The WTO in 2003: The Rocky Road to Cancun

Razeen Sally

There is very little progress to report one year into the World Trade Organisation’s Doha Round of multilateral trade negotiations. Intergovernmental divisions remain entrenched, and key deadlines have already been missed. No wonder doomsayers prophesy a replay of the Seattle disaster at the next WTO Ministerial Conference in Cancun, Mexico, next September.

Where is the WTO heading? What difference is the Doha Round likely to make to its future?

Much has changed in the transition from GATT to WTO. The latter ranges wider, with much broader sectoral coverage. It also ventures deeper, to encompass domestic regulations as well as the border barriers (tariffs and quotas) covered by the GATT. In addition, the WTO has a stronger, quasi-automatic dispute settlement mechanism, and a membership that has doubled since the mid 1980s. Four trends need to be highlighted:

• Standards harmonisation: The WTO is creeping towards a complex, regulation-heavy standards harmonisation agenda intended to bring developing country standards up to developed country norms. This would raise costs out of line with comparative advantages, thereby shutting out cheap developing country exports.

• Legalisation: Developed country governments are increasingly trying to fill in regulatory gaps in WTO agreements through dispute settlement. This is a dangerous and slippery slope. Policy choices should be made by WTO member governments through negotiation, not by international judges.

• UNisation: The WTO is increasingly politicised, buffeted by external pressures and fractured by internal divisions. It has lost the decision-making effectiveness of the GATT and risks becoming an irrelevant, UN-style talking shop.

• Regionalisation: Bilateral and regional trade agreements are spreading like wildfire. Without accelerated multilateral liberalisation, trade policy across the world will become more opaque and discriminatory. The WTO will be marginalised; the major powers will dominate regional blocks; and the poorest, weakest countries will be squeezed most.

The WTO will not be able to arrest these trends without reviving the diplomatic and negotiating mechanism that worked well in the GATT. This is really in the hands of the major developed and developing country governments who count in the WTO. The focus of their efforts must be the Doha Round. What are its prospects?

The new round has a large, messy agenda, and a (hopelessly optimistic) three-year deadline. Let’s take a look at its individual elements.

• Market access: The reduction and removal of persistently high trade barriers is (or should be) the bread and butter of the round.

In agriculture, the EU is still the main obstacle to serious liberalisation, so far showing no signs of performing major surgery on its Common Agricultural Policy. This threatens to become the one major round-stopper. In services, there will be no significant advance without breakthroughs elsewhere, particularly in agriculture. For industrial goods, one key to progress will be a ‘formula’ approach that would entail higher cuts in peak tariffs and tariffs on processed goods, which hinder developing country exports in particular. The US has made the boldest and most imaginative proposal in the round hitherto with a target of scrapping industrial tariffs worldwide by 2015.

• Rule-making: Rules on anti-dumping procedures, countervailing measures, subsidies, regional trade agreements and dispute settlement are supposed to be “clarified and improved”. These negotiations may well suffer from neglect.

• Developing country issues: Three end-2002 deadlines for agreement on development issues have been missed. One concerns compulsory licensing of imported generic drugs for countries without domestic production capacity. The other two concern ‘implementation’ issues and ‘special and differential treatment’. The sensible way forward is to focus Special and Differential Treatment on the least developed countries with really serious problems in implementing Uruguay Round agreements. This should entail flexible transition periods and increased technical assistance on a country-specific, needs-must basis.

• Singapore issues: Negotiations on the four Singapore issues – investment, competition, trade facilitation and transparency in public procurement – will only start providing there is “explicit consensus” in Cancun. Differences could be bridged by building consensus around light agreements to begin with, e.g. with opt-ins or opt-outs and not necessarily subject to dispute settlement.

• Trade and environment: Developing countries are very cautious about these bits-and-pieces of the round. The EU, it would seem, would like to gain WTO sanction for tighter restrictions on developing country exports on the grounds of inferior home country environmental standards and the risk to public health.

It will be a steep uphill struggle to prevent breakdown in Cancun and keep the round on track. At stake is the future of the WTO, and by extension that of the world trading system. What might this future look like?

Scenario One would rediscover the raison d’être of the GATT -- the progressive liberalisation of trade – but with broader sectoral coverage and more focus on transparency in domestic regulation.

Scenario Two is an EU-style future for the WTO, with an implicit standards harmonisation agenda and regulatory overload.

Scenario Three is a UN-style future for the WTO, which would become another bureaucratic development agency-cum-talking shop.

Alas, the political constituency for Scenario One is too narrow. The silver lining is that the US, for the first time since the Uruguay Round, has begun to exercise active, robust leadership in the WTO, in contrast to the EU’s defensiveness. A Bush administration leading from the front, notwithstanding protectionist blemishes at home, will be indispensable if the WTO is to head in the right direction.

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