4:54 AM Sep 7, 1994


Kuala Lumpur, 6 Sep (TWN) -- Participants at an Asian regional "brainstorming session" on the Trade Agenda of the l990s have expressed strong concern that developing countries might be adversely affected by attempts of some major developed countries to link new issues to trade under the World Trade Organisation.

They feared that the introduction of environment, labour standards and competition policy in the new trade agenda, so soon after the Uruguay Round's completion, would over-tax the capacity of developing country negotiators and governments.

Moreover, the industrialized countries might try to link these issues to trade in the GATT/WTO context in order to reduce the competitiveness of developing country exports or to shift the burden of economic adjustment on to the South.

About l50 participants, including senior trade policy-officials from ten Asian countries (China, India, Sri Lanka, Pakistan, Bangladesh, Malaysia, Indonesia, Thailand, the Philippines, Korea), and academics, civil servants and NGO representatives from Malaysia are attending the three-day meeting.

The meeting has been co-organised by UNCTAD, the Malaysian Institute for Economic Research and the Institute of Diplomacy and Foreign Relations, Malaysia.

The "brainstorming session" is reviewing the programme of work in implementing the Uruguay Round as well as the implications for developing countries of dealing with issues such as trade and environment, competition policy and trade and labour standards, which the North has sought to put on the post-Uruguay Round WTO agenda.

"While we acknowledge the desirability of improving global standards in trade and environment and competition policy, we are nevertheless concerned with the speed at which some countries are moving in their efforts to evolve multilateral rules and disciplines in these areas," said Rafidah Aziz, Malaysia's Minister for International Trade and Industry, when opening the meeting.

"These issues are complex and complicated. It will not be prudent to rush into evolving rules and disciplines when countries are still in the process of understanding how these issues will impact on the global trading system and the domestic trade and economic policies," she said.

Rafidah said that at the Marrakesh Ministerial Meeting, all developing countries, including ASEAN countries, strongly opposed the move to have the WTO examine the linkage between international trade and labour standards.

"Malaysia," Rafida said, "is strongly opposed to moves by major trading countries to link trade with extraneous issues and include them in the work programme of the WTO. International labour standards should be addressed in more competent fora such as the ILO."

She recalled that the ASEAN countries had tabled a joint resolution at the Geneva ILO Conference and had called upon the ILO to resist attempts to link the social clause to international trade. (The resolution was not taken up for discussion due to lack of time.)

"The linkage of trade with labour standards," the Malaysian Minister said, "would in effect provide a convenient cover for trade protectionism and negate the Uruguay Round efforts to liberalise world trade."

Rafidah said developing countries did not have the advantage of technology, capital, large domestic markets and management and marketing know-how. Their major advantage was the relatively lower labour cost.

"The move to link labour standards with trade would be tantamount to removing the comparative advantage that developing countries enjoy. It can be questioned whether it is the intention of the countries that sponsor the social clause to shield themselves from competition rather than to actually advance the interest of workers in developing countries."

Rafidah also warned that the competence of the WTO should not be overstretched. "Attempts to justify the relationship between trade and extraneous issues would not help to allay the fears and doubts of developing countries about the emergence of new forms of protectionism. Discussions on new issues will only distract attention from the most important task of the WTO, the effective implementation of the Uruguay Round results."

Rafidah's concern that the capacity of developing countries would already be overstretched appeared to be shared by an UNCTAD trade policy official, Delfino Bondad who outlined an extensive work programme emerging from the Uruguay Round, and forthcoming negotiations on existing issues alone, and remarked: "There will be tremendous pressures on negotiators in Geneva and administrators in the capitals just to keep up with the implementation, the follow-up to the issues, and the establishment of the WTO."

The first day of the "brainstorming session" focused on competition policy, a new issue that is likely to emerge in the new trade agenda.

In a presentation on competition policy in the post-Uruguay Round trading system, UNCTAD expert Philippe Brusick outlined the various types of restrictive trade practices as well as actions at national and multilateral levels to promote competition policy. He pointed out that in the many countries undergoing market-oriented reforms, the introduction of competition policy to counter the dangers of monopolies was even more important.

For instance, privatisation of state enterprises would not have positive results if it merely led to the setting up of a private monopoly; competition should instead be fostered. Import liberalisation may also be dangerous if not accompanied by competition policy as other it might empower big foreign firms whilst excluding local competition.

Liberalisation of foreign investments might be positive in loosening local cartels, but a competition authority should also ensure that the market is open to competition, otherwise there was a danger of foreign firms monopolising the local market.

Brusick also outlined many varieties of restrictive practices such as price-fixing, retail price maintenance, market allocation, predatory pricing and transfer pricing used by big companies to distort the market for monopolistic interests. These practices could be countered by competition policy, he suggested.

Martin Khor of the Third World Network commented that, at first glance, the promotion of competition policy at the WTO might seem potentially beneficial to developing countries and help to curb the restrictive practices of transnational companies.

However, a comprehensive treatment of competition policy was essential. Otherwise there was a danger that the major trading countries would use their own interpretation of competition policy for their own interests.

For instance they may insist on anti-monopoly measures at the domestic level to break up import and distribution monopolies in the developing countries and thus open space for foreign companies to move in. But it would merely result in local cartels being replaced by foreign ones. There was hence a need to shape competition policy in such a way as to curb the dangers of foreign firms monopolising the local markets and include measures to control the restrictive business practices of TNCs.

Khor also pointed out that the TRIPS agreement was anti- competitive by definition as it facilitated the further monopolisation of technology by a few big firms and prevent the competition to them from local firms in developing countries. Similarly, the TRIMs agreement might also make it more difficult for local firms to compete with foreign companies.

Developing countries should thus be on the alert against the use of negotiations allegedly fostering competition but which might result in the promotion of greater monopolisation of TNCs. Brusick agreed that it was vital to consider the motivation behind the seeming consensus to bring in competition policy within the WTO, especially since previous attempts by UNCTAD to promote measures against restrictive business practices had not been taken seriously.

TRIPs could pose a threat to the development of competition principles as developing countries would have to adopt intellectual property rules that are even stronger than those which presently exist in some developed countries. The IPRs conferred on big firms could be used to monopolise markets. It was true that there was a contradiction between some of the results of the Uruguay Round and competition principles.

Zainal Aznam, adviser to the Malaysian Central Bank said he shared the view that competition policy might be sought to be brought into the WTO to open up the markets of developing countries.

Kyu Uck Lee of the Korea Development Institute said he shared the concerns that negotiations on competition policy in WTO could be used against the South.

The second day of the meeting discussed trade and environment, with extensive briefings being given by UNCTAD experts Rene Vossenaar and Veena Jha on the background of how the issue emerged in the GATT/WTO; on environmentally-related product measures (including eco-labelling and packaging); and on process related measures and competitiveness.

Ting Wen Tian, former Malaysian ambassador and UNCED negotiator, warned that environment issues should not be linked to trade regulations, particularly in the WTO which lacked competence in the subject. There was a danger, she said, of environmental issues being used as a tool and weapon for trade conditionality, and of the WTO being put in a position of "playing God" in determining sustainability criteria.

Vossenaar said GATT was very well aware of its limited competence and its Trade and Environment Committee was intended to examine the trade effects of environmental policy and not to set environmental standards. GATT's role was to place international disciplines on environmental measures, discourage unilateral measures and encourage the use of multilateral agreements. A strong GATT was the best defence against the use of unilateral measures by big countries.

Malaysia's Permanent Representative to the UN in Geneva, Amb. Harun Siraj agreed that what was important was to disallow unilateral trade measures on grounds of environment, and bring unilateral practices come under multilateral control; this was GATT's role, rather than controlling environmental policies.

Mohammad Afzal Bajwa from the Commerce Ministry in Pakistan said it would be disadvantageous to devloping countries to have the environment issue brought into the WTO. He said many issues were now sought to be brought into GATT because it had a system of trade sanctions, and thus it was hoped that there could be enforcement. "Anyone with a cause, whether it is the environment, labour rights or animal rights, is trying to take advantage of GATT because of the possibility of using a government to apply trade sanctions," he added.

Khor said the link between trade and environment was a legitimate concern, but the real issue was whether the WTO was an appropriate venue for comprehensive discussions on the issue.

There was a danger of the North, which dominates the GATT, to interpret the link in a manner that shifted the burden of adjusting to a better environment on to the South, and to reduce the South's competitiveness.

In particular, the concepts of production and process methods, cost-internalisation and ecodumping were very complex and could be misused if they were introduced for negotiations in the WTO.

The countries from the South should place their own issues for discussion in the Trade and Environment Committee, such as the link between TRIPS and environment, the trade in domestically prohibited goods, and the need to allow developing countries to restrict exports of resource-based products to enable higher local value added and reduce resource depletion.