Select Committee on Environmental Audit Appendices to the Minutes of Evidence


APPENDICES TO THE MINUTES OF EVIDENCE


APPENDIX 1

Memorandum from the Confederation of British Industry

CBI OBJECTIVES FOR THE 1999 WTO MINISTERIAL MEETING

I  BACKGROUND

  1.  The Confederation of British Industry (CBI) supports the World Trade Organisation (WTO) in its mission to ensure that international trade is fair and as free from restrictions as possible. We believe that, through this process of liberalisation, opportunities are offered to all countries to benefit from greater economic growth, to increase living standards and work towards sustainable development. Companies now operate in a world characterised by rapid change which raises new challenges. For example, innovations in the fields of both information technology and telecommunications technologies and improvements in transportation are accelerating the globalisation and integration of markets for goods, services and capital; and economic disruption causes uncertainty for companies as markets risk closure under protectionist pressures.

  2.  Therefore, we see it as necessary to:

    —  improve the predictability of the environment in which companies operate

    —  resist protectionism

    —  ensure that public opinion fully understands and supports open, liberalised markets and further liberalisation of trade and investment.

  3.  The third meeting of the WTO at Ministerial level will take place in Seattle from 30 November—3 December 1999 and will provide an opportunity both to review progress since the WTO's establishment in 1995 and also to continue to move forward the WTO's agenda.

  4.  The CBI believes that the Seattle meeting should make a formal decision to launch a new Round of trade negotiations, and take decisions in a number of other areas.

II  OBJECTIVES FOR SEATTLE

  5.  The CBI sees the following as prime objectives for the 1999 Ministerial meeting:

    (a)  The overriding objective should be for the Ministers of WTO Members to agree to launch a new comprehensive Round of multilateral trade negotiations to reinforce the legislative authority of the WTO, and to deter lapses into protectionism. This should include not only services and agriculture, which are already scheduled for new negotiations in 2000, but also industrial tariff reductions and provisions governing the treatment of direct investment (see paragraphs 20-24 below).

    (b)  The agreement by WTO Ministers in Geneva in 1998 on duty-free treatment of electronic commerce should be made permanent. Electronic commerce will be one of the largest contributors to the increase in world trade and actions to encourage it should be a priority.

    (c)  Agreement to increase and bind duty-free access to more developed markets for industrial products from the least developed countries, to enhance their chance to participate in global growth.

    (d)  Progress the accession to the WTO of new Members, especially but not exclusively, China which should include undertaking to participate fully in the new Round in addition to liberalisation in the context of entry negotiations. There are currently 135 Members of the WTO, some thirty applicants and a number of observers. The CBI supports accession to the WTO by the maximum number of countries able to meet the appropriate conditions for membership.

    (e)  Clarification by Ministers of the relationship between WTO rules and multilateral environmental agreements.

    (f)  Additional funding by the WTO and/or its Members for the development of expertise in the implementation and negotiation of trade policy rules in smaller and less developed countries.

  6.  A comprehensive Round is necessary to provide a basis for mutual benefit between the Members of the WTO and it should be time-limited and concluded by a single undertaking.

  7.  The CBI wish to see full and faithful implementation of all WTO agreements. We also attach importance to respect for the agreed schedules for implementation and review of agreements reached in the Uruguay Round.

  8.  The conduct of the new Round, which should aim to be of limited duration, should nevertheless allow for "early harvesting" on issues which do not disrupt the overall balance, or the continuation of negotiations on issues which prove to require longer. Where such cases are identified their treatment needs to be agreed by all parties and must not serve as an "excuse" for failure to agree on those issues which can be agreed in the time-limited negotiation.

  9.  The effectiveness of the WTO's dispute settlement mechanism has recently been brought under the spotlight. The CBI believes that there is scope for clarification and improvement of its provisions because, to be efficient, the multilateral trading system needs to have a strong, reliable, consistent and effective mechanism to settle international trade disputes.

  10.  In the increasingly globalised world in which companies operate, the need for increased co-operation between the WTO and other multilateral bodies (e.g. World Bank, IMF, UNCTAD, UNEP and ILO) is becoming evident. Such co-operation is necessary to ensure that developing countries can benefit fully from further trade liberalisation by developing capacity to implement WTO rules and participate in negotiations.

III  CBI PRIORITIES FOR A NEW ROUND

  11.  The CBI has given close attention to the possible components of a new comprehensive Round and has identified the following priorities.

(i)   Market Access/Tariffs

  12.  Successive GATT Rounds have already led to a substantial reduction in tariffs, particularly in the developed countries. The import tariffs of the European Union are generally already amongst the lowest in the world and, in practice, EU customs duties only fully apply vis-a"-vis OECD countries (EEA countries excluded), with developing countries enjoying duty-free access or very low tariff levels in the framework of preferential trade agreements. However, it needs to be stated that for certain sectors the maintenance of even a marginal tariff is still of great importance, especially in the bulk commodity area.

  13.  On the other hand, EU exporters continue to face high tariffs in other parts of the world, especially the major growth areas of emerging markets. In numerous sectors third counties still apply relatively high tariffs, with the possibility of increasing these within the limits of an even higher bound rate, thereby seriously damaging trade predictability and reliability.

  14.  Non-tariff barriers including technical barriers to trade also constitute obstacles to accessing the global market place where countries restrict trade by specifying standards and testing procedures which may prove overly costly as well as unduly restrictive. The current WTO Technical Barriers to Trade (TBT) Agreement contains a Code of Practice designed to encourage national standards bodies to adopt international standards wherever possible and to work towards non-discrimination and harmonisation.

CBI Position—Market Access/Tariffs

  15.  The CBI attaches great importance to improving access for goods to the markets of third countries through:

    —  bound reduction of high tariffs and in particular tariff peaks with a view to securing greater tariff harmonisation between countries

    —  binding of unbound tariffs at commercially acceptable levels

    —  improved geographical coverage of zero-duty sectoral agreements and sectoral tariff harmonisation agreements.

  16.  It is important that in a new Round all tariff reductions, either general or sectoral, become part of a single undertaking (i.e. part of a wider agreement accepted by all parties).

  17.  To obtain real market access, any tariff liberalisation process should also be accompanied by substantial progress to improve market access by elimination of existing barriers and prevention of the imposition of any new non-tariff measures.

  18.  The CBI are keen to see full, faithful and internationally consistent implementation of the TBT Agreement and negotiation for the removal of the barriers which remain. However, to be fully effective the TBT Agreement should be amended to keep pace with changes in how standards are developed, specifically to allow for democratically developed, internationally accepted sector schemes.

  19.  A report on progress from the WTO's TBT Committee is due in Seattle. National standards bodies should be encouraged to sign up to the Code of Practice whilst recognising that technical assistance may be necessary to help developing countries adhere to the Code. Mutual Recognition Agreements also provide a useful mechanism for reducing barriers to trade in particular sectors.

(ii)   Investment

  20.  All countries seek investment in their economies, desirous of the transfers of technology, skills and standards, creation of employment and opportunities for industrial development that it brings. Increasingly, access to markets involves investment in some form, but there are no global rules to complement those for trade in goods and services: market realities are, as a result, only partially reflected by existing WTO provisions. Investors seek markets which are stable, transparent and predictable to give them the confidence to take risks inherent in investing their capital.

  21.  Virtually all governments are involved in or contemplate regional trade agreements, which increasingly tend to cover investment as well as trade. They have also entered into bilateral investment treaties with other WTO Members, recognising that increasing numbers of countries find themselves not only hosts to inward investment, but also the source of foreign direct investment (FDI). These developments increase the risk of conflicting requirements being placed on companies, placing unnecessary costs on business and/or diverting scarce government resources. Removal, or at least the reduction, of these inhibitions to investment flows, improving levels of investment protection and transparency of national investment regimes would all add value to the existing situation, especially for small companies and countries; and provide a basis for future liberalisation.

CBI Position—Investment

  22.  The CBI attaches high priority to the establishment of a global regime for FDI, which is non-discriminatory, transparent, stable and liberal and we therefore advocate the commencement of WTO negotiations for an investment agreement. International provisions on investment, demonstrating commitment to multilateral disciplines cannot of themselves produce investment flows, but should aim to make positive investment decisions both easier and more likely: companies accept the obligation to comply with international law and the law in countries where they are to become corporate citizens, while governments, especially in developing countries, seek support to prevent their lowering of national standards or provision of costly incentives to attract investment. A multilateral investment agreement should not encroach on governments' right to regulate, nor on areas of policy such as labour or environmental standards which should be, and are being, tackled on their own merits in appropriate fora.

  23.  The Trade Related Investment Measures (TRIMS) Agreement is scheduled for review in the year 2000. Points emanating from its review combined with provisions of the WTO Subsidies Agreement relating to investment incentives and of the General Agreement on Trade in Services (GATS) relating to commercial presence should be absorbed into such a comprehensive investment agreement to ensure consistency of treatment.

  24.  We are aware that free access to markets for investment is not a realistic short term objective for the WTO. The investment agreement envisaged should nevertheless introduce the first welcome steps in the direction and include provisions on: a definition of investment; right of entry/establishment; national treatment; transparency/binding; transfer or repatriation of funds; non-interference in the management and operation of investment projects; incentives and disincentives/no lowering of standards; expropriation and compensation; dispute settlement; and future review/revision.

(iii)   Services

  25.  New negotiations on services (GATS 2000) will be launched in Seattle regardless of the scope of the comprehensive Round. Part of GATS 2000 will consist of further scheduling of commitments by WTO Members in specific service sectors, but a new comprehensive Round will also be a chance to improve the GATS as a whole and to review the place of services in the WTO structure. Services account for 60%/$210 billion of the annual flows of foreign direct investment and as such are essential for improving the economies of both developed and developing countries.

CBI Position—Services

  26.  Business supports increased liberalisation of services; the GATS negotiation should be included in a new comprehensive Round concluded by a single undertaking. More specifically we want to see, inter alia: the widest possible standstill commitments obtained, so that measures in force are not changed for the worse, with grandfathering of instruments and other established principles where necessary; a reduction in the number of exceptions and discriminations by negotiating away barriers to services trade, professional services and investment; and an improvement in the methods and techniques of scheduling, to achieve greater liberalisation in cross-border supply, consumption abroad, commercial presence and natural persons. If, as the CBI hopes, an agreement on investment is concluded in the new Round, investment aspects of the GATS must be consistent with it and preferably transferred to it. Service negotiations should also include consideration of the inclusion of postal and express delivery services.

  27.  Those countries which have yet to ratify and implement the WTO Agreement on Financial Services, December 1997 should be encouraged to do so as should full implementation of the WTO Agreement on Basic Telecommunications (especially in the context of electronic commerce).

(iv)   Agriculture

  28.  The WTO is committed to further negotiations on agriculture to begin next year and a Europe positively disposed to reform is vital if progress is to be made. In this context, the EU currently faces the challenges of: enlargement of the European Union; free-trade areas under discussion between the EU and third countries/regions; improving competitiveness in the single market; the resumption of WTO negotiations; capturing an increased share of growing world markets; and an expected surplus of agricultural products and the consequent budgetary problems which the Commission expects around the year 2005. These challenges are exerting pressure on the reformation of the Common Agricultural Policy (CAP).

CBI Position—Agriculture

  29.  There are significant opportunities for increasing the openness of markets and removing barriers to trade in the agricultural sphere and WTO negotiations on agriculture have the potential to influence how the other components of a new Round proceed. The CBI believes that the EU should engage constructively in WTO agricultural negotiations to ensure a truly global, substantial and balanced agreement whilst continuing to streamline the CAP.

(v)   Trade Facilitation

  30.  Trade facilitation has the capacity to greatly improve the operations of companies both large and small engaged in international trade. For these benefits to be realised, co-operation at the multilateral level is required in order to develop harmonised solutions necessary for traders to most effectively carry out international transactions.

CBI Position—Trade Facilitation

  31.  The CBI would welcome negotiations on trade facilitation being launched as part of the new Round. As part of these negotiations we would like to see: co-operation between operators and customs; "one-stop clearance" procedures; transparent arrangements; the use of accurate and reliable statistics; and simplification, harmonisation and computerisation of customs procedures. We also attach high priority to the full and effective implementation of WTO agreements, such as Customs Valuation, as important building blocks towards a framework of appropriate commitments in the WTO. The CBI supports WTO and World Customs Organisation (WCO) co-operation on these issues.

  32.  It also seeks to minimise burdensome administrative procedures in international trade and payments by utilising IT, electronic documentation and circumventing electronic smuggling. The IMF, of which 141 countries are members, requires under its Article VIII the elimination of restrictions on the making of payments and transfers for international transactions. The CBI supports, and is seeking within the EU, concrete proposals on all such measures aimed at trade facilitation.

(vi)   Trade and Environment

  33.  The WTO's Committee on Trade and Environment (CTE) has made a valuable contribution in examining the interaction of multilateral trade agreements and multilateral environmental agreements (MEAs) which may contain trade measures and also the role of eco-labelling. Trade and environment policies are, or need to be made, mutually supportive but it is not the task of the WTO to set international environmental standards - other international fora have the capacity to formulate international environmental agreements which can enshrine standards. It is the WTO's role to ensure that any such measures are compatible with WTO rules. Trade measures designed to protect the environment should not contravene the fundamental WTO aims of most favoured nation treatment and non-discrimination. Their goal should be the protection of the environment and not the protection of domestic industries. This is an area which needs urgent attention since, allegedly, the Basle Convention and Montreal Protocol both allow trade measures which contravene WTO's basic principles.

CBI Position—Trade and Environment

  34.  The CBI believes that the WTO should accommodate trade measures contained in MEAs, which address global environmental problems, by adopting an Understanding laying down a number of trade policy considerations and other suggestions which MEA negotiators should take into account (e.g. proof that the measure is necessary to achieve the agreement's environmental goal, including least-trade restrictiveness and proportionality, or, that the MEA seeks to solve a global problem, etc.) and then lay down the assumption that such widely agreed trade measures are presumed to be compatible with GATT Article XX (exceptions). Such an Understanding would have the advantage that WTO Members would not lose their right to initiate a dispute-settlement procedure against an MEA trade measure, the complainant however would have to prove that the trade measure was not compatible with GATT Article XX. The CBI believe that this is an area which could be resolved by Ministers in Seattle.

  35.  On eco-labelling WTO Members should establish that the TBT Agreement is applicable to national rules on eco-labelling. This would lead to notification of such rules to the WTO, and therefore to greater transparency and scrutiny. Clarification is also needed as to the extent to which private eco-labelling rules should be covered by the Agreement. The CBI also believes that the WTO should consider drafting clear and workable rules for border tax adjustment of environmental taxes which distinguish between product and process.

(vii)   Government Procurement

  36.  The WTO's Working Group on Transparency in Government Procurement, which was given its mandate in Singapore, gave a progress report in November last year and hopes to reach an agreement by Seattle. Meanwhile, the WTO Government Procurement Agreement is the subject of a review to be completed by the end of 1999.

CBI Position—Government Procurement

  37.  Transparency in procurement is vital. The CBI is very keen to see the Working Group reach an agreement on transparency by Seattle or shortly afterwards and to build on this adding market access conditions incrementally. The CBI wants to see the establishment of a truly multilateral agreement on government procurement. The WTO Government Procurement Agreement needs to be updated and we welcome its review.

IV  OTHER ISSUES OF CURRENT WTO CONCERN

(i)   Commercial Defence

  38.  WTO provisions on anti-dumping, export subsidies and safeguards are essential in underpinning the multilateral liberal trade regime. The CBI is against any attempt to weaken these provisions as part of a comprehensive negotiation.

(ii)   Trade and Competition

  39.  The CBI is committed to companies' ability to compete with each other in individual foreign markets on a level playing-field, taking full advantage of the expansion of international trade. The WTO's Working Group on the Relationship between Trade and Competition reported last year and the CBI supports its continuing educational role. We could support a set of principles within the WTO designed to shape national competition laws to prevent market foreclosure (improve market access) and to encourage developing countries, in particular, to draw up transparent and non-discriminatory competition rules. The terms on which co-operation arrangements between national competition authorities are devised in matters such as the exchange of information on companies are crucial; one must be safeguards for business confidentiality and against the misuse of information.

  40.  The WTO's dispute settlement mechanism, as currently constituted, should only be able to resolve complaints about the general operation of a national competition enforcement regime; it should not be able to act on individual rulings of competition authorities.

(iii)   Trade and Labour

  41.  UK business is strongly opposed to exploitation of child labour and forced labour, and supports active promotion of the respect of basic human rights. Adequate solutions need to be found in discussions between industrialised and developing countries to combat the non-respect of core labour standards throughout the world. However, the CBI does not accept the rationale behind calls for the introduction of a "social clause" into the WTO and moves to use trade policy to achieve social policy objectives by using trade sanctions. Such action would have serious negative implications for the multilateral trade system and not serve to improve social conditions.

  42.  The CBI believes that the International Labour Organisation (ILO) is the right international organisation for discussion of the impact of global labour standards; it has the expertise, it is more universal than the WTO, and has a tripartite constitution. Thus, we continue to support the WTO's Singapore Ministerial communique« which recognised the ILO as the competent body to deal with the observance of internationally recognised labour standards.

(iv)   Intellectual Property

  43.  The CBI attaches great importance to full and timely implementation of the Trade Related Intellectual Property (TRIPs) Agreement, noting the impending expiration of the transitional period on 1 January 2000 and that the TRIPs Agreement was one of the major achievements of the Uruguay Round. We welcome the joint WTO/World Intellectual Property Organisation (WIPO) programme to provide assistance to developing countries' implementation of TRIPs Agreement.

  44.  Since the TRIPs Agreement has its own built-in Agenda for review, a precondition for change must be to take the present agreement as a baseline, and there must be no weakening of the provisions of the present text, either on the substance or on its implementation provisions or deadlines.

(v)   Electronic Commerce

  45.  Recognising that global electronic commerce is growing and creating new opportunities for trade, last year's WTO Ministerial approved the establishment of a comprehensive work programme to examine all trade-related issues relating to global electronic commerce. The 1998 Ministerial also agreed to extend the practice of not imposing customs duties on electronic transmissions: the CBI supports making this practice permanent. Progress on the work programme and any recommendations will be reported in Seattle and a future work agenda decided there.

  46.  The applicability of existing trade rules to the techniques of electronic commerce and making adjustments necessary to achieve such compatibility should be the objective, not a separate agreement risking conflicting requirements on companies engaged in this rapidly developing form of conducting business.

(vi)   Regional Trading Agreements/Free Trade Areas

  47.  Since the Marrakesh Agreement creating the World Trade Organisation, proposals for regional trade agreements (RTAs), some including the European Union, have multiplied risking trade discrimination and politically undermining the WTO multilateral re«gime. However, multilateral and regional trade liberalisation can be complementary, economically beneficial and trade-creating, where RTAs are established in accordance with WTO rules and principles. The establishment of RTAs should include: removing high tariffs, non-tariff barriers and impediments to service trade/investors; and protecting intellectual property.

  48.  Against such a background there is an increasing need to review the provisions of GATT Article XXIV to ensure that regional or other free trade agreements are compatible with multilateral rules and regulations and are not allowed to develop into an alternative, discriminatory approach to trade liberalisation.

CONCLUDING REMARKS

  49.  The priorities identified by UK business are largely shared by our counterparts in Europe (Union of Industrial and Employers' Confederations of Europe—UNICE). With over one hundred and thirty potential participants in the new Round other countries will naturally have other priorities and concerns which will be brought to the table in Seattle. No one country will be able to set the agenda for the new Round and it is therefore important to remain flexible as to the final coverage of the Round if the CBI's main priorities are to be included.

  50.  Acceptance by all WTO Members of the concept of a comprehensive negotiation governed by a single undertaking represents the best chance of achieving our objectives while offering benefits to all participants.

  51.  The CBI will continue to monitor the developing situation and will comment further as this becomes desirable.

July 1999


 
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