Select Committee on International Development Appendices to the Minutes of Evidence



APPENDIX 3

Memorandum submitted by Save the Children Fund

CONTEXT

  Save the Children Fund was one of many non-governmental organisations represented at the third WTO Ministerial meeting in Seattle. Save the Children's interest in this event was both positive and negative in the impacts that trade policies have on children and communities in developing countries. International trade policies can impact children and their communities in a number of complex direct and indirect ways through changes in such factors as government revenue and the provision of basic welfare services, changes in prices and employment and, more directly, through effects on the extent of child work. What is clear is that as WTO rules are expanded into more and more areas of domestic policy, children will be affected. For Save the Children the issue is not whether to have global trade rules but rather what kind of rules, and how they should be balanced to ensure they do not have adverse impacts on social, health and education provision within poor countries and other negative distributional consequences.

  We welcome this inquiry following the suspension of negotiations to launch a new trade Round. The Seattle meeting demonstrated without doubt that the WTO does not present a level playing field for all countries. The failure of the conference to pay due attention to the concerns of developing and least developed countries demonstrates the need for fundamental and substantive reform of the WTO processes.

  This submission will focus on developing country concerns at Seattle; the linkages between trade and child labour; and the public health implications of the Agreement on Trade-Related aspects of Intellectual Property rights (TRIPs).

1.  DEVELOPING COUNTRY CONCERNS AT SEATTLE

  The Seattle talks failed because differences on almost every subject hindered efforts by member governments to draft an acceptable declaration. The failure was primarily attributed to acrimony over procedural issues, specifically the difficulty of managing the negotiating process in a transparent and inclusive manner, together with specific disagreements over traditionally difficult issues (agriculture, textiles and anti-dumping). The US and EU pursued their own agendas and were unwilling to make meaningful concessions, while developing countries were clearly unhappy with the way in which the meeting was conducted. In the words of Ambassador Barshefsky (US), Chair of the Conference, "the WTO has outgrown the processes appropriate to an earlier time".

 (A)   IMPLEMENTATION VS. NEW ISSUES

  In Seattle, WTO Member States were divided over EU proposals for a comprehensive Round comprising negotiations on "new issues" (investment, competition policy, transparency in government procurement, competition policy, industrial tariffs, trade facilitation, and electronic commerce) versus a narrower "built-in agenda" (agriculture, services and built-in reviews). The most contentious areas were the long-standing issues over further liberalisation in agriculture, labour standards and implementation of existing Uruguay Round agreements.

  On this last item, the Seattle trade meeting failed to address developing country concerns to "review, repair and reform" existing Uruguay Round agreements. Developing countries and least developed countries were concerned about the implementation of developed country commitments in areas such as the phasing out of the multi-fibre agreement; reducing agricultural export subsidies; restraint in the use of anti-dumping measures; and implementation of the provisions on special and differential treatment for developing countries. They argued that the Uruguay Round had not improved market access for their exports of goods and services. Furthermore, insufficient human and financial resources and weak institutional capacities have restricted their ability to comply with their contractual obligations and exploit the opportunities open to them under the WTO, particularly in the dispute settlements mechanism.

  It was felt that a proper review of implementation problems and the process of initiating necessary changes in the agreements could not be properly carried out if there was a proliferation of new issues in a new Round. For example, at the opening of the conference Mike Lamin, the Minister of Trade and Industry for Sierra Leone was not alone in pointing out that:

  "The introduction of new issues at a time when we have not come to terms with the existing Agreements, including those under the built in agenda, will pose serious difficulties to the legal and regulatory authorities and slow down our integration into the system" (Speech to the conference).

 (b)   Least-Developed Countries

  During the negotiations, the US and Canada objected to the EU proposal to provide tariff- and quota-free access for essentially all exports from the world's poorest 48 countries. This was a lost opportunity to make a goodwill gesture because the initiative also included the establishment of a programme for focused and effective trade-related technical assistance in support of capacity building. Tariff barriers are far from the only constraint facing poor countries. The least developed countries, with 10 per cent of the world's population, have only 0.3 per cent of world trade, half the share they had a decade ago. The EU is however committed to implementing this package by 2005, and Member States must take steps to do this unilaterally for all exports from least developed countries. It is important that momentum for this proposal is not lost within any current discussions within the Quad group (EU, Japan, US and Canada).

 (c)   Capacity-building

  Developing country after developing country reiterated the need for capacity building to be a priority to enable them to negotiate and implement agreements. Seattle demonstrated the danger of new negotiations taking place prior to first ensuring an acceptable level of negotiating capacity on the part of the poorest countries. The stark reality was that 30 WTO members could not afford to send any delegates to Seattle at all, and others had delegations of no more than one or two. Whereas the US had a team of 85, Belize, Burkina Faso and the Congo had five delegates. Thirty-three of the WTO's least developed country members have no diplomatic representation in Geneva and do not have the capacity to formulate negotiating positions and trade legislation. In this respect, the newly established WTO legal advisory centre in Geneva will be an important first step towards providing subsidised legal advice to member governments and must be adequately financed.

  Many least-developed countries in particular pointed out that any capacity-building programme had to address the inextricable link between increased market access and improved supply capacity. This compares with the usual focus of the WTO and donors on demand side issues such as improving market access. Widely divergent capabilities, skills and resources mean that many developing countries cannot compete on an equal footing. So, for example, limited trade finance and commercial skills, limited transport and telecommunication systems, poor information about foreign markets all combine to create a major disadvantage. The elimination of trade barriers must be complemented by appropriate measures to help the poorest countries to overcome their infrastructual and institutional weaknesses. Without this, they cannot benefit from improved market access. The Minister of Tourism, Trade and Industry in Zimbabwe pointed out some of the constraints:

  "On, the one hand, institutional, financial and skilled human resource deficiencies that lead to weak capacities to utilise potential opportunities offered by global trade liberalisation. On the other hand, limited market access in products of export interest to developing countries, which hampers our efforts towards diversification and industrialisation" (Speech to the Conference).

  Other least developed countries, like Nepal, called for the speedy operationalisation of the WTO's Integrated Framework for Least Developed Country's Trade and Development and full implementation of the Special and Differential provisions as a first step towards helping the smaller economies. Capacity building has to be given a priority to prepare developing countries for resumed negotiations and be generously financed.

2.  THE NEED FOR GENUINE REFORM OF THE WTO

  Seattle highlighted the undemocratic nature of the WTO negotiating process, explaining why many developing countries were unenthusiastic about embarking on a new Round. Decision-making within the WTO relies on consensus and developing countries account for three-quarters of the membership. However, in practice smaller countries come under pressure not to use their right of veto.

  The Seattle preparatory meetings and the negotiations themselves witnessed the resumption of the "Green Room" method, originating from the old GATT practice of convening small groups of invited members to progress on the drafting process. Developing countries felt excluded and humiliated by the process. The Latin American, Caribbean and African delegations all issued statements saying that their concerns with the process were such that they could not agree to any final declaration. This was despite the rhetoric of developed countries and the WTO Director-General promising to make the WTO work better especially for least developed countries. Sonny Ramphal, Chief Negotiator for the Caribbean explained the dilemma: "If I am a member of an organisation that takes decision by consensus and I am not consulted, I am not even invited to participate in the process by which a decision is reached, how can I be asked to concur? And if I cannot concur, how can there be consensus?" (Statement to the Press, 2 December 1999).

  The way in which trade negotiations are conducted in the future will have to better reflect the consensus-making structure of the WTO. The suspension of talks offers an opportunity for genuine reform. The UK has proposed a special "Ministerial meeting on Ministerials" for improving the way trade negotiations are conducted and asked EU Commissioner Lamy to have the EU come up with a paper on ideas for reform of the WTO.

  This is an encouraging way forward, as is the recent statement by UK Secretary of State for Trade and Industry Stephen Byers to Commonwealth Trade Ministers in New Delhi that the "WTO will not be able to continue in its present form. There has to be fundamental and radical change in order for it to meet the needs and aspirations of all 134 of its members."

  The next formal WTO General Council meeting is scheduled for 7 and 9 February. Japan is also expected to propose the establishment of a special advisory council idea as an alternative to the so-called Green Room process. This advisory group would comprise between 20 and 30 WTO Members from both developed and developing countries to foster greater transparency in the WTO decision-making process.[1]

  In the short-term, the UNCTAD X meeting in Bangkok next month will provide a critical test of developed country commitment to address developing country concerns about further trade liberalisation. The meeting will focus on the development impacts of globalisation and will determine UNCTAD's work programme over the next five years. UNCTAD has long pointed out that the world economic system is failing the poorest countries and developed countries should support the idea of UNCTAD carrying out impact assessments of current WTO trade agreements. Earlier this month, UNCTAD Secretary General Rupens Ricupero urged the forum to be used as "world parliament on globalisation" to break the deadlock in WTO trade talks.[2]

3.  LINKAGES BETWEEN TRADE AND CHILD LABOUR

  The issue of labour standards generated much of the tension and division among WTO members in Seattle. In a controversial move, the US proposed that the WTO establish a working group on trade and labour standards. The issues to be discussed by this working group would go beyond the "core labour standards" proposal that was rejected at the WTO 1996 Ministerial in Singapore. New items included employment, forced or exploitative child labour, social protection and safety nets. Developing countries, fearing this to be disguised protectionism, had their worst fears confirmed in Seattle when President Bill Clinton decided to depart from his original demand for a working group. Following the mass demonstrations, he proposed that core labour standards should be part of every WTO trade agreement enforced through trade sanctions.

  As a compromise the EU proposed a joint ILO/WTO forum on trade, globalisation and labour issues. The forum idea explicitly ruled out the use of trade sanctions, favouring positive incentives (such as linking labour standards to the Generalised System of Preferences). The forum would exist outside of the WTO structure aiming to promote dialogue between all interested parties, including governments, trade unions and others such as UNCTAD and the World Bank. Given the suspension of the talks, and hostility from developing countries, it is not clear where this proposal now stands. Save the Children suggests that any future proposal for a forum outside of the WTO must include NGOs as a formal partner alongside international agencies and trade unions.

  Child labour is now higher on the international policy agenda than ever before. In June 1999, the International Labour Organisation adopted a new convention on the worst forms of child labour. Save the Children supports core labour standards and in particular, believes that eliminating harmful child work which jeopardises a child's health, education or development should be a priority for action. Children work in a variety of reasons and "solutions" will only work if they take this diversity and complexity into account. However, our evidence suggests that trade sanctions and boycotts have limited immediate impact and may shift child workers into worse paid and more hazardous jobs, making the problem more difficult to resolve. Less than 5 per cent of children work in the production of goods for export, which would be affected by trade sanctions. Most children work in domestic family-based agriculture, service industries (street trading and food), and small-scale manufacturing.

  We also believe that the WTO is not the institution to take forward the issue of core labour standards. It has no representation aside from governments and, unlike the ILO, no experience of the range of different methods that can be employed to improve labour standards. Developing country experiences in Seattle give very strong grounds to their fears that the linkage of trade and labour standards within the WTO may be abused. Instead, we would call for a speedy universal ratification for the new ILO Convention on worst forms of child labour (I82), strengthening of the ILO particularly its monitoring of, and action on, labour violations, and international co-operation in support of action to eliminate the worst forms of child labour. These measures must be underpinned by more equitable trading conditions for developing countries.

4.  THE HEALTH IMPLICATIONS OF THE WTO TRIPS AGREEMENT

  The WTO TRIPs agreement was one of the first multilateral agreements negotiated as part of the Uruguay Round in 1994. The TRIPs agreement sets out minimum standards in the field of intellectual property. All WTO Member States have to comply with these standards by modifying their national regulations in accordance with the agreement.

  With respect to pharmaceuticals, the main change is the obligation to grant patents for pharmaceutical products and process inventions for a minimum of 20 years. Developing countries have a period of 10 years (up to 2005) to amend their patent legislation, while least developed countries are given 11 years (up to 2006).

  The agreement permits Member States to provide limited exemptions to the patent holder's monopoly through their national legislation. Firstly, public health authorities may be allowed to issue compulsory licenses against the owner's will if justified by "the public health interests of its people". Secondly, the agreement does not prohibit parallel imports, which gives a government the legal right to import a patented product manufactured or sold more cheaply from a third country. However, this can only take place following strictly enforced procedures and the patent holder has to be compensated.

  Intellectual property rights that protect drug patents enforced by TRIPs will have negative consequences for developing countries leading to higher consumer prices for drugs, while undermining domestic drug production. Concerns about the negative consequences of TRIPs was expressed in the WHO resolution on essential drugs. This resolution faced substantial opposition in the WHO Assembly in 1998 before it was adopted in 1999. The World Health Assembly Resolution WHA52, 1999 calls upon Member States to explore and review their options under relevant international agreements including trade agreements, and to safeguard access to essential drugs.

  The gains made world wide in health status in the last few decades are being lost in the poorest countries as they are excluded from global economic development. These and other factors have caused many state health systems to collapse. The poorest countries are only spending a fraction of the very basic minimum for health care, which the World Bank estimates at $14 per head year. For example, Malawi and Rwanda spend $3 dollars and 1\4 dollars per head.

  Save the Children believes that the TRIPs agreement will have implications for the affordability of essential drugs for the poorest people. The collapse of health systems in the poorest countries and the absolute lack of resources mean that essential drugs cannot be delivered to those most in need. By raising the cost of essential drugs, the TRIPs agreement will further deny poor people access to basic health care.

  Defenders of the TRIPs agreement argue that it will not affect essential drugs as only 15 per cent of the World Health Organisation's model list is patented. However, the reality of the public health situation today means that affordable drugs will be required for diseases such as HIV infection, and drug resistant infections such as TB and malaria, if health strategies are to be effective.

  During the Seattle talks, several developing countries including the Africa Group of countries, submitted proposals on reviewing and amending various aspects of the TRIPs agreement. These proposals include the need to review article 27.3(b) of TRIPs to clarify artificial distinctions between life forms and to clarify that all living organisms and their parts cannot be patented; and the need to extend exemption from patenting for essential drugs under the WHO list. However, the US and EU rejected developing country proposals on the grounds that existing WTO agreements cannot be re-opened.

RECOMMENDATIONS

  1.  Save the Children believes that the credibility of the WTO as the focus of a rules-based multilateral system is at stake unless developing country concerns to "review, repair and reform" existing agreements is genuinely addressed. Any future resumption of negotiations on a new round will not succeed unless these concerns have been addressed.

  2.  The UK Government should work with its EU partners and take steps towards providing tariff and quota free access for all the exports from the least developed countries. It should also push this proposal within any discussions within the Quad group (EU, Japan, US and Canada).

  3.  The collapse of the Seattle talks offers an opportunity to make the WTO a genuinely consensus-driven organisation. The proposal for a "Ministerial meeting on Ministerials" offers an opportunity to take the reform agenda forward, based on the lessons from Seattle. Developing and least developed countries must be equal participants in this process. The UK Government must also support NGO participation in future discussion on WTO reform.

  4.  Seattle demonstrated the danger of embarking on new negotiations prior to ensuring an acceptable level of negotiating capacity on the part of poorest countries. Negotiations on the built-in agenda begin this year and must proceed hand in hand with a sustained and well-resourced programme to enhance the negotiating and legal capacity of the poorest countries.

  5.  There is a growing lobby of Southern governments, international and national NGOs calling for a comprehensive reform of the WTO Trade-Related aspects of Intellectual Property rights (TRIPs) agreement. The life patent provision of TRIPs under Article 27.3(b) will be reviewed this year. During the Seattle talks, President Clinton announced a change in US policy in support of greater access to life-saving medicines. In view of President Clinton's announcement and the recent UK Government moves to formulate a policy position on access to drug treatment, Save the Children believes that the TRIPs review should also address the issue of access to essential drugs. The UK Government should also work with the EU to support President Clinton's statement calling for a flexible interpretation of TRIPs to enable access to affordable drugs.

  6.  Core labour standards are essential to a modern international trading system. However, the WTO is not the institution to take forward the issue of core labour standards. Developing country experiences in Seattle suggest that any discussion on the linkages between trade and child labour cannot be dealt with fairly and by consensus. Save the Children would favour the strengthening of the ILO, particularly its monitoring of and action on labour violations, as well as the speedy universal ratification of the new ILO Convention on the worst forms of child labour. These measures must be underpinned by greater market access for developing country goods and services.

Save the Children Fund

January 2000


1   Reported by ICTSD Bridges Weekly News Digest, Vol 4, Number 1, 10 January 2000. Back

2   Reported by ICTSD Bridges Weekly News Digest, Vol 4, Number 2, 18 January 2000. Back


 
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