8:59 AM Sep 19, 1996

WTO HEAD ADMITS TO OPPOSITION TO MIA DRIVE

Geneva 18 Sep (Chakravarthi Raghavan) -- The head of the World Trade Organization, Mr. Renato Ruggiero, has acknowledged that there is resistance and opposition to his efforts to begin work on investment by putting it on the WTO agenda and start the process at Singapore.

Ruggiero, who first raised the investment issue on WTO agenda at a speech in Singapore in 25 May 1995, (where though in the context of the Marrakesh laundry list, he spoke of some aspects of trade and investment only) has been gradually expanding it and going around the world speaking about and promoting the investment issues and rules being taken up at the WTO. Till this week's informal Heads of Delegations meeting, he has tried to dismiss the opposition as coming from one or two countries, and based on 'some sovereignty' issues, as he put it in Ghana.

But speaking at Dublin to the Trade Ministers of the EU Wednesday evening, Ruggiero acknowledged a wider opposition inside the WTO to any negotiations on investment or even a study process, than his earlier speeches had indicated. He however combined this with the bogey argument that in the absence of a clear direction on the issue from Singapore, the WTO would be stuck on the sidelines while the most important future policy influences on the world economy are worked out elsewhere.

The EU Ministers had an informal dinner meeting Wednesday ahead of the formal meeting Thursday.

In his prepared speech, made available here by the WTO press office, Ruggiero stressed the 'central importance' of full and timely implementation of the Uruguay Round commitments, and spoke of the dispute settlement system as a "major success". He also spoke of the 'notification' problems and need for more technical assistance to the developing countries.

While the WTO and the industrial nations look at the notification problem of the developing world as a technical one that could be resolved through technical assistance, at several recent gatherings of Third World countries, including the Third World Network organized seminar (10-11 September), developing country delegations view it as a substantive economic and political one that needs more than technical assistance. Though the implication is for changes in the rules or other accommodations, they have been careful not to spell them out so far.

Ruggiero also spoke of the 'situation in textiles', and the concern of textile-exporting countries including the LDCs that the major importers were not always living up to the spirit of the Agreement.

This was a reference to the actual implementation of the ATC, as a result of which only one product, and in one major importer (Canada), previously under restraint had been liberalised and integrated.

The United States has announced its entire integration programme for the second, third and final stage, and this shows that nearly 50% by volume (and 80% in value) would be liberalised only on the final day of the ten-year implementation period.

The EU is yet to announce its second phase, but has began demanding that for providing genuine liberalisation and integration, developing countries should pay a price to enable the EU to implement its commitments by providing new market access to the EU in this sector - a demand that has been rejected by the developing exporters.

In the second stage, the EU has to integrate another 17% of the products into the WTO general rules.

Last week, the EU Commission said in Brussels that although the major textile exporters were not obliged (under the ATC) to offer quantitative reductions on their imports, unless this was done, the EU would merely include in the second stage of integration products where the EU has already voluntarily scrapped quotas.

This is an issue before the Dublin agenda.

The WTO head said that it was impossible to talk seriously about furthering a relationship of mutual confidence with developing countries, "unless the industrial countries are ready to act courageously in this (textiles and clothing) sector".

Developing countries, he said, were not seeking to rewrite the rules, but wanted a commercially more meaningful second integration phase, and were anxious about what the end-loading of commitments would mean in terms of pressures the importing countries would face when they finally come to be implemented.

"There is a case to answer here, and it is in the interests of Europe -including its textile producers - to be more forthcoming," said Ruggiero. He also spoke of the 'unfinished business' in the services negotiations, the 'trade and environment' question.

As for the future work programme of the WTO, there was already a built-in agenda and Singapore agenda here would consist largely of agreeing on implementing the commitments.

He then spoke of the work being undertaken in regional agreements, such as on investment issues, and said it was difficult to accept that what was possible in the regional context would not be possible in the multilateral system.

But since it is the Europeans who are pushing for the investment agenda on Singapore, it was not clear whom Ruggiero was addressing and chiding in his Dublin speech.

Investment, he said, was the first issue to be addressed in the work programme. He repeated the arguments he has been making in speeches around the world to promote the EU's investment issue at the WTO, and spoke of the 1160 bilateral investment agreements (most, if not all, devoted to protection of investments and not the right of foreigners to invest and establish) and that linking these together among WTO members would need 7500 treaties.

He did not say in whose interest such a linkage was needed -- for the host or the home countries?

He repeated the somewhat misleading argument of FDI growing more rapidly than trade and the sales of foreign affiliates of TNCs exceeding value of world trade, and the interest of all countries to promote a stable and attractive investment, which the multilateral system with its rules could provide.

Ruggiero then went on to say: "However it is no secret that the proposal to begin work on investment in the WTO is not universally accepted. Some countries oppose any suggestion of a negotiation, while others object even to the creation of a WTO working group to study the issue. These countries point to the mandate UNCTAD has received to examine trade and investment questions and their concerns clearly need to be taken into account."

The WTO head then spoke of the OECD continuing its work on MAI (Multilateral Agreement on Investment) negotiations "in which more advanced developing countries are taking an interest" and said he saw a danger that without clear direction from Singapore, the multilateral system could be stuck on the side-lines with some of the most important future policy influences on the world economy being worked.

The risk of competing rules and jurisdictions would be serious and so would be that of the poorer countries who at the moment receive practically no FDI and look to the multilateral system to help level the playing field.

This last argument of Ruggiero was squarely addressed by Tanzania at the TWN seminar here last week, as well as within the WTO and Ruggiero's Heads of Delegations meet where the Tanzanian ambassador, Mr. Ali Mchumo said that far from increasing the flows to the LDCs and the poorest countries, with a right of investment and establishment, foreign investors would go to other countries with available infrastructures where they could make more profits.

Ruggiero also said at Dublin that on competition and government procurement there were still significant difficulties, while on the issue of WTO rules, clarifications were needed as to whether "it is a highly political debate that is sought or one which focuses the discussion on a few specific rules."

The WTO head then went on to address the labour standards issue, repeating his formula about the four areas of common ground: core labour standards agreed to be everyone in the Universal Declaration on Human rights, recognition by everyone of the primary role of the ILO in this area, the need not to call into question the competitive advantage of low-wage countries, and statements of major proponents that trade sanctions were not envisaged.

Ruggiero said that he would be shirking his responsibility if he pretended that it would be easy to agree even on a statement on these four points. Some delegations, he said, argued that even a reference to these principles could be used as a justification for unilateral measures. Others he noted were arguing that trade sanctions were not envisaged nor was competitive advantage being questioned, why the issue should be brought up in an organization dealing with trade problems on a contractual basis.

There was here a problem of clarity which those wanting to see this issue discussed at the WTO could not afford to ignore, and that there remained a strong suspicion among many WTO members that it was a concern not so much to limit labour abuses as to limit competition from low-cost imports.

Some developing country diplomats in Geneva say that finding stout opposition from developing countries, including from the host country, to bringing up the issue at Singapore and setting up a working party or study group, a socalled compromise of a Ministerial political declaration or statement was being canvassed, and the reference to the core labour standards mentioned in the Universal Declaration on Human rights was being canvassed.

But one trade diplomat who did not want to be identified said that it had long been the contention of developing countries and many in the developed that the Rights in the Universal Declaration were indivisible and none could be singled out for priority over others.

There was hence no reason to single out the labour standards and leave out the other social and economic rights recognized in the Universal Declaration -- and some in the North could argue, or use it as precedent for the future, the civil and political rights too.