WTO: DOHA ROUND

Neither a Victory for the North, Nor a Loss for the South

By Anju Sharma with S S Jeevan

The choice of venue was clever and the September 11 attack on the World Trade Center added to the security paranoia. The result was that it combined to give trade negotiators somewhat of a breather when they met in Doha, Qatar, for the fourth ministerial conference of the World Trade Organisation (WTO). The massive street protests that marked the Seattle round were non-existent at the Doha ministerial. In the aftermath of the terrorist attacks against the US, anti-globalisation protesters were suddenly disoriented, and several plans for protests at Doha were cancelled. "Are we talking about anti-capitalisation, anti-globalisation or anti-Americanism? It didn’t matter before September 11; now it does," says Tom Spencer, director of the European Centre for Public Affairs.

Besides, the organisers were not taking any chances, and the conference venue looked like a fortress. The perceived threat of terrorism was used as an effective way of stopping anyone opposed to the WTO — out of sight, and perhaps out of mind.

With the debacle of Seattle looming large, the negotiators were under pressure to come up with results. And at the end of the six-day marathon meeting, a deal was struck. It was agreed to start negotiations on a new trade round to culminate in 2005. For the North, which was keen to bring issues of investment and competition into global trade negotiations, it was a "given". Most importantly, they got an agreement for a new round of negotiations. The South lost most battles, but was relieved to still be in the reckoning. Most gains were in the backroom "bilateral deals" — a euphemism for arm-twisting.

Give and take!
The biggest gain for developing countries was on patents and drugs. Countries were granted the right to break the monopoly over patented drugs in case of health emergencies like epidemics. Analysts feel that the issue was clinched only due to the US’ predicament over anthrax drugs. But the drug industry has dismissed Doha as a political statement and not legally binding. The European Union (EU) brought an agreement within reach by making a concession on agricultural subsidies. It agreed to "reductions, with the view to phasing out", of agricultural export subsidies — something it had always resisted. However, a qualifying phrase was included in the agreement, which said the EU’s concession was made "without prejudging the outcome of the (final) negotiations". "It was clear from the very beginning that we have to give and to take also something," said European agriculture commissioner, Franz Fischler. In return, WTO members accepted EU demands that investment, competition and environment rules be put on the agenda.

The US agreed to relax some import curbs. And it got an assurance on the anti-dumping issue. The US has given assurance of greater discipline in imposition of anti-dumping provisions. But on the issue of greatest concern to the South, textiles, the US refused to advance the deadline for quota reduction from January 2005. It has, in fact, threatened to impose non-tariff barriers on other imports if pushed.

In return for the concessions made by the EU, negotiators wanted stronger language on trade and protecting the environment. Developing countries, however, did not want the environment to be linked to trade rules. They felt that environmental concerns would be used as an excuse for renewed protectionism. For now, the issue has been put on the backburner. The EU has won the right to talks within two years on how to improve the investment climate for international companies abroad, and how to introduce competition policy into trade law.

The Indian act: deal breaker
India made all the right noises at the meeting, but came back with very little. Indian commerce and industry minister Murasoli Maran, who called WTO "a necessary evil", was seen as the champion of developing countries. He was also the biggest stumbling block during negotiations. India, which has just a share of 0.7 per cent of world trade, was wary that a clause on competition would allow foreign companies too much freedom to operate in the country. India’s intransigence led to the extension of the conference by a day. Till the last day, the minister seemed to block a declaration. In an effort to reach an agreement, many trade ministers held several closed-door meetings with Maran. But nothing worked. Media reports suggest that the issue was clinched only when the Qatari chief negotiator Yousef Hussein Kamal held a one-to-one meeting with the minister. That meeting changed everything. India finally fell in line. What transpired at that meeting, however, remains unknown.

Maran is being showered with encomiums for holding his ground at Doha. In reality, he has only bought more time with regards to issues such as investment and competition. The delay is being seen as a victory — typical of Indian bureaucracy’s shortsightedness. The strategy is to block a proposal without proposing a new one. But as countries tighten the noose in the forthcoming negotiations, India will be forced to accept what it fought all the while.

TRADE AND ENVIRONMENT
Can green mean free? The debate reached a boiling point in Doha, but remained inconclusive

Midway through the Doha meeting, EU trade commissioner Pascal Lamy visited Rainbow Warrior, the mascot ship of the international environment activist organisation Greenpeace, anchored in the Qatari seawaters. "Some balance between the trade rules and environmental protection is to be struck, that is why we are here," Lamy said on board his high-visibility platform. The gesture might have struck a chord back home in Europe, but most countries from either side of the economic divide did not agree.

The EU had made it abundantly clear even before the ministerial that inclusion of environmental concerns was in effect a sine qua non for the EU’s agreement to ambitious negotiations on cutting back state supports for agriculture. The EU move is perceived as a means to retain some green barriers to its agriculture markets when its agricultural subsidies are eventually phased out as envisaged in the Doha declaration. It is pushing for recognition of the ‘multifunctionality of agriculture’. Under this concept, agriculture does not just serve the purpose of providing food but also helps in maintaining rural communities, protect the environment if non-intensive methods are used, preserve culture and promote sustainable development. This possible connection between agriculture and environment is seen as one of the reasons why the EU is pushing environment at the WTO.

The South opposes bringing the issues related to environmental protection into the mainstream of multilateral trade talks, saying their potential abuse as green protectionism cannot be ruled out. In the past, the demands for linkages between trade and environment have come not only from Northern non-governmental organisations (NGOS), but also from Northern industry and labour unions, which stand to benefit if environmental standards are applied to trade.

Developing countries also fear the huge costs associated with greener technologies, which will be unbearable by their domestic industries. It could make their goods uncompetitive in western markets. This unequivocal opposition to greening of trade is what brings the motley crew of poor countries together. "If there’s one thing that unites developing countries, it is opposition to negotiations on trade and environment," said a developing country official before the meeting. "If the EU says it’s a deal-breaker, so be it. There are just too many people against it." The Republican Bush administration shares these views (unlike the democrats), and would rather the green issues remain outside the purview of the WTO, as they could harm the interests of US industry. For instance, US biotechnology firms stand to lose out, due to the wariness against genetically modified (GM) food.

Despite this opposition, the EU threat that it would negotiate on liberalising agricultural trade only if other WTO members agree to talk on trade and environment, eventually worked. The final ministerial declaration controversially proposes negotiations to enhance "mutual supportiveness of trade and environment". The declaration reiterates the EU demand seeking clarification on the relationship between the WTO rules and "trade obligations set out in multilateral environmental agreements (MEAS)" instructs the WTO’s committee on trade and environment (CTE) to give special attention to, among other things, ecolabelling suggests reduction and even elimination of trade barriers to environmental goods and services, a move that has been mutely welcomed by developing nations seeks to further strengthening the links between trade and environment by proposing negotiations on "procedures for regular information exchange" between the relevant MEA bodies and their counterparts in the WTO.

Indian industry minister Murasoli Maran dismissed the environment provisions in the declaration as "the price we have to pay for something in agriculture". "We have marginally agreed on environment, which to a large extent, is a political acknowledgement of its importance rather than rebalancing of rights and obligations," he said.

The environmental measures listed in the Doha declaration are not new. They have been part of the discussions at the CTE for several years now, and have been discussed in by the WTO’s dispute settlement mechanism before that. CTE was set up in 1995 and is composed of all WTO members and a number of observers from inter-governmental organizations. It functions with the understanding that "it does not modify the rights and obligations of any WTO member under the WTO agreements." A ten-point agenda forms the basis of the committee’s work, which includes decisions on environment measures for trade, ecolabelling, environmentally unfriendly subsidies and intellectual property rights.

CTE has not reached any conclusions due to the controversial nature of the issues. In 1996, it presented an inconclusive report at the Singapore ministerial due to the fact that its members had failed to reach agreements on most of the issues under discussion. The ministerial made note of the "the breadth and complexity of the issues covered by the committee" and "further work needs to be undertaken on all items of its agenda". The committee was directed to carry on its work.

Although CTE discussions have been unfruitful, the trade and environment debate is being addressed in other fora. As the pressure from Northern civil society to take on board environmental concerns increases, the dispute settlement mechanism has come out more and more in support of green issues. In a recent ruling on the shrimp-turtle case, a WTO appellate body (AB) endorses a US ban on shrimp imports from countries that do not use turtle excluder devices to prevent harming sea turtles (see box: In through the backdoor). These judgments cannot be taken lightly, since they are making law by setting precedents.

In October 2001, an appellate body set up under the WTO ruled that the US was justified in banning shrimp exports from countries that do not use ‘turtle excluder devices’ (TEDs) to prevent sea turtle mortalities while catching shrimp. Through this ruling, the WTO has endorsed unilateral, extrajurisdictional action by nations. Moreover, it has endorsed discrimination between products based on their process and production methods (PPM).

The shrimp-turtle issue goes back to 1996, when the US banned shrimp imports from countries that did not use TEDs. India, Malaysia, Thailand and Pakistan took the matter to the WTO, contending that the US was trying to dictate the environment policy to be followed by other countries, and imposing its unilateral decision on other countries. They said the US ban amounted to disguised protectionism.

In 1998, the WTO dispute settlement panel (DSP) dismissed the US ban on grounds that it was discriminating among the exporters. The DSP stated that the US action was arbitrary and inconsistent with article XI of the General Agreement on Tariffs and Trade (GATT), which does not allow WTO members to impose import restrictions. Although the ruling did not go to the extent of rubbishing the unilateral nature of the US ban, the WTO’s dispute settlement body won new respect amongst developing countries for this ruling.

But in response to a US appeal, a WTO appellate body (AB) partially overruled the DSP ruling. The AB ruled that the US law did not violate the WTO obligations and was covered under an exception to the GATT (article XX (g)) rules for measures relating to the conservation of exhaustible natural resources. However, the AB felt that the US ban resulted in unfair discrimination between exporting nations, since the process of certification was to be decided by the US agencies alone. Hence there was a lack of transparency and participation in the process. Also, the US guidelines gave exporting countries little time to implement the mandatory use of TEDs. In August 1998, the US changed its guidelines to accommodate the WTO ruling. Instead of an outright ban on shrimp exports from the four countries, it made certification that TEDs were used essential on a shipment-to-shipment basis.

Malaysia and India were not satisfied with these changes, and wanted a complete lifting of the shrimp import restriction. Malaysia filed a complaint in late 2000, and sought a review of the whole issue and requested the re-establishment of the original panel to examine whether the US had, in fact, complied with the appellate body findings. A compliance panel, set up to look into the case, in May 2001 ruled in favour of the US, concluding that the US was not obliged to lift its import ban to implement the 1998 appellate body report, which requested the US to bring its import ban into conformity with WTO trade rules.

The latest ruling indicates that the WTO’s dispute settlement mechanism is giving in to pressure from environmental groups, and protests by Southern governments to keep environmental concerns out of the trade agenda may eventually prove futile. Morevover, as the EU faces pressure from its civil society on the issue of genetically modified organisms (GMOs), the Union is unlikely to let go of issues such as the primacy of public health, the precautionary principle, and process and production methods (PPMS).

In June 2000, seven months after non-governmental organisations demanded that the WTO look beyond trade concerns at the doomed Seattle ministerial, a WTO dispute settlement panel (DSP) ruled in favour of public health and against free trade for the first time, in a case involving Canadian asbestos exports. WTO representatives lost no time in announcing that the decision "disproves charges by radical environmental and human rights bodies that the organisation works in favour of big business by giving free trade interests preference over other concerns".

Canada is the world’s largest exporter of chrysotile (white) asbestos — in 1999 alone, its four mines based in French-speaking Quebec produced 345,000 tonnes of chrysotile, worth roughly US $110 million. But health concerns lead several European countries to ban the import and use of this material in many countries that had, until then, been strong import allies. The World Health Organisation (WHO) lists asbestos fibres as carcinogenic. France was the first among the EU countries to implement such a ban, starting in January 1997. Other EU nations followed, and as of late 2000, most EU member states, excluding Spain, Portugal, Greece, Ireland and Luxembourg, had similar bans in place.

Canada filed a complaint with the WTO against the French ban in May 1998. A dispute settlement panel (DSP) was set up in November 1998. The DSP first decided that imported Canadian asbestos and domestically produced substitutes (polyvinyl alcohol or PVA, cellulose and glass) are ‘like-products’, since they are similar in properties, nature and quality and had similar end-uses. Therefore, the panel first decided that the ban was not a question of health, but rather a question of GATT article III on national treatment, or equal treatment of foreign products and their domestic equivalents. Following the DSP’s ruling that asbestos was indeed a ‘like product’, France was required to justify its ‘violation’ through article XX (b), which allows for specific general exceptions to the WTO rules, in support of health and environment. In September 2000, the DSP ruled in favor of France, setting a new precedent by allowing a WTO member to use article XX (b) to impose trade measures for the first time. Canada decided to appeal, but the WTO’s appellate body (AB) ruled again in March 2001, to once again uphold the decision in France’s favour.

This case could also have an impact on interpretations of the scope of the agreement on technical barriers to trade (TBT), which explicitly rules against discrimination of final products based on the process of their production. Canada had asserted that France’s ban on asbestos was effectively a regulation of the characteristics and process of production, while the European Community (EC), representing France, asserted that the ban was not. The DSP agreed with France, and ruled that the French ban was not based on the characteristics and process of production, and thus not covered by the TBT agreement. The AB reversed this finding, taking the view that product characteristics could be presented in a positive or negative light.

In this case, France had specified that imports shall not contain asbestos fibres. "The effect of this ruling is that countries can circumvent a product and production method (PPM) analysis, at least as it relates to goods containing a banned product, by simply outlawing the hazardous substance as a whole," says London-based trade and environment analyst Kevin Gray.

Developing country concerns over green protectionism are legitimate, but they cannot simply continue to oppose negotiations on the links between trade and environment — they have to take them head on to make sure their concerns are addressed through legitimate multilateral negotiations, rather than through the back door, by a few people on a dispute settlement panel or appellate body.

Conflict with environment treaties
For instance, the discussion on the relationship between trade rules and MEAS has been uneasy to say the least. While the WTO currently allows importing countries the freedom to choose their own standards in the interests of public health and the environment in their own countries, they are not allowed to impose standards aimed at improving health or environmental practices of exporting countries. But can environmental standards be imposed on another country if a multilateral treaty has been signed to this effect? The EU considers it necessary to ensure that when there is dispute concerning environment-related trade measures, linkages between trade and environment are taken into account so that one does not jeopardise the fulfillment of the other.

Developing countries see the debate on MEAS as a non-trade issue, but it is in fact in their interests to sort out the issue once and for all, rather than leave the issues open for interpretation by the WTO’s dispute settlement mechanism. Several feasible options have been suggested in the past, such as moving environment-trade conflicts to tribunals provided specifically under MEAS; or moving such disputes to the International Court of Justice. But even before agreeing to a venue, developing countries must insist on clarification on a set of overarching rules. For instance, they should insist on a provision that forbids the use of trade sanctions to conserve the global environment, since such sanctions can only be used by the more economically powerful nations against the less economically powerful. Extra-jurisdictional and unilateral action should not be possible even within a multilateral agreement.

Northern green activists were not entirely happy with the outcome at Doha, though for reasons other than those troubling developing countries. The declaration states that negotiations on the relationship between trade and MEAS shall not prejudice the WTO rights of any Member that is not a party to the MEA in question. Greenpeace fears that this phrase would prove a powerful disincentive for countries to sign the MEAS. The declaration also states that negotiations on the effect of environmental measures on market access and the Trade Related Intellectual Property Rights (TRIPS) accord shall not add to or diminish the rights and obligations of Members under existing WTO agreements. These environmental activists feel that the final outcome of the negotiations on these points could end up as footnotes rather than effect any change in the WTO rules.

Marks of shame?
Ecolabelling started out as a consumer awareness aid to help them make better choices. The EU penchant for ecolabelling was on full display in all the pre-Doha drafts. Ecolabelling is a way to ensure that all exports are harmless to humans and the environment — in itself a rational and benign idea. However, its practice could erect new insurmountable barriers to exports from the poorer countries.

Ecolabelling requires that products be marked environmentally friendly not just because they do not directly harm the environment but also indirectly. At the centre of the debate is the ppm criterion which looks at the environmental-friendliness of the technologies used to make a product rather than the superficially judge the product, the final outcome of the process. Life cycle criterion is another specification applied for ecolabelling. This looks at the ppm, the product and how the product will be eventually disposed, making ecolabelling an even more stringent requirement. This has raised hackles in the developing world where state-of-the-art green technologies are seldom considered for their prohibitive costs. Insisting on ppm for labelling would bar most of poorer countries’ exports from the northern markets. At the moment this agenda has only been put on a fast track, but it is not for negotiations.

Pragmatic investment
Developing countries must try and use global investment rules for their benefit

Attempts by a few developing countries, including India and Malaysia, to keep investment out of the Doha declaration failed. The declaration calls for ‘clarifying elements’ of a possible multilateral investment framework, and recognises the need for a multilateral framework to secure transparent, stable and predictable conditions for long-term cross-border investment, particularly foreign investment that will contribute to the expansion of trade. A decision will be taken at the next ministerial conference on modalities of negotiations in this area.

Addressing a press conference in India after the Doha conference, minister for commerce and industry Murasoli Maran took solace in the fact that "nothing would happen immediately" and the negotiations would take their time "during which we have to be watchful". But rather than simply saying and then hoping that nothing will happen, the Indian government would do better to start thinking about what they would like out an investment treaty, which now seems inevitable. Otherwise, they will find themselves at a disadvantage, as industrialised countries jump a readymade pro-industry model such as the North American Free Trade Agreement (NAFTA) on them. NAFTA gives foreign investors the right to sue host governments, which do not have the right to appeal once a decision has been reached. Such a multilateral framework can have deep repercussions for developing countries.

Civil society around the world has also been wary of attempts to establish global multilateral investment rules since the Organisation for Economic Cooperation and Development (OECD) tried to secretly negotiate a Multilateral Agreement on Investments (MAI) that would vest MNCs with the power to question the decisions of national governments. These groups, based mostly in Europe and Canada, opposed the OECD MAI draft, but many believed that global multilateral investment rules were needed to stop the exploitation of developing countries through poorly negotiated bilateral investment treaties (BITs).

There has been a dramatic increase in the number of BITs signed from 385 at the end of the 1980s to 1,857 at the end of the 1990s. Often, BITs do not reflect a balance between the desire of developing country governments to attract FDI, and their domestic developmental concerns. At a meeting on foreign investments and their development dimensions organised by UNCTAD in 1997, some developing country governments considered themselves ill equipped to draw up balanced BITS, given the unequal bargaining power between industrialised and developing countries. Some contend that a global set of established guidelines could ensure the parameters of accountability, social and environmental responsibility. Others disagree.

In any multilateral negotiation on investment, industrialised countries will hold the aces, and are likely to have an inherent bias towards protecting the best interests of their companies, while developing countries will continue to play the role of desperate investment-seekers. There are no precedents to indicate that developing countries can expect anything but an unfair deal out of such an arrangement, particularly if the negotiations are conducted under the already biased WTO. Therefore, while an overreaching investments agreement may help developing countries out of having to compete with each other for investment, they will have to take care to ensure that the negotiations take place at a forum that is capable of taking on their development concerns.

Precautionary principle
The EU locked horns with the US by banning American beef exports on the ground that the beef was laced hormones that could cause cancer and other health problems. The ban was not upheld by the WTO because it was not convinced with the scientific evidence the EU had provided to prove its case and that it was imposing its higher standards on health and food safety on others. The EU insisted that it was acting according to the precautionary principle. This better-safe-than-sorry principle lets a country take a similar action like the one the EU took even in the absence of supporting scientific rationale.

The WTO had judged the case by the 1996 agreement on sanitary and phytosanitary measures (SPS), which favoured a more scientifically demanding risk assessment to the precautionary principle. The US also proved that its beef hormones met standards set by Codex Alimentarius Commission, a world body that develops standards for food additives, pesticides, chemicals and contaminants. The precautionary principle has since become pet issue that the EU pushes in every WTO meeting. Doha was no exception. On the fourth day of the talks the EU broached the subject, but intense opposition kept it out of the final declaration.

At the insistence of the Philippines, the US and Iceland the Doha text pushes for negotiations on clarifying and improving WTO disciplines on fisheries subsidies. Fisheries subsidies have been seen as a major cause for the depletion of fish stocks due to overfishing. Apart from the environmental impact the subsidies-caused depletion also undermines the livelihood of those dependant on fishing. This is particularly the case in many developing countries as the text also points out.

Though fisheries subsidies have figured in the WTO debates and in its predecessor GATT, no agreement was earmarked to cover the issue during the Uruguay Round. At the Seattle 1999 meeting a proposal was made to tackle environmentally harmful and trade-distorting fisheries subsidies but disagreements over which WTO body should cover the subject halted progress. The EU is one of the leading providers of subsidies to its fishermen and hence has been shying from bringing the issue into WTO forum. The presence of the subject vindicates the view that much give and take has transpired to prevent Doha ending up as a disaster.

(Down to Earth, December 15, 2001)