SUNS  4314 Monday 2 November 1998



Trade: Beginning the long haul to a new round?



Geneva, 30 Oct (Chakravarthi Raghavan) -- North and South have squared off against each other, staking out views and positions, on issues under the rubric of "implementation" of the Uruguay Round Agreements, in the preparations for the 3rd Ministerial Conference of the WTO that may launch a new round of trade negotiations.

The positions were spelt out this week at the informal meetings of the General Council of the World Trade Organization (WTO), as it began the first of a series of meetings to set out a work programme and recommendations for the ministerial meeting to be held in November 1999 in the United States.

The 2nd Ministerial meeting of the WTO in Geneva in May 1998 mandated the General Council to set up a preparatory process, under each of the four areas identified in the Declaration, to prepare and submit recommendations to the 3rd Ministerial on the WTO work programme, including further liberalization sufficiently broad-based to respond to the range of interests and concerns of all Members, within the WTO framework.

The four areas specifically identified, in the Declaration, were:

9. (a) recommendations concerning:

(i) the issues, including those brought forward by Members, relating to the implementation of existing agreements and decisions;
(ii) the negotiations already mandated at Marrakesh, to ensure that such negotiations begin on schedule;
(iii) future work already provided for under other existing agreements and decisions taken at Marrakesh;

(b) recommendations concerning other possible future work on the basis of the work programme initiated at Singapore;

(c) recommendations on the follow-up to the High-Level Meeting on Least Developed Countries;

(d) recommendations arising from consideration of other matters proposed and agreed to by Members concerning their multilateral trade relations.

A series of meetings have been set for these tasks, and the first of these, to address "issues, including those brought forward by members, relating to implementation of existing agreements and decisions", was held on 26-27 October.

With a large number of delegations setting out in oral statements (some of which were later made available to the media in written texts) outlining the various problems faced in implementation, the two-day meeting left little time or space for comments and discussions by others, and at the end there was no consensus either on how to proceed forward, excepting that it was recognized that further meetings and consultations.

The issues relating to the already mandated negotiations - meaning further negotiations on agricultural reform process and a new round of services negotiations - and future work envisaged under existing agreements and decisions taken at Marrakesh are to be discussed at informal General Council meeting set for 23-24 November.

The recommendations on the follow-up to the High Level meet on Least Developed Countries and the future work are scheduled for similar discussions on 14-16 December.

A meeting has also been set for the third week of January in the New Year to discuss recommendations concerning other possible future work on the basis of the work programme initiated at Singapore (i.e. studies on trade and investment, trade and competition policy,  government procurement and trade facilitation), and the catch-all rubric to bring in other new issues -- recommendations arising from consideration of other matters proposed and agreed to by Members concerning their multilateral trade relations.

At this week's meeting, developing countries raised under implementation issues, both problems faced by them in implementing their commitments due to lack of resources, problems not envisaged when they agreed to these commitments, and deficiencies in the agreements themselves, as well as those due to lack of implementation, in letter and spirit, or derogation from commitments by the industrialized countries.

General market access issues including tariff peaks and escalations against exports from developing countries, the Agreements on Textiles and Clothing (ATC), Agriculture, Anti-Dumping, Subsidies and Countervailing Measures (SCM), Technical Barriers to Trade (TBT), Sanitary and Phyto-sanitary (SPS) restrictions, Balance-of-Payment (BOP) provisions of GATT, TRIPS, TRIMS, Customs Valuation, Rules of Origin, Safeguards, Regional Agreements and Arrangements, and GATS, LDCs, the Dispute Settlement Understanding (DSU), and the cross-cutting issues of Special and Differential (S & D) treatment in these and other WTO agreements were raised in some detail by delegations.

The Cairns group of agricultural exporters, anxious to set in motion new negotiations on continuation of the reform process in agriculture, while voicing their own grievances under implementation also suggested that implementation and built-in agenda of further negotiations were
just two sides of the same coin.

The industrialized countries, with the United States making a detailed presentation, and the EC contenting itself with some initial oral comments, insisted that the transition period under the WTO for various agreements would be coming to an end by end 1999 and all countries would be expected by 2000 to put in place the legislation and administrative processes for full implementation of their obligations.

In effect they served notice that developing countries could not, and would not be able to "escape" their time-bound implementation obligations, and that any changes or extensions would need to be part of future negotiations. This last aspect was adverted to by the EC and others to underscore the need for a new round of negotiations embracing a number of subjects.

Developing countries for their part insisted that the balanced outcome and benefits that were envisaged as part of the Uruguay Round package had eluded them, and they were looking now to setting things right.

They also insisted that having paid their "price" in the form of onerous rules in traditional and new areas of "trade", they were not going to pay a price once again merely to get implementation in letter and spirit of what had been agreed.

At the end of the two days of discussions, it was clear that there were fundamental differences between the industrialized and developing world on the "implementation issues", and drawing up a work programme and recommendations on them for Ministers will not be an easy one.

It can not be brushed aside or treated pro forma as the industrialized world and the WTO did at the 1st Ministerial Conference at Singapore -- with the WTO Director-General initially taking the position that the implementation issues had been covered in plenary meetings where ministers had spoken -- but need to be addressed and remedied.

At the same time, it was also clear that the "implementation" rubric would not provide easy solutions to the various problems faced by developing countries, both on account of their lack of resources and capabilities in implementation, as well as the inherent vagueness and deficiencies in the wording of the agreements themselves.

But at this point in the game, while developing countries seem slightly more prepared than they were in the Uruguay Round, and the WTO has very many more developing countries as members, not many attend all the meetings and are willing to make their views known and felt by withholding consensus, if needed. It was also clear that those present and active, would need to undertake more detailed work, individually (here and in their capitals) and collectively, to prepare detailed
papers and proposals, coordinate and cooperate better with each other, and be prepared for hard negotiations where they are willing to use, not the polite diplomatic language of "yes, but", but the same language as the US and EC do to defend their interests -- "No, No, No...."

At a general level, one participant said, developing countries were more united now and gave broad support to each other's positions. But the challenge would appear to be how to keep up the unity and support at the level of details, the participant added.

Another noted that even if the major trading nations ultimately agree to take on as part of a wider set of negotiations in a new round, some of the implementation problems and concerns raised by the developing world, unless the developing world is vigilant and constantly on its toes, the chances are that as in earlier trade negotiations under the GATT, in the rush to conclude negotiations, all the issues of concern to the developing world will remain unaddressed, and pushed into a post-negotiation work programme.

A number of countries spoke raising a wide range of questions under implementation.

Amb. Celso Lafer for Brazil: There are serious implementation problems and discussion on them could not be limited to technical matters or to a compilation of complaints. Our expectations of the overall balance struck in the Uruguay Round as a single undertaking has been frustrated in several areas, despite our good faith efforts to fully implement the provisions of all agreements. This perception will play an important role in our evaluation of the alternative paths to the 3rd Ministerial
Conference. We must not allow the lack of implementation or non-compliance by developed countries of commitments such as on Agreement on Textiles and Clothing to be utilized as bargaining instruments to achieve concessions from developing countries in the so-called "new issues.

Amb. Mounir Zahran of Egypt (for Africa, and separately for Egypt): The context for the present process is one of millions of people suffering from the financial crisis, threatening global growth and development. Africa's share in world trade is steadily declining, and this message should reach the trading partners, and the IMF and World Bank too. As World Bank vice-President Joseph Stiglitz admitted recently, the more developed countries preach countries undertaking painful liberalization
measures, entailing loss of jobs and industries, even as they use anti-dumping and safeguard measures to protect their own industries. Our objective is not to unravel the URAs or go back on liberalization  commitments. But there are fundamental problems in various agreements and if they are not adequately addressed, it would be extremely difficult to convince our public of justification of further liberalization commitments.

The implementation problems of the URAs arise from: unanticipated difficulties discovered in the process of implementation; deficiencies in agreements that have become apparent during implementation; agreements implemented in letter but not spirit such as the ATC or abused or used as a tool for disguised protection as the Agreement on Anti-dumping; expected benefits of decisions and agreements not ensuing as in case of declaration on net-food importing developing countries
(NFIDCs); and the cross-cutting issues of S&D which need to be addressed to ensure effective integration of developing countries into the MTS and the reasons hindering their participation in the WTO dispute settlement mechanism. There should be effective implementation of the S&D provisions, and linked to measurable development parameters, in various agreements (Agriculture, decision on NFIDCs, TBT and SPS accords, Anti-Dumping, ATC, TRIPs, GATS, DSU, LDCs so as to increase trading opportunities of developing countries, and the provision of technical assistance.

Amb. S. Narayanan for India: More knowledge and insight has been gained about the working of the world trading system, since the signature of the Marrakesh Agreement, and it has to be recognized that the Uruguay Round Agreements have not provided the expected benefits to developing countries including the LDCs.

Narayanan noted that Mr. Joseph Stiglitz, Chief Economist of the World Bank, had said (at the UNCTAD Prebisch lecture) listed some deficiencies: For all the benefits it brought to the world's consumers, the UR Agreements did too little to ensure opening of markets for developing country exports. There is also a need to stem the tide of new protectionism in the North through use of creative new measures, such as nuisance anti-dumping claims; international protection of IPRs
should strike a balance between interests of producers and users.
"Excessive protection" of IPRs may end the virtuous circle of knowledge transmission and regeneration in the developing world. And it is not enough to construct good policies but the processes by which policies are made should themselves be fair and open...."

There are two categories of implementation issues and concerns. The first set are problems encountered in the process of implementation, where we had not anticipated these problems when accepting the agreements nor could developed trading partners have visualized the enormity of problems facing developing countries in this. The second category relate to agreements where developing countries had expected benefits, but anticipated benefits had not materialised because of the manner of their implementation by developed countries without regard to the object and purpose of the agreements.

Implementation issues and concerns need to be handled with some political sensitivity, especially in the light of current perceptions about the multilateral trading system (MTS). The implementation issues and concerns should not be approached as mere ritual or opportunity to force the pace of implementation even faster than visualised in the agreements or as a process through which the balance of rights and obligations could be further distorted against the interests of developing countries. The implementation issues related to the asymmetries and imbalances in the agreements, and a review of the empty platitudes of S & D treatment of developing countries substantiate them.

Amb. Halida Miljani of Indonesia (for ASEAN): The URAs have not been implemented fully and faithful to letter and spirit, and there is room for improvement if political will is there. The issues should be approached with an open mind, for an objective assessment, rather than a rhetorical approach. Implementation problems arise from short-coming in agreements themselves, and those relating to failure of members to implement them in letter and spirit. The URA sought to achieve a
careful balance between varying interests, but in the process and in the context of negotiating dynamics, some issues were left vague and remain subject o differing interpretations; and in some cases issues of vital importance to developing countries were not simply not addressed. The preparations for the 3rd Ministerial should address these and improve the agreements to provide tangible economic benefits to Members commensurate with the obligations imposed on them.

As for implementation problems because of inability of Members, particularly the developing countries, due to substantive and procedural obligations beyond their means, the over-riding
developmental concerns should be recognized and S&D treatment made more prevalent and crucial. As for derogation from commitments in implementation, such as on SPS and Subsidies Agreements, where there is implementation inconsistent with underlying objectives, or the ATC
where there is non-realization of meaningful market access, no prescription is more potent than political willingness to take actions.

Art. I of GATT requires most-favoured-national treatment obligation, and the "Enabling Clause" (of 1949) authorized exceptions of preferential treatment by developed countries favouring developing
countries on a "generalized, non-discriminatory and non-reciprocal basis." This is being violated by conditional preferences to promote policies relating to workers' rights, environment and illicit drugs.
The contractual MTS does not authorise such departures, and developed countries should desist from these.

Colombia's Amb. Nestor Osorio (as Chairman of the ITCB): The central objective of the ATC was integration of textiles and clothing sector, one of the most important sectors of world trade and accounting for 19% of manufactured export earnings of developing countries, into normal GATT through progressive phasing out of quota restrictions under former MFA. After four years of implementation, and two stages of implementation put in place, these programmes cover 70% of
implementation period. But little has been accomplished in fact: 2 out of 750 QRs of the US, 14 out of 219 by the EU, 29 out of 205 of Canada's, have been integrated. And though 33% of import trade has been integrated, only 4% of value of trade actually under QRs have been freed of quotas in the EU, and only 6% in the US. The manner of implementation of the ATC by importing countries has contributed little to the central objective of progressive phase out of QRs. Even in terms of increased growth rates of 16% by volume in the first phase, and 25% of the second, since the pre-existing growth rates were small the total additional access in the first three years of the ATC was only 2% in each of the three importing markets.

Not only has implementation not resulted in meaningful trade liberalization, but one importing member (US) has invoked a series of safeguard actions affecting about $1 billion of exports of developing countries, and has effected far-reaching changes in rules of origin, impairing utilization of access under the ATC. The legislative amendments tabled by the US to revert to previous rules was only in respect of some products of special interest to another developed WTO member who had challenged the rules under the DSU. A second importing member (EC) has repeatedly invoked anti-dumping actions on products already subject to QRs. As a result, combined imports from six affected countries declined by over 33% in 1997 compared to 1996, and imports from these countries declined at an annual seven percent.

Amb. Rita Hayes for the US raised under implementation her country's concerns in Agriculture (including tariff quotas, export subsidies, Food aid, and export credit guarantees), Agreements on SPS & TBT, GATS and mandated new negotiations, and urgency of early ratification by members of the Financial Services Agreement, full TRIPS implementation within the transition period of 2000 allowed for developing countries, Customs Valuation, Harmonization of rules of Origin (where work could not be completed on time, because of complexity of technical work and need for further consultations among members to reconcile divergent views on scope of application of this work), agreement on pre-shipment inspection, general issues of Market access, TRIMS Agreement and many countries not providing information on how they will be complying, Subsidies agreement.
On ATC she noted that the Council debates had shown strong differences of views on the implementation, with developing countries voicing complaints that implementation has not resulted in substantial increase in commercial opportunities. She claimed that the US compliance has
been in accord with the terms of the agreement and has resulted in improved market access to its markets, but that the commitments of "all members" under Art. 7 to achieve improved access has not materialized, and as a result of high tariffs, even after 2004 (when the ATC expires) improved market access would not have been achieved in all countries. There was also the ongoing problem of illegal transhipment needing to be addressed.

The challenges of implementation, in the US view, were "within the realm of the manageable" and did not stand as an impediment to pursuing additional work and liberalization. There were areas of implementation needing more attention from governments for compliance, and others with problems where further clarification of provisions in agreements may be needed, and a number of areas where further technical assistance is required.