Apr 30, 1998

SOUTH NEEDS POSITIVE AGENDA TO FACE NEGOTIATIONS

Geneva, 29 Apr (Chakravarthi Raghavan) -- Any international negotiations is based on power and this will not be absent from the negotiations at the World Trade Organization, and developing countries need to be realistic, know what they want and put forward a proactive or positive agenda of trade liberalization, rather than adopt merely a negative stance UNCTAD Secretary-General Rubens Ricupero advised Wednesday.

Ricupero was opening a Third World Network Seminar for developing countries on current issues on Trade, the WTO and Developing countries, and placed his remarks in the context of the current macro-economic environment, the mood and situation of the industrialized countries and the differing perceptions and interests of developing countries.

In earlier years, he noted, the two major nations, the US and EC took the leadership and set the GATT agenda.

While it was not the occasion to deal with the current financial crisis and its causes, at the Paris OECD Ministerial meetings he had attended, it was clear that the crisis would have a strong effect on trade, and there will be reduction in rate of growth of world trade. The OECD in its report had made this point very strongly and categorically.

The financial crisis is also having an effect on patterns of trade. The OECD has noted that there would be a shift of $70 billion or more in the current account balances. The Asian countries were creating surpluses by cutting imports, while the OECD expects a booming US trade deficit.

Among the three major groupings, only the US was contributing strongly to import demand, while Japan is not contributing at all. Japanese trade surplus on current account, according to the OECD, is having a 'nuclear explosion' and according to data for February it had increased by 88 percent. Europe could perhaps make a modest contribution because of its recovery in growth.

The macro-economic imbalances among the three is now taking the situation back to the days before the 1985 Plaza agreement on currencies. It will have some effects on the relative values of the dollar and the yen and other currencies.

Another effect of the financial crisis has been a sharp fall in commodity prices. While oil price fall is also due to other factors, the average index of commodity prices of all categories have seen a sharp fall and prices are depressed. Current account deficits of the commodity exporting countries would grow, and it would affect Africa. 

Much would depend on whether there would be a prompt solution to the credit crunch in Asia. Revised data show that Korea, Thailand have shown surpluses but mostly due to import reduction. Most of the affected countries have been facing difficulties in getting credits for exports and imports of inputs and raw materials.

Much would depend on what happened in Japan which has now had the seventh package of economic stimulative measures since 1992.

There was a risk involved in terms of what would happen in the US economy and there is reaction on the trade front towards growing trade deficits. It is easy to persuade Congress and the public to accept deficits when the economy is growing, but not when conditions are not so favourable.

This macro-economic environment was reflected at the OECD in the attitude of the industrialized countries towards new trade negotiations. In that context it had to be borne in mind that the US administration had not been able to get fast track authority for trade negotiations. At a briefing at UNCTAD by one of the US trade experts, the difference between the administration's difficulties over fast track in the past, and the difficulty now was stressed and this would have serious implications for future negotiations.

The macroeconomic environment and its effects on getting a mandate for trade negotiations, Ricupero said, was reflected in the viewpoints of the US and EC, which came minutes apart, at the OECD meeting. 

Sir Leon Brittan for the European Communities called for the launch of a millennium round, broad in scope. And some of the EU members who took the floor translated this to mean that no question should be barred from the negotiations. The EC wants to see included in such a round trade and environment, trade and social issues, apart from other issues like investment rules etc.

The US Trade Representative, Mrs. Charlene Barshevsky was much more sober and cautious and reluctant to extend support for a new round. She said very clear that the Americans were not sure whether it would be necessary to have a more comprehensive round or whether the WTO should continue to make progress through sectoral negotiations or individual specific negotiations.

The differences among the two major trading nations about the scope of negotiations is no doubt due to their perceptions and nature.  

But whether there will be a full blown new round of negotiations or one based on the built-in agenda it would be difficult to predict at this point, the UNCTAD head said, but noted that it is due to the differing perceptions of the trading partners. Having successfully concluded at the WTO negotiations on information technology products, basic telecoms and financial services, it was perfectly understandable if the US did not feel the need for any new round, but rather seek progress in sectoral negotiations.  

Sir Leon suggested that the negotiations should be concluded within three years and not allowed to be protracted.

But as the past experience shows, it is difficult to set deadlines in these matters, Ricupero commented speaking from his experience as Brazilian negotiator in the Uruguay Round. 

In this situation, developing countries need to approach this matter realistically. An aspect to often forgotten is that power is an element in any negotiations, and it won't be absent from the WTO negotiations either. Power does prevail whether in conditionalities of the Bretton Woods institutions or soft power as elsewhere or market power. Any way these have to be taken into account in building up a strategy.

And whenever ministers are involved in negotiations, one has to take account of that too.

A second element is the differing interests, and hence differentiation among developing countries. This should not prevent however developing countries from taking a common view on systemic issues, and one of these would be decision-making.  

Recently, he said, the countries in the Latin American and Caribbean Group (GRULAC) wanted to have a seminar at UNCTAD to prepare for the negotiations. But one of the Latin American countries did not agree, and the group could not hold such a seminar. But countries interested then got together and held a meeting any way.

Differences in perceptions and interests of countries are a fact of life and countries acted on the basis of their interests. Some countries that have a strong interest on some issues would fight on that issue and even accept arguments that it is necessary to have a new round, since only then progress could be made on the issues of interest to them.

At Paris, Ricupero said, the WTO head, Mr. Renato Ruggiero, understood these very well and presented them frankly to the OECD -- about the reality of the preparations in Geneva. The OECD countries, he told them, should be under no illusion or naive that many developing countries were stressing their difficulties in implementing the existing agreements, and demanding technical assistance from WTO which had a programme to which only two or three industrialized countries were contributing funds, despite the rhetoric of support for technical assistance.

Ricupero said whether there would be a millennium round with new issues or a round on the built-in agenda, there would be negotiations started in 1999 and some decisions would be made by that ministerial meeting.

Ricupero recalled the way the decisions were made on the Draft Final Act of the Uruguay Round and at Singapore and said because of these in the preparations for the next ministerial developing countries were expressing concern and insisting on need for transparency and decision-making and discussions at formal meetings.

In terms of the future, one had to consider some major issues relating to the WTO.

The first he said was the accession question. The WTO had now a membership of some 130 odd countries, and 32 countries were seeking accession, and these included China and Russia. At the Beirut Arab meeting he had attended, it was evident that all the Arab countries are considering applying for accession.

At the moment a country seeking accession has to engage in prolonged negotiations, which is often tailor made for each. So far only two or three countries have been able to accede. To speed up the process some new initiatives would need to be taken.

In a few years the WTO would have some 160 or 170 members, and in such a situation how would the consensus rule function, and what proposals could be made to make the decision-making process more transparent in the future. This was an issue that needed to be faced. 

Developing countries should approach the future negotiations with a clear picture of what they want and have a proactive or positive agenda, rather than a negative one of what they want. In an institution with a culture of liberalization, only an approach based on a positive agenda and fighting for it would work. 

While some genius could always find a new issue, Ricupero doubted whether many new issues could surface. And in formulating a new agenda one did not have to reinvent the wheel.