Paving The Way For A Face-off

ON October 16, the World Trade Organisation (WTO) secretariat presented a report in Geneva that blatantly favoured the countries of the North. The report said that it was best for member countries to allow unrestricted flow of investment across national borders. It was immediately labelled ‘controversial’ by nations of the South and confirmed their suspicion that on this issue, WTO Director-General Renato Ruggerio was partisan to the North. In fact, these charges against Ruggerio were levelled two days prior to the submission of the report, when India’s representative to the WTO, Srinivasan Narayanan, told the trade body that he felt its secretariat was "trying to push one particular point of view on the subject". And that "the respect and credibility which the WTO’s secretariat commands with delegations like mine, is directly related to the fact that the secretariat does not take sides when delegations have different approaches to different issues".

This issue has brought to the fore the serious differences that exist between nations of the North and South at the WTO, the first ministerial conference of which begins in Singapore on December 10. And, as always, the North has the South on the backfoot. 

Nothing unusual about it. Except that, the North has dug out from the grave old issues that were discussed at the final round of GATT negotiations but given up as concessions to the South, window-dressed them by a little rephrasing, added and deleted a few points, and voila—they think they’ll bluff the South into discussing old issues as new points. And perhaps earn a few new concessions.

 There’s just one hitch: lack of unity. A bug that usually afflicts developing nations, it seems to have bitten the North for a change. Take the issue of core labour standards, a rehash of the old social clause that standardised international labour wages and working conditions must prevail. The European Union (EU) is not interested in this. And while the US has given up on the Multilateral Agreement on Investments (MAI), Canada, Japan and the EU are still keen on discussing it at Singapore. From the look of it, they just may succeed. 

At the WTO secretariat, it’s still too premature for discussions about who will give in how much. The point of contention, as of now, is the agenda for the Singapore meet. Do these half-a-dozen issues raised by the North have enough support to be placed on the agenda? Is the WTO the correct institution to lay down global policies on issues as diverse as labour and environment? And is this the right time to add new issues to the agenda, or, should the conference confine itself to reviewing the progress made by the WTO ever since the agreement was signed? These are some of the defences put up by the South in its attempt to keep these issues off the agenda.

But, by general consensus among trade analysts and policy makers in the Indian Government, there is one issue that will in all probability be on the agenda: the MAI.

The MAI aims to give TNCs of all members of the WTO the right to establish any business in any country without being discriminated against by virtue of being  foreign TNCs. It would also give member states the right to settle any dispute arising out of noncompliance with the MAI at the WTO. At present, the countries pushing for it the most include Canada, Japan, the EU and surprisingly Brazil, which has become a net exporter of capital and now looks at the MAI as an opportunity, rather than a threat. Besides, it is looking to open its borders and integrate itself with the North American Free Trade Agreement (NAFTA).

But, says trade expert Bibek Debroy: "Perhaps the nations most worried about the MAI are the ASEAN countries which have strong anti-right-to-establish policies for TNCs, and are its strongest opponents." India too is opposed to the MAI being put on the WTO agenda. Their point is that investment is not only related to trade but is even more integrally linked to development, and should therefore be regulated by national governments. India also points out that UNCTAD has mandated a study of all aspects of  the investment issue, including an MAI, and therefore investment should remain under its purview and not under WTO, which in 1999-2000 will in any case be looking to review the Trade Related Investment Measures (TRIMS) agreement signed under GATT, and if need be add to it. A senior Government source adds that India is concerned that the right to establish will cause "unbridled exploitation of our natural resources and could even cause huge trade deficits". With this in mind, Commerce Minister B.B. Ramaiah spoke strongly at a recent UNCTAD conference in Geneva, articulating India’s opposition to the MAI.

HOWEVER, Debroy claims that India needn’t harden its position. "We are trying to form a consensus among the countries of the South and play the role of the leader, even though, relatively, we will be least affected by the MAI." Pointing out that the ASEAN countries have more to fear than us, he adds that the United Front Government is turning it into a political issue, and taking a hawkish stand, which it could have done without, something that the previous government managed. He hopes the Government won’t paint itself into a corner on the issue. Incidentally, the North too has softened its position slightly—thanks to the South’s vehement opposition—and now expects to start an "educative process on the matter", rather than get it "discussed" at Singapore.

The MAI apart, the US is looking to make transparent as well as streamline government procurement policies around the world, as it claims that US businesses lose billions of dollars annually due to corrupt governments. This US endeavour began at the OECD level and it now hopes to extend it to the WTO. But it has received little support from the OECD countries where bribes paid are actually tax-deductible. Indian Government sources say: "Per se it looks alright. But how do you define and monitor Government procurement, since we deal with Central and state governments, apart from the hundreds of PSUs?" Adding that India would prefer to get more clarifications on the subject before taking a firm decision. "Besides, there is no coherent pressure developing multilaterally for us to join," points out Debroy. Government procurement, he says, would be a "plurilateral agreement", meaning it would be negotiated under the WTO umbrella but would not be mandatory.

A relatively more crucial issue is of trade and environment. For this the WTO had set up a committee—which slept till 1991—and later over the last two years, discussed the issue. A report is expected to be submitted soon. If submitted prior to the Singapore meet, the issue may find its way to the agenda. The South has objected to bringing environment under the WTO and has protested against the unilateral action taken under the WTO and disguised protection through trade measures taken for environmental purposes.

 Besides, the South contends that the issue of core labour standards should be handled by the International Labour Organisation (ILO), and one would be straying from the WTO charter if it were an issue at Singapore. They remark that most developing countries have legislations strongly favouring labour, the only problem is of implementation. Something that the WTO would find equally tough to ensure.

In any case, the South would prefer to treat the Singapore meet as an occasion to review the progress of the Uruguay Round commitments and not put new issues on the agenda. If the governments buckle under pressure, they would face a political storm at home, if they don’t, the North would only tighten the screws further. Catch 22 they call it.