Europe's Trade Agenda at the WTO and the Positions of ASEM Developing Countries

01 September 2002
Article

Published in Asia Europe Crosspoints

Introduction

The European Union (EU) has a clear trade agenda vis a vis developing countries, that is to gain access to markets for their corporations. This trade agenda was in the past addressed through trade Rounds to lower tariffs at the borders. Increasingly, given that tariff levels are generally low, the barriers the EU are now targeting are 'behind the border' measures, such as domestic regulation which it perceives to be restrictive towards foreign companies.

The European Union uses several different complementary forums to attain their corporate driven goals. The World Trade Organization (WTO) is a significant arena, particularly given its role in setting binding multilateral trade rules with 'teeth' as a result of the WTO's dispute settlement body. The WTO provides the policy framework needed for EU's corporations to legitimately demand market access in other countries.

ASEM does not embody a comprehensive set of economic agreements. The EU wanted binding principles, for example on investment. However, the Asian developing country governments have so far resisted any framework of rules which are binding. A sensitive area for Asian companies is the issue of 'national treatment' and Most Favored Treatment (MFN). (1) Even those businesses who are open to the idea of having a binding investment code in ASEM do not want 'national treatment' to be given to foreign corporations as part of this code. Not surprisingly, the EU is using the WTO fora to pursue what they cannot in other channels, since national treatment and MFN are core WTO principles.

Over time, ASEM seems to have evolved into a 'space' where the ground is assessed, and prepared for the final adoption of binding rules on a variety of new issues at the WTO, on investment promotion, competition, government procurement and trade facilitation.

How ASEM Complements EU's WTO Agenda

The work done in the various ASEM foras complement the EU's agenda at the WTO in various ways:

  1. With the help of Asian governments, inside information into the Asian countries' regulation is presented on a silver platter to the EU. This is information the EU needs in order to sharpen its target on the exact barriers for removal they will pursue in WTO negotiations. This kind of information 'exchange' takes place through a variety of channels - the decision-maker's roundtable, business to business exchange program and various forms of dialogue between governments, and businesses. For instance, the ASEM High Level Dialogue in investment is aimed specifically at uncovering investment regulations, particularly those that result in 'obstacles' to investors going into the developing countries.
  2. Information is not the only outcome. Foras such as the Investment Exports' Group (IEG) are exercises aimed at putting governments under pressure to remove the identified 'obstacles'. Governments report on the 'progress' they have made in removing the 'obstacles' identified in the 'Consolidated List of Obstacles to Investment'.
  3. ASEM, unlike the WTO, is an arena where business and governments come together. This essentially provides European businesses with a direct 'lobbying' channel with Asian governments, regarding regulations they want removed, with of course the promises of more investment.
  4. Since ASEM does not institute binding rules, developing countries are probably more forthcoming in their interaction and more open to suggestions of ways to take on re-regulation for EU investment purposes. Once this has been done, however, it is much easier for the EU, at the WTO to encourage countries to be bound by these rules (either by accepting the new issues which target domestic regulation, or by liberalization through the GATS (which also covers domestic regulation).

ASEM: Mutual Advantage or Unequal Outcomes?

In ASEM, as in other trade arenas, engagement is done on the basis of 'mutual advantage' since Asian countries would apparently benefit from EU investment. Yet, given that it is EU's corporations that have huge export capacity and investment interests compared to the developing ASEM countries, the outcome of this engagement is skewed.

Furthermore, while the EU seems to be well-coordinated - their ASEM objectives and WTO goals are the same. The same does not apply to the Asian developing countries. This is due to the shortage of human resources allocated by many developing countries to deal with trade and investment issues. This lack of co-ordination benefits the EU, since they can obtain the kind of cooperation and information from their Asian colleagues in Brussels, which they would not be able to obtain in Geneva. Given the 'binding' nature of WTO negotiations, provision of information is seen in a very different political context.

The Asians are also less ambitious in pursuing agendas in ASEM compared to their EU counterparts. This is because the EU has never been a very attractive region for investment. Many Asian investors are not able to compete on the same footing with the Europeans. They generally do not possess the economies of scale, or the needed state of the art technology and sophisticated management and marketing skills. They do not therefore actively seek significant investment opportunities. They are more interested in obtaining technology and finance from European investors (perhaps through joint ventures) than breaking into European markets. (2)

The main thrust of this paper is to explore the EU's WTO trade agenda, particularly on the new issues of investment, competition, government procurement and trade facilitation, and the Asian countries' response to this agenda. We also briefly explore the on-going negotiations on the supply of services and the agricultural sector.

Coalitions

It is important to note that where trade is concerned, it is by no means a Europe versus Asian alignment. In fact, the EU is always aligned with Japan and also South Korea at the WTO on almost all issues, for example, the launching of new areas such as investment. (3) They have also adopted the EU's position on agriculture and multifunctionality.

The developing Asian ASEM countries also do not necessarily act together. Often, the position of Singapore, for instance, is different from the other ASEAN countries, as Singapore usually aligns itself with the developed countries. China is also somewhat unique in the position it adopts. While it has shown much sympathy towards those countries at the WTO pushing for a more development-oriented agenda, they are in a difficult position with regards to the 'new issues' (see post). Their acquiescence there seems to have been part of their WTO accession package.

EU's Real Agenda and the Underhand Strategies It Employs

In comparison to the United States, the EU is usually more sophisticated in the rhetoric it adopts. Particularly since the collapse of Seattle, it promotes its agenda at the WTO as being 'in the interests of developing countries'. This is ironic since developing countries' assessment of their own interests are the complete opposite.

However, in an old 1996 press release, the European Commission (EC) gave a brief insight into the Commission's real interests. It states that the Commission intends to 'sharpen' and 'refocus' its trade policy, 'making it more effective at opening foreign markets which European companies consider most vital to their exports'. This strategy will involve identification of 'the most stubborn obstacles in specific countries that are hindering trade and investment'. Following which, 'the most effective trade instruments' will be selected in order to ensure 'swifter, more coherent and more coordinated action to remove those barriers'. (4) According to an EC official, the 'European industry is highly competitive worldwide, and European jobs depend on foreign trade'. (5)

In order to ensure that its ambitious corporate-led agenda is accepted by the 144 WTO Members, the EU, together with the other influential Members, does not rule out playing an anti-democratic and non-transparent game in the process of trade negotiations, using strategies to marginalize and exclude the majority of developing countries in the manufacturing of a 'consensus'. (6)

Anti-democratic Processes in Trade Negotiations

The talks in the last Doha Ministerial are a case in point. The Least Developed Countries (LDCs), the African group, as well as some prominent Asian countries were opposed to agreement on new negotiations surrounding the areas identified at the Singapore Round, Yet, by holding Green Room meetings with about 23 countries (and therefore isolating those who were excluded), the EU finally secured agreement, which was presented to the rest of the 120 Members largely as a take it or leave it package. Post Doha, reports have emerged of delegates requesting admission to these Green Room meetings, but were refused entry by security guards because they were not 'on the list' - the Zimbabwean Ambassador to Geneva, Boniface Chidyausiku was a case in point. (7) There were also stories of some delegates - from Belize, Jamaica, Cuba, Zimbabwe- who were unhappy with the Ministerial Declaration, particularly the mention of 'negotiations' in the section on the Singapore issues (8), but were told by the Secretariat on the morning the text was adopted that it was too late to make any changes.

The EU and US have also been putting in place key personnel they trust and who will push through their positions in any negotiations. Take for example Stuart Harbinson, who chaired the General Council in the course of the preparations for Doha, and who played a dirty game. Despite major opposition on the General Council at the mere mention of a launch of new negotiations on the Singapore issues in the first draft declaration, Harbinson deleted the brackets on these issues in the second draft, indicating that there was consensus that negotiations should be launched when, in fact, there was none. (9)

The EU and the US have ensured that post-Doha, Harbinson continues this 'crucial' role. According to a European delegate to the WTO in Geneva, Harbinson had the 'moral authority' to pull off the Doha talks, which Charlene Barshefsky (the former US Trade Representative) did not have at the time of the Seattle Ministerial. Not surprisingly, in 2002, Harbinson has been appointed to chair the controversial talks on agriculture. More recently, it has been announced that he will take leave from the Hong Kong civil service and join the WTO secretariat as the Chef de cabinet of the WTO Director General's office as of September, 2002. There has been no indication that he will relinquish his position as Chair of Agriculture when he joins the Secretariat - again illustrating the point that influential Members are prepared to break all procedural rules in what is supposedly a rules-based international institution to get what they want. (10)

The politics of negotiations in which the EU is involved, is therefore not limited to the substantive issues. The EU also actively engages in deploying anti-democratic negotiation processes to secure its interests.

EU and Allies Refuse to Deliver on Doha Promises to Developing Countries

The aggressiveness by which the EU attempts to have fully-fledged agreements passed on the new issues will be dealt with below. However, it is also important to note that even as the EU tries to extract tremendous concessions from the developing countries, it has been faltering on promises it made in Doha.

For example, developing countries were promised that steps would be taken on strengthening Special and Differential Treatment provisions by the 31st of July, 2002. The EU, together with the US and Canada, instead recently postponed the deadline for decision-taking till the end of the year (in the same way that they have postponed dealing with 'implementation' (11) issues since before Seattle).

Similarly, the Doha Declaration requested the main importing countries (the EU, the US and Canada) to provide 'growth-on-growth' market access to developing countries whose exports were constrained. Certain decisions were to have been taken also by the 31st of July, 2002.

However, this too was postponed.

Together with other developing countries (12), China (in carefully worded language), warned that the foot-dragging by the more powerful members on promises made to developing countries could unravel agreements reached at the Doha. (13)

1. Investment

The Controversy Over the Doha Declaration and the Chairman's Interpretation

As a consequence of pressures placed on developing countries by the more influential members, the first WTO Ministerial in Singapore in 1996 established working groups on investment, competition and transparency in government procurement. Proposals for trade facilitation were also added as an issue to be explored, although no working group was set up. It was clear that the EC's intention was that these issues would be included as fully-fledged agreements in the WTO. Developing countries, particularly India and Malaysia were vehemently opposed to this. Since then, the pressure to conclude the work of the groups and move from discussion to negotiation on the modalities has only multiplied.

A variety of arm-twisting strategies were used against leaders of the LDCs and African groups at the Doha Ministerial. As the Ministerial took place shortly after September 11, the influential countries intimated that any developing countries standing in the way of agreement would be branded as a supporter of terrorism. Telephone calls at the highest level were made by developed country leaders to various heads of states of countries holding out on agreement. For example, it is well-known that the Commerce Minister, Maran of India received a call from Tony Blair while in Doha because Maran was taking a firm position against accepting negotiations on these Singapore issues.

Finally, a compromise of sorts was achieved. On all these four new issues, the Doha Ministerial text states: "we agree that negotiations will take place after the 5th session of the Ministerial conference on the basis of a decision to be taken, by explicit consensus, at that session on modalities of negotiations."

However, due to the unease of India and others, who requested that the word 'negotiations' be dropped, the Chairman, Qatar's Minister Kamal provided a clarification at the closing plenary at the Doha Ministerial as follows: "I would like to note that some delegations have requested clarification concerning Paragraphs 20, 23, 26 and 27 of the draft declaration. Let me say that with respect to the reference to an 'explicit consensus' being needed, in these paragraphs, for a decision to be taken at the Fifth Session of the ministerial conference, my understanding is that, at that session, a decision would indeed need to be taken by explicit consensus, before negotiations on trade and investment and trade and competition policy, transparency in government procurement, and trade facilitation could proceed."

"In my view, this would also give each member the right to take a position on modalities that would prevent negotiations from proceeding after the Fifth Session of the ministerial conference until that member is prepared to join in an explicit consensus."

Some analysts (14) feel that this clarification given by Minister Kamal and its endorsement by the meeting means that developing countries therefore have the right to stop these negotiations from being launched at the Fifth Ministerial in 2003.

EU's Interpretation

The EU, however, has a totally different interpretation of the Doha outcome. In subsequent discussions at the WTO, the EU has said that negotiations on the new issues are part of a complete and single-undertaking in the Ministerial declaration. No area of negotiations in this round would therefore be concluded, until negotiations on new issues are also concluded.

Most Developing Countries' Position

However, many developing countries, citing the Chairman's clarification hold that they were given an entirely different interpretation when they agreed to the clarification as a compromise in Doha.

Since the Ministerial, discussions on modalities have taken place in Geneva. However, many developing countries have reiterated that these talks are exploratory in nature, and by participating in them, developing countries are not committing themselves to any new agreements in these areas after the Cancún Ministerial. They repeatedly refer to the 'explicit consensus' that is required in Cancún if negotiations are to commence.

The EU's Investment Agenda

The EU, together with Japan and Korea, would like an agreement which would provide investors with high standards of investor protection, and eventually, with the freedom to invest anywhere and in any activity. In addition, any agreement would contain severe sanctions against restrictions placed on the free flow of Foreign Direct Investment (FDI) activity.

EC Rationale for an Investment Agreement

According to the EC, 50% of world trade today takes place between affiliates of multinational enterprises. If rules are devised for trade, there is no reason why rules should not be devised for FDI, which is supposedly an important generator of trade.

A large number of bilateral and regional investment agreements are already in place. However, the EU continues to find these unsatisfactory. The reason given is that investors apparently view them as inefficient and non-transparent, given the variations in treatment experienced by investors in different countries. Often, the production activities of companies are spread over a number of countries. Hence, the EUs argument for a basic, common framework which would be more convenient, and facilitate business interests.

Objectives

The EUs key objectives for investment are:

  1. The right of establishment for foreign investors;
  2. Universal recognition of the principle of most favored nation treatment;
  3. Universal recognition of the principle of national treatment;
  4. Investment protection - including matters relating to expropriation and the transfer of capital;
  5. Regulations relating to entry, stay, and work of key personnel;
  6. Abolition of performance requirements imposed by host governments on foreign investors;
  7. Multilateral rules on investment incentives;
  8. Binding rules on dispute settlement mechanisms.

Protection of Investors Abroad

The EU's main aim here is to improve the legal framework governing world-wide FDI, make the investment environment more predictable and reduce the risk for investors abroad. A key component would be transparency in domestic investment regimes (see post).

Non-discrimination and National Treatment between Domestic and Foreign Investors

Since the collapse of the MAI, the EC has been waxing lyrical on the importance of allowing the host countries to regulate the activities of investors, however, they have always referred to the WTO's basic principles as critical - national treatment/ non-discrimination. According to the EU, this would be the way to 'level the playing field' between foreign and local investors.

This essentially means that host countries would have the right to regulate foreign investors' activities in their own territory, but only to the same extent as domestic investors are regulated. This is serious problem for developing countries, since providing small and medium enterprises and multinationals with the same rights, would in fact amount to tilting the playing field in favor of the multinationals.

Scope of the Investment Agreement Which the EU Wants

In recent WTO submissions, the EU has also said that the investment agreement it wants should cover FDI, defined as direct investment in companies, and direct investment capital. The investor should also have a 'lasting interest' in a company based in another country's market. According to the EC, this definition excludes portfolio investments. The EC's preference is for a broad definition of FDI: 'The need to preserve the development objectives of host countries in a multilateral investment framework should not be addressed by merely narrowing the scope and definition but rather by including substantive provisions that allow all countries, and in particular developing countries, to pursue their development policies'. (15)

According to some global financial analysts, it is not always easy to differentiate between FDI and portfolio investments. There are some gray areas. The US, for example, is pushing for long-term portfolio investments to be included in the Agreement. This seems to be supported by the EU's call for a 'broad' FDI definition.

EU Seeks Transparency and the Removal of Domestic Regulation

The EC has also made it clear that in the international trade and investment area, transparency on host countries means the requirement of making available the relevant the 'rules of the game' in force in their territory. These cover the relevant laws and regulations, as well as the procedural rules and formalities regarding investment.

According to the EC, the lack of transparency in the rules and regulations governing investment was most frequently cited as the greatest hindrance to investment by 71% of the companies. Many developing country negotiators know that transparency, while seemingly innocuous, is the first step towards regulatory reform.

Bottom-up Investment Agreement

The EC, post-Seattle and post-MAI, has indicated that it would like a bottom-up, GATS (General Agreement on Trade in Services)-style approach to any investment agreement. This is quite a change in position from previous years, where the ECs agenda was postulated in a far much more direct manner. However, this bottom-up approach is proving not to be the most development friendly as developing countries, having far less export capacity compared to developed countries, are nevertheless put under tremendous pressures to liberalize their markets in GATS rounds of negotiations.

Performance requirements

The EU would like to see Performance Requirements (PRs) abolished entirely. PRs relate to terms imposed by national governments on foreign companies investing in the domestic market. PRs include terms under which locals are employed, the transfer of technology, environmental regulations, local content requirements, requirements limiting imports to the value of exports etc. Many developing countries have different views on the matter due to their development implications.

EU's Double Standards - Rules of Origin

Even as the EU is trying to eliminate performance requirements, together the US, it invokes 'Rules of Origin' jurisdiction to ensure that low-cost inputs sourced from outside the EU are not used by foreign investors in the manufacturing process, and that a high percentage of inputs are obtained either locally or from other EU member states.

For example, the EU has adopted high domestic-content rules of origin in the automobile sector and other industries, such as the production of photocopiers, printed circuit boards and telecom switching equipment. For example, in 1989, the EU abruptly changed the rule of origin to require that wafer fabrication for the production of semiconductors be manufactured within Europe. As a result, Intel invested $400 million in Ireland for wafer fabrication and semiconductor assembly lines. Even though wafer fabrication was not cost-competitive in Europe, compared to Asia or the United States, twenty-two fabrication facilities were set up in Europe within two years of the change in the rule of origin. (16)

Since the Uruguay Round, developing countries have been calling for the need to harmonize Rules of Origin. The harmonization process was supposed to have been completed by 1998, but remains unfinished due to the intransigence of key Members. This 'Rules of Origin' issue is of grave concern to many developing countries, particularly in the areas of agriculture, textiles, footwear and marine production.

Asian Developing Countries' Responses to the EU's Investment Agenda

There are many reasons why developing countries continue to resist the EU's investment agenda. At the 1996 ASEM, Malaysia's Prime Minister, Mahathir, was reported as saying that 'We think that it will not bring about a level playing field'. Thai Foreign Ministry officials were reported in Bangkok's Asia Times as saying that Malaysia, Indonesia and Thailand have opposed the EU proposals on investment, insisting that host countries should have the right to frame national laws regulating the activities and conduct of foreign enterprises. (17) Their positions have not change significantly since then.

Why A Multilateral Investment Agreement Does Not Bode Well for Development

Most developing countries do not want a multilateral Investment Agreement because:

  1. There is no direct correlation between signing up for an agreement on investment and receiving increased FDI flows. China and Malaysia have fairly strict regulations for foreign investors, yet have received the largest percentage of FDI among Asian countries.
  2. Research on FDI flows has shown that technological transfer and other spill-over benefits have taken place when FDI is carefully regulated and fits well into a host country's development program. In fact, if not carefully regulated, FDI could have the effect of 'crowding out' any investment by local firms.
    Research has shown that in the 1990s, the most far-reaching liberalisation of FDI regulation took place in Latin America, yet this certainly did not lead to the 'crowding in' of FDI. In contrast, Asia remained the most tightly regulated in the developing world but had had the strongest examples of 'crowding in'. (18)
    Other than China, increasingly the FDI flows into developing countries is in the form of mergers and acquisitions between foreign and indigenous countries. The best developing country corporations are being acquired by multinationals, although such mergers may not lead to the most efficient outcome. This type of M&A is not going to have a positive effect on development. According to UNCTAD, M&As account for 72% of all FDI flows to developing countries (excluding China). FDI that is in the form of an acquisition may not bring about an increase in the country's capital stock, output or employment. (19) In fact, it can even lead to asset stripping and unemployment.
  3. The principle of national treatment could lead to serious negative results. Large foreign corporations, when they enter a country, are already more advanced and sophisticated than domestic firms. In most developing countries, the local entrepreneurship risks vanishing altogether, if forced to compete with the global corporations under 'national treatment'.
    Given the critical importance of regulation, many developing countries feel it would be dangerous to limit the ability of host governments' power to direct FDI. Even free trade advocate Bhagwati has argued that FDI policies, such as performance requirements (which EU wants eliminated) is an area where 'host countries should be free to make their own choices, based on their own (even if often harmful) assumption about externalities and the spillover effects on their national economies'. (20)

Fighting It Out at the WTO

Developing countries are presently feeling the pressure from the EU. Even the WTO Secretariat, which is supposed to be neutral, is parroting the EU's line - the position that that negotiations will take place, and that the only issue to be agreed upon are the modalities.

Therefore, ASEM Asian countries (excluding Singapore) are having to remind their colleagues at the WTO that there will be no agreement until 'explicit consensus' has been reached in Cancún. While they will participate in the current discussions on modalities, according to one Southeast Asian negotiator, the message and strategy being adopted is:

  1. To make it clear that they do not want the new agreements (including competition policy) as currently drafted;
  2. To try their utmost to dilute the modalities of the agreement so that the proponents will not want the re-worked framework to be agreed.

Another Southeast Asian delegate at the WTO said that they were struggling with how to insert the principle of 'development' into an investment agreement (maybe because the two areas of development and investment are so fundamentally contradictory).

Some suggestions one ASEM member had about how to dilute the agreement included:

  1. Include exemptions to national treatment citing the GATS which provides some room for this.
  2. Allow for MFN Exemptions (21) - also adopted in the GATS. Any MFN exemption should not be time-based and should not be re-negotiated after a certain period.
  3. Any attempts to have rules on pre-establishment is a non-starter. Developing countries want to maintain the ability to screen incoming investment. (22)
  4. Adopt a code of conduct for corporations, although the worry is that this may backfire if also applied to domestic firms.
  5. Open fewer sectors to investment and competition because of development concerns.
  6. Demand freedom of movement of labor. The argument in GATS has been that if capital is mobile, people should also be allowed to move freely.
  7. There should not be any suggestion of 'progressive liberalisation', as in the GATS, so that the agreement mandates rounds of negotiations.
  8. Some governments (India and Brazil) are also thinking of throwing in performance requirements, such as local content, export requirements etc. as issues for debate.

Another Southeast Asian delegate to the WTO observed that in Geneva, positions between the proponents and those opposing were far apart. (23) However, she was not hopeful that they could sustain their opposition going into the Cancún Ministerial. She expects that in the end, the gap will be narrowed by 'political means', as had happened during the Doha Ministerial.

2. Competition Policy

The EU's Competition Policy Agenda

The EU is attempting to introduce the issue of competition regulation at the WTO. Japan and South Korea are also backing this. According to EU documents and statements at the WTO, the benefits of trade liberalisation may in fact be offset by 'private barriers' which engender uncompetitive practices. However, domestic competition laws often come to naught when faced with anti-competitive practiced at an international level. Some abuses may originate in one jurisdiction, but have their effects in another.

At present, bilateral cooperation only exists between industrialized countries, such as the EU and the US. The EU sees advantages to extending such 'cooperation' to include developing countries who are increasingly the object of anti-competitive practices.

The EU's Real Agenda

But multilateral agreements on competition rules already exist outside of the WTO ambit. For instance, developing countries initiated at UNCTAD in the 1980s, a non-binding legal instrument known as 'The Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices'. The absence of a multilateral framework on agreement is therefore not true. Why does the EU want yet another set of multilateral rules at the WTO?

The EU's real agenda for wanting a competition agreement specifically at the WTO, is again directly related to the WTO's principles of non-discrimination / national treatment. Critiques fear that what is supposed to be a pro-competitive agenda, may in fact become the leading instrument which the powerful trading Members would use to ensure that their corporations are treated as equals to local firms (despite their market power) - notwithstanding the fact that because of multinationals market power, an anti-competitive situation would develop.

This would not be the first time for such irony at the WTO. The Agreement on Anti-dumping, originally considered to be an instrument dealing with anti-competitive practices, has become the main policy instrument used, and abused, by the US and the EU for implementing anti-competitive practices. Only seven months into its Membership at the WTO, the EU had filed 90 anti-dumping charges against China. The cases are often dropped before they reach the WTO's dispute settlement body. Nevertheless, the intended trade damage has already been done, as managers are now attempting to find more 'stable' supply sources.

The EU's Competition Policy Objectives at the WTO

The key elements the EU is asking for in a multilateral competition regime includes the following:

  1. Core principles for inclusion in domestic competition laws. These would include transparency, non-discrimination (i.e. national treatment) and procedural fairness;
  2. Domestic competition laws should also include an undertaking to treat hardcore cartels as a serious breach of competition law;
  3. Modalities for voluntary cooperation;
  4. Support for progressive reinforcement of competition institutions in developing countries through capacity building.

The Core Principles EU Wants in Domestic Competition Laws

A Non-discrimination (National Treatment)

This is the most controversial area in the area of competition with which WTO Members are grappling. According to the EU, "there is a close connection between the WTO principle of non-discrimination and the basic objectives of competition law. Indeed, an effective competition law regime is essential to combat anti-competitive practices which deny to foreign producers effective equality of competitive opportunities, thereby undermining WTO market-opening commitments." (24)

In its 1999 submission to the WTO's Working Group on Trade and Competition Policy, The EU states that there should not be de jure discrimination, or de facto discrimination between local and foreign companies. Citing the GATS as having the clearest definition of national treatment, the document states that 'formally identical or formally different treatment shall be considered to be less favorable if it modifies the conditions of competition in favor of services or service suppliers of the Member compared to like services or service suppliers of any other Members'.

According to the EC, three sets of issues should be dealt with in such an agreement:

  • whether there are provisions under the competition law regime of WTO Members, including both substantive law and procedures, which imply formal discrimination vis-à-vis foreign enterprises;
  • whether the competition law regime of a WTO member is effectively equipped so as to address anti-competitive practices which deny to imported products (or to foreign firms established in the market) effective equality of competitive opportunities; and
  • whether in the actual application and enforcement of competition law, there may be instances in which de facto less favorable treatment is applied to cases involving foreign interests vis-à-vis similar cases which essentially involve domestic interests. (25)
  • B Transparency

    Again, as with the investment agreement, transparency is important for the EU and others to pressurize developing countries into removing legislation deemed to be anti-competitive.

    C Procedural Fairness

    Procedural fairness, or guarantees of 'due process' refers to the right of petition to competition authorities and/or the judiciary in competition investigations. It also includes protection of confidential information.

    D Hard Core Cartels

    These are typically groups of powerful multinational companies which keep their prices of goods and services artificially high by working together through bid-rigging, price fixing etc. The EU supports international efforts to put an end to hard-core cartel activity.

    Voluntary International Cooperation

    This could include setting up an 'information clearing house' on domestic laws, practices and developments. The EU has also suggested a peer review process, where other Members evaluate a country's competition legislation and implementation, as well as provide assistance. This peer review would be non-binding and voluntary. Some developing countries welcome this, but many do not, since they do not want even more scrutiny of their domestic legislation and further opportunities for the powerful trading members to exert more pressure.

    Progressive Reinforcement of Competition Institutions in Developing Countries

    The EU asserts that competition authorities in developing countries would benefit from better coordinated technical assistance and capacity-building. Post-Doha, much emphasis has been put on this area. However, developing countries remain skeptical about the effectiveness of such 'technical assistance'. (26)

    No Recourse to Full Dispute Settlement Facility

    There has been no suggestion so far that this area should be fully covered under the auspices of the WTO's Dispute Settlement Body. The reason for this softer approach is clearly because the powerful members, particularly the United States has no desire for an international body to make decisions on its anti-trust regime. The talk in Geneva is that the DSU could perhaps cover the implementation aspects (i.e. countries putting in place and implementing domestic competition legislation along the lines agreed upon multilaterally). This is blatantly unfair, since it would mainly be developing countries that would bear the brunt of disputes.

    ASEM Developing Countries' Response to the EU's Competition Agenda

    As many as 60 developing countries at the WTO do not have domestic competition legislation. Even amongst the 80 that do, there is huge diversity in terms of their understanding, capability, and ability to implement the vital functions of a competition policing authority. The dearth of experience rather than the lack of legislation is even more critical amongst WTO Members that lack legislation. (27)

    Most ASEM developing countries do have some form of competition legislation. However, there is no competition culture, and sometimes, such with the Philippines, no competition authority has been set up. Malaysia is currently in the process of putting in place its fair practices legislation. Only after that will a commission be established. Thailand has a new Trade Competition Commission. According to its WTO delegation, it is still grappling with its 'rather unfamiliar mandate'. (28)

    Some reasons why many ASEM developing countries do not want any multilateral competition policy are as follows:

    1. A 'one size fits all' approach is not appropriate. (29) Each country should be free to choose how to apply competition policy in a way that takes cognizance of the realities of the domestic economy and supports or enhances a country's development goals.
    2. A culture of competition often does not exist in most developing countries. These countries are therefore less likely to assert their rights even if a multilateral agreement is brought into force. They would also have to deal with heavy obligations mandated by such an agreement.
    3. Lack of institutional capacity. This issue was recently raised by Thailand as well as several delegations. The Thai delegate highlighted four types of obstacle the country faces:
      1. Lack of human resources with adequate technical knowledge in this area;
      2. Financial constraints;
      3. The absence of legal norms, such as the absence of definitions of key concepts such as the abuse of market dominance, and the poor enforcement of rules and regulations, or the unclear application of these rules;
      4. The lack of case handling procedures. Procedures have not yet been put in place with regards to fact-finding, public hearings, conflicts of interests and the classification and disclosure of documents.As Thailand underlined, meeting these needs would 'require long-term assistance over a period of years, in the local language'. There seems to be some doubt as to whether existing technical assistance programs are adequate or sufficient. (30)
    4. The main reason why developing countries are opposed or very reluctant to agree on a multilateral competition policy is due to the threat of having to provide national treatment to foreign corporations, as well as to foreign produced goods and perhaps even services. (31) Together with the investment agreement, such a competition agreement would eliminate the remaining policy space available to domestic governments, to support and develop indigenous industries.

    One negotiator from Southeast Asia, familiar with the type of political games played out at the WTO commented that the current focus on international hard core cartels as the substantive issue to be covered by such an agreement is in fact only a hook to lure developing countries. Eventually, it will not be easy to distinguish between domestic hard core cartels and international hard core cartels.

    3 Technical Assistance

    The EU's Empty Carrot?

    The Doha Declaration is full of nicely worded promises of technical assistance. The United States and Europe, since Doha, have targeted their technical assistance programs towards the 'new issues', clearly intended to ensure agreement from recipient countries at the fifth Ministerial on the launch of negotiations.

    Many developing countries, not surprisingly, are suspicions of this outpouring of support. While no developing country will refuse technical assistance offered to them, they see this ploy by the EU and other Quad members (US, Canada, Japan) as nothing more than a carrot. Some developing country delegates to the WTO in Geneva have informally made the following observations: "There has been, what I call, a 'carbonization' of technical assistance and capacity building. Technical assistance and capacity building are used to make palatable and acceptable something I may not have accepted in the first place. But this is not what it should be for. Technical assistance and capacity building are to empower me to achieve my objectives that I had in the first place. That element, I think, is unhealthy. No developing country can say that it doesn't want it, and this makes it even more dangerous."

    It is now extensively used as a persuasive technique'. (32)

    Another delegate, echoing similar sentiments said, "Everywhere, technical assistance is highlighted. That will be used for you to agree to negotiations. Yes, you will have workshops, regional seminars and policy analysis. But who is going to assess, whether in fact, consequent to this technical assistance, countries are ready for these agreements? That is how it is going to come up in the next Ministerial. They will say, we have given you so many millions in technical assistance. Now you are ready for negotiations in new issues. This is tricky. If it is really going to help, yes, we have workshops, but workshops to understand what the policy implications are, to evaluate whether or not we have the institutions in place, what the plus and minuses of the treaties are..." (33)

    The first working group meeting (23-24 April, 2002) on competition policy post-Doha, for example, focused on technical assistance and capacity building. After the EU stated what forms of technical assistance it intends to provide, India raised queries which clearly illustrates the problems many recipient Members have had with T.A. i.e. it is a donor-driven, one-off event without follow-up and with no real impact on building up long-term institutional capacity in the recipient country. India asked:

    • Could the resources which would be made available for different forms of technical assistance and capacity building be adequate, timely and for a sufficient period of time so as to enable countries at different stages of development to gain adequate experience and create adequate capacity?
    • How exactly would the needs and development objectives of developing and least developed country participants be taken into account, so as to avoid a donor-driven process?
    • Would such a process include creation of an organization that would coordinate capacity building and technical assistance provided to developing countries on a regular basis but at the same time maintain an 'arms length' relationship with donors?

    India concluded with the statement that: "Developing countries had little knowledge of what a multilateral framework on competition policy would entail. Therefore, it was perhaps too early to state comprehensively what their technical assistance needs were. An iterative exercise of training in various aspects is unavoidable. As technical knowledge improves, the need for understanding more issues would correspondingly increase and it would be necessary to provide for such additional training." (34)

    Clearly, building up human resources and institutional capacity is more complicated than the forms of assistance the EU has outlined. It seems unlikely that in a short span of two years, developing countries would suddenly possess the institutional capacity in investment and competition issues, and be ready for negotiations at the Cancún Ministerial.

    4 Government Procurement

    The EU's Agenda

    Government procurement of goods and services is the term used for the purchasing activities of governmental authorities and countries. It covers everything from pencils and paper clips to computer systems and telecommunications equipment and consulting services. Typically, this accounts for 10-15% of GDP for developed countries, and up to as much as 20% of GDP for developing countries.

    Government procurement has been specifically exempted from WTO agreements. There is however, a plurilateral WTO agreement on this issue, which only applies to the signatory countries - the EU and a dozen or so countries.

    In talks in Geneva, developing countries have made clear the need to protect this sector, since government procurement is one of the few policy tools now available for developing countries to pursue their socio-economic and development objectives.

    However, precisely because of the significant markets involved, the EU and US would like to see this plurilateral government procurement agreement become a multilateral agreement. Such a step would increase market opportunities for their own firms. So far, the Agreement sought has been couched as a 'Transparency' Agreement with no consequences on market access. However, internal EU documents produced by the Commission after the Singapore Ministerial (where the Working Group on Transparency in Government Procurement was established), left no doubt that the EU sees this as a first step towards finally eliciting market access in government procurement. (35)

    According to the Doha Declaration, there will be explicit consensus at the Fifth Ministerial to decide if negotiations on this issue will proceed. According to trade analyst Chakravarthi Raghavan, the EC is attempting to get negotiations started at the coming Ministerial, 'and then, as happened in the Uruguay Round (and at Doha), to change the mandate and scope of negotiations as they went along'. (36)

    The major issues put on the table by the most powerful trading members in relation to government procurement are:

    • Definition and scope;
    • Procurement methods;
    • Information on national legislation and procedures;
    • Information on procurement opportunities;
    • Tendering and qualification procedures;
    • Time periods.

    Concerns and questions raised by developing countries at a recent meeting about the need to limit discussions to 'transparency' were met with the response by the EC, US and Switzerland that these concerns could be addressed in the actual course of negotiations! (37)

    The EC has also been at pains to suggest that it was agreeable to providing 'flexibility' and 'special and differential treatment' in terms of the obligations the EC might undertake in relation to 'transparency'. This is another WTO-style irony, since Special and Differential Treatment provisions at the WTO have been ineffective and promises at Doha to come to agreement on ways to instigate and strengthen Special and Differential Treatment provisions in general have reached stalemate because of the behavior of the most powerful members, including the EC.

    Another area of contention between the EC and developing is the issue of whether or not transparency would apply to all levels of government. Malaysia and Indonesia, for example, have stated that sub-central agencies and services should be excluded. India and others have noted that extending the rules to all levels of government would be too burdensome since in many large countries, governing bodies ranged from village and district levels, to state and federal levels. The EC, together with the US, has continued to insist on broad coverage.

    Some developing countries have also asserted that any WTO transparency agreement should carry no obligations requiring change to domestic laws and regulations. Again, this point has been disputed by the major players.

    According to trade analyst, Raghavan, it is clear that the EC and US are attempting to get WTO members to provide information for the benefit of their Multinational Corporations (MNCs), in order to enable them to tender for projects. Why developing countries should undertake these obligations in order to cut the costs for these MNCs is an important question. (38)

    5 Trade Facilitation

    The EU's Agenda

    This is yet another area where the EU would like a new agreement in the WTO to be forged. The Doha Declaration (read together with the Chairman's statement) implies that explicit consensus at the Fifth Ministerial will determine whether or not negotiations on trade facilitation will proceed thereafter.

    According to the EU, inefficient and unnecessary import and export procedures impedes trade flows. They hope that the WTO is able to look at ways to simplify, harmonies and automate procedures, reduce documentation, and increase transparency.

    The rhetoric is appealing: 'Everyone would benefit from a push to simplify trade procedures, cutting out unnecessary bureaucracy via modern methods...Traders both big and small would enjoy reduced costs and fewer delays, which means more competitive terms of trade...' (39)

    According to the WTO website, the average customs transaction involves 20-30 different parties, 40 documents, 200 data elements (30 of which are repeated at least 30 times) and the inputting of 60-70% of all data at least twice. With the lowering of tariffs across the globe, the cost of complying with customs formalities has been reported to exceed in many instances the cost of duties to be paid. In the modern business environment, traders want fast and efficient delivery of goods. The website also states that many small and medium size enterprises are not active players in international trade. The reason is not so much because of tariff barriers, but as a result of the red tape at the borders.

    The EU would like an agreement that would encompass the following elements:

    • Application of key WTO principles - non-discrimination, national treatment and transparency;
    • Harmonization and simplification of documents and data - so as to reduce delays and costs to traders and assist in the introduction of automated procedures;
    • Modern customs and management techniques - introduce modern customs techniques pertaining to pre-arrival processing, post-release payment, time limits for release etc.;
    • Automation and Convergence of Official Controls - Commitments to progressively introduce automation and to replace paper procedures for export and import. This is to speed up transactions, and allow for seamless integrated transactions between exporting and importing administrations;
    • Development - coordinated capacity building to strengthen human and physical infrastructure and improve import and export management in developing countries.

    However, behind these seemingly benign objectives of facilitating trade, is the real objective to curtail the remit of customs authorities' to question the transaction value declared by the MNCs of the North, and any attempts by developing countries to prevent unfair transfer pricing are curtailed.

    The issue has been on the table since the Tokyo Round, where EC and other Quad members attempted to push through 'rules' that would virtually disarm customs administrations of developing countries and to force them to accept as 'transaction value' the invoices of the transnational corporations and their agents. At the time, this was rejected by a coalition of developing countries. The Customs Valuation Code adopted in the Tokyo Round eventually allowed developing countries a certain amount of autonomy in demanding proof of the transaction value claimed. (40)

    The Uruguay Round and its agreements on Customs Valuation and Preshipment Inspection led to further curtailment of an importing country's right to challenge the transaction value of goods. (41)

    Current EC proposals to convert Article X (Publication and Administration of Trade Regulations) of the GATT into an Agreement on Trade Facilitation, is likely to place further limitations on developing countries' autonomy in this area. For instance, EC's recent submission states that Members should 'take administrative actions, decisions or rulings affecting importers or exporters where a legal basis to do so is established'. There should also be a provision for consultation between interested parties - both governments and private sector - on proposed new legislation and regulations, before these are implemented in order to ensure 'sensible regulation'. In fact the EC would like the establishment of a 'regular consultative mechanism' with private sector bodies. It also suggests that any notice which invites comment on proposed regulations should be accompanied by publication of the grounds on which the regulations are being made, as well as whether or not there are less trade restrictive measures available! (42)

    Developing countries at the WTO are indignant about being asked to take on such burdensome reforms - reforms which help suppliers from the developed countries. Malaysia has made it clear that no amount of rule making can build customs infrastructure in developing countries. (43)

    The point was also made by India that customs rules in developing countries differ to those in developed countries. The latter's imports and exports are generated through intra-firm trading between the regions. This is not the case for developing countries; hence the concepts, rules and formulae of the industrialized countries were not useful for developing countries. (44)

    The other major area the EC has not seriously addressed is the cost to developing countries to implement such systems, and whether, in cash-strapped countries with a myriad of other more immediate concerns, rule changes should take priority.

    6 General Agreement on Trade in Services (GATS))

    The EU's Agenda

    The European Union sees the GATS as offering the largest advances in the present new round of trade talks. The EU is the world's largest exporter and importer of services, with 26 per cent of world trade in services. The sector also accounts for more than two-thirds of the EU's GDP. The Doha Declaration established a timeframe within which negotiations in services will take place. The 'request phase', where Members request other WTO Members to liberalize specific services sectors, commenced on 30 June 2002. The 'offer phase', where countries outline sectors they are willing to liberalize and in what manner, should commence not later that the 31 March 2003. In theory, developing countries are not obliged to make any offers. However, in practice, they are likely to come under huge pressure to do so.

    The EC is aggressively pursuing its agenda. Since the request phase commenced, the EC has submitted requests to 109 WTO Members. These requests have demanded:

    • Liberalisation of basic services, ranging from water supply and power distribution to postal delivery services;
    • Unlimited access for European multinationals to all service sectors, anywhere from retailing to tourism;
    • The removal of specific restrictions which certain countries have imposed during previous GATS negotiations and which promote domestic development and limit the activity of multinationals e.g. setting limits on on the amount of land a foreign company can own. These are the specific issues the EU is requesting countries to liberalize.(45)

    The Battle Over Water

    Under attack from NGOs for requesting the liberalisation of basic services, the E, went on the defensive when its requests to other Members were leaked. The EC stated that: "Requests are being made on environmental services, but these do not touch on the issue of access to water resources and in no way undermine or reduce host governments' ability to regulate pricing, availability and affordability of water supplies as they choose". (46)

    However, according to a UK NGO, World Development Movement, this is an outright lie. The EC is seeking to reclassify the environmental services section of the GATS. This is to ensure that water distribution is clearly classified as a service and therefore covered by the agreement. The EC wants the first sub-section of this reclassification to read 'Water for human use and wastewater management'. This covers basic water supply. In their requests, the EC has asked for liberalisation in this area. (47)

    GATS and Investment: The EC Requests Removal of Restrictions on Foreign Investors

    The EC requests (based on the 29 requests that were leaked in May 2002) have especially targeted horizontal restrictions put in place by WTO Members. This is not surprising, since half of global FDI in the world is invested in the services sectors.

    If target countries remove their restrictions, they would be leaving their entire economic policy open to WTO challenge, including policies which are designed to promote the development of domestic enterprises. Some examples of these targets in ASEM developing countries include:

    • Malaysian laws outlawing land purchases if the intention is purely speculative;
    • Malaysian laws which subject foreign corporate take-overs to government approval.
    • Indonesian laws which oblige multinationals to form joint ventures with indigenous companies when they establish a presence in the country.

    According to Indonesia's GATS restrictions, foreign companies are limited to a controlling stake of 49% in any joint venture and they must work through/ with a local representative when setting up branches inside the country. (48)

    EC's request has also included sector specific restrictions. For example, the EC asks for the removal of Malaysia's cap of 51 per cent foreign equity participation in the insurance sector, a cap that had been deliberately put in place in order to allow local insurance companies the opportunity to survive while allowing the giant foreign insurance companies to operate in the market. (49)

    The EC's aggressive approach in the negotiations calls into question its proposition that the GATS agreement is development friendly.

    Developing Countries and the GATS Negotiations

    The majority of developing countries at the WTO lack the capacity to deal with the many GATS requests they have received and which cover a myriad of sectors. Amongst the ASEM developing countries, there are varying levels of capacity. One Southeast Asian negotiator was certain that liberalisation of services would in no way benefit them. However, they found it difficult to argue their position in the negotiations due to the lack of information. In future, most of the GATS negotiations will take place at the bilateral level, and countries will be facing pressures in a one to one environment.

    Before the current 'request-offer' phase commenced, many developing countries had already asked for:

    1. A comprehensive assessment of the effects of liberalisation should take place before a fresh round of GATS negotiations takes place. The complete lack of assessment in the GATS makes it difficult for further liberalisation to take place. Despite the issue being raised many times by developing countries, there has been no political will by the developed countries to seriously commence such an assessment;
    2. The establishment of a 'credit' system where developing countries are, at the very least, acknowledged to have implemented some form of liberalization process. Countries felt that some kind of 'credit' should be given to them in the current GATS round, so that they can use this to have some leverage over the developed countries in the negotiations;
    3. The emergency safeguard mechanism should have been instituted. This is again in the GATS agreement, but deadlines for decisions on this have lapsed and the developed countries refuse to take concrete action on this front.

    One Southeast Asian delegate said that they had numerous received requests covering every type of sector. The delegation was very worried about the social and economic implications of implementing the requests, and was particularly anxious to put in place conditionalities on the provision of basic services so that the process of liberalisation would not put these services out of reach of the less advantaged.

    Given the nature of GATS as a bottom-up agreement implementing 'progressive liberalisation', these developing countries are not obliged to liberalize sectors merely because requests have been made of them. However, the extent to which countries can deflect pressures clearly depends on the wider political situation and whether other forms of pressure (e.g. IMF loan payments, debt-rescheduling, aid and market access etc.) are used as leverage by the EU to secure its objectives.

    7 Agriculture

    The EU's Agenda

    A further round of negotiations on Agriculture has been mandated in the WTO Agriculture Agreement.

    The Agreement on Agriculture has been widely acknowledged to have failed in removing protective subsidies to farming in the OECD countries. As a result of the many loopholes in the Agreement, OECD subsidy levels have generally risen since Uruguay Round. Developing countries' farmers have been hardest hit. As developing countries lowered their tariff, they left themselves open to dumping from subsidized OECD exports. Combined with the liberalisation policies of the World Bank and IMF many small farmers in the ASEM Asian countries - Indonesia, Philippines, (and most likely China in the near future) - have been plunged into an ever-worsening rural crisis.

    The OECD's subsidies (measured in terms of the Producer Subsidy Equivalent), for instance, have steadily increased from the Agreement's base periods (1986-88) $274 billion to the present $327 billion. The EU's own subsidy levels were $107.6 billion in 1999 and $97.9 billion in 2000. This slight reduction is due to fluctuations in world market prices, as well as currency movements, rather than to significant changes in policy. (50)

    The enlargement of the European Union is now generating an internal debate about the need to reduce subsidy levels. Tough fights are taking place between France, which is adamant about continuing to subsidies farmers and others such as the UK and Germany, which want more subsidy reductions. It is unlikely that the subsidy levels will come down. With the inclusion of the other Eastern European countries, they will most likely in fact increase.

    Export Subsidies ('Legalized' Dumping)

    Export subsidies are essentially legalized dumping. While dumping has been banned for non-agricultural products, it was 'legalized' in the Agreement on Agriculture because of its heavy usage by the more powerful members, particularly the EU. Almost 90% of all export subsidies used are provided by the European Union. However, US also provides support to its exports through other forms - such as export credit programs and food aid.

    One of points of disagreement at the Doha Ministerial was the fact that the EU refused to accept language in the text about the phasing out of all export subsidies. Eventually, the watered-down compromised text adopted was that governments would "commit ourselves to comprehensive negotiations aimed at:... reduction of, with a view to phasing out all forms of export subsidies",but this was "without prejudging the outcome of the negotiations'! (51)

    During subsequent talks in Geneva, the EU has asserted that: "the extent to which they were prepared to reduce export subsidies would depend on the rules or commitments affecting other types of supports for exports, such as export credits, food aid and support that could be provided through exporting state trading enterprises." (52)

    Domestic Supports

    The CAP is being changed from offering production linked supports to direct payments to farmers (US style supports). This is touted as being non-trade distorting. However, given that supports run into the billions, these will no doubt be trade distorting.

    The US also seems to be on the path towards increasing domestic supports, particularly given the Farm Bill that was recently passed, legislating an increase of $180 billion in additional supports over the next 10 years.

    Market Access

    The EU is one of the largest agricultural exporters, and therefore is interested in tariff reductions to order to gain more market access. While the EU is frequently announcing the extent to which it provides market access to developing countries, it hides the fact that this has not come about without huge costs to developing countries. Subsidized EU products have flooded many markets in the South to the detriment of farmers' livelihoods living in these countries.

    Non-trade Concerns / Multifunctionality -A Red Herring

    The EU is always raising the issue of multifunctional agriculture - agriculture is not to be completely marketised since it serves other purposes, such as protecting the rural landscape, rural development, the environment etc. These arguments have convinced many civil society /farmers groups within the EU. However, it has not convinced either governments or civil society groups from without. This is due to the contradiction between the practice and rhetoric of 'multifunctionality' and the reality of CAP subsidies.

    While multifunctionality is used to explain why agriculture needs to be protected, the EU in fact spends at most 5-10 per cent of its CAP subsidies on protecting the environment. The bulk of the subsidies accrue to the largest landowners in the Union. Furthermore, due to the dumping of subsidized produce, the EU, while attempting to protect multifunctionality at home, in fact destroys the 'multifunctionality' in the South - not only the environment, but also rural livelihoods.

    Developing Countries Get Trampled Upon as the US and EU to Join Hands?

    With the passing of the US Farm Bill, it looks as though the EU and US agendas are now more or less aligned. In the current agricultural negotiations, each will use the other as an excuse not to budge on the heavy dumping in which they both engage. The EU will target the US' export credit programs, as well as the Farm Bill, and the US will criticize the EU's export subsidies. If the Uruguay Round was anything to go by, a pact between the two giants and convenient for both of them will be the most likely outcome. It will leave the developing countries to suffer the consequences of another Agreement on Agriculture which legalizes and fully supports dumping by the more powerful members, resulting in the destruction of small farmers livelihoods in the South.

    From ASEM to the Approaching Battle At Cancún

    Developing Countries Disadvantaged in the Round of Negotiations

    As the trade agenda is being both overloaded and accelerated by the EU, and the US and its allies, developing countries are being increasingly marginalized in the negotiations. The very structure of negotiating a huge variety of very technical subjects simultaneously excludes effective participation by most developing countries, including those in ASEM. Many developing countries have missions in Geneva staffed by only a handful of persons and little or no technical back up from home.

    As developing countries scramble to barely keep up -the EU and its friends take this opportunity to seize the leadership of the negotiations and bring them to a rapid conclusion, with as few countries as possible participating.

    ASEM: Preparing the Ground for Cancún

    This is the broader context in which ASEM 2002 will take place. The real issue at this ASEM meeting, will be the EU's attempts to prepare the ground for Cancún and obtain consensus on agreeing to the new issues of investment, competition and government procurement.

    More intense efforts will take place in the coming year in ASEM to identify and dismantle domestic regulation in those Asian countries which prevent the easy flow of foreign investment, and which stymie 'competition'. ASEM may also become another fora for the disbursement of 'technical assistance'.

    Developing countries should better coordinate their positions between Brussels and Geneva and resist being coerced or bribed by superficial technical assistance programs or promises of market access. Giving up the last frontier of policymaking of protection for their domestic industries against the giant corporations will only lead developing countries' economies on a further downward spiral.

    References

    1 National treatment forbids governments from favouring their domestic sectors over foreign-based companies. MFN refers to the obligation to provide equal treatment to all WTO members.
    2 UNCTAD 1996 'The IPAP in the ASEM Co-operation Process and the Investment Environment', in 'Investing in Asia's Dynamism', Transnational Corporations and Investments, FDI Database.
    3 For instance, Japan used its influence over Indonesia before Doha to ensure that the Indonesian government would agree to the launching of negotiations in the new issues at the Ministerial. Japan had apparently signed an investment deal with Indonesia a week before the Ministerial, and one of the conditions was for Indonesia not to stand in the way of the consensus desired by the EU/Japan in Doha.
    4 European Commission Press Release, 14 February 1996 'EC calls for Sharper European Trade Policy', No. 9/96.
    5 Sir Leon Brittan, then EC Vice President, European Commission Press Release, 14 February 1996, No. 9/96.
    6 Consensus decision-making is the main mode of decision-making at the WTO. Voting is allowed when there is no consensus. However, it has never been used because of objections by the majors.
    7 Kwa, Aileen 2002 'Power Politics in the WTO: Developing Countries' Perspectives on Decision-making Processes in Trade Negotiations', forthcoming, draft version available at www.focusweb.org.
    8 'Singapore issues' refers to investment, competition, transparency in government procurement and trade facilitation.
    9 This process has been documented in Kwa, 2002 ibid.
    10 A fuller discussion of this issue on the WTO breaking procedural rules and Harbinson's chairmanship can be found in an article by Kwa, 'US and EU's Pointman Harbinson Appointed as Supachai's Chef de Cabinet in WTO', www.focusweb.org.
    11 'Implementation' issues refer to the imbalances for developing countries in the existing set of WTO agreements. This has been forefront on the agenda of developing countries since the first Singapore Ministerial, but the influential Members have been opposing any advances in this area.
    12 India, Pakistan and Brazil.
    13 Raghavan Chakravarthi SUNS #5174 5 August 2002.
    14 See Das, Bhagirath L. 2002 'The New Work Programme of the WTO', 8 April.
    15 EC 2002 'Doha Development Agenda - Trade and Investment, Concept Paper on The Definition of Investment', Submission by the EC and its Member States to the Working Group on Trade and Investment, 17 April 2002.
    16 Kumar, Nagesh 2001 'WTO's Emerging Investment Regime and Developing Countries: The Way Forward for TRIMs Review and the Doha Ministerial Meeting', Research and Information System for the Non-Aligned and Other Developing Countries (RIS) Discussion Papers, RIS-DP #14-2001, India.
    17 Third World Network 1996 'EU, Asia Differ on Investment Agreement', March 4.
    18 Agosin, M and Mayer, R 2000 'Foreign Investment in Developing Countries: Does it Crowd In Domestic Investment?' Discussion Papers, No 146, UNCTAD, February.
    19 Singh, Ajit 2001 'Investment-related Disciplines and the WTO: a Southern Perspective', South Centre, TRADE Occasional Papers 6, October.
    20 Bhagwati, Jagdish, 1998 'Interface between International Trade, Investment and Competition Policies, Outline of Keynote Address to the UNCTAD Seminar on Investment Policy, New Delhi, 15 July 1998.
    21 That is, not all countries need to be treated in the same manner.
    22 The right of countries to screen investment and be able to decide on whether a particular type of investment is allowed to proceed is a principle enshrined in the UN Charter on the Economic Rights and Duties of States 1974.
    23 This is not in the least surprising since these negotiators are the same people who were opposing the introduction of new issues before Doha.
    24 EC, 25 May 1999 WT/WGTCP/W/115 'Communication from the EC and its Member States: 'The relevance of fundamental WTO principles of national treatment, transparency and most-favoured nation treatment to competition policy and vice versa', Working Group on the Interaction between Trade and Competition, WTO.
    25 EC, ibid.
    26 See WT/WGTCP/M/17, 26 June 2002, Statement by India, 23-24 April 2002, 'Report on the Meeting of 23-24 April 2002', Working Group on the Interaction Between Trade and Competition Policy at the WTO.
    27 Intervention by Philippines in the Working Group on the Interaction between Trade and Competition Policy, WT/WGTCP/M/17, 26 June 2002, Report on Meeting of 23-24 April 2002.
    28 See WT/WGTCP/M/17, 26 June 2002, Report on Meeting of 23-24 April 2002.
    29 Statement by Philippines in the Working Group on the Interaction between Trade and Competition Policy, WT/WGTCP/M/17, 26 June 2002, Report on Meeting of 23-24 April 2002.
    30 Such an intervention by Thailand has also been echoed in various ways by other developing countries. The main aim seems to be to point out to the EU that provision of technical assistance between now till the next Ministerial is not adequate for countries in Cancún to agree to a multilateral competition policy. Institutional capacity building requires a 'period of years'.
    31 Whether services should also be included is currently being debated. India has said that services should not be covered since it is already covered under the GATS.
    32 Kwa, Aileen 2002 'Power Politics in the WTO: Developing Countries' Perspectives on Decision-making Processes in Trade Negotiations', forthcoming, draft version available at www.focusweb.org.
    33 Kwa, Aileen 2002, ibid.
    34 WTO, 26 June 2002, WT/WGTCP/M/17 'Report on the Meeting of 23-24 April 2002', Working Group on the Interaction between Trade and Competition Policy.
    35 See Raghavan, Chakravarthi, SUNS #5130, 3 June 2002, 'Trade: Behind the talks on transparency in government procurement', Geneva.
    36 Raghavan, Chakravarthi ibid.
    37 Raghavan, Chakravarthi, Ibid, Bridges Weekly Trade New Digest, Vol 6, No. 21 4 June 2002.
    38 Raghavan, Chakravarthi, ibid.
    39 European Commission, DG Trade, September 2001, Trade facilitation: towards better procedures.
    40 Raghavan, Chakravarthi May 2002 'WTO Goods Council Discuss Trade Facilitation', http://www.twnside.org.sg/title/twe281b.htm
    41 Raghavan, Chakravarthi, ibid.
    42EC, May 2002 'Trade Facilitation: Article X of GATT on the Publication and Administration of Trade Regulations', Communication from the European Communities, submission to the WTO Council for Trade in Goods.
    43 Raghavan, Chakravarthi, May 2002 ibid.
    44 Raghavan, Chakravarthi, May 2002 ibid.
    45 World Development Movement May 2002 'Leaked European Negotiating Documents Confirm WDM's Fears about the GATS'.
    46 Financial Times 5 July 2002 'EU Seeks Improved Access to Markets', by Michael Mann.
    47 World Development Movement, May 2002 ibid.
    48 World Development Movement, May 2002 ibid.
    49 World Development Movement, May 2002 ibid.
    50 WTO 2002, EU's WTO Trade Policy Review 2002, Report by the Secretariat.
    51 Paragraph 13 Doha Ministerial Declaration, 14 November 2001.
    52 Oral Report by the Chairman (Stuart Harbinson) of the Special Session, Committee on Agriculture, Negotiations on Export Competition, 20 June 2002.