10:42 AM Nov 25, 1996

MORE CONSULTATIONS ON SINGAPORE DECLARATION

Geneva 24 Nov (Chakravarthi Raghavan) -- The Director-General of the World Trade Organization, Mr. Renato Ruggiero, was due to hold more consultations Monday with a smaller group of delegations to take stock of the HOD process which has showed a sharp division on inclusion of labour standards and new trade issues in the draft Ministerial Declaration for the Singapore Ministerial Conference.

These sharp divisions came to the fore at the 22 November HOD meeting which discussed a revised draft prepared by Ruggiero, retaining the formulations on new issues that had been opposed by a number of developing countries at the previous meeting on 2 November, and including a para on labour standards that the US has been pushing.

While the discussions on the revised draft also showed differences on the other parts of the text -- relating to the implementation and socalled built-in agenda -- trade diplomats generally agreed Friday that these could be resolved through drafting and fudging of language.

However, they said, the differences on reference to labour standards or on a future work programme on the new trade agenda proposals -- investment, competition policy or government procurement -- are so fundamental that no drafting exercise could resolve them.

A number of Latin American countries who at earlier meetings had voiced opposition to the labour standards question seemed willing to go along with the text on the basis there would be no WTO follow-up. But the US remarks left little doubt that the US will not stop at the declaration, but will come back on the labour issue and the trade links. The Latin Americans generally were also agreeable to a study process on investment.

But a number of Asian and African countries made clear their opposition to the new issues or the labour standards question.

There are probably two or three options before Ruggiero: presenting to the SMC a draft commanding a consensus, leaving out parts of his current draft on which there are strong objections, presenting a text with square brackets around disputed parts, or present the text as a 'package'.

There were reports last week that Ruggiero has been planning to include the controversial formulations in his draft and tell the Ministers his assessment of the extent of support on them, implying large majority support and minority opposition.

But the statements at Friday's HOD process by a number of delegations, who later made available to the media texts of their remarks, made clear their strong objections to such a course and a signal to the WTO head that this would land the institution and the secretariat into trouble at Singapore and beyond.

Several of these delegations said they had conveyed this in bilateral and smaller meetings, but since these had been disregarded, they had done so at the HOD, so that no one should be unaware.

The United States has taken the position that without a formulation in the Declaration about observance of core labour standards, it would not agree to any declaration.

In a similar vein, but probably less strident, Canada, Japan and the EU are intent on getting some commitment at Singapore, through the Declaration, for work programme on the new issues.

Equally strongly, a number of countries, particularly from Asia and Africa, have taken a firm stand against allowing any reference in the Declaration to the labour standards question and the new issues. They have insisted that only those issues that command a consensus should find a place in the draft to be presented to the SMC, and that Ruggiero should clearly and frankly report to the Ministers about the lack of consensus on the other questions.

Some like Mexico, even though agreeable to work at WTO on investment rules, have taken a "systemic" view and have stressed the importance of preserving the consensus decision-making process of the WTO, and thus remaining silent on things that do not command consensus.

At this stage, the only question thus appears to be how Mr. Ruggiero will reflect these differences, and lack of consensus on new issues and labour standards, in any report of his to the Singapore meeting.

Trade officials said they expect further negotiations, perhaps at level of senior officials at Singapore on 7-8 December, ahead of the SMC, to tackle the labour standards and new issues.

The WTO head has convened another informal HOD meeting for 27 November, when he is to indicate on how and what he would report to the SMC on the outcome of his consultations and efforts to evolve a consensus.

The 27 November HOD is expected to be the last before the SMC (9-13 Dec), though further talks cannot be ruled out.

After weeks and months of bilateral, plurilateral and multilateral consultations, Ruggiero had put forward a draft on 30 October and this was discussed at an HOD meeting on 2 November -- where both opposition to new issues was voiced clearly. After several consultations with a small number of delegations, and drafting sessions, Ruggiero put forward a revised text which retained the formulations on new issues, and included one on labour standards to whose exclusion the US had objected on 2 November, warning that without a reference no declaration would get US consensus.

The informal HOD plenary meet, which considered the revised Ruggiero draft on 22 November, officials said, showed a hardening of positions on the part of protagonists on the labour standards and the post-SMC work programme on new issues, and the way forward was not very clear.

The comments showed a deep division both on substance of the draft, particularly on Labour Standards (pushed by the USA) and new issues of investment, competition policy and government procurement -- and the HOD process and its outcome.

One effect of the WTO discussions on Labour Standards and work programme on investment rules has been that work on these at the competent bodies, respectively at the International Labour Organization (ILO) and UNCTAD, have been stalled, Third World sources said.

The ILO's Governing Body and two ILO bodies dealing with labour standards and trade liberalisation found their work stymied, with the workers' group as well as some of the governments promoting a social clause, unwilling to agree on any compromise that may undercut their efforts to get a WTO declaration that would open the way to a future WTO work on this issue. The issue will come up at the ILO Governing Body meeting next March.

Similarly at UNCTAD, a Commission on Investment ended a week-long meeting unable to move forward, despite a mandate given at Midrand in May 1996 on the investment issue.

The US, Canada and EU took some hard positions in trying to whittle down the Midrand mandate, in scheduling expert group meeting to study the issue, and setting the terms of mandate. The developing countries refused to compromise. The March meeting of the Trade and Development Board is expected to take up the issue in the light of what happens at Singapore.

At the WTO's HOD meet on Friday, a number of developing countries, including some who were ready to envisage work at WTO on investment rules, insisted that only those issues that commanded a consensus should be included in the draft Declaration to go before the SMC, and any report to the Ministers on the informal process should make clear the lack of consensus on other issues.

On the other parts of the draft, there was a conflict on the future work programme arising out of the UR agreements. There were those, like some members of the Cairns Group, who wanted some ambiguously worded language for exchange of information and analysis on agriculture and a few other subjects that could lead to a 'mini-round' in 2000. There were others who insisted that any SMC decisions should be strictly in line with the report and recommendations of the WTO bodies.

There were also criticism of the selective way issues have been picked up, from reports and recommendations of WTO bodies, for mention in the declaration as also to references to plurilateral negotiations on tariff cuts information technology and pharmaceutical products.

In terms of process, and the report of the Director-General to the SMC, a number of delegations insisted that only those issues which commanded consensus should figure in the draft, and any report of the WTO head to the SMC should clearly state the lack of consensus on others.

The Director-General's opening remarks at the Friday meeting that he would decide on the "best means" of presenting the draft to the SMC, brought sharp reactions from a number of delegations, some with differing views on the substance of the new issues. They insisted on the application of the "consensus rule", and adherence to the decision of the WTO General Council that any report to the SMC from any of its bodies should follow the "consensus rule".

Pakistan said that an effort to please politicians of one or two countries would result in arousing opposition of many others and this should be avoided.

The informal HOD process chaired by the Director-General which would be reporting to the formal SMC, India said, was itself created by a formal decision of the WTO General Council, and thus must follow the General Council decisions on consensus recommendations for SMC.

Mexico's Amb. Alejando De La Pe$a said he saw problems in six paragraphs of the draft. The problems on paragraphs on labour standards and new issues was to have them on not. The problems in other paragraphs could be solved by further consultations.

On how to present the results of the Geneva process to the SMC, Pe$a said the Ministerial Declaration was an integral document and the presentation should not jeopardise the position of any one. "We should follow the maxim 'silence, we are negotiating'; we need to follow for form and substance the golden rule of consensus."

Egypt's Amb. Mounir Zahran, who made a detailed presentation (and which received support from several others who spoke after him), said Egypt was "deeply concerned" over the attempts being made to overload the WTO agenda with new issues, overstretching available staff and resources of the WTO at a time when there was need to consolidate it.

The Singapore meeting should concentrate on implementation, unfinished business and built-in agenda for future negotiations as appropriate. The conference should not be controversial nor politically loaded and should not present unnecessary future burdens on developing countries in such a manner that it would lead to further marginalization.

While Egypt was committed to the built-in agenda, he said, it was not ready to acceleration of any of the elements of this agenda. It was a package of balanced interests which should not be tampered.

They had to be "realistic" about the SMC outcome; dealing effectively with the implementation question would constitute a great success. Some trading partners wanted to be "ambitious" and wanted to proceed at a rapid pace, but this would be difficult for many developing countries who were struggling to implement and comprehend the UR agreements. Unrealistic expectations should not be aroused, affecting the credibility of the WTO. This would further victimise and marginalise the developing countries he said.

Egypt, Zahran said, was opposed to the introduction of any new issues in the future work programme. "We caution against the attempts to impose on the future agenda of the WTO Ministerial Conference issues which carry with them seeds of neo-protectionism and additional conditionality," Zahran said. "Any pressure or threats to any of the developing countries which do not agree to the inclusion of such new issues should be halted, since this attitude goes contrary to the democratic nature of the WTO. The last few weeks have clearly demonstrated that many developing countries were unable to follow the numerous and simultaneous meetings that were taking place in the WTO with a clear danger that their interests may have been compromised. Adding new issues, working groups or study groups would constitute an unbearable additional burden on developing countries including Egypt."

Zahran said the para on labour standards remained "problematic and unacceptable" and how to tackle the subject in an acceptable manner remained open. It was not within the competence of the WTO to speak of freedom of association, the right to organize and bargain collectively and non-discrimination in employment and observance basic enable rights of workers and their "positive" relationship with trade liberalization. This was something not so far proved and did not fall within the WTO's work or competence. It cannot be part of a Ministerial Declaration.

The WTO, Egypt added, could certainly affirm the legitimate right of countries to use comparative advantage of lower costs to compete in world markets and that countries should not have recourse to trade restrictions and disguised protectionist measures as means to enforce labour standards. Going further than that was not acceptable to Egypt.

The formulation about full compliance with notification requirements should be explicitly linked with technical assistance to developing countries -- as has been done in the final report of the committee.

On the future services negotiations, the formulation now as problematic. There was no agreement in financial services on "higher" levels of commitments and the language in the text should reflect the report of the GATS Council. As for future negotiations in this area, a major issue for some developing countries was the need for "appropriate flexibility" in future rounds of negotiations for liberalisation. This was a consensus agreement at the GATS Council and this should be reflected in the Declaration. Egypt did not also see why, on future negotiations for exchange of concessions, there should be reference to professional services, which was a rule-making area and not to other such areas of interest to developing countries.

Any reference to the plurilateral agreements on information technology and pharmaceuticals should make clear it was on a voluntary, but MFN basis. Otherwise it should not be mentioned in the Ministerial declaration.

Investment and competition policies were covered in the built-in agenda of TRIMs, which combined them together for future consideration because of the recognition that various conditions imposed on investors and countries should protect rights of investors as also rights of the public from anti-competitive practices.

UNCTAD had been mandated to start a comprehensive work programme on investment including on the issue of a possible multilateral framework on investment and the WTO should await the results of this exercise. UNCTAD could do so taking account of the development perspective, and could draw on the contribution of the business community, think tanks and other segments of civil society - which was not possible in the WTO. The main areas of WTO competence was trade, and though several elements of investment and competition were trade-related, many others were not.

Egypt expressed its deep disappointment at the "obstructing positions" taken recently in UNCTAD by some delegations at the Commission on Investment and said "such arms twisting by refusing to allow UNCTAD to pursue its mandate agreed at UNCTAD-IX is unacceptable."

Thailand's Amb. Krirk-Krai Jirapaet, for the ASEAN countries, said ASEAN was opposed to including the labour standards issue in the draft and could not accept the para four of the draft. Studies to date proved there was no linkage between trade and labour standards and the latter was not a trade-related matter.

The paragraph 20 on new issues was also contentious and ASEAN had major difficulties in dealing with this paragraph. Some delegations had however felt that further dialogues in the coming days could result in some appropriate arrangements. "In any event, we must be faithful to the principle of consensus, and therefore, the 'no-consensus-issues' must not be incorporated in the draft for the Ministers."

ASEAN also objected to the formulation on the future work on environment which had replaced the CTE recommendation to "continue" the work by the words "carry out".

Indonesia's Amb. Agus Tarmidxi, complained that the statement by Indonesia and other countries on investment had been totally ignored and "green room" meetings had poured energy into discussing the non-paper by Canada and others. There was no consensus on the investment issue and it should not be pursued further. UNCTAD and its secretariat had the necessary expertise and competence to deal with this issue and its development dimensions. The issue could be discussed at a more appropriate time after the completion of the study by UNCTAD.

Indonesia hence "strongly objects" to the inclusion of investment and other new issues in the Singapore declaration and requests its removal from the text. Only issues that have achieved a consensus should find a place in the draft and "controversial issues which have no consensus should not be reflected in the Declaration or in the Director-General's report (to the SMC), Tarmidxi added."

Malaysia's Amb. Haron Siraj, said the SMC should concentrate on implementation, unfinished business of sectoral negotiations and the built-in agenda. Malaysia wished to register "its great disappointment" both in terms of substance and procedure on the preparation of the draft Ministerial Declaration.

"Some of us who had been invited to your small group consultation, cannot but come out of the process with the impression which we are familiar with in the 19th century. We used to hear 'let me tell you, let me show you and let me do it for you.' Our views which do not coincide with the idea of proponent of certain issues are totally being ignored and disregarded.

"We had mentioned during the previous HOD meeting that it will be risky for you to ignore such position. I am sure we have this common objective of enabling the SMC to be conducted in a successful manner. We are really puzzled why our views are being ignored. We had conveyed our position very clearly and frankly... my delegation cannot agree to the proposal to broaden the WTO involvement in such new issues as investment, competition, labour standards and Interim Agreement on government procurement."

Haron quoted a major trading entity which in opposing a proposal for the SMC had said any issue that did not enjoy consensus should not go before the Ministers. "Our request is this rule also be applied to the new issues. It will be a tragedy if the WTO indulge in double standard. In our view, the Director-General will report to Ministers that consensus cannot be reached on these issues. We wish to emphasize we cannot agree to any initiative that would weaken the decision-making process of the WTO (based on consensus)... we cannot agree to any initiative which contribute towards departure from this decision-making principle."

Tanzania said it had "problems of a fundamental nature" on paras (4 and 20) on labour standards and other new issues such as investment, competition policies and government procurement. Amb. Ali Mchumo said the agenda of the SMC should not be overloaded with new issues. Labour standards should be dealt with in the ILO, and investment and trade first by UNCTAD before bringing it into the WTO.

Mchumo also complained that in the selection of delegations for 'consultations', not a single least developed country had been involved. Thus more than a third of the WTO membership had not been consulted and "this is a major and inexcusable deficiency."

The WTO secretariat was active in promoting participation of LDCs in global trade and the WTO process, and Tanzania was thankful for the promised assistance to enable LDC delegations to go to Singapore.

"But we find it inconsistent that LDCs are given or promised all such assistance but their views are not sought in the process of preparations for such an important matter as the SMC. If we are talking of not marginalising LDCs, let us start by not marginalising them in such important processes.

"We may be poor, but we are not poor of ideas or in knowing what we want. WTO belongs to us all, and we need to be treated in the same spirit as other members of the organization which belongs to us all."

India's Amb. S. Narayanan restated 'in firm and unequivocal terms' that the entire para 20 of the draft, on new issues, should be deleted as there was no place for new issues in the WTO Ministerial Declaration. Labour standards issue was not within the competence of the WTO and the paragraph relating to it should be deleted from the draft. Labour issues are best dealt with by the ILO, established to deal with it. Any Ministerial Declaration of the WTO, which is a contractual organization, regarding labour standards will create a misleading impression that the WTO has jurisdiction over labour standards.

On Ruggiero's opening remarks that he "will decide" on the best means of presenting the text to the SMC, India agreed with delegations like Mexico that presentation was part of substance. The Declaration was the "most visible output" of the SMC, and the presentation should not place any delegation at a disadvantage.

The Marrakesh Ministerial Declaration, Narayanan pointed out, was worked out on a consensus basis and it was his understanding that even the concluding remarks of the Chairman at Marrakesh were negotiated in advance and decided on consensus basis. This was a healthy tradition and practice that should be maintained.

The various WTO bodies that prepared reports for the SMC were guided by the General Council mandate that the reports to be forwarded to the SMC should be a consensus report. Accordingly, the various WTO bodies worked hard to arrive at reports based on consensus, and where there was no consensus on some conclusions and recommendations, they were not included, and the factual reports made a reference to the difference.

Narayanan said: "We must keep in mind that the informal process we are participating in today has to report to a formal process, which is the Ministerial Conference and that our informal process presided over by the Director-General was itself created by a formal process through a decision of the General Council.