Examination of witnesses (Questions 197
- 220)
TUESDAY 21 MARCH 2000
MR MICHAEL
BAILEY, MS
CLAIRE MELAMED
and MR GEORGE
GELBER
Chairman
197. Perhaps I could open by, first of all,
apologising to you for your not being with us last week and for
our asking you to postpone until this week because we had the
opportunity of hearing from the Secretary of State for the Department
of International Development and indeed the Secretary of State
for Defence on the pressing issue of Mozambique, so thank you
very much indeed. I did not mean to say we were not interested
in what you had to say; we are indeed very interested and would
like to thank you for your written submissions and we would like
to talk more about your written submissions this morning. Perhaps
I can begin our discussion. It is now four months since we launched
our inquiry into the WTO and in that time the World Trade Organisation's
General Council has agreed to initiate discussions on the in-built
agenda. I do hate these terms, but I think you understand what
that means. That means those things which the Uruguay Round said
the next Round should look at, ie, agriculture and services. Some
moves have been made towards reforming the WTO, although very
tentatively. If you read the evidence that Mike Moore gave us,
it was very tentative indeed, I thought. What is your assessment
of the progress so far made both on agriculture and on services
and on institutional reform? In particular, what is your assessment
of the World Trade Organisation's decision to adopt a "case-by-case"
approach to extending implementation deadlines?
(Ms Melamed) I think, to sum up, the general progress
has been disappointingly slow, despite several opportunities that
have come up since Seattle. I think our basic analysis of what
happened in Seattle was that the failure was due partly to the
very clearly expressed issues raised by developing countries,
their dissatisfaction both with the WTO processes and with the
outcome of the agreements so far, and I think it came out fairly
clearly in what Mike Moore said to you several weeks ago, that
certainly as far as the processes of the WTO go, there has been
very little progress. I think our concern is that the issue is
being in some senses defined away, that, for example, the European
Union's analysis of the problem is that essentially what went
wrong in Seattle was simply a problem that relates to Ministerial
meetings as a very specific part of the WTO's processes, and that
the general kind of processes of negotiation and so on in the
WTO really do not have so many problems. I think that kind of
trend in trying in a sense to down-play the problem of the WTO
as an institution is quite worrying and seems to be disappointing
certainly in terms of what developing countries said at Seattle
and since. On substance, which again was a very important issue
that was raised in Seattle, I think it was a particular disappointment
certainly to many developing country governments that we spoke
to, and all three of us were present at the UNCTAD-10 conference
in Bangkok last month, and I think that certainly developing country
governments there felt extremely disappointed that some substantive
issues were not on the table there, such as the proposal for duty-free
market access for the imports coming from least developed countries.
Now, in terms of a total share of world trade, this is tiny, this
is half a per cent of all world trade, and yet the industrialised
countries were not even able to make an agreement on this and
to make firm commitments on this at UNCTAD or since. I think that
in terms of trying to take seriously some of the concerns that
were raised at Seattle and to show their willingness to listen
to these concerns about the outcomes of the Uruguay Round, the
industrialised countries have been, as I say, disappointing in
their actions since Seattle. Specifically on the built-in agenda,
I think again this was something that Mike Moore seemed to be
implying from what he said to you, that although negotiations
have started at least formally, progress is likely to be quite
slow on those and I think the issue has been raised of the possible
impacts of the American elections later on this year in terms
of what the capacity of the US Government to negotiate on some
of these issues is. On the case-by-case implementation, I think
it rather depends on what that actually means in practice. Some
of what we say on a whole variety of trade issues is a kind of
plea for a more nuanced approach and an approach which does take
more seriously the concerns of particular countries. On the other
hand, if this becomes a reason to delay change and in a sense
to be more restrictive about what is possible for particular countries,
then that would be a problem, I think, on implementation, but
it really depends on how it works out in practice.
198. Mr Gelber, CAFOD said in their memorandum
that "the breakdown in talks was not a disaster for the developing
world". Would you like to expand on that in view of what
Ms Claire Melamed has said to us?
(Mr Gelber) Yes. I think it was not a disaster because
I think one of the key moments of Seattle was when the Latin American
countries, the Caribbean countries and the African countries produced
their declarations saying that they were aghast at what was happening
in the Ministerial meetings and threatened not to join the consensus,
if one emerged. This was, in our view, a very healthy development
which, whilst it was not solely responsible by any means for the
breakdown of the talks in Seattle, was certainly a contributory
factor. The failure of the talks also meant that there was not
going to be a comprehensive Round as the EU had argued and many
of the developing countries, especially the least developed countries,
had argued very strongly that they were quite incapable, in terms
of capacity, of negotiating on the new areas that would be in
the comprehensive Round—investment, competition and government
procurement—but they were still grappling with very difficult
implementation issues. Now, several of them, many of them do not
have permanent representatives in Geneva to follow these topics,
so the breakdown of the talks gave us some breathing space probably
until well after the elections in the United States to look at
how we are going to deal with these issues in the future.
199. Mr Bailey, would you like to contribute?
(Mr Bailey) Those two contributions reflect Oxfam's
assessment as well.
Chairman: Then perhaps we can move on
to WTO's relations with other multilateral organisations.
Ann Clwyd
200. Both Oxfam and CAFOD argue for greater
linkages between the WTO and the UN system. Oxfam state that "in
order to ensure that multilateral agreements on human rights,
development, the environment and health take precedence over WTO
rules, WTO members should consider establishing mechanisms to
involve specialist agencies, such as UN bodies, in WTO trade disputes".
CAFOD, in the same way, is saying that the WTO should be made
"development compatible", suggesting that it should
be subordinate to the UN system to which it theoretically belongs.
You argue that "when disputes arise which involve the environment,
development or other on-trade concerns, the WTO should defer to
the relevant specialist agencies of the UN". Now, I would
like you to expand on how you would see that co-ordination between
the WTO and the UN developing in practice.
(Mr Bailey) Well, I will start off with a general
point, that I really do see a need for there to be greater co-operation
between all the multilateral institutions, and that extends beyond
the UN agencies to the Bretton Woods institutions as well. And
we would obviously like to see greater coherence in terms of the
policies adopted by that range of multilateral institutions. That
coherence and co-operation is clearly made easier to the extent
to which they have shared objectives, and we would like to see,
as Oxfam, understandably enough, poverty reduction as being fairly
central to their objectives, and certainly sustainable development
as being explicitly what they are about. I think there has been
progress in getting the IMF, for example, out of its box, saying
that it actually accepts poverty reduction as being one of its
objectives, and that it is not merely about short-term assistance
to countries' balance of payments problems. And I think we would
like to see the WTO go further in getting out of its box and not
seeing its role as being reducing trade barriers and not judging
its success by the extent to which average tariffs fall. However,
clearly that coherence and that co-operation at the international
level does depend on coherence and co-operation within national
governments which they then take to those multilateral institutions.
I think the extent to which we get joined-up government at the
national level, we will get more of it in the multilateral institutions
and in that regard I'd say that the British Government has been,
I think, good in the sense of not leaving the WTO to DTI, although
the DTI may lead, but also bringing Environment and DFID and FCO
into the management and determination of our relationship and
our role within that multilateral body. Specifically on WTO rules
taking precedence or not, I think we have all seen problems with
the WTO finding itself in a position of making rules and decisions
on matters which are not really within its competence, whether
it is human rights or notably the environment, and cases where
it may indeed be overruling what are agreed multilateral policies
on key issues. There are something like 200 multilateral environmental
agreements and I do not think anyone is clear what the relative
status of those agreements is in relation to WTO rulings. We would
clearly like to see the saving of the planet or fundamental issues
like human rights take priority over commercial issues and concerns,
and I think we would all agree on that. I think there are very
practical ways, coming on to the more institutional part of your
question, in which the WTO can be better linked to the family
of UN agencies. Certainly on the labour rights issue, it could
work more closely with the ILO as has been covered already, and
on environmental issues there could be closer co-operation with
UNEP. This co-operation could extend to the participation of UN
agencies in the disputes settlement process. On these issues,
if they involve environment or labour, why not bring in environmental
and labour organisations to contribute to the process? There are
the trade policy reviews which the WTO carries out which analyse
individual countries' trade policies. Again, traditionally, that
has been just a look at the narrow trade policies and issues,
but why do we not broaden out those reviews so that the WTO is
looking at a country's trade policies, but looking also at the
impact on poverty, the social dimension, environmental issues
and so on? And those reviews could be done jointly with other
UN agencies. I think it is regrettable that to date the WTO has
not established a mechanism for giving inter-governmental organisations
consultative status with it. The ILO does not have consultative
status as an intergovernmental organisation with the WTO. Now,
I do not think there are any particular political obstacles to
that; I think it is just a reflection of the fact that it has
not been a priority with the WTO to create that space with that
co-ordination. So it is not a sort of conspiracy to keep them
out, but I think it has just been a cultural thing almost, that
"the WTO is about trade, so why do we need these other people
near to us?"
(Mr Gelber) I would just add that I think the concentration
on the WTO is because it is an organisation with teeth and whereas
the UN rule-making bodies do have teeth in that they do not have
enforcement mechanisms and however worthy or good the treaties
and agreements that are signed, there are no sanctions against
countries which violate them. For that reason, we think that it
would be a very good thing if there were some mechanism for relationship
between the WTO and the WHO on health issues, the ILO, and I am
repeating now what other people have said, and to bring them in,
partly because they do tend to spend a lot more time in a more
consultative way looking at the issues that they are dealing with.
(Ms Melamed) One point which is, I suppose, specifically
related to the work of this Committee is that I think there are
various ways in which the WTO institutionally could ensure that
it is more complementary to other institutions, but I think at
the very least we should ensure that the WTO is not undermining
agreements that have been reached in other fora, and I think particularly
with relation to the international development targets, there
is the risk that that is happening at the moment. Some research
that has come out of the World Bank in preparation for the next
World Development Report seems to indicate that in circumstances
where trade has been liberalised, it tends to be the poorest 40
per cent of the population who suffer most or who, at the very
best, gain least from the process of trade liberalisation, and
this is based on evidence from trade liberalisation that has already
happened, so I think that certainly and specifically in relation
to the international development targets, there are concerns there
that what is happening already is actually undermining existing
obligations under the international development targets.
Chairman
201. The opposite end of that argument is that
protectionism would help them. Do you believe that?
(Ms Melamed) I do not. Taking up the point that was
made in your earlier evidence, I think that it is wrong always
to say, "If you are not in favour of liberalisation as it
is currently happening, then, therefore, you must be an out and
out protectionist". I would certainly resist having to fall
into either of those two camps.
202. How would you modify it then?
(Ms Melamed) I would say that perhaps we should look
at liberalisation sector by sector and that perhaps one could
look at liberalisation in terms of the development of industries
and to revisit perhaps some of the infant industry arguments that
were made at the time of the development of the East Asian economies.
I would say that what is appropriate for one country may not always
be appropriate for another. There are all sorts of ways in which
one can divide up the case to look for a more nuanced approach
to trade policy to try to escape this either/or framework.
203. It sounds rather close to "case-by-case",
does it not?
(Ms Melamed) Yes. I would think that hopefully one
could arrive at a more general situation where one was somewhere
in between saying that the same policy fits all and saying that
one has to have a different kind of policy for every sector, for
every company in every country because clearly that is a difficult
basis for policy-making.
Chairman: There is a compromise somewhere,
yes.
Ann Clwyd
204. I wanted to talk about the responsibility
of the ILO for core labour standards. Is the ILO a strong enough
organisation actually to assert itself? When we went to visit
the ILO, I got the impression of a fairly laid-back organisation,
to put it mildly, and the WTO, whenever we raised core labour
standard issues, kept saying, "Well, that's for the ILO",
but I never got any feeling in the ILO that the ILO felt particularly
energetic on some of these matters. I just wondered what your
assessment was. Surely the ILO should be making an aggressive
case for handling core labour standards and we should be hearing
more from them than we do at present?
(Mr Gelber) I think Mr Somavia would say that it is
quite difficult to handle a tripartite organisation where you
have representatives of government, employers and unions and although
he is very receptive to the issues of core labour standards, I
think it is quite difficult for the ILO, as such, as you suggest,
to welcome this with open arms. I would add that I think that
what we say about the United Nations is that it is desirable for
the specialised agencies of the United Nations, but they are probably
not ready themselves, to welcome the WTO with open arms. I think
when we say that the WTO should relate to the United Nations agencies,
we say that this is a desirable medium-term aim and it is not
something certainly that could happen easily tomorrow.
(Mr Bailey) I would like to see a somewhat more, I
was going to say "aggressive", but that is not the word
I want, let's say combative ILO that was prepared to do, perhaps
at the minimum, more naming and shaming of countries where labour
rights were systematically violated. Sometimes I think they are
a bit coy. On whether they should actually have powers of enforcement
or of imposing sanctions, I think we have a problem there and
I do not think we have a clear view on that. We do feel, and this
may set us apart from some of the NGOs, that there is in the long
run a need for a social clause within trade agreements which refers
to at least core labour rights, by which we would mean collective
bargaining and freedom of association, being the key enabling
rights which enable workers to negotiate better conditions independent
of the level of development of the country. We realise that it
is a political minefield and that practically such a clause would
not be viable. We do, though, say that if there were a labour
clause in a WTO agreement, it should not be just the WTO disputes
settlement system that deals with any problems that arise through
that, but the ILO have to be involved and there could be possibilities
of joint panels, say; but these are areas that need work and we
would certainly encourage the WTO and the ILO to work constructively
on that.
Mr Khabra
205. CAFOD argue that many developing countries,
along with the US, see the Common Agricultural Policy as one of
the greatest obstacles to ensuring developing nations benefit
fully from globalised trade since it both limits access to European
markets and dumps artificially cheap food on other countries.
However, CAFOD also seem to be arguing for a narrow Round. Do
you consider that a broad Round would not maximise the chances
of a reduction in agricultural tariffs which would benefit developing
countries?
(Mr Gelber) Yes, I think we do and in our contacts
with developing country governments, especially least developed
countries, they were saying that they are concerned primarily
with the implementation of current commitments and, to repeat
the point that we made earlier, they do not have the capacity
to negotiate a broad Round and they are struggling with implementation.
For them, it is difficult to see in a broad Round what the trade-offs
are, how and in what way they are going to benefit from the new
issues of a comprehensive Round, namely competition, government
procurement, and investment, and how they could make trade-offs
there which would actually benefit them to secure the lowering
of these restrictions and subsidies in the European Union. It
has been our opinion that the European Union is advancing this
argument really because it does not see eye to eye on agriculture
with the United States and the Cairns group and that we find it
very difficult to understand the argument that all countries,
especially the least developed countries, would benefit from a
broad Round in this way.
Chairman
206. Have you got views on a broad Round, Ms
Melamed?
(Ms Melamed) I think a lot of what I would want to
say on the broad Round was said by my colleagues earlier on this
morning. I think that the key issues are the problems of capacity
of developing countries actually to effectively defend their interests
in a broad Round. That seems to me to be fairly key along with
the question of what it is we actually want the WTO to be covering
anyway and whether some of the issues that were proposed for a
new Round would be appropriately dealt with in the WTO in any
case.
207. Many NGOs have been assisting developing
countries with their delegations to Seattle and indeed in preparing
themselves for these Rounds and for membership of WTO which many
of them have recently taken up. Could you not help them technically
with these problems so that the capacity to negotiate was built
up and, therefore, developing countries need not fear the negotiations
because of a lack of capacity? I think you all have such capacity
within your ranks, so why do you not make it available?
(Mr Bailey) You flatter us, Mr Wells! I think it would
be great if we did have the capacity to do that. I think our concern
as non-governmental organisations is to try and strengthen civil
society groups in developing countries, be they farmers, unions
or urban community groups or whatever, to understand some of these
broader international issues and to play a more active role within
their own societies and in influencing their own governments in
their interests. I think that is where we do our capacity building,
if you like, with our non-governmental counterparts in the developing
countries. That said, I think we would all very much welcome it
if particularly the UN agencies had a heightened role in providing
those capacity building services, and that does mean resources
obviously and that does mean, therefore, that northern governments
need to put their hands in their pockets to some extent. I think
it would be wrong to suggest that the problem with the comprehensive
Round is developing countries' negotiating capacity. I think,
in our view, there is a more fundamental problem in that the political
balance, if you like, is such that we would not necessarily get
development-friendly agreements out of multilateral negotiations
at the WTO. Oxfam's view is that we would love to see an international
agreement against corruption, that would be great, but we are
not sure that if we had a WTO agreement on procurement that that
is what we would get, because it looks like an agreement on procurement
would be more to do with market access than dealing with corruption.
I think the same is true of competition policy, for example. I
think we would all welcome an effective trust-busting international
organisation or international agreement, but we are not sure that
the political balance is such that we would get that, if competition
policy was on the WTO agenda. Again we might get an agreement
which is much more about market access than it is about trust-busting.
I think we would be happy to see these issues on the international
agenda at some point, but at a time when we could be more confident
that they were development-friendly, if you like, rather than
about market access. So perhaps it is not a question of principle,
but it is a question of realpolitik, if you like—where
the balance is at the moment and to what extent are the industrialised
countries prepared to make concessions in the interests of fairness,
rather than just pursue hard-nosed commercial interests. All the
signs are at the moment that the northern countries are pursuing
hard-nosed commercial interests.
Mr Khabra
208. Both Oxfam and CAFOD have called for the
implementation of the Marrakesh Decision on Least Developed and
Net Food-Importing Developed Countries. The Government, in evidence,
stated that they do not see this as a well-conceived decision
because food aid would undermine domestic agricultural production
as prices fell still further. The Government preferred to address
any potential rises in food prices at the broader level of balance
of payments, especially given that, as Mike Moore stated, food
prices have not increased for developing countries, and this is
partly because agricultural subsidies have actually risen. Given
that food prices do not seem to have risen and given that food
aid can have similar consequences to "dumping", is it
really necessary to implement the Marrakesh decision?
(Mr Gelber) I think my colleague from ActionAid pointed
out that food prices had in fact risen even though the cost of
commodities was continuing to fall and also that the Marrakesh
decision was about technical assistance as much as it was about
the needs of net food-importing countries for compensation. I
think there are mechanisms by which the disincentive to local
produce can be minimised when one makes available food for importing
countries and those have to be studied. There are programmes,
such as Food for Work, which do not mean that you just take food
and distribute it automatically.
Chairman: Can we hurry on again then
to Special and Differential Treatment, which is another piece
of jargon which we like to use in these discussions.
Ann Clwyd
209. The Government has stated that there is
". . .a certain oddness in a sense in Special and Differential
Treatment for one hundred or so members of an organisation of
135". They went on to question the benefits of it and warned
against the danger of the WTO developing into a two tier system.
Since then the Government, I understand, have forwarded a copy
of a review they commissioned into SDT which concluded that "SDT
provisions seem to be little used and applied in often limited
and tokenesque ways" and that ". . . these provisions
are in reality little more than symbolic compensation to developing
countries" First of all, would you agree with that assessment
and, secondly, how can Special and Differential Treatment measures
be developed so that there is not a two tier system so as to ensure
that they actually properly benefit developing countries?
(Ms Melamed) First of all, I think certainly we welcome
the commitment of DFID to base their trade policy on evidence
in this case and certainly perhaps feel that this commitment to
evidence is lacking in other areas of trade policy making. That
aside, I think that we might agree the Special and Differential
provision since the Uruguay Round agreement has been applied in
perhaps a very limited way. I do not think that this would lead
us to the conclusion that Special and Differential Treatment as
a concept is necessarily the problem, it is more a question of
how it has been implemented so far. I think that Special and Differential
Treatment originated with the understanding that there are real
economic differences between countries and these have to be reflected
in some way in agreements. In practice, particularly in the Uruguay
Round, what this has actually meant is simply longer time periods
to implement what are essentially the same policies. I think really
that is the crux of the problem, that it is not Special and Differential
Treatment per se but it is how it is formulated. You talked
about the jargon, I think perhaps part of the problem is Special
and Differential Treatment is a bit of a misnomer. Special and
Differential Treatment implies that we are talking about a kind
of norm and very occasionally under a few particular circumstances
countries should be allowed to deviate from that norm. I think
we want to turn that around and say what are the kind of trade
policies that are relevant, in fact, for particular countries
at particular phases of their development? Clearly when, for example,
all of the least developed countries taken together have a share
of world trade which is less than that of Belgium and where the
structure of economies is totally different, some are dependent
on primary agricultural exports, others derive most of their GDP
from services and so on, there is a good case for treating countries
that are so unlike differently. We have seen that in a sense in
the implementation of trade policies so far but when we do try
and treat countries that are very unlike the same what you get
in many cases is, in fact, more inequality. I think the case for
Special and Differential Treatment is fairly clear. In a sense
the failures of Special and Differential Treatment so far indicate
that what we need is more Special and Differential Treatment more
broadly defined than that.
Chairman
210. Would you like to add to that?
(Mr Bailey) I think that it is particularly important
to defend this principle of treating different countries in different
ways given that, at least for the foreseeable future anyway, the
WTO is going to work on the basis of the so-called single undertaking.
The single undertaking, if the Chairman will forgive another piece
of jargon, is the idea of a negotiating method where everybody
has to agree to everything, sign up to it. You cannot opt out.
Clearly if developing countries are going to sign up to a package
of things there have to be special provisions that enable them
to have longer periods, possibly indefinite periods, to conform,
if you like, to what is required of them through the package.
We would actually question whether the single undertaking is the
best way to approach multilateral trade negotiations. Arguably
it has been one of the complicating factors for the WTO. It has
driven many developing countries to sign up to agreements where
they did not really understand what they were signing up to, what
the implications would be five or ten years down the road. The
broader, more comprehensive Round is more problematic, with the
idea of the single undertaking.
Ann Clwyd
211. That is something the EU already do. When
countries accede, are candidates for accession to the European
Country, there is usually a five year run-in. One of the things
they negotiate, of course, is concessions for their particular
industries which the EU want to see run down. There is nothing
really unusual in having a two tier system, is there, because
it exists in the EU itself?
(Mr Bailey) Yes.
Ms King
212. You might be aware that we put your point
previously to the Government that in order to have a credible
pro-development policy then it needs to be based on impact assessment
and empirical evidence. You might have seen the Government's response
to that suggestion which was essentially, and we have heard some
more of this this morning from your colleagues previously, that
if an agreement has not been implemented its empirical effects
cannot be fully assessed firstly, and, secondly, transitional
agreements mean that it is very difficult to establish a causal
relationship. What is your response to that?
(Mr Gelber) I think this is a very purist approach
to impact assessment. In development work impact evaluations are
done when the project is finished and you are actually able to
sit back and look at how the impacts, intended and unintended,
have been made on people in a community or an area. This is such
a huge area, agricultural trade for instance in the Uruguay Round,
that it is important to make interim judgments and to see how
things are going. Of course, trade is not the only factor affecting
people's lives. Trade has come on top of a long period of liberalisation,
especially in most indebted countries in which you have to undergo
a lot of structural adjustment. Nevertheless, we think it is very
important to attempt to set up mechanisms to look at impact. The
Food and Agriculture Organisation has already done that and has
produced some interim findings which are of real concern to us.
They took 16 countries and found that only one had actually been
able to take advantage of the export opportunities opened up by
the Uruguay Round and all of them had experienced what they call
import surges, which is agricultural exporting nations being able
to export immediately into those countries, so there was a balance
of payments effect. This is part of the asymmetry that we are
talking about in terms of global negotiations between rich, powerful
countries and poor, vulnerable ones. A common reported concern
across a wide number of countries was the concentration of land
ownership which was accelerating and this has produced the contradictory
result of increased productivity and competitiveness but without
safety nets it has led to the marginalisation of small producers
and added to unemployment and poverty. This, for us, is the developmental
or anti-developmental effect that the World Trade Organisation
should be looking at. My colleague from Christian Aid mentioned
the finding of the World Bank, that trade liberalisation and openness
in economies actually does not seem to benefit the poorest 40
per cent of people, and this again is a huge concern to us. If
these are interim findings, they are extremely alarming because
who knows then what the final finding is going to be.
213. I just wonder, given that we have been
hearing how you almost need a case-by-case study and it is virtually
impossible to synthesise these changes to see what the cause and
effect is, if we did have these studies done, would you accept
them, would we accept them, would anyone accept them because there
are so many differentials involved? I wonder how in practical
terms you take it forward, seeing as the people we have spoken
to and DFID have put forward many objections and they have said
that it takes several years of data to find statistical regularity
in the evidence to be able to measure empirically the outcome,
and indeed with the transitional arrangements, with a lot of it
you cannot even see an outcome yet. I do have sympathy for what
you are saying and of course we want evidence-based analyses,
but I just do not see how we are going to reach that point.
(Mr Gelber) I think that the statistical approach
has to be complemented by a sort of dynamic, qualitative approach
and this is possibly where some non-governmental organisations
and civil society can help by looking at the actual effects on
particular communities of a number of factors because of course
there are national factors to measure alongside the international
ones, but I think in places we would be able, with our overseas
partners, to produce quite compelling results. Sometimes, I suppose,
we would actually say, "Well, the fact that this community
has become more impoverished is not related to international trade,
but is related far more to national circumstances", but I
think that more evidence can be gathered.
Chairman: Well, can we now move on to
trade-related aspects of intellectual property rights and trade-related
investment measures.
Ann Clwyd
214. From now on I will call them TRIPs and
TRIMs. The Government, in its memorandum, states that developing
countries were, even prior to the date at which they had to apply
the TRIMs Agreement, abandoning compulsory domestic procurement
measures and that the loss of this instrument would, therefore,
not be of serious consequence to them. Do you agree with that?
(Mr Bailey) That is quite a difficult question. Our
understanding is that TRIMs prohibits a number of policy instruments,
if you like, that developing countries might like to adopt to
regulate direct foreign investment to make sure that it is as
pro-development as possible. We would argue that foreign investment
does have a positive role to play in development, but that it
does have to be regulated to make sure that positive benefits
are maximised. Amongst those regulatory instruments, we think
that the requirement on local content, on having domestic inputs
into production, is important, and we believe that the policy
of export performance requirements is also desirable and necessary.
Those are both ruled out by TRIMs. Now, some developing country
governments, I think, have bought the liberalisation, non-regulatory
message to the extent that they have been prepared, if you like,
voluntarily to abandon those, although there has been some considerable
political pressure on them, and a lot of economic leverage, to
get them to do so as well. But I think the evidence shows that
those policy instruments have been crucial for the industrialisation
process, and I think the East Asian case shows us that, where
the Tigers regulated foreign investment quite tightly and tried
to ensure that as much as possible it was export-oriented, employing
precisely the measures that TRIMs would currently prohibit. So
I think one has to look at why individual governments may have
surrendered some of these policy options. We think that probably
those that have are not wise to do so. Our problem with TRIMs
is that it obliges them to do so. I could expand on the local
content argument and the export performance argument if you wish,
but I think those are the two policy areas where we think that
developing countries should continue to have the right to make
their own policies, essentially.
(Ms Melamed) I wanted to add that one of the justifications
in a sense for having a TRIMs agreement specifically and investment
agreements more generally is that developing countries in particular
need to have investment agreements in order to liberalise their
investment regimes in order to attract more foreign investment,
and this is always in a sense the big justification for TRIMs
and for other kinds of investment agreements. I think that that
link in a sense between investment liberalisation and more investment
is not one that necessarily holds and certainly UNCTAD have done
studies into countries which have bilateral investment treaties
and found that there is really little, if any, relationship between
countries that have bilateral treaties and countries that receive
foreign investment and that signing a bilateral investment treaty
does not lead to any increase in foreign investment, so I think
there are serious questions there also in the kind of logic which
says that we all need to have investment agreements of this type.
215. In the same memo, the Government also says
that it believes that the TRIPs Agreement does not restrict developing
countries from obtaining necessary drugs at affordable prices.
Do you agree with that?
(Mr Gelber) That is technically and absolutely true.
Article 31 of the TRIPs Agreement allows countries to undertake
compulsory licensing not only of drugs, but of any patented product
in situations of national emergency. I think that this illustrates
a difficulty that the WTO has where agreements are flexible in
that powerful countries can still bring enormous bilateral pressure
on less powerful ones to interpret those flexible agreements in
certain ways and certainly in the case of South Africa, I think
that pressure was brought to bear on the South African Government
not to go ahead with certain permissions, licensing, legislation
which would have enabled them to do compulsory licensing of drugs
believed to combat HIV/AIDS, so yes, Article 31 is a very wide-ranging
Article which gives, on paper, a lot of scope for compulsory licensing.
216. Christian Aid argue that in any future
agreement, the rights of multilateral companies must be balanced
by obligations to make essential goods, such as medicines, available
to poor communities. How would you like to see that principle
being enforced and would it not adversely affect the incentive
for pharmaceutical companies to conduct research and to produce
drugs relevant to the needs of developing countries?
(Ms Melamed) To take the second point first, I think
that the current regime that we have of intellectual property
is not conspicuous in its success in getting the kinds of drugs
that developing countries need to them certainly, and I think
there are some figures that I saw at the time of the latest pharmaceuticals
merger which was that of the total R&D in the world, about
1 per cent is going to research and development of drugs which
are likely to address the kind of illnesses that affect poor people
in developing countries, so I think that the kind of incentives
we have now are not necessarily actually leading to the kinds
of results we might want. In terms of a more general point about
the need to have incentives for companies to invest in new technology
generally, that is certainly something that should be given consideration
and the question is more about the balance between the needs of
companies to make profits out of their investments and other social
needs, particularly in relation to medicines. I think our concern
with the TRIPs Agreement is that in a sense it pushes the balance
over in the wrong direction and perhaps it is needed to push it
back again. Further to that, although certainly the majority of
development of new drugs happens within pharmaceutical companies,
particularly the kinds of medicines that are needed in the poorest
countries, a lot of the research actually goes on in publicly
funded institutions. There are lots of different kinds of researches
going on here and in a sense one should not direct more than one
policy effort funding one kind of research because there are other
ways of developing new medicines. In terms of implementing the
rights and obligations of TNCs, I think that has to happen at
a number of different levels. Certainly where agreements confer
very specific new rights on trans-national companies it is conceivable
that within those agreements obligations could also be built into
those agreements. For example, to come back to the TRIPs agreement
and patenting, where companies seem to be getting a very specifically
defined set of new rights as a result of particular agreements,
it could be within that agreement companies are given obligations
to provide new drugs cheaply to developing countries. One can
imagine how that might happen within that specific agreement.
There is also a very, very important role for national governments.
National governments need to retain the powers that they already
have to impose their own nationally defined obligations on the
TNC. That has already been covered in the discussion of the TRIMs
agreement. Also, I think perhaps we should investigate obligations
being exercised through countries where trans-national corporations
are based. For example, the different kinds of support that European
countries, the US, give to their own trans-nationals to operate
overseas could perhaps become conditional on particular kinds
of obligations that would be expected of TNCs in relation to environmental
labour standards, technology transfer and so on. At present we
have a problem with this in the WTO. It is quite well documented,
the way that WTO agreements are giving specific kinds of new opportunities
to corporations, but WTO agreements only apply to countries, so
it is impossible at the moment for the WTO to specifically impose
obligations through its agreement on companies except through
countries. Although I think it could possibly do more through
countries there is still that central problem. This comes back
in a sense to what was being talked about earlier, looking at
new kinds of institutions, new kinds of agreements. I would support
what was said earlier about certainly the possibility of some
kind of global competition authority being a very interesting
one and one which would, in fact, have authority over companies
rather than always working through countries. In the future when
we are talking about rights and obligations we need to think about
different institutional ways to balance those two internationally
as well as nationally.
(Mr Bailey) If I could just add something on intellectual
property, because this is a growing concern of our's in Oxfam
too—the increasing scope and duration of protection, which
is a restrictive practice. It is paradoxical that often the proponents
of liberalisation also argue for more and more restrictive intellectual
property rules. The key thing here is the context, that we are
increasingly in a knowledge based economy. It is a cliche to say
that but it is true. If developing countries are going to be able
to compete they need access to knowledge. If that knowledge is
becoming more expensive for them, or they simply do not have access
to it, then that is going to be one more reason for growing inequalities
between, or possibly within, countries. The high price of access
to technology and know-how is something that should concern us
increasingly. On that basis we would say that the balance has
certainly gone too far in favour of corporate interests over the
interests of the public good or development.
Chairman
217. One of the problems we face with these
two instruments, is it not, is again implementation and capacity
within these countries? In order to implement them they have to
first of all pass laws which would enable their implementation
to take place and then there is the question of whether they have
the capacity to implement them in any event either administratively
or indeed through the courts. It is a very difficult issue I think.
(Mr Bailey) True.
218. Perhaps we could just end, because it is
the same problem, on the question of dumping. Is it likely that
developing countries will ever be able to bring dispute settlement
procedures against dumping? Again, this is a capacity building
problem. Not all of them, of course. South Africa probably could
do it.
(Mr Bailey) I think one does need to differentiate
here between different developing countries. Clearly the capacity
of, say, Brazil to bring an anti-dumping action is much greater
than Chad.
219. Yes.
(Mr Bailey) I think it is factually the case that
most of the complaints that have been brought to the dispute settlement
procedure have been brought by the large and more sophisticated
developing countries, and the ones that have applied duties on
allegedly dumped products have been, again, the more sophisticated
larger economies. It is extremely difficult for the poorer developing
countries to apply countervailing tariffs when they think they
are being dumped on. It is partly because of the political power
and economic power of the countries that are doing the dumping.
It is quite hard for Chad to stand up to the European Union. Also,
if they want to take measures against dumping they know that they
risk being taken through the dispute settlements process, which
is very complex, very time consuming and very expensive, so there
is a major deterrent there. I think we also have to be honest
and accept that the rural communities that are particularly prejudiced
by the dumping of the agricultural products do not necessarily
have great political weight within their countries, so their capacity
to mobilise their Government to take action is limited. The developing
country government may also be responding more to urban consumer
interests, which might be to obtain cheap food, and they may not
be so sympathetic to the farmers whose livelihoods are disappearing.
It is a complex issue. Certainly we would feel the system does
militate against the poorer countries using anti-dumping legislation.
Similarly, and this is probably an even greater concern, there
is a lot of evidence that the industrialised countries are using
anti-dumping legislation to keep out imports from the developing
countries.
220. Yes.
(Mr Bailey) The number of cases where tariffs are
levied on the grounds that there have been dumped products has
been increasing very much. There is definitely a lot of closet
protectionism behind these anti-dumping measures by the northern
countries. That is one of the things meant when the developing
world talks about "implementation issues". They would
like to have the anti-dumping agreement looked at again, so that
there are stronger provisions against protectionist exploitation
of that provision.
Chairman: Yes, indeed. Thank you very
much indeed, that has deepened our understanding of this difficult
question that we have got to deal with. Thank you very much indeed
for coming and for helping us this morning, it was very welcome.
Thank you very much.
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