Developments and challenges in trade and trade policy

The first meeting of the Ministerial Conference, in Singapore, was also the first occasion for a full stock taking by WTO members of their new organization’s achievements and shortcomings.

In general, ministers were happy with what they saw, although they were anxious at the time about the telecommunications and financial services negotiations, whose outcome then hung in the balance, and also identified some practical problems in applying the new agreements.

On future work, apart from the studies — already mentioned — on trade and investment, competition policy, transparency in government procurement and trade facilitation, they agreed to start exchanging ideas for the coming negotiations on agriculture and services.

The most difficult discussion in Singapore concerned labour standards. While some countries believed this was an appropriate issue for the WTO, most did not.

The outcome was a statement in which ministers renewed their commitment to recognized core labour standards, affirmed their support for the work of the International Labour Organization (ILO) as the responsible international body, stated their belief that trade and trade liberalization helped in promoting these standards, and agreed that the comparative advantage of countries must in no way be put into question. They endorsed existing collaboration between the WTO and ILO Secretariats, but did not support any WTO work on labour standards.

The main event in the world economy between the Singapore meeting and the second Ministerial Conference in Geneva, in May 1998, was the sudden financial crisis that swept East Asian countries in the summer and autumn of 1997. The effects in the region were severe, and were also felt, to a lesser but significant extent, as far away as Latin America and Russia. Low demand in Asia, including Japan, and falling commodity prices, slowed the growth in world trade.

By the time of the Geneva meeting, however, it was clear that the trading system had stood up well to the crisis. There had been no perceptible shift towards protectionism, and strong import demand in the United States, in particular, had helped offset weakness elsewhere. There can be no doubt that a negative trade policy response to the crisis would have had serious consequences for economic recovery and for trade relations more generally.

Within the WTO, the year had brought successful conclusion of the market-opening negotiations on basic telecommunications and financial services, as well as the important special meeting on least-developed countries.

However, it also brought to the fore increasing concerns on how some of the Uruguay Round agreements were working out. Developing country exporters of textiles and clothing argued forcefully that removal of bilateral restrictions blocking access to developed-country markets was going very slowly.

The importing countries, for their part, insisted that implementation of the integration process was being enforced and consequently, the restrictions would be removed on schedule. Developing countries also maintained that they were not receiving special treatment envisaged under several agreements, that other practical problems had arisen, and that some of them might not be ready to assume the full obligations of the agreements by the end of their transition periods.

A number of highly publicized trade disputes, some of which had reached the WTO, suggested that serious conflicts could arise unless greater efforts were made to reconcile trade rules and public concerns about environmental problems or food safety.

Some WTO members, but not all, felt that the time was ripe to prepare for a new round of negotiations to tackle these issues and also push liberalization forward across a wider front than just the negotiations on agriculture and services.

Even those in favour of new negotiations were divided on whether it should be broad or narrow in scope, and whether or not the whole enterprise should, like the Uruguay Round, be a single undertaking with no substantial agreements concluded before an overall settlement was reached.

The road ahead

At Singapore in 1996, ministers had decided that WTO work should continue on essentially the same lines as laid down by the Marrakesh agreements.

True, they added the studies on trade and investment, trade and competition, transparency in government procurement and trade facilitation, but these were clearly, for the time being at least, secondary matters, focused on exploring unfamiliar issues rather than taking action. They did not agree to bring the issue of labour standards into the WTO.

On agriculture and services, they agreed to exchange and analyze information to allow members to understand better the issues involved and to identify their interests before undertaking the negotiations on these subjects that had already been agreed to at the end of the Uruguay Round. There was no question of starting these negotiations ahead of schedule.

The Geneva meeting of 1998 was different. Only one new subject — electronic commerce — was added to the work programme. Dramatic though its growth and implications may be, electronic commerce falls squarely within the WTO’s mandate: the core issue is whether the existing trade rules are adequate to cover it.

The crucial decision in Geneva was to instruct the WTO’s General Council, in which all member countries are represented, to prepare recommendations for Ministers “regarding the WTO’s work programme, including further liberalization sufficiently broad-based to respond to the range of interests and concerns of all members, within the WTO framework.” The decision specified that the recommendations should cover:

• the “built-in agenda”, made up of issues concerning the implementation of existing WTO agreements and decisions, together with negotiations and other work agreed on at Marrakesh
• other possible future work based on the subjects added to the work programme by the Singapore meeting
• follow-up to the 1997 high-level meeting on the trade needs of least-developed countries, and
• “other matters proposed and agreed to by members concerning their multilateral trade relations”

These four headings obviously differ not only in subject-matter but in status.

The first group, all members agree, consists of mainstream WTO responsibilities and mutual obligations. No one questions that member governments have to work together on these questions, and that they have indeed already agreed to negotiate on some of them.

The second group, the “Singapore subjects”, consist of matters which, up to now, members have agreed only to discuss, without undertaking any obligations, without prejudice to their positions.

Follow-up to the meeting on the least-developed countries, the third subject, has been given special mention because all members recognize this as an issue that must have priority attention.

Finally, the fourth heading allows any member to put forward proposals on any other matter relevant to multilateral trade relations, but at the same time authorizes inclusion of these proposals in the recommendations to ministers only if the other members so agree.

Since September 1998. the WTO’s General Council has been working continuously on preparation of its recommendations. In a first stage, it reviewed each of the main subjects specified by ministers. From the beginning of 1999, individual member countries were invited to put forward specific proposals.

Over 200 such proposals have been made, many in considerable detail. They range far too widely to be summarized in a few words, but cover issues under all four headings, including all the concerns voiced at the Geneva Ministerial meeting last year. Most of the proposals can be found in the documents section of the WTO website . Some call specifically for new negotiations; others do so by implication; yet others clearly do not.

In September of this year, the General Council embarked on the third and final stage of its preparation work, that of drawing up recommendations to ministers.

The approach adopted, following long-established practice, and experience of what works best, has been to bring together these recommendations in the form of a draft agreement, or declaration, which ministers could discuss, and then agree on after making whatever changes they think desirable.

At the time of writing, the draft is under discussion in Geneva, in the General Council, and much remains to be settled. Any substantial comment on the position reached could well be invalidated before these words are printed, and in any case the final decision rests with ministers, at the Seattle meeting. It remains to be seen, in particular, whether ministers will decide that the recommendations require that a new round of multilateral trade negotiations be launched.

As of now, some members have yet to be convinced that new negotiations, other than those already scheduled as part of the built-in agenda, would be in their interest. Their final judgement seems likely to depend on their overall assessment of what would be on offer — in other words, on the detailed content of the whole package of recommendations presented to ministers.

In the meantime, public discussion of issues for the third Ministerial Conference, and of the WTO itself, may well focus on a number of issues that have raised controversy, particularly among non-governmental organizations that are likely to be well represented in Seattle.

The WTO has been accused of many sins, including dictating policy to governments, destroying jobs, and harming the environment. Right or wrong, these accusations raise important questions, and deserve careful responses. By implication at least, many of these questions were answered in the previous chapter. The next section, however, discusses them directly.

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