8:13 AM Aug 9, 1995

NO ONE DANCING A JIG NOW

Geneva Aug (Chakravarthi Raghavan) -- On 15 April 1994, after the Uruguay Round was finally concluded at Marrakesh, GATT Director-General Peter Sutherland, an Irishman, confessed to a feeling of elation and said he felt like climbing the table and dancing an Irish jig.

Sutherland was responding at Marrakesh to a question from a British reporter as to how he felt at the end of it all. His elation was not surprising. He had left a highly profitable private sector job to take up in July of 1993 the top job at the GATT, at the instance of the US and EU, to bring the negotiations, teetering for months on the edge of failure, to a successful end. He did, managing to get an accord by publicly cajoling and berating everyone, not less so the majors, and privately pressuring the negotiators.

Nearly four months earlier, meeting at official level in Geneva, when the Trade Negotiations Committee ended the negotiations by adopting all the texts of the agreements as a package, the ambassadors, senior officials and diplomats may not have done a jig, but were quite euphoric as they clinked glasses and drank champagne.

But by the time of the Marrakesh ministerial meeting, in the four-month interval when many of them from the South who were still negotiating tariff and non-tariff schedules and offers and concessions, discovered the fine-print in the schedules and concessions available to them, had become less euphoric.

Most of their Ministers spoke at Marrakesh of the imbalanced outcome and the sacrifices that the developing countries had made to conclude the negotiations successfully, but all of them still notched up as a major gain the fact that the old General Agreement (GATT 1947), as a provisional agreement, was being replaced by the World Trade Organization, and its "rule-based" multilateral system with its integrated dispute settlement that would uphold the rights of the weak against the strong.

But when the World Trade Organization came into being on the midnight of 31 December 1994 and 1 January 1995, it ushered itself in almost like a thief in the night, unnoticed and without any celebrations.

Failing to 'enthuse' the media and news cameras for a 1 January event, marking the occasion with Sutherland unveiling a new plaque and changing the name (from GATT to WTO) at the headquarters building at Centre William Rappard on the banks of Lake Geneva, the GATT press office and Sutherland had to settle for an "embargoed" photo-opportunity session before xmas recess - the old GATT plaque was removed, the new WTO plaque temporarily put in, pictures taken, and promptly removed until it could be put in again on 1 January.

Sutherland, while publicly beating the drums over the WTO as a "powerful" organization (privately, he was cautious about the future) -- and speaking of everyone gaining and no one losing, though it was clear that Africa would certainly be a loser -- to ensure the acceptance of the WTO by the United States, repeatedly insisted on the majors abiding by the letter and spirit of the accord and observing the rules.

And from April to December of 1994, the Preparatory Committee for the WTO, struggled to complete all the preparations, but ended up by taking decisions on only the minimum to usher in the WTO, and leaving many important issues, for the WTO and its bodies to handle.

But by the time the US Congress (in December 1994) had accepted the outcome and adopted the legislation to give effect to it, the reality between the promises and actualities had sunk into the minds of policy-makers, diplomats accredited to the GATT, and the public of various countries.

When the trade diplomats came back to work in mid-January (after the year end seasonable holiday break) to complete the many organizational tasks to get the WTO up and running, they found that while some things had changed, very much remained 'more of the same'.

With some considerable difficulty, reflecting the efforts of the United States and the European Union to establish control over the organization and its secretariat, the WTO managed to name a successor to Sutherland, Renato Ruggiero of Italy, who took over on 1 May.

Some trade diplomats, speaking on conditions of anonymity, suggest that many of the promises and commitments (from him and the majors) that brought about that election are beginning to be perceived now.

Under the old GATT, a provisional body functioning on a consensus basis, every contracting party was 'equal'. But in practice, to cite Orwell and his 'Animal Farm', some were more equal than others. The United States and the European Community were the two who wielded considerable behind-the-scenes power and influence.

It was exercised through the secretariat where the top post had been held by an European since the inception of the GATT, and key posts of decision-making were held by their nationals, and the intergovernmental decision-making was informally made through the "green room" consultations of key countries.

The US and EU also took effective control of the entire process, meeting individual countries standing in the way of their proposals (minor and major) by calling in trade diplomats of individual or groups of developing countries involved and applying pressures - at Geneva, Washington and Brussels, and capitals of countries.

In the new setup this process does not appear to have changed, and developing countries seem more disunited and disorganized than before. Their small missions, and rapid turnover of personnel having to specialize and deal with a variety of issues, and capitals interested only in short-term trade gains or losses.

Sutherland, when he took over, announced a process of consultations among heads of delegations - and many who were not in the earlier 'green room' process welcomed it and lauded it as a very transparent and democratic decision-making one. But in fact it proved much less: the real negotiations and decisions were shifted outside, first to the United States and the European Union, then among the four quad countries (US, EU, Japan and Canada). In many of the other key negotiations in the rules areas - most of the negotiations were held outside in some missions. Only the final product agreed upon was brought before the informal heads of delegations meetings.

Three months in office, Ruggiero and his outlook and style are naturally different. But several trade diplomats say that standing up for the underdog, and espousing the developing world against the majors came naturally to Sutherland (with his Irish background) and Ruggiero, while making an effort in this area, still seems more likely to go along with what the US and EU seek.

While the WTO's new style is yet to develop fully, in his first exercise on this front, over the financial services negotiations in June (when the US was threatening to pull out), Ruggiero called in, separately, key groups of Asians and Latin Americans, but with the EU and US in each case -- effectively thus dividing the developing countries even further.

There were two views of this: one was that at the instance of the EU, he had held these regional meetings both to encourage the countries to "better" their offers if possible, but show to the Americans that nothing more can also be expected. The other was that with his EU Commission background, dealing with differing groups of countries with differing interests came easier to him.

Either way, if extended into future, it would accentuate the old "some are more equal than others" syndrome.

In terms of the secretariat and its manning, while there are now four deputies (one each from Korea, India, Mexico and the United States), trade diplomats say that the US and the EU are still exerting efforts to ensure that key divisions are under their control and influence.

The United States is now reported to be pressing for an American to be in charge of the legal division which plays a very important role in the dispute settlement process. Most panels are guided and influenced by the inputs and views in disputes coming from the substantive division of the secretariat and by the legal division.

The WTO's Dispute Settlement Appellate Body is yet to be constituted with seven members; the US is still insisting on two places for its nationals on the seven-member body, the EU also pushing for two from Europe. The appellate body, when set up, has to settle its procedures and functioning methods and is to have a secretariat, distinct and separate from the WTO secretariat so that it is not influenced by the WTO secretariat. In the recruitment to this secretariat division, the chairman of the Dispute Settlement Body is to be involved. There are again rumours of attempts to ensure that it remains in the hands of an American, European or from another of the OECD member.

On 31 July, when work at WTO recessed for the summer recess, the WTO bodies had still many loose ends to tie up in the internal organization of work.

In December 1993, Sutherland had spoken of the end of the GATT multilateral trade negotiations -- the last of many rounds launched by the General Agreement on Tariffs and Trade, 1947 through special ministerial meetings and declarations.

But he also stressed that with the WTO, as an international organization, was now the forum for negotiations among its members on all trade relations dealt with under the agreements annexed to the WTO, and may provide a forum among its members for multilateral trade relations.

This underlined the point that the WTO was a perpetual forum for negotiations, that with its many bodies dealing with various subject areas of agreements, and the built-in work programme, the kind of tensions and arguments on negotiations about negotiations would not be there, and these could be handled and resolved more quietly first at technical, and then the political level - the Ministerial sessions of the WTO every two years.

When he took over in May, Ruggiero spoke of the many new questions and a preparatory process for the Singapore meeting so that a package of issues could be agreed upon and decided.

Competition policy, WTO investment rules and the controversial social clause issues have been mentioned and flagged, and the US, EU and the WTO secretariat itself appear to be working to that end. The various remarks of Ruggiero on some of these questions could be read either way, with some leaning towards the US-EU views.

When the WTO's General Council met on 30 July and adjourned for the summer, its Chairman, Amb. Kesavapani of Singapore, left on the table a proposal or thought, for a preparatory committee to be set up under the Chairmanship of the WTO Director-General Renato Ruggiero to prepare for the 1996 December meeting at Singapore of the WTO's first Ministerial session.

But no one appears to have asked or commented in the formal meeting, why the old GATT habit of a preparatory committee has to be revived when there was an institutional framework for this in the de jure WTO agreement? It is not clear whether it was discussed informally and what was the position of key nations.

The WTO agreement, and the Marrakesh Final Act, have set out the agenda and work for the Ministerial Conference, including how any Member or Members could bring up new issues, propose changes in the agreements. The WTO General Council, functioning in between Ministerial Conferences is mandated to these many tasks with assistance of its numerous bodies of the WTO (the General Council, the Councils for Goods, Services and Trips). A Preparatory Committee could undercut these processes and bodies.

At Marrakesh, various Ministers had raised various issues that they thought ought to be addressed by the future WTO, but no agreement or consensus could be reached before or at Marrakesh. All of them were mentioned by the Chairman of the Marrakesh ministerial meeting as among those that could be pursued in the Prepcom and the WTO.

The establishment of a Preparatory Committee for Singapore Ministerial meeting appears to be part of the attempt of the US and the EU, and the WTO Director-General Renato Ruggiero to bring up new issues, and launch a new process of negotiations -- with several issues in a basket -- to create new agreements in the old (bad) GATT way, and forced on the developing countries.

A major claim when the WTO accord was concluded, and the WTO was launched was the emphasis on the 'rule based system', and the integrated dispute settlement mechanism and rules that effectively rule out unilateral trade actions and sanctions as in the U.S. S.301.

In pushing for an interim deal in financial services, even in the absence of the EU, a major argument advanced by the EU and the WTO officials has been that this multilateral accord on an most-favoured-nation principle provides a bulwark against US unilateralism or S.301 sanctions.

But the view that the US unilateralism would be at an end after the WTO's entry into force was shaken when in the hearings before the Congress adopted the implementing legislation, US administration officials, and leading Congressmen asserted the US right to pursue S.301 remedies.

Nevertheless, trade diplomats continued to suggest that this was largely for US domestic consumption.

But this was shattered when the US went ahead with US. S. 301 actions against Japan over their differences in the trade in the auto sector, and the two sides almost went over the brink in what could have been a costly trade conflict and trade war.

Both pulled back, just hours before the US announced trade sanctions were to bite. And while both sides claimed victory, and the Japanese suggested that US may now think twice before taking S.301 trade sanctions, the United States appears to be defiant, and seems set to pursue this path visavis atleast the smaller nations.

The US financial services enterprises that blocked a US acceptance of the accord, have already started pushing for the US bilaterally applying pressures and threat of US sanctions to get concessions from the major developing countries.

Apart from trade sanctions, the US has also been applying other pressures -- including political influence and threats and its influence in the IMF/World Bank boards -- to gain benefits for its corporations in the markets of developing countries of Asia and Latin America.

While the US system forces its administration and Congress to function "transparently", the EU with its more non-transparent decision-making is not above it either.

The WTO accord had been presented in 1993 as an important way of preventing a two-tier system, one for the generality of countries and members, and another (GATT plus as it was described then) among the OECD and select group of others with more privileges and obligations. Now there is already such talk; the trade minister of Canada, which in 1993-94 had pushed for the MTO (named as WTO in the final hours of December 1993) as a way of preventing a US GATT-plus initiative, spoke of such a WTO plus idea in Australia a few weeks ago - to enable higher level of commitments and obligations through accords and arrangements among some, involving trade and investment and other rights and obligations to adherents over and above the WTO system.

Plus ca change, plus c'est la meme chose -- the more things change the more they remain the same.