Examination of witnesses (Questions 280
- 292)
TUESDAY 28 MARCH 2000
MS SHEILA
PAGE and DR
CHRISTOPHER STEVENS
280. What do you think can be done to ensure
that developing countries are not subjected to the imposition
of trade sanctions for what is essentially a lack of administrative
or judicial system capacity on their part? How can cases of wilful
neglect of the rules be distinguished from people who just conveniently
did not realise that they were there?
(Ms Page) This is the job of the disputes procedure,
in principle. The only way in which a trade sanction could be
imposed would be after a country had been taken through all of
the stages of the disputes procedure, the appeals and so on. There
is not a defence of ignorance of the law; there is not the defence
that you did not have administrative capacity. On the other hand,
the disputes procedure will take a year and it probably does not
take much more than a year to put an anti-dumping law together,
so it is not a major threat. I think it comes down to a certain
amount of restraint on the part of developed countries in not
taking countries which are obviously incapable of doing something
just because they want to get at India. The fact that the procedure
is a civil type procedure rather than a criminal prosecution one
is an advantage. The WTO is under no obligation whatsoever to
identify what countries have not complied and take them to the
disputes procedure. The only way in which you can get taken to
the disputes procedure is if some other country feels sufficiently
damaged by it to do it. If you have not complied and this has
not hurt anyone, you can get away with it.
(Dr Stevens) I have a somewhat more radical approach
to this. It seems to me that it comes down to what I talked about,
updating Special and Differential Treatment, which at the moment
is simply for all developing countries. If the developed countries
agreed to cut their tariffs by 30 per cent over six years, for
developing countries it is 20 per cent over ten years. It is the
same thing only slightly slower. In the case of some of these
new rules which involve administrative changes, they have rather
longer to do it in. I do not think that is appropriate to the
new areas of trade policy which increasingly involve not just
a political willingness to abide by one's commitments but an actual
capacity to implement change. If you have a country where the
system for the administration of justice is pretty rickety, to
suggest that the highest priority is to get the system for intellectual
property up to international standards before, for example, land
settlement or whatever seems to me highly anti-developmental.
What one needs to do is to distinguish between rules which are
implemented at the stroke of the legislative pen and rules that
actually require some serious administrative change; and then
to distinguish between those countries in the world where it really
makes quite a lot of difference to world commerce whether they
are abiding by the rules or not and those where it does not. So
long as Malawi does not become a haven for pirated software or
whatever, the fact that it has inappropriate intellectual property
rules is not going to bring the western industrialised system
to its knees. Those countries should be exempted completely until
such time as they have met certain bench marks for their administrative
system across the board. To relate that answer to the previous
question, the worrying thing is that so few countries know where
their area of difficulty is. The WTO Secretariat has asked developing
countries to list specific cases in which they are having difficulty
implementing their obligations on the Uruguay Round and they have
received very, very few responses, not because of an unwillingness
to reply but because the Governments themselves do not know in
detail what it is they are not doing that they should be doing.
One of the critical areas for technical assistance is at least
to take an inventory on where countries are at the present time,
how long it is reasonable to expect them to get from where they
are to where they should be and from that agree on whether they
should get an extension of their deadlines which might be possible
to negotiate under a broad Round or an exemption from those obligations
altogether until such time, probably quite a way in the future,
that it makes sense to give high priority to international trade
concessions.
Chairman
281. Sheila Page has argued that when India
does not comply with the rules and regulations that is because
they do not want to do so, because they have the legal, administrative
and judicial capacity to do that; yet, in your memorandum, Dr
Stevens, you say that India has already lost a case in intellectual
property rights. India is seen as a danger by developed countries
because of its intellectual capacity in many areas. Why did they
lose that case?
(Dr Stevens) I cited that because it is a concrete
example of this more general problem we have talked about. I do
not know the details but my assumption would be that it was because
they did not want to, not because they could not. In India's case,
I agree with your analysis entirely that this is a country with
a very well developed administrative system, but it does exemplify
how a problem which could apply to other countries which do not
have the capacity could be hauled over the same coals, not because
of any deliberate foot dragging but accidentally.
282. Singapore is another example of having
a huge capacity and wilfully wishing to avoid intellectual property
rights questions.
(Dr Stevens) Absolutely.
283. Sheila, can I ask you about the question
of plywood in Malawi? You have said sometimes developing countries
do not know what the effect of the agreements they have signed
up to implies. In our recent visit to Malawi, we were told there
was a plywood factory which had an agreement to sell to South
Africa in preferential terms. Those terms now, through SADC, have
been extended to the regional organisations which include Zimbabwe.
The result is that Zimbabwe is exporting plywood to Malawi at
a price less than they can produce it for. Their home market is
now closed to them and South Africa is now demanding that they
reduce their prices from the plywood factory in Malawi to those
which Zimbabwe is offering. In that case, they seem to have killed
off an industry in their own country. Is that through lack of
capacity or is it lack of understanding what they were doing?
What is it?
(Ms Page) First, I know nothing about plywood in Malawi.
Malawi does have a bilateral agreement with South Africa. One
of the advantages which it sees in SADC is putting this on a firmer
basis because at the moment it is an agreement which is not recognised
by the WTO. There are no enforcement procedures. They are having
considerable problems on textiles with South Africa because there
is no enforcement. In that case, South Africa and Malawi, it is
the large country against the small with all the usual problems.
It may have decided that it was worth sacrificing plywood for
all the other benefits of SADC. I do not know. I think it is unlikely—there
are not that many industries or factories in Malawi—that
it is ignorance which caused it to be left out. If Zimbabwe can
produce plywood more cheaply than Malawi, which you are suggesting,
it is presumably to the advantage of the Malawi furniture and
construction industries to import it rather than produce it. It
is hard on the Malawi plywood factory but this may well be a case
of the trade-off and they decided that the other benefits they
could get were greater. If you think about the geographical location,
it seems unlikely that Malawi could ever compete very effectively
with Zimbabwe on exports of the same good.
284. I was very surprised.
(Ms Page) It probably was something that came out
of their old bilateral agreement.
285. You think they have enough capacity to
have realised what they were doing. They were not doing it simply
because they do not have the capacity within the Civil Service
to do it?
(Ms Page) I know they take representatives of the
appropriate private sector along to SADC negotiations and SADC
negotiations are on an industry by industry basis, so it is possible
to do this. I think it is unlikely that it was ignorance in this
case.
(Dr Stevens) I know even less about plywood in Malawi
than either questioner or respondent. But, on the facts stated,
it is a rather good example of why one gets involved in organisations
like the WTO. Malawi's problem is that South Africa has decided
to reduce its trade restrictions on imports of plywood from other
countries and that would happen regardless of whether Malawi had
participated in SADC. Excluding itself would not have solved its
problem.
Mr Worthington
286. Can you extend your thoughts on the Special
and Differential Treatment area? I believe you both recently went
to a seminar organised by the WTO where this was discussed. Could
you tell us what was going through the minds of people? Dr Stevens,
you were saying that the way Special and Differential Treatment
had been applied had not been all that successful or sensible.
What is the current thinking? What are the issues being raised
by the developing countries about how Special and Differential
Treatment should be used in the future?
(Ms Page) One point which Chris was indicating in
the disputes procedure answer was that you need to think a little
more clearly about the criteria for giving Special and Differential
Treatment, certainly to developing countries whatever that means,
but if you are going to do it through time limits this does not
make a lot of sense. If you are giving Special and Differential
Treatment because you believe that countries with a certain level
of capacity, income and so on are not capable of taking on the
obligations, the limit of that Special and Differential Treatment
should be stated as an income level, a share of manufactures in
output level, some sort of development level, a poverty level
perhaps. You must have in your mind some idea of what a country
has to be like before it can take on these obligations. That is
not something which can be measured in terms of 11 years from
the end of the Uruguay Round, it might be 10, it might be 20.
So I think that you need to reconsider how you would do it. To
be fair to the Uruguay Round my impression is that the arrangements
there were very much a five minutes to midnight type arrangement,
"We must do something for developing countries. Let's give
them more time", and no one worked out that it takes exactly
11 years for least developed countries to introduce intellectual
property. I think you could re-think this on a basis of what you
need. The idea of giving more special treatment to the least developed
countries is part of this. Presumably when the least developed
country is graduated into developing, it will lose this. I think
you may need more different stages than just least and developing,
and you may need some fairly complicated criteria for promotion,
but this is the way that you should be thinking about it. One
point which came out, yet again, in the meeting, which I think
was quite important, is that Special and Differential Treatment
is important, as Chris has just said, for particular areas. To
say it is not important for a country as a whole, or for developing
countries over the last 20 years, does not say anything at all
about how important it was to the electronics industry in Malaysia.
This is where you have to look at what the effect is on particular
sectors at particular times when they were just starting their
production. There is certainly a case for extending this idea
to the new areas, to things other than trade, and saying that
you do need special treatment and when you are just starting to
use technology you may need a special intellectual property agreement.
When you are just starting to attract foreign investment you may
need a special investment agreement. So that is probably the way
in which one should try to move.
(Dr Stevens) I agree with that and I think that if
we do move in that direction it will be less a question of having
lesser obligations for developing countries and much more a question
of in the course of the negotiations, as the Is are dotted and
the Ts are crossed, specific provision being built-in from the
outset that will apply in the following form to middle income
and companies above, and not at all to the least developed, and
not at all to country X and sector Y because of its special problems.
That will only be possible if developing countries are involved
in the negotiations in a serious way from the outset. We cannot
have the sort of Special and Differential Treatment that we agree
is necessary through an 11th hour change. It just will not work.
It has got to be built into the negotiating architecture from
the outset and is yet another reason why we can all agree that
one thing which has to be done is to boost the capacity for developing
countries to participate in the negotiations.
Mr Worthington
287. From the seminar did you get the sense
of an emerging consensus on that?
(Dr Stevens) No. On the contrary, the representative
of the Europe Union went to great pains to point out that he was
the only representative of an industrialised country who was willing
to make a presentation at the seminar, and we learned afterwards
that at least one industrialised country felt that the whole day
was a complete waste of time and not necessary at all. There is
no consensus at the moment on either whether Special and Differential
Treatment is a good thing or a malign thing and, secondly, what
form it should take.
Chairman
288. In both the IDS and ODI you have argued
for a review of the UN's procedures defining developing and least
developing countries. What we would like you to tell us is how
the UN should define developing and least developed countries,
and what methodology should they use for this purpose? How would
this increase the benefits of the rules-based system to poor countries?
(Dr Stevens) Our general point is that the WTO does
not have its own internal classification system, it makes use
of the UN list. Whilst this may be helpful if you trying to cobble
together something at the 11th hour, it does not make much developmental
sense. What we should be seeing are multiple groups and partial
groupings depending upon the issue being discussed, evolving within
the WTO itself, so as to divorce differentiation within the WTO
from whatever the UN does or does not agree. I think that was
the point that we were trying to make.
(Ms Page) The problem is that the UN system is pretty
much devised as a guide to aid-givers. In fact, the point at which
you may need Special and Differential Treatment may not be when
you are at your poorest but when you are starting to export new
things, when you are starting to, as I said, use technology or
other intellectual property. So it is very much a question of
giving to countries when they need it, which may not be when they
are poorest. I do not think we can use a system designed for aid
to define grouping and benefit from trade.
289. We are getting a lot of pressure to develop
a new concept of small island states and that sort of categorisation,
but you are saying, "Do not do that, let us look at their
specific problems, for example, if they are mainly sugar exporting
or something like." Is that the way you are thinking?
(Ms Page) The small island state is a way of trying
to generalise across countries which are really very different.
If their problem is that the cost of trading are higher for them,
which to some extent is true, then one should be looking at countries
for whom the cost of trading is unusually high, which is some
but not all small islands, some land-locked countries, some countries
in particular geographical areas, for example, Nepal. There are
all sorts of things that can make trading more expensive but the
way to tackle that is to look at that sort of trade barrier and
do something about it. I think that small islands are a convenient
lobby group. Perhaps I had better stop there.
(Dr Stevens) In advance of there being anything like
a consensus that it is sensible to treat Nepal and some other
small countries differently, the small island countries are doing
what is the most sensible thing for them to do, and that is bringing
to the attention of influential people the special problems which
many of them do share. I would hope that we do not have a category
"small island". I hope we do not have it because the
details of what is agreed in the further negotiations take into
account a more subtle differentiation than that allows, but "small
islands" is more subtle than "least developed, developing,
and rich". So it is a step in the right direction, but we
need to take further steps.
290. You think that it ought to be a more intelligent
approach which looks at the details and not simply categorising
countries?
(Dr Stevens) To be fair, the debate has shifted from
small islands to countries of high vulnerability. So I think it
is moving in the right direction. Were there to be some carrots
in terms of saying that we would agree different treatment for
this group of vulnerable countries, but not those, then further
differentiation will occur, but in the absence of any carrots,
the sensible thing for these countries to do is to emphasise the
fact that they do share certain characteristics and try and use
their numbers to shift the discussion in that direction.
291. So if we categorise the four eastern Caribbean
islands as highly vulnerable, we would have been able to avoid
the US banana dispute with the European Union. Is that what you
have in mind?
(Dr Stevens) No, because that was a dispute about
favouring European based multi-nationals against a US based multi-nationals.
292. On the other hand the arrangements for
those islands would have been protected by WTO if they were in
that highly vulnerable categorisation?
(Ms Page) I think this is the problem of having categories
which you try to use for several purposes. If you have a separate
category in, let us say, the Agricultural Agreement for countries
which have particularly unfavourable agricultural conditions or
which have traditional products, either of which might have worked
for the bananas, then you are dealing with the actual problem
which the eastern Caribbean countries have. Their problem with
bananas is not specifically being small islands, it is having
a traditional crop which is difficult to grow and for which there
is now other competition. If you try to do it for small islands
you are bringing in a country like Mauritius, which does not need
special treatment. Therefore, because you have Mauritius on your
list, as well as the eastern Caribbean, you will get much less
special treatment, because countries will be looking to see how
Mauritius use this. They may not use it for bananas, but they
may use it for something else.
Chairman: Thank you very much indeed
for a most interesting and fascinating excursion into the guts
of WTO and the problems that we face. You have helped us a great
deal in understanding the issues, so thank you both very much
indeed, particularly as you, Dr Stevens, have just come off a
plane from the Caribbean.
Mr Rowe: Can I just say, as probably
one of the more lay Members of this Committee on this particular
subject, I have found it the most helpful two hours we have had
for a very long time. Thank you both very much.
Chairman: Thank you very much.
|
