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WTO Situation Report: March 2001

Introduction

Built-in Agenda

A) Agriculture

B) Services

Stock-taking on Implementation Issues

Transition Periods: TRIMs and Customs Valuation

Qatar Ministerial: The Launching of a New Round?

The EU’s Everything but Arms Initiative (EBA)

Integrated Framework (IF)

 

I. Introduction

1. This note seeks to take stock of recent WTO developments from the perspective of the less-advantaged countries (LACs). The WTO’s coverage is wide and meetings, activities, negotiations and decisions are numerous. Thus, the focus has been on those subjects which are considered to be of particular relevance to the LACs.

II. Built-in Agenda

          A) Agriculture

2.  The number and nature of the proposals presented so far at the Special Sessions of the Committee on Agriculture illustrate the intractability of the negotiations and the difficulties of finding agreement given the vastly divergent positions. Difficulties remain on issues such as WTO disciplines on the use of export subsidies and export credits, revised parameters on the provision of domestic support, restrictions on the use of food aid, and clarification of use of sanitary and phytosanitary measures to control food imports. Discussions have continued to centre around two distinct positions: those of the exporting countries supporting liberalisation and that of the European Union, Japan, Korea and a multitude of developing countries which advocate ‘multi-functionality’ and non-trade concerns.

3.   From a developing country perspective, there is widespread agreement that the benefits of liberalisation in agriculture have not accrued to them and that the playing field between them and developed countries continues to be uneven. It is generally agreed among developing countries that the reform process mandated under Article 20 of the Agreement on Agriculture should attain a balance between trade and non-trade concerns, and that the latter vary significantly between developed and developing countries. Non-trade concerns for developing countries would include: subsistence farming, rural development, employment and production, access to food, poverty alleviation, whereas for developed countries concerns centre on environmental protection, cultural heritage, food safety, reducing the risk of food shortages, etc. Another important issue to consider is that the contribution of agriculture to GDP, foreign exchange earnings, and employment is far higher in developing countries than in developed countries. Thus, developing countries underscore the need that more flexibility be allowed to them to address these specific concerns.

4.  Specific developing country proposals include that further tariff reductions by developing countries ought to be linked to ‘genuine’ reductions by developed countries of tariffs and levels of domestic support; that the preferential access for small developing economies be maintained; that new disciplines for state trading enterprises be established; that duty-free access for LDCs agricultural products be granted and that developed countries’ rice subsidies be abolished, rice being a major LDC export.

          B) Services

5.  Work in the area of services has proceeded along several tracks: in the Council for Trade in Services (CTS), MFN exemptions were considered. According to the provisions of the Annex on exemptions to the MFN principle (Article II), all such exemptions taken for a period of more than five years had to be reviewed by the CTS at the latest five years after the entry into force of the GATS. The review took place in 2000 but did not lead to any particular conclusion thus far. It has been proposed that further review of the MFN exemptions should be undertaken in 2004, but no decision has been taken yet.

6.  The five-year old discussions on the development of provisions on emergency safeguard measures in the Working Party on GATS Rules have not led yet to any agreement. Some developing country Members argue that their service sector needs to be protected from unforeseen developments having negative consequences on their economy and that this can only be achieved through an emergency safeguard mechanism. The deadline for the conclusion of such discussion was recently extended for the third time until 15 March 2002. Beyond emergency safeguard measures, the Working Party on GATS rules also deals with subsidies and government procurement, on which hardly any progress has been made thus far.

7.  The CTS held special sessions on progressive liberalisation under Article XIX of the GATS. The treatment of autonomous liberalisation was part of the discussion on negotiating guidelines, although in the end it acquired a life of its own; discussions on it will continue beyond the adoption of the guidelines. According to Article XIX of GATS, guidelines and procedures for the negotiations have to be approved by WTO Members for each round of negotiations. The first draft of the guidelines was close to a proposal of the G-24[Note 1] tabled in December 2000, which stressed the need for special and differential treatment for developing countries which would allow them to make fewer market access commitments and for establishing reviews on how increased services liberalization would benefit developing countries. However, several developed countries considered this draft as too heavily slanted on developing country needs, and a new draft was issued. The second draft considered in February 2000 was rejected by the G-74 (as the G-24 was joined by the African and CARICOM countries) on the grounds that (a) it had eliminated almost all the provisions on special and differential treatment, (b) it did not reflect what had been discussed in the informal meetings, and (c) it was issued without being subject to full consultations. Finally a fourth draft was approved on 28 March 2001 paving the way for the more substantive negotiating phase. 

8.  The outstanding negotiations to elaborate GATS disciplines on domestic regulation mandated at the end of the Uruguay Round were considered in the Working Party on Domestic Regulation (WPDR) under Article VI.4 of the GATS. Although the GATS recognised Members’ right to regulate, it also required domestic regulation on licensing, technical standards and qualification requirements and procedures not to create unnecessary barriers to trade. After the completion of the Article VI.4 mandate for the accountancy sector, the WPDR organised consultations with other professional services organisations (lawyers, architects, engineers, etc.) about the horizontal applicability of the disciplines developed for the accountancy sector. Responses have been rather positive. Current discussions in the WPDR have focused on two main issues: transparency and the necessity test. Problems on both counts on matters of definition, scope and ‘legitimate objectives’ have accounted for muted progress so far.

III. Stock-taking on Implementation Issues

9.  The Decision adopted on 15 December 2000 to advance on implementation-related issues as part of the ‘confidence-building’ exercise which followed the failure of the Seattle Ministerial has given way to taking stock of progress made on this major developing country concern. Developing countries would wish to see tangible benefits from the existing agreements, particularly those on SPS, agriculture, services and TRIPS, by improving or adjusting them.[Note 2]

SPS

• increased transparency in the development of mutual recognition agreements (MRAs) and opening them for parties to be able to join them at later stage;
• clearer definition of standards, guidelines and recommendations in the SPS agreement;
• increased participation of developing countries in standard-setting bodies.

Agriculture

• flexibility in the green box to address non-trade concerns of predominantly rural agrarian economies;
• effective implementation of the Marrakesh Ministerial decision on the negative effects of the agriculture reform on least-developed and net-food importing developing countries;
• effective international disciplines on agricultural export credits, export credit guarantees and insurance programmes to prevent the circumvention of export subsidies commitments.

Services  

• full implementation by developed countries of commitments undertaken under mode 4, i.e. movement of natural persons;
• putting in place a monitoring and notification mechanism to ensure effective implementation of Article IV of the GATS on increasing the participation of developing countries.

TRIPS

• a moratorium on nullification and impairment cases under TRIPS;
• additional protection for geographical indications for products other than wines and spirits;
• making obligatory and subject to periodic notification developed country commitments to provide incentives to their enterprises to promote and encourage the transfer of technology to LDCs;
• exempting from patentability the WHO’s list of essential drugs;
• extending the transitional period for developing countries.

10.  However, the scant progress made in more than a year’s work on implementation became clear at the 16 March 2001 informal meeting on implementation. Several of these issues were referred to the respective WTO bodies for further discussion. However, several Members maintain that the demands on implementation are so significant that complying with them would mean backtracking on already agreed commitments and therefore it made sense to roll these demands into new negotiations.

IV. Transition Periods: TRIMs and Customs Valuation

11. The longstanding differences between Members regarding developing country demands for extension of the transition period under the TRIMs agreement under which Members are required to cease all investment restrictions inconsistent with the agreement (e.g. local content, export performance, trade and foreign exchange balancing requirements) by 1 January 2000, remain unresolved. Ten developing countries have requested such extension[Note 3] for periods ranging from five months to seven years. At present a ‘2 + 2’ agreement (two years’ extension plus two years’ grace period subject to a case-by-case review) is being negotiated by these countries and the Quad (Canada, the EC, Japan and the United States).

12.  Regarding customs valuation, since October 2000, of the 18 Members whose five year delay period under Article 20.1 expired, 15 have been granted an extension. However, 25 countries whose delay period has expired have not applied the Agreement nor requested an extension. 

V. Qatar Ministerial: The Launching of a New Round?

13.  The General Council decided on 8 February 2001 that the Fourth Ministerial Conference will take place in 9-13 November in Qatar, after Chile withdrew its offer to host the meeting. It is clear that vast differences exist on the scope or even the need for a new Round. Its launching has become a difficult balancing act between progress on developing countries’ demand for enough flexibility on implementing existing agreements so that they too can benefit from them; advancing on the mandated negotiations on agriculture and services; and agreeing on what will be on the negotiating table regarding new subjects.

14.  Those who are openly in favour of a new Round (namely the EU and Japan) and (to a lesser degree the US, which is not fully convinced of the desirability of including negotiations on  investment and competition, and even less on antidumping and subsidies), are finding difficulties convincing either themselves or those who oppose a new Round, mainly developing countries, in particular the ‘Like Minded Group’.[Note 4]  Thus, flexibility has become the key word, with the EU toning down several of the more contentious issues (agriculture, competition, investment, core labour standards and environmental issues) but opening up the possibility of abandoning the concept of ‘single undertaking’ and adopting the ‘plurilateral approach’, whereby Members are free to pick and choose which agreements they sign on to.

15.  Evidently, a repeat of Seattle is to be avoided at all costs, thus Members are seeking to avoid proposing a text for a declaration unless there is enough general consensus. A parallel track is being developed to engage in consultations for preparing the Ministerial and advancing on developing countries’ implementation demands.  A number of developing countries do not see the need to launch a new Round in Qatar and contend that WTO Ministerial Meetings should not be tied to the launching of new negotiations. A July deadline has been set to assess whether sufficient progress in the preparatory process has been made for continuing on the track of launching a new round in Qatar. However, the July deadline may be premature, as some have expressed doubts that there would be sufficient time to prepare the groundwork and, in addition, the USTR has stated that by July the US would still not be in a position to be able to support a new round.

VI. The EU’s Everything but Arms Initiative (EBA)

16.  This initiative, to a great extent the result of the efforts of the previous and present Directors General of the WTO to provide universal duty- and quota-free access to all LDC imports, is related to important concerns within this organization, in particular the preferential treatment of LDCs within the larger framework of special and differential treatment to developing countries. (This positive development differs markedly from the lack of progress on a waiver for continuing the preferential treatment granted to the ACP countries under the Partnership Agreement between ACP countries and the EC.) Indeed, in late February 2001, the European Union approved the ‘Everything but Arms’ initiative to eliminate quotas and duties on all products except arms from LDC imports taking effect on 5 March 2001. However, the liberalization of three sensitive products, sugar, rice and bananas, will be phased in during a transition period, with full liberalization not expected for bananas until 2006 and for rice and sugar until 2009.[Note 5] Additionally, the EC Commission would have broad discretion to impose safeguards against these products if imports were to cause ‘serious disturbance’ to the EU markets. Moreover, rules of origin will be tightened and imports of these products monitored to avoid fraud, or transhipment, in which case, preferences for these products would be suspended. 

VII. Integrated Framework (IF)

17.  The disappointing results regarding the IF moved the six core agencies (WTO, World Bank, IMF, ITC, UNCTAD and UNDP) in tandem with several donor countries to step up efforts to revitalize it. In February 2001, under the WTO Sub-Committee on Least-Developed countries, a new Integrated Framework Pilot Scheme was launched to assist LDCs committed to mainstreaming trade in their country development strategies, particularly in the Poverty Reduction Strategy Papers (PRSPs) of the World Bank or the United Nations Development Assistance Framework (UNDAF). Through this Pilot Scheme the objective would be to strengthen the IF ensuring coordination and collaboration amongst LDCs, multilateral agencies and donors involved in trade-related technical assistance and capacity building. To guarantee the finance of the strengthened IF a Trust Fund open to voluntary contributions will be established. Norway, the United Kingdom, the Netherlands, Sweden, Canada, Denmark , Japan and the EU, as well as the IMF and World Bank committed funds for the IF Trust Fund.

18.  The management of the IF would be entrusted to two organs: the IF Steering Committee (IFSC) composed of six LDC representatives, the six core agencies and the donors. and the Inter Agency Working Group (IAWG) which would also perform Trust Fund management functions and would be composed of: the six core agencies, the Pilot Scheme Special Representatives (of LDCs and donors), and a representative of the OECD Development Assistance Committee (DAC) Secretariat. The former’s functions would include policy guidelines and oversight, and the latter would be in charge of preparation of the work programme and budget, the sequencing of activities, the selection of experts and monitoring and evaluating field level operations.

Note 1 : Argentina, Brazil, Cuba, Dominican Republic, El Salvador, Honduras, India, Indonesia, Malaysia, Mexico, Nicaragua, Pakistan, Panama, Paraguay, Philippines, Sri Lanka, Thailand, Uruguay, and the members of the Andean Community (Bolivia, Colombia, Ecuador, Peru and Venezuela). (retour texte)

Note 2 : The WTO Secretariat has produced a document compiling implementation issues raised by Members, including paragraphs 21 and 22 of the draft Ministerial Text of 19 October 1999 and other issues raised since: (JOB(01)/14, 20 February 2001.(retour texte)

Note 3 : Argentina, Chile, Colombia, Egypt, Malaysia, Mexico, Pakistan, the Philippines, Romania and Thailand.(retour texte)

Note 4 : A group formed by Cuba, Egypt, Dominican Republic, Honduras, India, Indonesia, Malaysia, Pakistan, Tanzania, Uganda and Zimbabwe, which share a similar outlook regarding implementation issues: that these should be resolved before any new negotiations take place; that developing countries receive additional time to implement certain trade obligations; and that existing agreements be changed to provide developing countries with the benefits they had negotiated but which had yet to materialise.(retour texte)

Note 5 : Duties on fresh bananas reduced by 20% annually starting January 2002 and eliminated on 1 January 2006 at the latest; Duties on rice will be reduced by 20% on 1 September 2006, by 50% on 1 September 2007 and by 80% on 1 September 2008 and eliminated on 1 September 2009 at the latest. Duties on sugar will be reduced by 20% on 1 July 2006, by 50% on 1 July 2007, by 80% on 1 July 2008 and eliminated on 1 July 2009 at the latest.(retour texte)

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