Select Committee on European Communities Tenth Report


266. When we began this inquiry in January 2000, all those involved were still reeling from the events in Seattle a month before. In this Part we examine their reactions, and then look at the "confidence-building" package put forward and the reactions of WTO member countries to it at the early May WTO Council.


267. In the immediate aftermath of Seattle, the Government and the EU were concerned to show that they were picking up the pieces. DTI told us in its submission in January (pp 4-5) that "in the absence of formal agreement on the launch of a Round, there is much the UK and the EU can do in the meantime. In particular, [we shall]:

  • push for liberalisation in agriculture and services [in the negotiations on the built-in agenda], while recognising that progress will not be so easy outside a Round;
  • continue to make the case for further comprehensive liberalisation of tariffs as part of the new Round and similarly for work on trade facilitation, regulatory barriers and government procurement;
  • press for consensus within the WTO [on] the need to address the growing consumer interest in trade in particular through work on labelling and the reform of the anti-dumping rules to discipline their use and to increase transparency … ;
  • do more to build a consensus for including the trade/environment interface within a new Round;
  • communicate more clearly the need to include investment and competition;
  • keep in play the important debate in the WTO on how to ensure that electronic commerce is best reflected in trade rules;
  • continue to support capacity building in developing countries, so that they can respond constructively to concerns about implementing existing WTO agreements and take greater advantage of trading opportunities;
  • press for the early implementation by the EU and other members of the Quad of the duty free initiative for essentially all products from least developed countries;
  • continue to reinforce the multilateral trading system through widening WTO membership, including China, Russia, Saudi Arabia and the Ukraine, on the right terms; and
  • play a constructive part in preparing the ground for a successful Ministerial Conference to launch a new Round of negotiations through parallel work on pragmatic reform of the WTO's operation".

In presenting this comprehensive programme of action, the DTI did not make clear how much of it the Government thought would have to be achieved before a new Round could start. Mr Hutton told us in January that, allowing for a period of intensive preparation in Geneva, "you are talking about reconvening possibly with a meeting in the summer at the earliest", but he recognised this might not be practicable because of the impending US Presidential election[213] (Q 2).

268. Since then, the Government has become more cautious. In April, Mr Byers said:

    "The prospects of launching a new Round in the near future are perhaps limited. That does not mean that we should not try … We should not rush into it. I think the worst thing that could happen is out of desperation to start a new Round when the prospects for success would be limited … It would be, I think, quite devastating for the WTO to begin a Round which then falls apart … [To get a Round started] we need some wins for the WTO … We have got to be able to demonstrate … that trade liberalisation, as has been the experience in East Asia, can bring huge benefits to developing countries … We can only do that if we have a WTO which is reformed, which is more in touch with those member countries" (QQ 524, 535 and 561-2).

Mr Michael Meacher (the Minister for the Environment) is reported[214] as having been equally forthright at a Conference at the Royal Institute of International Affairs on 27 March 2000, saying that there was still much to be done to assure developing countries that their trade demands would be met, and to counter their distrust of the motives of developed countries: "Just to rush ahead bull-headed as soon as you can when you haven't got these assurances in place is, I think, destructive". He pointed out that support for a new Round from the US and Japan was not enough, and commented that trying and failing again to launch a Round would set the WTO back years. In her evidence to us, Clare Short went further:

    "I do not think we should take the survival of the WTO for granted … There are a lot of forces ranged against it and it could be weakened and that would be a desperately serious loss" (Q 562).

269. The Commission has always sounded more bullish. Addressing the European Parliament on 25 January, Commissioner Lamy said:

    "I believe that we should not relinquish the possibility of launching a new Round this year. I say that as I think it best suits the interests of the European Union. I also say it because that is what I believe, Before saying it I have checked that we are not alone, and that this is a shared viewpoint[215]".

This was still the EU view in April, when Mr Ian Wilkinson (the Deputy Permanent Representative of the EU to the WTO) said:

    "I still do believe—[though] I must say I did not in January, perhaps even February, in the immediate aftermath of Seattle—that it is feasible to talk of an early date for the launch of a new Round … If the Americans are telling us that they are in favour of a Round then we should go for it. The chance may be one in a hundred, it may be one in a thousand but, so long as there is a chance and we judge that that chance is real and alive, we should go for it" (Q 285).

He admitted that he was not sure exactly what the Americans understood by "a Round", but he could see political advantages for them in getting something going. This would have to be done on the basis of a proper negotiating draft:

    "We all know the issues now … Assuming there really is not in any of the world's capitals an absolute outright opposition to a Round at any price, where countries are genuinely frightened of a commitment to further liberalisation, with goodwill and good direction at the level of the General Council from the Director General and his new team (and do not forget that team is now a little bit more experienced than it was before Seattle) we could do it, quite honestly" (Q 294).

270. Others were more hesitant. Mr Ouedraogo, one of the Deputy Directors General of the WTO, said:

    "Maybe if we are not able to launch a new Round this year we will work step by step prudently to reach this target of launching a new Round, avoiding what we obtained in Seattle" (Q 342).

Mr Eglin of the WTO thought that another Round was not likely to start for two or three years. His prediction was that if Mr Gore were to become the US President, he would be so indebted to the environmental and labour movements in the US that he would only be able to accept an agenda going deep into those two areas— which would not be acceptable to other member countries. Moreover, he added:

    "We have not done the work. This place has been more or less frozen since Seattle, six months pretty much now, during which we have been chasing mini-packages and confidence building measures and all the things that technocrats and bureaucrats and diplomats do when they do not quite know what they should be doing".

And member countries had been pre-occupied with their own regional trade agreements:

    "We are moving into a period of great distraction without having, frankly, any compelling reason why we need a multilateral Round. Business does not seem to want one … We have not made a good case for why we need a new Round … I am afraid that if we continue on the course we are going we will have another Seattle" (QQ 414-415).

271. Some of our NGO witnesses wanted the WTO to use this breathing space to reflect on where it was going, and to make significant reforms to its institutions. The RSPB considers that the UK and the EU should make a commitment to reforming the decision-making process before the launch of more negotiations, even on the built-in agenda, claiming that the UK Government had made such a commitment, but that the EU was pressing for a rapid resumption of negotiations (p 277). The World Development Movement suggests even more extensive preconditions for the start of a new Round, to include banning the "undue influence" of business lobbies in formulation of trade policies at national level and in negotiations or standard-setting bodies at the international level, and dropping the "tit-for-tat approach" to negotiations (p 64).

272. Before an attempt is made to launch a new Round, member countries must also do their homework domestically. Mr Eglin said (Q 424) that "the main problem was the lack of preparation of our members". Politicians, particularly in the new member countries who were being introduced for the first time to "a big new liberalisation agenda"; they had to be prepared to go back to their constituents and explain why they were agreeing to deals which might appear to be selling them down the river. They must "get business lined up to say: 'We want this. This is of value to us. Get out there and do it. We will back you up'", so that when for example a government had to confront its agriculture lobby it could be sure of the support of the business lobby. He applied this equally to the EU, which he said "must get a sensible non-politicised debate going". Noting that only a tiny proportion of the population in EU Member States was employed in agriculture, Mr Stoler presumed that there would be pressure on the EU position on the CAP from those within the EU wishing to secure gains for other sectors (QQ 479-480) [216].

273. To this end, ODI considers that it is important to facilitate public understanding of how international trade rules work:

    "It is only ignorance of the subject which drives consumer organisations, environmentalists or NGOs claiming to speak for developing countries into protectionist mode, yet such an alliance was apparent at Seattle and Davos and may re-emerge in Bangkok[217] too".

This suggests that the Government and the EU should increase funding for better public education and media reporting (p 269). PricewaterhouseCoopers agrees that there is a need for publicity on the benefits of "an open, rule-based system of international trading" (p 275).

274. There is also a role for contacts between governments. For example, Clare Short believes that

    "potentially the Commonwealth has an enormously important role here … [for] new ideas and new thinking that might move the world forward" (Q 562).

Mr Byers said that already during the Seattle Conference the UK was using its Commonwealth contacts, acting "as someone who can be a bridge between the EU position and the position being adopted by other countries" (Q 527). These Commonwealth contacts could be useful, and should be fostered, albeit without exaggerated hopes of the results to which they may lead.

275. There is a need to continue efforts to win the confidence of NGOs, since they could play a useful role in enhancing the public acceptability of the WTO. As Mr Philip Lee suggests[218]:

    "There is a perception among countries, NGOs and civil society that the WTO is a 'rich man's club' devoted to the liberalisation and globalisation of trade to the benefit of large multinational corporations and the largest industrial trading blocks such as the US and the EU … To be successful, the WTO requires acceptance, not only by government but by NGOs and the citizens of its members. The UK government should take, and be seen to take, a lead role in removing those defects in WTO institutional or procedural arrangements which are the cause of, or fuel, such criticisms" (pp 87-88).

276. Meanwhile, of course, even without agreement on a new Round, matters are not standing still. Significant events include:

  • The opening of negotiations on the built-in agenda, for services in late February and for agriculture in March.
  • The US attempt to impose "carousel" sanctions (rotated from one industry to another) on the EU in relation to the Bananas dispute[219].
  • The resolution of further dispute settlement cases, in particular an important victory for the EU, in which the US scheme allowing exporters based in the US to avoid taxes by channelling funds through offshore tax havens was found to be in breach of WTO rules (Foreign Sales Corporations (FSC))[220].
  • The formal lodging of the EU's request to the WTO for a waiver for its new agreement with the ACP countries (Q 307).
  • The agreement between China and the EU on 19 May 2000, bringing nearer the accession of China to the WTO and thus satisfying one of the US's major objectives[221].


277. During March 2000, the Quad countries put forward an interim package which they hoped would encourage the developing countries back to the table. Clare Short saw the package as "a confidence building measure", though the Government thought that it should have been more generous to developing countries (Q 538), but Bangladesh is reported to have described it as "confidence shattering" rather than confidence building[222]. We asked our witnesses in Geneva whether the package was likely to do the trick. Mr Wilkinson, the EC Deputy Permanent Representative, said:

    "It is a necessary, but it is certainly not a sufficient condition for a re-launch … It was never intended to buy a new Round … It was meant as a gesture which would help to contribute to confidence building in the post-Seattle period. One of the unfortunate features is that it has dragged on for so long" (Q 301).

278. The package made proposals on four main elements: the implementation of agreements made during the Uruguay Round; market access for least developed countries; technical assistance; and improving the functioning of the WTO. We examined the adequacy of its component parts.

279. On the implementation of agreements made during the Uruguay Round, the proposals were that:

  • developing countries could be granted an extension of transition periods for TRIMs, on a case by case basis;
  • least developed countries could be granted an extension of transition periods under the SPS Agreement, and also under the Customs Valuation Agreement "in recognition of their capacity constraints";
  • assistance could be provided in relation to various technical agreements;
  • recommendations should be brought forward on implementing the Marrakesh Ministerial Decision [on trade in agricultural products] on "measures concerning the possible negative effects of the Reform Programme on Least Developed and Net-Food Importing developing countries"[223]; and
  • an "implementation work programme" could be established within the WTO.

280. Mr Stoler's view was that the biggest obstacle to progress was indeed implementation problems from the Uruguay Round—not as customarily interpreted (the failure of developing countries to meet implementation deadlines, which can be easily dealt with by granting longer transition periods) but the non-implementation by developed countries of the anti-dumping and textiles agreements from that Round (Q 454). However, reducing the pressure on developing countries to implement existing agreements should be an encouraging feature. Clare Short said:

    "Because implementation is one of the themes for the next Round the logic is that to take action against individual countries because they are formally breaching their agreements would be disruptive and unwise and it would be the view of our Government that would not be the right way forward" (Q 553).

But she recognised that the UK—or indeed the EU—could not stop others exercising their rights, though "there is broad agreement that that would not be helpful" (Q 555). WTO member countries had been asked by the Chairman to exercise restraint in relation to important deadlines, but the US seems reluctant. In her statement to the House of Representatives Committee on Ways and Means, Ambassador Barshefsky said that the implementation of existing agreements must "proceed smoothly: … In case of outright refusal to keep promises, [the US] will not hesitate to use dispute settlement to enforce compliance", but it was prepared to work through genuine difficulties "on a practical, constructive and pragmatic basis" (p 204). Such sabre-rattling is not likely to be conducive to progress[224].

281. On market access for least developed countries, the Annex to the package contained a draft declaration that

    "(i) Developed country members shall provide least developed members with enhanced market access by according and implementing tariff-free and quota-free treatment consistent with domestic requirements and international agreements, under their respective preferential schemes for essentially all products originating in least developed countries so far as they remain in that category; and

    (ii) Developing country members shall, to the maximum extent possible, also provide least developed members with enhanced market access …".

282. Mr Wilkinson said "We were all disappointed at the insistence by some [countries] on those famous but I fear rather damaging words 'essentially all' trade" (Q 301). The issues were well exposed in a Financial Times editorial at the time when the Quad package emerged[225]:

    "The hope had been that the US, European Union, Japan and Canada would allow free access to all imports from the 48 least developed countries. With annual per capita incomes as low as $100, these are deserving cases. They account for barely 0.5 per cent of world trade, and their exports are mostly commodities and simple manufactures that pose little competitive threat to the big trade powers. Yet the latter are reluctant to deliver on their professed good intentions. The EU says it is ready to admit 99 per cent of least developed country exports duty free. But that is less generous than it sounds. It marks little change from existing trade preferences, which favour products that Europe does not produce or that few poor countries make. Proposals to lower high barriers for farm products, such as rice, in which many least developed countries could compete, face fierce resistance in the EU—as they do in Japan. US largesse consists mainly of warmed-over proposals to improve market access for African and Caribbean exporters … Failure to make good on the idea would deepen [the] doubts [of poor countries about backing a new trade deal] and sour still further the atmosphere in the WTO. The rich trade powers have a responsibility to avoid that. They should do so by standing up to their protectionist lobbies and tabling a package that genuinely opens up their markets—and fast".

283. When we took evidence in February from Mr Carl (the Commission's chief WTO negotiator), he agreed that the distinction between "all" and "essentially all" imports was highly significant: the present arrangements excluded some of the most sensitive products from least developed countries. The Commission had been trying to persuade Member States to allow open access to all products, but had not so far succeeded "because of the agricultural sensitivities" (QQ 115-118). Mr Stoler said that the limitation of the interim package to "essentially all" products paralleled the equivalent provision in the EU/ACP agreement (Q 473)[226]. The Government provided a note (pp 219-220) to amplify what Clare Short told us on this issue (QQ 541-544). It explains that some 98 per cent of the EU's current imports from least developed countries enter without duty or quota, either under the Lome Convention[227] or under the EU's Generalised System of Preferences (GSP). But under EU rules

    "barriers remain on a significant number of products which the least developed countries might produce for the European market, notably certain agricultural, fishery and processed products. Tariffs and quotas on these products confine these countries' exports below their potential level".

The Government sees real problems in removing barriers for those products covered by the commodity protocols, but the Prime Minister has indicated[228] that the Government wants all products from least developed countries to have unrestricted access "in due course".

284. The Government's note says that the proposals in the Quad interim package are "less liberal than the EU wanted because of US, Japanese[229] and Canadian reservations"; as well as the limitation to "essentially" all products, the right to free access is qualified by the words "consistent with domestic requirements and international agreements"[230]. Nevertheless, the Government judged that the commitment

    "would be of higher value to beneficiary countries than previous discretionary and autonomous arrangements. Moreover, the EU's commitment to improve market access for the least developed countries is in no way dependent, in scope or in timing, on the actions of other members of the Quad".

285. Many of our witnesses believe that, whatever other developed countries do, the EU should lead the way by implementing zero tariffs at once for all goods from least developed countries, and by starting to reduce tariffs on imports from other developing countries in priority sectors, especially agriculture and textiles and clothing. If the next WTO Round were to remain stalled this kind of unilateral liberalisation would be even more important (War on Want: p 293; World Development Movement: p 64; ODI: p 268).

286. On technical assistance, the declaration in the Annex to the proposal would "agree to establish an improved programme for capacity building and technical assistance undertaken by the WTO", directly and in co-operation with other international institutions, to promote better understanding of WTO rules; ensure coherence among institutions and donor countries; anticipate the needs of recipients; and monitor the effectiveness of the assistance given. The declaration then lists actions which the Director General is requested to take to devise such a strategy.

287. On rapid action for improving the functioning of WTO and enhancing internal and external transparency[231], the package suggested that informal meetings "should be broadly representative of the WTO membership at different levels of development", and should be followed by report-back meetings, in which all members would be able to express their views. Priority in the technical assistance programme should be given to "supporting developing country participation in negotiations". Transparency should be increased by making most documents publicly available ("with a few limited exceptions"), and encouraging contacts with NGOs.


288. The WTO press release issued after the meeting of the General Council on 3 and 8 May 2000 reports Mike Moore as having "hailed the efforts of the WTO's 136 member governments, following approval by the General Council of a series of measures designed to raise confidence in the multilateral trading system by addressing the needs of developing countries, including the world's poorest". Taking the items in the Quad proposal separately:

  • On implementation, it was agreed that a special series of meetings of the General Council (starting in June 2000) would "tackle the thorniest implementation issues and concerns"; "member governments have pledged to complete this process by the Fourth Ministerial Conference which will be held before year end 2001[232]". Specifically, the General Council "agreed on a method for addressing requests" for extending the implementation period of TRIMs.
  • On market access, Mr Moore praised 13 member governments for "taking a significant step in the continuing process" of further opening their markets to products from the least developed countries, saying: "Collectively, these measures are beginning to add up to tangible and meaningful market access improvements in favour of least developed countries. There is, of course, more that can and should be done in improving least developed countries' market access, but this is a good starting point".
  • Member governments were "in agreement that technical co-operation work is a core activity of the WTO and must be funded in a stable manner"; member governments would be asked to increase the core budget for this to SF 10 million over 3 years from the current level of SF 750,000, and co-ordination with other international agencies would be improved.
  • On institutional arrangements, work "on addressing key problems affecting developing countries and on seeking procedural improvements to enhance participation by all member governments [marked] a significant step in raising confidence among member governments that the WTO and the multilateral trading system can offer important contributions in promoting economic growth and development", and would be continued by the Chairman of the General Council[233].

289. This meeting appeared to have agreed to take matters slowly. And the WTO Annual Report, released on 15 May, noted that

    "Many of the issues that prevented agreement at Seattle are still unresolved, and we are not yet seeing the signs of flexibility in national positions that would justify predicting an early launch with confidence[234]".

Nevertheless, the joint statement from the EU-US summit on 31 May says:

    "The EU and US reaffirm their conviction that the early launch of an inclusive new Round of WTO trade negotiations would offer a major boost to global economic growth, employment and sustainable development … The EU and US pledge to build on the constructive work of the last six months to try to launch such a new Round during the course of this year".

290. The conclusions of the WTO General Council at the beginning of May 2000 give some grounds for optimism as to the way forward. But there is still a long way to go. In particular, we agree with the Director General of the WTO when he says that although the concessions on access offered by 13 developed countries "are beginning" to add up to tangible and meaningful market access improvements in favour of least developed countries, "there is, of course, more that can and should be done in improving least developed countries' market access". While the EU procrastinates on the Common Agricultural Policy, and thus continues to impose restrictions on agricultural imports, it weakens its bargaining power in persuading others to go further in the concessions they offer to developing countries. We think that the EU should seriously consider giving a lead by allowing duty-free access for all imports from least developed countries, without waiting for other developed countries to follow suit. Meanwhile, in the light of what happened at Seattle, we are disturbed that EU and the US have agreed to try to launch a new Round during the course of this year; it is in our view more important that that the Round should be properly prepared and successful than that it should be launched this year rather than next.

213   Although Mr Carl, giving evidence to us in February, reported President Clinton as saying that he did remain in favour of the launch of a new Round this year if possible (Q 134). Back

214   Financial Times, 28 March 2000. Back

215   He cited Japan, South Africa, Brazil and Thailand as being "keen to get the process back on the rails and launch a Round as quickly as possible". Back

216   Wang and Winters agree: "Developing country policy makers will have to tackle fundamental institutional problems and confront domestic protectionist interests … Developed country leaders will need … to confront their own interest groups in order to make the significant concessions necessary to ensure that, in the long-run, the trading system survives intact and that all countries can benefit from it … The main contribution of the GATT (now WTO) system was to fortify governments against the narrow and sectoral interests of their domestic pressure groups. Any observer of the way the EU kow-towed to its farm groups or the US government to its labour groups would conclude that this medicine is as much required in rich as in poor countries" (op cit, pp viii and 2). Back

217   At UNCTAD X. Back

218   He is referring specifically to the dispute settlement procedure, but his comments are valid more generally as well. Back

219   Economist, 13 May 2000. Back

220   Financial Times, 18 February 2000; the Economist (4 March 2000) described this case as "particularly inopportune", carrying the threat of an escalation in transatlantic trade tensions so soon after Seattle. Back

221  In addition, on 24 May, the US House of Representatives voted to grant permanent normal trade relations (PNTR) to China, putting an end to the annual review of its trading status linked to an examination of the human rights situation (Financial Times, 25 May 2000). Back

222   Financial Times, 11 April 2000. Back

223   See paragraph 156. Back

224   Since then, the US has announced its intention to bring proceedings against six more countries: Denmark on intellectual property rights; Brazil on customs valuation and patents; Romania on customs valuation; India on investment requirements in the automotive industry; the Philippines on local content requirements for vehicles; and Argentina on patents (Financial Times, 2 May 2000). It has placed 59 countries on "various lists of alleged violators" (Financial Times, 3 May 2000). Back

225   Financial Times, 28 March 2000. Back

226   He explained that developed countries were hesitant to go further partly because Bangladesh fell within the group of least developed countries, given its "capacity in particular to produce textiles and certain other types of sensitive products". The problem of Chinese textiles gaining access via Bangladesh was being addressed by specifying in the proposal that the products giving preferential treatment must be "of least developed country origin" rather than simply "exported by least developed countries" (QQ 471-472). Back

227   To which the principal exceptions are products covered by the CAP, and those covered by the commodity protocols (on sugar, beef, bananas and rum) which give preferential access to certain designated countries, which the EU is proposing to extend until the successor arrangements to the Lomé Convention enter into force. Back

228   Speech at Mansion House, November 1999. Back

229   However, Mr Stoler said that there was more to the package than met the eye; for example, Japan's offer of concessions (albeit limited) was significant, because Japan currently offered no special treatment to least developed as compared with developing countries (QQ 471). Back

230   The note explains that this qualification results from Japan's desire to continue to protect its agricultural sector, and the wish of the US and Canada to maintain their quotas on textiles and clothing until 2005 (when they are due to end under the ATC). Back

231   On which the European Commission had already submitted a more detailed paper, proposing also that the role of the host country at Ministerial Conferences should be limited to chairing plenary sessions (with other sessions being chaired by the WTO Director General and Deputy Directors General). Back

232   By which time a Ministerial Conference would in any case have to be held, since they are required to take place every two years. Back

233   Ambassador Kare Bryn of Norway. Back

234   European Report, 17 May 2000. Back

previous page contents next page

House of Lords home page Parliament home page House of Commons home page search page enquiries index

© Parliamentary copyright 2000