Prospects
for WTO Trade Negotiations After Seattle: Foreign
Strategies and Perspectives
1
May 2000
The
views expressed are those of individuals and do
not represent official US intelligence or policy
positions. The National Intelligence Council routinely
sponsors such unclassified conferences with outside
experts to gain knowledge and insight to sharpen
the level of debate on critical issues.
Strategic
Estimates Program
Summary
In
a recent conference, trade experts identified three primary
reasons the World Trade Organization (WTO) failed to launch
a new trade Round at its December 1999 Ministerial. First,
leading members were unable to resolve differences on
critical issues prior to the gathering. In addition, many
developing countries and nongovernmental organizations
were more assertive than they had been at previous conferences.
Finally, in recent years, the WTO has expanded the range
of issues it addresses, which has made efforts to reach
a consensus on any point more difficult.
According
to the speakers, as a result of the acrimonious Ministerial,
the WTO has suffered a substantial loss of credibility,
which will impair efforts to launch a new Round in the
near term. There is no immediate alternative to strong
US leadership, and WTO negotiations will be more complicated
because developing countries and nongovernmental organizations
will be more inclined to resist trade liberalization efforts
that they believe do not advance their interests. Experts
at the conference offered a variety of assessments regarding
the course the WTO might choose to follow this year. The
majority argued that if the trade body is seeking to rebuild
confidence, it could continue with scheduled meetings
on agriculture and services and use the time to rebuild
confidence. A minority, however, held that the forum is
too fractured to make progress, thus talks would only
undermine the already declining prestige of the trade
body.
The
experts identified several long-run challenges that the
WTO will probably need to address to be an effective decisionmaking
institution, including:
Bridging
the developed-developing country gap
Costa Rica, Mexico, and South Africa generally support
trade liberalization and have credibility among
developed and developing states; thus they are in
a position to meld the interests of the two sides.
Enacting
institutional reforms
The organization's expansive agenda and large membership
require that it adopt policies that facilitate decisionmaking,
especially before new members such as China and
Russia join. The trade body may try to increase
transparency to promote greater trust in its procedures.
Also, to avoid protracted and bitter selections
such as the forum suffered last year, the WTO could
review its procedures for electing a new director
general.
Managing
the backlash against globalization
Supporters of freer trade could launch a massive
educational program to highlight the gains for all
countries from expanded trade and to counter the
dire assertions made by nongovernmental organizations
(NGOs).
Overview
In
the aftermath of the controversial WTO Ministerial
in Seattle that ended in December 1999, the National
Intelligence Council and the Department of State's
Intelligence and Research Bureau- in consultation
with the Economic Security Group of the Central
Intelligence Agency-hosted a one-day conference
of US Government officials, former trade negotiators,
academics, and trade experts to examine prospects
for negotiations this year. The conference addressed
three main topics. First, participants identified
the lessons that various countries derived from
the Ministerial. In the second session, attendees
examined how the lessons from Seattle and other
factors would combine to promote or discourage progress
on trade negotiations this year. The conference
concluded by looking further down the road to analyze
larger issues the WTO will face in its efforts to
be an effective decisionmaking body regardless of
its record on trade negotiations this year.
Session
I:
Lessons Learned From Seattle
The
experts analyzed what the Ministerial revealed about the
dynamics of international trade negotiations. In general,
they agreed on three primary factors that prevented the
Ministerial from launching a new trade Round.
Lack
of Major-Power Coordination
Perhaps
the single most important reason for the collapse of the
Ministerial was the failure of leading states to iron
out differences on key issues, such as agriculture, prior
to the conference. For its part, the European Union was
preoccupied with internal matters, which slowed efforts
to develop a unified EU position on WTO-related issues.
Another reason for the absence of coordination between
major players was, according to some participants, that
EU delegates consider resisting expansion of US influence
to be one of their negotiating objectives. Thus they will
challenge the US on trivial issues simply to complicate
talks. This tendency among EU states has become more pronounced
over the last year as the Eurodollar has established itself
in international financial markets and has begun to enhance
economic growth in Europe.
Participants
also expressed concern that many countries may not be
willing to commit to a new Round during a US election
year, fearing another failure should the United States
not show flexibility. They also have expressed concern
that agreements made by the current administration may
not be endorsed by the next.
More
Assertive NGOs and Developing Countries
Regardless
of the level of cooperation among industrialized countries,
developing countries and NGOs were poised to be more aggressive
than in previous negotiations.
- Developing
countries-even small states like Bolivia and the Dominican
Republic-were more assertive in part because the expansion
of the WTO agenda has increased the likelihood that
a member will find issues that it views as important
to its national economic interests. ASEAN countries
in the Cairns Group were disappointed with what they
perceived to be slow progress on agriculture and were
not inclined to discipline their developing country
partners. As a result, the already complex negotiations
became more tangled.
NGOs
are now more inclined to see the WTO as unrepresentative
of national populations, and the emergence of the Internet
has increased the ability of these transnational organizations
to coordinate their activities, publicize their agendas,
and mobilize support.
Although
panelists agreed that the Ministerial would have failed
even without the headline-grabbing demonstrations, NGOs
and developing countries now believe they have blocking
power within the trade body and are likely to continue
to be assertive in future negotiations. For example, recalcitrant
developing countries, such as Pakistan, have been emboldened
by what they view as their successful resistance against
US initiatives on labor and the environment.
The
WTO: A Victim of Its Own Success
The
WTO arguably has been the most successful post-World War
II multilateral organization, given the dramatic progress
in trade liberalization and expansion of trade. Consequently,
policies that have failed or languished in other fora
have been pushed onto the trade body by representatives
who want to see more progress. Chief among these is the
move to establish global standards for labor, including
the treatment of children. The WTO has even taken on issues
that have no formal representative body, such as those
concerning the environment. This "mission creep"
within the WTO, however, has left it with a sprawling
and unfocused agenda that makes reaching consensus extremely
difficult. To generate interest in the talks, the United
States wanted an agenda that had something for everyone
but was not so loaded that it became unwieldy. One participant,
however, noted that starting with a huge text that had
to be pared back created a dynamic in which many countries
felt as if they were having to give up positions. Another
speaker cited competition policy and investment as issues
that would be difficult for the WTO to tackle now. Some
presenters suggested that enhancing the role of other
international organizations, such as the International
Labor Organization on child labor issues, could help the
WTO consolidate its agenda and clarify its mission.
Several
panelists indicated concern about a severely weakened
WTO.
- They
argued that the protracted and rancorous election last
year of a new director general delayed the organization's
preparation for the December meeting. The election embittered
many members and made "green room" discussions-small
working group meetings of select members-in Seattle
more contentious.
The
WTO is in danger of losing the support of the business
community-traditionally one of its key backers-because
there are growing doubts in the business community as
to whether the WTO can deliver on its agenda.
During
the question and answer session, the most spirited discussion
centered on opportunities for the WTO to repair its damaged
credibility. The majority of speakers judged that discussions
on the built-in agenda could serve as confidence-building
exercise. They were concerned that canceling scheduled
talks would send the wrong message and could encourage
some countries to backtrack on commitments.
- A
vocal minority argued that the organization is
in grave danger because it lacks vision and direction,
and thus any talks this year are doomed to failure.
Consequently, launching a new Round this year
might not be fruitful, given the risk that any
negotiations would only further undermine the
tattered prestige of the trade forum. Instead,
key industrialized-country leaders might be better
served spending the year consolidating their domestic
support before moving forward with new talks.
Session
II:
Near-Term Prospects for Trade Negotiations
In
the next session, experts examined countries' views on
the prospects for progress on trade negotiations and signs
of flexibility in members' demands. The first presenter
declared that the greatest threat to progress this year
is a weak and divided Quad (a quadrapartite group comprising
Canada, the European Union, Japan, and the United States)
that invites irresponsible developing countries to try
to fill the political gap. Pakistan, in particular, is
becoming more assertive and is leading a like-minded group
of developing countries that is trying to delay and extend
deadlines for trade reform.
He
outlined a three-pronged strategy for reviving negotiations
that featured promoting alternatives to Pakistan, continuing
with scheduled talks, and moderating Quad positions. He
noted that:
- Several
emerging market countries-such as Costa Rica, Mexico,
and South Africa-generally support trade liberalization,
have credibility among both developed and developing
states, and thus are in a position to bridge the interests
of the two groups.
Although
significant progress on trade liberalization is unlikely
this year, continuing with the scheduled talks on the
built-in agenda could keep countries engaged and decrease
the possibility of a rollback of hard-fought reforms.
There
are steps Quad members could take to create a climate
in which developing countries are more willing to compromise;
in particular, Japan could relax its stand on multifunctionality
in agriculture; the European Union might choose to moderate
its position on agricultural supports; and the United
States could tone down rhetoric on labor and be more flexible
on antidumping. A
second expert analyzed the role of Japan in the WTO. He
argued that the Japanese delegation left the Ministerial
with a sense of relief and glee. They were relieved that,
because of the chaos of the conference, Japan was not
pressed hard on its multifunctionality position and had
not been put in a position of having to fold under US
pressure. At the same time, they were delighted that the
conclave had been a public relations disaster for the
United States, because increasingly Tokyo has been chafing
at what it views as Washington's triumphalism while Japan's
economy falters.
The
speaker also argued that Japan will continue to press
the United States to moderate its antidumping position,
but this objective is not as important to Tokyo as protecting
its agricultural position. Although last year Japan passed
its first agricultural law in 38 years-legislation that
emphasized the need for fairness in agricultural imports-it
is not likely to soften its position in the WTO. Instead,
Japan will probably seek a long-term alliance with the
European Union to blunt US pressure on agricultural liberalization.
Another
speaker gave a more sanguine assessment of the prospects
for progress on services. His thesis was that services
negotiations will continue as though Seattle had not occurred,
because of nearly unanimous agreement to work from the
Seattle text on services. The General Agreement on Trade
in Services (GATS) Council has been instructed to carry
out talks and work on market access-which was previously
relegated to the rules committee-can be taken up by the
council. There is also encouraging support for service
reform from emerging market countries such as India and
Pakistan. A concern, however, is that lack of progress
on agriculture might slow services talks given that several
members, such as Brazil, have said that they want strict
symmetry of progress between agriculture and services.
The
final presenter was optimistic about the potential for
progress on agricultural issues, despite the December
Ministerial. He reasoned that progress made during the
Uruguay Round on agriculture will not be forgotten. Japan
imported no rice prior to Uruguay Round concessions, but
subsequently was able to initiate unpopular reforms to
open domestic markets. He argued that the most significant
change since the Uruguay Round is that Japan and the European
Union now recognize that they need agricultural reform.
Because of domestic pressure, however, they will need
the cover of the WTO to implement reforms. This process
will take time and we are not likely to see much change
this year, but the prospects for success over the longer
term are good.
Luncheon
Address: Responding to Globo-Phobia
The
luncheon speaker described strategies industrialized countries
might employ to manage the backlash against globalization.
He asserted that earlier this year appeared to be the
perfect time to launch a new trade Round because the US
economy is strong, its strength is directly related to
steps the United States has taken to open up to global
markets, and the benefits of openness are being shared
across a wide spectrum of income classes. The Ministerial,
however, failed to launch a Round in large part because
of widely held suspicion of the consequences of globalization.
- The
public has a poor understanding of the benefits of transnational
markets and thus is easily influenced by a small, but
well-organized, minority of critics, largely from NGOs.
International
competition is displacing some workers who have been understandably
vocal in complaining that their jobs are going to foreign
workers.
Globalization
and the dispersion of power that accompanies it are viewed
as a threat to governance by leaders in many developing
countries.
Each
of these obstacles can be overcome, according to
the speaker. In particular, he contended, industrialized
countries could launch a coordinated education campaign
to make clear the benefits of globalization. The
effort could highlight the gains for consumers of
open trade and point out the large and growing number
of US jobs that depend on exports. The education
crusade would be most effective if it acknowledged
that keeping US markets open to international forces
will inevitably cause some workers to be displaced
in the short run. As the domestic labor market adjusts,
however, workers will have more stable employment
that will exploit US comparative advantages in production
and trade. Indeed, now is a good time to push forward
with globalization efforts because the adjustment
process is easier in a robust, full-employment economy.
Session
III:
Future Challenges
The
conference concluded with an examination of the issues
that will present the greatest long-term challenges to
the WTO's efforts to be an effective decisionmaking body.
One speaker outlined a broad list of obstacles the organization
will face.
- The
issues of labor and environment will continue to complicate
trade policy, especially for the United States.
Increasing
WTO transparency could help quell suspicions about its
decisionmaking process. Greater transparency and a rising
number of developing countries, however, will make efforts
to reach a consensus on any issue more challenging.
Institutional
reforms are needed to streamline the deliberative process.
Attempts early in the Ministerial to allow all parties
to speak created laborious, slow-moving sessions. In the
"green room" sessions during the last few days,
however, key countries representing regional blocs did
a poor job of coordinating discussions with their constituent
members. The WTO will be challenged to find a way to allow
all members to be heard so that they will support decisions
without making the talks so cumbersome that progress is
impossible.
China's
entry will make WTO decisionmaking more complicated but
not unmanageable. Beijing's performance in APEC suggests
that China will want to position itself as a leader of
developing countries but will not want to be seen as a
barrier to progress.
The
process for selecting the director general creates enmity.
The contentious election process last year undermined
chances for launching a new Round in December. Moreover,
the decision to split the term between Moore and Supachai
satisfied no one, and it ensured that Supachai- who remains
bitter toward the United States for not supporting his
bid-will be director general during critical years if
a new Round is launched soon.
The
next speaker followed with a somewhat more optimistic
assessment of the prospects for the WTO. He argued that
the recent decision on the Bio-Safety Protocol-albeit
outside of the WTO-has shown that participants can compromise
on a trade-related issue for the good of the group. The
decision on the United States-Australia leather case,
however, has set a disturbing precedent because the WTO
is forcing the losing government to take property from
a private industry to settle the case.
The
session concluded with a presentation that raised additional
concerns about challenges ahead for the WTO.
- Negotiations
on genetically modified organisms (GMOs) pose a unique
challenge to the WTO. The European Union has been leading
a campaign to caution consumers about what it sees as
the dangers of GMOs. As a result, consumer groups-which
have long benefited from free trade and supported liberalization-are
becoming concerned about the WTO's power and are leading
calls for protection.
Subnational
governments also pose a threat to further trade reform.
Nontariff barriers at the subnational level in countries
such as China will slow implementation of liberalization
policies on issues such as services and intellectual property
rights.
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