Report of the UNECE/AITIC Briefing Preparing for the Fifth WTO Ministerial Conference Cancun
(held in Salle VIII, United Nations Office, Geneva, on 7 July 2003)

I. Introduction

1. Ms Carol Cosgrove-Sacks, Director, Trade Development and Timber Division of the United Nations Economic Commission for Europe (UNECE) chaired the meeting. She explained that it was intended to be an open forum to promote a better discussion of the current negotiations in the WTO. UNECE and Agency for International Trade Information and Cooperation (AITIC) collaborated to organise this meeting as both organisations share an interest in assisting transition economies and small countries to better understand the Doha issues.

2. Ms Esperanza Durán, Director, AITIC thanked the UNECE for collaborating in this joint effort for the third time. She reminded participants that AITIC and the UNECE had held joint meetings on WTO Ministerial Conferences prior to the Seattle meeting and just after the Doha Ministerial. She pointed to the progress made by transition economies in securing recognition of their special interests within paragraph 38 of the Doha Declaration. She also stressed the importance of accelerating the process of accession for transition economies that were not yet WTO members, and highlighted that acceding members are now able to participate in WTO negotiations, a clear improvement in their status since Punta del Este. Six clusters of transition economies had completed or are engaged in the process of WTO accession: 1) those already integrated into the General Agreement on Tariffs and Trade (GATT) prior to the formation of the WTO; 2) those that had joined prior to the Seattle Ministerial; 3) those that acceded between the Seattle Ministerial and Doha; 4) the CIT that has acceded since Doha; 5) those that still have some way to go; and 6) the CIT that has requested observed status, but yet to file an application to begin its process of accession. Clearly, each of these groups of transition economies will have diverse interests within Doha round of trade negotiations, as well as areas of commonality including the full implementation of existing agreements.

II. Progress in the WTO Accession Negotiations

3. Mr Hector A. Millán, Senior Counsellor, WTO Secretariat remarked that none of the Least-Developed Countries (LDCs) have acceded to the WTO since 1995, and his hope that Cambodia and Nepal might do so before the end of 2003. While some ten transition economies have acceded since 1995, another ten are in the process of negotiating their accession. The number and range of commitments made by acceding countries varies widely. There are a variety of systemic issues that are related to the accession process and priority is predominantly focused on compliance with WTO rules and obligations. However, compromises were always possible as demonstrated by the cases of Armenia which received six years to bring its Value Added Tax (VAT) regime into conformance with WTO Agreement on Subsidies on Countervailing Measures, and China, which has experienced delays in the field of public procurement.

III. Russian Accession to the WTO

4. Mr Maxim Medvedkov, Vice Minister, Ministry of Economic Development and Trade of the Russian Federation, and Chief Negotiator of Russian Accession, introduced Russia as the seventh largest customs territory in the world and a major exporter of commodities, value-added products and services. As Russia is also a major importer, it cannot be separated from the most significant international forum for trade issues. While WTO accession is a political priority for Russia, it also carries significant economic implications. In that light, Russia’s terms of accession must be balanced. Still, Russia will not request significant transitional arrangements. Viewing that the final stages of Russian accession have been reached, he explained that Russia was ready to include financial services and telecommunications under a gradual transition process, but the liberalisation would not be complete. Given the fact that one major Western financial institution had a higher rate of capitalisation than that of all Russian financial institutions put together, the degree of liberalisation agreed would decide the question of whether there would be any domestic financial institutions left in Russia over the long term.

5. While 80 per cent of the bilateral accession negotiations concerning goods were complete, the figure in the area of services was between 50-60 per cent. It was important to recognise that systemic difficulties within the WTO itself were creating difficulties for Russian accession. For example, the lack of consensus within the membership over the question of how agriculture should be addressed has seen the WTO members split between those in favour of liberalisation and those supporting multifunctionality, each attempting to secure Russian support for their positions within the context of the bilateral accession negotiations. Within the context of the services component of the bilateral negotiations, Russian negotiators have similarly found themselves walking a fine line between those members who wish to include the cultural exception and those supporting unfettered operation of the market mechanism. Also under the services sector, were tough negotiations yet to be completed over liberalisation in the provision of energy services as well as in the areas of distribution and extraction. Under the subject of environmental protection, Russia had found itself responding to requests that are beyond the parameters of the existing WTO Agreements. Such systemic issues were ones which the WTO membership had to deal with over the long term, and he was not convinced that taking them up in the accessions negotiations was a productive way to address them.

IV. WTO Work Programme of the International Trade Centre (ITC)

6. Mr Peter Naray, Senior Counsellor, ITC underlined that the ITC was working to strengthen the capacities of the transition and developing economies to better engage the Doha Work Programme by strengthening business-government interaction. Explaining that the agenda for trade negotiations in developed countries is primarily driven by business interests, he highlighted that business interests generally had little influence over the agenda for trade negotiations in developing countries and transition economies. While it is clear that the latitude of the US trade negotiators working on trade in intellectual property rights is heavily conditioned by the position of its pharmaceutical industry, it is equally self-evident that no country could effectively engage in the current negotiations on market access without input from its commercial sector. It is in this context that the ITC actively works to host and to promote meetings in developing countries and transition economies where government officials, the commercial sector and non-governmental organisations can engage the topic of WTO negotiations. To illustrate the pitfalls of poor business government interaction, he recounted the case of one WTO member that had made concessions in the automotive sector without substantial input from its automotive industry. In was not until time to implement these commitments that it became clear that full implementation would have led lead to the wholesale bankruptcy of the domestic automotive sector. In this case, it was possible to re-negotiate the commitments, but the exercise was costly. In the area of services, input from the business sector was crucial. It was his experience that due to the abstract nature of trade in services, the commercial sector would have the clearest picture of the barriers to trade in that sector. If developing countries and transition economies were to effectively represent their national interests within the current round of trade negotiations, strong business government interaction in developing their national negotiating agendas would be pivotal.

V. Looking Ahead to the Cancun Meeting

7. Mr David Woods, Consultant, World Trade Agenda stated that the Singapore issues were meant to be decided at Cancun, but a decision on modalities to begin negotiations seemed unlikely at the September ministerial. The reasons for this were many:

● Many negotiating deadlines had been missed, agriculture in particular;
● There was little likelihood that the negotiations under market access; could begin without progress in agriculture;
● In the services negotiations, there were 25-30 offers on the table, but none were impressive;
● On TRIPS and public health, there had been no progress over the draft on the table;
● Negotiations for strengthening Special and Differential treatment (S&D) for developing countries and over implementation issues remained at a stalemate.

8. Substantive breakthroughs did not seem possible because of the stalemate in the negotiations on agriculture. The recent agreement on reform of the European Common Agricultural Policy (CAP) did address the issues of de-linking support from production, but the package did not go very far and more importantly, would not be applied evenly. To date, there has been no attempt to translate this reform into a new European Community (EC) position within the agricultural negotiations. Countries supporting more liberalisation have not been impressed with the CAP reform package and, more importantly, do not see that the CAP reform resulting in substantive increases in market access.

9. On the Singapore issues, it was worth recalling that the previous attempt to bring a Multilateral Investment Agreement (MAI) negotiation within the Organisation of for Economic Co-operation and Development (OECD) into the WTO was unsuccessful due in large part to efforts by Non-Governmental Organisation (NGOs). It was equally important to recognise that the effort to bring investment into the WTO is not corporate driven. If a large multinational wants to invest in a developing country the existence or absence of an international agreement on investment will not be the main consideration. The effort to bring investment within WTO disciplines is essentially a concession that EC negotiators need to bring back as a justification for further reforms to the CAP.

10. Similarly, competition policy is not a corporate driven issue. Although corporations would favour a fair and open competitive environment, they are unlikely to see negotiations for competition policy rules in the WTO as a compelling way to achieve this end. Although some developing countries could be interested in competition policy rules as a means to secure information from developed countries regarding anti-competitive practices in their countries, there is general scepticism among developing countries on whether a competition regime within the WTO would be in their interest. The issues of trade facilitation and transparency in government procurement essentially revolved around the question of corruption, and are for that reason, very complex undertakings. The lack of consensus on negotiations in these two areas reflects this fact.

VI. United Nations Conference on Trade and Development (UNCTAD)

11. Mr Norbert Lebalé, Division on Investment, Technology and Enterprise Development, UNCTAD shared that the UNCTAD assists transition economies and developing countries with accessions, but pointed out that the question of development must go beyond the accession process. It is what happens in the long-term following accession that counts. That said, the ability of acceding members to participate in negotiations following Doha was a positive step, but requests for WTO-plus commitments was clearly a problem. For instance, Mr Medvedkov had remarked on the issue of energy within the context of WTO negotiations. Mr Lebalé did not see a justification for transition economies or developing countries to become laboratories regarding energy policy. Neither did he consider that accessions were a reasonable context in which to introduce subjects that WTO members had not been willing to formally address within the WTO itself. Sharing the lack of optimism shown by the previous speaker over progress on implementation issues, he recalled a variety of non-WTO agreements regarding development that the WTO negotiations should take into account.

12. Regarding Singapore issues, he considered that investment rules had the potential not only to limit “policy space” for development, but could constrain the ability of developing countries to implement policies to attract Foreign Direct Investment (FDI). On competition policy, there were few developing countries with solid domestic competition policies and a distinct lack of clarity regarding how flexibilities for developing countries could be implemented should be noted. In the area of transparency in government procurement, the cost of implementing transparency requirements in developing countries was an obvious obstacle to further progress.

13. The discussion focused on accession. A participant noted that the question of internal coordination was important for developing countries and transition economies, but also for developed countries. Countries could not defend their interests in the WTO accession process if there was a lack of coordination between the private and public sectors domestically. Another participant asked whether ITC had a dialog with developing countries in the process of accession. She explained that it was necessary to cooperate with the business sector prior to accession. Mr Naray replied that ITC was implementing work programmes, in particular in Central Asia, to inform countries on how to involve the private sector in their accession process.