PART 3: THE CONTEXT OF THE EU MANDATE
|EU negotiating position
"The Council, whilst noting that market opening, the development of trade and increasing technological advances have contributed to world economic growth, underlined that this growth should produce a fairer spread of the benefits of globalisation
The Council underlined the need to ensure that an appropriate balance between the further liberalisation of trade and the strengthening of multilateral rules contributes towards sustainable development, environmental protection, social progress, the reduction in poverty and consumer health" (paragraphs 3 and 4).
The benefits of international trade
34. The argument that trade is beneficial is based
on the theory of comparative advantage.
Total economic welfare is maximised if each trading partner concentrates
on producing what it does best, and goods are traded openly. As
the WTO itself puts it,
"countries prosper first
by taking advantage of their assets in order to concentrate on
what they can produce best, and then by trading these products
for products that other countries produce best
multiply the rewards that result from producing
the best products, with the best design, at the best price".
35. It does not necessarily follow that all countries
involved, or all individuals within those countries, will benefit
equally. The classic example is the abolition of the Corn Laws,
which initially damaged British landowners, but through international
trade ultimately enabled the economy to grow more rapidly, as
well as benefiting Britain's trading partners. In his presentation
to us, Dr David Vines (Lord Thomson of Fleet Fellow and Tutor
in Economics at Balliol College, Oxford) contrasted this example
with that of Australia, where protection in favour of the products
of urban workers had prevented specialisation on the basis of
comparative advantage and led to relatively slow economic growth.
Dr Vines concluded that well-managed trade liberalisation creates
export opportunities which match or exceed the losses in the import-competing
sectorsbut he emphasised "well-managed", pointing
out in particular that wide-reaching changes within domestic economies
might be needed to secure the benefits.
36. Whatever the theory, some of our witnesses believe
that in practice the expansion of trade makes the poor even poorer.
For example, the World Development Movement
"the weight of evidence
is now that unregulated trade and investment is implicated in
the increasing disparities between rich and poor (within and between
countries), environmental damage and downward pressure on social
and environmental standards" (p 62).
It argues that the assumptions underlying the comparative
advantage theory are unrealistic. The pure theory assumes a perfect
market (with a large number of small producers and consumers,
no economies of scale or scope, immobility of capital and free
availability of information), conditions which do not prevail
in today's worldif indeed they ever did. So, says the World
Development Movement, "the benefits of trade are realised
by those with the market power to capture them". It quotes
Mr Rubens Ricupero (the Secretary General of the UN Conference
on Trade and Development) as saying that "no-one imagines
a lightweight [boxer] should fight a heavyweight", and claims
that the existing trade rules are distorted in favour of large
countries and multinational corporations, and that any new rules
should incorporate positive discrimination in favour of poorer
countries (p 63). Friends of the Earth claims that the objective
of deregulating international trade is based on the belief that
benefits will "trickle down". This, it contends, is
demonstrably false: the gap between rich and poor countries is
increasing, and security and employment rights are diminishing.
37. Unfortunately, it is difficult to obtain reliable
evidence on the benefits or disbenefits of trade to participating
countries. The World Development Movement claims that the burden
of reform in the trading system so far has fallen heavily on the
poorest countries. The share of least developed
countries in international trade has halved over the past 20 years;
whereas they have 10 per cent of world population, they account
for only 0.3 per cent of world trade (p 62).
38. Two estimates supplied to us by the Department
of Trade and Industry (DTI) (p 17) are reproduced below. Unfortunately
the figures provided do not show how the likely gains relative
to the present size of the economies, but both studies suggest
that although the largest economies stand to gain the most in
absolute terms (because of the size of their economies and the
potential for removing large barriers), developing countries are
also likely to make substantial relative gains.
Breakdown of the figure of around $400
Gains anticipated from future trade liberalisation
|Other Latin American and Caribbean||50
|Rest of the world||63|
Source: Nigel Nagarajan, The Millennium Round: An Economic
Appraisal, European Commission Working Papers No 39, November
Welfare gains from a 50% cut in protection in manufactures,
agriculture and services
Source: Global trade reform: maintaining momentum",
Australian Ministry of Foreign Affairs and Trade, 1999.
39. Dr David Evans (of the Institute of Development
Studies at the University of Sussex)
says that "little is known at present about where and by
how much trade liberalisation will contribute to poverty alleviation,
and where it may even help those in poverty", though he suggests
a range of possible interactions. Trade liberalisation in the
global economy can be expected to yield an overall economic welfare
benefit ("the gains from trade"), but these gains "are
unevenly distributed between both countries and regions".
There is some evidence that "trade openness hurts the poorest
regardless of the structural characteristics of the countries
observed", but results of empirical studies are ambiguous.
It is often argued that trade policy liberalisation will increase
economic growth, and is likely to have a favourable effect on
the wages of unskilled labour, but Dr Evans suggests that the
effects of other factors (such as investment) are likely to have
more impact (pp 239-243).
40. It would obviously be useful to have more hard
information on this issue. War on Want
suggests that the regular reports of the Trade Policy Review Mechanism
(through which the WTO conducts regular reviews of trade policies
of its individual member countries) should be broadened to cover
the social and economic impacts of trade policies (p 292). Dr
Evans suggests that the EU should promote the use of a general
equilibrium trade model to work from trade policy changes to impact
on income distribution (p 242). Both approaches could provide
some of the information which is currently lacking.
And as to distribution within countries, a recent World Bank study
gives further support to the argument that all benefit, claiming
"Income of the poor
rises one-for-one with overall growth. This general relationship
between income of the bottom fifth of the population and per capita
GDP holds in a sample of 80 countries covering four decades ...
Openness to foreign trade benefits the poor to the same extent
that it benefits the whole economy".
In her evidence to us, Clare Short (the Secretary
of State for International Development) took a similar view:
"The fastest reduction
of poverty for the largest number of human beings that has ever
happened in human history was East Asia's progress over the last
25 years, and it is built on opening up their economies to inward
investment and trade and export and a
on education of their people, a fantastic achievement
in pure numbers of people getting out of abject poverty and seeing
improvement in their lives".
In her view, the poorest countries now had the choice
"to make [through trade] a big advance in the systematic
reduction of poverty or to become more marginalised and stuck
in greater poverty for a long period of time" (Q 525).
41. In describing the circumstances in which trade
can be beneficial to all, we are tempted to say that it must be
"fair trade". Unfortunately, that term tends now to
be used in a rather narrow context, to refer to specific initiatives,
normally initiated by NGOs, which operate through voluntary participation,
with participants agreeing to pay a "fair price" negotiated
on a case by case basis.
When we speak in this Report of the need for trade to be "fair"
we have in mind a broader concept of fairness.
42. We believe that the benefits of increasing
world trade within a rules-based system canand ought tooutweigh
the disbenefits for all parties. However, we stress the term "rules-based",
which implies that those participating in the process adhere to
mutually respected "rules of the game". The world therefore
needs an international organisation to agree the principles on
which the rules are to be based, and to set and police the rules.
This was the original basis of the GATT, the predecessor of the
WTO, with its emphasis on reciprocity and equal treatment for
all trading partners. In an increasingly globalised world, the
big multinational companies which play a large role must also
adhere to the rules. With this caveat, we broadly support the
EU negotiating position on the desirability of further trade liberalisation.
We particularly note that the mandate recognises the need for
an "appropriate balance" between trade liberalisation
and the other desirable objectives referred to in the negotiating
position. We consider that, although the largest economies stand
to gain the most in absolute terms from liberalisation, developing
countries are also likely to make substantial relative gains.
We underline the need for the EU mandate to reflect a firm commitment
to the achievement of a fairer spread of benefits.
within a "rules-based system"
|EU negotiating position
"The Council agreed that the further development of trade needs to be accompanied by the strengthening of rules. The Council also reaffirmed the importance it attaches to the primacy of the multilateral trading system and of its basic principles as guarantees against protectionism and unilateralism" (paragraph 3).
"The Council reiterated its firm conviction that a comprehensive trade Round involving a broad range of issues is the best way to address the challenges resulting from rapid and far-reaching economic changes, to manage properly and effectively the globalisation process" (paragraph 7).
"Decisions could also usefully be taken
on a balanced package of trade principles on electronic commerce, covering inter alia such issues as domestic regulation, anti-competitive practices and clarifying the application of GATS rules" (paragraph 12).
THE WORLD TRADE ORGANISATION
43. The stated objective of the WTO system is
"to help trade flow
as freely as possibleso long as there are no undesirable
side-effects. That partly means removing obstacles. It also means
ensuring that individuals, companies and governments know what
the trade rules are around the world, and giving them the confidence
that there will be no sudden changes of policy. In other words,
the rules have to be 'transparent' and predictable".
Thus the aim of the WTO is not to regulate the international
trading system, but
"to establish and implement,
by consent of its members, a framework of agreed principles and
rules which (a) limit the ways in, and the extent to, which national
governments intervene or interfere in international trade, and
(b) aim to reduce and remove barriers to such trade".
Since the membership of the WTO is made up of governments,
the system is based on the assumption that governments are in
some sense responsible for the behaviour of firms located in their
countries, and that if necessary they will act against those firms
(for example to impose the sanctions resulting from a dispute
44. The 1948 General Agreement on Tariffs and Trade
(GATT) provided the first international framework for world commerce.
Its successor, the World Trade Organisation (WTO) was established
on 1 January 1995 as a result of the Uruguay Round of GATT negotiations.
The Uruguay Round also brought agriculture, services, intellectual
property rights, trade-related investment measures, and textiles
and clothing under the effective discipline of multilateral trade
rules for the first time, as well as establishing a stronger dispute
settlement procedure. And it mandated a "built-in agenda"
for further negotiations on agriculture and services to start
in January 2000, together with reviews of the other agreements
and of the dispute settlement procedure.
45. The basic principles of the WTO are that "the
trading system should be:
- without discriminationa country should
not discriminate between its trading partners (they are all, equally,
granted "most favoured nation" or "MFN" status);
and it should not discriminate between its own and foreign products,
services or nationals (they are given "national treatment");
- freerwith barriers coming down through
- predictableforeign companies, investors
and governments should be confident that trade barriers (including
tariffs, non-tariff barriers and other measures) should not be
- more competitiveby discouraging "unfair"
practices such as export subsidies and dumping products at below
cost to gain market share;
- more beneficial for developing countriesby
giving them more time to adjust, greater flexibility and special
privileges [known as Special and Differential Treatment]".
Crucially, "WTO members have agreed that if
they believe fellow-members are violating trade rules, they will
use the multilateral system of settling disputes instead of taking
action unilaterally. That means abiding by the agreed procedures,
and respecting judgments",
which may involve the application of trade sanctions.
46. The benefits of a rules-based system are widely
recognised. From the point of view of business, the Confederation
of British Industry (CBI) supports
"the maintenance and
the advance of a liberal and global trading system within the
framework of the rule of law, as represented by the WTO, which
we regard as being a substantial advance on the former GATT and
essential to the proper conduct of trade and investment world-wide"
Mr Ablasse Ouedraogo, one of the Deputy Directors
General of the WTO, drawing on his experience as a Minister in
Burkina Faso, said:
"This world is lucky
enough to have these rules set up within the framework of the
WTO protecting small, big, rich and poor countries. Otherwise
we would have been in the jungle, and peace, security and stability
would have disappeared. This is the key element attached to the
existence of the WTO" (Q 339).
47. There is not however universal support for the
work of the WTO. For the World Development Movement, Mr Barry
Coates claimed that "a large proportion of the public has
lost confidence in international trade policy making", and
that people were concerned that national rights over decision-making
were being eroded by the WTO (QQ 91-92). Similarly, the Green
that there is
"an unprecedented background
of global opposition to ever-increasing trade liberalisation
If the protests in Seattle have proved anything, it is that people
are ready for a wholesale redefinition of the process and purpose
of international trade, and that there is a growing recognition
that the invisible hand of free trade never favours the weak.
It always makes the strong stronger" (pp 255 and 258).
48. The public lack of confidence arises particularly
from perceptions of the WTO's objectives. Some of our witnesses
saw it as being too narrowly focused on trade liberalisation,
treating that as an end in itself rather than a means to an end.
For example, the Royal Society for the Protection of Birds (RSPB),
while recognising that "international trade rules are required
to regulate the actions of governments and companies", suggests
that liberalisation may not always be the appropriate option.
Instead, "international trade policy should be based on managing
trade to benefit people and the environment" (p 276). English
puts forward a similar argument:
"The key lesson from
the breakdown in trade negotiations is that society does not accept
that trade liberalisation objectives should override important
environmental and social priorities" (p 237).
It suggests that sustainable development should be
built in to the remit of the WTO both as an explicit priority
and as a measure of its success. According to Oxfam GB,
the WTO does already have a somewhat broader remit; the problem,
however, is that its success is judged on the basis of reductions
in trade barriers and increases in international trade flows,
whereas the explicit central objective should be poverty reduction
(pp 269-270). Others argue for more specific interests to be factored
in; for example, Compassion in World Farming wants the rules to
be reformed "to provide a proper balance between free trade
and other legitimate concerns such as animal welfare" (p
49. There are dangers in seeking to expand the WTO's
remit, which Clare Short highlighted in her evidence to us:
"We need to tidy up
and shape the roles of all the different organisations and make
them complementary. I agree with you, that because the WTO has
sanctions people are trying to smuggle other issues that
belong in other institutions in to the WTO
That is enormously
dangerous and would endanger international consensus around the
WTO" (Q 559).
The CBI agrees that unless the role of the WTO is
formally limited "it risks becoming the focus for issues
which are not properly within its remit and which will overburden
the system, if not break its back" (p 34).
50. Dr Peter Holmes and Professor Jim Rollo of the
University of Sussex describe the suggestion that the WTO rules
put free trade above all else as a misconception. The WTO actually
works by laying down rules, agreed by all its members, which govern
permissible departures from free trade. The issue is thus what
criteria (which might if desired include environmental or labour
standards) should be agreed to justify departures from the rules
51. We consider that a rules-based trading system
prevents a slide back into protectionism and strengthens the position
of parties with less bargaining power. We therefore concur with
the EU's re-affirmation of support of "the multilateral trading
system and of its basic principles as guarantees against protectionism
52. A rules-based system is particularly crucial
in the light of the inexorable pressures of globalisation.
The phenomenon of globalisation threatens sovereignty by effectively
reducing the power of individual governments in the face of multinational
corporations whose annual turnover may exceed the GNP of many
WTO member countries. The WTO may help preserve the power of governments
collectively in the face of these profound economic changes.
53. The debate on globalisation of course goes much
wider than the debate on the WTO, and falls outside the terms
of reference of this inquiry. In his evidence on behalf of DTI,
Mr Tony Hutton said:
"Much of the more violent
opposition to the WTO which you saw on the streets of Seattle
is actually directed against the phenomenon of globalisation,
which is not exclusively an issue concerned with the WTO"
Clare Short warned us that
"what happened at Seattle
is enormously dangerous to a stable world order in these
globalising times when we need global institutions that manage
the world economy and to ensure that all countries are included
in the potential benefits of globalisation more than we have ever
The rhetoric of the protesters is entirely the
wrong way round. It is the developing countries that need global
more than developed and wealthy
There is a sense across the world
of fear of globalisation" (Q 525).
54. The Government believes that the WTO has a key
role to play in ensuring that its member countries are in a position
to benefit from globalisation, as well an important contribution
to make to global political stability (p 1). As Mr Andrew Stoler,
one of the Deputy Directors General of the WTO, pointed out:
popularity of regional trading arrangements
the only rules
that exist today to govern trade relations between the largest
trading partners are the WTO rules. If we did not have the WTO,
how would you ever hope to resolve transatlantic disputes between
the United States and the European Community or between the United
States and Japan or between Japan and the European Community?
You need the WTO for other reasons as well. It has become
almost a cliché for people who are making speeches to talk
about the need for managed globalisation or some sort of accepted
norms to deal with this globalisation phenomenon. As far as I
can tell the WTO is the only place around where you have
effective rules that are backed up by this dispute settlement
understanding when there is disagreement" (Q 458).
And the World Development Movement comments: "A
core problem is that business has been globalised, but regulation
has not" (p 65).
55. E-commerce is a crucial element of the rapid
spread of globalisation. We did not specifically explore this
topic, because it was the subject of a concurrent inquiry.
However, we note DTI's view that the WTO has an important part
to play in ensuring that international trade rules do not act
as a barrier to the development of e-commerce (Q 12). PricewaterhouseCoopers
argues that as one of its priorities the EU should "continue
the debate in the WTO about the importance of e-business in the
formulation of new trade rules and, in due course, seek to make
permanent the moratorium on the duty-free tax treatment of e-commerce"
(p 275). The Association of British Insurers
emphasised the importance of this for insurance markets (p 223).
56. We agree with the assumption in the EU mandate
that globalisation accentuates the need for a rules-based trading
framework, which only an international organisation such as the
WTO can provide. But since it is companies, not countries, which
trade, the liberalisation of trade needs to be considered in conjunction
with other issues and not in isolationand the WTO needs
to work in co-operation with other international institutions.
within an international system of governance
|EU negotiating position
One of the "broad negotiating objectives" is "increased coherence on trade, monetary and financial issues through improved co-operation between the WTO and other international organisations, including the Bretton Woods Institutions and other UN organisations", specifically "to help developing countries to benefit fully from trade liberalisation" (paragraph 8).
"A work programme should be built providing
for enhanced co-operation and transparency in support of trade liberalisation between the WTO and the Bretton Woods institutions and for more efficient complementarity of action by international organisations in support of policy coherence" (paragraph 10).
57. There is considerable pressure to expand the
scope of the WTO, both to link trade liberalisation with other
issues (particularly those raised by globalisation), and because
the WTO is the only international institution which has a fully
developed dispute settlement procedure, with sanctions to back
up its rules. We have therefore considered how the "increased
coherence" desired by the EU mandate might best be achieved
within what Oxfam calls "the broader framework of global
governance" (p 269).
58. The WTO does not fall under the umbrella of the
United Nations. This is in part a historical accident: the 1948
Havana Charter would have established an International Trade Organisation,
either as a third arm of the Bretton Woods institutions
or as a UN specialised agency. But this plan came to nothing,
because the US withdrew before ratification. Friends of the Earth
suggest that the WTO should now be "brought into the UN"
(p 48), and this is also supported by CAFOD
(p 227). But Mr Stoler suggested that this would be inappropriate:
"We have a very extensive
interaction with other parts of the international system even
though we are not part of the UN system
The main reason
why we are not part of the UN system is because of a difference
in membership. Any country can join any UN agency if they just
agree to pay the dues. There is a different price of admission
Entry is not cost-free in WTO
You have to have
an economy and a set of rules in your economy" (QQ 462-464).
59. But this is not an argument against co-operation
and coherence. Clare Short said:
"Now we can look at
the world as one global phenomenon and we need to tidy up and
shape the roles of all the different organisations and make them
complementary" (Q 559).
There was broad support among our witnesses for encouraging
closer links between the WTO and other international organisations.
For example, the Food and Drink Federation
mentions the need for links with the IBRD, OECD, the ILO and UNEP
(p 250). The RSPB says that the broader goal of sustainable development
(agreed by the EU) should be pursued through coherence with other
international mechanisms to which most WTO member countries are
signatories (p 277). Mr Hoe Lim, External Relations Officer of
the WTO, also took the view that the link between international
organisations ought to be through the governments which are members
of several such organisations (Q 345). In his written statement
to us, Mr Juan Somavia, the Director General of the ILO, says:
"The [ILO's] 'decent
work' agenda will also require a closer integration of the ILO's
work with that of other multilateral agencies, notably the World
Bank, the IMF, the UNDP, UNCTAD and the WTO. We have set up a
new small international policy group to develop strategies for
closer engagement with these institutions. We also have a special
Working Party of our Governing Body on the Social Dimension of
Globalisation. The agencies I mentioned are invited to participate
in that meeting and are picking up that offer. I think there is
tremendous scope to improve the performance of the multilateral
system as a whole. It sometimes seems as if each international
organisation is stuck in its narrow bureaucratic box with little
reference to what the others are doing. This has to be replaced
by integrated thinking and coherent action. I want the ILO to
be a leading player on a strong United Nations team" (p 136).
60. There is of course a question as to what joint
working would mean in practice. For example, Mr Jan-Eirik Sorensen,
Director of the WTO Trade and Environment Division, said that
there was no difficulty in the Secretariats of the ILO and WTO
working together as foreseen in the Singapore declaration (Q 397).
But this is of course different from joint working between the
two sets of members.
61. Friends of the Earth makes the more radical suggestion
that a new independent body
should be established under UNCSD
to review social, environmental and economic aspects of existing
trade rules and to consider future developments (p 48, and separate
note at pp 59-60). Although Friends of the Earth supports the
objective of "a rules-based multilateral trade system that
promotes fair and sustainable local, regional and international
trade" (p 47), Mr Duncan McLaren explained that it thought
that the "history of distrust" which existed made the
WTO an inappropriate forum to achieve the objective (Q 67).
62. We recognise that the matters dealt with in
the WTO may overlap with matters where lead responsibility rests
with other international organisations. We see no need for yet
another international body to arbitrate in such cases. Nor do
we believe that it would be appropriate to bring the WTO formally
within the UN family. But, mindful of the need to prevent the
use of WTO rules and dispute settlement procedures for matters
unrelated to trade, we agree strongly with the EU position that
there should be better co-operation between the WTO and other
international bodies so that each can fulfil its proper function
within the framework of international governance. We encourage
the EU to press for a process to be established to achieve this.
accountable to its members
|EU negotiating position|
"The Council expressed its full support for the Commission to continue to promote the EU position in favour of a comprehensive new Round and to participate actively, with the assistance of the 133 Committee, [in] the concrete formulation of the elements of the draft Ministerial Declaration on the basis of the objectives as identified by the EU in the various sectors and issues. The Council agreed to follow closely the developments of the preparatory process for the Seattle meeting
It also decided to meet in special session in Seattle throughout the duration of the Conference and to be assisted by the 133 Committee in order to contribute to the final stage of negotiations, take a position on the draft WTO Ministerial declaration resulting from those negotiations, and to take the necessary decisions" (paragraphs 15-16).
63. Although the individual EU Member States
are members of the WTO, in the areas where the European Community
has exclusive competence it is the Commission which handles negotiations,
on the basis of a mandate agreed by all the Member States in the
Council of Ministers.
In those areas, the Member States do not have individual voices.
This does not, of course, prevent the UK Government from having
informal contacts with other WTO member countries. Nor does it
prevent EU Member States "getting into individual trouble"
(that is, being challenged under the dispute settlement procedure),
though Mr Stoler explained that if such a dispute was pursued
the EU insisted that it, rather than the individual Member State,
should be the party (QQ 476-477). The competence (in the legal
sense) of the Commission is not in question. Mr Mogens Peter Carl,
the Commission's chief WTO negotiator, told us that there had
never been any serious attempt by a Member State to challenge
"the Commission's role as spokesman and negotiator"
(Q 111). Some of our witnesses wished that this was not the case.
Friends of the Earth, for example, suggest that the position should
be reviewed, claiming that "it is not necessary for the Commission
to have competence" (p 53). In his oral evidence, Mr McLaren
said that Friends of the Earth felt "that the Seattle events
raise a question mark over whether [giving competence to the Commission]
is a wise move" (Q 79). In practice, however, the concern
of Friends of the Earth turned out to be more with the way in
which the Commission exercised the mandate (QQ 71-74).
64. It is clear from the EU negotiating position
that the responsibility for identifying objectives rests with
the Member States. However, it then falls to the Commission "to
continue to promote the EU position". We explored the means
available to the Member States for ensuring that the Commission
did not depart from the mandate which had been granted, or interpret
that (necessarily vague) mandate in a way which did not correspond
to the wishes of Member States.
65. We understand that during the Ministerial Conference
in Seattle the EU Council was in virtually permanent session.
But in more normal times the interests of Member States are represented
by officials sitting in the "133 Committee".
There is however a question about the status of this Committee.
In one of his answers to us,
Mr Carl referred to "the way in which the Commission was
being advised by Member States in the Council" during the
negotiations in Seattle. Challenged on his use of the word "advised",
Mr Carl said:
"The 133 Committee is
a consultative committee
It is the Council that decides
at the end of the day, but
[it is] the Commission [that]
is out there [negotiating]" (QQ 136-137).
In addition to the work of the 133 Committee, there
is a heavy programme of co-ordination meetings among representatives
of EU Member States in Geneva. Mr Ian Wilkinson (Minister and
Deputy Permanent Representative of the European Commission to
the WTO) told us that
"For any period of six
there are between 200 and 250 co-ordination meetings,
that is to say, representatives of the 15 Member States plus the
Commission and Council officials and so on
That is a lot
of meetings, talking to ourselves
I really do believe that
the Community set-up, with all its heaviness and apparent cumbersomeness
to the outside world, does work" (QQ 297-298).
We wondered whether all those meetings would simply
serve to confuse the mandate already given by the Council, but
Mr Wilkinson explained that the issues discussed were of tactics
and fine-tuning (Q 300).
66. We looked at two particular examples where it
appeared that the Commission might either have departed from the
mandate which had been given to it, or not even sought the views
of Member States.
67. The first of these was the well-publicised incident
in Seattle where Commissioner Lamy agreed on behalf of the EU
that there should be a WTO working group on biotechnology, whereas
the position of Member States was that this issue should be treated
In his evidence to us, Mr Carl shrugged this off:
arose out of the fact that Member States were taken by surprise
because the Commission took a certain position
took the dramatic, revolutionary initiative of suggesting that
one should set up a working group in the WTO with the mandate
of looking at biotechnology issues generally speaking and at trade
issues more specifically in an open-ended way. This was seen as
a threat to the Biosafety Protocol negotiations
to put it as gently as I can, we did not understand what all the
fuss was about
This was our attempted down-payment in the
direction of the US to persuade [it] to move away from its very,
very negative attitude towards dealing with trade and the environment
in the WTO
That was the background (Q 135).
Member States did not view the position so lightly.
Referring to the incident, Mr Wilkinson said:
"I was present at the
discussions in Seattle when Member States sentlet me put
it diplomaticallya very clear signal to Commissioner Lamy.
One [the Commission] cannot win them all" (Q 308).
This is a particularly disturbing incident because
it has been frequently cited to us by NGOs as an example of how
the Commission was prepared to renege on environmental issues.
68. The second example which we considered arose
during March 2000, when chairs of various WTO groups were being
appointed for the next year. The Commission blocked the appointment
of the highly-respected Brazilian Ambassador to the WTO, Mr Celso
Amorin, as chair of the group to take forward the negotiations
on the built-in agenda in agriculture, reportedly on the basis
that the country he represented formed part of the Cairns Group.
Asked to comment on this, Mr Stoler said:
"That is very unfortunate
and the chairmanship question is the type of issue where WTO members,
and GATT members before them, tend to behave badly and it is a
stupid issue because who the Chairman is of any of these groups
matters very little provided that they are somebody who knows
how to run a meeting. The idea that any Chairman is going to successfully
bring a national viewpoint into a WTO meeting and steer the direction
one way or the other does not make any sense because that is not
the way things work around here
It would not have mattered
if we had put the man in the moon in this job so long as he knew
how to run a meeting" (Q 455).
It was perfectly apparent from our informal contacts
in Geneva with a range of Ambassadors from other WTO member countries
that this decision had gone down very badlyat a time when
one could argue that the EU could ill afford to lose friends.
69. Because we were concerned about the decision,
we asked Mr Stephen Byers, the Secretary of State for Trade and
Industry, how it had been taken. He agreed that "the difficulty
was one which was very divisive", but explained that:
"Essentially the Commission
is given a negotiating brief from the Council and it is for the
Commissioner to go away and negotiate the detail and then report
back to the Council of Ministers
[This decision] would
have been taken as part of a negotiating position by the Commissioner,
but it would have been reported back to the Council of Ministers.
If there is a fundamental disagreement, then we would have said
we are not supporting this particular approach, but you have got
to give your negotiating team a degree of flexibility to take
decisions as and when they need to be taken".
In this instance, the Government would have been
content to accept the Brazilian Ambassador as Chairman, "but
as part of the European Union there was a view that it would not
have been helpful to have had a leading member of the Cairns Group
chairing those negotiations at that particular time" (QQ
70. We recognise that under the EC Treaty it is
inevitable that the Commission will negotiate in the WTO on behalf
of Member States. The terms of the mandate which has been given
to it allow considerable flexibility, but it is important that
the Commission should act strictly within the limits of its authorityand
disturbing that some important decisions seem to have been taken
without reference back to Member States.
and to civil society and parliaments
EU negotiating position
"The Council underlined the need to involve fully civil society in this process and to this end to continue the dialogue with it in order to take into account its legitimate interests and concerns
The Council stressed the importance that close contacts be maintained
with parliaments, including the European Parliament. The Council also encourages the Members of the Council to continue and intensify their dialogue with the organisations of civil society and expressed its appreciation for the efforts undertaken by the Commission in organising regular dialogue with the civil society at European level" (paragraphs 5 and 14).
71. In his opening statement to us for DTI, Mr Hutton
"Among the criticisms
which are made [of the WTO] is that it is unaccountable and undemocratic;
it serves solely the interests of big business; it is damaging
to the environment and it inhibits economic development. These
criticisms are very far from the truth and reflect a basic misunderstanding
of the nature of the WTO, what it is and what it does
WTO is formed exclusively of national governments. It has no independent
existence apart from its membership. It has few executive powers.
It does not impose sanctions on others. The sole function of the
Director General and Secretariat is to support the member [countries]
in their work. They have no independent authority. The rules are
made by national governments reflecting the interests of their
countries. Those national governments are answerable to their
parliaments and national assemblies" (Q 1).
Or, as Mr Martin Wolf put it before Seattle,
none of the charges made against the WTO "is as mistaken
as the proposition that the WTO is undemocratic. The WTO is not
a Stateand cannot be judged by the standards applied to
States. It is something quite different: an agreement among States".
Its decisions are reached by consensus, and legislated by parliaments.
72. As it should be, the accountability of the WTO
is through governments, not through pressure groups representingor
claiming to representspecific interests, whether they be
the "social partners" (employers and trade unions) or
non-governmental organisations ("civil society"), whatever
they may claim about their legitimacy as compared to that of governments.
Clare Short was sceptical about the role of NGOs:
"We have got lots of
people from industrialised countries speaking on behalf of the
interests of developing countries who, in the words of the Minister
from Malaysia, are almost trying to save the developing world
I think the WTO is an instrument of greater
justice and that the rhetoric of the demonstrators was profoundly
wrong" (Q 525).
Professor JC McCrudden, Professor MR Freedland and
Dr ACL Davies of the University of Oxford suggest that the credentials
"should be scrutinised
with care. It is sometimes suggested that trade unions represent
the views of a 'labour aristocracy' and may fail to represent
some groups effectively: women and minorities, for example. It
is not clear how representative some Western NGOs are of the disadvantaged
for whom they purport to speak" (p 261).
Mr Giles Chichester MEP considers that "we should
resist attempts by NGOs and by single issue pressure groups to
claim seats at the table" (p 232). Dr Razeen Sally and Mr
Stephen Woolcock (of the International Trade Policy Unit at the
London School of Economics and Political Science) agree that the
WTO should remain an intergovernmental mechanism:
of them democratically electedare the only legitimate negotiating
and decision-making parties within the WTO. Direct interest group
participation, whether by business constituencies or non-business
NGOs, would be inevitably unwieldy and unrepresentative; it would
diminish, not enhance, democratic accountability" (p 281).
73. We were therefore interested in the composition
of delegations to Seattle. The UK delegation included three representatives
of social partners and NGOs
as full members, although they were not able to attend EU Council
meetings during the Ministerial Conference. As for the Commission
delegation, DTI initially told us that it had included no outside
representatives, but later recorded that
"the European Commission
decided less than a week before the Seattle Conference to offer
11 places as advisers on the Community delegation to business
(four places), non-governmental organisations (four places) and
social partners (from the EU's Economic and Social Committee)"
(Q 25 and footnote).
Mr Carl explained that the Commission itself decided
on the composition of its delegation. It had consisted mainly
of Commission representatives and members of the European Parliament,
with 6 or 7 so-called 'advisers' "at the end of the list
after a few little dots". They were identified on the list
of delegates by name only, but they were actually from
"the main trade union
organisations, the main employers' organisation in Brussels, the
European Services [Forum]
and three or four NGOs who had agreed within the larger group
of NGOs who were the ones who could be put on the list, so to
speak. The purpose of this was not to subvert the way in which
the Commission was being advised by the Member States in the Council
but to ensure that we had sectoral advisers readily available
I really must insist that the fact that we have close and
continuing contacts, not only with the European Services [Forum]
but with a host of other representatives of European industry,
agriculture, trades unions, NGOs and what have you, in no way
detracts from the fact that at the end of the day it is the Council
that decides what our negotiating mandate is. It goes without
saying, however, that we have to know what people in civil society
think and want" (Q 136).
He argued that it was crucial for the NGOs to be
involved in the process, rather than being out in the streets.
74. There is also a question as to who should take
the lead in the "dialogue with civil society" to which
the EU mandate refers. The mandate expresses appreciation "for
the efforts undertaken by the Commission in organising regular
dialogue with the civil society at European level".
We sought the Government's views on this. Mr Hutton said that
"it is mainly the responsibility of national governments
to remain in touch with their civil society" (Q 13), but
Mr Byers was not worried by interest groups lobbying the Commission,
because "in the end it is going to be Member States who have
to ensure that the negotiating brief that we give to the Commission
is [the] one that the Commission works to" (Q 536).
75. According to DTI, the WTO itself also has a role
in relation to civil society, especially in increasing transparency.
Mr Hoe Lim, WTO External Relations Officer, told us that the organisation
tried to be helpful, but the mandate given to the Secretariat
was only to provide information "about what has been happening
in a general sense in the WTO. That does not satisfy the NGOs.
What NGOs really want is a consultative mechanism and they also
want to have observer status in WTO meetings. We are not at that
stage" (Q 342). Mr Ouedraogo was quite clear that
"WTO belongs to the
governments and to the people, because all the accords are negotiated
and signed by the governments and ratified by [members of their
parliaments]. It means it is the representative of the people"
If NGOs had a point to make, he thought they should
do so toand throughtheir governments. Nevertheless,
as Mr Stoler told us, the WTO is open to dialogue with the NGOs,
"there are a lot of
people who are genuinely not interested in having that type of
dialogue because if the WTO is de-demonised their own organisation
may lose some of its legitimacy as a forum in which to attack
the WTO" (Q 486).
Dr Rorden Wilkinson (of the Centre for International
Politics, University of Manchester) makes a similar point in one
of the articles which he sent us:
"For civil society associations,
stepping into the committee rooms of the World Bank, the IMF and
the WTO presents both opportunities and threats. While it offers
the opportunity to influence policy, it poses the threat of being
associated with the very institutions towards which many civil
society associations have long been critical".
76. The NGOs ask for access, but naturally what they
really want is for their views to be adopted. Friends of the Earth
told us that they appreciated "the way that the DTI has reached
out to engage with civil society and with environmental and social
concerns over recent months"(Q 82), but their real wish was
that governments should "give due regard" to the input
of civil society (p 48). And the World Development Movement complains
that, although NGOs had had opportunities to meet Ministers and
officials, "there is little sign that NGOs have been listened
to in these consultations" (p 66). Sally and Woolcock,
on the other hand, argue that "policy makers
been pandering to a plethora of single-interest NGOs", rather
than exercising political leadership in favour of free trade (p
77. The question over the role of lobby groups applies
at least as much to those representing business and commercial
interests as it does to development or environmental NGOsindeed,
perhaps more so, given the need to show that the WTO is not a
"rich man's club". In this context, we examined carefully
the role of the European Services Forum (ESF).
This body was formed at the request of Sir Leon Brittan
when he was Trade Commissioner, in order to give input direct
to the Commission on "the real issues" (Q 222), and
it has a wide range of members (listed at p 130). Mr Andrew Buxton,
the Chairman of the ESF, explained that
negotiators really do not know very much about the detail of the
industry they are talking about, so that we were able to give
them chapter and verse on individual countries' positions"
We had some concern that direct advice of this kind
to the Commission might usurp the role of Member States governments.
Mr Buxton rejected this:
"I am absolutely sure
the Commission accepts its mandate from the governments, and actually
that is what has happened, but the Commission does find it useful
to discuss some issues direct with industry representatives"
He explained that the ESF did also meet the Article
133 Committee, and its members could and did also make representations
direct to their own governments (Q 240).
78. We also considered the reference in the EU negotiating
position to "the importance that close contacts be maintained
with parliaments". At present, the role of parliaments within
the WTO is only in relation to their national governments (or,
in the case of the European Parliament, to the EU).
Both CAFOD (p 228) and War on Want (p 292) suggest increased Parliamentary
oversight of the WTO through national parliaments. But Commissioner
Lamy has gone further, floating the idea that there might be a
WTO parliamentary assembly. Mr Carl commented that "anything
that one can do to demonstrate that [the WTO] is not a closed
opaque institution is worth pursuing", and said that proposals
for a parliamentary assembly had been put to the 133 Committee
(QQ 140-142). The Green Party supports the idea, provided that
it is not just "a fig-leaf", but notes that it did not
find favour with developing countries in Seattle (p 258). However,
the House of Commons Environmental Audit Committee did support
79. It is crucial for the voices of the social
partners and of the NGOs concerned with WTO issues to be heard.
We believe that they have been. It seems to us that the UK Government,
the EU and the WTO itself have been commendably open over the
issues, and that the complaints of NGOs about lack of transparency
must sometimes be interpreted as complaints that their lobbying
does not have the desired effect.
80. We naturally support the proposition that
the Government should involve Parliament as closely as possible
in its preparations for WTO negotiations, and there must also
be a role for the European Parliament. We consider, however, that
the establishment of a WTO parliamentary assembly would not be
likely to serve a useful purpose.
5 Here, and throughout, the "EU negotiating position"
quoted (also referred to in this Report as "the EU mandate")
is that adopted by the General Affairs Council on 26 October 1999
and confirmed by it on 15 November 1999 as the mandate for Seattle.
The text was re-confirmed by the March 2000 Informal Trade Council
in Oporto. Back
A term coined by Ricardo, who used the example that even if Portugal
could produce both cloth and wine with less labour than England,
if the advantage was greater in wine it would be "advantageous
for [Portugal] to employ her capital in the production of wine,
for which she would obtain more cloth from England than she could
produce by diverting a portion of her capital from the cultivation
of vines to the manufacture of cloth" (The Principles
of Political Economy and Taxation, 3rd edition, 1821, Chapter
WTO, Trading into the future, p 8. Back
"An independent research and advocacy organisation". Back
Defined by the United Nations as the 48 countries with annual
incomes in 1994 of less than $725 per capita. Back
Who refers to a wide range of (mainly econometric) studies (see
pp 242-243). Back
"An overseas development and campaigning charity founded
by the UK labour movement". Back
Though Zhen Kun Wang and L Alan Winters suggest caution in the
use of the conclusions from general equilibrium models, arguing
that the absolute sizes of their results "should not be taken
too seriously, and it should always be remembered that they reflect
their authors' assumptions and approximations. However, provided
they are carefully conducted and honestly reported, the results
of such exercises are useful in suggesting the relative importance
of different policies and in terms of highlighting broad issues":
Centre for Economic Policy Research, Policy Paper No 4, Putting
'Humpty' together again: including developing countries in a consensus
for the WTO, March 2000, p 7. Back
David Dollar and Aart Kraay, Growth is good for the poor,
March 2000 (unpublished, but available on the World Bank website). Back
A number of initiatives of this kind are discussed in 14223/99,
Commission Communication: fair trade. Back
WTO, op cit, p 4. Back
Evidence from Mr Michael Johnson, submitted through the World
Trade Law Association, p 253. Back
Which lasted from 1986 to 1994. Back
WTO, op cit, p 5. Back
Ibid, p 38. Back
In evidence submitted by Dr Caroline Lucas MEP on behalf of the
Green Party of England and Wales. Back
"The largest wildlife conservation charity in Europe",
taking "action for wild birds and the environment, with a
strong interest in conserving all biodiversity". Back
"The statutory body responsible for advising central and
local government on nature conservation and for promoting the
wildlife and natural features of England". Back
"A voluntary organisation involved in relief, development
and advocacy work". Back
Recently debated in the House of Lords: HL Deb, 19 April
2000, cols 752-789. As the Overseas Development Institute says,
"authors seeking to define globalisation
The common thread in most definitions of globalisation
is the idea that the world is facing a qualitatively new level
of integration in a variety of economic and non-economic spheres,
and that this is driven by communications and transport innovations"
(ODI Briefing Paper 2000/2, May 2000). Back
We recall the conclusion in paragraphs 102 and 113 of our Report
on Taxes in the EU: can co-ordination and competition co-exist?
(HL Paper 92, 15th Report Session 1998-99), where we considered
the possibility that joint action through tax co-ordination within
the EU might be a weapon against the erosion of sovereignty by
the "anonymous market place". Back
e-Commerce: Policy Development and Co-ordination (being
carried out by Sub-Committee B of the European Union Committee:
Report forthcoming). Back
"The world's largest professional services organisation". Back
It had indeed been hoped to achieve this in Seattle. Back
Who submitted evidence jointly with Lloyd's and the International
Underwriting Association of London. Back
The others being the International Bank for Reconstruction and
Development and the International Monetary Fund. Back
"The official aid and development agency of the Catholic
Church in England and Wales". Back
Which "represents the interests of UK food and drink manufacturers,
the UK's largest manufacturing sector".. Back
To be known as IPTES (the Intergovernmental Panel on Trade, Environment
and Sustainability). It would be able to receive academic advice
and input from civil society, would be advisory rather than decision-making,
and would have transparency built in from the beginning. Back
The UN Convention on Sustainable Development. Back
With the agreement of Member States, the Commission also takes
the lead in negotiations on matters where competence is shared
(see paragraph 164). Back
Though they do in relation to financial and administrative matters. Back
So called because it is appointed by the Council under Article
133 EC to assist the Commission in international negotiations
in relation to the common commercial policy (it was formerly known
as the 113 Committee, prior to the renumbering of Articles in
the consolidation of the Treaties which took effect after Amsterdam). Back
See paragraph 73. Back
In the context of the Biosafety Protocol to the Convention on
Biological Diversity (the Cartagena Protocol), already under negotiation
at the time of the Seattle Ministerial Conference, and subsequently
agreed in Montreal in January 2000. Back
See for example paragraphs 127, 204, and 212-213. Back
The group of large agricultural producers (including Argentina,
Australia, Brazil, Canada, Chile, Colombia, Fiji, Indonesia, Malaysia,
New Zealand, Paraguay, Philippines, South Africa, Thailand, Uruguay),
who are pressing for sweeping liberalisation of agriculture: see
paragraphs 130-139. Back
The difficulty has since been resolved by the appointment to the
chair in question of Mr Jorge Voto-Bernales, the Ambassador of
Peru, which is not a member of the Cairns Group. In reporting
this, the Financial Times notes that "by upsetting
the delicately balanced package of appointments, the EU has lost
the prestigious chairmanship of the body handling trade related
intellectual property issues to Singapore's ambassador" (9
May 2000). Back
Financial Times, 17 November 1999. Back
For example, Friends of the Earth claimed that "we hear from
civil society groups in Southern countries with concerns that
perhaps are not reflected by their governments within the negotiations"
(Q 66). As evidence that there were "widespread concerns
in civil society", Mr McLaren told us that the statement
for Seattle in which Friends of the Earth was involved had "sign-ups
from over 1400 groups in 91 countries" (Q 69). Back
Mr Donald Anderson (CBI), Mr Rodney Bickerstaffe (TUC) and Ms
Hilary Colby (chair of the UK NGO network). Back
See paragraph 77. Back
Though in fact it does not appear that the two were mutually exclusive
in Seattle. Back
For example, on 19 April Commissioner Lamy held a meeting with
"civil society and stakeholder representatives" (reported
on the Commission's website). Back
Though Clare Short said that she did have concerns about NGOs
in the development field having direct relationships with the
Commission (Q 536). Back
Rorden Wilkinson and Steve Hughes, "Labour standards and
global governance: examining the dimensions of institutional engagement",
Global Governance, forthcoming 2000. Back
Whose representatives gave helpful evidence to us on the liberalisation
of trade in services: see paragraphs 161-173. Back
Now Lord Brittan of Spennithorne. Back
Though there was an informal inter-Parliamentary session in Seattle,
on which the WTO Director General told the European Parliament
that he wished to build (WTO press release, 21 February 2000). Back
World Trade and Sustainable Development: an agenda for the
Seattle summit (Second Report, 1999-2000, HC45), paragraph