The Cancun conference failed as the developed world was not ready to eliminate the heavy subsidies on their agriculture sector but was ready to ‘consider’ their reduction in return of the acceptance of Singapore issues by the developing countries. But the developing countries refused to make these issues integral part of the WTO agreement.
Several developing countries including India have stated that the adoption of these new issues is a direct attack on sovereignty and freedom. Surprisingly, Pakistan has supported these issues and stated, in its position papers in Cancun, that these issues are not problematic and can be beneficial for Pakistan.
Background: In the first WTO Ministerial Conference in Singapore, four issues were put on the table.These are; (1) Trade and investment; (2) trade and competition; (3) transparency in government procurement and (4) trade facilitation. These are known as “new issues” or “Singapore issues”.
The common theme of three of the issues (investment, competition, government procurement) is to maximize the rights of foreign enterprises to have market access to developing countries through their products and investment; to reduce to a minimum the rights of the host government to regulate foreign investors; and to prohibit government from measures that support or encourage local enterprises.
If these agreements come into the WTO, the developing countries will find it increasingly difficult to devise their own policies for development and for setting up their local enterprises and making them competitive. The rich countries governments will press for the principle of “national treatment” to be applied to these new areas. Developing countries would no longer be allowed to support their local industries. Many local companies may not survive, and millions of workers would lose their jobs.
Actually, these issues do not belong to the WTO as they are not directly trade issues. The developed countries want to place them in the WTO so that they can use the trade sanctions mechanism to enforce rules that suit their interests. This is why the WTO has become a favourite vehicle for their global economic governance. But the results would be very damaging. Trade and investment: The proponents of an investment agreement ultimately want international binding rules that give foreign investors the rights to enter countries without conditions and regulations, and to operate in the host countries without most conditions now existing, and be granted ‘national treatment’ and MFN status. The principles of “non-discrimination, MFN and national treatment” were created in the context of trade in goods. They are inappropriate when applied to investment. When “national treatment” is applied to investment at the pre-establishment phase, it curtails or prohibits developing countries’ control over the entry of foreign investors and types of investments. And if national treatment is applied at the post-establishment phase, it would also impede the ability of government to give preferential treatment to local firms, or to channel foreign investment in certain desired directions.
Trade and competition policy: There is no common understanding, let alone agreement, among countries on what the competition concept and issue means in the WTO context, especially in terms of its ‘interaction’ with trade and its relationship with development. The whole set of issues relating to competition, competition law and competition policy and their relation to trade and to development is extremely complex. Proponents of a WTO agreement are to have multilateral rules that discipline members to establish national competition law and policy. These laws/policies should incorporate the ‘core principles of WTO’, defined as transparency, non-discrimination (MFN) and national treatment. Thus, locating competition negotiations within the WTO will bias the manner in which the subject is treated and the type of agreement that will emerge. Most importantly, the ‘core WTO principles’ would be applied to competition.
Competition can be viewed from many perspectives. From the developing countries’ perspective, it is important to curb the mega-mergers and acquisitions taking place, which threaten the competitive position of local firms in developing countries. Also, the abuse of anti-dumping actions in the developed countries is anti-competitive against developing countries’ products. The restrictive business practices of large firms also hinder competition.
Transparency in government procurement: The Singapore WTO Conference (1996) agreed ‘to establish a working group to conduct a study on transparency in government procurement practices, taking into account national policies, and based on this study, to develop elements for inclusion in an appropriate agreement’. Trade facilitation: A decision on whether to begin negotiations on this subject was also to be taken at Cancun. The Doha Declaration (para 27) states that until the Fifth Ministerial Council for Trade in Goods shall review and as appropriate clarify and improve relevant aspects of Articles V, VIII and X of GATT 1994 and identify the trade facilitation needs and priorities of members, particularly developing and least developed countries. (Article V is on freedom of transit, Article VIII is on fees and formalities connected with import and export and Article X is on publication and administration of trade regulations).
The main objective of the proponents is to have the rules and procedures similar to theirs adopted by the developing countries. Improvement in trade facilitation should be a subject of international cooperation and aid, through institutions such as the World Customs Organization. Developing countries can be assisted technically and through finance to upgrade their facilities in appropriate ways. Trade facilitation should not be the subject of legally-binding rules and obligations in the WTO, for it would then impose obligations on developing countries to undertake expensive programmes that they can ill afford and which is not in their priority list. And some of the obligations may also not be in their interests.
Suggested stand: Martin Khor, expert on the WTO, has suggested the developing countries to adopt the following stand, which Pakistan should also consider:
Investment: An investment agreement in the WTO will be damaging to development options and interests. Investment is not a trade issue, and thus bringing it within the ambit of the WTO would be an aberration and could cause distortion to the trade system. It is certainly not clear that the principles of the WTO (including national treatment, MFN) that apply to trade in goods should apply to investment nor, that if they were applicable, that they would benefit developing countries. Traditionally developing countries have had the freedom and right to regulate the entry and conditions of establishment and operation of foreign investments, and they should retain this right.
Competition: There is not a convincing case for a multilateral set of binding rules to govern the competition policies and laws of countries; and there are especially justified grounds for serious concern if such an agreement were to be located within the WTO, as it is likely to be skewed in a way that is inappropriate for the development interests of developing countries as a result of the attempt by proponents to apply the ‘core principles’ of the WTO to the issue and to the agreement.
Government procurement: The developing countries should not agree to begin negotiations on this subject. A major strategic decision should be taken to prevent the issue of government procurement from entering the WTO as a negotiating topic. If so, then even a transparency agreement should not be welcomed. It should be recognized that the existence of a transparency agreement would make an eventual market-access agreement very difficult to stop.
Trade facilitation: There is no need for binding multilateral rules on trade facilitation. Negotiations should not start on trade facilitation after the Fifth Ministerial. Clarification and improvement of the rules in these areas will add to the commitments of the developing countries in the WTO, adding new burdens and may have adverse implications too. Improvements in trade facilitation should be made through national efforts aided by technical assistance, rather than through imposing additional obligations in the WTO.
Pakistan’s position: Pakistan’s position as earlier mentioned was very astonishing. On the issue of trade and investment our country’s position was “Pakistan’s investment regime is liberal, so this issue does not create much difficulty for us”; on trade and competition it was “most of the objectives of this negotiation suit Pakistan also, so this is not considered to be a problem area for us”; on the transparency in government procurement it was “here again Pakistan does not see itself as being adversely affected since as per our national reform agenda we have already introduced transparency in government procurement,” and on trade facilitation issue it was “this issue is also not much of a problem for Pakistan since as part of our reform agenda we have been improving our trade procedures and facilitation of trade in any case. Improvement of trade facilitation by our trading partners can only benefit us”.
The above Pakistan position is not, in any way, favourable for the growth of our economy. The developed world is still giving high subsidies to their farmers and supporting their industries, like textile and clothing, by way of quantitative restrictions. The recent example is the US steel rift with the EC and Japan.
The researchers of the IFIs and developed world are continuously trying to prove that the liberal or open economy would benefit the developing countries. But the facts and figures have always shown that it has ruined their economy. Pakistan is an example: our growth rate has dropped to 3 per cent — an average growth rate from 1988 — poverty has gone up to 33 per cent and most importantly our sovereignty has been compromised.
