By Chee Yoke Heong
Asia TimesAugust 6, 2003
As the Cancun round of World Trade Organization (WTO) talks draws closer, developing nations including Bangladesh, India, Indonesia, Malaysia and Pakistan are growing increasingly suspicious that Japan, the United States and the European Union are going to use the talks as a pretext to help multinationals break into their economies.
The WTO talks are named for Cancun, Mexico, where they are supposed to take place September 10-14 to discuss progress of the Doha Development Round, held last year. The 12 objecting nations are raising concerns over a set of issues revolving around investment, competition policy, transparency in government procurement and trade facilitation. The 12 say discussion of the issues, known as the "Singapore issues", named after the city in which they were adopted in 1996, cannot be raised until certain "modalities" are cleared up on how the discussions should take place.
During the same meeting, the African, Caribbean and Pacific (ACP) states, a group of 78 mostly Least Developed Countries (LDCs), are determined to urge rich countries to pull down agricultural trade barriers, eliminate subsidies for agricultural exports and strengthen provisions that allow poorer countries to shield their markets from multinational competition. The call was made at the sixth meeting of ACP trade ministers last week in Brussels, attended by top EU officials such as Trade Commissioner Pascal Lamy, who committed to making sure the poorest countries and landlocked and island states will be heard.
The EU resolved to work hand-in-hand to ensure due attention to the Doha Round development objectives by striking the right balance between tighter global trade rules and market liberalization, and taking the particular situation facing ACP states given their level of development and problems they encounter in meeting their WTO obligations.
The Singapore issues have been discussed in WTO working groups since 1996. The major industrialized countries, led by the EU, want a decision in Cancun to launch negotiations on the issues. They are pushing for the right of foreign companies to compete equally with local firms in local markets. Under the new rules, governments would be prohibited from giving preferences or assistance to local firms. They invoke the WTO's non-discrimination principle to make this argument. This means that any attempt by governments to assist and promote local firms so that they can survive, be viable and develop despite their present relative weakness would be deemed against WTO rules and thus be subject to trade retaliation.
"Even if a WTO competition agreement were to deal substantively only with hardcore cartels, it would also require all members to adopt a national competition law and policy, in which the national treatment principle would apply, not only to hardcore cartels but also to all other elements in the national law," said Martin Khor of the Third World Network, an international non-governmental organization based in Penang, Malaysia.
At a trade and competition working group meeting recently, India, Malaysia, Pakistan and Egypt said they see no need for a WTO competition agreement, saying such an agreement would burden developing countries more. Moreover, they pointed out, many developing countries still do not have a competition law regime and thus are not ready for a WTO competition agreement.
Malaysia said that so-called hardcore cartels are a developed-country phenomenon that has burdened developing countries with excessive costs, but that it is not convinced a multilateral agreement on competition is the only way to deal with the problem. India and Indonesia, among others, added that they remain unconvinced about the benefits of a WTO competition agreement.
Meanwhile, Ajit Singh, a Cambridge University professor, said multilateral competition policy proposed by the EU is "neither suitable from the perspective of developing countries nor from the world economy as a whole". While for developing countries the policy goes too far in instituting homogenization of competition policy and thus deprives them of what they feel are important developmental instruments, from an international perspective it is too feeble to deal with the challenges posed by large multinational corporations intent on monopolizing world markets.
Both the European Commission's proposals on competition policy and on foreign direct investment seem more concerned to provide transnational corporations with additional tools to give them unfettered access to developing countries and undermine their ability to control the economy and foster their own domestic companies and national economic development, Ajit Singh said.
Similar differences in view are also expressed over the investment issue, with divergent opinions having emerged even among its proponents. There is as yet no decision on whether investment should include both foreign direct investment and portfolio investment. Some developing countries have demanded that the definition be kept narrow. Given the experience of these countries with financial instability, a very broad definition of foreign investment could lead to financial difficulties in these economies. Some analysts and delegations have raised the question as to whether a multilateral framework on investment is at all needed as such an agreement does not guarantee increased investment flows. Foreign investments are attracted more to factors such as political stability and market size, and the existence of an investment agreement made little difference.
A Malaysian delegate in Geneva reiterated the importance of policy space in the area of investment for many developing countries, and said the costs would outweigh the benefits for these countries in a multilateral investment framework. This view is shared by Thailand, which said that while it is keeping an open mind about the negotiations, it was disappointed by the provisions put on the table. It wants special provisions for developing countries built into the agreement and said that countries should be allowed to attach conditions to investments.
There are divergent opinions on some of the crucial issues of scope and definition. Some countries such as India, Pakistan and China have proposed that the discussions should cover the obligations of foreign investors and their home governments, but this has been rejected by some industrialized countries on the basis that this is not part of the clarification process.
Discussions are also bogged down on transparency in government procurement and trade facilitation - due to opposing views between the proponents and those who are concerned over the proposals put forth and are generally against new binding agreements. The EC (largely supported by Japan, South Korea, Canada, Switzerland and some Eastern European countries) believes that a multilateral agreement on transparency on government procurement would bring the benefits of more efficiency and innovation as public procurement is applied transparently with a clear set of rules which allow tendering companies from all countries to foster enhanced competition. It thinks an agreement would also reduce corruption or bribery to officials and politicians during the tendering process due to the principles of transparency.
But questions were raised as to what is meant by transparency, and some countries are sensitive to the EC's insistence that the agreement should cover all levels of government - federal, sub-federal and municipal levels of government - regarding it as an encroachment on their sovereignty. Although there is broad understanding that measures leading to improved trade facilitation would be positive, there is disagreement on what is required to bring about the improvements, particularly whether binding multilateral rules are appropriate or whether international cooperation and domestic initiatives are better options.
As consensus seems farther and farther away and as Cancun draws nearer, a new process has began outside the working-group consultations to forge consensus on modalities that some delegates see as a neat sidestepping of the problem of divergent views. But as one delegate said, "The important matter is not finding a consensus on modalities but whether we should launch talks on the new issues at all."
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