Picking up the Pieces: The WTO after Seattle

GLOBAL ECONOMICS

Patrick Grady and Kathleen Macmillan
"Picking up the Pieces: The WTO after Seattle"
CABE News, October 2000, pp.6-8.

The launch of a new round of multilateral trade negotiations fizzled spectacularly in Seattle last December. While a rainbow coalition of anti-WTO protestors outside got worldwide media exposure along with tear gas and pepper spray, angry delegates inside talked themselves into a stalemate. The protestors went home feeling victorious, while the stressed delegates exchanged recriminations on the way to the airport. The WTO took a real beating in Seattle, but fortunately it kept on ticking.

After much collective navel gazing, soul searching, and gnashing of teeth, work is now underway at the WTO on the most important issues raised by the Seattle debacle. These include: confidence building; improved market access for the Least-Developed Countries; implementation issues of developing countries; agriculture; services; institutional reforms, and transparency.

Without a new round, the WTO faced the critical task of rebuilding confidence in the world's rules-based trading system and moving the multilateral trading agenda forward. In the weeks following Seattle, Michael Moores, the WTO's new Director General, consulted widely with members about how this could be best done. He focused particularly on regaining the confidence of the WTO's most alienated members from the developing countries. Many of them had come to Seattle feeling shortchanged in the previous Uruguay round WTO agreements and hoping to improve the balance in their favour. And the first thing they heard when they arrived was President Clinton's musings on the need to enforce labour standards through the WTO. In their view this was a direct threat to their comparative advantage in labour intensive industries. Mr. Moores came up in February with specific proposals deal with the developing countries concerns.

The developing countries have several specific concerns about implementation issues. These stem from the fact that for a variety of reasons many developing countries have not yet fully implemented their commitments arising from the Uruguay Round of multilateral trade negotiations. The first of these is the January 1, 2000 deadline for implementing the Agreement on Trade-Related Investment Measures (TRIMs). This Agreement prohibits some performance requirements (such as domestic sourcing and export restrictions) in some goods-producing industries that developing countries have traditionally relied upon. The second is the same deadline for implementing the Agreement on Trade-Related Intellectual Property (TRIPs). This Agreement obliges all WTO members to enforce minimum standards of protection for intellectual property. This is something that has not been done in most developing countries. The developing countries led by Pakistan would like see a five to seven year extension applied to these deadlines. The third is the deadline for implementing the Customs Valuation Agreement.

On the other hand, the developed countries, particularly the United States, are opposed to such a long blanket overall extension. They favour considering extensions on a case-by-case basis.

At the meeting of the WTO's General Council on May 3 and 8, the members of the WTO agreed to meet in a series of Special Sessions to try to find mutually acceptable solution to the impasse over implementation issues. In the meantime, the General Council has directed the WTO's Council for Trade in Goods to "give positive consideration to individual requests to extend the transition period for implementation of the Agreement" on TRIMs. In addition, for measures that have not been notified to the WTO and that may not be in conformity, the General Council agreed that governments should seek to resolve their differences through consultations. No direction for an extension of the transition period was made for TRIPs because no such provision exists in the agreement. But developed countries are expected to hold off launching any dispute settlement cases on TRIMs and TRIMs.

Part of the problem for developing countries in complying with their WTO obligations stem from their technical complexity. The Director General has been championing a proposal to increase the core budget for technical assistance to 10 million Swiss francs over three years from 750,000 Swiss francs. It has been gaining acceptance from members. And if approved would be helpful.

Another part of the confidence-building package to show that the WTO can address the concerns of its developing country members were the announcements made by thirteen WTO Member Governments, including the US, the EU, Japan and Canada that they were unilaterally going to open up their markets by allowing duty-free and quota-free access for essentially all products originating in the Least Developed Countries. While this is a positive step forward, it's not quite as good as it sounds because of exceptions in many countries relating to agriculture and textiles.

When a global round of trade negotiations could not be launched, the WTO's built-in agenda for negotiations on agriculture and services kicked in. In February, the General Council scheduled the required first meetings of the Agriculture Committee and Services Council. The agriculture negotiations were the most difficult to get off the ground because of frictions between the United States on the one hand and the European Union and Japan on the other. This was played out in the dispute over the appointment of the Committee Chair. It wasn't until early May that the quarreling parties were finally able to agree on the appointment of Ambassador Jorge Voto-Bernales of Peru. To keep an eye on the Chairman and make his job even more difficult, Mr. Yoichi Suzuki of Japan was appointed Vice Chair.

The Agriculture Committee is charged under Article 20 of the Agriculture Agreement to pick up where the Uruguay Round left off. This means seeking to continue the reform process through "substantial progressive reductions in support and protection." In March, WTO members reached agreement on the process and timetable for Phase 1 of the agriculture negotiations. Proposals for negotiating objectives are to be submitted by the end of December. The Agriculture Committee will take stock of the proposals at a meeting next March. In the meantime, a series of special sessions of the Agriculture Committee have been scheduled for June, September, and November and the technical work on agriculture and the current round of reductions in subsidies and protection has already gotten underway.

There is still disagreement though about the prospects of the negotiations. Some of the Cairns Group of countries, including Canada, regard the negotiations to be "stand-alone," whereas the EU, Japan and Korea stress that the talks can not get very far until a new round is launched. They are also still insisting on the multi-functional role of agriculture, which many consider a disguised form of protectionism.

The service negotiations are being carried out in the Council for Trade in Services under the Chairmanship of Sergio Marchi, Canada's Ambassador the the WTO. At a special session in April, the Services Council approved a work program and timetable. Its negotiating sessions will take place in four weekly sessions in the week of May 22, July 10, October 2, and December 4. These weeks will begin with meetings of subsidiary committees of the Council, the committee on specific commitments, the working party on domestic regulation, and the working party on GATS rules and end with a meetings of the Services Council. The first two Services Council meetings will focus on Most Favoured Nation exemptions currently allowed under GATS, and the last two on air transport services, an area where negotiations are required under the existing agreement.

Members have been asked to submit proposals on the modalities of the negotiations by the end of the year. These will be considered at a Services Council meeting next year that will launch the second phase of the services negotiations, when members will start to offer and request specific commitments for liberalizing trade in services.

The developing countries are still resisting efforts by the developed countries to reach an Agreement on Transparency in Government Procurement. This Agreement, which is intended to make sure that potential suppliers are provided with adequate information on the rules governing particular government tenders, was to be one of the early harvests of Seattle. Now it will probably have to await the resolution of implementation issues before developing countries will be willing to sign on.

Much discussion has taken place at the WTO since Seattle about increasing transparency. Some members led by the United States believe that opposition to the WTO, particularly among NGOs, has been fueled by the organization's lack of transparency. Proposals have been circulating in Geneva to open up the WTO. These include: quicker declassification of panel decisions; making publicly available submissions to panels; opening up dispute settlement panels to the public; and allowing amicus curiae briefs in disputes. Consensus has not been reached on specific measures to increase transparency.

In the absence of a new trade round, China's success in negotiating accession to the WTO has to be the most significant development for the world trading system over the last year. The agreement reached with the US prior to Seattle and with the EU in late spring promises to open up the Chinese economy to international market forces. It won't be easy to overcome the legacy of state planning and state enterprises that still shapes the Chinese economy. But WTO membership will strengthen the hand of reformers in China that want to establish a rules-based market economy. A China that is integrated in the global community will be a peaceful and prosperous China. The opportunities for all created by its market of over 1.3 billion will be great.

The WTO has managed to pick up the pieces of the aborted trade round left by Seattle and has already made some progress in putting them back together. By the time the next Ministerial meeting rolls around next year, the WTO's members should be ready to take another crack at launching a comprehensive trade round. By that time, the US election will be over and the new Administration should be ready to focus on the need to improve the world trading system. Business economists will need to be ready too. Next time it's important that the supporters of the WTO and liberalized trade are heard from more than the opponents. Another Seattle would be disastrous for global trade.