Developing Country Trade Issues: New Issues

1 December 1997

It was clear, at the conclusion of the joint  ICTSD - CUTS Roundtable, held in November in Geneva, that `new issues' for developing countries in the international trade system will need much further debate and consideration. Provocative remarks from the Chair, Professor Jagdish Bhagwati of Columbia University, set the tone for the afternoon. Professor Bhagwati raised the specter of standard WTO arguments against consideration of `new issues' in trade talks, questioning the imposition of environmental and labor concerns, the investment furor in connection with the OECD MAI negotiations, the legitimacy of competition policy analysis, and trade diversion as related to regionalism.

Regionalism

A convincing presentation from Professor Christian Friis Bach of the University of Copenhagen challenged conventional thinking with regard to regional trade integration processes. Set in a context of increasing inequality between rich and poor, public opposition in some countries to trade liberalization and the need for `global affirmative action for development', his questions included whether regional trade agreements were stumbling or building blocks in trade liberalization for sustainable development; and whether regionalism diverted or created more trade. Among his initial points were the suggestions that social and environmental policies were easier to jointly set and achieve in a regional context, and that while regional trade agreements could result in trade diversion in certain sectors, they often increased trade overall. In addition, he maintained that regional agreements could support infant industry while WTO rules often facilitated the needs of larger industries. He pointed out that since some national economic sectors did lose from trade liberalization, a regional free trade agreement might mean less abrupt changes, and less likelihood of public opposition. He also stressed the importance of ensuring that regional trade agreements were conducted in a transparent, time-limited fashion resulting in binding trade rules.

Investment

Ambassador Anthony Hill of Jamaica, to launch the discussion on investment issues, gave an insightful commentary on the dynamics of international trade negotiations. He offered the WTO intellectual property and services agreements as examples of developed country issues which, in spite of `stretching imaginations', had been successfully introduced as priorities for international trade rules. Driven by the same forces, investment agreements  within or outside the context of the WTO  might also become priority agenda items. He emphasized that any negotiations should be grounded in sound economic theory, particularly because of the danger of a `financial economy' driving the `real economy', which provided employment and a chance to better human conditions. The Ambassador pointed out that unsound rules, once written, still bound their signatories, and challenged  developing countries to follow the debate and defend their interests in the WTO in spite of the serious investment of resources this required.

In response to the presentation, comments from the floor pointed out that current multilateral investment treaty negotiations were unbalanced in their aim to serve business interests, and expressed clear opposition to the investor-state dispute resolution provisions being discussed in the Organization for Economic Cooperation and Development as part of the new Multilateral Agreement on Investment (MAI). Another question arose concerning the forum chosen for MAI discussions, and the unequal access for developing countries to the negotiation of an agreement which would then be open for all to sign. The fact that business, as exporters, had more voice in many trade and investment debates was acknowledged, and it was pointed out that the current MAI drafts were unbalanced in terms of investors being given rights while nations would carry all the obligations. However, some speakers mentioned that though non-OECD members had no access to the MAI negotiations and, indeed, UNCTAD or even WTO expertise with investment issues might contribute to the discussions, fundamentally the OECD had the right to negotiate any accord desired by it's members. Developing countries were advised to follow the debates if their interests were at stake. A developing country trade delegate expressed concern about this closed forum in negotiating an agreement which would eventually affect all countries.

Competition Policy

Mr. Pradeep Mehta of the Consumer Unity and Trust Society launched competition policy discussions by calling for strengthened domestic and international competition policies. He reviewed the development of competition law and policy in various countries, concluding that national level competition law should be directed at enhancing consumer welfare, enforced by a single body with a consumer policy branch represented at the executive level, responsible for anti-dumping laws and regulating all trade agreements restricting imports. This body should be taken into consideration in all industrial policy decisions. Mr. Mehta advocated the creation of an international agreement to deal with problems of international competition enforcement, and recommended that the WTO begin informal negotiations, with UNCTAD and OECD specialist support, to identify main problems in this area with the goal of enhancing consumer welfare. He further recommended strengthening, reforming and harmonizing national laws under a single, legally-independent agency and ensuring that agency's role in consumer and business-related policies; as well as the development of basic principles of competition rules on the basis of which national parliaments could legislate mutually recognizable and harmonized domestic laws. He also suggested the development of principles for `rules on rules' on cross-border competition mechanisms under the WTO system but with an arms-length relationship.

Environment

The former Chairman of the WTO Committee on Trade and the Environment, Ambassador Juan Carlos Sánchez Arnau of Argentina, initiated discussions on environment by pointing out that this issue was not exactly new. He reminded the audience of the honest and sober consensus of the 1997 United Nations General Assembly Special Session that insufficient progress had been made in solving environmental problems. Ambassador Sánchez Arnau highlighted several reasons for this: low government priority; institutional weaknesses in environmental legislation, regulations, enforcement and administration; developing country incapacity to implement multilateral environmental agreements (MEAs) or take on new commitments; and the spreading of unsustainable consumption and production patterns into developing countries in the context of globalization. His recommendations included addressing environment on government agendas, improving environmental management institutions and capacity, and distinguishing between state projects and enterprises for wiser resource allocation. National-level actions, he recommended, should deepen interest in the environment, transform production and consumption patterns, and fight poverty as the source of environmental problems. At the international level, Ambassador Sánchez Arnau called for better analysis, ensuring that industrialized countries fulfil their commitments, and a recognition that, from an environmental perspective, Northern and Southern concerns were similar while strategies might differ. A review of the WTO Committee on Trade and Environment's work touched upon two principal themes: the need to build effective bridges between multilateral environmental agreements and the WTO, and the openings presented by market access and tariff debates which might begin to address agricultural subsidies and real costs of production.

Pointing out the institutional weakness of the UN Environment Programme (UNEP) and the difficulty of dealing with dispersed MEA secretariats, Ambassador Sánchez Arnau welcomed a suggestion from the floor to set up a World Environment Organization, with the competence to deal with trade-related environmental measures.

Other questions raised in the debate that followed the `new issues' cluster, focused on possible amendments to the WTO's dispute settlement procedures and the importance of good domestic economic policies to ensure social and environmental independence from the IMF and other international financial institutions. As time constraints prevented in-depth discussion on many points, several participants expressed their interest in continuing in other fora the debate regarding the `non-trade' issues that so inexorably seem to make their way into the rules of the multilateral trading system.

Marie-Claire Segger-Cordonier is Coordinator of the Canadian Environmental Network in St. Victoria, Canada.

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