A Broad South African Approach to New Multilateral Trade Negotiations in the World Trade Organisation

Introduction

Multilateralism promises to be the appropriate institutional policy response to globalisation and the growing interdependence of national economies. The marginalisation of many countries in the global economy, particularly those in Africa, and the question of coherence in global economic policy-making between the IMF, the World Bank, and the WTO, constitutes key challenges confronting the international community, in the context of an integrating global economy. In this context, the WTO has moved to centre stage in an evolving system of global economic governance. Meeting the challenges of global governance is at the heart of the ensuring the progressive development of the global economy as a whole.

The establishment of the WTO marks the emergence of a strengthened rules-based international trading system that provides enhanced certainty and security for market access. The WTO reduces the scope for unilateral trade measures and aims to ensure the economic interactions, including the resolution of disputes, are governed by a system of rules, and not solely by the interplay of economic power. This is the essential contribution of the WTO to the creation of a system of clear, transparent and predictable global economic governance.

The disciplines that emerged from the Uruguay Round Agreements are extensive and have an intrusive impact on all aspects of Members’ trade and economic policies. The prospect that new negotiations would seek re-negotiation of existing agreements and broaden the ambit of WTO competence into new areas, with further inroads into domestic policy formulation, indicates the WTO’s growing centrality to international trade relations.

Notwithstanding the advances made in the Uruguay Round, including the establishment of the WTO, the outcome of those negotiations respond to - a large extent - to the concerns and interests of developed countries – the leading trading nations. From the perspective of developing countries, WTO agreements exhibit a range of imbalances and deficiencies that are prejudicial to their trade and development interests. Further, the Agreements reflect the concerns of sophisticated economies and presuppose an institutional, human and financial base that is often lacking in developing countries.

Globalisation and rapid technological development are establishing new dynamics for trade and investment not foreseen or well understood during the Uruguay Round. These present new challenges to the multilateral trading system and require a further strengthening of global economic governance to manage the diverse consequences of globalisation.

Developing countries have a clear interest in strengthening the system in a manner that promotes their development. In many respects, multilateral rules need to be designed – and re-designed – to become more responsive to the trade and development interests of developing countries and to achieve equitable objectives.

For the developing countries, the key challenge confronting the multilateral trading system is to ensure that issues of development are addressed adequately and decisively. Meeting this challenge will serve to strengthen the multilateral, rules-based trading system, enhance its legitimacy and create the basis for a new round of world economic growth from which all WTO member must benefit.
Strategic Objectives for WTO Negotiations

In our view, the key to sustained global economic growth lies in unlocking the growth and development potential of developing countries. To achieve this, developing countries must pursue industrialization by processing their natural and utilizing their human resources where they possess comparative advantage. However, realising the full potential of these advantages has been frustrated by projectionist interests in some of the developed countries under various national policy regimes, and buttressed by multilaterally negotiated disciplines in the WTO.

The strategic objective in the new negotiations is, therefore, for developed countries to undergo far reaching structural adjustment in their economies. Such restructuring requires reducing a range of protective and support measures to inefficient "grandfather" industries and sectors in the economies of the developed countries, and thereby allows a relocation of production and investment to developing countries, which process comparative advantages in these areas. This existence of a large "overhang" of capital in the developed economies is the basis for such a resource transfer if production possibilities are opened in the developing countries. Such structural adjustment would boost investment, production and trade in developing countries, promote industrialization and development, exchange North-South and South-South trade and provide an impetus to a new round of global economic growth.

This understanding has informed our approach to future trade negotiations in the WTO. We would seek to ensure the WTO Agreements facilitate – not frustrate – such processes of structural adjustment in the North. In sum, our strategic objectives should be to:
Contribute to structural change in the geographic allocation of global production;
Establish disciplines that level the playing field, address concerns and imbalances in existing multilateral agreements;
Extend and elaborate more effective provisions on special and differential treatment; and
Extent disciplines to new forms and dimensions of trade in recognition of the increasingly integrated nature of the global economy;

These broad objectives are translated into more specific proposals under the various elements of the WTO’s ongoing work programme and negotiations, as spelt out below.
Modalities for New Multilateral Trade Negotiations

New negotiations must be based on a broad and balanced agenda that accommodates the concerns and interests of all WTO Members. Broad-based negotiations, which would permit trade-offs among issues, would, in our view, best serve developing countries’ interests. We support the principle of a "single undertaking" through which the results of negotiations an all issues are adopted by all members in their entirety.

This framework constitutes the only guarantee that results of negotiations would strike a balance acceptable to all Members. Plurilateral approaches would, by contrast, threaten a further fragmentation of the international trading system and undermine the principles of inclusiveness and universality that are the cornerstones of multilateralism.

The Ministerial Meeting in Seattle has provided lessons that should not be forgotten when launching a New Round. Issues related tot he internal governance of the WTO must be addressed. Developing and developed countries must pursue the democratic future of the WTO as embodied in the "one country, one vote" system of operation of the Organisation. This principle, however, must not be allowed to affect the efficiency and effectiveness of the negotiating process. Both formal and informal solutions must be found to guarantee the "ownership" of the WTO growth and evolution process by developing countries. Parallel to negotiations of substance, discussions on means of avoiding the marginalisation of many developing countries in decision making must take place.
Scope of new Multilateral Trade Negotiations

Implementation Issues

We have a range of concerns under existing WTO Agreements that we seek to address. These are the so-called implementation issues, as identified during the preparatory period leading to Seattle and as delineated in the Chairman’s text of 19 October 1999. While some concerns may be addressed through a clarification of existing provisions, others may require re-negotiation.

We seek to strengthen the anti-dumping agreement in a manner, which reduces its scope and potential for abuse and harassment from narrowly projectionist interests. While it is necessary, politically and for genuine dumping reasons, to retain anti-dumping as an instrument of trade policy, current multilateral provisions provide undue scope for trade harassment and protectionism against competitive imports and, thereby, reverse efficiency and welfare gains associated with a more open international trading regime.

The subsidies agreement is highly prejudicial to the interests of developing countries. While subsidies for R&D, environmental upgrading and regional development, commonly used by developed countries have been categorized as non-actionable, those required developing countries to support their industrialization and development- and which were previously utilised by the now industrialised countries – are prohibited and actionable subsidies under the WTO. We seek to reintroduce and broadened scope of non-actionable subsidies to include measures aimed at achieving, in a fiscally responsible manner, legitimate development goals. We seek to reintroduce the concept of non-actionable subsidies with the aim of partially redressing the current inequities suffered by developing countries under the SCM Agreement. In view of the investment finance inequities (and associated risk premiums) which developing and least-developed countries face on international financial markets, we feel that a review of the appropriate Uruguay Round Agreements should be undertaken to redress this inequity.

Under the TRIP’s Agreement, we would seek to ensure that the benefits of intellectual property regimes are equitably shared between the innovators/owners and users/consumers of technology. We seek to ensure that intellectual property protection encourages innovation and technological development in a manner that is also conducive to meeting public and social policy objectives and that strikes a balance between intellectual property protection and maintaining a competitive international trading environment. The TRIP’s agreement should be clarified to ensure, amongst other things, the protection of bio-diversity, food security, and access to essential drugs. We seek a precise definition of the scope and modalities for non-violation complaints. The protection of geographic indications should not undermine the benefits of a more open and competitive international trading environment.

In the context of a more open international trading environment, the proliferation of standards to protect health and safety can become obstacles to the exports of developing countries: where they lack the resource requirements necessary to meet new standards; where they do not participate in the creation of standards; and where standards are designed with projectionist intent. To meet the requirements of legitimate standards for the protection of health and safety, developing countries require considerable technical, human and financial support to upgrade their production for export.
Mandated Negotiations

The Uruguay Round Agreements contain an in-built agenda for negotiations in agriculture and services. These commenced in January 2000. Services negotiations currently involve the development of new horizontal rules and will lay the basis for further market access negotiations in areas of financial, telecommunications, tourism, transport, energy, and environmental sectors, amongst others; under the four modes of supply. In our view, services negotiations hold great potential for economic development, in terms of the growing direct contribution of services to the economy (GDP), its indirect contribution as an input into other sectors (manufacturing) and, generally, in improving overall economic efficiency and competitiveness.

Nevertheless, given the structural imbalances in the development of the services sectors between developing and developed countries, and the resulting discrepancies in shares of international trade in services, developing countries will not, in the main, be demanders in the negotiations. They would, therefore, seek trade offs in other sectors – such as agriculture – for concessions made in services.

In Agriculture, our objectives are to achieve a substantial improvement of market access opportunities for all its agricultural products with export potential; to improve fair trade conditions on agricultural products imported or exported; and to ensure that the rural development objectives of developing countries are accommodated within the allowable range of WTO disciplines. We seek:
i) Tariff reductions; viable market access quotas; the reduction in tariffs from bound rates;

ii) Further substantial reductions of domestic and export support by major developed countries, while retaining an adequate space for such support for developing countries;

iii) Commitments to cap and reduce production-related support measures;

iv) Special and Differential treatment for developing countries;

v) The elimination of export subsidies and any subsidization as part of export credits; and

vi) To develop transparent and coherent disciplines for export credits.

Trade in agriculture has been hitherto characterised by the use of a range of non-tariff instruments by developed countries (such as tariff quotas, seasonal entry thresholds, entry prices, variable specific duties). Developing countries will seek an umbrella agreement providing for the precise definition of such instruments, regulating their use, and establishing the necessary parameters for limiting their trade disrupting and trade restricting impact on developing countries’ exports in agriculture.

Industrial Tariffs

We favor a comprehensive approach to multilateral trade negotiations that includes Industrial Tariff negotiations. Our objective, among other things, is to ensure the reduction and elimination of tariff peaks and tariff escalation on products of export interest and in value adding sectors that offer to build upon the comparative advantages of the developing countries.

While the average MFN tariff rate in the major advanced industrial countries are low, the level and the frequency of tariffs remain a matter of concern in a number of key sectors of direct interest to developing countries. Frequent tariff peaks and significant tariff escalation still apply on agricultural products, clothing and textile sectors, footwear, leather and leather goods, and some capital-intensive goods.

Although tariff escalation has decreased as a result of the Uruguay Round, rising tariffs from raw materials to intermediate products and sometimes peaking for finished industrial products restrict export opportunities and hamper vertical diversification and industrialization in developing countries. In general, the growth of exports of developing countries to industrial countries is inversely related to the degree of tariff protection in the latter.

New Issues

27. So-called ‘New issues’, as stated in the Singapore, Geneva and draft Seattle Declarations, include: trade and competition policy, transparency in government procurement, trade and investment, electronic commerce, and trade facilitation. Our general approach is that any new disciplines to be negotiated should contribute positively to development, equity and consistency in the international trading system, and not merely provide advantage to one group of economies over another.

28. Any consensus to negotiate new disciplines will depend, critically, on clarifying the level of ambition sought in these new areas. We would need to establish clear parameters, some key elements and principles that will govern the negotiations in order to build a sufficient degree of comfort for all Members. An over-ambitious or open-ended agenda for the New Round would constitute, in our opinion, a recipe for an impasse.

29. In preparing for a scenario that Trade and Investment is included in future negotiations, the manner in which foreign direct investment is addressed become crucial. A key element for developing countries would be the ability to prevent disruptive investment patterns in the economy as a whole or in particular sectors that would be detrimental to development. Such measures will have to work within the disciplines of the market while setting clear and transparent operational parameters for the market. The current development of competition policy in many jurisdictions is the type of regulatory structure that should be explored. In addition, a GATS-type framework, which sets out a positive-list of investment commitments, is most appropriate. An investment agreement could be constructed in a development-friendly manner that, among other things:

i) Assures transparency;

ii) Provides for investor protection through intergovernmental dispute settlement procedures;

iii) Allows for flexibility by permitting countries to place limits and conditions on the right of establishment, MFN, market access, and national treatment within the framework indicated above;

iv) Permits appropriate performance requirements; and

v) Disciplines incentives that distort investment flows among member countries.

30. We recognize the importance of exploring the interaction between Trade and Competition policies. Processes of globalisation are leading to growing concerns about the international and multi-jurisdictional effects of Restrictive Business Practices. Developing countries suffer from such practices by trans-national corporations and foreign companies, in general. We are also concerned about the implication of the rapid growth of mergers and acquisitions for the concentration of economic power in the world economy. We recognize that competition policy and law in developing countries form part of a broader policy framework, including meeting public policy objectives.

31. As these considerations raise a complex set of issues, we attach great importance to the ongoing ‘educational’ process underway in the Working Group on Trade and Competition Policy. We need to intensify work in this area, with a particular focus on its developmental dimensions, and we need to examine fully the financial, human, institutional and juridical implications of competition policy and law both at national and multilateral levels.

32. As far as Transparency in Government Procurement is concerned, we believe that commitments to transparency will add to the financial, institutional and administrative burdens of developing countries, and that – therefore – the provision of adequate technical and financial support should be built into disciplines in a meaningful application of special and differential treatment. Measures to improve transparency should not constitute efforts to achieve market access goals nor impinge on practices to address domestic development concerns. Any multilateral arrangement in this area should be in the form of non-binding guidelines, that are not subject to the dispute settlement mechanism. Domestic or regional review mechanisms should be employed for any dispute which may arise.

33. On Trade Facilitation, there is agreement that the simplification of trade procedures has potential for considerable savings in time, money, human and other resources and could result in substantial benefits for all economies. Efforts to improve the security and predictability for traders, including through trade facilitation are welcome, but the realities of trade impediments in many developing regions (underdeveloped and poor customs administration procedures, documentation and infrastructure etc.) are not best addressed by binding commitments in the WTO subject to dispute settlement. What is required is a comprehensive and integrated effort in technical cooperation, financial support and human and institutional capacity building.

34. Electronic Commerce, largely a GATS issue, has greatly enhanced the relevance of the cross-border mode of supply of services and has underlined the importance of implementing the commitment to provide developing countries with improved access to technology and information networks to underpin their increased participation in world trade in services. We support the continuation of the work programme on electronic commerce and calls for technical assistance for training and the development of infrastructure to enable developing countries to participate and benefit from electronic commerce. Extension of the standstill on the non-imposition of customs duties on electronic transmissions should be accompanied by the availability of technical assistance. Infrastructure and capacity constraints, connectivity, and access to hardware and software are critical issues for developing countries.

Other Issues

35. Some developed country Members would like to also include trade and environment, and trade and labour standards on a future negotiating agenda. We attach great importance to the ongoing discussions in the Committee on Trade and Environment with a view to resolving the issues related to interface between trade and environment policies. Given the complexity of the issues and the concerns raised by many Members, we believe it is premature to include the issue of trade and environment in the forthcoming negotiations where prospects for a positive outcome are minimal and will undermine progress on all other issues.

36. We endorse the principle of core labour standards as enshrined in the I.L.O. conventions. Like others, we reject the use of labour standards for projectionist purposes. These views were recognised at the Singapore Conference where it was agreed that the ILO was the competent body to set, deal and promote core multilaterally negotiated labour standards. It was also agreed that the ILO and WTO Secretariats should continue their collaboration.

37. In our view, efforts to bring labour standards under WTO disciplines, where it would actionable under the DSU, would fatally undermine any multilateral progress not only on the issue of labour standards themselves, but also on every other issue under consideration in the WTO. In this light, labour standards must not form part of the proposed negotiating agenda for the New Round.

Department of Trade and Industry, South Africa

June 2001

So-called ‘New issues’, as stated in the Singapore, Geneva and draft Seattle Declarations, include: trade and competition policy, transparency in government procurement, trade and investment, electronic commerce, and trade facilitation. Our general approach is that any new disciplines to be negotiated should contribute positively to development, equity and consistency in the international trading system, and not merely provide advantage to one group of economies over another.

Any consensus to negotiate new disciplines will depend, critically, on clarifying the level of ambition sought in these new areas. We would need to establish clear parameters, some key elements and principles that will govern the negotiations in order to build a sufficient degree of comfort for all Members. An over-ambitious or open-ended agenda for the New Round would constitute, in our opinion, a recipe for an impasse.

In preparing for a scenario that Trade and Investment is included in future negotiations, the manner in which foreign direct investment is addressed become crucial. A key element for developing countries would be the ability to prevent disruptive investment patterns in the economy as a whole or in particular sectors that would be detrimental to development. Such measures will have to work within the disciplines of the market while setting clear and transparent operational parameters for the market. The current development of competition policy in many jurisdictions is the type of regulatory structure that should be explored. In addition, a GATS-type framework, which sets out a positive-list of investment commitments, is most appropriate. An investment agreement could be constructed in a development-friendly manner that, among other things:

i) Assures transparency;

ii) Provides for investor protection through intergovernmental dispute settlement procedures;

iii) Allows for flexibility by permitting countries to place limits and conditions on the right of establishment, MFN, market access, and national treatment within the framework indicated above;

iv) Permits appropriate performance requirements; and

v) Disciplines incentives that distort investment flows among member countries.

We recognize the importance of exploring the interaction between Trade and Competition policies. Processes of globalisation are leading to growing concerns about the international and multi-jurisdictional effects of Restrictive Business Practices. Developing countries suffer from such practices by trans-national corporations and foreign companies, in general. We are also concerned about the implication of the rapid growth of mergers and acquisitions for the concentration of economic power in the world economy. We recognize that competition policy and law in developing countries form part of a broader policy framework, including meeting public policy objectives.

As these considerations raise a complex set of issues, we attach great importance to the ongoing ‘educational’ process underway in the Working Group on Trade and Competition Policy. We need to intensify work in this area, with a particular focus on its developmental dimensions, and we need to examine fully the financial, human, institutional and juridical implications of competition policy and law both at national and multilateral levels.

As far as Transparency in Government Procurement is concerned, we believe that commitments to transparency will add to the financial, institutional and administrative burdens of developing countries, and that – therefore – the provision of adequate technical and financial support should be built into disciplines in a meaningful application of special and differential treatment. Measures to improve transparency should not constitute efforts to achieve market access goals nor impinge on practices to address domestic development concerns. Any multilateral arrangement in this area should be in the form of non-binding guidelines, that are not subject to the dispute settlement mechanism. Domestic or regional review mechanisms should be employed for any dispute which may arise.

On Trade Facilitation, there is agreement that the simplification of trade procedures has potential for considerable savings in time, money, human and other resources and could result in substantial benefits for all economies. Efforts to improve the security and predictability for traders, including through trade facilitation are welcome, but the realities of trade impediments in many developing regions (underdeveloped and poor customs administration procedures, documentation and infrastructure etc.) are not best addressed by binding commitments in the WTO subject to dispute settlement. What is required is a comprehensive and integrated effort in technical cooperation, financial support and human and institutional capacity building.

Electronic Commerce, largely a GATS issue, has greatly enhanced the relevance of the cross-border mode of supply of services and has underlined the importance of implementing the commitment to provide developing countries with improved access to technology and information networks to underpin their increased participation in world trade in services. We support the continuation of the work programme on electronic commerce and calls for technical assistance for training and the development of infrastructure to enable developing countries to participate and benefit from electronic commerce. Extension of the standstill on the non-imposition of customs duties on electronic transmissions should be accompanied by the availability of technical assistance. Infrastructure and capacity constraints, connectivity, and access to hardware and software are critical issues for developing countries.

Other Issues

Some developed country Members would like to also include trade and environment, and trade and labour standards on a future negotiating agenda. We attach great importance to the ongoing discussions in the Committee on Trade and Environment with a view to resolving the issues related to interface between trade and environment policies. Given the complexity of the issues and the concerns raised by many Members, we believe it is premature to include the issue of trade and environment in the forthcoming negotiations where prospects for a positive outcome are minimal and will undermine progress on all other issues.

We endorse the principle of core labour standards as enshrined in the I.L.O. conventions. Like others, we reject the use of labour standards for projectionist purposes. These views were recognised at the Singapore Conference where it was agreed that the ILO was the competent body to set, deal and promote core multilaterally negotiated labour standards. It was also agreed that the ILO and WTO Secretariats should continue their collaboration.

In our view, efforts to bring labour standards under WTO disciplines, where it would actionable under the DSU, would fatally undermine any multilateral progress not only on the issue of labour standards themselves, but also on every other issue under consideration in the WTO. In this light, labour standards must not form part of the proposed negotiating agenda for the New Round.

Department of Trade and Industry, South Africa

June 2001

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