The 'Singapore Issues': Prospects for Cancun
Roundtable

March 25th 2003

Summary of Discussions

Tactics or conviction?
The Singapore issues are nothing more than the “Anything but Agriculture” WTO strategy of a few countries, according to participants at the Roundtable Dialogue “The WTO’s ‘Singapore Issues’: Prospects for Cancun,” organised jointly by The Federal Trust , the Commonwealth Business Council, and LSE Global Dimensions Programme in London on 25 March.

“The Singapore issues make the WTO large, unwieldy and slow down the negotiations, buying time for countries on other issues where they have trouble moving forward,” one participant explained.

The Dialogue brought together WTO trade negotiators, officials and experts on trade issues to discuss the build-up on the controversial ‘Singapore issues’ – investment, competition, trade facilitation and transparency in government procurement, as the next WTO Ministerial meeting in Cancun approaches. *

State of play at the WTO
Despite deep opposition to their inclusion by a few WTO members, debate in the Working Groups of the WTO so far has been very constructive. However, the prevailing feeling among many countries remains that the WTO should “Do it right or don’t do it at all.”

The original proposals put forward by demandeur countries and groups, Japan, Korea and the EU, have been watered down to such an extent that they no longer pose much of a constraint on the ‘policy space’ of Member countries, according to some of the Roundtable participants. Demandeur countries have been willing to make big sacrifices in the content just to keep the issues on the Agenda.

It is now clear that the market access objective, which drives the WTO and gave the initial impetus to bring these issues onto the WTO agenda, has been replaced by a good governance agenda. In the area of competition, for example, the EU proposals are now so weak that they will not deliver any market opening. Some participants saw this switch from access to governance as an unconscious and unintended shift on the part of the demandeur governments.

The coalitions of proponents and opponents are by no means the same across the issues. While the EU is in favour of all, the US has little interest in investment. It was suggested that the US proposal made in the Working Group last year to include ‘portfolio investment’ in the definition of investment for the purposes of the agreement was intended to undermine the discussions rather than to drive them forwards.

Set against the demandeurs is a small group of mostly developing countries. They strongly oppose the inclusion of these subjects in the WTO Agenda. However, the majority of countries do not hold strong views and are treating the issues as bargaining chips, to use depending on the offers they receive in other areas.

The ‘ghost at the feast’ is the state of the negotiations on agriculture: whatever the pros and cons of the Singapore issues might be, it is impossible to get around the fact that they are being discussed as part of the overall negotiations where agriculture remains the sticking point. The fate of the Singapore issues lies in the give and take of negotiations under the ‘single undertaking’ – where countries must agree to all or nothing.

The business agenda
Participants questioned the motivations of governments: are they being driven by business interests eager to expand in the Third World? This seems to be contradicted by the minimal, unengaged role played by the business community so far. Any agreements negotiated at the WTO would almost certainly be weaker than existing bilaterally treaties so businesses see no advantage in pushing forward in that forum. Some are even concerned that a weak agreement at the WTO would drag down the standards that they are guaranteed by other agreements.

Business communities in different countries divide over which issues they give priority: the US business community, for example, is supportive of progress on trade facilitation and transparency in government procurement but is not pushing for agreements on either investment or competition. Elsewhere, trade facilitation comes out on top.

Four or one?
Some delegates from national missions in Geneva called for the merits of the different issues to be considered separately. Most of the discussion during the Roundtable did look at the details of the four different issues. At the same time, in the WTO, the EU and Korea are trying to force the pace on the package of issues, demonstrated by the EU’s recent submission of a plan applying to modalities for all four of the issues. However, looking more deeply within the EU, some of the smaller countries would be happy to see the issues treated separately, if this would allow the negotiating agenda as a whole to move forwards.

Common concerns
Certain concerns crop up in the Working Group discussions on all four of the issues: the development dimension, national treatment, technical assistance, dispute settlement and the behaviour of corporations.

Concerns about the development dimension have driven a general consensus among WTO members that the issues should be treated flexibly. However, the discussions in the Working Group on this tend to be theoretical and abstract and would benefit from pilot work to explore practical measures.

The questions of whether the agreements would be legally binding, treaty-like commitments and what sort of dispute settlement mechanism would be put into place are still up in the air. The shape of the GATS (General Agreement on Trade in Services), which allows for countries to pick and mix how and what they want to liberalise, is being proposed. Some are even calling for any new agreements to be “More like the GATS than the GATS.”

Another concern was that the concepts of national treatment and most-favoured-nation treatment, which are the core principles on which the trade negotiations are based, are difficult to define in the context of the Singapore issues. They might even increase discrimination rather than diminishing it as a result. Furthermore, the ongoing programme of technical assistance needs to be tailored to the individual needs of the country and needs to be made concrete in order to be effective. A mechanism also needs to be defined to explore, discuss and agree the technical assistance programme.

Whatever the benefits of the agreements might be, the costs must not be forgotten. Creating new institutions, policies and procedures uses up scarce public resources and skilled manpower. For developing countries, this should be carefully considered as the costs may well outweigh the benefits, even in the long-run.

Investment: Re-emergence of old issues
The most controversial issue of the four was, inevitably, the discussion about an international investment agreement (IIA), where the issue of architecture came to the fore.

Investment is already touched on by other WTO Agreements, most importantly the GATS, which covers the 70% of global investment that is in the services sector. An IIA would therefore only apply to investment in manufacturing. But this is a misplaced focus as countries now have very few regulatory barriers to manufacturing investments. Foreign firms are generally granted equal or preferential treatment.

One way to restore coherence and relevance to agreements on investment would be to shift part of the GATS – ‘Mode 3,’ commercial presence – into the new investment agreement. Several participants agreed that the architectural implications needed to be thought about more seriously and that the meeting in Cancun could be an opportunity to do this.

Expropriation has, somewhat surprisingly, re-emerged as a cause for concern among investors. The focus is no longer the sudden nationalisation of assets, but ‘creeping expropriation,’ the result of environmental or social regulations gradually reducing the value of the investment. A delicate balance will need to be struck in the WTO and other investment agreements between the protection of investors’ rights and the need for countries to regulate the activities of companies.

Some participants were unconvinced that a WTO investment agreement could add value to the web of bilateral and regional investment-related agreements. The bilateral forum allows more far-reaching agreements to be made, possibly because governments do not foresee their provisions being widely exploited.

Developing country concerns about the power of multinational corporations could be partly allayed by looking at the kind of commitments investors’ home countries could make to ensure that the investment agreement does enable poorer countries to benefit from FDI. Another possibility would be to consider a side-agreement on corporate social responsibility or to weave provisions on the transfer of technology into the agreement.

Dispute settlement is an area where consensus is hard to find. While the experience of NAFTA has made governments wary of investor-state dispute settlement, businesses are not interested in an agreement which delivers less than they already have.

Getting to grips with trade facilitation
Trade facilitation is not well understood, a fact that emerged from the discussions in which participants debated what an agreement on trade facilitation could and ought to include. The definition which the WTO Working Group uses covers mainly bureaucratic procedures. Some felt that a broader notion of trade facilitation would be more appropriate for developing countries, as the problems that really prevent their exports from reaching rich markets are behind the border.

Other participants made a strong argument for the benefits of the targeted agenda that is currently being discussed. The potential for progress is higher, they felt, with a more limited scope for the agreement. They pointed to the potential advantages for developing countries which include increased efficiency in border procedures, higher customs revenue, reduced corruption and cost savings of up to 50% of the price of the good. Small business, too, will be a major beneficiary.

Participants also emphasised the importance of taking steps to improve policy and practice at the national level and recognised the difficulties caused by the bureaucratic gulf between the trade negotiators and Finance Ministry officials who deal with customs policies.

First define the problem, then the solution
“What is the problem that the competition agreement is trying to solve?” was the question that motivated the interventions on the discussions about trade and competition at the WTO. A multilateral competition policy reflects a recognition that there are private as well as public constraints on trade. The purpose of addressing this issue at the WTO would therefore be to tackle exclusionary business practices that replace trade barriers in keeping foreign companies out of certain markets.

Participants emphasised the difference between the word of the law and actual practice in competition policy. While foreign companies may have national treatment according to the provisions of the law, business practices may still effectively keep them out. The proposals currently on the table in the Working Group would not address this gap as they only relate to the principles of national competition laws and not the way that they are applied.

On the other hand, the discussions about competition at the WTO have had the beneficial effect of raising awareness about competition in developing countries. A multilateral agreement could help to build up constituencies at the national level with an interest in creating a competition culture.

Clearing up transparency
An agreement on transparency in government procurement is, on the face of it, one that all countries could benefit from. Transparency could improve efficiency and reduce corruption and, as procurement by the public sector accounts for some 20% of GDP in developing countries and 10% in developed countries, the numbers involved are not negligible.

However, the concern is that transparency may not make any difference in terms of market access: close relationships between governments and favoured contractors may well continue despite new regulations on transparency. If this is the case, participants argued, then either the rationale for having the agreement at the WTO is undermined, or a more far-reaching – and therefore intrusive – agreement is needed. Resistance to the market access agenda means that the issues mentioned in the Doha Declaration intentionally do not include market access, but only cover core transparency principles.

The relationship with overseas aid was also called into question. The practice of tying aid could conflict with transparency measures in countries where aid accounts for a large proportion of government revenue.

Dispute settlement is unresolved, as for the other Singapore issues. Participants questioned whether it would be realistic to impose sanctions on a country that was deemed not to be transparent enough. As there is only one full meeting of the Group left before the Ministerial, it may be difficult to move forward without further agreement.

Cancun: sunset or sunrise for the new issues?
In the light of this, and the fact that there has been no groundswell of support for any of the issues, participants discussed the likely outcome of the Cancun Ministerial. Many felt that it would be a ‘stock-taking’ rather than the scene of ground-breaking high-level negotiation. The current round of trade negotiations might therefore go on for longer than had been envisaged at its launch in Doha in 2001.

After Doha, we might see the Singapore issues moving ahead at different paces, with some being treated more profoundly and others, where suspicion and uncertainty remain, could be treated more superficially.

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