After Doha

< http://www.hinduonnet.com/ >
WTO
Beyond Doha
Following the fourth ministerial conference of the World Trade
Organisation, the focus shifts to implementation issues.
SUKUMAR MURALIDHARAN


SINCE the fourth ministerial conference of the World Trade
Organisation in Doha in November, the prospects of a new round of
negotiations on a framework for global trade have hinged on the
resolution of a singular anomaly. WTO negotiations typically follow
the 'single undertaking' format, in the sense that a gamut of
agreements are concluded as part of a package that must be accepted or
rejected in their totality. Once the deal is clinched, there are no
piecemeal options available.

Yet the U.S., as the most influential voice within the WTO, has to
surmount a major legislative hurdle to participate meaningfully in
this single undertaking process. Under the U.S. Constitution, Congress
retains the ultimate power to regulate external trade and could amend
any deal that is reached within the WTO. This power of amendment can
be surrendered under a specific clause of the Trade Promotion
Authority Act, through the grant of 'fast track' authority to the
President. Once so authorised, the President can conclude bilateral
and multilateral trade deals on the understanding that Congress will
either accept or reject these in totality, and not press for piecemeal
changes.

Fast track authority was a top legislative priority for the George
Bush administration which took office in January. But Congress, facing
a multitude of sectional demands and the looming prospect of an
economic slowdown, was in a truculent mood. The House of
Representatives was scheduled to take up the legislation prior to the
Doha conference, but postponed a vote. On December 6, following a week
of hectic lobbying by the administration, the House approved fast
track authority by the narrowest of margins. The bill will now go to
the Senate, where approval is virtually assured by prevalent
supportive attitudes towards trade liberalisation. But the mood that
was manifested in the House provides certain indications of the U.S.'
likely priorities in the next round of trade negotiations.

Despite the intense efforts of the U.S. administration and the moral
halo of the war effort it is pursuing in Afghanistan, the vote in the
House seemed a lost cause till the very last gasp. Representatives
from the States of North Carolina and South Carolina, where textile
interests have a substantial influence, were insistent that they would
not allow the fast track vote to pass. They were joined by legislators
from States where citrus farming and steel manufacture are of crucial
economic importance. These largely conservative States tend to have
Republican legislators who were under pressure from the Republican
President and his floor managers in the House for a favourable vote.

Leading the charge against the grant of fast track authority were
Democratic legislators concerned about the overall impact of
multilateral trade agreements on employment. In the picturesque phrase
of a Democratic member of the House, for the people fast track
authority would only mean "a bullet train to the unemployment line".

Environment pressure groups constituted another strong lobby that
opposed the fast track authority. Between them the labour and
environment lobbies have ensured that there is a powerful constituency
within the U.S. to push for the inclusion of these factors in the
global trade negotiations process. This is an outcome that India and
all other developing countries had firmly opposed. And though the
ministerial declaration in Doha was ambiguous on this point, the
recent vote in the U.S. might be the prelude to the furtive
introduction of these elements into the WTO agenda.

Two legislators from the textile States made the final difference in
the fast track vote. One reserved his counsel till the end, determined
to cast a favourable vote only if it was indispensable to ensure
victory for the administration. Another changed his vote from 'no' to
'yes' just when Democratic members, sensing victory, were clamouring
that the gavel be brought down and the proceedings be declared closed.
The final outcome was 215 votes in favour and 214 against.

One of the key clauses that members from South Carolina and North
Carolina inscribed into the bill mandates that garment imports from
certain Caribbean and Latin American countries be made from fabric
finished and dyed in the U.S. The lobbying that was mounted by textile
interests provides an interesting retrospect on the U.S. stance in
Doha, when among the developed countries it alone chose to block an
outcome favourable for developing country exporters.

In August this year, before terrorism became central to U.S. policy, a
group of Senators had addressed a letter to U.S. Trade Representative
Robert Zoellick, insisting that "no further concessions" be granted in
textiles and clothing, "beyond those already agreed in the Uruguay
Round". The hardline attitude, they said, was necessary because of the
conspicuous "lack of reciprocity in... currently negotiated textile
agreements".

U.S. sensitivities on textiles cast a long shadow over the proceedings
in Doha, holding up progress along a broad range of fronts. A
coalition of developing countries has been arguing since the 1998 WTO
ministerial meeting in Geneva that the Uruguay Round agreements, which
went much beyond earlier such negotiations in terms of scope and
depth, needed to be reviewed not just for the compliance of various
countries, but for their impact in different areas. Notably they
pointed out that the agreement to dismantle restrictive import quotas
in textiles had first been worked out to the developing countries'
disadvantage and then been further vitiated in practice.

Variously, the U.S. and the European Union took the plea that to
review the Uruguay Round necessarily meant renegotiation - which could
only be done as part of a comprehensive new round of talks. This
rather reverential attitude towards the written text of the Uruguay
Round was quite remote from reality, since there are standing bodies
within the WTO which monitor compliance with various agreements and
undertake any other work that they might be entrusted by the
membership. The Council on Trade in Goods, for instance, monitors the
Uruguay Round Agreement on Textiles and Clothing (ATC).

Where the ATC was concerned, the developing countries had a
substantive grievance. The advanced countries which maintain
restrictive quotas only agreed most grudgingly to dismantle them in
accordance with a back-loaded schedule, that is, one which defers
almost half the job to the year 2005. And secondly, shortly before the
agreement came into effect, they notified a number of quota restraints
on items that were earlier free of such fetters. This constituted a
much larger bulk from which to begin the process of quota dismantling,
allowing them to simulate an elaborate pretence of compliance with the
ATC while remaining secure in old ways.

A few weeks before Doha, WTO Director-General Mike Moore seemed to
think it expedient to acknowledge the developing countries' concerns
on implementation. "Member governments have worked very hard on the
issue of implementation and there is a growing recognition that
implementation is central to our work. Developing countries have won,"
he said. But the trophy of victory he awarded seemed distinctly like a
poisoned chalice: "It is also clear that further efforts to rebalance
past agreements in any significant way will require new negotiations.
Implementation can thus become another key building block in our
future work."

At the mini-ministerial meeting held in Singapore in October in
preparation for Doha, U.S. Trade Representative Robert Zoellick put
the case with much less subtlety and guile. Addressing the
implementation concerns that had been raised by Commerce Minister
Murasoli Maran, Zoellick demanded that India pay a price to gain
further benefits in textiles and enter a new round of negotiations.

The draft decision on implementation that was circulated among
member-states prior to Doha embodied five proposals in the area of
textiles and clothing. Of these, three were mere affirmations of the
principles of flexibility, effective utilisation of provisions for
early elimination of quotas, and restraint in launching investigations
on exports from developing countries. These could be of benefit in a
longer-term context, particularly when - and if - developed countries
comply with the Uruguay Round timeta-ble and dismantle all quotas by
the end of 2005.

Of the two provisions of substantive economic benefit, one pertained
to small suppliers and least developed countries. The sole proposal of
interest to the other main textile exporters including India was one
that applied quota growth rates applicable for the years between now
and 2004, retrospectively to the year 2000. This meant that the
gradual acceleration of quota growth rates (the "growth on growth"
scenario) would be applied backwards, so that the current year would
yield a much larger base upon which to calculate quota entitlements in
the three years remaining before final dismantling of quotas.

Developing countries were insistent that neither of the two proposals
of immediate economic benefit involved an amendment of the ATC. Rather
they only implied that the flexibility available under the agreement
would be fully exploited in a gesture of good faith to the developing
countries. Zoellick, with the admonitions of the U.S. Congress ringing
in his ears, was not prepared to look at things this way.

On Day Two at Doha, the U.S. and Canada, which have generally been
adopting similar methodologies in dismantling textile quotas, placed
on record "significant difficulties" in accepting the draft decision
on textiles. With that the WTO ministerial meet lost a vital element
of flexibility, impeding progress across a broad front. In bilateral
interactions with delegates from other countries, the U.S. and Canada
took the plea that the proposal to abolish quotas on an accelerated
basis would put many jobs in their countries at stake.

Subsequent bargaining produced an agreement on referring the entire
matter to the Council on Trade in Goods. But the developed countries
had yet again squandered an opportunity to restore the faltering
confidence of the poorer nations in the WTO. The far more decisive
test will come in 2005 - significantly enough, the year following the
U.S. presidential elections - when quotas are expected to be finally
eliminated. If the recently manifested militancy of the U.S. Congress
on textile imports - not to mention labour and environment issues - is
any indication, then the prospects for the credibility of the WTO are
rather bleak.