Three Months Until WTO Ministerial And Agenda Differences Unresolved

By Daniel Pruzin, Bureau of National Affiars, 30 August 1999

GENEVA--Preparations for the World Trade Organization's third ministerial meeting will shift into high gear starting in September, but the road to Seattle and beyond promises to be a bumpy ride for the still-fledgling trade body and its 134 member countries.

The launch of a new round of global trade liberalization talks is expected to be the outcome of the ministerial, which the Pacific Northwest city will host from Nov. 30 to Dec. 3. But big gaps remain within the WTO membership over what those negotiations should cover, how the talks should be carried out, and whether any minor sectoral agreements should be clinched as confidence-building measures in the run-up to Seattle.

The Seattle ministerial will bring the WTO under the blazing glare of the public and media spotlight, a situation to which the organization, located on the tranquil shores of Lake Geneva in Switzerland, is not accustomed. When WTO members met for their first ministerial in Singapore in December 1996, the event attracted some 1,500 journalists. For Seattle, ministerial organizers say 4,000 media representatives are expected to seek accreditation.

Focus of Protest

The press may be the least of the WTO's worries. Around 300 non-governmental organizations, many critical of the WTO, are planning to be in Seattle for the meeting.

The ministerial will act as a magnet for the organization's fiercest opponents: environmentalists angry with WTO rulings striking down U.S. measures to protect sea turtles and the EU's ban on hormone-treated beef; union activists who blame the WTO for allowing in cheap goods produced through unfair labor practices; and farmers from Europe and the Far East keen to defend their generous agricultural subsidies.

"The presence of our organization will be unprecedented in size," promises Charles Arden-Clarke, trade expert with the World Wide Fund for Nature (WWF), a leading international environmental group.

WTO officials note with some nervousness that U.S. steelworkers, fuming over what they claim is dumped foreign steel, are booking accommodations for Seattle in large numbers.

Public Support Cools

The timing of the ministerial is not particularly auspicious. Public support for further trade liberalization in the United States, the chief architect of the WTO, is decidedly lukewarm, despite the role that international trade and investment has played in helping fuel nearly a decade of economic expansion.

The growth in trade "brings enormous benefits, but also arouses some public fears," Deputy U.S. Trade Representative Susan Esserman admitted to the WTO last July. "Together with the rising trade imbalance, and events like the surge in steel imports in 1998, they create broader public concerns about the role of trade in the U.S. economy."

Enthusiasm from the U.S. farming community for further liberalization in agricultural trade is being dampened by the sharp fall in global commodity prices. Business may also turn sour on the WTO if, as expected, a dispute settlement panel formally rules later this month that Foreign Sales Corporation provisions, which save U.S. firms an estimated $2 billion-plus in taxes each year on export earnings, violate global trading rules.

EU Ambivalence

The mood is not much better elsewhere. Despite the European Commission's enthusiasm for its proposed "Millennium Round" of comprehensive trade talks, the WTO has taken a beating in the pubic eye as a result of dispute settlement rulings against the EU's banana import rules and ban on imported hormone-treated beef. Angry at WTO-sanctioned penalties allowing the U.S. to impose punitive duties on imported European goodies such as Roquefort cheese and Dijon mustard, protesters have called for a boycott on American imports and have even begun torching McDonalds outlets.

Developing countries complain that promised benefits from the previous Uruguay Round such as improved market access for their textile exports have failed to materialize. In South Africa and Thailand, NGOs charge that the WTO's Agreement on Trade-Related Intellectual Property Rights (TRIPs), which developing countries must implement next January, will make it more difficult for their citizens to access needed medicines.

Merely agreeing on an agenda for the upcoming trade round will be a challenging task.

Wide Gaps on Talks' Scope

Members have already submitted hundreds of position papers to the WTO secretariat in Geneva and have less than two months after their return from summer break to forge a draft ministerial statement reflecting a consensus view.

The positions range from the "everything goes" attitude of the European Union, Japan, and a number of Eastern European members--who favor opening negotiations in sectors such as competition policy, investment, trade facilitation, industrial tariffs, consumer health, and trade and the environment--to the more skeptical attitudes of major developing countries such as Egypt, India, and Pakistan, who argue that members should first focus on the problems of implementing existing WTO agreements before opening up negotiations in any new areas.

In the middle is the United States, which is intent that the focus of the new round should be on the so-called "built-in" agenda items of agriculture and services for which WTO members have already agreed to launch new negotiations.

"The temperature for the new round varies," noted one Geneva-based trade official. "On the hot end is the EU, on the cool end are the major developing countries, and somewhere a bit warmer is the United States."

U.S. officials counter that the EU's and Japan's real intent is to flood the negotiating agenda with as many issues as possible so as to divert attention from the sensitive issue of agriculture, and in particular agriculture subsidies. Farm trade proved to be the Achilles' heel of the Uruguay Round; trade officials are predicting that the next round of farm talks will be just as bruising. Agriculture is "core to the negotiations," Esserman warned Aug. 12.

The more militant Cairns Group of agricultural exporting countries is insisting that the new round must lead to the elimination of all export subsidies and substantial improvements in market access for farm goods. The EU says it is ready to talk, but a modest farm reform package adopted by the European leaders last March--and which Brussels hopes to use as a basis for negotiations in the WTO round--has been trashed by the Cairns Group as a non-starter.

Disagreements Over Services Sector

The services side also sees big gaps between the positions of major WTO members. The EU, Australia, Chile, Hong Kong, Japan, Indonesia, New Zealand, Singapore, South Korea, and Turkey have all called for comprehensive negotiations covering all services sectors, including air and maritime transport.

The United States in contrast is calling for a more general improvement in market access opportunities (with no mention of the sensitive maritime transport sector) while establishing broad WTO "disciplines" on the domestic regulation of service providers.

Outside of the "built-in" agenda items, trade diplomats say the makeup of the future negotiating agenda is still hard to divine.

Further cuts in tariffs on industrial and non-agricultural goods appear a likely agenda item, although countries such as Egypt and India may push for better recognition of the WTO's "special and differential treatment" provisions for poorer members as the price for their participation.

LDCs, ITA

In addition, trade ministers are likely to endorse some sort of initiative for developing countries at the Seattle meeting--such as the EU's zero tariff proposal for least-developed country (LDC) exports--as an enticement for their backing of the new round. "This is more or less a must," commented one WTO official, noting that developing countries now make up three-quarters of the WTO's membership.

A statement from some or all WTO members in Seattle calling for further work on electronic commerce and a (non-permanent) continuation of the standstill on customs duties applicable to electronic transmissions also looks probable.

The stalled Information Technology Agreement-II may also be wrapped up in time for Seattle, although WTO officials note that negotiations have been stalemated since the beginning of the year.

No Competition Rules

Beyond that, the prospects for trade enthusiasts look bleak.

The United States has nixed the idea of negotiating new WTO rules on competition and investment, suggesting instead that the two issues be shuttled off to a "forward work program" for further study.

Washington also has shot down efforts by Japan and South Korea to review WTO antidumping provisions in the new round.

The EU and Japan for their part are rejecting a U.S. efforts to have WTO members approve the Asia-Pacific Economic Cooperation (APEC) forum's Accelerated Tariff Liberalization package in the run-up to Seattle. Developing countries have shown little enthusiasm for the idea of negotiations on government procurement and have firmly rejected a U.S. proposal calling for the creation of a WTO work program on trade and labor standards.

Early Harvest?

Disagreements also exist over the method for carrying out the talks.

The United States had originally proposed an "early harvest" mechanism allowing agreements in priority sectors to be concluded ahead of others, rather than the "single undertaking" approach used in the Uruguay Round. But faced with opposition from most of the WTO membership as well as well as its own domestic farm lobby, U.S. officials now argue that the structure of the talks should be determined only after the negotiating agenda is fixed.

About the only thing WTO members seem to agree on the moment is the need to avoid a repeat of the marathon Uruguay Round, which dragged on for more than seven years. Most members now say that the new round should last no more than three years. The EU claims this goal is feasible even with its proposed comprehensive agenda. But a more modest round is likely to be perfectly in tune with the mood of the times, say trade officials.

By Daniel Pruzin