Global Policy Forum

By Martin Khor

Representatives from several African countries have stated that the WTO Ministerial Conference in Cancun should decide that negotiations should not begin on the four ‘Singapore issues' but instead the process of clarification of each of the issues should continue in the respective working groups. This position on the "new issues" was part of a set of recommendations drawn up by about 50 participants of a workshop on the WTO organised by the Southern and Eastern African Trade Negotiations Institute (SEATINI) held in Arusha, Tanzania on 2-5 April.

Among the participants were trade officials from 15 countries, including Tanzania, Zambia, Kenya, Namibia, Uganda, Mauritius, Mozambique and Angola. The aim of the workshop was to enable senior African trade officials to exchange views on the state of WTO negotiations in Geneva and prepare for the Cancun Ministerial meeting. Recommendations adopted at the end of the workshop covered a wide range of issues, including agriculture, market access for non-agricultural products, TRIPS, services, internal transparency and the Singapore issues.

In their statement, the participants said the Singapore issues would constitute the most important decision to be made at Cancun. Tracing the background of the issues, they said that before Doha most developing countries were resistant to the developed countries' push on the new issues, as evidenced by the decisions and declarations of the LDCs Ministerial Conference in Zanzibar and the African Trade Ministers Meeting in Abuja. However their views were ignored in successive Doha Declaration texts. As a result, a decision was made in Doha that negotiations would begin on the four Singapore issues after the Fifth Ministerial, but only on the basis of an explicit consensus on modalities. "We take this to mean clearly that a decision has not yet been taken to begin negotiations, and a crucial set of decisions will be taken at Cancun whether or not negotiations will begin."

The statement said: "On examining the present status of discussions, we are of the view that WTO Members are far from having reached consensus on the modalities of each of the Singapore issues. Since there are only a few months remaining, we believe it is not possible that consensus will be reached before or at Cancun. Several issues have been brought up after Doha, that require further clarification. "Moreover, the more aware our African delegations have become of the issues, the more worried we have become, in that the new obligations arising from the proposed new agreements would limit our policy space and flexibility and could severely damage our present and future development., and therefore there are now more substantive reasons to add to our concerns.

"Although there has been some technical assistance provided since Doha, this has mainly been in the form of workshops, and many of these have been donor-driven. The capacity of African countries to negotiate these issues has not increased (especially since the expanded work programme after Doha has stretched our personnel resources even more) and our capacity to implement new obligations arising out of the four issues has certainly not been increased either. "We are therefore of the view that African countries should take a position that the Cancun meeting decide that negotiations on the four issues should not begin. African countries should take the position that instead of starting negotiations, the process of clarification of issues (for each of the issues) should continue in the respective working groups."

The participants outlined five reasons for their taking this position:

· We do not have the capacity to begin negotiations on such complex and important subjects, as we lack the financial and personnel resources and technical expertise, especially because the extremely heavy workload of the Doha work programme is taxing the time of our policy makers and negotiators even more than ever before;

· We still do not have sufficient knowledge about the issues, and therefore the process of clarification of issues should continue;

· There is no consensus among WTO members on the modalities of the issues;

· Negotiations would lead to new agreements that would commit African countries to a range of serious obligations that would adversely affect the flexibility and policy options they currently exercise over development policies. Indeed, such commitments would also hinder our present economic and social structures and future development prospects;

· The technical assistance programs have not been adequate as they are not designed by the developing countries themselves. Instead, experts for carrying out these programs have been chosen by and from developed countries.

The participants also rejected the European Union's approach to "modalities" of negotiations which only sought to list some "elements of modalities". According to the statement: "Modalities should be treated not as "procedural modalities" (i.e. the procedures to be adopted for negotiations) but "substantive modalities (i.e. modalities of the contents of the issues and obligations)."

On the issue of investment, the participants said that negotiating an agreement on investment may erode governments' ability to regulate investment and to formulate investment policies. An investment framework advocated by the proponents would prevent or limit the host government's ability to regulate the entry and operations of foreign firms and funds, and its ability to assist or give preference to local firms. "This will be the result of principles or provisions as pre-establishment rights of investors, non-discrimination (MFN and national treatment), banning or restraints on performance requirements, freedom for investors for transfer of funds, and compensation for "expropriation. "Our governments would not be able to exercise choice on foreign investments and channel them along national objectives. Local firms may lose protection and assistance provided by the state. The prohibition on government to regulate the flow of funds could lead to financial instability, balance of payments problems and increased external debt." The statement added that the WTO's non-discrimination principle which was created for trade is most inappropriate when applied to investment. The DSU also has the potential to enforce imbalanced investment rules to the detriment of African countries. Thus, African countries should raise their concerns that the WTO is an inappropriate forum to house an investment framework. This issue should be resolved before any decision is taken on starting negotiations.

On trade and competition, the participants said this was an extremely complex subject which is subject to different interpretations. "Our understanding of competition policy, from the development perspective, is that there is a need for government to assist and promote local firms so that they can be viable and develop despite their present relative weakness, so that they can successfully compete with foreign firms and their products. "The opposite interpretation, advocated by the developed countries, is the market access approach, i.e. that foreign firms should be granted the right to effective equality of opportunity to compete equally with local firms in the local market, and governments would be prohibited from giving preferences or assistance to local firms. They invoke the WTO's non discrimination principle to make this argument. "If negotiations begin, it is likely that the developed countries' market access approach may eventually win out, due to their higher negotiating capacity and influence. There could then be a competition agreement in WTO that would oblige our governments to give almost total freedom and market access rights for foreign firms and their products and services, whilst local firms would not be able to receive assistance or subsidies and many of them may not survive. "African countries should take the position before and at Cancun that negotiations should not start on competition, and that the process of clarification should go on. The question whether WTO is the right venue for a competition agreement should be part of this further clarification process."

On transparency in government procurement, the participants said there are still many complex issues that have not been resolved. They proposed that African countries should take the position that the framework should strictly be confined to transparency issue and should not in any way cover market access. There must be a satisfactory guarantee that such a transparency framework will not lead on to market access issues in future. Transparency should be confined to the provision of information and notification in relation to tenders and the conditions for tenders. It should not include administrative or judicial processes, or decision-making processes. Moreover, the framework should only cover the central government, and "Procurement" should be confined to government supplies, and only purchases above a high level should be covered. Concessions for projects such as road construction and other projects should not be covered. Also, the WTO DSU process should not apply and the framework should be in the nature of a voluntary cooperation non binding framework, and not a legally binding framework.

On trade facilitation, the participants expressed serious concerns that negotiations could lead to an agreement that would impose new obligations on African countries that are costly and difficult to implement. "It may require our countries to purchase and maintain expensive equipment for customs clearance and safety testing. Moreover, a set of customs harmonisation rules would be inappropriate and unfair on developing countries as we should not be obliged to take on high standards that will be expensive. "The structure and functions of customs are different in developing countries, as governments there are much more reliant on customs duties for revenue and therefore there is a greater need for careful checking of invoices to prevent under-invoicing and underpayment of duties. "It is more appropriate that a cooperation arrangement of a non binding nature be made at the World Customs Organisation, than a legally binding agreement with minimum standards at the WTO."

On market access for non-agricultrural products, the participants were against the formula approaches put forward by the developed countries. "Since developing countries have much higher tariffs than the rich countries, these formulae and proposals would mean much larger tariff cuts by developing countries in terms of percentage points, even if the proposals are couched in terms of less percentage reductions for developing countries." They suggested instead a different approach, where the main aims of the negotiations should be to promote domestic industries and the industrialisation process of developing countries. "Developing countries, especially LDCs and other countries with a weak and vulnerable industrial base, should not have to assume obligations for tariff reductions. "In line with most of the previous Rounds, developing countries should not be subjected to tariff reductions based on any harmonization or formula approach. Instead, developing countries with a weak and vulnerable industrial base should have the policy freedom and flexibility to choose their own commitments regarding which sector and at what rate of reduction their commitments are to be. Developed countries should commit to steep reductions for products of export interest to developing countries, and they should also phase out tariff escalation."

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