Seattle 99 • Volume 4 • Number 1 • January 2000
Confidence-building: A Cure for Post-Seattle Blues?
by Mark Halle
Two months after the Seattle debacle, WTO Members are cautiously starting to pick up some of the pieces. Countless analyses have pinned the blame on a variety of causes, all of which played their role: real and deep divisions about the scope of the new round; inadequate preparation in Geneva, which encouraged inflexibility and meant that key issues where not ripe for deal-making; flawed negotiating procedures; too little time; the labour linkage fuelled by US electoral politics, as well as the much-reported demonstrations and riots.
A first attempt to deal with the aftermath resulted in bitter fingerpointing at the 17 December 1999 General Council meeting, which ultimately agreed to delay consideration of Seattle follow-up to its first session in 2000.
Since then, WTO Director-General Mike Moore has conducted a series of informal consultations with Members about the way forward, particularly with regard to improving the WTO’s decisionmaking and negotiating structures and the way to deal with expiring deadlines and provisions in WTO Agreements that were expected to be addressed through ministerial decisions at Seattle.
Built-in Agenda Negotiations Start in February
A more constructive atmosphere reigned at the General Council’s meeting on 7-8 February. Members agreed to start the built-in agenda negotiations on agriculture and services on 23-24 March and 21 February respectively, based on the provisions in the Agreements themselves. The talks will take place in special sessions of the Committee on Agriculture and the Council for Trade in Services, to be held back-to back with the regular sessions of the two bodies. The first sessions are not likely start on substantive negotiations, but will attempt to agree on a mandate, work programme and rules of procedure.
The services negotiations will be chaired by Ambassador Sergio Marchi of Canada, who was elected chairman of the Council for Trade in Services on 8 February. A vice chair will be appointed later to conduct the regular Council meetings. The respective appointments for the Committee on Agriculture were still pending when this issue went to press (see page 4 for more details about agriculture).
First Step in Confidence-building: LDCs
WTO Members have agreed that at least some of developing countries’ key concerns must be dealt with as a matter of priority in order to rebuild trust in the fairness of the multilateral trading system and get the WTO as an institution back to an even keel. At the 7-8 February General Council meeting, a number of issues of particular importance to developing countries were on the agenda, some of which stemmed directly from unfinished business in Seattle, including initiatives aimed at better integration of least developed countries (LDCs) in the multilateral trading system. WTO Director-General outlined steps taken in this direction in recent weeks, stressing that greater market access and capacitybuilding measures were ‘never to be seen as a trade-off or leverage to gain agreement to a new round of negotiations’.
In Seattle, the European Union and Japan offered duty-free and quota-free access to ‘essentially all’ products of least-developed countries but failed to secure agreement from the United States and Canada. In the EU’s case, certain ’sensitive’ agricultural products were to be excluded, whereas the US sought to leave textiles outside the initiative. Instead, the US stressed its pending legislation that would increase market access for ‘reforming’ countries in Sub-Saharan Africa and the Caribbean, as well as greater technical assistance to LDCs.
Consultations are still going on between the Director-General and WTO Members regarding an LDC ‘package’. A progress report is expected before the Easter break.
Transition Period Extensions Still Uncertain
Deadlines for compliance with several WTO Agreements remain a major concern for most developing countries, whose transition periods for full compliance with the Agreement on Trade-related Intellectual Property Rights (TRIPs), the Agreement on Traderelated Investment Measures (TRIMs) and the Agreement on Customs Evaluation expired on 1 January 2000. Least-developed countries have more flexibility for some of the provisions. Some progress was made at Seattle in addressing these issues, but most of the key demands never came close to being met: the US in particular continued to oppose blanket extensions of the TRIPs and TRIMs deadlines, which it said it would at the most review on a case-by-case basis. In its own draft declaration, the EU proposed a three-year extension of the transition periods of the Agreement on Sanitary and Phytosanitary Measures and the Agreement on Customs Valuation, as well as a two-year extension for the TRIMs Agreement. On TRIPs, the EU proposed accepting developing countries’ right to issue compulsory licenses to drugs on the WHO ’s essential medicines list, consideration of the relationship between the Convention on Biological Diversity and the TRIPs Agreement, and clarifying the effect of TRIPs Article 27.3(b) on the patentability of plants and animals and biological reproduction processes.
At the General Council meeting of 7-8 February, developing countries sought a multilateral agreement on three to five-year extensions, but no decision was reached. LDCs might still obtain some as part of the package currently under preparation, but so far developing countries have only managed to secure a ‘gentlemen’s agreement’ that their non-consistent measures will not be challenged until trading partners have reviewed their individual specific requests (see separate article on page 9).
Consultations will continue on the issue, which will be on the agenda of the next General Council meeting on 3 May.
Other Implementation Issues
Before and during the Ministerial Conference, a great many developing countries resisted the inclusion of any ‘new issues’ to the built-in agenda, at least until an agreement to address imbalances in existing WTO rules and provisions had been secured. These demands were dealt under the loose cluster of ‘implementation’. In addition to the deadline extensions, these included changes to some existing rules and a review of industrialised countries’ implementation of Agreements and provisions in favour of developing countries. The implementation of the Agreement on Textiles and Clothing, as well as the Antidumping Agreement were particular priorities (see Bridges Year 3 No.8, pages 1 and 4).
The Seattle draft Declaration would have created a ‘Special Mechanism’ under the General Council to address the ‘remaining issues relating to the implementation of existing WTO Agreements’. The process was to be completed within a year, and trade ministers were to review the results and take ‘appropriate decisions’ on outstanding issues at the Fourth WTO Ministerial Conference.
Most WTO Members acknowledge that they should address the implementation of existing Agreements ñ beyond the urgent question of deadlines ñ as part of the confidence-building effort, but it is still unclear where and how this should be done. The February 2000 General Council meeting did not discuss the wider implementation problems, but informal consultations are underway between Members on how to tackle the issue in the absence of a ministerial decision. The EU has developed a proposal on the subject, which ñ with the exception of measures aimed at LDCs ñ would leave the most difficult issues to be resolved as part of a wider negotiating round (see excerpts opposite). The General Council is likely to address implementation as a separate agenda item at its meeting on 3 May.
Textiles Concessions Are Unlikely
It was obvious throughout the tortuous Seattle negotiation process that ñ in an election year, with thousands of trade unionists in the streets ñ the US would neither agree to review its slow liberalisation of the textiles sector, nor to address anti-dumping. Briefing the House Means and Ways Committee on the US trade agenda at the WTO, US Trade Representative Charlene Barshefsky said on 8 February that US was meeting its ‘own commitments, of course, in areas such as textiles’. Continued on page 4 The European Union, supported Hungary, Japan, Korea, Switzerland and Turkey offered to apply the stage three phase-in rate as of 1 January 2000 rather than 1 January 2002. Developing countries generally considered the offer insufficient.
Institutional Reform
One of the factors that helped derail the Seattle train was smaller countries’ exasperation at the WTO’s non-transparent ‘consensusbuilding’ procedures. Throughout the preparatory process, many of them complained about semi-official meetings where the majority of Members could not participate. In Seattle, working groups open to all delegations were set up on the clusters under consideration, but ‘green room’ meetings with far fewer participants were held simultaneously and many delegations ñ particularly from Africa and the Caribbean ñ felt that they were once again sidelined from real decision-making. Several Latin American countries and the members of the Organisation of African Unity issued statements warning that unless ‘procedures designed to secure participation and consensus’ were re-established, they would not be able to ‘join the consensus required to meet the objectives of this Ministerial Conference.’
Institutional reform, or internal transparency as it is also known, has been a subject of consultations between the WTO Director- General and Members since Seattle. The issue was not discussed at the February Council meeting, but the Director-General proposed further consultations in March, possibly in an informal Heads-of- Delegation meeting or a special session of the General Council. He also stressed that the ‘principle of consensus’ was ‘not negotiable’.
Although many Members now seem to agree that the negotiation procedures of the Seattle Ministerial were not the main cause of the failure, various approaches for increasing transparency are currently under consideration. The EU has outlined several immediate steps that could improve the preparation and organisation of future ministerial meetings, including advance agreement on the structure of such meetings, as well as a more transparent balance between ‘informal processes and open-ended meetings’. The EU and Japan have also proposed setting up an Eminent Persons Group to consider all possible WTO institutional improvements. The group would then present its recommendations for the consideration of WTO Members.
The EU’s institutional reform paper also contains a number of proposals designed to ‘enhance transparency and consultations with civil society’, such as the establishment of a formal accreditation system for NGOs or opening trade policy review meetings to parliamentarians and NGOs of the country under review. According to trade sources most developing countries are reluctant to discuss the subject. Agriculture
Although agricultural negotiations will get under way 23 March, they are expected to proceed slowly, as the principal targets of the market opening drive ñ the European Union and Japan ñ will have little incentive to make politically-sensitive concessions. In the absence of the precise negotiating mandate that was to have been agreed in Seattle, the negotiations will proceed on the basis of Article 20 of the Agreement on Agriculture, which provides for the continuation of the liberalisation process but contains no precise goals or time frames for achieving the ‘long-term objective of substantial progressive reductions in support and protection’. Sub-paragraph 20(c) allows Members to take into account ‘nontrade’ concerns, as well as special and differential treatment for developing country Members while working towards the goal of a ‘fair and market-oriented agricultural trading system’.
At Seattle, Members came closer to a compromise on agriculture than is generally recognised. The latest draft text recognised developing countries’ right to special and differential treatment, which was to be ‘embodied in the schedules of concessions and commitments and, as appropriate, in the rules and disciplines to be negotiated’ so as to enable developing countries to take into account their development needs, including food security and agricultural and rural development. Paragraph 24 also provided for special attention to be paid to the situation of least-developed, net food-importing and small island developing countries.
The most controversial issues were export subsidies and multifunctionality. Virtuoso wording (paragraph 25(ii)) eventually emerged on the former where negotiations were to address ‘export subsidies, and equivalent action in respect of the subsidy component of other forms of export assistance, in the direction of progressive elimination of export subsidies’. Multi-functionality disappeared from the text, but its key components remained under non-trade concerns, which in the draft text included ‘the need to protect the environment, food security, the economic viability and development of rural areas, and food safety without prejudice to the Agreement on the Application of Sanitary and Phytosanitary Measures’.
Non-trade concerns were a subject of heated debate pre-Seattle and will continue to be contentious once the negotiations start. Developing countries will seek to enlarge the ‘green box’ agricultural subsidies in order to protect food security and rural employment. The EU, Japan, Korea, Switzerland and Norway will defend ‘multifunctionality’ or the roles that agriculture plays in maintaining rural landscapes, employment and the environment. The multifunctionality argument is flatly rejected by the Cairns Group of fifteen developed and developing country agricultural exporters, which argue that eventually trade in agricultural goods must come under the same disciplines as trade in other goods.
In its statement on the EU’s post-Seattle strategy, released on 25 January, the European Commission said that while the EU would ‘participate in good faith in the scheduled negotiations’, it noted that ‘in the absence of a decision at Seattle to launch a new round as a single undertaking, there remains no time frame for the conclusion of these negotiations’. The EU has also made clear that the near-agreement reached in Seattle is now off the table and that negotiations will be pursued only on the mandate contained Article 20 of the Agriculture Agreement.
The US has warned, however, that it might significantly increase its own subsidies if Europe engages in foot-dragging. In addition, the ‘peace clause’ is due to expire in 2003. This Due Restraint Provision, contained in Article 13 of the Agreement on Agriculture, exempts domestic support policies and export subsidy arrangements from dispute settlement challenges. ‘It’s hard for me to see a situation in which the United States would agree to an extension of the peace clause absent a new agreement,’ US special agricultural trade negotiator Peter Scher said on 12 January.
Labour
One issue united developing countries as no other in the pre- Seattle process, as well as at the Ministerial: the determination to keep questions related to labour out of the WTO. While the European Union also sought some sort of a forum to address the trade and labour linkage, it was the United States that clearly had the keenest interest, proposing a WTO working group to look into a number of sensitive questions, including child labour and respect for core labour standards (Bridges Year 3 No.8, page 14). Although US officials were careful to portray the proposed working group as only exploratory, developing countries wanted no part of it.
At Seattle, a working group on trade and labour was convened for less than an hour. The group came to no formal conclusion, but the time was sufficient to confirm that four-fifths of WTO Members were opposed to the establishment of the proposed WTO working group, as well as the joint ILO/WTO forum sought by the EU. Developing countries’ suspicions were further strengthened by President Clinton’s much-quoted comment to a local newspaper in Seattle that he would ultimately support trade sanctions for violations of core labour standards. While US Trade Representative Charlene Barshefsky tried to downplay the significance of the President’s remark, it served as death warrant for introducing labour discussions in the WTO in any form at all.
The US continues to include labour in its wish-list for future talks, but Charlene Barshefsky acknowledged in her testimony before Congress that the US ‘must address more effectively the reasons why many developing countries are suspicious of these discussions’. A proposal from future WTO Director-General Supachai Panitchpakdi could provide a venue for such discussions: he suggested in Seattle the convening of a once-off ’soulsearching’ forum under the auspices of a neutral institution such as the United Nations or UNCTAD. Participants would include high-level government officials, as well as representatives of relevant international organisations such as the WTO or the ILO.
Dispute Settlement
The WTO’s dispute settlement mechanism is another reason why developing countries are wary of taking on additional obligations ñ including environmental ones ñ under WTO Agreements. They see trade sanctions as a very effective weapon in enforcing WTO rulings against their restrictive trade measures because the industrialised countries are their principal export markets. They are, however, acutely aware of their own limited capacity to retaliate with sanctions to violations of WTO rules the by the major players, due to the fact that their markets count only for a fraction of the overall exports of powerful trading nations. In addition, the imports are often necessary for the functioning of the local economy. Faced with this conundrum, Ecuador is currently seeking the right to retaliate in the intellectual property rights sector against the EU’s continued non-implementation of the banana rulings (see separate story on page 6).
Conclusion
In the aftermath of Seattle, most WTO Members agree that confidence-building measures must be undertaken as a priority, although the details are still unclear. Beyond that, the EU and Japan continue to push for the rapid relaunch of a broad-based single undertaking. The United States has also said it wants a round to be launched this year, but has so far shown few signs of flexibility. Developing countries have limited interest in restarting the process. Their immediate concerns focus on the extension of transition periods and establishing a mechanism for the consideration of imbalances in existing WTO Agreements.
Seattle and Sustainable Development
By Mark Halle
Among the different opinions on what happened at the Third WTO Ministerial Meeting in Seattle, one point seems to rally everyone ñ that Seattle changed things for good. Seattle represented the demise of the old way of preparing and conducting multilateral trade negotiations. Whatever ways are devised to take the multilateral trade agenda forward, they are unlikely to bear much resemblance with the approach followed in the past.
Trust and trade-offs
So, what reforms? It is important to preface a discussion of needed reforms with a note on how progress is made in a complex, political system such as WTO. Trade negotiations are similar in many ways to straightforward commercial negotiations. They are successful if there is an adequate level of trust, and they are successful if both sides are prepared to make trade-offs.
Seattle stood little chance from the outset, because the minimal level of trust had not been developed. They stood no chance at all when it became evident that the key players had not come prepared to make the trade-offs necessary for progress to occur. In approaching WTO reform, the governing questions are: what can be done that will rebuild the trust so badly damaged in Seattle; and how can the issues be assembled on the table in such a way that the right trade-offs become possible?
The most evident levels of distrust exist between Europe and North America (though more accurately it is Europe and several others against North America and several others). This distrust is most evident around the subject of agriculture, but it is really about the purity of the trading system. GATT was easy, because it essentially dealt with tariff barriers to the flow of manufactured goods. One of the reasons for WTOís tribulations is that it has tried to go on as if the issues ñ like agriculture ñ that it now deals with were susceptible to the same sort of treatment. They are not. Much of the motivation behind Europeís insistence that the diverse functions served by agriculture be acknowledged (the multifunctionality debate) may be protectionist, but not all of it is. Nor is agriculture the only sector characterised by multiple functions. Indeed, virtually the entire WTO agenda is made up of multifunctional issues.
Distrust is alive and well also between the rich and poor countries. The latter feel both cheated and excluded. It will now be hard to win their trust without concrete measures which both offer them a better deal and a more assured place at the table.
For all their raucousness, the NGOs would not have been able to muster such energy and visibility had they not tapped into currents, which run cold and deep in societies throughout the world. The methods and alliances of some NGOs may be deplored, but at the heart of NGO rejection of the WTO system is the widely-shared sentiment that it is up to societies ñ and not the forces of capital and economic self-interest - to chose the shape and character of their world. Some way will have to be found to deal with this sentiment ñ either by co-opting the NGOs World Bank-style, or preferably by finding appropriate means to recognize and incorporate these concerns in the workings of the multilateral trading system.
The Reform Agenda
What, then, is needed? The required action can be grouped into three categories: measures to improve transparency and participation; measures to address the impact of trade liberalization on sustainable development; and improved coherence and mutual support between the trade regime and other essential elements of the global institutional and policy infrastructure.
Transparency and Participation
Of all the reforms required of the WTO, the call for more transparency and more effective participation drew the most press. In many ways it is incredible that WTO should have got away with negotiating in (literally) smoke-filled rooms for so long after everyone else had moved on to recognize that a new world requires new institutions and new ways of taking decisions.
But that is now over. The WTO will have to come to grips with enabling effective developing country participation in the trading system. It will have to find a way of allowing genuine, balanced participation from legitimate representatives of civil society. And it will have to operate in a way that is substantially more transparent than has been the case in the past. None of this is rocket science. Hundreds of other international organizations have grasped this particular nettle and turned it into a tasty soup. WTOís protests that it is different notwithstanding, it is not withstanding the wave of criticism levelled at it, and it is clear that its differentness has left the public indifferent.
Transparency measures will make it far more difficult for nations to say one thing to their public and another behind the locked doors of the WTO committee rooms. It will make it more difficult for them to agree a national position in public, then sell it out to commercial interests in private.
What applies to the WTO applies also, in spades, to national trade policy. The most diligent opponents of transparency in the WTO are countries that operate opaque systems back home. Those who oppose participation with the shrillest voices are from countries who discourage it at home. It is time to recognize that there is an emerging global standard (the Aarhus Convention symbolizes it) for transparency, participation and access to judicial processes which cannot be ignored. It is the basis of the new global governance.
One development which is clearly picking up momentum is the interest shown by parliamentarians. They can be counted on to play a more active role at both the national and transnational level, and can serve as a useful bridge between civil society and the WTO.
But participation requires more than an open door. It requires the capacity to walk through that door. Capacity to follow trade and to operate its rules in oneís own favour is severely limited, especially in the developing world, but also in non-trade sectors in the rich countries. If there is one thing that is broadly agreed, it is that there must be a considerably greater effort made to build this capacity if the trading system is to operate effectively in the future.
Calls for capacity-building echoed through the halls in Seattle, and provoked a negative backlash. Desperate for something to show for its four days of work in Seattle, the developed countries hoped to look good by promising a massive increase in resources for training. While it is needed and urgent, it sounded a tad patronizing, and did not go down well with developing countries that had deployed their existing capacity en masse and were still denied entry to the negotiating rooms.
The fact remains, however, that building capacity within governments, civil society and the research community remains a high priority, and one area where positive action can quickly be taken.
Sustainable Development
Seattle made it clear that WTOís commitment to sustainable development remains almost wholly theoretical. A dedication to the notion is carried in the Preamble to the agreements closing out the Uruguay Round, but preambular language in a binding and enforceable legal agreement carries no more weight than such language would in a contract setting out the terms of a merger between two giant corporations. What counts is what is enforceable. The rest is for public consumption.
An examination of the texts being negotiated in Seattle before the collapse repeated the preambular dedication to sustainable development, but the legal text was disturbingly free of sustainable development commitments. So have we had no impact?
It is fair to say that the WTO is now paying for its blanket disdain of any group that was not a member state. In treating friendly and constructive forces in the same way as hostile ones, it has missed the opportunity to collaborate with the former and to move forward in a way that might have afforded it some protection from the latter.
One problem is that the WTO has never been clear about the goal that trade liberalization is intended to reach. This may be because articulating such a goal would give ammunition to those who feel that WTO should be judged by the progress it makes towards that goal. If the goal is economic growth of the GDP kind, WTO will not win broad support. The goal must be wider.
The time is right for WTO to articulate its end-purpose and that end-purpose should be sustainable development or something very similar. Sustainable development would link WTO with many other international processes, but more important it would provide the basis for developing filters in the absence of which the WTO is flying blind. Is TRIPs a good agreement or a bad agreement? The answer depends on what one believes it aims to achieve. If, however, the goal were clearly sustainable development, then TRIPs could be judged on the extent to which it advances ñ or impedes ñ the achievement of sustainable development.
There is still much work to be done in looking at the real sustainable development impact of existing WTO agreements and practices, without even raising the issue of new agreements. Sustainable development is a factor in all of the WTO agreements, and not just in those issues covered by the Committee on Trade and Environment or those focused on the developing country interests. Sustainable development interests must be looked at in the context of all aspects of WTOís work. Ideally, all areas of WTOís work should contribute to the advancement of sustainable development.
The coming years will require a rededication of the WTO to broader goals, and an agreement to put all of its actions to the test of compatibility with these goals. The current wave of assessments is a good step in that direction, and will provide much empirical ammunition for the coming discussions with WTO. But the process should go further. It may be the only way to generate the confidence in WTO needed for the coming reforms.
Coherence
Hearing the WTO repeat like a mantra that trade liberalization is good for the environment, good for the poor, good for development, indeed just plain good was grounds enough for the Seattle riots. It has long been clear that trade liberalization can be good for sustainable development but only provided that trade, development and environment policies are harmonious and mutually-supportive. By and large, they are not, with the result that trade liberalization has undermined development objectives and damaged the environment.
Real compatibility among key policy sectors will not be possible until there is an equitable means of adjudicating among the different and conflicting policy objectives, and a set of principles to guide such adjudication. There is no single answer, but in respect of trade policy, it is clearly important that frontier commissions be set up to examine the interface between the different policy areas. This means both a heightened effort in areas such as the environment to achieve coherence among its own policies and positions, allowing the environmental community to negotiate with the trade area on a more nearly equal footing. It also means tying progress in trade liberalization to progress in other key areas ñ and thus achieving the trade-offs noted above.
Conclusion
Every crisis is an opportunity, and if Seattle was a disaster for the cause of liberalized trade, it was also a clarion call for change. WTO had been on a collision course with the developing countries and with social and environmental interests for some time. That they finally collided is not a surprise, although it is somewhat astonishing that the collision took place so soon and so violently.
For those who believe that the economic growth made possible by trade liberalization is a necessary ingredient of sustainable development, the debacle is the prelude to an era of exceptional opportunity (assuming that WTO does not go the hedgehog route of rolling up into a ball and aiming the bristles outwards). If we know where we would like to end up on transparency and participation, on sustainable development, and on policy coherence, it does not mean that we are clear about the best way to get there. We will need energy, creativity, and the ability to put aside old quarrels in the common search for a better outcome.
Mark Halle is the European Representative of the International Institute for Sustainable Development and the Chairman of the Board of ICTSD