APPENDIX
THE GOVERNMENT'S RESPONSE TO THE COMMITTEE'S
REPORT "AFTER SEATTLE — THE WORLD TRADE ORGANISATION
AND DEVELOPING COUNTRIES"
The Government welcomes the Committee's Report. The
Government thinks that the tone and content of the report are
constructive, helpful and supportive of the broad thrust of government
policy. The Government particularly welcomes the conclusion that
the WTO is not an enemy of the poor and the Committee's judgement
that there is no evidence to support the claim that the WTO is
undemocratic or not transparent. It agrees strongly with the conclusion
that the WTO is the only place where global trade policies can
be developed in a way that is shaped by the developing world and
that it is to be welcomed that at Seattle, developing countries'
voices began to be heard.
The Government agrees with most of the points raised
in this report. Its White Paper "Eliminating World Poverty:
Making Globalisation work for the Poor" sets out how it plans
to take forward policies on international trade and development.
(1) The failure to organise 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 (paragraph 3).
The Government agrees.
(2) 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
them 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". How anyone could have
expected delegations from 135 states to resolve such enormous
differences over a period of five days is quite beyond us (paragraph
4).
The Government agrees.
(3) 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 Supachi 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 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 (paragraph 7).
The WTO General Council is pursuing consultations
on the process of appointment of the Director General. The Government
believes there are grounds for optimism that agreement can be
reached on modest improvements. The Committee is mistaken in its
belief that Mike Moore and Supachai Panitchpakdi will each have
two-year terms: in fact they will have three years each.
(4) 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 (paragraph 9).
The Government agrees.
(5) Any new Round should be preceded by intensive
consultation and preparation in order to maximise its chances
of success (paragraph 9).
The Government agrees.
(6) 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 (paragraph 11).
The Government agrees but considers that the differences
between the EU and US, though substantial, were and are not irreconcilable.
(7) 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 (paragraph
15).
The Government agrees.
Part 1: The Costs and Benefits to Developing
Countries of WTO Membership
(8) Donor assistance is a vital catalyst to the
development of poor countries. The volumes of such aid are not,
however, enough to lever billions of people out of poverty. It
is economic activity and trade which can generate the necessary
wealth to provide schools, clinics and a decent standard of life
(paragraph 17).
The Government agrees.
(9) As the above chart demonstrates, in 1998,
sub-Saharan Africa accounted for only 1 per cent of world merchandise
trade. This compares with a 42 per cent share for EU Member States.
The 48 least developed countries, home to 10 per cent of the world's
population, account for just 0.4 per cent of world exports. It
is vital that trade barriers are brought down and low income countries
encouraged to take advantage of the resulting opportunities to
increase their share of world trade (paragraph 19).
The Government agrees.
(10) It is absolutely clear that the main engine
for pro-poor growth in developing countries must be their ability
to export products to previously closed or restricted markets
and to encourage domestic industries. But economic growth is not
enough to achieve the 2015 targets. It must be coupled with domestic
policies to reduce inequality and improve human security (paragraph
23).
The Government agrees. It believes that economic
growth must also be coupled with policies to protect the environment
and promote sustainable development.
(11) There is a clear difficulty in establishing
a precise causal relationship between trade measures and development
outcomes. Whilst we do not consider the task of reviewing the
impact of the Uruguay Round agreements on every single member
country to be a useful or practicable one, we nevertheless think
it is important that there be some form of empirical study, on
the basis of a sample of countries, to assess the impact of the
various existing WTO agreements on growth and development. Adequate
resources must be provided to enable it to conduct such a review
at the earliest opportunity. We recommend that the WTO state the
funds necessary for this purpose (paragraph 29).
The Government agrees that there are many factors
that determine a country's economic growth and many more for its
human development and environmental sustainability. It is also
the case that many of the Uruguay Round commitments have not yet
been fully implemented and the benefits of trade liberalisation
are most clearly seen in the medium to long term. If one were
to wait for a conclusive impact assessment before launching a
new Round, it would be 10-15 years before one could do so.
Paragraph 28 records the advice of Chris Stevens,
that country studies should be done on the impact of changes in
the international economic environment (which of course goes much
wider than WTO agreements). The Government agrees that one could
pursue studies along these lines, but this would not give a definitive
assessment of the impact of the Uruguay Round alone and it would
not be appropriate for these studies to be undertaken by the WTO.
Therefore, the Government will continue to support research by
appropriate multilateral institutions such as the World Bank and
UNCTAD on the impact of trade liberalisation on growth and poverty.
Moreover, the Government is a strong supporter of
Sustainability Impact Assessments (SIAs) as a tool to assist negotiators
in the run-up to and during the next trade Round.
(12) Donors should be sensitive to the implementation
costs of WTO commitments to developing countries and be ready,
where appropriate to provide funding and technical assistance
for compliance (paragraph 30).
The Government agrees. Referring to paragraph 15,
the government also believes that developing countries themselves
need to consider the implementation costs of taking on agreements.
(13) In principle, Special and Differential Treatment
has been an important provision for developing countries in implementing
the Uruguay Round agreements. There are, however, serious questions
as to how these measures have worked in practice. Of course, Special
and Differential Treatment will continue to be necessary for developing
countries. But a review is necessary of the purpose of Special
and Differential Treatment; when it is required; and what measures
can be readily and practicably implemented to benefit poorer countries.
Certainly the interests of developing countries need to be central
to all discussions from the outset of WTO negotiations, not just
a last minute consideration. Any Special and Differential Treatment
agreed needs to have demonstrable effect, rather than merely providing
token comfort (paragraph 34).
The Government agrees. Developing countries are concerned
to ensure that there will be adequate flexibility in the implementation
and phasing in of new rules. Without some reassurance on this,
many countries will continue to resist a Round. The Government
believes that new rules should recognise more explicitly that
WTO members are at different stages of development. It believes
that future special and differential provisions should be real
and binding, and that any new WTO rules should reflect countries'
implementation capacity.
(14) We recommend that WTO amend its objectives
so as to include poverty reduction as an explicit aim of growth
through trade liberalisation (paragraph 37).
The Government agrees. It is urging the WTO to commit
itself to the International Development Targets. The Marrakech
Agreement establishing the WTO clearly identifies trade liberalisation
as a means and not an end ("with a view to raising standards
of living ... and a steadily growing volume of real income ¼
the optimal use of the world's resources in accordance with the
objective of sustainable development").
(15) We also recommend that no further steps in
liberalisation take place without clear statements from the UN
family and from the IMF and World Bank as to how they envisage
such steps affecting poor people. Donors must also state, in each
instance, how they are going to adjust their own activity so as
to complement that of the WTO and ensure that the poor are not
only protected, but also benefit from future growth (paragraph
38).
The Government welcomes the opinions and research
of these institutions on the subject of trade liberalisation.
The Government believes that there needs to be much closer co-operation
between these agencies. But it would be inappropriate to give
the UN, IMF and World Bank what would amount to a power of veto
over progress towards WTO negotiations and further trade liberalisation.
The WTO is an inter-governmental organisation and its decisions
cannot be controlled by other international organisations. It
is up to governments to advocate consistent policies for international
institutions, rather than for the agencies to police each other.
WTO negotiating positions should reflect joined up government,
hence the active involvement of DFID and other departments in
formulating the UK Government's trade policy.
The Government agrees that trade policy should be
better integrated into the activities and dialogue of donors.
It will work with multilateral agencies and others to improve
and widely apply the analytical tools available for assessing
the probable effects of the agreements reached in a new trade
Round on the poor in each country. Through phased implementation
and adjustment assistance, any short term negative effects on
specific groups of poor people can be mitigated.
Part 2: Building Trust of Developing Countries
in the WTO
(16) We welcome the increased assertiveness of
developing countries at Seattle (paragraph 40).
The Government agrees.
(17) We welcome the decision in February by the
General Council of the WTO to conduct consultations on the package
of confidence building measures proposed by the Director-General
(paragraph 42).
The Government agrees.
(18) We urge the UK Government to encourage EU
member states to agree to the proposal for tariff-free access
for least developed countries for all imports apart from those
associated with the arms trade, and to press for rapid implementation
of the necessary measures to put the commitment into practice.
This will be a significant gesture which will surely make a major
contribution to the rebuilding of developing country confidence
in the WTO (paragraph 45).
The Government agrees.
(19) Pro-poor trade liberalisation requires the
rich trading blocs to liberalise first, to make sacrifices, to
demonstrate a desire to see the developing world enter the trading
system (paragraph 46).
The Government agrees that this is important for
building confidence. However, liberalisation on the part of rich
trading blocs is not necessarily a sacrifice, at least at the
macroeconomic level: reduction of tariffs can lead to beneficial
reallocation of productive resources within a country's own borders,
irrespective of what it extracts out of others for doing likewise.
(20) The UK should push forward discussions within
the Quad group, encouraging Canada, Japan and the USA to allow
tariff-free access for least developed countries (paragraph 47).
The Government agrees.
(21) We note that the ACP countries had agreed
the "essentially all" position which the EU adopted
at Seattle. There are clearly concerns within the ACP group, particularly
among small island states and vulnerable economies, over tariff-free
access for least developed countries. Careful negotiations will
be necessary to meet ACP concerns. We would welcome the Government's
comments on the possibility of extending tariff-free access to
other vulnerable but non-least developed states such as small
island states and those which are dependent on one commodity (paragraph
48).
The impact of duty- and quota-free market access
for the least developed countries depends on the form of the final
agreed proposal (still being discussed in the Commission) and
the speed at which least developed countries can respond. Some
ACP countries have legitimate concerns about the impact the proposal
may have on them. We have encouraged the Commission to ensure
that these concerns are addressed in the formulation and implementation
of the proposal. It has been known for some time that market conditions
are changing and the ACP countries need to adapt accordingly.
We will work with vulnerable countries (particularly Guyana, Jamaica,
St. Kitts, Mauritius and Fiji) through the EU, the multilateral
agencies and other donors to ensure that those affected are given
adjustment support.
WTO rules allow WTO members to give preferential
treatment (that is better than Most Favoured Nation Treatment)
to developing countries, provided that there is no discrimination
in that treatment between developing countries except as regards
the Least Developed Countries, who can be given better treatment
than other developing countries. Extending LDC treatment to some
other vulnerable developing countries would be incompatible with
WTO rules. The Government has considered the possibility of the
creation of a new category in the WTO, but believes that such
a change would be difficult to achieve. Nevertheless, the
Government is committed to working for the improvement of preferential
arrangements for all developing countries through the EU's Generalised
System of Preferences (GSP).
(22) The situation where more than half of the
least developed members of the WTO do not have any representation
at the WTO's headquarters in Geneva should be rectified as soon
as possible, as should the lack of proper representation of some
members at Ministerials. The European Commission has recently
been developing proposals for assistance to be provided to an
ACP collective office in Geneva. This is a positive step, but
much more needs to be done. There must be an assessment of the
costs necessary to establish representation for all developing
countries at the WTO. There must then be an agreement as to how
these costs can be fairly met by donors and by developing countries
themselves, within an agreed timetable (paragraph 52).
The Government agrees that the question of representation
in Geneva is an important one. Together with other donors we are
looking at ways in which we can strengthen our support to countries
that have difficulty participating fully in the WTO. This may
include strengthening the services provided by organisations such
as AITIC (Agency for International Trade Information and Co-operation).
We also fund two advisers on trade matters in the South Centre,
an intergovernmental organisation of developing countries based
in Geneva, and the Commonwealth Secretariat. The Government would
encourage all developing countries to establish appropriate representation
in Geneva as soon as they are in a position to do so, but donors
would not normally provide any direct subsidy to the cost of diplomatic
missions.
(23) We consider that the sizes of negotiating
teams at the WTO needs further examination to make such negotiations
more equitable (paragraph 55).
The Government believes it is unrealistic to impose
limits on delegation sizes and that doing so would not necessarily
reduce their influence.
(24) NGOs can not have it both ways. They either
want civil society involvement in trade negotiations or they do
not. Civil society does not just mean western NGOs. For developing
countries, we consider the involvement of non-governmental actors
in negotiating teams to offer at least a partial solution to the
problems of lack of technical expertise and negotiating skills.
We would therefore oppose any proposal to restrict participation
in delegations to government officials and ministers (paragraph
59).
The Government agrees.
(25) We believe strongly that the principle that
the WTO negotiations are ultimately between governments must be
retained. We would be concerned if private sector interests were
the only ones taken seriously by the UK Government and the EU
in preparing for and taking part in WTO negotiations. We would
urge our own Government to consult as widely as possible in all
sectors in developing its own policy. We welcome the fact that
the British delegation drew on expertise of both NGOs and the
private sector (paragraph 60).
The Government agrees.
(26) There is a clear need for the technical expertise
and resources of some developing countries to be significantly
increased, in order for them to be able to benefit from their
membership of the WTO, to participate fully in its negotiations,
and to meet the commitments they make in its agreements. It is
crucial for development more generally that developing countries
are able to understand and develop trade and economic policies
that will result in pro-poor growth (paragraph 64).
The Government agrees. It has recently announced
an expansion of its trade-related technical assistance activities.
(27) Capacity building cannot be restricted to
representation and negotiating capacity. It must encompass all
aspects of trade development and expertise (paragraph 67).
The Government agrees.
(28) In our view, trade-related technical assistance
is best delivered by multilateral agencies, rather than by industrialised
countries which are party to the same negotiations and inevitably
have their own interests and agendas. Such assistance should be
provided not only by the WTO, but also by the other multilateral
agencies, in particular, UNCTAD and the World Bank, which already
has resident missions in most developing countries and is well-placed
to provide such assistance. We recommend that technical capacity
building becomes a key strand of any World Bank development programme
(paragraph 70).
The Government agrees that multilateral agencies
play a key role in providing trade-related technical assistance.
To this end, the Government is working closely with the agencies
responsible for the provision of trade-related technical assistance,
in particular to ensure that it takes place within a coherent
development strategy in particular the Poverty Reduction Strategy.
The Government is working with other like-minded donors to improve
the Integrated Framework for least developed countries in order
to mainstream trade in their development programmes. An effective
Integrated Framework will also help to enhance the delivery of
trade-related technical assistance by bilateral donors, which
the government believes need not lead to a conflict of interest.
(29) There are already some excellent initiatives
in place within the WTO, in concert with other multilateral agencies,
for providing effective technical assistance to developing countries.
But the resources available to the WTO for technical assistance
are minuscule when compared to the demand. Funds for technical
assistance available to the WTO must be increased significantly
in the immediate future. Furthermore, if the WTO is to be able
to plan and deliver good quality technical assistance to those
who require it, it must have access to a permanent budget. For
these purposes, which are central to its work, it should not have
to rely on ad-hoc extra-budgetary contributions from member states.
We recommend that a permanent technical assistance budget is established
with the aim of providing courses free of charge to developing
countries (paragraph 76).
The Government agrees. However, the WTO is not a
development assistance institution and should not always take
the lead on technical assistance activities.
(30) We welcome the contributions which have been
made by the Department for International Development towards multilateral
technical assistance programmes. We would urge DFID to continue
this work and to encourage its counterparts to make similar contributions
(paragraph 77).
The Government agrees.
Part 3: WTO Reform
(31) We find little to substantiate the claim
that the WTO is undemocratic. Whereas voting in the World Bank
and the IMF is weighted according to members' shareholding, the
WTO requires one member one vote, and unanimity in agreeing trade
liberalisation measures. The Lords, in their report, quoted Martin
Wolf of the Financial Times who stated that none of the charges
made against the WTO "is as mistaken as the proposition that
the WTO is undemocratic. The WTO is not a State - and cannot be
judged by the standards applied to States. It is something quite
different: an agreement among States" (paragraph 83).
The Government agrees.
(32) We have found WTO representatives (including
Mike Moore) willing to account for the work of the organisation.
In this respect, we agree with the Lords' conclusion that the
UK Government, the EU and the WTO itself have been commendably
open over the issues, and that the complaints of NGOs about lack
of transparency must sometimes be interpreted as complaints that
their lobbying does not have the desired effect. We do not consider
there to be a problem with the external transparency of the WTO
(paragraph 84).
The Government agrees that the WTO has been commendably
open, but that more should be done, for instance on the further
derestriction of documents.
(33) We do, however, consider that there is merit
in the proposals currently being discussed between the WTO and
the Inter-Parliamentary Union for a parliamentary assembly associated
with the World Trade Organisation. It is vital, however, that
the appropriate mechanisms are in place to ensure delegations
are truly accountable to their national parliaments. There should
also be a representative variety of views within parliamentary
delegations (paragraph 85).
The Government believes that delegations should be
accountable to national governments, which are then accountable
to national parliaments. It is also concerned about how developing
countries would finance representation at such a parliamentary
body. On the issue of the accountability of delegations, it is
worth noting further that they do not ultimately make decisions,
rather it is Governments, accountable to their Parliaments, that
sign the Agreements.
(34) The Green Room process at Seattle was a failure.
The main problems were that the Green Room was used at too early
a stage considering the lack of anything approaching a consensus
on the broad issues; the flow of information in and out of the
Room was inadequate; and the way in which delegates were selected
to take part in the meetings was perceived at best as unclear,
and, at worst, impartial (paragraph 92).
The Government agrees.
(35) The Green Room process, where a limited but
representative number of delegates participate in negotiations
on the finer details of an agreement, is not in itself flawed.
In fact, it seems to be the only way to proceed at that stage
of negotiations (paragraph 94).
The Government agrees.
(36) In future, the selection of delegates to
take part in Green Room meetings should be conducted on the basis
of a clear system of representation, where one country negotiates
on behalf of a group of countries with shared interests. Such
a system will only work if it is transparently organised and flexible
so that different groupings can be formed for different negotiations.
The key issue is that countries must be able to choose for themselves
who will represent them, and those countries not party to discussion
must have opportunities to lobby and have full access to information
about proceedings in the meetings, including the possibility of
observing meetings directly (paragraph 99).
The Government shares the view that better handling
of informal consultations is necessary, but believes that this
might best be achieved through flexible written guidelines. It
has a fundamental concern to ensure that any system is responsive
enough to handle all cases - including those where small countries
have concerns not shared by any group. Any system should avoid
being over-prescriptive, particularly as regards anything which
suggests a regional group based approach.
(37) It is unlikely that member states will allow
the principle of consensus decision-making to be abandoned in
the foreseeable future. Any failure of the system to work to the
benefit of developing countries is, in our view, more a product
of the obstacles to their participation in negotiations than of
flaws in the system itself (paragraph 102).
The Government agrees.
(38) The reform of the WTO will not be fully resolved
in the immediate future. As Clare Short suggested to us in evidence,
it will be an incremental and gradual process. It would not in
our view be appropriate to delay future negotiations in anticipation
of a day when reform is "finished". That said, there
are some key reforms which must be implemented immediately, and
before consideration is given to holding another Ministerial Meeting.
These include: drastically improving the preparatory process leading
up to the Ministerial; improving the Green Room meeting arrangements;
and establishing clear rules of procedure to be agreed by all
members (paragraph 105).
The Government is sympathetic and would again caution
against making reform a pre-condition for a new Round.
(39) We are amazed that the WTO itself has no
record of the extent to which the Uruguay Round agreements have
been implemented in member countries, or of compliance with agreements
(paragraph 108).
The WTO actually has a pretty good idea of the level
of implementation and compliance with Uruguay Round agreements.
One of the major functions of the subsidiary bodies is to monitor
implementation and compliance, particularly as regards responses
to the notification obligations which occur in the Uruguay Round
agreements. The Marrakech Ministerial Decision on Notification
Procedures established a central registry of notifications in
the WTO Secretariat. This monitoring of compliance and implementation
is also a fundamental part of the Trade Policy Review process.
It is also worth noting that whether a country has implemented
an agreement is often a matter of judgement and can sometimes
only be tested in Dispute Settlement.
(40) The review of implementation of the Uruguay
Round is a welcome step. Properly funded and properly conducted,
it could go some way to addressing the concerns of NGOs and some
developing countries and to building confidence in the WTO. We
are astonished, however, to discover that this initiative has
only now been agreed. In future, we recommend that the UK demand
the inclusion in WTO agreements of mechanisms for monitoring the
implementation of and compliance with agreements and adherence
to WTO rules by member states. Appropriate resources must be provided
to the WTO for this purpose. We would welcome comment from DFID
on the possibility of peer reviews being conducted, similar to
those which take place within the OECD (paragraph 109).
The Government also welcomes the Implementation Review
Mechanism and hopes that it properly addresses the concerns of
developing countries. It also agrees that implementation of new
agreements should be properly assessed, both during and after
negotiations. A number of current agreements have built-in reviews.
The Government would like to point out that the Trade Policy Review
Mechanism is a process of peer review in the WTO. It believes
that this would benefit from more funding.
Part 4: A New Round?
(41) We support the UK's position that a new Round
should be launched, and that the new Round should be conducted,
at an appropriate pace, on the basis of a developmental agenda.
The new Round should not, as we have already stated, be delayed
in anticipation of the reform process being completed. However,
several things must happen before a new Round can be launched
which has any chance of success:
- First, a review of the implementation and
impact of the Uruguay Round agreements must be initiated. Without
this, we fail to see how the WTO can make any claim to have learned
from experiences to date and apply those lessons to the new Round.
- Secondly, there must be an immediate and significant
increase in technical assistance to developing countries, in order
to allow them to participate fully and effectively in the new
Round of negotiations.
- Finally, we must emphasise that the chaos
of Seattle must never be repeated. There must be adequate preparation
for the new Round, and the meetings themselves must be properly
organised so as to ensure access to negotiations for all members
(paragraph 115).
The Government welcomes the Committee's support for
its position on a new Round. The first point on implementation
has been discussed in earlier parts of the response: the Government
reiterates that a full impact assessment cannot be undertaken,
but many model-based studies provide useful evidence; however
the Implementation Review Mechanism is ongoing. For the second
point on technical assistance, the Government has just announced
a large increase in our budget, but it cannot force other donors
to do the same; moreover the Government believes that any technical
assistance must be provided in a coherent manner that complements
the trade agenda of the country. The Government fully agrees with
the final point.
Conclusion
(42) 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 (paragraph 116).
The Government fully agrees.
Department for International Development
30 January 2001
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