Introduction
This chapter focuses on the status of the Doha Development Agenda (DDA) and the current round of negotiations in the World Trade Organization (WTO). This round of negotiations is of crucial importance since it will define the multilateral rules for trade for years to come. Since the conclusion of the Uruguay Round (1994), the multilateral trade agenda has considerably widened and according to the European Union, the new agreements should reflect this.
Seattle showed clearly the existence, both in the North and in the South, of high degrees of skepticism towards the negative effects of globalization, blaming WTO, inter alia, to be an organization biased against the poor. The Seattle events seem to have happened centuries ago, but the debate on the subject is more lively than ever. The DDA is in itself a response to the concerns expressed both by developing countries and significant parts of the public opinion of the developed world since the Seattle ministerial. This agenda is very different and much more balanced than that which had been proposed in Seattle: the DDA takes much more into account the legitimate interests of the developing world, it is really an agenda focused on the developmental aspects. The European Commission, therefore,feels that a failure in these negotiations would be detrimental for the WTO system as a such: a balanced and realistic consensus, a win-win solution beneficial to all members of international trade community can and must be achieved. This is a sine qua non for the future of trade multilateralism.
Basic Principles of EU Trade Policy and the WTO
The General Agreement on Tariffs and Trade (GATT) (1947)predates the EC Treaty of Rome (1957). The latter has been inspired by many of the GATT provisions.
Trade, with technological innovation, is the primary engine of world growth. For the past 50 years, the growth of trade has outpaced the growth of national economies of the world by on
average of 2-3 per cent per annum.
Trade is also an instrument of development. Many countries have exported their way to industrialization (Japan in the 1950s and the 1960s, Korea in the 1980s and the 1990s, and now China). Trade was also a fundamental component of the process of European integration.
The Uruguay Round (ended in 1994) established the WTO as the successor to the GATT and greatly increased the scope and depth of world trade rules. New features of the trading system include the coverage of the services sector and rules to protect intellectual property rights, as well as the establishment of a binding dispute settlement system. This is a very important feature which distinguishes the WTO system from the previous GATT: every member of WTO can be obliged to respect its commitments by a binding decision. The fact that all the “great” countries like the United States, the European Union, and Japan lost important cases in WTO in recent years show that the system is not as unbalanced as many argue, considering that “rich” countries impose their rules in WTO. Reality has more nuances than that.
In this sense, I would also add that GATT/WTO has evolved more rapidly and strongly than any of the other postwar international institutions (the United Nations, the International Monetary Fund, the World Bank, the International Labour Organisation, the World Intellectual Property Organisation, the United Nations Conference on Trade and Development).
Fundamentally, the trading system creates individual economic rights. Nonetheless, trade liberalization is not an end in itself. When implemented sustainably, the welfare it generates gives room to governments to also take initiatives in other areas.
Common Trade Policy
The EU has a Common Trade Policy (CTP) that is based on uniform principles. EU Member States have therefore pooled their sovereignty and foregone their right to have an autonomous trade policy. At the same time, CTP is a consequence and indispensable prerequisite for the EU Single Market.
Trade policy is a core EU policy area and one of the Commission’s “noble tasks”. The Commissioner for Trade is Europe’s de facto “Mr Trade”. In the field of trade, Europe is really a single Europe.
The Commissioner for Trade (currently Pascal Lamy) is the exclusive spokesman and negotiator on behalf of the 15 member states. However, his actions are delineated by a negotiating mandate established by the Council (on the basis of a Commission proposal), and the results of a negotiation have to be approved by the Council before they any legal effect. Simply put, the European Commission is the initiator of trade proposals and negotiator, and the Council gives the mandate and is the final decision-maker.
Trade talks generally take some years to conclude, during which the Commission reports to and is guided by a consultative Trade Policy Committee of the Council-the so-called Article 133 Committee. It consists of capital-based officials and meets every week, usually at the level of Deputy Members, and once a month at the level of full members. The negotiating process is as follows:
- Mandate. Determined by the Council on the basis of a Commission proposal.
Negotiation. The Commission negotiates as sole spokesman of the 15 on the basis of this mandate, in close consultation with the Article 133 Committee.
Ratification. The Council approves the result of the negotiation, after consulting the European Parliament.
The results enter into force once transposed into EClaw, and are then subject to review by the European Court of Justice. The WTO Agreements The WTO has currently 144 members. It has an intergovernmental institutional structure. The WTO Agreements are the following:
- Trade in goods. GATT Agreement and annexes (Agriculture and SPS, TBT, Textiles, Safeguard, Subsidies, Anti-dumping, Schedules of Tariff Commitments).
Trade in services. GATS Agreement, Schedules of tariff commitments).
Trade-related Intellectual Property Rights: TRIPs Agreement.
Apart from these, there is the Dispute Settlement Procedure governed by the “Understanding on Rules and Procedures Governing the Settlement of Disputes”, the “Trade Policy Review Mechanism”, and the Plurilateral Agreements;
The Plurilateral Agreements refer to agreements where not all members are signatory to these agreements. The main Plurilateral Agreements are the “Agreement on Civil Aircraft”, “Agreement on Government Procurement”, “Agreement on Dairy Products” (terminated in 1998), and the “Agreement on Bovine Meat” (terminated in 1999).
The Doha Development Agenda
The DDA comprises of three important declarations, viz. the Ministerial Declaration, Declaration on TRIPs Agreement and Public Health, and Decision on Implementation-Related Issues and Concerns. These are the documents which resulted from the Doha Ministerial held in November 2001. The Ministerial Declaration is the overarching declaration.
It was the separate decisions taken by the WTO members on TRIPs and implementation-related concerns of the developing countries, which has given way to the belief that the Doha Declaration’s primary objective was towards creating a balanced “development” agenda for the member countries of the WTO.
Para 3 of the Doha Ministerial Declaration states: “We recognize the particular vulnerability of the least-developed countries and the special structural difficulties they face in the global economy. We are committed to addressing the marginalisation of least-developed countries in international trade and to improving their effective participation in the multilateral trading system.”
The DDA Work Programme is a comprehensive agenda for negotiations for the member countries of the WTO. It includes the following subjects: Implementation-Related Issues and Concerns; Agriculture; Services; Market Access for NonAgricultural products; TRIPs; Four Singapore Issues; WTO Rules Dispute Settlement Understanding; Trade and Environment; Electronic Commerce; Trade, Debt and Finance; Trade and Transfer of Technology; Technical Cooperation and Capacity Building; Least Developed Countries; and Special and Differential Treatment.
The Ministerial Declaration states: “The negotiations to be pursued under the terms of this Declaration shall be concluded not later than 1 January 2005. The 5th Session of the Ministerial Conference will take stock of progress in the negotiations, provide any necessary political guidance, and take decisions as necessary. When the results of the negotiations in all areas have been established, a Special Session of the Ministerial Conference will be held to take decisions regarding the adoption and implementation of those results.” This Fifth Session is foreseen for 10-14 September 2003 in Cancún, Mexico.
The overall conduct of the negotiations will be supervised by a Trade Negotiations Committee under the authority of the WTO General Council. Except the improvements and clarifications related to the DSU, the conduct, conclusion, and entry into force of the outcome of the negotiations shall be treated as parts of a single undertaking, even though agreements reached at an earlier stage may be implemented on a provisional or a definitive basis.
This chapter does not focus on all the issues in the DDA, given the scope of the Work Programme. It seeks to highlight some of the important elements of the DDA Work Programme and discuss the European Commission’s perceptions.
TRIPs and Public Health
The deadline for resolving issues relating to TRIPs and public health was 31 December 2002. Unfortunately, no consensus could be arrived at amongst WTO members mainly due to American opposition to any dilution of the intellectual property rights in the hands of the pharmaceutical industry.
The main problem stems from drawing up the list of diseases, apart from well known epidemics like HIV/AIDS, tuberculosis, malaria, for which the flexibility of compulsory licensing will be allowed by members of WTO.
Since the inception of the discussions, the European Union was fully in favour of exploring possible solutions to allow a substantial reduction of the cost of medicines needed to fight certain epidemic diseases in favour of poor countries.
If the suspension of patents in emergency situations is already possible, what is discussed now is the possibility for producers not in possession of a patent to export generic and lower cost versions of medicines to poor countries. This is not possible now, and it would be a fundamental step forward in the fight against epidemics like HIV or malaria. On the other hand, the European Commission is fully aware of the need to preserve the intellectual property rights system and to protect medical research.
A trade-off is needed and possible. The Indian pharmaceutical industry on its part is very much attracted by the possibility to produce and export generics to countries not having a productive capacity on their own. Therefore, the interest for India is not only humanitarian but also commercial.
The factors hindering an agreement are now two: a) who defines when an emergency situation exists (the country itself or an external body?); b) which diseases are covered (all or only the three mentioned above?).
In order to build a consensus, the European Union has suggested that Members should seek advice from the World Health Organisation for assessing the public health aspects of other potential diseases. At the same time, it has proposed to define objective criteria to declare an emergency situation.
Implementation Issue: Agriculture
Amongst the issues pertaining to “Implementation Issues” which have been of considerable concern to the developing world, including India, a major issue is agriculture. The EU’s Common Agriculture Policy (CAP) has been a concern for many, even though the European Union is the largest importer of agricultural products from the developing world.
The EU has already submitted an ambitious proposal to the WTO outlining its stance on the Agreement on Agriculture. The EU proposal calls for the reduction of import tariffs by 36 per
cent, reducing export subsidies by 45 per cent, and lowering domestic support by 55 per cent. Moreover, the proposal intends to give special and differential treatment to the developing and
least developed countries with regard to market access and the creation of a “Food Security Box”.
As regards Geographical Indications, the European Union has proposed the extension of specific commitments with regard to agricultural and foodstuff products, apart from wines and spirits.
The proposals contain many elements which should be to the liking of countries like India. The EU and India have many common grounds with regard to agricultural issues. Even though India would welcome a more substantial reduction of export subsidies to enhance its own agricultural exports, it is also interested to maintain its own internal subsidies to farmers. In this sense, India should favourably assess the EU proposal, which incorporates two specific Indian requests (“a Food Security Box” and protection of Geographical Indications).
Market A ccess for Non-A gricultural Products
Another significant area of interest for the developing world lies in market access for non-agricultural products. Liberalization of trade in non-agricultural products implies significant benefits for exports of developing countries, which account for 70 per cent of its total exports.
The European Union has proposed a “Compression Mechanism” which flattens tariff levels all around. The application of such a compression mechanism should result in considerably reduced tariff rates with limited dispersion, thus streamlining tariffs.
For products of interest to developing countries, both the relevant ad valorem and specific tariff protection should be reduced so that tariff escalation can be tackled. The European Commission has also proposed that all developed countries should now implement tariff and quota-free access for all products from least developed countries.
Another EC proposal seeks to eliminate all duties beneath a specific floor (to be negotiated) by all WTO members. This would benefit developing countries and especially the least developed countries (LDCs) since tariffs at such a low level are generally applied by developed countries. Where appropriate and depending on the results of the negotiations, members may not necessarily be expected to implement tariff reductions according to the same timetable. Here too, S&DT treatment could be given for the developing and LDCs.
The EU proposal also talks about deeper than average cuts for those goods that will be identified by the negotiating group as environmental goods.
A nti-Dumping A greement
Technically, it is referred to as Article VI of GATT, 1994. It is a very sensitive issue, since, unlike the past, every country has now become a potential user and a potential target of antidumping action: if Asian countries were specially targeted by anti-dumping actions in the previous decades, India recently became one of the main users of anti-dumping measures against products from other countries, very often from the European Union. The substantial increase in the use of this instrument, which should be used only in exceptional cases, without becoming a protectionist tool aimed at compensating the insufficient competitiveness of some sectors, led the European Union to suggest some modifications to existing rules.
The EU has suggested the need to strengthen current disciplines, simplify, and clarify the various provisions and take into account the needs of the developing countries. To that end, some of the methods that have been outlined by the European Union are: greater disclosure and access to non-confidential documents, exploring the possibility of a mandatory lesser duty rule, a public interest test, in terms of examination of the impact on economic operators, initiation of investigations subject to a swift dispute settlement mechanism as also devising a developing country package. The discussion on the subject is still in its early stage; there was no real debate up to now in Geneva.
A greement on Subsidies and Counterrailing Measures
The European Union believes that the the Agreement on Subsidies and Countervailing Measures needs greater clarity. More operational rules are required for “disguised subsidies”. These involve cases of financial contribution by a government, which confers benefits only to the commercial activities of the recipients. The link between the subsidy and the recipient or product is often concealed and therefore much more difficult to establish than in cases where the funding is more up front. Similarly, there may be entities which may be providing “subsidy” under the covert direction of the government. Rules for “local content” subsidies with regard to the industrial sector also need to be clarified.
With regard to the environment, there are some subsidies which harm the environment, while there are some which have a positive effect on environment (such as subsidies to prevent pollution, etc). This too needs to be discussed.
Finally, the cost of reducing countervailing duty investigations needs to be explored, especially for the benefit of developing countries and LDCs.
GATS: A greement on Services
The GATS is a new addition to the WTO brought about bythe Uruguay Round. Its standard procedure is to engage member countries into discussions and seek liberalization based on negotiations. Such liberalization is made “à la carte”, in the sense that every state submits its proposal of commitments of sectors to be open to foreign operators. Once committed, the countries have to open erga omnes to other members of WTO.
There are four ways or modes of delivery of services: crossborder, consumption abroad, establishment, and movement of persons. In WTO language, these are called Mode 1 to 4.
So far, India’s current commitments do not do justice to its service sector potential. It has committed to liberalize only 33 of the 161 sectors that are listed for scheduling commitments. The European Union has requested commitments from India in sectors such as professional services (like legal services, telecom) and financial services (like banking, maritime transport, etc.).
Similarly, India has requested to commitments from the EU primarily in Mode 4 in areas such as computer professionals,professional services, like architects and urban planners, various medical professionals, hospital services, audiovisual services,tourism, maritime, etc. This is a sector in which both India and the European Union have a lot to gain: there is an important room for convergence between the EU and India.
New Issues (Singapore Issues)
One of the most debated aspects of the Doha Development Agenda are the so-called “New Issues”, also known as Singapore Issues, viz. investment, competition, trade facilitation, and government procurement. These are trade-related sectors which were not part of any of the previous negotiating rounds. The European Union strongly believes in negotiations aiming at defining a sort of minimalist agreement on these matters would be extremely beneficial for the members of the WTO.
The EU feels that despite the reservations of countries like India, there is much to gain from a multilateral agreement on all these four issues. This is because India can derive tremendous benefits from such a multilateral process, given the rapid strides it is taking and is in the process of becoming an economic powerhouse.
Indian corporates are today doing business abroad, while a considerable lot of autonomous liberalization is taking place in many crucial sectors. Thus, the Multilateral Investment Agreement can only be in line with domestic reforms that are being undertaken in India. Moreover, the European Commission is suggesting a GATS-type positive list kind of an approach for formulating the pre-establishment norms with regard to investments.
Trade facilitation, for instance, will tremendously benefit Indian exporters and importers and enhance government revenues as well, since corruption and inefficiencies in the customs duties will come down considerably for the benefit of the most. Similarly, India’s new Competition Act meets the needs of a multilateral framework, while transparency in government procurement is a much desired objective in most countries.
In general terms, the Government of India seems to think these issues are not a priority and that eventual agreements on these matters would not benefit developing countries. On the contrary, the European Union maintains that developing countries would be benefited from the existence of multilateral rules and fora, which could be used as a reference for the modernization of their internal regulations. Unfortunately, so far not much progress has been made. It is hoped, however, that the forthcoming mini-Ministerial in Tokyo will come up with some action points.
WTO Dispute Settlement Understanding
The Dispute Settlement Understanding (DSU) of the WTO represents one of the main successes of the post-Uruguay Round system. All actors in WTO have won and lost cases, and this shows the system is not so unbalanced in favour of the richer countries as many argue. This does not mean it is perfect either. Therefore, a debate on the possible improvements is very necessary.
The European Union has presented detailed contributions in Geneva to make the DSU process more effective. The broad contours of this proposal deals with issues pertaining to the establishment of the panel at first request, procedures that could be adopted for multiple complaints, withdrawal of request to establish a panel, establishment of a roster of permanent panelists,issues pertaining to third parties, and streamlining of panelprocedures. Moreover, the proposal looks at ways to improve appellate review procedures, remand procedures, surveillance, and implementation of DSB rulings.
Trade and Environment
The European Union firmly believes that trade liberalization and environmental clearance protection should be mutuallysupportive. Both have a paramount role for achieving sustainable development worldwide.
The Committee on Trade and Environment (CTE) has underlined the importance of clarifying the relationship between WTO rules and trade measures taken pursuant to Multilateral Environment Agreements (ME As). The EU proposes a definition of a MEA with the sole objective to clarify the circumstances under which specific trade obligations set out in an MEA should be given an explicit recognition under WTO rules. The European Union has called for “Specific Trade Obligations” under MEAs, which can cover a wide spectrum of possibilities, ranging from trade bans to notification procedures or labeling requirements. The EU also feels that any specific trade obligations in MEAs that have been negotiated and agreed by consensus in a multilateral context should be, in principle a guarantee against discriminatory and protectionist action. Hence, if parties have agreed to specific trade obligations, they should have no reason or ground to challenge them afterwards (“Among Parties”).
The EU is also of the view that if such a case does arise the parties involved should make every effort to solve the issue through the MEA dispute settlement, as recommended by the CTE in its report to Singapore.
Technical Assistance and Capacity Building
The DDA has emphasised that technical cooperation and capacity building are core elements of the development dimension of the multilateral trading system. For this purpose, six levels of action under the Coordinated WTO Secretariat Annual Technical Assistance Plan have been outlined.
The EU is (by far) the largest donor in the world. It has a strong culture of cooperation. It believes that developing countries have to be helped to increase their capacity of action in international trade and, more specifically, in the WTO. Often, lack of skill and resources seriously hamper the possibility for developing countries to defend at best their interests.
Coherently with this vision, the EC is the first contributor to this effort coordinate by the WTO Secretariat (63 per cent of the WTO Global Trust Fund).
Apart from this multilateral contribution, the EC itself is carrying out similar programmes on a bilateral basis. The Commission is launching a Trade and Investment programme with India (Euro 15 million), and similar programmes with other countries of the region such as Sri Lanka, Nepal and Bhutan (in these cases pre-accession programmes).
Special and Differential Treatment
The EU has been one of the key proponents of Special and Differential Treatment (SDT) to be reserved to developing countries, as it considers that this is essential for the success of DDA. In every submission of the European Commission concerning any other DDA issue, the EC especially takes into account SDT requirements of member countries.
Some of the important proposals that the EU has been suggesting at the WTO relate to the strengthening of the relations between SDT and the rest of DDA, the integration of SDT in the WTO agreements, taking into account the needs, interests, and specific circumstances of the developing countries. It is unfortunate that the deadline for completing the negotiations for an agreement on SDT could not be met. Hopefully, the Tokyo Mini-Ministerial will look into this aspect.
Trade, Debt and Finance
The relationship among these three aspects is a very important concern for developing countries. The EC welcomes the establishment of a Working Group on Trade, Debt and Finance
under the auspices of the General Council, examining the relationship between trade, debt, and finance through sharing information and understanding the problems and opportunities, and strengthen coherence of policies of the different organizations, whose mandate relate to the trade-debt-finance nexus.
The Working Group should look at issues like trade liberalization and indebtedness; integrating trade in economic reform, addressing supply-side constraints and investment and indebtedness.
Conclusion
This chapter has sought to highlight the EUs views on some of the major areas of negotiations at the WTO pertaining to the DDA. There is a lot of work to be done at the DDA and the year 2003 is filled up with meetings on the various DDA issues. However, two significant events are the Mini-Ministerial in Tokyo from 15 February 2003 should shed through greater light on the state of play with regard to DDA and the Fifth Ministerial Meet at Cancun in Mexico in September 2003, which will assess the progress made in DDA and take over the necessary steps to conclude the DDA by 1 January 2005.
The difficulties are many, and to reach a consensus in Cancun will not be an easy task indeed. In this framework, India and the European Union are two prominent actors in WTO, and many possibilities of convergence between their positions exist, despite the relative distance on some other points of the agenda.
What is really needed to make this convergence possible is to leave aside ideological positions and prejudices, and to tackle reality and facts with a constructive spirit. In so doing, we will discover that a win-win solution is possible, and we have the obligation to work together for it.