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!

Agriculture is key to Doha

Published: The Financial Times, December 04, 2002 ,

By Pradeep S Mehta

Sir, "In the long run we are all dead," said John Maynard Keynes. Last month, the US unveiled an ambitious plan to eliminate industrial tariffs by 2015. Earlier, the European Union postponed its plan further to cut farm spending by putting a 10-year ceiling on the growth of already very high farm subsidies. These are all long-term programmes, which cannot be realised until we achieve our short and medium-term targets. One wonders whether the US initiative can act as an impetus to the Doha trade round ("Trading barriers", November 27). Many in the developing world are not so excited, for several reasons! Better market access is dependent on many factors, not least non-tariff barriers.

It does not require much imagination to see that without a resolution on agriculture, the Doha round will not move an inch forward. "As we all know, agriculture is critical to the negotiations as a whole and so we simply must meet our deadlines if we do not, the credibility of the Round could be undermined," noted Stuart Harbinson, chairman of the World Trade Organisation's negotiating group on agriculture, at the end of the September negotiating session.

A close examination of the US proposal on agriculture and the more recent one on industrial tariffs demonstrates that the ball will be lobbed into others courts. In agriculture, its proposal of capping trade-distorting domestic support to 5 per cent of the value of agricultural production would require no reduction in its current level of support, which is about $10bn. The EU would be forced to reduce its support from $47bn to about $12bn, and Japan from $33bn to $4bn. One can see who will have to move, if negotiations are to make sense.

Similarly, the proposal to end industrial tariffs by 2015 would put greater burden on developing countries as many poor countries have high average tariffs of up to 40 per cent, compared with 4 per cent in the US and the EU. Dr Supachai Panitchpakdi, director-general of the WTO, has also echoed this view.

The progress on the Doha Development Agenda has been miserable. We have failed to meet the key deadlines. It is not industrial tariffs; it is agriculture liberalisation which holds the key. So far, neither the US nor the EU has touched this most contentious issue. This is other than the special and differential treatment review, tariff peaks, tariff escalation and clarification on trade-related intellectual property rights and public health, which need to be addressed first. Clearly the burden for this lies more on the world's two largest trading powers: the EU and the US.

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.

WTO: The Punching Bag!

Published: Business Line, September 19, 2002 ,

By Pradeep S Mehta

"Tata Engineering to counter WTO threat with LF (low-floor) buses", read a headline in a respected business daily in June. This news item was from a wire service story. I was surprised why should a large and respected business house need to combat the World Trade Organisation on its buses. The mystery was resolved to an extent, when the news item quoted the company's regional manager in Kolkata, as saying that with the WTO regime setting in, it would be difficult for Indian manufacturers to survive in the market with buses made out of truck chassis. Now that Volvo is offering competition, Tata Engineering wants to give us better vehicles. The poor WTO had nothing to do with it. It is due to competition and government policy that we will get better and safer vehicles.

This sort of misconceptions abound about the WTO. Media reports, or rather misinformed reports, leaves senior politicians and bureaucrats frothing about the WTO and globalisation. The Government does little to clear doubts. Reverting to the issue of Tata vehicles, indeed, consumers in India have had to suffer bumpy rides in buses, made out of lorry chassis for as long as any one can remember. We would have continued on such vintage busses, trucks and cars, but for the the liberalisation of the automobile sector by Rajiv Gandhi.

In 1985, he opened up the two-wheeler segment, and the black-market for scooters immediately disappeared. In the 1990s, Mr P. V. Narasimha Rao, opened up the car market, and from 1995 on, one could make some thing more than an either or choice. There was no WTO around during those years. If more cars were available that was due to voluntary liberalisation. It is another matter that the auto policy got embroiled in a WTO dispute, because it would have violated our commitments under the WTO Agreement on Trade-Related Investment Measures.

But has that harmed our interests? No, because now the car market in India is very competitive and saturated. If manufacturers have to survive, they will have to look for markets outside India. Until, we had competition in the car industry, we had a choice of the Ambassador, Premier Padmini or Standard. That is, until Maruti came in with Suzuki. Even then there was not enough competition until other foreign auto-makers came in. Consider the case of Malaysia with a similar nationalistic outlook. It nurtured its own brand, Proton, but once it realised that it could not compete with Japanese and Korean cars, it opened up the market. It also realised the cost of protectionism for the economy if there was little competition in the market place.

Returning to the WTO — the favourite punching bag. Another article in another business newspaper, blames it for the woes of coffee. The author speaks of the use of biotechnology by the countries of the North to produce coffee in their countries, and that it will spell the death knell for coffee produced by natural means in the South, including India. The author writes: "And the all-encompassing WTO is widely believed to provide a commercial legitimacy and `structural framework' to hasten this process of diminishing the dependence of the North on nature and the South for the supply of agricultural commodities of their interests".

On the contrary consumers in the North are demanding organically- produced agricultural goods, including coffee. It will no longer be a niche market but will continue to grow at an exponential rate. As far as coffee is concerned, the market will grow on the basis of consumers' choice, but the consumer will certainly not switch to artificial or genetically produced coffee. Competition can come from tea or aerated drinks. But if one wants to drink coffee, then forget a synthetic coffee drink.

One can, of course, pose counter-factuals such as the indigo dye, which died due to synthetic dyes becoming available. The consumer was then concerned with getting the typical blue colour on their clothes. Its taste or smell did not matter. Yet, there is a revival in the demand for the natural indigo dye, even if only for a niche market. There is a big move towards things eco-friendly and organic. No WTO agreement will prevent the expansion or development of such goods and services. When one speaks of indigo, the exploitative British merchant comes to the mind. During Raj days, surely there was exploitation by colonial rulers and their businesses with the aim of filling their own coffers.

East India Company continues to haunt us. On another occasion, when news came of relaxation of FDI in print media, one report likened it to the revival of the East India Company.

Surely, the presence of foreign TV channels has not led to re-colonisation. Be that as it may, the role of the WTO is to ensure that every one gets a fair market and to prevent exploitation, that rules are in place to enable the aggrieved to challenge distortions. Indeed, the WTO is an unequal treaty, but it is certainly not entirely a set of one-sided agreements. Much has to be done, but to make the WTO punching bag for all the changes happening in the economy is like tilting at windmills.

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.

An Invitation to take the initiative on trade issues

Published: Financial Times, August 26, 2002 ,

Gene Hutchinson

Sir, Your editorial ‘A good deal on trade’ (July 29) produced an interesting letter from Mr Pradeep Mehta, secretary general of the CUTS Centre for International Trade, Economics and Environment in Jaipur, India (August 8). Mr. Mehta asserts that ‘standards, and the uncertainties they create, are getting in the way of producers getting better market access and the right price for their produce’. He continues ‘that there is negligible information exchange between developed-country consumers and developing-country producers on issues of standards’. We are surprised that he sees standards as creating uncertainty. Where is his evidence?

The International Organisation for Standardisation (ISO) has been developing international consensus-based standards for many years, and the standards are published and widely available. All relevant stakeholders are able to participate in the development process and the voting procedure provides an opportunity for any member country to express approval or disapproval.

The ISO recognises the importance of proper consumer input in standards development and the resourcing difficulties consumers have. There is therefore an arrangement that allows Consumers International (CI) – and Mr. Mehta’s organisation is a member of CI – to represent consumer interests in ISO technical work. The ISO is well aware of the difficulties of the less powerful stakeholders and long ago established policy committees – the committee on developing country matters and the committee on consumer policy – to advise on the needs of these special groups. This year the committee on consumer policy’s international workshop addressed corporate social responsibility and the role of standards. The lack of information, and hence trust, between the ‘developed-country consumers’ and the ‘developing-country producers’ was identified as an issue; and standards, in which relevant stakeholders participated, were seen as helpful.

Two current ISO initiatives are relevant to the issues raised by Mr Mehta. First, a programme sponsored by the World Trade Organisation to equip all developing country National Standards Bodies (NSBs) with the IT necessary to benefit fully from standardisation should enable developing country producers to get advice about international standards and other standards. Second, concern that the NSBs in many developing countries do not engage adequately with their various stakeholders has prompted an initiative to promote better communications. On September 24 in Stockholm the committee on developing country matters is organising an open workshop to move this initiative forward. We do hope to see Mr Mehta there.

Gene Hutchinson
Chair, Committee on Developing Country Matters
Caroline Warne
Chair, Committee on Consumer Policy
International Organisation for Standardisation
Geneva, Switzerland
(Financial Times, 26 August 2002)

Standards creating barriers to market access

Published: Financial Times, August 08, 2002 ,

By Pradeep S Mehta

Sir, I agree with your editorial (A good deal on trade, July 29) that the “fast track” authority for US President George W. Bush would help in taking forward the Doha round of world trade talks. This is the driver of world trade talks, unfortunately.

However, Washington needs to rethink on some of the steps that it had taken in recent times, particularly those relating to agricultural subsidies and the backtracking on the implementation agenda agreed upon as a package during Doha discussions.

Such steps result in uncertainties, which may slow the momentum of negotiations.

The two leading trading blocks (the US and the European Union) should assert that the quality of market openness is more important than opening of markets per se. It is true that for many agricultural products developed countries have reduced tariff barriers. But the crux of the matter is whether developing countries’ products are getting better market access or not.

The answer is somewhat in the negative, given the proliferation of non-tariff barriers, particularly with regard to health and consumer safety. For many countries, standards – and the uncertainties they create – are getting in the way of producers getting better market access and the right price for their produce.

As a social activist from a large developing country and being closely associated with the international consumer movement and trade, I can say that there is negligible information exchange between developed-country consumers and developing-country producers on issues of standards. One solution could be to institute a process of dialogue process between these groups so the information asymmetry (and resultant market uncertainties) could be reduced significantly.

From Doha To Cancun
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.

A message on labour linkage for Mr. Zoellick and Mr. Maran

Published on: The Financial Express, 9 August, 2001

By Pradeep S Mehta

Secretary General
CUTS Centre for International Trade, Economics and Environment

It might surprise him to know this, but commerce minister Murasoli Maran could be doing US Trade Representative Robert Zoellick a big favour if he says a resounding “No Way” to the very mention of labour standards in connection with the World Trade Organisation (WTO).

In doing so, Mr Maran would also be defending the fundamental national interest of India as the country awaits the promised gains from integration into the world trading system. India’s abundant skilled labour is the source of its riches, a thought which India’s representatives should vigorously reiterate at the upcoming negotiations.

Introducing a social clause in the WTO would open the floodgates for trade measures against developing countries. One only needs to look at the strident demands for the social clause by the US’s textile unions to understand that the real motivations are not humanitarian. They are narrow and selfish.

But the members of the Bush Administration are free traders at heart who find themselves up against these parochial demands of regions and sectors for protectionism. Many Democrats in Congress and a handful of Republicans have taken up the agenda of certain constituencies and have set the labour linkage as the price for trade negotiating authority. But why should broad national interest be held to ransom by lobbies?

Mr Zoellick and his colleagues have some powerful arguments for resisting the labour linkage. One is the prevailing view among the world’s most prominent international trade economists that the linkage is harmful. Well known economists Jagdish Bhagwati and Jeffrey Sachs, among many others, see the linkage as an impediment to the gains that free trade can bring.

Two, developing country academics and civil society are overwhelmingly against it. Evidence of this can be found in the TWIN-SAL statement of 1999. In the run up to the Seattle meeting, 103 people from all over the world signed on to the Third World Intellectuals and NGOs Statement Against Linkage. Two years on, experience has only fortified their arguments. How convincing are the ‘humanitarian’ arguments put forward by northern NGOs for the social clause in the light of this?

Three, is that developing country governments will not accept the linkage at any price. In the tug-of-war of WTO negotiations, there are some issues where developing countries are willing to give ground. Labour linkage is not one of them. If the US wants to restore the confidence of developing countries in the multilateral trading system, it will have to be the one to show flexibility on this issue.
It is in relation to this last point that Mr Maran can help. If he comes out with a clear message that developing countries will not let a WTO Round go ahead if linkage is on the agenda, then Mr Zoellick can take this message home with him to Congress to buttress his case.

This outward opposition should not, at the same time, cloud over many other WTO issues where the US and India have much scope to co-operate. Both have a clear interest in getting the European Union (EU) to open up agricultural and reduce their enormous farming subsidies. Both have an interest in blocking the introduction of the unnecessary and unscientific environmental standards that the EU is pushing for. On reducing industrial tariffs, the core business of the WTO, both countries have much to give and much to gain.

India, then, should focus its resistance. Rather than saying ‘No’ to almost everything, including the new Round itself, it should say ‘No’, pointedly and selectively to linkages. Elsewhere, it can say a judicious ‘Maybe’. After all, at this stage India is only committing to start talking about the issues, certainly not to agreeing to whatever treaty may finally emerge, a process which could take years, even decades. A country with 4,000 years of history can certainly hold its own in drawn-out negotiations.

India could even try saying ‘Yes’ and laying its own proposals on the table. One of these items on India’s proactive agenda could be freeing up workers’ ability to provide services in foreign countries. Movement of “natural persons”, as this is known in the WTO jargon, was one of the methods of trading in services identified in the General Agreement on Trade in Services (GATS), since downplayed and forgotten. India has brought it back into the limelight with a concrete proposal for liberalisation of the temporary movement of labour.

It is not clear at the moment which issues will be on the table for the Doha Ministerial. The last meeting of the General Council before the WTO’s August holiday forced a reality check revealed how wide the gaps between members’ positions still are on agriculture and environment? Where the EU stands exposed? And on implementation and anti-dumping. India’s energies are much better spent shaping this agenda and forging issue-based alliances with its trading partners.

If Mr Maran can strengthen Mr Zoellick for his return to the Capitol, then Mr Zoellick can fortify Mr Maran to be active rather than reactive.

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Can trade sanctions eliminate child labour?

Published on: The Financial Express, 16th January, 2001
By Pradeep S Mehta
Secretary General
CUTS Centre for International Trade, Economics and Environment

In 1820, Charles Dickens, as a 12-year old, was forced to work in a factory because his family was in the debtors' prison. Child labour was rampant in Europe in those days. Those days it was not through sanctions or boycott of goods produced by them, that the condition of child workers could be bettered. It was only through economic development spurred by the Industrial Revolution that jobs could be created and the curse of child labour and other exploitative labour practices in Europe could be curbed.

However, the scourge of child labour continues, more so in the poorer parts of the world, like Asia, Africa and South America. Acute and widespread poverty is the main cause for. These countries are not witnessing industrialisation. In fact, de-industrialisation is taking place. The International Labour Office (ILO) has estimated that in 1998 there were over 250 million children between the ages of five and 14 who worked as part-timers. Of these, 61 per cent are in Asia, 32 per cent in Africa and 7 per cent in Latin America. Although child labour is concentrated in Asia, the problem is most severe in Africa, where two out of every five children are engaged in some economic activity. In Africa, where the growth is substantial, the situation is compounded by the AIDS scourge, as many children have been forced into penury due to parents who died young.

In India, one of our field surveys done in the carpet industry in Rajasthan showed that it was usually children of a large family who had to work to earn their living. A ban on carpets produced by them, in 1995, by German buyers only `helped' in throwing them out of their jobs. They turned to either begging or stealing to survive.

Poverty is the main driving force behind parents pushing children to work. Population explosion is the other reason. It is always a large family that needs to send their children to work for survival. Even if one would like to send all of them to school, there are many problems. Are there enough proper schools? Are there enough teachers? Will the children be provided with required books and stationery? Our study showed that it would require anywhere between $12 billion to $18 billion per annum to provide functioning schools etc., for the estimated 15-140 million child workers in India. This estimate is based on providing functioning schools in the 600,000 villages with a mid-day meal. Additionally, the cost also includes an allowance as compensation for the loss of income for the poor to send their children to school.

The government doesn't have that kind of money. These resources can be raised through aid and/or strong economic growth of 8-10 per cent. As overseas development aid is going down every year, high growth can be achieved only through increased trade and investment flows, and increased exports. Sanctions or boycotts will not only hit the economy but also worsen the condition of these children. There are laws everywhere to prevent children from going to work, especially in hazardous occupations. But, implementation is poor in developing countries, as there is often no viable alternative and little resources.

In its annual report, `Global Economic Prospects and Developing Countries, 2001', released in December 2000, the World Bank points out: "The threat of trade sanctions or the imposition of trade barriers are likely to be excessively costly instruments for raising labour standards and even be counterproductive in some cases" . The overwhelming evidence against sanctions as an approach to child labour issues only confirms that there is need for better understanding and compassion about the issue, alongwith reduced trade barriers to help children in poor countries overcome their misery.

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