GEI Newsletter Issue No. 4 - Editorial

Also in this issue:

Report on the CEPR/GEI Workshop ‘Competition, Regulation, Standards and Trade Policy for Information and Telecommunications Services’
by Paul A David and Todd Shaiman

‘The New Commercial Policy Agenda: Strengthening or Overburdening the WTO?’, 30 May 1996 at RIIA, Chatham House
Workshop on Subsidiarity in the Governance of the Global Economy

Editorial

LSE/RIIA conference on The New Commercial Policy Agenda: Strengthening or Overburdening the WTO?

30 May 1996 at RIIA, Chatham House.

This formed part of the LSE's project on Subsidiarity in the Governance of the Global Economy and was convened with the objective of contributing to the policy debate on the WTO agenda prior to the first WTO Ministerial Meeting in Singapore in December 1996. The conference brought together some leading international experts on the WTO and international commercial policy with researchers involved in GEI projects, government officials, and representatives from business, international organizations and non-governmental organizations. The 50 or so participants contributed to a lively discussion resulted in concrete proposals. The conference was sponsored by CRUSA, the Department of Trade and Industry, the Economic and Social Research Council, the Foreign and Commonwealth Office, the RIIA and ICI Plc. Conference participants addressed six major issue areas on the new commercial policy agenda: 1) the WTO's future agenda; 2) investment; 3) competition; 4) environmental issues; 5) labour standards; and 6) the WTO's agenda for the Singapore Ministerial Meeting. A GEI Working Paper No. 17 by Stephen Woolcock entitled An Agenda for the WTO: strengthening or overburdening the system? produced the basis for discussion.

1 The WTO's Future Agenda

Given the increasing interdependence of the global economy and the fact that ever more countries are seeking to become members of the WTO, a general consensus emerged that the WTO is at a decisive stage in its development. Papers presented to the conference argued that the WTO must act now to define its role within the international system. If the WTO is to live up to its potential as the foundation of a open, rule-based multilateral trading system, as well as remain a credible international organization, it will have to pursue an ambitious agenda that includes both deepening and widening. Deepening involves addressing the new issues of investment, competition, the environment, and perhaps even labour standards, as well as carrying forward the WTO's in-built agenda, and implementing the results of the Uruguay Round. At the same time, however, the WTO must also widen its membership in order to become a truly global trade organization. This widening versus broadening debate must also be seen in the context of other issues, such as the place of regional or plurilateral agreements in the multilateral system, the role of developing countries within the WTO, the role of the WTO as an institution (as opposed to a negotiating forum), and the timetable of future accessions.

1.1 Regionalism versus Multilateralism

If WTO members opt for a narrow trade agenda, the pressure to include the new commercial policy issues (environment, investment, competition and labour standards) is likely to result in the increased use of regional or plurilateral agreements for these issues in order to establish at least some minimum rules for these policy areas. The question of the compatibility of regional agreements with a strong, rule-based multilateral system was a subject of debate throughout the conference. In the end a broad consensus emerged among conference participants, that the issue was not whether regional agreements are building or stumbling blocks, but how one should ensure the two levels were complementary. As the issue of regional agreements and WTO rules has moved ever higher on the agenda, a consensus has emerged among key members of the WTO to do more to consider the implications of such agreements. Thus a WTO committee has been established to study the effects of regionalism on the multilateral system. The work of the committee is expected to be discussed at the Singapore Ministerial Meeting.

1.2 Less-developed countries

The role of developing countries within the WTO raises issues such as fair representation and legitimacy. Several participants voiced their concern that developing countries are not adequately represented in the WTO. The financial burdens involved in maintaining trade missions has led to only one-fifth of the least-developed members having a physical presence in Geneva. While some participants argued that this may be positive in that it is easier to find a consensus in an otherwise increasingly heterogenous organization, it was agreed that more must be done to involve all members in the formulation of global trade rules, if the legitimacy of the WTO is to remain unquestioned. Legitimacy is enhanced when the issue of representation of developing countries is added to the WTO agenda, but does shift the balance towards a widening rather than a deepening of the WTO.

1.3 Institutional relations of the WTO

A widely expressed view was that the WTO secretariat must be given both the financial and human resources necessary to perform its current and future responsibilities in an effective manner. Although all agreed that development of a large international bureaucracy is to be avoided, the 195 staff members of the WTO are already overburdened, even before any new issues or duties are added to the WTO agenda. One way of overcoming bottlenecks due to the lack of WTO resources, would be to draw on member governments. It is therefore particularly important that member governments support the WTO in its crucial formative stage of development.

Relations with other international organizations, both governmental and non-governmental, were discussed. As work programmes of international organizations overlap, to promote synergy and effective action, the WTO will increasingly have to work together with other international organizations, such as the OECD, IMF, World Bank, the International Labour Organization (ILO), and relevant United Nations (UN) agencies.

1.4 Accession

Due to its pressing strategic nature, the widening of WTO membership through the accession of the 27 applicant countries, in particular, Russia and China, holds a high priority on the WTO agenda. In order to be become a truly global trade organization the WTO must include these major trading countries. However, as was discussed, the timing of their accession is dependent on whether current WTO members are willing to lower the standards allowing membership. The consensus favoured postponing their accession until all the normal standards of membership could be met.

These broad issues, and in particular the issue of deepening or widening, shape the context within which the current debate on the WTO agenda must be discussed.

2 The New Issues

Unlike issues such as agriculture, intellectual property, and services which were negotiated during the Uruguay Round and now form part of the existing or in-built WTO agenda, the new issues must first establish a secure a place on the agenda of the WTO.

2.1 International investment

The conference first considered investment. It was recalled how some contracting parties of the GATT, especially the United States, had attempted to establish GATT rules for investment in the Uruguay Round, and that these parties had been generally dissatisfied with the resultant Trade-related Investment Measures (TRIMs) agreement. In an effort to carry forward the debate, efforts to establish 'multilateral' rules for investment were transferred to the OECD, where negotiations on a multilateral agreement on investment (MAI) are scheduled for completion by mid-1997.

The primary point of discussion on this issue was whether the negotiations should be transferred to the WTO and if so, when? There was no consensus on this issue at the conference, but a slim majority appeared to favour negotiations within the WTO. This was advocated because of the growing importance of FDI in developing countries, the lack of legitimacy if the MAI was negotiated without input from the developing countries, and the need for a global investment regime to have effective dispute settlement procedures which the WTO could offer. Recent developments in the policy debate suggest that agreement will be reached in Singapore on the establishment of a working group on investment within the WTO.

2.2 Competition

Discussion on the issue of developing an international competition policy focused on whether there should be cooperation or competition between various approaches to competition policy. Although elements of competition policy have already found their way onto WTO's in-built agenda, such as in the context of intellectual property rights and telecommunications market liberalization, there remains no consensus on the desirability of developing general WTO principles for competition.

Those favouring efforts to strengthen cooperation among WTO members in competition policy argued that as public barriers to trade (tariffs and non-tariff barriers) are removed, private restraints on trade become more important. Increased globalization is also seen as requiring global approaches to competition. Finally, conflicts between national extra-territorial application of competition law can only be avoided through cooperation, perhaps through closer links between the various regional competition initiatives (i.e EU and NAFTA).

Those against cooperation or efforts to develop some common approaches where possible, argued that there were no demandeurs for such an approach. The differences between national approaches to competition excluded any prospect of cooperation and, even if it were possible, the additional costs of regulation would make it undesirable. The option favoured by the opponents of adding competition to the WTO agenda, was to continue to focus on public restraints on trade (such as in agriculture, textiles and the abuse of anti-dumping actions). In other words competition can best be provided by liberal trade.

The conference therefore reflected policy differences that exist within the leading members of the WTO on this issue. The discussion of multilateral competition policy at the Singapore Ministerial Meeting is likely to follow the same pattern, with the result that no concrete agreement appears likely.

2.3 Environment and Trade

Although considered a new issue, environmental standards within the context of multilateral environment agreements (MEAs) are already on the WTO agenda through the work of its Committee of Trade and the Environment (CTE), which was established formally by the WTO General Council in 1995. The objective of the CTE is to encourage sustainable development by investigating links between trade and environmental measures. Among conference participants, there appeared to be considerable dissatisfaction with the achievements of the CTE, including the unbalanced make-up of both the CTE and GATT dispute panels, favouring 'trade interests', and the hesitance of the WTO to enter into discussions with environmental groups.

In light of the historic inequalities among developed and developing countries, it is no surprise that environment has created some North/South tensions in the CTE. The developed countries have urged action to integrate aspects of the environment regime into the WTO trade regime. Fearing this could open the door to abuse and 'green' protectionism, the developing countries have sought to retain the status quo based on national treatment and no new exceptions for even MEAs.

In order to facilitate future progress concerning trade and the environment, several suggestions were offered including the recognition by both the trade and environment regimes that their issues are interrelated. Such reciprocal learning could benefit the trade regime by helping it to react more rapidly to environmental concerns and to incorporate scientific knowledge into the CTE. The environment regimes could also learn, for example, to link various issues together in a similar manner, as was done by the WTO in the Uruguay Round. Distribution of information and advice by the WTO secretariat to non-governmental bodies on these issues was seen as an additional step. It was also argued that more work is necessary on the implementation of the existing environmental agreements.

While the majority of participants were not against including environmental issues on the WTO agenda, there was a general belief that to do so could overburden the WTO. One option proposed was that if no concrete proposals result from the CTE's work for the Singapore Ministerial Meeting, other fora, such as the UN Conference on Trade and Development, should be investigated.



2.4 Labour Standards

Among conference participants no consensus was held on the need for the WTO to address the issue of labour standards. Although noone argued against the desirability of improved labour standards, discussion focused on the most efficient mechanisms for achieving and enforcing global labour standards.

The case was made that there was widespread sympathy and frustration at examples of deplorable labour conditions found in some of the developing (and perhaps developed) WTO member states. It was also documented that a growing constituency is demanding international organizations, such as the WTO, ILO and OECD, to address core labour standards and to remedy violations. The case was made for linking WTO activities to the current work of agencies such as the UN, International Court of Justice, and specifically the ILO. Proposals for achieving such a linkage only involved the WTO after member governments’ repeated failure to make progress towards agreed core ILO standards.

But several participants questioned WTO use of trade sanctions in cases of labour law. Given the WTO's role in trade liberalization, sanctions were seen as opposing the primary purpose of its existence and opening the way for new forms of protectionism. Additionally, trade sanctions tend to most severely affect those whose labour rights are being disputed. A more constructive approach was seen to be based on rewarding countries if they meet certain basic labour standards.

Debate on the establishment of multilateral labour standards concluded by recognizing that although consensus is forming, progress may be hindered by political considerations in developing countries. The possibility of trade-offs with other agenda items was seen to be a possible solution.

3 The Agenda for the Singapore Ministerial Meeting

Expressed throughout the conference was the undisputed need for the Singapore Ministerial Meeting to produce solid results on both the in-built agenda items as well as the new issues. This meeting will present the WTO with an opportunity to project itself as a vital and dynamic organization at a critical stage in its development. It was argued that the Ministerial Meeting should not be oversold, for fear that failure to match false expectations could result in renewed disillusionment with the multilateral process and greater recourse to regional, plurilateral or unilateral approaches.

The issues discussed in this report, along with further liberalization and in-built agenda items (see GEI Working Paper No 17 by Stephen Woolcock An Agenda for the WTO: Strengthening or Overburdening the Multilateral System? for a full discussion of the various agenda items) will form the main items on the Singapore Agenda. In order to achieve success in Singapore, the WTO must achieve a consensus among its members. A starting point for such a consensus would be establishing WTO working groups with the objective of generating discussion on the new issues. However, conference participants issued a caution that these discussions proceed in such a way as not to prejudice the eventual outcome of a consensus or give the impression that the future agenda of the WTO has already been decided.

In concluding the conference, speakers stressed that the Ministerial Meeting must present forward-looking proposals which have broad support among the growing number of national constituencies affected by multilateral trade and investment regimes. National governments will have to play their part in ensuring that such support exists. One crucial step towards achieving this support will be to ensure there is transparency in an area of policy which has hitherto been characterized by a lack of transparency. There is also a need for a broadening of the debate on the scope and role of multilateral regimes and in providing a forum for such a debate this conference represented a concrete contribution to this end

For more information and papers contact: Professor Stephen Woolcock, European Institute, London School of Economics, Houghton Street, London WC2A 2AE, UK, tel: (44 20) 7955 6796, email: woolcocs@lse.ac.uk.

GEI Working Paper No. 17 by Stephen Woolcock An Agenda for the WTO: Strengthening or Overburdening the Multilateral System is available for £4/$8 from: Centre for Economic Policy Research, 90-98 Goswell Road, London EC1V 7RR, UK, tel: (44 20) 7878 2900, fax: (44 20) 7878 2999, email: gei@cepr.org.

The Newsletter of the GEI programme is published three times annually to inform policy-makers and the academic community of research, meetings, conferences, and Working Papers of the GEI programme.

To receive regular issues of the Newsletter of the Global Economic Institutions programme or to receive copies of back issues send an email containing your address and contact numbers to gei@cepr.org.