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
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 market countries more attractive hosts to foreign capital”, the US decla-red, adding that any exclusion of portfolio investment would “defeat the purpose” of an international investment agreement.
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.