European Affairs

Winter 2002

 

Trade Relations
The Developing Countries Came of Age in Doha
By Carlo Trojan

 

The agreement to start a new round of world trade negotiations, reached in Doha last November, has saved the international trading system from disaster. After the abortive meeting in Seattle two years before, another failure would have constituted a fatal blow to the multilateral trading system and to the World Trade Organ-ization as an international institution.

Much of Doha's success was due to the joint leadership of the United States and the European Union and the personal commitment and involvement of Robert Zoellick, the U.S. Trade Representative, and Pascal Lamy, the European Trade Commissioner. From last May until the very end of the Doha meeting, they worked together relentlessly to secure the launch of a new round.

Most importantly, this time the United States and the European Union have been building bridges, not only between themselves as major trading partners, but with the developing countries. Rather than imposing solutions, they have shown a genuine willingness to address the concerns of the developing world.

This development dimension, both in process and in substance, made the difference between the failure of Seattle and the success of Doha.

As for the process, we have learned quite a few lessons from the inadequate preparations of Seattle. This time the Geneva preparatory process was far more transparent and inclusive. We have been at pains to include the entire membership of the WTO in preparatory ministerial meetings and regional seminars.

The result has been much more structured and enhanced coordination among developing countries. Their common positions, and the growing assertiveness with which they were presented, constituted a coming of age of developing countries within the WTO system that is very much to the system's benefit.

But it was not just a question of process. "The Doha Development Agenda," as the final declaration was aptly named, should bring tangible benefits to poorer countries.

The developing countries obtained a meaningful package on "implementation," which since Seattle had become the overriding development issue. The term had come to mean much more than its original sense of implementing the agreements reached in the Uruguay Round, the last set of major world trade negotiations, with which many developing countries had difficulties.

The concept has now expanded to become an exercise in re-balancing WTO rights and obligations in favor of developing countries. The positive overall result may even have exceeded the developing countries' expectations. The remaining implementation issues will now be part and parcel of the negotiating agenda of the new round.

The Doha Declaration that reconciled the demands of developing countries for greater access to medicines with the need to preserve patent rights can be considered a landmark agreement in terms of public relations vis-à-vis the developing world. While the Declaration preserves rights and obligations under the TRIPS agreement on intellectual property, it clarifies the flexibility of the agreement in a way that should make developing countries more confident that they can acquire the medicines they need.

The broader negotiating agenda also caters extensively to the interests and concerns of developing countries. Negotiations on tariff peaks, agriculture and trade defense measures, such as anti-dumping actions, will all open new opportunities for developing nations.

The Declaration contains specific commitments on the integration of the Least Developed Countries into the global economy. WTO members also agreed to innovative work on the specific problems of small and vulnerable economies, as well as an examination of inter-relationships between trade, debt, finance and technology transfer.

Last but not least, the Declaration gives particular emphasis to special and differential treatment for developing countries, and the need to enhance technical cooperation and "capacity building" - the strengthening of the poorer countries' institutions and personnel resources, so that they can better negotiate and implement trade agreements.

Direct links have been established between capacity building and the assumption of new obligations as a result of the negotiations. On a broader basis, WTO members now explicitly recognize and support efforts to make trade a coherent part of development strategies and programs.

It will be extremely important for the success of the new round that the developed world fulfills these commitments at an early stage. Hard thinking on how to deliver increased, improved and better-coordinated technical assistance, as promised in Doha, has already begun in Geneva and in national capitals.

The strategic objectives for the new round were certainly not identical on both sides of the Atlantic. The most important common point between the European Union and the United States was simply the determination to launch the round. In order to achieve that objective, each had to take account of the other's political imperatives.

The European Union had two major strategic objectives. Firstly, we sought comprehensive trade liberalization, not least to restore business confidence, together with a strengthening of the rules-based trading system. We wanted more market access, balanced by more rulemaking in order to harness the overall process of globalization.

Secondly, the European Union wanted a round that focused on development. Our aim was not just to take account of the direct trade interests of developing countries but also to build sustainable development into the system. These objectives were certainly much more ambitious than those of most of our major trading partners, including the United States.

As a consequence, our negotiating position was also more difficult than those of other countries, whose principal aim was improved market access. Our determination to include the so-called new issues, such as the environment, investment and competition, in the negotiations met fierce opposition from a number of developing countries. So did our requirement that the outcome of the negotiations should be a "single undertaking," meaning that every country would have to implement all its provisions.

Notwithstanding our extensive ambitions, the overall result is positive by most measures. Doha did agree on a comprehensive agenda, and the round will have a strong development dimension.

The Doha Declaration strongly reflects our goals for increased action in the WTO in favor of sustainable development and for the protection of the environment. The new issues will be part of the negotiations - albeit in a phased manner - and of the single undertaking.

On the other hand, as far as agriculture is concerned, the Declaration takes sufficient account of non-trade concerns that are of particular importance to the European model of agriculture. The Declaration calls for substantial improvement in market access and for negotiations ultimately to eliminate all forms of export subsidies and trade distorting domestic support, without, however, prejudging the outcome of the talks.

The starting point is there, the framework is there, but the end point will be a matter of negotiations. As far as the European Union is concerned, these negotiations will coincide with ongoing efforts to agree further reforms in the Common Agricultural Policy and to integrate a large number of new member states into the present CAP system.

Both in Geneva and in Doha there has been much fuss about the new issues, particularly investment and competition policies. I do not think that the major difficulty was that opposing countries had substantive difficulties in including these items in the negotiating agenda. In fact, there were only very few developing countries that were unwilling to engage in this direction.

The overwhelming majority of the opponents recognized the merits of a multilateral framework for investment and competition policies, but did not feel ready to engage in negotiations owing to a lack of institutional capacity and human resources.

I am quite convinced that the situation will be different by the time we approach the next ministerial conference, in two years' time, provided that in the meantime we can enhance capacity building and reach a better understanding of the issues involved.

A multilateral framework for foreign direct investment will ultimately benefit developing countries while preserving the host government's right to regulate. I am confident that most WTO members will be ready to comply with the principles to be included in the investment framework (transparency and non-discrimination) and that provisions for the admission of investors will allow for the necessary flexibility.

As for competition, the Doha Declaration rightly focuses on the need to respond to the particular interests and concerns of developing countries. It explicitly recognizes the need for flexibility and enhanced technical assistance.

Most developing countries acknowledge that the introduction of competition policies, sooner rather than later, would be to their benefit and enhance the competitiveness of their industries. It should also be recognized that competition policies and competition authorities aim principally to protect weaker elements within the economic system, whether they be consumers, small and medium-sized enterprises or developing economies.

As far as the environment is concerned, the most important aspect of the Doha Declaration is that the WTO will be seen to be dealing seriously with environmental issues and sustainable development. That can only be to the advantage of the WTO as an organization.

It will be up to negotiators to show that there is no hidden agenda of protectionism lurking behind European demands that environmental considerations be taken into account in agricultural trade. The Doha Declaration in fact contains the necessary safeguards in this respect.

It has been quite amazing, however, that no substantive negotiations have ever taken place, either in Geneva or in Doha, on the extremely short time frame set for the round - no more than three years.

The importance of such a short and snappy round is that we make up for the time lost since Seattle and conclude the negotiations during the mandates of the present Commission and of the current U.S. Administration.

In other words, we can continue to build upon the close collaboration between the United States and the European Union, at both political and official levels. It is also a time frame that coincides pretty well with the EU domestic political agenda of CAP reform and enlargement.

As far as the WTO reform is concerned, it will be more and more difficult to combine claims that the 144-nation organization is "member-driven" with the need for efficiency.

Internal transparency and inclusiveness is certainly an important feature of any organization, and the WTO has come a long way in this respect since Seattle. But these improvements have to go hand in hand with enhanced efficiency.

A rule-making organization such as the WTO should have more resources, both human and financial, and should be more management-driven. It should have mechanisms that allow for routine decisions - both on management and on substance - without going through the cumbersome process of reaching agreement in the General Council.

We also should allow initiatives to be taken by the Director General on substantive issues, and, last but not least, the organization should be able to take decisions to improve, adapt and clarify its rules without having to wait for a full-scale negotiating round.

The advance of globalization should be matched by the capacity of the rule making body to harness it. In the Doha Declaration we have a comprehensive agenda for a round that will be beneficial to the global system and more particularly to the developing world.

At the same time we have to realize that the WTO cannot by itself eradicate poverty, ensure sustainable development or promote labor standards. The Doha Declaration usefully reminds us of this.

Other international organizations, such as the International Monetary Fund, the World Bank and UN bodies, will need to work together with greater coherence and complementarity, as will national governments. Only then can we respond to the challenges wrought by globalization and fully address the needs of the developing world.