[Documents/Docheader.htm]The Doha Development Agenda: world trade at a crossroads
Doc. 10278
17 September 2004Report
Committee on Economic Affairs and Development
Rapporteur: Mr Kimmo Sasi, Finland, European People’s Party
Summary
The report examines the state of the negotiations currently under way within the World Trade Organisation (WTO) for the Doha Development Agenda, especially after agreement on a framework package was reached in Geneva this summer. Final agreement is urgently needed in order to adapt the world trading system to new economic realities and thereby permit much needed renewed growth worldwide, especially in the developing world.
The promise by richer countries to phase out all export subsidies in agriculture and reduce other trade distorting support to the sector is therefore particularly welcome. It now needs to beconsolidated by parallel progress in such areas as liberalisation of services and lower industrial tariffs. Environment protection is also of increasing importance in any comprehensive approach to world trade.
The WTO is a unique tool to preserve world interaction, prosperity and peace, even as its working methods may have to be reviewed to make it better equipped to ensure that the quickening process of globalisation can benefit all the world’s population. Vision and mutual understanding are required to conclude the Doha talks in good time.
I. Draft resolution [Link to the adopted text]
1. The Parliamentary Assembly recalls its Resolution 1269 (2002) on “Managing globalisation: the role of the World Trade Organisation in the world economy”, in which it welcomed the world community’s agreement in 2001 to pursue the quest for more open world trade by means of negotiations on a broad range of issues under the World Trade Organisation’s (WTO) so-called “Doha Development Agenda”. It emphasises the need for multilateral trade rules that ensure free and fair trade.
2. The Assembly warmly welcomes the WTO’s agreement reached in Geneva in July 2004 on a framework package for the pursuit of the Doha Development Agenda, thereby overcoming the setback suffered at the Cancun Ministerial Conference in September 2003 and rendering possible a final agreement at the WTO Ministerial Conference foreseen to be held in Hong Kong in 2005. The Geneva success is all the more noteworthy since any failure in these endeavours would have serious consequences for developed, emerging and developing economies alike, in the form of economic tensions potentially spreading to the political arena and affecting world peace and prosperity.
3. In a sign of progressing world interdependence, world trade grew by nearly 5% in 2003 and is expected to rise by an additional 8% in 2004 – raising the prospect of increased prosperity and new employment in large parts of the world. There are growing indications, however, that, in the absence of a successful conclusion of the current Doha negotiations, such increases will be harder to come by in future, since present WTO rules – essentially those concluded under the Uruguay Round a decade ago - are in less and less alignment with current economic, technological, trade and other developments. The result has been an increasingly sub-efficient world trade order characterised by widening trade distortions, forgone growth and rising international discord. A new agreement which permits the participating countries better to draw on their competitive advantages is therefore urgently needed.
4. Europe, Japan and the United States, which together count for two thirds of world trade, bear a special responsibility for securing success, notably through concessions on agriculture. The Assembly in this context welcomes the agreement reached in Geneva in July 2004 to phase out all agricultural export subsidies and substantially reduce trade distorting domestic support to agriculture within a reasonable time period and urges the European Union and the United States to present a credible end date as soon as possible. The final agreement should include a timetable for the successive realisation of these commitments and for gradually greater access to the markets of advanced countries for agricultural exports from developing countries, many of which have few other means of developing economically.
5. The Assembly, while noting the persistent difficulties to reach agreement on the so-called ‘Singapore issues’ concerning competition, the protection of investment, transparency in government procurement and measures to facilitate trade, notes the limited progress reached in Geneva in July 2004 in this area. A flexible and gradual implementation of the “Singapore issues” may well be the best way forward and will require concessions by emerging and developing economies, also in order to facilitate parallel agreement on agriculture. The Assembly in this context recalls its Recommendation 1646 (2004) on “Improving the prospects of developing countries: a moral imperative for the world”, in which it stressed the importance of transparency and good governance in all countries, the need to reduce technical barriers to trade and the major potential for increased trade between less developed economies.
6. The world community is increasingly agreed that more intensive trade and economic development must be compatible with an efficient protection of the environment. The Assembly strongly supports efforts under way in the WTO to ensure that trade rules take into account the need to protect the environment and that, similarly, environmental protection does not unduly impede trade.
7. The protection of core labour standards, including a ban on child labour, has been a source of disagreement between, on the one hand, developed economies which tend to be in favour of their inclusion in the WTO agenda and, on the other, emerging and developing economies which take a more reserved attitude to their inclusion. The Assembly in this context recalls the values enshrined in the United Nations Convention on the Rights of the Child, the European Convention on Human Rights and Fundamental Freedoms, the revised European Social Charter and the Charter on Fundamental Rights forming part of the European Union’s Constitutional Treaty. The Assembly strongly believes in the need for core labour standards such as those elaborated within the International Labour Organisation to increasingly inspire world trade rules and in defending them in all contexts, including in the WTO.
8. The Assembly notes the widely felt public apprehension over a perceived lack of democratic scrutiny regarding, and accountability of, international institutions as well as various aspects of globalisation. Against this background, it welcomes the co-operation between the Inter-Parliamentary Union (IPU), the European Parliament and the Parliamentary Assembly of the Council of Europe to ensure greater involvement by parliamentarians in the WTO process. It also calls on national parliaments to pursue and strengthen parliamentary oversight of WTO activities in shaping the multilateral trading system.
9. The WTO’s present consensus-based method of decision-making has the advantage of being highly democratic and respectful of the wishes of all its members, but it also risks unduly slowing down the process and diluting agreements. If the world is to preserve a multilateral trading system which has served it so well and avoid a retreat to protectionism, bilateralism and excessive trade regionalisation, it will need to reform WTO decision-making procedures as soon as the Doha Development Agenda has been successfully concluded.
10. The WTO at present has 147 members and 30 observers. Six Council of Europe member states - Andorra, Azerbaijan, Bosnia and Herzegovina, the Russian Federation, Serbia and Montenegro and Ukraine - are observers and at present engaged in negotiations for membership, which the Assembly hopes can soon become a reality. The Assembly in this context welcomes the agreement in May 2004 between the European Union and the Russian Federation aimed at facilitating that country’s membership of the WTO. It believes that Russian membership would be of major benefit both for Russia and for the world – marking as it would, after China’s joining in 2002, a near-universal reach for the organisation. The Assembly also welcomes the efforts of developing countries to organise themselves within the WTO framework through the G-21 and G-90 groupings.
11. The Assembly in conclusion calls on Council of Europe member states to pursue the vision, statesmanship and willingness that they, like all their WTO partners, manifested in Geneva in 2004, so that the Doha Development Agenda can be successfully concluded in good time and pave the way for a new era of stability, peace and growing prosperity. There can be no room for complacency in consideration of the limited time remaining and the vital issues at stake. It is in this context essential that further progress can be reached in lowering industrial tariffs, liberalising services and reducing trade distorting agricultural subsidies, in order to arrive at a balanced and fairfinal agreement beneficial to all parties - in consideration of the fact that, in WTO negotiations, “nothing is agreed until everything is agreed”.
II. Explanatory Memorandum by Mr Sasi, Rapporteur
Table of Contents
2. A BACKGROUND TO THE BREAKDOWN OF THE TALKS IN CANCUN
2.1 Europe
2.2 United States
2.3 Developing countries
3. LESSONS TO BE LEARNT - DEVELOPMENTS SINCE CANCUN
3.1 Needed changes in the approach of industrial countries to trade
3.2 Needed changes in the approach of developing countries to trade
3.3 Suggested reforms of the WTO
3.4 Trade in services: GATS, TRIMs and TRIPS agreements
3.5 Collateral issues: multilateral trade, environmental protection and core labour standards
3.6 Saving Doha: the WTO framework agreement of July 2004
4. THE PARLIAMENTARY DIMENSION OF THE WTO PROCESS
1. The reduction in the barriers to trade has been a major driving force behind the historically unparalleled development of the world economy since the end of the Second World War. With the establishment of the GATT (General Agreement on Tariffs and Trade) system in 1948 the industrialised nations turned to tariff-cutting negotiations that culminated in the successful completion of the Uruguay Round (1986-1994). That Round essentially did away with tariffs for many industrial sectors; launched the liberalisation of trade in Services (GATS); improved a number of basic trade rules pertaining to investment (TRIMS) and saw an agreement on intellectual property protection (TRIPS). Moreover, the round paved the way for stronger participation of developing countries and led to the birth of the World Trade Organization (WTO) in 1995.
2. The WTO, with its binding rule-making and its dispute settlement authority, has since its establishment championed a qualitatively new approach to trade policies, whereby global rules are increasingly intertwined, and interacting, with national policies. The WTO’s first Ministerial Conference, held in Singapore in 1996, broadened the multilateral negotiations’ agenda to include environmental aspects, competition policies, protection of foreign direct investment, trade facilitation and public procurement. There followed inconclusive talks in Seattle in 1999 and a much more constructive 2001 Ministerial Meeting in Doha (Qatar). The latter gave rise to the so-called Doha Development Agenda.
3. Despite uneasy compromises sometimes leading to delayed results, international trade has continued to flourish, amply demonstrating the benefits it brings to the society at large. Substantial welfare gains derive from innovation, lower prices, greater choice in supplies, stronger competition and more dynamic employment markets, although some countries found that achieving such gains can be problematic, especially with regard to the agricultural sector. In Doha, therefore, ministers agreed to observe longer transition periods and improve technical assistance to developing countries in order to help them implement already agreed undertakings. They also recognised the need for special and differential treatment of these countries in various sectors of negotiations.
4. The Assembly notes with regret[1] that the most recent WTO Ministerial Conference held in Cancun (Mexico) in September 2003 failed to reach agreement on the principles meant to inspire a successful conclusion of the Doha Development Agenda in 2004. This notwithstanding, and although the collapse of the talks clearly constitutes a setback in the world community’s quest for a fair and balanced multi-lateral trading and investment system, the new situation also presents all sides with an opportunity to ponder the deeper reasons for the stalemate, and to seek out each other in dialogue in order to identify areas of eventual compromise.
5. Disappointment over the failure of the talks stems from the fact that trade has been the engine of world economic growth over the past 50 years. However, in the past few years there has been a slowdown, making any new trade deal even more welcome as it would boost economic growth and confidence. For any such deal to become a reality, a new partnership between the industrialised nations and the developing world will have to be forged.
6. Developing countries that nowadays account for over 75% of the WTO’s membership will be the biggest losers if trade liberalization fails. The World Bank estimates that 144 million people would be lifted out of poverty if a deal had gone through in Cancun. This is not to say that the increasing scepticism of developing countries towards the whole global trading system is not justified. The problem is that the developing world is not getting its fair share of the economic development created by this increased trade. The planet's poorest 50 countries, with about 10% of the Earth's population, account together for less than 0.5% of world trade. The danger is that they decide self-sufficiency is the way forward, and the WTO becomes at best irrelevant. Yet this is the surest way for them to lock themselves into poverty. The collapse of the talks therefore clearly signals a ‘lose-lose’ situation for all parties. Instead, the aim should be a ‘win-win’ situation for all.
2. A BACKGROUND TO THE BREAKDOWN OF THE TALKS IN CANCUN
7. The natural question which follows on from Cancunis why did the talks fail? The representative of the Council of Europe’s Parliamentary Assembly attending the parliamentary meeting accompanying the Cancun summit believes that all sides were responsible, being too fixated on their own objectives and insufficiently attentive to those of their negotiating partners, and even less to the reasons and concerns underlying those objectives.
8. There were two main issues over which the negotiations failed. The first and most contentious of these was agriculture. Rich countries were accused of hypocrisy for urging poor countries to open their markets but not being prepared to open their own, or reduce the huge subsidies to their farmers. The sum of over $ 300 billion that developed countries pay each year to subsidize their agricultural industries – indeed seven times more than they give in development aid! – is looking increasingly untenable[2]. In the end, rich countries would not agree to the abolition of all export subsidies which make their agricultural products cheaper on world markets. The second issue involved a great deal of opposition to European Union’s focus on the so-called‘Singapore’ issues, including proposals for rules on investment, competition, trade facilitation and public procurement. Many countries felt that they could not agree to these rules without losing control of their own industrial development policies. They further argued that the WTO was not the appropriate forum for such discussions.
9. To compound these difficulties involving attitudes and issues, there were also problems with the process as a whole. Fundamental disagreements on the negotiating package had spilled into the negotiation process long before the ministers met, and decisions which should have been taken before the meeting started were not finalized, leading to a backlog and overloading of the meeting itself. This was despite the fact that substantialprogress was made in textiles, pharmaceuticals and services. The timetable for talks onthe Singapore issues was not clearly defined at the Doha meeting that launched the trade round. Placing development at the core of the round proved a problem, given that this term means very different things to different participants. In addition, the negotiation process was marred by staggered intermediate deadlines, making it more difficult to assess tradeoffs between different areas of the negotiation. Finally, some participants felt that the Mexican chair closed the meeting too early, and too suddenly, before final compromises had a chance to be reached.
10. Looking at the position of the various participants in more detail, one can question whether some of the countries who came to the meeting really wanted an agreement at all. They arrived armed with their own agendas. The EU and US positions were considered of particular importance, since these two players together represent about 40% of world trade (a figure which is today even higher after the recent EU enlargement).
2.1 Europe
11. The European Union has certainly shouldered much of the post Cancun criticism for pushing the ’Singapore issues’ too aggressively. Many developing countries had categorically stated that they did not even want to discuss them despite Doha conclusions until a deal on agriculture had been struck, and that they should be kept off the already overloaded agenda. These issues cover competition, transparency in government procurement, trade facilitation and investment. The EU continued to push especially for trade facilitation andfor multilateral agreements on foreign investments, in the face of concerns raised by developing countries that such agreements would be subject to the WTO principles of non-discrimination and therefore would prevent host states from pursuing important industrial development policies (such as requiring foreign investment in the form of joint ventures). However, developing countries all the time negotiate investment protection treaties with industrialized countries on a country by country basis.
12. EU countries remain locked in a rigid negotiating position over agriculture. Several EU member governments have consistently pushed for a reform of the Common Agricultural Policy (CAP) reform and there is an encouraging recent initiative to decouple production and subsidies. However, rather generous promises of farm support to the ten countries that joined the EU in May 2004 and a plan to maintain the overall level of CAP spending until 2013 will leave little room for manoeuvre. Because nearly half of the EU’s budget is tied up in payouts to farmers, the inevitable reform of CAP will have to be gradual in order to prepare for the likely outcome of the Doha negotiations.
2.2 United States
13. The United States has faced similar criticisms in the post-Cancun analysis, with many asking whether there is a real will in the US to havea deal at all. Many see the Americans as not really interested in international agreements, or only when it suits them. Theirs, it is argued by some, is onlya ‘multilateralism of convenience’. However, in all fairness one has to note that the US Congress accorded a ‘fast track’ negotiating mandate to the administration.Robert Zoellick, the US trade representative, said after Cancun thatUS would now concentrate on negotiating regional and bilateral trade deals, rather than on reviving the Doha round. Mounting protectionist sentiment at home, combined with the final stages leading up to the November 2004 presidential elections forebode little in terms of new trade initiatives or tradeoffs.
14. In this context, we should also recall that the United States, as well as many other developed countries, remain strongly attached to the protection of intellectual property rights and a further reinforcement of TRIPS agreement (Trade Related Intellectual Property Rights), which in fact created minimum universal standards in that area on the basis of American and European norms. However, if developing countries embraced the TRIPS deal during the Uruguay Round of negotiations, it was partly in exchange for US and EU promises to reduce barriers to trade in textiles and agriculture. The Cancun outcome was therefore perceived as a double disappointment.
2.3 Developing Countries
15. At Cancun, a number of international groupings led by developing countries emerged, particularly the G-21[3], led by China, India and Brazil. These groupings demonstrate that developing countries are becoming increasingly well organized. Their expertise and capacity to influence WTO negotiations on issues of vital importance is growing. The G-21 stood firm in Cancun, asking for product-specific support reductions, the elimination of agricultural export subsidies and the lowering of agricultural tariffs. The problem was that most European and American negotiators did not see their countries’ farm subsidy programmes as trade distorting measures, while most developing country negotiators did. This ‘expectations’ gap’ ultimately undermined the potential for a nearing of negotiating positions at Cancun.
16. It is also argued that the developing countries should be more flexible andanalytical regarding the Singapore issues and see the benefits of a better entrepreneurial environment. Transparency in public procurement decreases corruption which is one of the biggest problems for development in some of the developingcountries.
17. The question now is whether the G-21, this dynamic new force on the world trade negotiating scene, can be sustained for good. The G-21 was very late in appearing on the scene and the poor world has been disunited for too long. It is also a fact that developing countries have different interests. If some of the key players, such as Brazil (an important food exporter), stand to benefit from more liberal trade in agricultural products, others, like India, insist on maintaining protectionist tariffs on farm produce at home while asking for the elimination of agricultural subsidies abroad. There will be temptations to bicker, there will be inducements from the north to sidle off and acquiesce in more compromise. But if the G-21 does manage to keep going, the future for farmers in the north could before long be very different. When the news of the collapse of WTO talks at Cancun reached the conference centre, many campaigners, such as protectionist farmers, cheered, as many have come to believe that no deal is better than a bad one for developing countries.
18. However this is not a healthy response given that, if the whole WTO system does not develop and we revert to a world of bilateral agreements, developing countries will suffer. Trade will be less open; these countries will have even less bargaining power and will be more subject to pressure from the major trading nations. It is they, after all, who suffer from any unfairness of the world trade system, the agricultural subsidies in Europe and the US, the stringent product standardsand sometimes escalating trade barriers. But this system will not be changed without an agreement at the WTO. So the immediate result of Cancun is that the current injustice remains in place. A multilateral solution, reached via the WTO, will always be fairer to developing countries than a system composed of bilateral deals, in which the poorest countries can be isolated and pressurized. The danger with the new grouping is that a few of the larger developing nations (notably Brazil, India, China, South Africa) will lead the smaller, least developed and most needy countries into a new agenda which if anything hurts them even more.
3. LESSONS TO BE LEARNT - DEVELOPMENTS SINCE CANCUN
19. What will happen next? The Cancun Conference was only an interim meeting in the Doha Round of trade talks. The negotiations returned to the rooms of Geneva, where trade officials have been searching for the way forward via a combination of informal consultations and official talks. It should be stressed that it is less disastrous for this an interim round to fail than the final round and that earlier trade rounds also suffered from delay, including the previous Uruguay round which lasted eight years.But there are real doubts whether the ambitious deadline of concluding the Doha Development Agenda by the end of 2004 can be met and it is very likely that it will not.
20. One immediate concern in the aftermath of the meeting was to ensure that an escalation of trade disputes would not follow the breakdown. This was key as we saw, in December 2003, the expiry of the ‘peace clause’ on agriculture which had sheltered the US and EU farm subsidies from WTO challenges. Clearly a period of calm was needed to allow tension to subside. A series of informal meetings took place in early 2004 among African, Asian, EU and US trade officials, with the latter showing willingness to compromise on a number of issues dear to developing countries. Mr Zoellick, the US Trade Representative, announced that his country was eager to drop its insistence on the more contentious Singapore issues, namely those relating to the administration of trade. Pascal Lamy, the EU Trade Commissioner, joined in along the same lines but was still pressing for further discussions on transparency in government procurement and trade facilitation. In May 2004 Mr Lamy announced the Commission’s provisional readiness to abandon agricultural export subsidies in order to revive the negotiations, and Mr Zoellick, welcoming the Commission’s move, heralded US concessions along the same lines.However, groundbreaking initiatives to bring the positions of the EU, the US and the developing countries closer together on the sore issue of trade distorting agricultural subsidies have yet to come about.
21. It is hoped that disappointment with the results of Cancun talks will make all sides more willing to compromise in Geneva and at the next ministerial meeting, which should take place in Hong Kong, as soon as possible. Often a wake up call is required, and talks have to be pushed to the wire before a compromise can be reached. The Assembly’s representative at Cancun meeting expressed the hope that all sides would approach each other in a more cooperative spirit and show more eagerness to understand and reach out to each other rather than pursuing the brinkmanship which was so manifest at Cancun.
22. The failure at Cancun does not mean the end of the "development round", or the collapse of the rules-based multilateral system. In fact, the Cancun setbackhas created an opportunity to strengthen the WTO's legitimacy and to improve trade rules. However, while it is only natural that negotiators should watch out for their respective countries’ interests, they should never lose sight of the ultimate goals of trade negotiations, which are to optimise production and the use of the respective strengths of countries, to agree on fair global rules of competition and to ensure the predictability of investment conditions and the long-term protection of investments. In this connection, a number of lessons need to be learnt from past experiences.
3.1 Needed changes in the approach of industrial countries to trade
23. There is a somewhat ‘melodramatic’ lesson that could be read from the breakdown of Cancun talks, if one adopts the pessimistic stance that the breakdown represents a serious breach, rather than simply a showdown on the road to a compromise. Cancun could be seen as a watershed where the post-war (or certainly post-Bretton Woods) global economic order, represented by the industrialized world pushing only for free trade, is seen as too narrow in scope. Unless a new global structure is found which can be agreed upon by a broader coalition of nations, the global economic system risks falling backwards into a unilateral or bilateral, protectionist phase which would spell lower economic growth levels for all. That could very much hurt the rapidly industrialising countries.Governments have to accept that attempts to impose rapid trade liberalization whilst maintaining domestic protection will no longer be possible.
24. Such pronouncements have come from as credible a source as UNCTAD (the United Nations Conference on Trade and Development). In their 2003 annual report they advised the United States and the European Union that instead of focusing on dismantling trade barriers, they should be working together to kick-start the global economy and avert a crisis of confidence in countries which have failed to benefit from globalization. They claim that developing countries need policies to nourish, support and develop domestic industries, and the capability to compete in international markets, to supply their home market, and attract investment flows. Such policies should be at the forefront of developing issues rather than onlypushing towards more free trade. This will require a much more pragmatic approach to trade policy, giving less emphasis to levelling the playing field through liberalization measures and more attention to providing the policy space to promote stronger investment-export linkages in countries with very different economic and institutional capacities. The lesson from Cancun is that ‘one size fits all’ simply means that many countries are wearing ill-fitting economic policy clothes.
25. The main manifestation of such a change in the global economic system must come from agricultural reforms. Without major changes in the stance taken by the USA, the EU and other developed countries on agriculture, trade negotiations on all other subjects will be blocked. The EU is slowly delivering the adjustments to the Common Agricultural Policy which were agreed at EU level in June 2003. These will gradually cut the trade-distorting support and export subsidies given to European farmers. Given the unilateralist tendencies emanating from the current US administration, more leadership will have to come from the EU. Europe should defend multilateralism in trade. That means tackling head-on the issues that scuppered Cancun. The EU can either defend the Common Agricultural Policy or it can defend multilateralism. It can not do both. Europe should agree to lower the trade barriers that deny poor countries market access and a fair share in world trade. Action in these areas will be a small price to pay for the survival of a rules-based trading system. But it will require what EU governments have failed so lamentably to provide - political leadership. Without these moves being made, the lessons from Cancun will not have been properly learnt.
3.2 Needed changes in developing countries’ approach to trade
26. The main lesson to be learnt from Cancun is that developing country governments representing most of the organisation’s 147 members have found their voice. Led by India, Brazil and China, the Group of 21 countries has emerged as a formidable negotiating force - as have African governments. By refusing to concede demands on investment, rejecting bilateral European Union-US deals on agriculture and demanding better access to northern markets, developing countries have taken a strong autonomous stand. However, if not handled carefully these countries may well ‘cut off their nose to spite their face’, bringing down the whole system and causing all to suffer. Hence the need for the reform of the entire trading system discussed above.
27. But lessons also need to be learnt by the developing world itself. Cancun demands a rethink, not just for the governments of the developed world, but also for the campaigning movement for global change. The stakes are too high now for rhetorical victories that paper over continuing disaster for the poor. The anti-globalisers and communists do not want to see more trade at all. They want "localisation" - protected, more self-sufficient local economies - not globalisation. But this surely is not the way forward, as it will only perpetuate poverty. It has been shown that countries which engage most actively in trade with the outside world are those that develop most successfully. The socialist countries were an explicit example of the opposite. What should be aimed at is more trade managed under a rules-based system, but a system of fair trade rules.
3.3 Suggested reforms of the WTO
28. A further lesson that has to be taken from the failure of Cancun is that reform of the WTO system is also required. A consensus based system is very democratic but also renders decision-making difficult.An unprejudiced scrutiny of the present WTO negotiating process should be undertaken and should lead to reform, for the purpose of facilitating future agreements as it has become increasing difficult to reconcile the different interests, capabilities and political timetables of 147 members. If action is not taken soon, the whole organization could dissolve into ineffectiveness. However, care should be exercised, and members should not try to fix the structure before Doha round has been finalized. It is too risky to change the rules half way, which would threaten to leave both objectives (the Doha round and reform) open to failure.
29. During this reform process difficult questions, fundamental to the organization, need to be addressed. Is the WTO in terms of both its principles and organization adapted and adaptable to today’s demands? Is consensus building possible given the increasingly technical questions with political implications now faced? Will the WTO dispute mechanism become one for deciding between competing and incomplete rules? Should bilateral and regional agreements be seen as compliments or substitutes to the multilateral process? The lesson from Cancun’s failure must be that sweeping such fundamental questions under the carpet is no longer an option. Unless they are addressed the whole multilateral trading system risks collapse.
30. The WTO dispute settlement mechanism is a major achievement and should be consolidated even further. Over the decade it has been in place (since the creation of the WTO in 1995) its rules have been streamlined and strengthened. Timeframes have been defined for each step in the procedure, which has led to greater discipline while allowing consultation and mediation at all stages. The rulings and appeals reports are automatically adopted unless there is consensus among all WTO members to reject them. A compliance obligation then follows, which may ultimately lead to limited trade sanctions. The latest review of the dispute settlement rules is imminent. To date, over 300 disputes have been brought before the WTO.
3.4 Trade in services: GATS, TRIMs and TRIPS agreements
31. Among the most significant results of the Uruguay Round negotiations were the agreements reached on trade in services. They include the so-called GATS (General Agreement on Trade in Services), TRIMs (Trade Related Investment Measures) and TRIPS (Trade Related Aspects of Intellectual Property Rights). According to the WTO, the share of services in international trade remained stable, at about 20%, over the 1990-2003 period, growing an average 6% per year, with some sectors (such as computer and information services, financial services, insurance, telecommunications, and personal, cultural and recreational services) developing even faster.
32. Developed countries which are major sources of innovation have long feared the unauthorised (and hence non-remunerated) use of intellectual property, especially along with the increasing delocalisation of production facilities to the emerging and developing countries. The rapidly growing international trade in counterfeit goods has been another source of concern. The TRIPS agreement has established a minimum universal protection framework for intellectual property on the basis of existing US and European laws. However, many developing countries find it difficult and costly to implement this agreement. As early as 1996 the WTO signed a co-operation agreement with the World Intellectual Property Organisation (WIPO) in order to better assist its members, especially developing countries, in implementing the TRIPS agreement.
33. Although the Doha Development Agenda stressed the importance the ministers attached “to implementation and interpretation of the TRIPS agreement in a manner supportive of public health”, the clash of interests between the intellectual property owners and users became particularly visible in the run-up to Cancun, when developing countries tried to negotiate a more flexible arrangement regarding their access to essential medicines for combating HIV/AIDS, tuberculosis and malaria[4]. Developing countries saw the control of pandemics as being a far higher development priority than that of protecting patents. An agreement was finally reached shortly before the Ministerial Conference, showing that concessions by developed countries can help resolve difficult situations. What is often forgotten, however, is the other side of the coin, namely that companies in developed countries (as elsewhere) must be able to recoup the cost of their research and development leading to new medical and other discoveries. Unless they can do so, further research and development may be compromised, with negative consequences for both industrialised and eventually also developing countries.
34. The milestone GATS agreement, which came into force in January 1995, laid the foundation for the progressive liberalisation of trade in a large number of services and was perceived as being more flexible and applicable than TRIPS. GATS allows countries to set their own pace for opening their services sectors to international competition and thus permits a more realistic implementation framework. It covers all international services, except public services provided by the state and air traffic control services. Argentina and India are frequently cited as good examples of how countries can manage the liberalisation of their services sectors and derive major benefits there from. The services negotiations, which started in early 2000, should in principle be finished by 2005.
35. The TRIMs agreement, effective since January 1995, recognises that some investment measures may restrict or distort trade. It seeks to phase out trade-related investment measures inconsistent with Articles III (national treatment) and XI (elimination of quantitative restrictions) of the GATT. Even though a list of such measures was appended to the agreement, the lack of a precise definition of the phenomenon has led to differing interpretations and disagreements. As one of the Singapore issues, the link between trade and investment has been on the table since 1996. Although the Doha Declaration did not launch negotiations on this issue, it spelled out a number of general principles to be observed, such as the need to balance the interests of investor and host countries, as well as countries’ rights to regulate investment, development, public interest and specific circumstances. At Cancun and since, negotiations on TRIMs have unfortunately stalled.
3.5 Collateral issues: multilateral trade, environmental protection and core labour standards
36. WTO members share an ambition to ensure that world trade and economic development are compatible with protecting the environment. Although the relationship between trade and environment is complex and not yet fully understood, there is a strong will, especially in Europe, to ensure the coherence between environmental and trade rules. There is clearly a growing market for environmental products and services in areas such as air and water pollution, waste treatment, recycling, noise and vibration control, safe transport and disposal of hazardous substances, deforestation, desertification, habitat protection and the sustainable use of resources.
37. OECD studies on the benefits of multilateral trade liberalisation in environmental products and services show a continuing shift in environmental regulatory approaches from pollution control to pollution prevention, via the use of ‘cleaner’ technologies and products and the active involvement of the private sector. This has broadened the range of environmental goods and services available, even though the gap between industrialised and developing countries is widening. Because some environmental services are public goods, they tend to be a state monopoly in many countries - implying price controls, lack of competition in government procurement and limited access for the private sector. Still, trade liberalisation under the WTO’s leadership has contributed to a gradual privatisation and de-monopolisation of public utilities in many countries and hence to greater trade, investment and competition, especially by lowering technical barriers to trade. Even so, trade is still inhibited by differences in norms and to a certain extent also by the pre-eminence given in some countries to the so-called precautionary principle, by which a product or service is not allowed until its innocuousness has been proven. The Rapporteur will still rise to the defence of the precautionary principle unless applied excessively, for though trade is important, so also is public health, such as in the case of medicines and foods with partly unknown health consequences.
38. WTO members also agreed at Doha to launch negotiations on the link between WTO rules and trade obligations set out in so-called MEAs (Multilateral Environmental Agreements); on procedures for the exchange of information between MEAs and WTO committees and the granting of observer status; and on the reduction or elimination of tariff and non-tariff barriers to trade in environmental goods and services. The EU has stressed that progress on the environment is vital for reaching agreement on the Doha Development Agenda.
39. Some argue that current WTO rules inadvertently tend to erode national environmental standards, as producers in countries with stricter norms feel they have to adapt to an international competition where countries with laxer norms often dominate. Another concern is that the GATT policy of focussing on ‘product, not process’ induces many producers to use low-cost production processes that nevertheless cost a lot in terms of environmental destruction, in the knowledge that their products will receive equal trade treatment as those made with more environmentally-friendly production techniques.
40. However, a number of developing countries fear that environmental concerns will be addressed at the expense of international trade, and that such a new ‘green conditionality’ would limit their market access opportunities. WTO discussions therefore evolve around the ways of ensuring that environmental policies do not act as obstacles to trade, and that the latter does not infringe on environmental protection in individual countries. There is also growing recognition that MEAs may be a good way to resolve trans-boundary environmental concerns at regional and global level while keeping discrimination and protectionism at bay.
41. Similarly, ‘core labour standards’ have been a source of tension between developed and developing countries. The latter tend to view them as being invoked by the former for protectionist purposes and have refused to have them included in WTO talks. Thus, all attempts to curb child labour, for instance, have so far failed. The International Labour Organisation (ILO) in 2002 established an independent body – the World Commission on the Social Dimension of Globalisation, for the purpose of better understanding the concerns of workers and enterprises as regards globalisation and to build an international consensus on policy responses and higher labour standards at national and international level. The Commission’s conclusions were published in February 2004. They among other things pointed to the value of dialogue and enhanced parliamentary oversight of multilateral bodies; the importance of fair rules for labour migration; and the need for global trade rules to allow more policy autonomy in developing countries. However, any worldwide consensus on core labour standards - whether in the WTO, ILO or any other framework – is unfortunately years away but should not deter European or other countries from pursuing the issue wherever possible.
3.6 Saving Doha: the WTO framework agreement of July 2004
42. The WTO General Council, consisting of all WTO members, at its meeting in Geneva in July 2004 managed to agree on a framework package for the pursuit of the Doha Development Agenda, thereby ending the post-Cancun standstill and rendering possible a final agreement at the WTO Ministerial Conference foreseen to be held in Hong-Kong in 2005. The aim of the highly intense negotiations has been to agree on a more precise framework for concluding Doha round and thereby to permit any progress reached since its launch in 2001 to be reflected in common language binding all sides. The Geneva agreement extended the negotiation timeframe beyond the date originally foreseen, December 2004.
43. Two major concessions made the agreement possible. Firstly, the richer industrialised nations agreed to abandon all export subsidies to agriculture within a reasonable timeframe and to reduce substantially domestic support to their agriculture with trade distorting effects. This is good news for the world economy, since agricultural subsidies, especially export subsidies, distort world agricultural trade and impoverish many developing nations that have few export possibilities outside farming. They also cost consumers and tax payers in the richer countries a fair amount. Worth noting is also a breakthrough on cotton trade, with the prospect of giving better opportunities to cotton farmers in the developing world.
44. The second concession was made by the developing countries. They agreed to negotiate various trade facilitation measures, including the streamlining of customs procedures and the further opening of trade in manufactured goods. However, the other three so-called ‘Singapore themes’ – competition policy, investment policy and public procurement - were not included, much to the disappointment of industrialised countries.
45. In conclusion, the Geneva compromise framework of July 2004 was reached at the eleventh hour to keep the momentum of the Doha Round alive, especially since little can be done until after the US Presidential election in November 2004 and the instalment of a new European Commission at around the same time. The psychological blow to the world economy of a failure at Geneva would have been severe and the United States and the European Union could well have concluded that the WTO framework no longer suited them. It was, in brief, the future of the multi-lateral trading system that was at stake and all the partners seem, luckily though belatedly, to have realised this.
46. Some people will complain that the Geneva Agreement contains much vague language and numerous national reservations, clarifications and interpretations. This is, however, almost inevitable in an interim, framework agreement of this kind. The important thing to note is that a major milestone on the way to a conclusion of the Doha Development Agenda could be reached thanks to the efforts of all sides, including the WTO Director General and his hard-working staff. As is eventually the case in any journey, the point of no return has now been reached, and there is no way other than the one forward. It must now be hoped that all WTO partners, including the incoming European Commission and US Administration, will carry the Geneva spirit forth.
4. THE PARLIAMENTARY DIMENSION OF THE WTO PROCESS
47. In the past few years, parliamentarians have paid increasing attention to international trade negotiations and especially to the multilateral trading system. This has occurred in reaction to the growing concern of elected representatives over the impact of the globalisation on the lives of their electorates. Parliamentarians feel that issues pertaining to international trade are too important to be left to governments alone and that these should therefore be subjected to some sort of democratic oversight by parliaments. The willingness to enhance the transparency and accountability of WTO activities has prompted the inter-parliamentary consultations that led to the organisation, by the Inter-Parliamentary Union (IPU) and the European Parliament, of a series of parliamentary meetings and conferences, starting with a year 2000.
48. This Parliamentary Assembly became more closely involved in this process as from 2001[5], although it expressed its full support for the WTO mission as early as 1996 and maintained close working ties with the Organisation ever since. The Assembly welcomes the WTO’s openness to dialogue with parliamentarians through the meetings which are driven via the IPU-European Parliament initiative just described. The Assembly plays the role of an active regional partner in this process. The IPU’s membership is indeed the one that corresponds most closely to that of the WTO[6]. This being said, their relationship between the two is of an informal rather than formal nature. The parliamentary mechanism as it stands today does not seek to create any new institutional or administrative structure and aims to use the existing network of parliamentary bodies to further their goals. It evolves around annual Parliamentary Conferences on the WTO - organised whenever possible in conjunction with WTO Ministerial Conferences.
49. At this stage one general principle needs to be recalled: governments negotiate international trade rules and arrangements on behalf of states. Parliaments for their part scrutinise governmental work, including by trying to influence governments’ position in negotiating trade deals. Parliaments also ratify - or choose not to ratify as the case may be - the agreements that have been negotiated by governments, as it were on their behalf, and make the necessary legal and budgetary provisions in order to ensure and supervise their implementation. The WTO’s rules and enforcement tools (such as the dispute settlement mechanism) now extend far beyond the traditional domain of tariffs, spilling over into states’ domestic policies on intellectual property, services, industrial development programmes, etc. This in turn has a growing impact on national health, education, employment markets, food safety and natural resources management. Understandably therefore, parliamentarians feel duty-bound to act as intermediaries between the citizens and the WTO. They all need to understand how the global trade system works. WTO for its part offers the public easy insight into its work via its website www.wto.org.
50. The failure of the Ministerial talks in Cancun can now be said at last to be behind us. Following the understanding reached at the July 2004 meeting of the WTO General Council, there is renewed hope that common ground can be found on agriculture, cotton and trade facilitation. It is now essential that further progress also be reached on lowering industrial tariffs and liberalising services in order to arrive at a balanced final agreement. It must also be hoped that developing countries in particular will show the necessary flexibility on the so-called ‘Singapore issues’, in order to permit the principles agreed on in Geneva in July 2004 to find their way into the final agreement in Hong-Kong in 2005. Progress has been made in textiles and medicines. Developing countries are on track to make gains in these two areas, with the full opening up of textile and clothing markets by the end of 2004, and the August 2003 deal that should make cheap medicines available to poor countries in the near future. There is a basic principle in negotiations which says that ‘nothing is agreed until everything is agreed’. That should be enough to reassure countries that they can afford to show flexibility in areas where they have interests to defend, and to measure any concessions they make in one area against those they extract from their WTO partners in others. Any final agreement will be a ‘package deal’. That is how world trade agreements have moved forward for half a century, and they will continue to do so.
51. The author of these lines pleads with all parties not to bring to a halt the development of a WTO systemwhich has been built over decades and which, for all its shortcomings, has produced greater prosperity for millions of people around the world. Such a halt would lead to the chaos of bilateral agreements between countries so characteristic of the pre-World War II era. This would in the first place exclude the poorest countries from the benefits of growing trade, when in fact the Doha Development Agenda was specially designed to take their interests into account. For the Europeans the round is very important as well. We have vital interests in services and we need trade facilitation because we do not want new technical barriers. We need protection of know-how, quality and brand names. The round must benefit the European consumer and work force, and that can be achieved when a win-win situation is found.
Reporting committee: Committee on Economic Affairs and Development.
Reference to committee: Doc. 9968 and Ref. No. 2893 of 25.11.2003.
Draft Resolution adopted by the Committee on 14 September 2004
Members of the Committee: Mr Kirilov (Chairman),MrsBurbiene,Mrs Pericleous Papadopoulos, Mr Figel (Vice-Chairpersons), MM. A�ikg�z, Adam, Anacoreta Correia, Andov,Assis Miranda, Ates, van Baalen, Berceanu, Bilalov, Blanco Garcia, Braun,Brunhart, Budin, �avusoglu,Cosarciuc, Cosido Gutierrez, Crema (Alternate: Rigoni), Djupedal, Gasoliba i B�hm (Alternate: Puig Cordon), Ms Griffiths,MMGrignon, Gunnarsson, Gusenbauer, Ms Hakl, MM. Haupert, H�gmark, Jonas, Kacin, Kalanovic, Karapetyan,Klympush, Korobeynikov, Kraus, Kristovskis, Lachnit, Le Guen (Alternate: Hunault),Leibrecht, Makhachev, Masseret, Melcak, Mikkelsen, Ms Milicevic, MM. Mimica, Nikolopoulos, �hman, O’Keeffe, Opmann, Mrs Pintat Rossell, MM. Podgorski, Popa, Pullicino Orlando, Ramoudt, Ramponi, Rattini, Reimann (Alternate: Randegger), Rivolta,LordRussell-Johnston (Alternate: Banks), MM. Rybak, Sasi, Schreiner, Severin, Seyidov, Slutsky, Ms Smith, MM. Sofiyeva,Stefanov,Tepshi, Timmermans (Alternate: Kox), Todorovic D.,MrsVadai, MM. Versnick,Vrettos, Walter, Wielowieyski, Wikinski, Mrs Zapfl-Helbling, Mr Zhevago.
N.B. The names of the members who took part in the meeting appear in bold.
Head of Secretariat: Mr Torbi�rn
Secretary to the committee: Mr Bertozzi
Co-Secretaries to the committee: Ms Ramanauskaite; Ms Kopa�i-Di Michele
[1] See a motion for a resolution presented by Mr Sasi and others (Doc. 9968).
[2] In agriculture, the US is often criticised due to the production subsidies it awards to its farmers; Japan for the limited access it gives foreign producers to its domestic markets; and the EU (and some others) for the subsidies awarded to exports. This being said, the international community seems to agree that agriculture requires special policies, but that these should not be allowed to distort international trade.
[3] G-21, or the Group of 21 negotiating block, also involves South Africa, Argentina, Egypt, Bolivia, Chile, Colombia, Costa Rica, Cuba, Ecuador, El Salvador, Guatemala, Mexico, Pakistan, Paraguay, Peru, the Philippines, Thailand and Venezuela. It represents close to half of the world’s population and about two-thirds of its farmers.
[4] These diseases are estimated to kill up to 7 million people in developing countries each year.
[5] Notably, by participating in the IPU-led parliamentary meeting on the role of parliaments in the shaping of ‘a free, just and equitable multilateral trading system’ (8-9 June 2001) and by subsequently adopting Resolution 1269 (2002) on the role of the WTO in the world economy ( Rapporteur: Mr Elo, doc. 9295).
[6] To date the IPU groups 142 national parliaments, while the WTO counts 147 members, of which 144 are sovereign states (seven of these countries have no parliament).