Now Agriculture On The Hot Seat, TRIPs and S&DT Pushed Behind

Between Farm & Pharma, Nothing Special About Differential Treatment

Tough Times Ahead For Harbinson & Smith

Will Sidney 'Mini-ministerial' Provide the Much Needed Boost?

The Uphill Battle at WTO Continues

It's Time to Pull Up Our Socks

There’s Both Good And Bad News From Geneva
The Road from Doha has been long and arduous for the poor nations

Now Agriculture On The Hot Seat, TRIPs and S&DT Pushed Behind

Published: The Financial Express, March 06, 2003 ,

By Pradeep S Mehta

Geneva, March 5: Talks on TRIPs and Public Health failed; no consensus on S&DT; EU, Japan rejects Harbinson’s draft on agriculture “modalities”; Tokyo Summit fails... . Does anybody need further evidence for the poor progress of negotiations in the current Doha Round? It seems that the mask of “development” from the Doha Work Programme is fast slipping.

Last week, the WTO Agriculture Committee chairman, Stuart Harbinson, unveiled a first draft of the “modalities” paper.

The draft is a starting point for the farm negotiations, which aims at bridging differences and search for the compromises necessary for a final agreement. The “modalities” are targets (also numerical targets) for achieving the objectives of the negotiations.

There could not have been more opportune time for releasing this draft text, as two days later trade and agriculture ministers of 22 select WTO members were gathering at Tokyo to make further efforts towards untying several knots around agriculture and TRIPs negotiations.

The Harbinson’s draft, which was rejected outright by the EU and Japan, calls for minimum 25-45 per cent and average 40-60 per cent cuts in all farm tariffs over five years; an increase in import quotas to 10 per cent of consumption; a 60 per cent reduction in trade distorting domestic subsidies, and a phase-out of export subsidies within nine years.

Japan has rejected the draft proposals, as they will threaten its uncompetitive rice farmers, and described the proposals as biased in favour of exporting countries. The Harbinson’s draft proposes a minimum 45 per cent cut in its 490 per cent rice tariff and a rise in the 7.2 per cent “minimum access” mandatory rice import quota.

The EU trade commissioner Pascal Lamy was more blunt in his reaction. The proposal is simply “unacceptable”, he said, adding “for us, the text is completely unbalanced.

The non-trade concerns of agriculture, which was included in the Doha mandate, have disappeared. It is not acceptable”. The draft has already been dubbed as “US-centric” and Mr Lamy made no effort to hide this feeling, saying “it is very favourable to big exporting nations like the US and the 17-member Cairns group.”

The US quite expectedly welcomed the draft proposal on agricultural modalities, particularly its support for the elimination of export subsidies. However, the US Trade Representative (USTR) Robert Zoellick expressed that the US trade negotiators would like to see further cuts in tariffs and domestic subsidies.

Earlier, in one of my articles, published under the same column, I had argued that what US has done to TRIPs can easily be a role model for the EU in blocking a deal on agriculture as the farm lobby in EU is no less powerful than the pharma group in the US. COPA (Committee of Agricultural Organisations in the EU) and COGECA (General Committee for Agricultural Co-operation in the EU) in their first reaction to Harbinson’s draft termed the proposal as far more damaging for the EU than on other developed countries.

COPA and COGECA have urged the EC to stop using agriculture as a bargaining chip in exchange for other deals. Further, the heads of two agricultural organisations have called upon the Commission that it must defend the values and concerns of European society much more strongly in the WTO.

Already, the current Doha Round has been crippled by deadlock over TRIPs and Special & Differential Treatment (S&DT). The USA has so far vetoed every proposal made. At the Tokyo Mini-Ministerial meeting, Brazil took a fresh initiative by unveiling its plan, intended to meet US’ concerns. Brazil suggested that the World Health Organisation (WHO) be asked to verify whether poor countries seeking compulsory licenses for drugs had the domestic capacity to manufacture life-saving generic drugs themselves in the situation of public health crises.

If they were found with inadequate manufacturing means, they would be ale to import cheap copies of drugs from richer developing countries with pharmaceutical industries, including India, Thailand and Brazil.

However, there is no sign from US that it would drop its opposition to such a deal on medicines. When asked about the Brazilian idea, Robert Zoellick, the US Trade Representative, said, “I don’t think it’s fair to say we had a formal proposal”. Earlier, similar efforts made by the EU and South Africa have gone in vain.

Seeing the continued tough stance of the USA on TRIPs and Public Health issue, it looks like that the matter will be pushed to Cancun, where the USA could give its consent in exchange for some gains in other areas. This was stated in very clear terms recently by Sidey N Weiss, president, Customs and International Trade Bar Association, USA.

In the midst of all these, the biggest casualty has been the S&DT provisions for the poor countries. The 10th February meeting of the General Council failed to adopt a report on S&DT for developing countries, thus missing a third deadline, after having failed to meet the earlier two deadlines - 24th July 2002 and 31st December 2002.

Services, one of the built-in-agenda of the Uruguay Round, so far maintained a low profile in the current Doha Round of trade negotiations. But the recent offers by the EC on services liberalisation have contributed enough to make this sector join the list of other controversial trade issues such as Agriculture and TRIPs. The EC in its offer is only willing to open markets further in areas such as banking and telecommunication, whereas it would not take any new commitments in public services such as health and education as well as in audio-visual services.

The EC‘s denial of access to its trading partners in European markets of health and education clearly reflects double standards. This has jolted the hopes of many developing countries who were hoping to gain access in EU health and education markets through Mode 4 of service supply. The supply of services in banking and telecommunication takes place under Mode 3, where developing countries are at a clear disadvantage.

TRIPs, S&DT, Agriculture and now Services joining the list, alongwith the failure of Tokyo Mini-Ministerial, the forthcoming Cancun Ministerial Conference appears to be heading towards a major fiasco like Seattle.

The new commerce and industry minister of India, Arun Jaitely rightly told, “the road to Cancun is riddled with roadblocks and potholes. It is for the developed countries to win trust back so that the people in the developing countries can see some tangible benefit of a multilateral forum”, when he returned back after attending the Tokyo Mini-Ministerial.

Stupid, Stupid, Stupid

Published: The Financial Express,, January 03, 2003 ,

By Pradeep S Mehta

The negotiations at the World Trade Organisation (WTO) have not got off to a good start in 2003. This is certainly the opinion of Pascal Lamy, the EU’s Trade Chief, who has branded the US pharmaceutical lobby to not allow the government to agree a settlement on access to essential medicines “very stupid.” In rejecting the compromise on the interpretation of the TRIPs Agreement, the US government succumbed to the pressure by the pharmaceutical lobby, which is scared that a flood of generic drugs produced in developing countries will und-ermine their profit margins. Th-ese arguments are implausible, given that very few poor countries have the capacity to manufacture medicines, let alone export them. “If people want to be stupid, they will be stupid” was Mr Lamy’s comment.

The EU had put forward a modified proposal after the winter break to end the deadlock over TRIPs and Public Health negotiations. The EU formula proposes to involve the World Health Organisation in decisions on whether a particular disease would be covered by the solution. The EU’s initiative found a less-than-enthusiastic welcome among developing countries, while health activists strongly criticised the proposal, arguing that it might be the most opportune time to move the debate out of the WTO. In a letter to Financial Times, I have also argued that the case is now ripe for the TRIPs agreement to be moved to the World Intellec-tual Property Organisation, where it rightly belongs. Some developing countries argued that each country should be able to define which diseases are “epidemics” or “pandemics.” Perhaps not surprisingly, Lamy finds this a “stupid question” to which the EU was attempting to give “an intelligent answer.”

The US, on the other hand, initially did not react and waited five days before giving the same answer they had been making throughout the discussions: that it provides inadequate protection for drug patents. Failure to reach an agreement means that the WTO members have now missed two of their first deadlines in the packed negotiating agenda mapped out at Doha. With the round due to be completed by the end of 2004, missing even some of the more minor deadlines could accumulate into major setbacks. Mr Lamy is due to complete his term as Trade Commissioner at the end of next year, so the EU can be counted on to push for completion of the round on schedule.

Negotiators, back in the meeting rooms, have a challenging task ahead as crucial negotiations take place on agriculture, TRIPs and Special & Differential Treatment (S&DT). But tensio-ns between the EU and US are not helping. The US greeted the new year by firing its first major salvo towards its trading partners: a strategy for dealing with WTO rulings that have eroded the US’ ability to impose import restrictions on products ranging from lamb meat to steel. Earlier, angered by a series of reverses at the Dispute Settlement Body (DSB) of the WTO, the Congress gave the Bush Administration until the end of 2002 to come up with a plan to reverse that trend and maintain the US’ ability to act against what it determines are unfairly traded imports. Pur-suant to this, the Administration submitted a report to the Cong-ress in which it noted that the US has benefited from the WTO dispute settlement system.

The US has recently faced two major reverses at the hands of the DSB. First, a WTO panel report concluded that the Conti-nued Dumping and Subsidy Offset Act 2000 (Byrd Amend-ment) of the US, is incompatible with WTO rules. The US’ appeal on the ruling was rejected on January 16th. This was followed by rulings on Foreign Sales Corporation (FSC) provisions of the US tax law, which authorises the EU to impose $4.043 billion in trade sanctions.

A possible motive of the US could be to avoid a possible third major debacle after Byrd Amendment and FSC. Next spring, the WTO is expected to issue its preliminary ruling on President Bush’s decision in March 2002 to slap tariffs of up to 30% on steel imports to help struggling US companies get back on their feet.

There are eight complainants in a WTO panel investigating US steel tariffs. But what is really holding up the negotiations is something much more serious: the EU’s refusal to take real steps toward the liberalisation of agriculture. I and many other experienced trade watchers see a replay of the truncated Uruguay Round and the Seattle Ministerial when agriculture often proved an insuperable obstacle. The EU has put its limited proposals on the table. However, a 35% cut in export tariffs may not be enough to make a difference for poor country producers trying to break in to a very difficult market. The EU has acknowledged the food security concerns of these countries and included a ‘development box’ in their proposal, but the price to pay will be the EU’s ‘green box’ of demanding health and environment standards. Fed up by the continued deadlock over farm trade liberalisation, three lobby groups, representing more than 260 million farmers in the EU and Asia, recently came together for their first organised excha-nge of views in the run-up to next month’s crucial WTO meeting on agriculture negotiations.

Delegates to the two-day meeting in Brussels agreed that farming is not just a trade issue but is also vital to the lifeline of any society. This is likely to be on the pattern of “type-II” initiative of the Johannesburg world summit held last year. Whatever the domestic pressures, in the eyes of almost every other country at the WTO, the EU proposals are not good enough. Time is fast running out as we are moving closer to the Cancun Ministerial Conference. If more progress is not made, the delicate inter-dependence of the negotiating agenda could lead to its collapse and a re-run of Seattle. The consequences could be even more serious this time. As WTO Chief, Supachai Panitchpakdi warned recently, inability to reach a consensus on the Doha Development Agenda could kill the concept of multilateralism.

Between Farm & Pharma, Nothing Special About Differential Treatment

Published: The Financial Express,, January 06, 2003 ,

By Pradeep S Mehta

When negotiators at the WTO broke for the winter holiday, champagne bottles were not uncorked as none of the deadlines could be met. First, the TRIPs and public health clarification ended in a stalemate. The US pharma lobby insisted on a coverage of very limited number of diseases under the window of compulsory licencing and the power of poor countries to import them if they did not have a domestic manufacturing capacity.

Second, the issue of farm talks, did not move forward on their desire to liberalise more than what was agreed during the Uruguay Round. Third, and this was the Like Minded Group’s (LMG) pet issue: special and differential treatment (S&DTs) provisions to be made enforceable was stuck between ‘hee haw’ and ‘hum haw’ (Who moved my cheese?). The LMG comprise of countries like Egypt, India, Malaysia, Zimbabwe, Pakistan, etc.

One worried soul is the WTO Director-General, Supachai Panitchpakdi. He had made an impassioned plea in the Financial Times of 16th December: “World trade must not be tripped by drugs”, but that did not work before a very stubborn US. This is in spite of the fact that the US position can well derail one of the crucial development aspects of the Doha round of the WTO: the flexibility aspects of TRIPs and public health. It will not only reinforce the comments by sceptics, who questioned the word ‘development’ in the Doha agenda, but will marshall forces which are inimical to the whole trade liberalisation agenda. That will be bad for both the rich and the poor in the world.

In trying to balance his views on the issue of access to life-saving drugs, Supachai also argued about the protection of the patent rights of the pharma industry, otherwise the billions of dollars required for research will not come forth. This is a flawed argument, because the pharma industry invests in research from current revenues, which have been raised from its existing customers, and not the future ones. Of course, it is cyclical, but the pharma industry is not doing any charity.

Coming to fundamental issues, many have argued about the validity of the TRIPs agreement in the WTO. Protagonists argue that if TRIPs was not there, the US will walk out of the WTO. So what, if it does. Anyway, by its ‘ugly American’ behaviour, it causes enough problems, whether at Geneva or out of Washington. For example — and this has not been reported widely — when Iran’s application for an observer status at the WTO came up at the General Council meeting in October, the US delegate shot it down, with words to the effect that “it does not even have to give any reasons for its objection”.

As a share of the world trade, the USA’s imports in 2001 was 18.3% and exports: 11.9%. On the other hand, the EU’s share for imports was 36.26% and 37.16% for exports. Not that the EU doesn’t come up with unfair actions, but at least it doesn’t throw its weight around obscenely. Thus, one of the ways forward for the Doha agenda to move is to get the TRIPs out of the WTO and dispatched to the World Intellectual Property Organisation, where it belongs. Until the combined wisdom of the global community sends the TRIPs to the WIPO, one will still need to deal with at the WTO. The original deadline for the TRIPs debacle was set at the end of December 2002. The negotiations have now been postponed to February 2003. But, as happened at the Sydney Ministerial, many fear that there will be no breakthrough by that time. The breakdown of these highly visible talks on medicines may have some serious implications on other negotiations. One thing that’s sure is it would release a considerable amount of pressure from the EU to fulfil its commitments on agriculture under the Doha Development Agenda.

Agriculture, too, is important, as progress in this area would have a profound impact on other elements of the negotiations. However, at present, the Cairns group and the EU are at loggerheads on this issue and most of the poor countries are merely passive onlookers.

Given the deadline, the EU might have yielded and submitted a proposal for modalities in the WTO farm negotiations. But this proposal has not yet been ratified by the EU member states. Further, we must not forget that the EU farm lobby is no less powerful than the US pharma lobby. The leading EU farm lobby, COPA, has blown the bugle of opposition to some elements of the proposal. So what the US has done to TRIPs can easily be a role model for the EU’s approach to farm talks. The long-awaited EC proposal on agriculture calls for a reduction of EU export subsidies by 45%, eventually eliminating export subsidies on products such as wheat, oilseeds, olive oil and tobacco. In addition, “trade distorting” farm subsidies would be cut by 55% while reducing agricultural tariffs by 36% on average.

There are serious drawbacks in this proposal. First, the Commission wants a reduction in trade barriers to be staggered over six years, starting 2006. This means farmers in poor countries will have to wait until 2013 for the EU to halve its export subsidies. Second, the EC’s proposal does not embrace fundamental reform in global agricultural trade as it has little intention to reform its Common Agricultural Policy (CAP), which would have enabled them to go for deeper tariff and subsidy cuts. This was even admitted by the EU Agriculture Commissioner, Franz Fischler, when he said, “these proposals can be carried out by us without having to make further reforms to the CAP”. Third, the EC conditioned its proposal on allowances for animal welfare and food safety support to farmers. Only two days after the EU submission, Stuart Harbinson, Chair of the negotiating session of the Committee on Agriculture (CoA), circulated an ‘overview paper’ that outlined the current status of negotiations on establishing numeric targets, formulas and other ‘modalities’ for countries’ commitments to be met by March 31, 2003. Negotiators will continue to have sleepless nights in the ensuing first quarter of the new year.

As regards S&DT provisions, the Trade and Development Committee of the WTO could not bridge the gap and thus failed to meet the second deadline. Having already missed a mandated July 31, 2002 deadline, members postponed the date to report to the General Council “with clear recommendations for a decision”, on a review of “all S&DT provisions, with a view to strengthening them and making them more precise, effective and operational” to December 31, 2002.

The discussions on S&DT over the last few weeks were split into two thematic groups. The first focussed on coming up with a first basket of decisions for immediate action. In this regard, Chairman Ransford Smith, prepared (on his own responsibility) 22 potential recommendations for agreement-specific proposals. The second thematic group dealt with how, and in what time frame, to proceed with the remaining issues.

On the last day of talks before the winter break, members could not agree on either of the two tracks. On agreement-specific proposals, only four out of the 22 on the Chair’s list were acceptable to all. On the way forward, members could not agree on future deadlines or the procedure to handle the remaining proposals. Finally, members agreed that Ambassador Smith would go ahead and make a factual interim report to the GC on the state of S&DT discussions.

Overall, the year 2002 ended on an extremely disappointing note for the poor countries. Frankly, there is no pundit who can forecast which way things will turn. Clearly, the overloaded developing country negotiators will be had pressed to deal many issues simultaneously. A country like India will be more burdened, because of the claims on its time by other poor countries. The energy that will be spent won’t be directly proportional to the gains that India might make. How we respond to the realpolitik will be an acid test for Arun Shourie, our new commerce minister.

Third World should keep its eyes open

Published: The Financial Express,, December 18, 2002 ,

By Pradeep S Mehta

Brussels, December 17: The Doha agenda is likely to be mired in a show of virility between the European Union (EU) and the US. Each will flex its muscles. To reduce the pressure on its agriculture reforms, the EU will go after anti-dumping, which as we know, is a red rag for the US. That certainly looks like the contours of a trade-off package, if things have to move forward towards Cancun.

Many pundits believe that agriculture is the key to a successful conclusion of the pre-Cancun pow-wows in Geneva. Pascal Lamy, the EU trade supremo, doesn’t think so. “Each and every other issue in the Doha agenda: agriculture, special and differential treatment, investment, competition, TRIPs and public health are the keys which can determine the failure or success of the Cancun talks. Each one of them can be a deal-breaker or a dealmaker”.

Lamy was speaking at a seminar on a possible WTO agreement on investment, organised by Confrontations, a think-tank of some French members of European Parliament at Brussels last week. He believes that if one has to label a deal-breaker, it will be anti-dumping.

Indeed, the EU would look for diversion for its lack of progress in agriculture. For a change, Lamy agreed that in agriculture, the EU has to reduce export support; improve market access for developing countries; and reduce domestic support.

Just after the Doha conference, at a civil society meeting in New Delhi, he had stated that they had agreed to only address trade distorting subsidies in the Doha Round. By end of this year, they will file their proposals at Geneva, while the deadline for negotiations is March 31, 2003.

Deep internal splits, spearheaded by a Franco-German alliance, have so far prevented the EU from budging its stand on agriculture. Continued recalcitrance on the part of EU will put the Doha Round at risk, in spite of what Lamy wishes to say. The EU parliament’s position paper on trade and poverty, while shedding crocodile tears, does not even whisper a word on agriculture. This has invited condemnation for cynically betraying the world’s poor. The US is also not far behind, having expanded the basket of domestic support to its agriculture since the Doha meeting, but explains it as legitimate under the agreement on agriculture. Be that as it may, investment can be another bone of contention between the two giants.

The US has already signaled its support for an investment agreement of the highest standard, by including market access and portfolio investment. This is certainly against the spirit of the Doha Declaration, which proposes for gradual development of the accord rather than a fully-blown agreement to begin with.

The draft OECD multilateral agreement on investment (MAI), which died in 1998, after traversing three years of intense negotiations, was aimed to be a high-standard agreement. At the end of the day, when the cake was nearly baked, even the US found it not so tasty. Investment and other new issues like competition have been understood as the armour for EU’s reduction of agriculture support.

At this seminar, Lamy laid out the EU’s position which was quite different from the US. Firstly, he reassured the meeting that this will not be a remake of the aborted OECD MAI. Because it was a mistake in many ways, and both the topic and the timing was bad. On the current proposal, he referred to it as the investment for development agreement, thus breaking from the mould of MAI or MIA or MFI and so on. The definition of investment would be limited to a very extensive flexibility clause for developing countries to hold exceptions. It would be gradual and progressive, and in no case would investor stating dispute resolution be a part of the agenda. It’s not possible because in the WTO scheme, it is only states which can bring disputes against another state. Lamy feels that the timing is good now, and that many investment issues have already been covered under the GATS, mode-3. Further, he agreed that the agreement could also cover investor obligations.

Investor and home country obligations was the subject of a recent paper moved at the World Trade Organisation (WTO) by several countries, including China, India, Pakistan, Cuba, Zimbabwe and Kenya. This drew a sharp reaction from many developed countries, because of the proposed home country obligations to regulate their investors. In fact, they were quite surprised at China joining this bandwagon. It was heard in the corridors that China supported the paper merely for developing country solidarity, and may not sustain the position when it comes to the crunch.

At Doha, China was upfront in supporting negotiations on an investment agreement. This was certainly not a ’new kid on the block’ phenomenon. China already attracts the highest foreign direct investment (FDI) inflows among developing countries. The developing country solidarity in this case is rather weak. Most developing countries, such as Africa and South America are willing to go along with an investment agreement as proposed by the EU. Some others who may grunt today, but will settle for a minimalistic text tomorrow. WTO is all about power-play, rather than fair-play.

Investor and host (not home) country obligations was debated at the United Nations for several years under the now defunct: UN Code of Conduct for TNCs. It was killed in 1993 by the US, when it threatened developing countries with “no FDI”, if they continued to support the same. Only Pakistan remained brave enough as the last bastion of demand, but all developing countries, including India, just backed off. Not many would know that the two traditional adversaries are thick friends at the WTO.

On the other hand, developing countries have been signing up Bilateral Investment Treaties (BITs) with rich countries to attract FDI. (The rich do not do so among themselves, as they follow OECD codes for FDI flows). The number has been steadily growing over time, and stands at over 2,100 the spaghetti bowl syndrome. In this context, a point raised by the South African trade minister Alec Erwin at Doha in favour of an investment accord at the WTO is worth revisiting here.

BITs entered into by small and poor African countries are one sided, and thus a multilateral framework will provide them with more comfort. They are desperate for FDI, and will be willing to go along with any such arrangement, which can offer some hope for increased flows. On the contrary, BITs per se are no guarantee for FDI flows. Both Malaysia and India do not have a BITs agreement with the US, yet the latter is the largest investor in both the countries. Further, the US is going all over town to sign up BITs and bilateral trade treaties with both social and environment clauses. These are becoming the building blocks to get them into the binding realm of international economic relations at the WTO.

In a queer way, Lamy’s proposal on investor obligations could be a back door entry for the social clause. Investors will be prevented from the race-to-the-bottom phenomenon, i.e. investors will not be offered incentives of lower environment and labour standards by host countries. This is a strident demand by the influential civil society and the trade union movement in the OECD world. They will not be satisfied if such conditionalities are not a part of the agreement.

On the issue of labour standards in the WTO, Lamy responded to an influential trade union representative at the meeting, that in spite of his best efforts, he could not succeed at Doha: “There is no second chance at Cancun, and if you want it there, go and lobby the 3rd world governments who are opposing it”.

However, in a not so mischievous way, he added, that while they failed getting it through the front door at Doha, there is a chance to get through the back door via the International Labour Organisation’s Commission on the Social Dimensions of Globalisation. This body was set up to deflect pressure from the WTO, and allow the debate to continue. We only hope that this back-door entry also fails, but the developing countries need to keep their eyes open.

Tough Times Ahead For Harbinson & Smith

Published: The Financial Express, December 09, 2002 ,

By Pradeep S Mehta

Last year, the suave Chairman of the General Council, Stuart Harbinson’s, task was to ensure the successful completion of the Doha Ministerial Conference. Again, as Chairman of the WTO’s negotiating group on agriculture, he is facing an even bigger challenge. His chairmanship is curious, as he now works for the WTO Director General. Perhaps, his skills as a clever chair has thrown him into this, when people expect that he can broker a deal between the EU and the Cairns Group (agricultural exporting nations) on the crucial issues of agriculture, which Ministers agreed at Doha.

On the other hand, Ambassador Ransford Smith of Jamaica, as chair of the Committee on Trade and Development (CTD), also has the enviable task of doing a Harbinson to resolve sticky negotiations on Special & Differential Treatment — an issue on which the Like Minded Group of Countries (India, Pakistan, Egypt, Malaysia etc) had created an agriculture type make or break situation at Doha.

If you don’t give this, we will not move an inch forward, threatened Murasoli Maran, India’s commerce minister at Doha. Agriculture has a deadline until end-March, while SDT deadline comes up at the end of this year. On agriculture, in fact, we have moved backward, instead of building upon what we had agreed at Doha. The EU refusal to reform its Common Agricultural Policy, coupled with the Cairns Group’s unwillingness to dilute its position, has added fuel to the fire.

It is crunch time for the WTO now. Progress in negotiations over the next two months will decide not only the fate of Cancun Ministerial Conference but also the entire Doha Round. A panic situation seems to be setting in, quite evident by Harbinson’s remarks. During the November 18-22 negotiating session on agriculture, he warned that Members face a “daunting” task ahead in trying to reach an agreement by the end of next March on the framework for carrying forward their mandated negotiations on the further liberalisation of farm trade. Before the March deadline of agriculture, a more important task before the Members is to complete the review of S&DT as the year-end is just three weeks away. Much ground remains to be covered in a very short period of time. WTO members have to display both political will and flexibility, else we are back at square ‘A’.

In the last week of November, various pow-wows have taken place — ranging from agreement-specific and cross-cutting issues to monitoring mechanism, and ‘the way forward’. Everyone knows that failure on S&DT coupled with failure of breakthrough in agriculture will seal the

fate of Cancun and the entire Doha Round.

In S&DT, the crux of the divergence between mostly developed countries and most of the developing countries is how to deal with the 85-plus proposals that have been submitted to the special sessions of the CTD till date. To add to the injury, last month, the EU circulated an informal paper on “differentiation and graduation”, i.e. SDTs should apply differently to LDCs and developing countries, and so. This was vehemently opposed by developing countries, because it would have meant driving in another wedge between the poorest and the poor countries, thus breaking their occasional unity.

Further, they argued that it would divert the S&DT review away from the mandate of strengthening these provisions and making them “more precise, effective and operational”.

Currently, all S&DTs in favour of developing countries, are, at best, endeavour clauses, without any teeth. On the other hand, S&DTs in favour of rich countries, such as in agriculture, textiles and clothing are binding. The Sydney “Mini-Ministerial” could not do anything on agriculture. It remained busy in bring out a political fudge on the issue of TRIPs and Public Health. This too, as I had commented in the last column, has become mired in the US pharma lobby seeking an extremely narrow definition of “diseases”, which is currently being debated at Geneva. Suffice it to say, that it is another example of the power play in the WTO, where the rich get what they want; the rest of the world can go to hell.

Following the Sydney ministerial, protectionist Japan has offered to host another mini-ministerial in February, in a bid to break the ‘deadlock’ over farm trade. This meeting, too, has little hope, which is echoed in the initial remarks of Japanese foreign minister, Yoriko Kawaguchi, when he said that the meeting is unlikely to yield any desired result. He said, “We don’t want to settle farm issues by giving into the Cairns Group; we will use the meeting to deepen their understanding”.

In the midst of all this, the US has thrown a spanner in the works, with yet another proposal, this time on industrial tariffs. US Trade Representative Robert Zoellick, on 26 November, unveiled a proposal to eliminate tariffs on virtually all consumer and industrial products in all WTO members by 2015. While most US manufacturers greeted the proposal enthusiastically, it met strong resistance from the US textiles and apparel industry. Criticism was also heard from the EU, Panitchpakdi Supachai, the head of the WTO, and several developing countries, including India.

The US proposal, which was submitted to the WTO Negotiating Group on Market Access, envisages a two-phase approach to eliminating tariffs by 2015. By 2010, all tariffs of 5% or less and tariffs on highly-traded goods would be eliminated, while remaining duties would be reduced to less than 8%. By 2015, the rest of the tariffs would be cut to zero. These efforts would be complemented by a reduction of non-tariff barriers. The US is planning to put forward a list of such barriers in January 2003.

A close look at the US proposal on industrial tariffs and earlier on agriculture, demonstrates that the ball will be lobbed into others courts. The proposal to end industrial tariffs by 2015 would put a greater burden on developing countries as many poor countries have high average tariffs of up to 40%, compared with 4% in the US and the EU. Similarly, in agriculture, its proposal of capping trade-distorting domestic support to 5% of the value of agricultural production would require no reduction in its actual current level of support, which is about $10 billion. The EU would be forced to reduce its support from the level of $47 billion to about $12 billion, and Japan from $33 billion to $4 billion. One can see who will have to move, if negotiations are to progress.

However, as regards the success of the Cancun Ministerial and the current Doha Round, it is not industrial tariffs, it is agriculture, which holds the key. Failure to reach a mutually amicable agreement in the past has often derailed trade talks, whether during the Uruguay Round or even at Seattle. Now, it is the turn of the Cancun to face this acid test. The progress on the Doha Development Agenda has been miserable. We have failed to meet the deadlines. The issues are not agriculture or S&DTs or industrial tariffs, but tariff peaks, tariff escalation and resolution of the TRIPs and public health debate, which need to be addressed first.

Clearly the burden for this lies on the world’s two largest trading powers: the EU and US. Otherwise Cancun may just turn out to be a miserable holiday!

Will Sidney 'Mini-ministerial' Provide the Much Needed Boost?

Published: The Financial Express, November 19, 2002 ,

By Pradeep S Mehta

“The World Trade Organisation (WTO) is like a bicycle, which collapses, if it does not move forward”, said, C. Fred Bergsten, a noted trade expert. It did happen once when the Seattle fiasco happened in 1999. The successful conclusion of Doha Ministerial Conference last year brought it upright. But due to lack of progress in negotiations over the last one-year on several fronts, the ’bicycle’ seems to be losing its balance (if not collapsing) once again.

To seek solutions to some of the problems, trade ministers from twenty-five countries (seventeen of them are developing countries, including India), representing a comprehensive cross-section of regions, levels of development and interest groups, and the new WTO Director-General Dr. Supachai Panitchpakdi met at Sydney in a “Mini-ministerial” on 14/15 November. Whether they were able to provide the necessary momentum required to carry forward the Doha round of trade negotiations is suspect.

Australia had called the ’Mini-ministerial’ session to tackle sticking points in the WTO’s so-called Doha Development Round, which began a year ago and are due to end in 2005. The Australian trade minister Mark Vaile observed that the meeting is about reconciling positions so that we can provide the political momentum for the process to move forward in Geneva.

The meeting had two primary aims: to agree on ways for developing nations to gain access to low-cost drugs for HIV/AIDS and other diseases, and to press key agricultural producers like the European Union (EU) and Japan to cut farm subsidies.

On the issue of cheap medicines, the main campaigners: Oxfam and Medicines Sans Frontieres were quite disillusioned with the outcome. “This is a setback in the fight to put public health before corporate profit, but the battle is not over”, said their press release. “Many people in the Third World were hoping that Sydney will act in the spirit of WTO commitments made at Doha. As it is, they have been disappointed to see their trade ministers pressured by powerful countries into accepting a political fudge in a behind-the-closed-doors meeting”.

Just on the eve of Sydney “Mini-,ministerial”, the EU had come out with a controversial proposal on Trade-related intellectual properties (TRIPs), which tried to force a limited and narrow solution to the issues raised in paragraph 6 of the Doha Declaration on TRIPs and public health. The EU proposal states that any exemption to existing TRIPs rules should be limited to the production of medicines “where the gravity of public health problems afflict developing and least-developed countries, especially those resulting from HIV/AIDS, tuberculosis, malaria and other epidemics”.

The proposal further adds that countries benefiting from the exemption should only cover least developed countries (LDCs) and developing countries classified as low income economies by the World Bank. The proposal aims to bar high-income developing countries such as Brazil from benefiting from the new rules unless they faced a national emergency. This would also completely exclude other high-income countries such as South Africa, India, Thailand, China, Egypt, Hungary and Singapore. These countries argue that the attempt to differentiate among the potential beneficiary countries is an attempt to rewrite the mandate agreed to by the ministers in Doha for these negotiations.

But this ploy is not surprising as on many occasions such tactics have been used to divide the developing world.

In a true sense it seems that developed countries do not have good intentions towards the fruitful implementation of the Doha mandate. This is clear from US assistant trade representative Rosa Whitaker’s letter to African governments on Doha paragraph 6 negotiations. USTR was asking (pressuring) African countries to support a narrow ’solution’ to paragraph 6 that excludes most diseases and most countries.

As regards agriculture, the overarching focus of the Doha round, the issue took a back seat, without any signs of reprieve from either side. The deal between France and Germany on the eve of the Brussels summit had sunk even the little hope of reforming the Common Agriculture Policy (CAP) in the near future. Following this, the EU has agreed to cap the agricultural spending (nearly half its total budget) at 2006 levels until 2013. But the deal effectively froze reform proposals until 2006 as well.

It is a victory for France, a defeat for pro-reform countries including Britain and a personal snub for Tony Blair. It is a setback for countries who are about to join the EU and for millions of impoverished farmers in the developing world. It threatens the viability of the current round of WTO trade liberalisation talks. Central to the Doha declaration are pledges by rich countries to stop the subsidised dumping of surplus production on world markets and start opening up their markets to developing countries’ agricultural exports. With the US recently passing a highly protectionist new farm bill and Europe agreeing to maintain its farm subsidies for the next 10 years, developing countries have every reason to feel let down, rather badly.

The EU’s position further strengthened when Japan came out with its plan to propose an increase in the number of agricultural products subject to emergency import curbs by all WTO members. Japan will make the proposal at a special WTO session on agricultural products, starting November 18 in Geneva, as per government sources.

Such type of provision is prone to be misused by both developed as well as developing countries. Japan’s proposal is expected to face opposition from big agricultural exporters such as the Unites States and Australia, which have already proposed sharp tariff reductions for farm products to the WTO.

Meanwhile, the 18-country Cairns group in their ministerial meeting, which was held at Bolivia last month, reaffirmed that there would be no progress on the Doha round unless there was an acceptable result for agriculture. Ministers pointed out that the absence of proposals from key negotiating partners (EU and Japan) greatly complicated the negotiating process. The group has already submitted two negotiating proposals on market access and domestic support. They supported the US proposal of cutting down tariffs significantly by applying the “Swiss-formula”.

Other matters, such as tariff peaks, tariff escalation etc were also raised at the meeting. The 20 yard movement on TRIPs and public health may have reduced some tensions, especially coming from the civil society. But the major issues of market access and trade and development to solve some of the deep-rooted problems of the world trading system were not addressed substantially except in ministerial speeches. “Ministers had a useful exchange of views on ’bread and butter’, but still vital issues of improved market opening for agricultural products, industrial goods and services”, noted the EU press release issued after the meeting, rather lazily, but asserted: “The DDA is a single undertaking and underlined the commitment adopted at Doha to begin negotiations after the Cancun Ministerial in September, 2003”.The world had some hopes from this meeting, but the glass does not even appear to be half-full.

The Uphill Battle at WTO Continues

Published: The Financial Express, October 21, 2002 ,

The News, October 27, 2002

By Pradeep S Mehta

“We will face an uphill battle at Cancun if we do not grapple successfully with the intermediate deadlines”, said a worried WTO chief, Dr Supachai Panitchpakdi at the first meeting of the Trade Negotiations that he chaired at Geneva on October 3.

‘We will face an uphill battle at Cancun if we do not grapple successfully with the intermediate deadlines’ — Dr Supachai Panitchpakdi

Over the next three months, WTO members will be grappling with various deadlines agreed at Doha which have to be completed before end-December. These are matters relating to Implementation, Special and Differential Treatment (SDTs) and Clarity on the capability of poor countries to import medicines where they do not have a local manufacturing capacity. Supachai warned them that there are further new deadlines to be dealt with in the next year, as all these will have to be sorted well in time for the Cancun ministerial in September, following which, an overall deadline for completing the Doha round by end 2004 will loom.

As I wrote in the last column (September 23), Supachai has an uphill task as the chairman of the crucial trade negotiations committee, and will need all his diplomacy and skills to get countries to agree to a highly contentious agenda. Already, we saw the US reneging on promises in these two reform areas. Many countries also employ similar delaying tactics on other important issues. For example, on SDTs for developing countries, many believe that these are useless crutches. It is another matter that the rich are already enjoying enforceable SDTs in their favour in the area of textiles and agriculture. After all, it was the promise of SDTs that the poor countries made onerous commitments in the URA; if they are not made enforceable, they will hardly support any expansion in the WTO agenda.

Many agree that Supachai is more adept at handling the sensitive issues at the WTO than his predecessor, but his task is much more difficult than Moore’s. While Moore was lucky that he was able to get the Doha round launched before he left, for Supachai to be able to wrap up the same before he leaves after a three-year term is extremely suspect, because some of the issues in the Doha agenda can cause delays, which will beat even the seven-year URA ‘itch’.

For example, let’s take the issue of an investment agreement at the WTO. “It’s all or nothing” seems to be the US’ attitude toward the controversial issue of negotiations of an international investment agreement at the World Trade Organisation (WTO).

Recently, the US stated at the WTO Working Group on the Relationship between Trade and Investment that it will not be interested in a WTO investment agreement unless it covers not only foreign direct investment but also portfolio investment and pre-establishment commitments. Its experience, “based on negotiation of more than 40 bilateral investment treaties (BITs), the NAFTA, and the ongoing

FTAA and bilateral FTAs with Chile and Singapore, is that a broad, open-ended definition is necessary to maximise the benefits of investment liberalisation and protection”. This, of course, follows the general US approach adopted in its bilateral approaches to investment.

Investment negotiations at the WTO is already a controversial issue, even without such bold moves from the US. China immediately countered the US that this will not be acceptable. It was supported by other developing countries, including India and Malaysia. Many of them feel that the WTO is supposed to be about trade, but is turning into a forum for negotiations on just about anything. Secondly, many developing countries believe that an investment agreement at any forum will hold little benefit for them.

The US knew that its bold proposal was going to cause some countries to dig their heels in resisting WTO negotiations. So what explains this step by the US? Possibly, part of the explanation may lie in the fact that the US, unlike the EU, was never really a demandeur of WTO investment negotiations. It had already burnt its hands in the aborted OECD Multilateral Agreement on Invest-ment (MAI) negotiations and has been successfully promoting investment protection its own way, through BITs and NAFTA. Hence the US finds itself well served by its makeshift international investment framework, and may not have much more to gain from WTO talks. Hence, it can afford to ask for a wide and inclusive definition of investment, risking putting some countries off the idea of negotiating altogether.

For those critical towards investment negotiations, the US’ move could, in fact, prove to be a lifeline. Unless the US has its way, it is not interested in negotiations. If the US does have its way on the scope of investment, negotiations are likely to be stalled by those that have already protested against a wide definition of investment. Hence, a step away from the negotiations threat, towards a stalemate on the issue, has just been taken.

On the other hand, a multilateral competition policy is much less controversial and increasingly demanded by the poor countries. In an increasingly interdependent world, business malpractices across borders has been growing at a rapid pace.

Developing countries are not in a position to regulate or even penalise them. Thus there is a better case for drafting an international agreement on competition. For example, on the issue of cooperation in cartel investigations, many developing countries have privately supported Thailand’s proposal for mandatory cooperation. This is a difficult issue, but perhaps the US, which could be the toughest cookie, could find ways to cooperate with lesser minions.

The only fear is whether the WTO is the place to host it at, or would another international body like Interpol be a better forum? After all, many restrictive business practices, such as collusion and price-fixing, are of a criminal nature. The WTO appears less sexy because developing countries feel that the system is inequitable and the existing agenda quite onerous. This is a valid argument, but can be resolved if other reforms are addressed.

Thus, reforms at the WTO have to be pioneered through resolution of the issues of implementation and SDTs, which are at the core of a world trading system where every member is at different levels of development. If these reforms are not delivered honestly, Cancun may end up as another Seattle. That will be bad for both the trading system and the poor, who are trying their best to integrate into the world economic system.

It's Time to Pull Up Our Socks

Published: The Financial Express, September 23, 2002 ,

By Pradeep S Mehta

From September 10-14, 2003, the 5th Ministerial Conference of the WTO will be held at Cancun, Mexico and countries are gearing up for negotiations. From September 1, the apex trade-rules making body has been headed by Supa-chai Panitchpakdi, former depu-ty premier and trade minister of Thailand. He takes over from the former Kiwi premier, Mike Moore. As the organisation’s first head from the developing world, a lot of pressure has been put on him to champion the causes of the poor. This switch mid-way in the usual 4-year term for a Director-General is the result of a hard-fought battle between developed and developing countries over who would succeed former DG Renato Ruggiero.

The appointments battle lasted for over a year, resulting in the WTO not having any DG for months; a proposal from Australia and Bangladesh, that each take a 3-year term, finally resolved the deadlock in late-summer 1999. The new team of Deputy DG (DDGs), who will support Supachai in his aims, include Roderick Abbott, who till recently was DDG of the EC’s Trade Directorate and former head of the UK’s delegation in Geneva; Kipkorir Aly Azad Rana, former Kenyan ambassador and permanent representative to the UN in Geneva and currently, a senior representative at the WTO and the UN; Francisco Thompson-Flres, a former chief trade negotiator during the creation of MERCOSUR (1985-1988) and currently Brazil’s ambassador to Uruguay; and Rufus H. Yerxa, former deputy US Trade Representative and former permanent representative to the GATT (1989-93).

Before the summer break, disagreements arose between developed and developing countries over two crucial issues. First, in a meeting of the General Council, the rift widened further over textiles liberalisation, inviting many caustic comments. Commented a diplomat: “The ‘development’ aspect has gone from the so-called ‘Doha Development Agenda’”. Many developing country members argued that developed countries had failed to increase the growth rates for textile quotas to allow for meaningful access to their textiles markets, as mandated by paragraphs 4.4 and 4.5 of the Doha Decision on Implement-ation and by the 1995 WTO Agreement on Textiles and Clothing (ATC). But the rich countries maintained that they had adhered to the transitional process under the ATC. This aims to bring textiles trade under normal GATT rules by January 1, 2005. Further, they had already provided meaningful market access to developing countries, with considerable adjustments being undertaken by their domestic textile producers.

Secondly, developing countries continue to be frustrated because none

of the mandated issues on implementation and Special & Differential Treatme-nt (S&DT) had progressed befo-re the summer recess. These have been postponed to Dece-mber 2002. It is unlikely that the Quad group (EU, Canada, USA and Japan) will agree to address these issues in a concrete manner by the end of this year since both the EC and the US see these as negotiating items that involve trade-offs. The EC has hinted that they see S&DT and Implem-entation as a trade-off in exchan-ge for progress on other issues like investment, competition, environment, agriculture, market access on industrial goods.

Just after the break, a crucial meeting of the Committee on Agriculture (CoA) was held. There was not much progress on market access of farm goods, as the EC and Switzerland indicated that they would only move on the talks if “sufficient progre-ss” was made on issues such as the precautionary principle, ma-ndatory labelling and expanding the protection of geographical indications. The Chair of the CoA negotiating session, Stuart Harbinson, Hong-Kong, China’s envoy to the WTO, said the last four days of informal talks had provided more details, but said that “due to the lack of specificity in some areas” he might not be able to prepare a first draft of the general rules (modalities) for further liberalisation. These are scheduled for finalisation by end-February 2003.

Another interesting development was the WTO Appellate Body’s ruling on the EU-US dispute over an aspect of the US international tax law, which deals with foreign sales corporation and the extra-territorial income exclusion. The EU complained that these provisions give the US an unfair trade advantage. The WTO ruled that the EU could impose sanctions up to $4 billion a year on US exports. The EU has released a draft of the target list.

In another case, a WTO panel ruled that the Continued Dump-ing and Subsidy Offset Act of the US, the so-called Byrd Amend-ment, is incompatible with WTO rules. The Byrd Amendment directs the US Government to pay the liquidated anti-dumping and anti-subsidy duties to the companies that brought forward the cases in the first place.

Amidst all these, on September 17, the US put forwa-rd a rather controversial propo-sal to the WTO Working Group on Trade and Investment, calling on WTO members to negotiate a broad global pact on investment as part of the Doha round of trade talks. This would cover not only FDI but also portfolio investment. The US defin-ed portfolio investment as investment in financial assets and other investment that does not include significant management control of assets. “We believe that covering portfolio investment can contribute to the development agenda of this [Doha] round by making developing and emerging

Secondly, developing countries continue to be frustrated because none of the mandated issues on implementation and Special & Differential Treatme-nt (S&DT) had progressed befo-re the summer recess. These have been postponed to Dece-mber 2002. It is unlikely that the Quad group (EU, Canada, USA and Japan) will agree to address these issues in a concrete manner by the end of this year since both the EC and the US see these as negotiating items that involve trade-offs. The EC has hinted that they see S&DT and Implem-entation as a trade-off in exchan-ge for progress on other issues like investment, competition, environment, agriculture, market access on industrial goods.

However, in commenting on the proposal at a Working Group meeting on September 18, Braz-il, China, India, Malaysia and Mexico said the focus of WTO talks should be on FDI and that portfolio investment was not covered under the Doha negotiating mandate. India noted that the ministerial declaration ado-pted in Doha calls on WTO members to consider multilateral rules to facilitate long-term cross-border investment, which contribute to the expansion of trade. Portfolio investment, Ind-ia added, does not fall within this mandate. Only New Zealand supported the US proposal, arguing it could support discussions on portfolio investment.

US officials have made it clear that a WTO investment pact would hold little interest for Washington unless it covered portfolio investment and pre-establishment commitments, two areas addressed in typical investment agreements which the US has signed at bilateral and regional levels.

There are other developments which did not take place at the WTO, but will have a significant impact on the Doha round and may influence the process and outcome of the 5th Ministerial Conference. The US President has received Congres-sional approval on Trade Promotion Authority (earlier the fast-track authority), which gives him the authority to negotiate trade agreements that he can present to the Congress for a yes or no vote, i.e. the Congress can either accept or reject but not alter. The passage of the TPA comes at an important time for US trade relations, as negotiations at the WTO are now entering their substantive phase towards an agreement on the Doha mandate by Jan 1, 2005. However, it has been expressed that the Congressional approval of the product of the new (Doha) round of talks would be far more difficult than getting the TPA. According to some US lawmakers: “Linking the repeal of provisions for our job-producing exporters with tax liberalisations for companies operating overseas would make implementing a new round much harder”.

Given the developments taking place at various levels, the post-summer season at the WTO will be no less warmer, with countries humming and hawing on different issues like merchants out to make a fast buck. In this exercise the role of the new DG, Supachai, will be more important than ever befo-re. Pundits estimate that the Doha round may even outlast the Uruguay Round - which took seven years - considering the bundle of contentious issues on the table. Supachai may not be around till the very end, but the next three years of his stewardship will determine the course.

There's Both Good And Bad News From Geneva

Published: Financial Times, August 26, 2002 ,

By Pradeep S Mehta

When the WTO went into summer recess end of July there were some good news and a few bad ones. First, the good news. The US President got the Trade Promotion (fast track) Authority to negotiate trade pacts, not only at the WTO but also other bilateral agreements and a regional one involving both South and North America. It’s unfortunate that the trade world revolves around the US, but that is realpolitik. With such a tool, the US President can negotiate a trade deal, which can either be approved as it is or rejected in its entirety by the US Congress. Fortunately, the other big economic power - the EU - doesn’t have this kind of check.

It’s the lack of a TPA that the US trade negotiators pussyfoot around, as they are never too sure of what they will be able to commit to. Getting the TPA itself was an arduous task for the US Administration. Basically, there are strong textile and steel lobbies in the US which are not prepared to reconcile to even fair competition from abroad. That’s the reason when the TPA was being debated, these lobbies wanted that the same be granted on a conditional basis, i.e., with a carve-out on trade remedial measures. That would have meant that there would be no negotiations, even though it was agreed at Doha that the applicability of trade remedial measures, such as anti-dumping and safeguards on a special and differential basis to exports of developing countries, should be clarified. More on this later.

The other good news was the end of Mike Moore’s term and the coming in of Supachai Panitchpakdi, the former Thai deputy minister, as soon as the summer recess ends. Developing countries expect a more sympathetic Director- General, as Moore has been pushing a very partisan view.

Even before Supachai joined, he went hammer and tongs at multinationals. He suggested that there should be a code of conduct to regulate their undue influence on the world trading body. “Supachai can afford the luxury of making such statements until he actually becomes the WTO DG”, commented Pascal Lamy, the EU trade supremo. We hope that Supachai will act on his desires, as it would certainly restore the confidence of a large number of civil society actors, who are plainly against globalisation as they feel it is the MNCs who are gaining much more than people. That was at the heart of the street demos during the Seattle ministerial conference. Now the bad news. In my column on this page (Aug 5), I had written that the rich countries have been dragging their feet on negotiating the issue of implementation, an issue that is close to India’s heart. At Doha, the WTO members signed a separate declaration on implementation issues. It was agreed that the Committee on Trade and Devel-opment would come up with recommendations to be placed before the General Council on July 31, the last working day before the recess. That did not happen and the matter has now been dragged until the 2002 end.

At the July 31 General Council session, developing countries noted their disappointment in missing the Doha-mandated target of reporting “with clear recommendations for a decision by July 2002” on the review of special and differential treatment. United in their feelings of frustration on the perceived lack of will to move this agenda item forward, they proved that they are able to withstand attempts by a number of developed countries to push the new timeline into 2003. The EC had initially attempted to force a March 31, 2003, deadline (thus aligning this issue with the agriculture and services negotiations).

That was not the only battle at the July 31 General Council meeting. A continuing rift over textiles liberalisation also featured heavily, leaving developing countries asking where the ‘development’ aspect had gone from the so-called ‘Doha Development Agenda’ and dampening hopes on progress in other WTO negotiating areas.

According to the negotiating mandate agreed to in Doha last November, the Chair of the Council for Trade in Goods (CTG) was to have made recommendations to the General Council by the end of July for action on freeing up import restrictions - principally growth in quota levels - on textiles and clothing in importing countries (primarily the Canada, the EC and the US). Textiles and clothing are products of major export interest to many developing countries, which are the demandeurs in this area.

Ambassador Stuart Harbins-on (Hong Kong, China), on behalf of the textile exporting members, called the textile debate in the CTG “a charade”, and demanded redress for the lack of meaningful benefits from the ATC to developing countries. He cited the decreasing share of industrialised countries in the textile and clothing import total of the US, unjustified anti-dumping actions, and changes in the rules of origin as hurting developing countries.

India’s delegate, Ambassador K M Chandrasekhar, who joined him, said “the Doha work programme constitutes an overall package, with an emphasis on development. The message that is coming out is that the development message is being jettisoned”. He continued, saying, “If the development aspects are sidelined...it will inevitably have an impact on other aspects. Any attempt to drive the work programme forward at two speeds would lead to an unravelling of the package”.

More fireworks are expected when the WTO resumes in September after the summer recess, and the war will go on until the Cancun summit, which will take place just one year later.

The Road from Doha has been long and arduous for the poor nations

Published: Financial Express, August 05, 2002 ,

By Pradeep S Mehta

The way things have been going at Geneva, the 5th WTO Ministerial meeting to be held in Cancun, Mexico, in September 2003, may go the Seattle way i.e., end up as a failed meet. The doomsday prophecy is based on the fact that the rich countries have been dragging their feet on the issue of implementation. India had dug in her heels before Doha, saying that no new round could be launched without resolving the implementation problems. Hence, the Doha round was launched in November, 2001, on the understanding that it would address these concerns.

Three declarations were adopted at Doha. The first laid out the main text, the second dealt with TRIPs and public health, and the third dealt with implementation issues. Where the third declaration is concerned, the main issues revolved around special and differential treatment (SDTs).

SDTs are provided in various WTO agreements as concessions for developing and least developed countries. These include longer term commitments and flexibilities in the implementation of the particular agreement. This issue was put on the agenda at Seattle, but since the meeting collapsed for several reasons, all the complex issues were left unresolved.

The Third World’s grouse has been that the existing SDTs are only “best endeavour” clauses and do not amount to anything. For example, in applying the anti-dumping agreement, the rich should be more sympathetic about taking action against Third World exporters. However, many actions have been taken without any consideration of this clause. And since it is non-enforceable, a country cannot demand that as a right. There are scores of more such ineffective clauses in the WTO, which were put in during the Uruguay Round negotiations, to assure the poor countries that their interests would be treated differentially. Unfortunately, ever since the WTO came into being, there has not been a single instance when any SDT (except time frames) was actually used by a poor country, or a concession granted by a rich country.

Following the failure of the Seattle meeting, the WTO members decided that each of the contentious issues of the aborted Seattle Ministerial Declaration would be resolved before the next ministerial meeting. But things did not move at all, as the rich did not see any gain for themselves. Therefore, as a counter tactic in the hectic pre-Doha negotiations, the poor countries submitted a demand asking for a stand-alone agreement on SDTs, as it is a cross cutting issue.

However that was not agreed, and what ultimately transpired at Doha was an agreement to negotiate the issues and arrive at clear recommendations to be presented to the General Council by 31st July, 2002.

Not unexpectedly, however, the matter has dragged, with the US even suggesting that the issue of SDTs be studied conceptually! This has raised the hackles of the poor countries, because there was a clear agreement at Doha to negotiate the operationalisation of SDTs in each area, and not have a mere chat session. For developing countries, who wanted to see genuine progress made at the WTO, coming up against the wall of US resistance has been extremely frustrating. “Join us”, the developing countries were told at Doha by the US and the EU, “and we will bring your concerns into the heart of the negotiations”, referring to the forthcoming negotiations as the ‘Development Round’. But since then, very little has been achieved.

“The developed countries are failing to deliver on their commitments,” said the Malaysian Ambassador to the WTO, M Suppermaniam, pointing to the blocking tactics being used in two of the most important areas of negotiation for developing countries, market access and SDTs. He was speaking to this writer early July. Other representatives also agreed. “Things are not moving in the right direction,” said Naela Gabr, Egyptian Ambassador to the WTO.

According to her, there is even manipulation of the agreed texts, which further undermines the faith of developing countries in the WTO as a fair and democratic institution. The Chairman of the Committee on Trade and Development, Jamaican Ambassador Ransford Smith, was less harsh, but no less critical. “Once you have been at the WTO a few years, you realise the most important quality ....is patience”.

In the wake of September 11 and the prospect of a much less secure world, the US and EU were able to make a concerted effort to ensure that the stalled WTO received a jumpstart. A very tight negotiating timetable and a plan for the Round to be finished in 2005 intended to push things along were initiated. However, this timetable is already proving to be utterly unrealistic, and not because of developing countries’ actions. In fact, these countries have been actively engaging on a substantive level in the meetings of the Working Groups, even in areas where they are opposed to agreements, like investment and competition. On the contrary, it is the US and the EU who are holding things up and their over-ambitious timetable looks set to backfire. Just before the 31 July deadline, the Committee on Trade and Development came up with a report after months of wrangling.

This Committee has a special role in the WTO, as it was created to convince developing countries that their concerns were finally being taken seriously, in what now looks like a cynical tactic used in Doha. Progress has been painfully slow.

Ambassador Ransford Smith, who chairs this Working Group, has had to hold nine informal sessions of the group in the last month to produce this report dealing with contention over the timetable as well as the substance and had to have special discussions with the US representative.

The Committee has had to fashion a deal on SDT - provisions in the WTO that allow Agreements to be modified or applied differently for categories of countries. The concept of SDT is not new, and appears in earlier WTO Agreements, but it really came to the fore at Doha as part of the answer to meeting developmental concerns and making the multilateral trading system a more development-friendly reality.

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