Briefing by Director General of World Trade Organisation

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Trade and Industry

20 June 2000
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TRADE AND INDUSTRY PORTFOLIO COMMITTEE; FOREIGN AFFAIRS

PORTFOLIO COMMITTEE; SELECT COMMITTEE ON ECONOMIC AFFAIRS: JOINT MEETING
21 June 2000
BRIEFING BY DIRECTOR GENERAL OF THE WORLD TRADE ORGANIZATION

Documents handed out:
Information pack on the World Trade Organizatio prepared by Parliamentary Researchers

Chairperson
: Dr. Davies (ANC)

MINUTES
Dr. Davies welcomed Mike Moore, the Director-General of the World Trade Organization (WTO), who was en route to the World Economic Forum in Durban. The topic to be addressed by Mr Moore was "Where to after Seattle?" and was going to focus specifically on institutional reform within the WTO and on multinational trade negotiations.

Presentation by the Director-General of the World Trade Organization
Mr Mike Moore stated that some of the critics of the WTO are justified in their criticism. Africa has been marginalized in world trade, but it is not only the WTO that has brought this about. The WTO was formed out of the chaos of the Second World War and at that time comprised of only 13 members who all shared similar experiences and culture. Now the membership has risen to 136 members who are diverse in their cultural backgrounds, and despite the criticisms being levelled at the WTO there are many countries that are still wanting to join including China, Saudi Arabia and Beijing.

There were many myths about the Seattle Round. One was that no Africans were present in the Green Room, while in actual fact six African Ministers were present, including South Africa's. Another myth was that no developing countries were represented in the Green Room when in actual fact the majority were from developing nations. The process in Seattle lost a morning due to the demonstrations which, understandably, upset some delegates. However, Seattle failed without the help of either the protestors or the process used. This failure was the result of substantial disagreement on issues of substance, the transatlantic divide in Seattle being just as large as the North-South divide - unlike the Uruguay Round (UR) where the disagreements were mainly between North and South. These problem areas in Seattle included:
- The implementation of the UR Agreements, some developing nations not having the capacity and resources to implement the Agreements combined with an unwillingness to reopen issues settled at the UR.
- Agriculture
- Investment and Competition where the developing nations felt that the Europeans were wanting too much.
- Labour was an issue that some felt should not even be considered by the WTO while others felt that it was a protectionist strategy.
- Social issues

The process at Seattle was different from Uruguay. The report back structures in Seattle worked effectively, but the choice of nations to represent regions by the WTO caused offence in some cases, although this should not be lasting offence. Essentially the WTO has adopted a "swan policy" of looking graceful and calm on the surface while paddling frantically underneath.

The WTO is currently negotiating on both agriculture and services and has drawn up timetables and schedules for these areas. The agricultural negotiations are a continuation of the work of the Cairns Group on agriculture and this area is central to South Africa and is based on Article XX of the 1994 Marrakesh Agreement.

The WTO is also engaging in a number of conference-building and facilitation measures:
- To begin with, something needs to be done for the smallest and poorest members of the WTO. These members contribute less than 1% of world trade, are mostly African countries and are the most discriminated against. Ultimately this is because the core products in any trade package are always agriculture and textiles and previous packages for these countries have failed. Many countries have committed themselves to assisting in remedying these problems and the WTO is therefore now able to bring pressure to bear on these nations and hold them accountable to this commitment.

- The second area of focus is the WTO budget which currently stands at 80 million US dollars with between five and ten million dollars for technical development.

- A third area of focus is the internal transparency of the WTO which may be best addressed through the establishment of a standing committee on transparency. The process at meetings needs to be improved as there are currently no whips or time limits on speaking etc. Another area of concern is the inability of 30 members to afford missions in Geneva. The WTO tries to feed information to non-resident members and arranges a Geneva Week where non-residents come to Geneva to be briefed but there are budgetary problems with both of these processes. Furthermore, the media is not allowed at the council meetings of the WTO but it did not need Seattle to demonstrate that transparency problems of this kind exist, and the WTO is already improving in this respect.

The big issue for developing nations is that of implementation, and once again a structure and timetable has been drawn up for this in respect of agriculture. Internal reforms are necessary in that while promotions are made internally to encourage loyalty, this preserves the status quo of the organisation so that of 24 directors only two are female and only four are from developing nations. The Director-General has, however, visited Africa six times and has met with the Organisation for African Unity (OAU). The WTO also has an African deputy-director who has a plan drawn up for Africa. The WTO has developed a system of reference centres which are being utilised by African countries. In 1996, after the failure to get an operational open market framework in place, the WTO set up an integrated framework by means of which developing nations would be assessed. Plans would be drawn up based on these assessments with certain members assigned to remedying the problems of that nation, but although five such assessments have been done, nothing noticeable has come of it.

The WTO has also been asked to reach out to civil society. The developing countries are anxious about how the WTO works with civil society and feel that certain NGOs are doing violence to civil society. The WTO has begun to work more with Parliaments and this is improving matters. The WTO would like to be in contact with Parliamentarians on a regular basis, but again faces the problem of limited resources. Concerns that the WTO has created globalisation are unfounded. In a world of globalisation it is preferable that imperfect rules exist to govern relationships than having no rules at all. The WTO does not attack sovereignty, but rather guarantees it. The WTO is owned by sovereign governments and is answerable to sovereign governments.

Discussion
Mr Zita (ANC) noted that it would not be possible to speedily convene a second round of talks because of the upcoming elections in the United States and questioned whether such talks should be held hostage by the USA.

Mr Moore (WTO) considered it unfair to single out one country as every country's elections are important. A modest chance exists that a round could be held this year, but if this does not occur it would be due to a failure on the part of the leaders to display enough flexibility. Flexibility is being displayed on the matters of investment and implementation, but members are still too far apart, especially on agriculture and labour. The chances of a round are therefore extremely modest, and the fault lies not just with the US, but also with developing countries.

Mr Zita (ANC) asked whether TRIPS (Trade Related Intellectual Property Rights Agreement ) did not make it difficult for countries like South Africa to borrow ideas from other nations and whether the WTO should not address this.

Mr Moore answered that TRIPS was one of the great contradictions. All members want investment in areas of disease research, but while they want to produce the product at the cheapest possible price, the investor wants a return on the money invested. The pharmaceutical companies ought themselves to be responsible for answering some of these questions, but it would be inappropriate for the WTO to raise them. The problem is greater than simply asking who will produce treatments for illnesses that affect very few people but also goes to the distribution, quality control and follow-up of these treatments. South Africa is currently working with the pharmaceutical companies in this regard. Perhaps dual-pricing is a solution, but otherwise this is a great dilemma to which no solution seems imminent.

Mr Beukman (NNP) asked whether technical proposals exist in the WTO for making access to developed markets by developing nations easier. Furthermore, were subsidies not to be blame for making competition by developing nations difficult?

Mr Moore observed that subsidies and market access ultimately come down to agriculture and that a new round would be necessary to solve these difficulties. He again pointed out that negotiations were underway on agriculture and services.

Professor Turok (ANC) questioned whether globalisation rules were not merely a hindrance to the weak and a licence for the strong.

Mr Moore was of the opinion that rules protect the smaller countries from those members with vast treasuries. The WTO operates on the principle that when parties disagree on the interpretation of agreements between them, the interpretation of the agreement is referred to an arbitral committee whose decision is binding on the parties. Small countries therefore can and do win against larger nations, but the problem is that those who are unable to afford good legal representation will not be able to make the best possible case. However, despite this, not that many complaints have been lodged in this regard, and countries tend not to go to arbitration if they feel their chance of success is too low. The system should be revisited to make it more effective, but certainly not completely reworked.

Prof Turok (ANC) asked what role the G15 nations were playing in the WTO.

Mr Moore acknowledged the role of the G15 in globalisation and noted that as the leaders of large nations they had to be taken seriously, but that many of the comments in this regard were unfortunate.

Mr Moosa (ANC) observed that in Seattle developed nations had large delegations of several hundred members while developing nations had only sent delegations of two or three people. It did not seem then that the WTO was viable in terms of allowing delegations to participate in negotiations on an equal footing. Furthermore it appeared that the viewpoints and inputs of certain delegations were sidelined and treated as less valuable.

Mr Moore reiterated his comments on the diverse culture of the members of the WTO and noted that the WTO culture would have to change. Ministers need to be brought a document that is close to finalisation for them to negotiate around. The WTO is directing as much of its available resources as possible into helping small countries, but this is not enough. Those whose mandate it is to help the developing nations must be encouraged to do their job. The Green Room concept was that this must be exclusively a knitting-together room. The Ministers agreed that they would not be prepared to meet again until agreement between the WTO members was very close. These problems are being addressed but not enough is being done.

In answer to what the position of the WTO was on the subject of e-commerce, Mr Moore stated that a moratorium has been in place on e-commerce but that this moratorium has now reached an end. Most WTO members are of the opinion that the moratorium should be extended again, but a majority is not sufficient as the WTO operates by consensus. E-commerce has great potential but its impact has not been researched by the WTO, and while taxing the medium is prevented under the moratorium this does not stop countries from taxing the product.

An ANC member asked what the WTO position was on government procurement. The policy of the South African government was to prefer the disadvantaged while the WTO maintains the need for non-discrimination.

Mr Moore indicated that the WTO was addressing the question of government procurement and said that this work was focusing on the transparency of the procurement process. South Africa is not alone in the problem of affirmative action, and transparency in the process will be important if a positive signal is to be sent to foreign investors and taxpayers.

Dr Davies (ANC) asked what the opinion of the WTO was on the Seattle proposals to aid developing nations in processing all the necessary documentation.

Mr Moore responded that the WTO was concerned about the technical problems facing small countries in absorbing all the documentation. They were trying to assist but should be doing more. Institutions currently exist whose sole function is the processing of such documentation and perhaps they should be assisting. The WTO has insufficient funds to carry out this task alone. Translation volume alone has increased 120% in the last 5 years and it is up to members to assist as far as possible.

Dr Davies commented that the Uruguay Round was uneven and that there is a need for procedural change.

Mr Moore questioned the value in going back to the UR. A lot has changed since then and some things have improved, although it is unreasonable to expect a nation to admit to these improvements. Agriculture and textiles are certainly unbalanced but can only be remedied with a new round, and agriculture has never been in a round before. Rounds are more than merely determining tariffs but are also concerned with good governance.

Mr Bruce (DP) remarked that the size of delegations was surely determined by the country's financial resources and the importance of a particular issue to them. He controversially remarked that if developing nations wished to send large delegations their governments should make sacrifices in other areas in order to afford this. Dr. Davies (ANC) commented that in order to serve the committees each delegation needed eight members and some developing nations had less than this.

Mr Moore stated that the Seattle process was to have open meetings proceeding to the Green Room. It was unreasonable to expect Ministers to achieve in three days what experienced negotiators and specialists had not accomplished in two years. Furthermore the WTO should not have to scrounge to make money available when, for example, the World Wildlife Fund has a budget larger than the WTO.

Mr Bruce asked where the leadership impetus for the WTO came from and who the nations were that gave support to the WTO.

Mr Moore replied that he was in touch with Europe, the USA and the Japanese as well as many trade ministers of various developing countries including Minister Erwin and the Brazilian minister. Members of the WTO are bound by common interests and not by regions and there is a realisation that to advance your position, it is necessary to advance the position of everyone else.

Mr Moore concluded by promising to do his best to balance the system for poorer countries and stated that areas are currently being negotiated that are important to South African constituents. Research on facilitation and procurement is being carried out so that the WTO will be ready with proposals when the Ministers ask for a new round of talks.


 

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