Bridges Weekly Trade News Digest • Volume 9 • Number 2 • 26th January 2005

Members, Civil Society React To Proposals For WTO Reform

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Many WTO Member governments would not object to some informal discussions on the recommendations of the report on WTO reform released last week by WTO Director-General Supachai Panitchpakdi’s ‘Consultative Board,’ so long as they do not come at the expense of work for the Doha Round negotiations. At an informal heads-of-delegation meeting on 25 January, Members gave the report a generally positive reception, in spite of disagreements over its trenchant criticism of trade preferences and preferential trade agreements (see BRIDGES Weekly, 19 January 2005). Civil society organisations, on the other hand, were more critical of some of the eight-member panel’s recommendations.

Consultative Board chair and former WTO head Peter Sutherland opened the meeting with a presentation on the ‘Future of the WTO’ report. Although many Members are still discussing the report with their respective capitals, several delegations took the opportunity to make statements about the report and to challenge the five panel members in attendance about its contents. Members acknowledged that several of the recommendations, such as opening up dispute settlement hearings to the public, were controversial; they stressed the need to proceed with caution, particularly in the run-up to the Hong Kong Ministerial Conference in December.

Members say their FTAs support the WTO, not undermine it

Several Members echoed the report’s primary concern that a ’spaghetti bowl’ of overlapping commitments arising from bilateral and regional trade agreements were undermining the WTO’s core principle of non-discrimination. These Members included countries that have actively been pursuing such agreements. Chilean Ambassador Alejandro Jara said that his country’s many preferential trade agreements were part of a constructive approach to the multilateral trading system. He said that Chile was pursuing the Free Trade Area of the Americas (FTAA) because it simply could not wait for the multilateral system to agree on liberalisation. The US similarly praised its numerous bilateral free trade agreements (FTAs) for advancing, rather than hindering, the cause of multilateral trade liberalisation. It did not address the report’s criticism of preferential trade agreements for ‘non-trade objectives’ including strong labour, environmental, and intellectual property protections — all three of which have been hallmarks of recent US FTAs.

Panel member and Columbia University economist Jagdish Bhagwati said that the benefits of these trade agreements could be overrated. He noted that the North American Free Trade Agreement (NAFTA) had not led to the expected income gains in Mexico, and suggested that this was perhaps an indication that even NAFTA — cited by the report as a preferential trade agreement that spurred the development of the multilateral system — might be trade-diverting rather than trade-creating. He also pointed out that the Chile-US FTA talks took longer than the Uruguay Round.

Australia said that it would like to see more clarity in WTO law about what is acceptable in bilateral and regional free trade agreements.

ACP countries disagree with panel’s conclusions on preferences

Kenya and Jamaica challenged the Consultative Board’s analysis that unilateral trade preferences were undesirable. Both delegations said that they had found preferences to be useful in the past and would continue to pursue them in the future. Bhagwati countered that countries seeking such market access should "look preferences in the eye" — they may find that preferences help the donor countries more than the recipients. Sutherland clarified that the panel had not proposed getting rid of preference schemes; it had simply suggested that rich countries reduce tariffs to zero so as to restore the principle of non-discrimination.

Notably, Thailand took the opposite position in the largely South-South debate on unilateral trade preferences, arguing that preferences that discriminate between countries at the same developmental level are not really useful.

Some developing country sources disagreed with the report’s inclusion of special and differential treatment (S&D) for developing countries in its section on trade preferences. They argued that strengthening S&D is necessary, and would not undermine the principles of the WTO. In its statement to the meeting, Peru described the report’s conclusion that Members will have to contemplate graduated S&D for different developing countries as "very sensitive," and said that Members will have to address the issue with "extreme caution."

Members reflecting on proposals for reforms to decision-making processes

With regard to the report’s recommendations on improving the efficiency of decision-making at the WTO, Members stressed the need to preserve the principle of making decisions by consensus. Sutherland concurred, but said that consensus needed to be made to work better. Delegations expressed the need for caution with regard to the report’s suggestion that Members re-examine the use of plurilateral agreements.

Most Members agreed to reflect on the report’s proposal for annual Ministerial Conferences. China was of the view that the five-year summit of world leaders proposed by the Consultative Board would simply attract protesters. Some suggested that ad hoc ministerial involvement, as during the July 2004 negotiations that re-started the Doha Round talks, might be more effective than annual meetings. A few Members felt that more ministerial participation in Geneva-based processes, another recommendation of the report, would do more harm than good.

The panel’s proposal that Members establish a 30-member consultative body to provide political guidance to negotiators proved controversial. The report had envisioned permanent seats for senior trade officials from major trading nations and rotating seats for those from other Member countries. At the meeting, Members asked several questions about how such a board would be composed.

Argentina and Brazil were uncomfortable with the Consultative Board’s insistence that Directors-General of the WTO be selected without regard to geographical distribution, since alternation between developed and developing countries had worked well in other institutions. Sutherland said that ability must be the most important criterion for the position — if the requisite ability is present all over the world, so be it, but the most important thing is for the Director-General to be the ‘guardian of the [WTO] treaties.’

Where to go from here

A large number of delegations agreed with Australia’s suggestion for an informal heads-of-delegation ‘retreat’ where delegates could discuss the report with the members of the Consultative Board. Some said that institutional issues could be effectively discussed alongside the Doha Round talks, while others said that they were open to the idea of a one-off ‘retreat,’ but that the institutional questions would best be left until later. Supachai said that he would look into whether there was enough agreement among Members for such a retreat to be held, and when and how it could be organised.

Civil society sceptical about many of the report’s recommendations

Martin Khor of international NGO Third World Network (TWN) said that the report was right to attack FTAs, a sentiment echoed by Oxfam International. However, Khor argued that it erred in failing to differentiate between North-South FTAs, which are often unfavourable to the poor country partner, and initiatives like the Association of Southeast Asian Nations, which promote South-South trade. He also said that unilateral trade preferences and the principle of S&D for developing countries should not have been "lumped together" with FTAs.

The Minneapolis, US-based Institute for Agriculture and Trade Policy welcomed the reform initiative, pointing out that WTO Members and civil society have long called for changes in the functioning of the WTO. It particularly praised the report’s call for Members to provide adequate assistance to least-developed countries. However, it criticised the report for "failing to adequately explore the limitations of trade liberalisation." IATP also suggested that the report’s separation from the ongoing negotiations meant that it seemed "unlikely" that its contents "will ever feature on the WTO negotiating agenda."

Sources:

ICTSD reporting. "Future of WTO report launched, with some controversial proposals," SOUTH-NORTH DEVELOPMENT MONITOR, 18 January 2005; "The Sutherland Report: a call for change?" INSTITUTE FOR AGRICULTURE AND TRADE POLICY, 19 January 2005.