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WTO: Dead Man Walking?
New Round Prospects Fade The trade disagreements aired in Seattle were of an elemental nature. The rigidity displayed by all sides has mellowed, but only superficially. In hindsight, observations at the time - that a few more hours, or one more day would have been enough to seal a deal - were completely without foundation. Almost without exception, open sources and direct inquiries suggest the right noises are being made at the political level in both North and South: there is interest in a new round. However, nothing concrete is occurring to make it a reality. On the critical issues - LDC duty free access; internal and external transparency; agriculture; implementation issues; labour; competition; and investment policy - all of the major players have reverted to their pre-Seattle postures. The informal EU trade ministers meeting held in Porto in March concluded Mr. Lamy's October 1999 mandate is still valid. As a result, the EC has no greater flexibility than it had at Seattle. This continues to be reflected baldly in speeches, statements and analysis emanating from Brussels, especially associated with agriculture. Stuck with a mandate that conditions concessions as occurring only within the context of a new round, Mr. Lamy has taken to the air. This press the flesh campaign to flush out parameters of support has yielded little, and emboldened the EC's regional agreement strategists. Indeed, EU parliamentary committees in recent meetings with Mr. Lamy have listened politely, but expressed doubts that a new round can be launched this year. In a nutshell, the EC campaign to effect a launch is faltering, both with its domestic and foreign audiences. In the US, of course, President Clinton has said on many occasions since January, that he supports a launch in 2000. The real priority, however, is getting passage of the China PNTR bill through Congress by June. His evaporating political capital and the fast approaching onset of summer election campaigning eliminate any serious possibility for energetic, global negotiations advocacy before November. Of course, the signal of US preparedness to engage multilaterally - fast track authority - is unattainable for the Clinton Administration. You have a better chance of spotting a unicorn on Capitol Hill than a fast track advocate. Within the developing world, suspicion and mistrust remain high. India, courted since January by WTO's Moore, President Clinton, and Mr. Lamy, has called for a new round. However, it is still shopping offers with no hard commitments of its own. Brazil, once regarded as a potential southern leader in the FTAA process, has reassessed its interests: it now counsels a moderate pace in all negotiating fora. For the developing world, these are strategic thrusts, not tactical maneuvers. They are designed to extract more concessions from industrial trading partners. Ironically, both developing and developed country objectives are unrealisable without the emergence of a more flexible, responsive posture among the leading countries. As unfortunate as it may be, the failure to launch a new round in 2000 is merely the tip of the iceberg. This broad-based inflexibility is deep, dangerous, and intensifying. The Nature of the Crisis The world has changed profoundly in the last fifty years. The pace is breathtaking. Swift and powerful forces roll over institutions like a tidal wave. The lesson of organisation history is clear: transform or perish. There are almost no remnants of the regional trading systems that existed more than one hundred years ago. There is no natural or social law upon which one can assert that the multilateral trading system will even exist in 2100. It seems like a profoundly logical and beneficial notion, but lots of good ideas are banished to the dust heap. They whither mostly because they become disconnected from the evolving social and political base that gave them life, and lose relevance. This is not a new point, even at WTO. In February 1996 remarks, Director General Renato Ruggiero said, "…if the system is to remain fully relevant to the global market, its agenda must be in constant evolution." If labour, environment, development, gender, investment, and competition are inside the tent, what is there of any human significance that remains in the wilderness? With the final breakdown in analytical distinctions between domestic and external task environments, WTO must re-invent itself or drown in a sea of irrelevancy. This is the nature of the crisis in the trading system. It is extremely serious, and has yet to be addressed honestly. Even the most forward thinking Members, of which the EU is by far the most sensitive to the situation, have little appreciation of the depth and breadth of reform that is essential for the multilateral trading system to thrive in the 21st Century. Reform Languishes Surveying this landscape, the Quad has given its answer. The Quad set of proposals presented to Moore April 3 are practically devoid of meaningful measures for LDC access, and represent very little improvement over existing positions on transitional arrangements and extension of implementation periods. Four of the richest jurisdictions on the planet spurned even Moore's plea for an additional CHF 10 Million to support technical assistance projects. It is difficult not to read into this miserable rebuff bitterness over the Seattle outcome, for which the developing world evidently is expected to bear most of the responsibility. On other issues, including external transparency and document derestriction, the four leading models of democracy displayed a lack of ambition. Not surprisingly, an informal meeting of the WTO General Council on April 10 yielded no breakthrough on the 'immediate priority issues' of LDC market access, technical assistance, transition period expiration, and transparency. Developing country participants greeted the Quad proposal with justifiable skepticism. Both developing countries and LDCs criticized the Quad Group for failing to endorse the establishment of a standing WTO mechanism for reviewing implementation concerns, including requests for additional time to comply with the WTO agreements on investment (TRIMs), intellectual property (TRIPS), and customs valuation. Consultations will proceed until the General Council's next meeting on May 3 when it is expected to revert to these issues. However, Moore has made plain that Quad Ambassadors will have to try to sell the proposals without his direct involvement. Recognising that LDC market access and transition period expirations have been closely tied to reaching a consensus on a new round, WTO needs to address other aspects of the reform process with more vigour. Unless some of the issues are broken out from the new round fixation, even modest progress may be unattainable. External Transparency First rank international NGOs, which have breached the outer walls of WTO, have little to look forward to beyond modest improvements in more rapid document derestriction, and periodic gabfests in Geneva. Second tier civil society groups, transfixed by the afterglow of Seattle, seem blinded to the deeper implications of their disparate demands, and the potential impacts on the international economic architecture. Flagging complex problems and solving them is not the same thing. This is not merely a 'management' problem for WTO; it is an education issue for all concerned. Despite the inherent advantages that exist on this front, the WTO Secretariat has been slow to ramp up a public communications and education campaign to correct disinformation, build public support, and mobilise constituencies that benefit from the trading system. Members can and must assist in rebuilding and energising the domestic trade consensus. However, it is in large measure the responsibility of the Director-General to ensure the letter and spirit of the WTO is communicated to a wider audience. Keith Rockwell, WTO's Director of Information and Media Relations, has estimated that more than 90% of WTO documents are available already to the public. Though an essential element, document dissemination alone is not a communications strategy. Mr. Rockwell, a seasoned journalist and no stranger to contemporary communications practices, is burdened by an organizational culture averse to exposure. Hiding behind the notion that the WTO is a government-to-government institution shackles the organization to, rather than shields it from, charges of secrecy. If WTO only does one thing this year, it should be to get in train a media communications and education programme delivered at the community level around the world. In due course, WTO should sponsor conferences and seminars both for specialists and the general public at key locations outside Geneva. Eventually, these initiatives might be the core of an authentic global outreach programme. This cannot be merely a one-way propaganda exercise. WTO can benefit enormously from the input obtained by these efforts; the Secretariat needs a closer connection to the world beyond Geneva, if for no other reason than to keep the personnel grounded. Yes, there is a risk of negative publicity, but WTO gets that in spades now. WTO reform, of course, is about more than external transparency vis-ŕ-vis civil society organisations. The proposed parliamentary forum can bring a degree of legitimacy to the organization that the GATT never enjoyed, and move the WTO toward a level of genuine public accountability. Accountability is required because WTO Members, and the Secretariat under the current and former Director-General, have fenced-in issues that an earlier age deemed to be strictly 'domestic' concerns. Mr. Schwaiger's proposal to create a parliamentary assembly is the acid test for external transparency. Endorsed by US Senator Roth and a majority of parliamentarians in Seattle, the proposal needs to be pressed forward aggressively. An organizational meeting, originally suggested for February 2001, should be held this year. Developing Country Participation Which brings us to Member participation in WTO decisional processes. WTO processes recognize that some Members are more equal than others by virtue of their greater participation in the international trading system. Generally, this means considerable influence rests with the leading industrial exporters. This view is the basis of legitimacy for the much-criticized Green Room process. Inclusivity and equity are more likely to occur if the developing countries and others on the margin of decision-making are more fully situated within the decisional structure provided by the WTO Charter. While relatively few 'developing' countries are screened in, clustering countries with a stake in a particular issue might surmount this problem. The notion of having a single spokesperson for a group of the like-minded has been working, apparently well enough, in the FTAA process. Yet even there it was recognized that this did not necessarily go to the heart of matters for the smallest or most vulnerable economies. As a result, provision was made for a dialogue forum for the Western Hemisphere's smaller economies as part of the FTAA process. The alternative approach is to consider permanent, standing sub-committees hanging off the General Council. Moore and some WTO Members have convinced themselves that regional groupings are unworkable. This is an oversimplification, but there is another and better option. The most likely basis for shared interests in the trading system is among countries holding a common development level. In other words, sub-committees could provide essential platforms for LDCs, small economies, and transitional economies. Consensus views emerging from these fora could be represented by the chairs of each sub-committee during General Council meetings. It is especially important not to dilute the authority of the General Council, nor to place liaison and representation functions with the Secretariat. This is the core problem with all variants of 'executive committee' proposals: they may usurp the General Council mandate by implying a wholesale restructuring of authority, responsibility, roles, and functions at the General Council level. In the event, it is too fraught with the potential to further suppress those already self-defined as marginalised. The sub-committee approach also has the merit of ensuring a structural, built-in motivation on the part of major players to ensure that documents, informal meetings, and other communication processes at WTO do not exclude, intentionally or by oversight, the representatives of the majority of the WTO membership. Sub-committees of the General Council also might be better able to conduct meetings periodically off-site. The transitional economies sub-committee could, for example, hold at least one meeting a year in a participating jurisdiction. So too with the others. It may be argued that if these countries are unable to participate fully in existing committees, how could they also man new ones? Chances are, they cannot. There will be some relief from the consolidation of meetings around related subjects, as recently proposed by Canada. But with fora to call their own, they probably will not have to attend, as designated jurisdictions might attend regular meetings and report to the sub-committees, from which monitoring reports delegations could decide where and when their physical presence is required to make interventions. Technical Assistance However, there is only so much internal tinkering that can be done without jeopardizing the effective functioning of the committee system. The basic issue of capacity and physical presence is fundamentally a human resource matter. This appears largely beyond the capabilities of many developing countries to address on their own. The WTO technical assistance programme is intended to address issues in this area. With a budget of US$500,000 allowing WTO to respond to only 1 in 5 requests for assistance, it is necessary to consider an approach of greater ambition. Namely, WTO should examine the feasibility of establishing a multilateral trade policy training institution to provide the requisite education and technical training for public servants in national capitals and Member delegations. In particular, training needs of LDCs, transitional economies, and small states should be provided gratis. The core funding to establish such a facility could be incorporated as a regular budgetary item, and requisitioned from Members under existing formulae. It is after all in the long term interests of the developed countries to see WTO agreements implemented effectively and expeditiously by all who accept the obligations of the system. It removes what might otherwise be an interminable but fundamentally resolvable issue. In the meantime, the standing technical assistance budget, meager as it is, should be examined from the standpoint of leveraging additional resources through cost-shared assistance, especially for developing countries that have graduated under World Bank criteria. Cost-sharing might be effective in terms of allowing developing countries to expand their standing delegation strength, and thereby play a more fulsome role in Geneva. One can readily envision a number of other related measures that can address this basic hurdle to full participation in the WTO system. Deeper Reform If the will existed, the modest reforms discussed here could be designed, agreed upon, and implemented in a 12 to 18 month timeframe. Some might be set up in a matter of a few months. Whether these proposals are saleable or not, one thing is clear: the Quad initiative is non-responsive to the current situation. Even taking immediate measures, however, the Quad approach demonstrates that the WTO Secretariat and the Membership cannot rely on a plan of action emerging from self-interested factions within the organization. With the general drift so evident in Geneva, and only the slimmest chance for a new round to be launched in the foreseeable future, the Secretariat and the Membership need to step out of their fear, and get to work on salvaging an institution that is deeply troubled. In this regard, the Members under the auspices of the General Council should draft an international, multi-disciplinary panel of leading experts and visionaries. Representative of the Membership at large, the panel would examine and report on how best to move the dialectic forward to a new synthesis. The resulting report, including an institutional reform plan, could be ready for inclusion on the agenda of the 4th WTO Ministerial Conference. On April 13, the British Columbia Lumber Trade Council (BCLTC) filed a submission with the United States Trade Representative associated with the US-Canada Softwood Lumber Agreement (SLA), which is set to expire March 31, 2001. The Council, claiming to represent ninety five percent of the provincial lumber industry in BC, is urging government-to-government discussions based on an industry consensus. The discussions with the US, according to the Council, should involve the provincial and federal governments. The exploratory discussions would aim to "determine what policy explanations or modifications would be necessary to guarantee unencumbered access" to the US market. The submission argues that an expanding North American lumber market based on free trade represents the best bilateral solution for the long term. Ignoring regional differences, the Council is suggesting that no Canadian lumber-producing region should receive an advantage in the US market. Timber pricing based on market principles must ensure the public treasury gets a fair return for its resource.
The Council is urging the federal and provincial governments, as well as other industry representatives to support their view. A stakeholders meeting May 16 in Toronto should make it clear that there is no consensus within the industry or amongst the governments in Canada. The splintered Canadian position is well reflected in the views of Jake Kerr, co-chair of the BC Lumber Trade Council, who recently argued publicly that a majority of Canadian lumber producers have benefited from the SLA, and done well under it. Even though 'free trade' is the Council's goal, Kerr thinks managed trade agreements are necessary until US producers find the will to accept free trade Canadian style. BC's coastal timber producers are poised to enter labour negotiations when contracts expire in June. The Industrial Wood and Allied Workers of Canada are seeking a three-year contract, two years longer than sought normally. Employers, on the other hand, want a one-year contract rather than the usual three years they request. In other words, industry and labour in the principal export base foresee turmoil ahead. The US Coalition for Fair Lumber Imports also filed with USTR on April 13. The Coalition filing included a detailed report documenting what it regards as unfair, trade distorting Canadian subsidy practices. The Coalition urges USTR to press the provinces to commit to move to competitive lumber sales practices when the SLA expires. Competitive lumber sales, of course, can only occur after USTR flattens "massive subsidies" granted to the Canadian industry, including provincial stumpage. Significantly, the Coalition signaled its willingness in principle to support phasing out existing provincial stumpage regimes. In early April, US Ambassador to Canada Gordon Giffin indicated he did not see a consensus on either side of the border for a further agreement modeled on the 1996 SLA. Sustaining the Coalition view, the Ambassador noted that 95% of Canadian timber is harvested on government owned lands, where the government sets the price. In contrast, about 90% of US timber is cut on privately owned land, for which the market determines the price. While the Coalition keeps direct pressure on provincial stumpage, other interests are weighing in. Unlike previous routs, the Canadians face a growing amalgam of forces making the case for sustainable forestry practices:
This could eventually have a bearing on the Maritime side agreement. For example, it is estimated that only 10% of Newfoundland's old growth forests remain standing. Corner Brook Pulp and Paper Ltd. has announced plans to begin clear-cutting 1,500 hectares or about 2.5% of the total extant old growth in the province. The question is whether activist businesses will buy it. China and the Next Round
Not unexpectedly, China is unlikely to offer any quarter on issues of core interest to developed countries. In a May 25 statement, the Ministry of Foreign Trade and Economic Cooperation condemned a provision in the US PNTR bill to set up a commission to monitor human rights, labor standards and religious freedom. Deemed an interference in China's internal affairs, the provision is styled as being, "unacceptable to the Chinese government" and the US is called upon to withdraw it. EU Trade Commissioner Pascal Lamy recently touched on the implications of Chinese accession. His remarks came in a speech at a May 24 dinner held by the Transatlantic Business Dialogue, a meeting of EU and U.S. business and government representatives. China's entry to the WTO brings urgency for the United States and European Union to seek a quick start to new global trade talks. Mr. Lamy said China's admission would make it more difficult to reach agreement in a new round on issues of interest to the US and EU. Arguing for a launch in 2000, he said that, "My own view is that the U.S. mood...on trade liberalization is not turning the right way and I frankly don't believe it's going to be easier next year than this year." Launching a round after China is a member would be a further complication. He noted that,
"...a round with China in is going to be much more difficult than a round without China in." He singled out issues such as food safety, environment, and core labor standards as sticking points. He could have but did not mention China's trade-distorting industrial policies; restraints on trade related to foreign currency reserves; and questionable government procurement practices. Consequently, he suggested it was in the interest of the EU and the US "… to agree on an agenda which will be ours and on which we can try and compromise with some developing countries and that the sooner, the better." "For all these reasons, I believe that the feeling is increasingly coming that we had better do it (launch a round) rapidly and that is our view," he said. He indicated that this view also was increasingly shared by a number of developing countries. Despite the prospect of Chinese intransigence on a new round agenda, the progress on reaching an agreement on an agenda with the US is slow. He noted that, "We are still not there. We might be there if we have the necessary flexibility on both sides," he said. Parenthetically, Lamy said both China and Taiwan were expected to join the WTO at the same time. The EU had reached a bilateral agreement with Taiwan on its WTO entry, and Taiwan had almost finished bilateral negotiations with other WTO members. SCM Compliance Erodes Further
The WTO Secretariat's most recent factual report on compliance with the annual notification obligations under Article 25 of the SCM Agreement tells a sobering tale. Compliance with the triennial obligation to provide a new and full subsidy notification is low. For 1995, only 70 of 119 Members (counting the EC as a single Member) submitted a new and full notification. For the 1998 new and full notifications, the submission rate was halved, with just 39 notifications submitted, or only one-third of those due. Compliance for updating notifications is considerably lower than for the new and full notifications. The number of Members submitting such notifications has consistently been far less than the number submitting new and full notifications, and has declined significantly in each update period. The vast majority of such notifications have been submitted after the due date. Only 50 updating notifications for 1996 were received; only 38 updating notifications for 1997 were received; and only 21 updating notifications for 1999. As of 14 April 2000, only four updating notifications for 2000 (due 30 June 2000) have been received. Thus, only 107 of the approximately 357 updating notifications due to date have been submitted. This represents only a 30 per cent compliance rate. Of these 107, only 15 were submitted by the respective 30 June deadlines. Of the 107 updating notifications, 52 have been in combined notifications covering more than one period, and thus have been submitted much less frequently than the required annual basis. The following Members have not made any subsidy notifications (for Members that are not original WTO Members, the dates of entry into force are indicated in parentheses): Subnational Jurisdiction and Dispute Settlement featured analysis for subscribers of the Trade Policy Monitor. featured analysis for subscribers of the Trade Policy Monitor. 
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