TENTH REPORT
The International Development Committee has agreed
to the following Report:—
AFTER SEATTLE — THE WORLD TRADE
ORGANISATION AND DEVELOPING COUNTRIES
EXECUTIVE SUMMARY
The failure of the World Trade Organisation Ministerial
Meeting in Seattle in 1999 raised publicly and dramatically important
questions over the future of the WTO and the value of trade liberalisation.
Is the WTO the enemy of the poor or their only hope for a fair
share of world trade? The International Development Committee
has conducted an inquiry into the WTO and developing countries.
We have come to the following conclusions:
1. The Seattle Debacle
A number of factors contributed to the failure of
Seattle, including:
i. The incompetent organisation
of the conference by the United States
ii. A preparatory process which failed to produce
anything approaching an agreed text in advance of Seattle. The
process did not take account of either the expansion in WTO membership
or the wider range of issues up for discussion
Preparation was further disabled by the delay in
appointing a new Director General for the WTO. The decision to
appoint Mike Moore for a two-year term and then Supachai Panitchpakdi
for a two-year term was an appalling miscalculation, undermining
both Directors General.
iii. Unbridgeable differences between trading
blocs. There was much publicity given to differences between the
United States and the European Union. But in addition developing
countries made their voice heard, rejecting unacceptable proposals.
iv. Demonstrations. Many demonstrators were,
in effect, arguing for protectionism. It must be for developing
countries themselves to assess the costs and benefits of WTO membership
and to negotiate the means by which trade liberalisation is pursued.
2. The WTO — Friend or Enemy of Developing
Countries?
i. Economic activity
and trade are what is needed to generate the necessary wealth
to provide schools, clinics and a decent standard of life for
developing countries.
ii. Developing countries are unacceptably excluded
from the world trading system. It is vital that trade barriers
are brought down and low income countries encouraged and allowed
to increase their share of world trade.
iii. Economic growth through trade must be coupled
with domestic policies to reduce inequality and improve human
security.
iv. The WTO as a rule-based system is the best
and fairest process for trade liberalisation, ensuring the voices
of developing countries are heard.
v. We are astonished at the lack of empirical
study of the impact of the Uruguay Round on developing countries.
Adequate resources must be provided to fund such a review on the
basis of a sample of countries.
vi. The WTO must amend its objectives to include
poverty reduction as an explicit aim of growth through trade liberalisation.
Liberalisation through the WTO must at every stage be accompanied
by donor analysis and intervention to protect and benefit the
poor.
3. Building the Confidence of Developing Countries
in the WTO
i. The UK Government
must press the EU to agree to the Commission proposal of tariff-free
access for least developed countries. It must also press Canada,
Japan and the USA to agree to such tariff-free access. At the
same time, careful negotiations will be necessary to meet the
concerns of other developing countries likely to be affected by
the proposals, such as small island and vulnerable economies.
ii. Many developing countries suffer from inadequate
representation at the WTO in Geneva and at Ministerial negotiations.
Multilateral donors in particular must provide technical assistance
and build capacity in developing countries.
iii. The WTO lacks adequate funds to assist developing
countries improve their capacity for trade negotiations. A permanent
technical assistance budget must be established for this purpose
within the WTO.
4. WTO Reform
i. We see no evidence
to support the claim that the WTO is undemocratic or untransparent.
The failure was one of process, not structure.
ii. There was, however, a failure of the Green
Room process at Seattle. It was used at too early a stage, before
any consensus seemed likely; the flow of information in and out
of the Room was inadequate; the selection of delegates for the
Green Room was perceived to be at best unclear, and at worst partial.
iii. The WTO must consult with members and then
put forward proposals for reform of the negotiating process. We
support the principle of consensus for decisions within the WTO.
The Green Room process is in obvious need of reform, with a need
for a clear and flexible system of representation, effective information
flows, and the ability of non-participants to observe. There must
also be a mechanism within the WTO to monitor the implementation
of WTO agreements.
5. A New Development Round
We support the launching a of a new Round on a development
agenda. The launch of the new Round should not be inappropriately
delayed. In advance of the new Round, however, studies should
be initiated on the implementation and impact of Uruguay, technical
assistance provided to developing countries, and an effective
preparatory process instituted.
6. Conclusion
We disagree strongly with those who claim that the
WTO is an enemy of the world's poor. This Report makes clear that
if the poor are to have any hope of better lives their countries
must be given greater opportunities to participate in the global
trading system. Of course trade liberalisation must be planned,
phased in, and based on clear rules. Of course it must be accompanied
by increased trade capacity and domestic pro-poor policies. But
the WTO is the only place where global trade development can take
place in a way shaped by the developing world. Without the WTO
we are left with the economics of the bully. Despite all the chaos,
at Seattle the voices of developing countries began to be heard.
That can only be a good thing for the future of the WTO.
Introduction
1. With the dramatic collapse of the Ministerial
Meeting in Seattle in December 1999, the World Trade Organisation
suddenly found itself at the centre of an intense controversy.
Fundamental questions had been raised about the impact of globalisation
and trade liberalisation on the poorest countries in the world,
and the future direction of relationships between developed and
developing world. In this Report, after examining some of the
causes of the collapse of the Seattle Ministerial, we discuss
the critical questions, widely raised in the aftermath of Seattle,
of whether or not the WTO really benefits the world's poor. We
go on to outline the measures which are necessary to increase
the ability of developing countries to derive maximum benefit
from WTO membership: increasing their participation in negotiations;
improving their ability to negotiate and implement WTO agreements;
and reforming WTO procedures. Finally, we consider whether there
should be a new Round, the case for a development Round, and,
if there is to be a new Round, when it should be launched.
The Collapse of the Seattle Ministerial: What
went wrong?
2. The Seattle meeting received unprecedented media
coverage, probably as a result of the dramatic, and in some cases
violent, demonstrations which took place on the streets of Seattle.
Delegates on all sides, as well as the host country and the newly-appointed
Director-General, were under some considerable pressure to achieve
a result. The four-day series of meetings ended late on Friday
evening without an agreement having been reached, with the credibility
of the WTO severely damaged, along with prospects for the launch
of a new negotiating Round. We examine below some of the causes
of the collapse of negotiations at Seattle.
ORGANISATION
3. One important factor which differentiated the
Seattle Ministerial Meetings from other more successful international
meetings was the failure to organise the event sufficiently well.
The United States, the host country, did not provide even the
most basic facilities for participants. During this inquiry we
have heard example after example, on and off the record, of the
shambolic state of affairs which prevailed throughout the week:
delegates took part in meetings of several hours' duration without
being provided with drinking water; information about the arrangements
and agendas for meetings was not properly circulated; in one crucial
meeting, the interpretation facilities broke down;[3]
and rules of procedure were fabricated on the hoof by the Chairs
of meetings. The failure to organise the meetings at Seattle
efficiently was a disgrace. The success of international discussions
on matters of such enormous importance as world trade must never
again be threatened by such incompetence.
THE PREPARATORY PROCESS
4. A further serious problem was that the preparatory
negotiating process was totally inadequate. When delegations from
the 135 member states of the World Trade Organisation met in Seattle
in November 1999, they were meeting not to decide issues of substance,
but simply to agree an agenda for a Round of discussion to take
place over the coming months and years. Nevertheless Seattle failed
to bring members to a position where any sort of agreement on
an agenda for the new Round was possible. David Batt, Director
for International Economic Policy, DFID, told us "We went
to Seattle with a draft declaration of well over 30 pages, with
something like 75 paragraphs, of which about 73 were in square
brackets [i.e. not agreed] and some of those irreconcilable. So
the preparatory process clearly did not work as it needed to have
done to bring matters to the point where Ministers could address
the issues".[4]
How anyone could have expected delegations from 135 states to
resolve such enormous differences over a period of five days is
quite beyond us.
5. Witnesses gave a number of different explanations
for the failings of the preparatory process. Sheila Page, Overseas
Development Institute, stated that "there was an inexperienced
Director General. He did not prepare as well as even he could
have done in the three months before Seattle. There was a lack
of the sort of identifying of possible compromises which one expects
sherpas to do before a ministerial meeting".[5]
The lengthy and contentious selection process left WTO members
without leadership for five of the 11 months they had available
to prepare for Seattle. Mike Moore did not take the helm at the
WTO until September, when drafting of a declaration started in
earnest. His four principal deputies were named less than a month
before the WTO ministerial conference. While the WTO is largely
a member-driven organisation, the WTO Director General and his
deputies can play an important role in facilitating consensus
and organising work so as to ensure maximum progress. The diversity
of member interests and lack of institutional leadership meant
that few informal, consensus-building meetings took place both
in Geneva and Seattle.[6]
6. Chris Stevens, Institute for Development Studies,
drew attention to the problems caused by the inability of members
of the WTO to reach a consensus on the appointment of a new director-general,
"With the Director-General, if he has any influence at all
it is through being able to bring people together informally to
hammer out consensus... Someone who comes to office already opposed
by half of the membership is not well placed to do that. The second
point is, because of the compromise, splitting the normal turn
into two, he is effectively a busted flush because there are probably
not going to be serious broad negotiations before the end of his
term".[7]
Mike Moore agreed that "the delay in the appointment of myself
[as] the Director-General ... was not helpful. We never had our
deputies in place in the same room I think until Seattle".[8]
7. The delay in appointing a Director-General
of the WTO and the half-hearted mandate that was subsequently
given to Mike Moore seriously undermined his ability to prepare
for the Ministerial Meeting in Seattle. The 'compromise' which
resulted in the four year term being split between Mike Moore
and Supachai Panitchpakdi was simply a political expedient, which
did great harm to the WTO. With less than a year to go of Mike
Moore's term, there is a real danger that the handover will coincide
with the launch of the next Round and, once again, jeopardise
the preparatory process. WTO members must urgently consider how
best to ensure continuity, preparation and focus in the leadership
of the WTO.
8. Another mistake was that the preparatory process
did not take account of changes, following the transition from
GATT to the WTO in both membership and mandate of the WTO. This
point was made by Chris Stevens, "the WTO has expanded very
rapidly and that change has not been digested: one area is in
membership, moving from a small group of countries with fairly
similar interests and backgrounds, to a much larger group with
much wider interests - and we have seen the inadequacy of decision
making in that; and the other area of expansion is in the scope
of trade policy. It was much easier to forge a consensus when
trade policy meant tariffs and quotas; but when it means the system
of the administration of justice and intellectual property or
whether or not the United States is allowed to have a certain
tax treatment for its offshore companies, you are dealing with
issues which are inherently much more contentious. Until those
two areas of fundamental difficulty have been resolved we are
not going to be back on a smooth path of governance of international
trade policy".[9]
9. The lack of adequate preparation for the Ministerial
Meeting in Seattle was a major contributory factor to the failure
to launch a new trade Round. Mike Moore told us that "The
one thing that ministers are unanimous about is that they will
not come to another conference unless it is just about ready to
go, pre-cooked. It has got to be microwaved. It has got to be
ready to go".[10]
Any new Round should be preceded by intensive consultation
and preparation in order to maximise its chances of success.
UNBRIDGEABLE DIVIDE BETWEEN THE MAJOR WTO POWERS
10. Mike Moore told the Committee that "The
real reason we were unsuccessful in Seattle (which is not the
first time: ministerial meetings have collapsed twice before)
is that we were just too far apart".[11]
This was a point echoed by Charles Bridge from DTI who attributed
the failings more to a lack of flexibility between negotiators,
in particular between the EU and the US over agriculture,[12]
but the Committee has also heard of differences over labour standards,
tariff peaks, anti-dumping, investment and competition.[13]
This lack of flexibility has since been acknowledged by the US
Trade Representative, Charlene Barshefsky, "While broadly
supportive of a Round, a number of major WTO members were reluctant
to commit themselves to a negotiating agenda covering issues that
are genuinely difficult... WTO members began to harden their positions
rather than coming to consensus, and the negotiations proved unable
to bridge the gaps".[14]
We return to the position of the rich trading powers later in
this report.
11. Irreconcilable differences between the major
WTO powers, in particular the United States and the European Union,
were a clear factor in the failure to agree a negotiating mandate
at Seattle.
DEMONSTRATIONS
12. A final contributory factor was the demonstrations
themselves. The largest of these was 45,000 trade unionists demonstrating
against the transfer of jobs from the US to developing countries.
However, the ministerial also became the focus for protests against
many aspects of globalisation and capitalism and their impact
on development and the environment. The situation rapidly became
chaotic, and much of the evidence we received suggested that the
unfolding of events outside the conference exacerbated the difficulties
experienced by all members. Alec Erwin, South Africa's Trade Minister,
said, "It is very hard to tell whether the surrounding circumstances
impacted on the internal logistics or whether there just had been
insufficient account taken of the complexity of these negotiations
... We could not get to the hotel where the Egyptians were and
when we did we got teargassed. Good fun, but it meant it
was very difficult to start talking about practical problems,
because in Africa, Egypt and South Africa we play a very important
role. And Nigeria, we could not get to the Nigerians they were
outside the cordon sanitaire so we never saw the Nigerian Minister
for three days. Whereas to get Africa together those countries
had to be talking and saying: 'What do you think? What is happening?'
We could not talk".[15]
13. Sheila Page was dismissive of the protests against
the WTO, stating that "A great many of the developing country
delegations in Seattle felt that those who were there were capable
of speaking for themselves because they had prepared themselves
for it and they did not need to be told by people dressed up as
turtles what their attitude towards the environment should be".[16]
Alec Erwin, Minister of Trade and Industry in South Africa, agreed,
"The commitment to the WTO by the developing countries is
massive. The protest groups here that say that it is working against
us, of course there are aspects that are working against us, but
we will negotiate that. We do not need anyone else to negotiate
that for us; we will negotiate that".[17]
14. Clare Short was also scathing, "The World
Trade Organisation is a precious development instrument...and
those who are attacking it are, I am afraid, in the words of that
Malaysian Minister at Davos, 'organisations that claim to be in
favour of development who are trying to save the developing world
from development'".[18]
She went on, "The governments of developing countries are
becoming more and more exasperated that NGOs that claim to be
concerned about development speak so often in their name and often
make arguments with which they do not agree ... I think they have
got a real problem in that the world is changing under our feet,
as we know, and a lot of well-meaning NGOs just cannot command
the detail of what is happening to international trade and investment
and so on and are adopting a posture of, 'This is all multinational
capital. It is all exploitative', and I call it the 'Keep your
dirty capital out of Africa' sentiment. A lot of it is well meant,
but it is sort of this romantic idea of the noble poverty of the
rural poor of Africa and South Asia living at peace with nature
and their environment and spiritually at one".[19]
She concluded, "For me, the point is young people in Seattle
wearing Nike trainers with mobile phones who organise their demonstrations
on the Internet and fly in, living the comfortable life of citizens
of the kind of countries we live in with access to modern technology
and all the fruits of multinational capital which organises the
use of that technology for us, trying to protect the poor of the
world from many of the fruits of it".[20]
15. Whilst the groups and individuals who descended
on Seattle succeeded in focussing the world's attention on the
WTO and the impact of its policies on development and the environment,
many of them were simply arguing for protectionism, which is currently
imposing severe constraints on the growth of the developing world.
It must be for developing countries themselves to assess the
costs and benefits of WTO membership and to negotiate the means
by which trade liberalisation should be pursued.
3 Q.340 Back
4 Q.2 Back
5 Q.226 Back
6 Statement
of Susan S Westin, Associate Director, International Relations
and Trade Issues, National Security and International Affairs
Division before the Sub-Committee on Trade, Committee on Ways
and Means, House of Representatives, US, quoted in 10th Report
from the House of Lords' Select Committee on the European Union,
Session 1999-2000, The World Trade Organisation: The EU Mandate
after Seattle, Vol II, p.200 Back
7 Q.233 Back
8 Q.85 Back
9 Q.227 Back
10 Q.86 Back
11 Q.85 Back
12 Q.5 Back
13 Q.86 Back
14 10th
Report from the the House of Lords' Select Committee on the European
Union, Session 1999-2000, The World Trade Organisation: The EU
Mandate after Seattle, Vol II, p Back
15 Q.340 Back
16 Q.256 Back
17 Q.334 Back
18 Q.359 Back
19 Q.360 Back
20 Q.361 Back
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