benefits of regional trade liberalization to all WTO members;

* Pakistan, on the other hand was pleased with the formulation and did not want it to be removed;

A number of countries opposed selective mention in the formulations on a future work programme of the issues in the built-in agenda of the various agreements.

* on competition, Japan felt a working party was more important than setting up an experts group

Egypt, made some extensive comments on the different parts of the draft, and said the formulation about strengthening WTO and continuing liberalisation, should be qualified with the phrase "taking into account the differentiated needs and concerns of countries at different levels of development." There should be no inaccurate impression given that GATT/WTO efforts at conducting trade to raise living standards worldwide had "borne fruit". These efforts have had different effects on different parts of the world. Nor should there be the exaggerated view that "world prosperity has been brought about by increased trade";

The formulation that on the whole the Uruguay Round agreements have been "satisfactorily put into operation," could be prejudicial, as the results of implementing the agreements may turn out not to be satisfactory. More generally, Egypt said the Ministerial Declaration should not go beyond what had been tediously negotiated in various bodies of the WTO; what was needed was not a sweeping political statement but a factual statement reflecting the agreed positions.

Supporting Malaysia's view that where there is no consensus on an issue, the issue concerned should not figure in the Ministerial Declaration, Egypt said having a reference to new issues, and on a selective basis, could raise false expectations and give a wrong and prejudicial message which we as an organisation could regret. This was what had happened on the trade and environment issue, where the raising of expectations had not been positive and could be risky especially if a result could not be delivered in the end.

The built-in agenda, Egypt felt, should be left to the relevant Councils and bodies to take up the items when appropriate, without overloading and affecting the regular work of the WTO and the delegations. The Declaration should not precipitate activity and the question as to when preparatory work should be taken should be left to the Council after the Singapore Conference and should not be done now.

Egypt also supported Korea, India and Malaysia that the Declaration should not single out market access in industrial products, agriculture and services, to stress as areas for work. These issues should be placed in the framework of the regular programme.