[asia-apec 1031] NEW BATTLES BEGIN SOON IN THE WTO

[Roberto Verzola]

* Original is in : WELCOME-REQUEST
* Original date  : 22 Feb 1999 06:54:4
* Original is by : jesover at attac.org                  (6:751/401)
* Original is to : rverzola                           (6:751/401)
* Full text below: 

NEW BATTLES BEGIN SOON IN THE WTO
By Martin Khor (Director, Third World Network)
twn at igc.apc.org

(Note:  The Third World Network is an international organisation based
in Penang, Malaysia, that deals with economic, environmental and
development issues from a Third World perspective).

BLURB:  Even as the financial crisis places a heavy burden on the
affected developing countries, a new challenge is emerging at the
World Trade Organisation.  The developed nations are piling on the
pressure to launch a new Round of trade negotiations during the WTO's
Ministerial Meeting this December.  They are now planning their
strategy to get developing countries to agree to putting more issues,
such as investment, competition, government procurement, environment
and labour standards, onto the WTO system. This will put developing
countries into deeper trouble.  It is thus time for these countries to
pay attention to the developments in WTO and resist the attempt to
start a new Round.

__________________________________

The Asian financial crisis, which has now spread to Russia and Brazil,
should have at least taught the world the lesson that there are great
risks for developing countries when they are asked to liberalise their
economies too fast, or to take part in "globalisation" in an
indiscriminate way.

Opening the economy when a country is not yet prepared to withstand
the shocks generated by the world economy, or when its local firms and
farms are not ready to compete with international giant corporations,
can cause disruption.

Yet before we can even digest the full lessons of how to manage the
interface between the domestic and external economies, pressures are
once again mounting to get developing countries to open up even more
to the big companies of the industrial countries.

The extra pressures are coming in the World Trade Organisation, which
will be holding its third Ministerial Meeting at the end of November
in the United States.

The European Union, backed by Japan, Canada and other developed
nations, have announced they want to launch a new "Round" of trade
negotiations at this meeting.

In such a Round, several issues will be made the subject of
negotiations for new multilateral Agreements that will be legally
binding on WTO members.

For example, the Uruguay Round (1984-90) concluded with many new
Agreements covering services, agriculture, intellectual property
rights, investment measures and other issues.  It also created the WTO
to replace the old GATT (General Agreement on Tariffs and Trade).

The developing countries were generally against these new issues
entering the trade system, as the Agreements legally oblige them to
change their national policies and laws so as to open up their
economies further to foreign goods, services and companies.

Since the farmers and local firms are generally small and lack the
technology or marketing skills, they are unable to fairly compete with
the big companies of the West or Japan.

There is a deep fear that when these Agreements are implemented (after
a grace period of five years or so), the developing countries will
face a lot of problems.

Cheaper goods or services may swamp the market, replacing what is
locally made. Bigger foreign firms with the latest technology or with
marketing outreach will increasingly take more market share away from
the local sector.

This may well cause retrenchment and dislocation, especially in the
less developed of the Third World countries.  The least developed
countries are understandably most worried.

Even before these problems arising from the Uruguay Round have been
understood (let alone dealt with), the big companies are once again
pushing their governments to open up yet more areas in the developing
countries for them to enter.

The European Union therefore proposed launching a new round of
negotiations, which it even conferred the glamorous term "the
Millennium Round."

Although the US originally seemed cool to the idea (preferring to push
issues it liked on a sector by sector basis), President Bill Clinton
endorsed having a new Round in the WTO when he made his State of the
Union address last month.

The developed countries thus seem united in pushing the WTO into this
"new Round."

Developing countries should be very wary of what this means because a
range of issues that will be to their disadvantage will be thrown into
the preparations of this new Round.

The EU has already made it clear that it wants to pursue "new issues"
such as international investment rules, competition policy and
government procurement through this Round.

These three issues were put on the agenda of the first WTO Ministerial
Conference in Singapore in 1996.  Most developing countries were
against having any negotiations for Agreements on these issues, but
the pressure from the developed countries was so strong that they
compromised and agreed to taking part in "working groups" to discuss
the issues.

The developing countries made it clear that the working groups had the
mandate only to discuss the topics in a sort of academic way, in what
was called an "educative process".  They had no mandate to start
negotiations for Agreements.

The three working groups have now gone through two years of
discussion, during which the developed countries made it clear they
intend to "upgrade" the talks into negotiations. Their plan now is to
use the device of the Millennium Round to make the three issues
(investment, competition, government procurement) the subject of talks
for new Agreements.

But this is not the end of the story.  Some of the rich nations also
want other issues like "trade and environment" and "labour standards"
to be part of the new proposed Round.

The governments of these countries want to placate the environmental
groups and labour unions who have been protesting about the negative
effects of free trade.

If the environment and labour standards are also thrown into the pot
of the New Round, the influential civic groups may then be won over,
or at least they may not campaign so hard against the proposed Round.
Or so the establishment thinking goes.

The US meanwhile is very keen that the Uruguay Round issues of
services, agriculture and intellectual property rights be revisited
and revised so that its corporations will have yet more market
openings or advantages.

New negotiations on these existing topics, which are already on the
agenda in any case, will also likely be put on the agenda of the New
Round.

However, it is far from certain that there will be a new Round. Many
developing countries are against it.  Their position is that the WTO
should allow developing countries (who after all are the majority) the
time and space to tackle the problems of implementation of the
existing Agreements.

That is cause for enough headaches and economic dislocation.  The
present financial crisis and its bad impact on trade and growth has
now magnified the problem.

How then can they cope with negotiations on yet more new issues, which
are certain to cause another round of new and potentially disastrous
problems or crises?

Whist this position obviously has merit, the developing countries are
unfortunately not united.  India, Malaysia, Egypt and many African and
least developed countries have spoken out against a new Round.

But most Latin American and a few Asian countries have indicated they
are for the European proposal.

Those countries that have thought through the problem and oppose
negotiations on new issues should now get together and strengthen
their position as the talks in the WTO hot up in the next few weeks.

The financial crisis should not deflect the attention of policy makers
or the public from what is happening in the WTO.  Otherwise, through
pressure or by default we will be landed with a new Round that is not
of our choosing and that will place more obstacles not only to the
recovery process but to our development in the long term.

A new Round of multilateral trade talks under the World Trade
Organisation (WTO), now being advocated by the rich countries, would
put developing countries very much on the defensive as they will have
much to lose.

The European Union (EU), Japan and the United States have already
signalled that they want to put many topics on the agenda of such a
new Round, which they hope can be launched in November at the WTO's
Ministerial Conference.

On each of these topics, developing countries will be pushed to give
up more and more of existing policies that protect their domestic
economies, and allow foreign firms the right to take over their
national markets.

The Japanese government has already marked out nine areas for the
proposed new Round, according to a Kyodo News report.  They are
agriculture, services, tariffs on industrial products, investment
rules, anti-dumping, competition policy, electronic commerce,
intellectual property and government procurement.

Japan found common ground with the EU on the new trade talks when its
Trade Minister Kaoru Yosana met with the European Commission Vice
President Leon Brittan last month.

The Japanese government is now planning to win over developing
countries to the idea of the new Round by sending officials to
dialogue with the developing countries.

President Bill Clinton of the United States meanwhile also called for
a new round of trade talks that would "expand export of services,
manufactured goods and most of all farm products" for the US.
Officials from Japan, the EU and the US have agreed that they should
conclude the next round of talks within three years, compared to the
eight years for the Uruguay Round, according to Kyodo News.

The above reports show that the major trade powers are confident they
can push through a decision to start a new Round, although many
developing countries (who form the majority of the WTO's 130 members)
are against it.

There are good grounds for such confidence.  Although they form only a
small minority, the rich countries (and in particular, the US, EU,
Japan and Canada, known as the "Quads") have usually succeeded in
calling the shots in the WTO, often riding roughshod over the
objections of many developing countries.

It may well happen again at the WTO Conference this year.

The three issues that should especially worry developing countries are
investment, competition policy and government procurement.  If there
is a new Round, it could lead to new WTO Agreements on these topics.

The following is a summary of how these issues will affect the
developing nations:

     **On the INVESTMENT ISSUE, the rich countries are pushing to
introduce new rules that make it mandatory for all WTO countries to
give foreign investors the right to enter and establish themselves,
with 100 percent ownership.

    Foreigners and foreign firms should also be treated as well (or
better) than locals, and restrictions on the free flow of capital into
and out of the country (and on the foreign firms' operations) would be
prohibited.

    In discussions so far at the WTO working group on investment, the
rich countries have sought to give a wide scope to the definition of
foreign investment.  It would include not only foreign direct
investment but also portfolio investment and purchase of property.

    Needless to say, if such an agreement were to be passed within the
WTO, developing countries would no longer be able to give preferences
or protection to local investors, firms or farmers.  They would face
the threat of having their products wiped out by competition from the
bigger foreign firms, or of being taken over  by them.

    Also, the kind of restrictions that some countries place on inflow
and outflow of portfolio or loan capital from abroad, and on foreign
ownership of land and houses, may come under question or be banned.

    ** On COMPETITION POLICY, the EU and US are advocating a new
agreement that would look unfavourably on domestic laws or practices
in developing countries that favour local firms.

    For example, if there are policies that give importing or
distribution rights to local firms (including government agencies or
enterprises), or if there are practices among local firms that give
them superior marketing channels, these are likely to be called into
question.

    The rich countries would argue that such policies or practices
create a barrier to foreign products or firms, which should be allowed
to compete on equal terms as locals.

    Developing countries may argue that only if local agencies or
firms are given certain advantages, or if they have built up
distribution systems over the years, then they should be allowed to
keep these advantages. Providing the giant international firms equal
rights would overwhelm the local enterprises which are small and
medium sized in global terms.

    However, such arguments will not be accepted by the rich
countries, which will insist that their giant firms be provided a
"level playing field" to compete "equally" with the smaller local
firms.

    ** On GOVERNMENT PROCUREMENT, the rich countries are actually
casting their eyes on the lucrative business of providing supplies to
and winning contracts of the public sector in the developing
countries.

    At present, government expenditure is outside the scope of the
WTO, unless a member country voluntarily joins the "plurilateral"
agreement on government procurement.

   The aim of the rich countries is to bring government spending
policies, decisions and procedures of all member countries under the
umbrella of the WTO, where the principle of "national treatment" will
apply.

   Under this principle, governments in their procurement and
contracts for projects (and probably also for privatisation deals)
would no longer be able to give preferences or advantages to citizens
or local firms.

   The bids for supplies, contracts and projects would have to be
opened up to foreigners, who should be given the same (or better)
chances as locals. It is proposed that foreign firms that are unhappy
with the government's decisions can bring the matter to court in the
WTO.

   Since government expenditure in some countries is bigger in value
than imports, such an agreement to bring procurement under the WTO
rules would tremendously enlarge the scope of the WTO.

   As most developing countries would object to having their
public-sector spending policies changed so drastically, the rich
countries have a two-stage plan for this issue:  firstly, have an
agreement only to bring in greater "transparency" in government
procurement; secondly, to have a broader agreement that would cover
the national treatment principle.

   All the three issues have very serious implications for national
economic interests, and our policy makers must therefore pay great
attention to the plans and strategies of the rich countries that are
trying to introduce them in the WTO.

   It is certainly not inevitable that these and other new issues will
be brought into the WTO, since there is not yet any decision or
consensus that there will be a new Round.

   But the negotiations towards the November Ministerial Conference
have already started, and developing countries should make their views
known and heard as early as possible. In any case, the policy makers
and the public in each WTO member country should discuss and debate
these issues so that the developing countries can take a clear and
strong position.

   Otherwise we are in danger of once again being run over by the
mighty trade negotiating machine of the rich nations.