FOCUS ON TRADE
NUMBER 68, OCTOBER 2001

CRISIS IN WTO TALKS!
by Aileen Kwa*

GENEVA-- The US and EU, as well as the WTO Secretariat, are
showing desperation in their attempts to ram through a new round of
trade negotiations with a host of new issues by the WTO Ministerial
on 9 November even though more than half of the members remain
totally opposed to new issues being brought in.

In Geneva as well as in capitals, we are seeing the majors resorting to
a variety of underhand tactics - from Super Green Room meetings
(such as the mini-Ministerial held in Singapore) to spreading false
rumours that key developing countries have changed their positions
and manipulating the media to project a different reality from what is
actually happening in the WTO.

WHAT'S GOING ON?
The first draft of the Ministerial Declaration was circulated to
members on 26 September. In the run-up to, and since its release,
intense closed-door, small-group consultations of 20-25 members
have been taking place on various issues of contention. While it is true
that more informal General Council meetings have been held to then
brief the majority of the outcome of these consultations, the fact
remains that the language for the Ministerial draft has emerged as a
result of the views of those present in the Green Rooms and does not
reflect the views of the majority, including the LDCs and the African
Group.

Two mini-Ministerial meetings have already been held. One at the end
of August in Mexico and another in October 13-14 in Singapore.
Both meetings had about 20-21 Member countries as participants. In
both cases, some countries who had not been invited tried to obtain
an invitation, but were unsuccessful. According to a delegate from an
African country who tried to go to Singapore, the reply when he
contacted the WTO Secretariat was that they were not hosting the
meeting and therefore were not able to send him an invitation. When
he tried the Singapore mission, they told him that they were only co-
ordinating the meeting, and were not in a position to send out
invitations.

The Chair of the General Council, Stuart Harbinson of Hong Kong,
had initially thought of releasing a second draft after the Singapore
meeting. Probably in order not to anger those who were not invited to
the Singapore meeting this decision has since been changed. The
game plan now is that a second text of the declaration will be released
at the end of next week (about 26 October).

The strategy seems to be that the US and EC are trying their utmost
to get a consensus with the group of 20-25 countries in the Green
Room-type consultations on the text, and then presenting it to the
others on a take-it or leave-it basis, with the use of threats on various
levels to isolate and pressure countries into acquiesce.

To date, the positions are still far apart. The majority of developing
countries who are excluded from most of the small group
consultations - the LDCs, African countries and others, have made
their positions known at the General Council meetings.

However, the media has been used effectively (especially during the
Singapore meeting) to portray the impression that sticking points have
been resolved. One developing country delegate lamented "All this is
part of preparing the psychosis for a new round."

There is also a lot of confusion on the exact status of negotiations. At
a briefing early this week for all members on what happened in
Singapore, some delegates commented that the version they were
hearing was entirely different from their impressions from press
reports.

DEAF TO DEVELOPING COUNTRIES' CONCERNS
While developing countries' mantra have been 'implementation!' and
'no new issues' for the past three to four years, the state of
negotiations reflect nothing of this. Furthermore, the work on TRIPS
and health at the WTO this year, including the proposal by about 50
developing countries that nothing in the TRIPS agreement should
prevent members from taking action to protect public health, is
currently being stonewalled.

CARROTS AND STICKS
While more than half of the WTO members are saying an absolute
"no" to introducing rules on investment, the Green Room negotiations
have continued discussions and drafting of language on what types of
investment agreements should be brought in. There seems to have
emerged two options: one, an opt in-opt out approach, whereby all
members negotiate an agreement and then decide towards the end if
they want to join in, and two, a two-step approach, whereby
discussions continue, but with a clear mandate that negotiations
commence at the 5th Ministerial.

According to one delegate who attended the investment informal
General Council meeting after the release of the draft declaration,
Malaysia's representative had said that for his country, even the
second option was problematic. To the speaker's annoyance, his
comment was met with laughter by those at the meeting, to which he
retorted, "Let's see who's going to get the last laugh." Referring to the
laughter, the delegate I spoke to said, "With this kind of atmosphere,
you can imagine the kind of brow-beating that is taking place now."

At present, the developing country Cairns Group members - mainly
Latin American countries, and Thailand and Philippines are not
actively refusing investment rules. The speculation in Geneva is that
they have accepted investment since agriculture is their main interest.
They seem to be taking the view that a new round would at least
guarantee them an end to the agriculture negotiations, and possibly
with better results. Without the round, the mandated negotiations in
agriculture are unlikely to go very far, and may not even have an end
date in sight. Others though feel that even when the Cairns Group
agrees to new issues, they will not get the agriculture markets they
want. "The EU will only reduce subsidies when they are ready to, not
when they get a new round," remarked an agriculture negotiator.

During the Uruguay Round, services was included in the final package
through the same opt-in, opt-out strategy. Members in Punta del Este
agreed to a single undertaking - meaning that all agreements would be
negotiated and concluded at the same time. However, the option was
left open for developing countries to decide if they want to sign on to
services at the end. Half-way through the Uruguay Round, however,
the meaning of 'single undertaking' was manipulated and changed by
the US and EU. According to them, all members would have to
accept all, or nothing, of the outcome of the entire package of
negotiations. This could well happen if this approach is adopted with
investment and competition.

'FRIENDS OF THE DEVELOPMENT BOX'
There is speculation in Geneva that the agriculture text was largely
drafted by the US - not a hard guess since they also expressed the
most satisfaction with it.

In their draft, the US seems to have brokered the two polarised
groups in the agriculture negotiations - the EU on the one hand,
wanting agriculture to be treated differently from industrial goods, and
Cairns Group on the other, aiming at complete liberalisation of the
sector.

Agriculture is usually the sticking point in WTO negotiations, but there
seems to be some satisfaction with the agriculture text presently
available. One Southern delegate said, "It's a balanced text. Don't get
me wrong, this is not what I want. But there is some satisfaction and
some dissatisfaction for all sides."

However, in contrast, other developing countries remain unhappy with
particularly a group which had, in June 2000, submitted a paper on
'The Development Box' (G/AG/NG/W/13) and had subsequently
followed this up by various informal proposals this year. Calling
themselves 'Friends of the development box' they are currently
lobbying to include specific reference to a development box in the text
on agriculture in the declaration. Countries in this grouping include
Cuba, Dominican Republic, El Salvador, Honduras, Kenya,
Nicaragua, Pakistan, Senegal, Sri Lanka, Uganda and Zimbabwe.
Their vision is to create a 'third force' in the agriculture negotiations.
They want their proposals taken on board in negotiations. They also
want to ensure that agriculture negotiations are no longer dominated
by the EU, Cairns Group and US.

The provisions in this box aim to provide developing countries with
flexibilities in border measures and domestic support measures to
protect the rural livelihoods of their small farmers, as well as
protection of staple crops from dumping.

Specific reference to the development box in the declaration is
important for them since, despite their active participation in current
WTO negotiations on agriculture, their requests for a development
box have been politely received and subsequently ignored by the
powerful countries. Should there not be a clear mandate for this box
in the declaration, their recommendations in the past two years may
well drop off the table. The secretariat has also actively discouraged
proposals along this line. They tried to dissuade one developing
country who wanted to add their name to the paper some months
after it was first presented last year. They also told another signatory
of the paper that they were "asking for the moon."

US / SWITZERLAND REFUSE TO GIVE ON HEALTH
TRIPS and public health has been an issue which has united a good
majority of the developing countries. They have pushed hard for a
separate declaration to be endorsed at the coming Ministerial. Hours
upon hours of consultations on this issue have taken place in the
recent weeks, but with no positive results. The ones holding up the
process are the US, Switzerland, and lately Canada. The situation has
been characterised as being in logjam. Even the title of the declaration
has not been agreed to, much less the content. Developing countries
want a declaration on TRIPS and Public Health while the US wants to
narrow it down to TRIPS and HIV.

One African delegate, feeling worn down by the process commented
last week: "We are meeting everyday from 3-6pm. It's like torture.
We are not in a position to defeat them. For every argument which we
put forward, they have a counter argument, and it is not so the other
way round. They have lawyers that have worked on IPR issues for 30
years, and they try to defeat us on language. Something that looks
OK to us, ends up to be more restrictive (than the existing
agreement)."

Another delegate, also from an African country said that the group of
developing countries working on this issue is very disappointed. "The
other side wants to impose more conditions. What we agreed on was
to clarify flexibilities existing in the TRIPS agreement. We didn't ask
for it to be amended, only clarification, so we have a common
understanding. We haven't made any progress in the discussion so far.
We are still where we were in June, restating the same thing."

"I blame the Secretariat," he said. "We had already given our proposal
about the way the declaration should look like. The other side also
gave their own version. What the secretariat should have done was to
put the two texts together. Instead, we are starting from zero. When
we talk about parallel imports, they bring in article 28 on patent rights.
They are also trying to diminish article 6 on flexibility and subordinate
it to article 28, when it should be the other way round'.

ENVIRONMENT - THE DEAL BREAKER?
The EU has unexpectedly pushed hard for new rules on environment,
in areas on WTO rules and the relationship with multilateral
environmental agreements, the precautionary principle and labelling.
They are attempting to appease developing countries' opposition by
offering a two-stage approach, an initial work programme to clarify
rules in the Committee on Trade and Environment, eventually leading
to negotiations at the 5th Ministerial.

Opposition however continues to be quite high. EU in a Green Room
meeting before the Singapore 'mini-Ministerial' had appealed to
Members to understand that this was political problem with their
domestic constituency. In reply, one of the Southeast Asian countries
retorted that the EU should then find a political solution, rather than an
operational one which that country cannot live with.

Informal reports on the outcome of the Singapore 'mini-Ministerial'
are that the Cairns group, which initially had opposed environmental
rules for fear of protectionism in agricultural products, seemed to
show signs of buckling down. The majority of developing countries
however, are still holding out their opposition. Given how the WTO
essentially works for the interests of corporations, many developing
country members are certain that while there may be good intentions
on the part of those pushing for rules, the implementation would
certainly be used opportunistically to protect markets.

DEVELOPING COUNTRY DELEGATES ANGRY ABOUT
BULLYING TACTICS
With so little demand for a new round by the majority of members,
yet with the powerful countries desperate to push their agenda
through, it is not hard to imagine that a host of underhand tactics are
being used to force agreement, rousing anger and frustration amongst
developing country delegates.

A representative of a Caribbean country in charge of agriculture for
instance, had initially thought that the process of consultations for this
Ministerial was fairly transparent compared to the last. This was until
she heard that an agriculture text had emerged out of the blue without
her participation or knowledge.

According to another delegate, an ambassador of a transition
economy had wanted to attend a green room meeting on agriculture.
He called up the WTO Secretariat, who promised that an invitation
would be sent to him. He never received one.

Frustration towards the Secretariat is also surfacing. An African LDC
delegate, talking about the reference in the declaration on LDCs
asked: "Who is doing the drafting, the language which we don't like
and which we oppose every time? It is the Secretariat. Is he our
friend? He is the director of the LDC division in the WTO, but does
he have our interests at heart? Has he ever phoned me while drafting,
to ask me if the language makes sense to me before it is on paper?"

Elaborating further on the process of consultations and drafting, he
said, "What is basically happening is that we are negotiating with the
Secretariat. The Chair does not sit and draft. He consults, but it is the
Secretariat who writes. How representative is it (the Secretariat)?
There is too much of Secretariat driving the process. Why do
members have to leave such important things to the Secretariat? Why
is the Director General allowed to behave like a member?"

Recounting his recent experience at a WTO meeting on LDCs and a
proposal on the Integrated Framework, he commented, "We (LDCs)
said we haven't studied it (the proposal presented by Secretariat). But
it was adopted. I wanted to make changes, but we were told there is
no time. There is a propensity by the Secretariat to introduce things
just there and expect you to endorse. But when it concerns developed
countries' interests, they say: 'We have to refer to capital. We have
just received it today'. They are rushing us. They want to make sure
that the things which are not in their interests are pushed through
quickly. But on their part, they want more time."

Many delegates are also concerned about the bilateral pressure that is
put on their countries. Another African delegate had this to say on the
matter: "Everybody says rules are important to poor countries, but the
bilateral pressure they are using now is more powerful than the rules.
If I speak out too strongly, the US will phone my minister. They will
twist the story and say that I am embarrassing the United States in the
WTO. My government will not even ask, 'What did he say?' They will
just send me a ticket tomorrow."

He went on to elaborate how the powerful countries use bilateral
pressure to instill fear, effectively silencing the majority. "It has worked
and it works. That's why a bigger number don't speak. Why am I so
fearful? I fear that bilateral pressure will get me, so I don't speak, for
fear of upsetting the master. To me, that threat is real. Because I am
from a poor country, I can't say what I want."

Convinced that the power-riddled WTO is more negative than
positive for countries like his, he said: "I don't like watching
(developing countries) being cheated. At the end of the day, maybe it
would be better for us to leave the WTO alone, go back and develop.
Only when we have done that, then come back and join the WTO. It
cannot be used as an instrument for development."

THE CRISIS NOW WORSE THAN PRE-SEATTLE
Why is the current situation more critical than that before Seattle?
Even though there remains opposition, the stonewalling by developed
countries is creating a dangerous scenario. By next week, it is likely
that countries are basically pushed to the wall and either have to reject
the declaration outright, or are silenced into accepting another raw
deal.

There are several reasons for this more critical situation.

First, the Secretariat and developed countries have learnt from the
Seattle experience. The 33-page draft consisted of positions of all
groups on all issues, but was eventually impossible to bridge. The
current draft is a much cleaner text with only a few brackets. The
impression it gives then, is one of consensus even though the text is
opposed by many. During hard negotiations, however, there is
considerably less room for developing countries to dissent. The
argument that it is a finely balanced draft and that any substantial
change will unravel the entire process of negotiations will be used to
dissuade countries from making any significant changes. Their only
other option of rejecting it in entirety could be too strident a position
for most to take.

Secondly, the impact of the political climate after 11 September
cannot be underestimated. Negotiations on this 'grand coalition' have
spilt over into the trade arena. There is sentiment in Geneva that
Zoellick's rhetoric - a new round is needed to counter terrorism - is,
as one diplomat commented, descent to the "lowest depths of trade
diplomacy" he had ever seen. Yet it has been effective. Another
government representative said: "It has been used very effectively by
proponents to silence others. The atmosphere has changed. It has
created a kind of wave so that fence-sitters have changed sides to
take the easy option."

But a third and perhaps the most important reason is that the US and
EU, unlike in Seattle, have joined hands and agreed even on the
traditionally contentious issues such as agriculture. With their joint
political might, opposition to a new round has become almost
impossible. For example, Latin American countries (particularly those
in the Cairns Group) which would not have agreed to only an EU-led
effort on a new round, are relenting. US' pressure on them has been
crucial.

There seems to be two different processes taking place at the WTO.
One with those included in these Green Room meetings, and another,
amongst those who are opposing and excluded. For the latter, things
remain as they were in July / August this year. The majors are
counting on their political might to pressure this second group - mostly
LDCs, African group, the Caribbean countries and a few Asians - in
the coming fortnight.

It is difficult to predict what the final outcome of the Ministerial might
be, and this one with the added complication of the confusion and
political sensitivities over the choice of venue. One thing is for sure
though - developed countries have learnt nothing from Seattle, other
than to sharpen their strategies in pressuring and stonewalling
developing countries. In the process, they are unveiling the ugly power
politics crippling the multilateral trading system, which will result in
grave implications for most of the developing world.

* Aileen Kwa is a policy analyst with Focus on the Global South. She
is based in Geneva. [email protected]

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