Examination of Witnesses (Questions 231-239)
TUESDAY 8 APRIL 2003
MR JOHN
HILARY AND
MR PETER
HARDSTAFF
Chairman
231. John and Peter, thank you very much for
coming to help us with our inquiry on trade and development and
Doha. The House starts, as you know, on a Tuesday at 11.30, so
we have just under an hour, so colleagues have promised to be
reasonably brisk with questions, and I am sure you will be reasonably
brisk with your answers. You both might like to answer this, because
really it applies to both of you; in your view, what would make
the Doha agenda a genuine "development round", what
are the litmus tests, what are the bullet-points, what are the
indicators by which you believe that Doha will be judged a genuine
development round, and how do you rate the prospects of this occurring?
Peter, let us start with you, from the World Development Movement.
(Mr Hardstaff) Thank you, and thanks
to the Committee for the opportunity to provide oral evidence.
I think, if we run through a number of the key issues then what
WDM would be looking for from a genuine development round would
be some significant reform of the way that the WTO operates currently
and also reform of its current rules. So clearly within that would
be some significant reform on agriculture, currently we have a
very unfair trading regime, as the IDC has recognised a number
of times. We would be looking for reform on TRIPS (intellectual
property rights) both in terms of the "access to medicines"
issue, but also, more broadly, from the development perspective,
we would be looking at reform of patenting rules relating to life
forms. We would be looking for significant reform on GATS. Obviously,
we will be covering this in more detail later in this session,
but, to summarise, we believe that GATS has some serious flaws
which need to be addressed. Also there are issues like trade-related
investment measures (TRIMS), a review of which is under way but
no progress has been made, and the so-called "implementation"
issues which include TRIMS but also covers a wider range of issues.
And we would like to see reform of the way that the WTO actually
operates. For example, last year, a group of developing countries
put in a proposal for reforming the way that the WTO operates
its negotiating procedures[48],
to try to make them more transparent, to try to ensure that developing
country proposals get heard and that the procedures at ministerial
conferences operate in a way that draw in a larger number of countries
to the decision-making process, but unfortunately this was ignored.
So I think that forms quite a substantial agenda to change the
way that the WTO already operates, to make it fairer, more transparent,
involve a greater number of countries, and also to reform it in
terms of the rules.
232. John, have you got anything to add?
(Mr Hilary) Yes, thank you, just briefly, and can
I extend my thanks also to the Committee for allowing us to present
evidence here today. When we came back from the Doha Ministerial,
in November 2001, a group of 10 of the UK's NGOs, including both
the World Development Movement and Save the Children, produced
a statement on what we believed would constitute a genuine development
agenda for the Doha round, and obviously I will be very pleased
to make this available to the Committee. This was written over
a year ago, and it is very interesting now to look back and to
see how incredibly few of those suggestions, of those provisions,
which would make this round a genuine development round, have
actually been put into practice. We have seen already the incredible
block on any movement in terms of special and differential treatment,
in terms of TRIPS and public health, in terms of any progress
on agriculture, or indeed in terms of the assessment of the impact
of GATS. All of these were key indicators which we believed would
show whether or not we had a development round; they simply have
not been met. And I think that is why a lot of developing countries,
in the run-up to Cancún, are throwing up their hands and
saying, "Where is this development agenda that you've been
talking about?".
Chairman: John, let us have that, and
obviously we can have it as a sort of exhibit to your evidence,
so to speak, when it comes to the printed report as well[49];
a very useful document.
Hugh Bayley
233. I wonder whether you will accept the Government's
argument that having a multilateral agreement on various new issues
would be better than having a patchwork of bilateral agreements
on these things like contracting and public procurement and investment,
and so on? More generally, what are your impressions of what developing
countries are saying about the desirability of putting the new
issues on the agenda at Cancún?
(Mr Hardstaff) I think that it is important to distinguish
between the issues, when we are talking about a patchwork of bilateral
deals. I am not aware that bilateral deals tend to encompass,
for example, competition policy. I think the main issue, when
it comes to bilaterals, is investment, and, you are right, there
is a large number of bilateral investment treaties around the
world, apparently some 2,000. I think the critical thing to recognise
with this is that the investment agreement, as seems to be proposed
by the European Union and countries like Japan, will not replace
these bilateral deals, it will not supersede them in any way,
so, the regulatory spaghetti that is apparent currently from bilateral
deals will not be replaced by a multilateral agreement within
WTO. It will merely add to it. So we do not agree with the argument
that it would affect the number or content of these bilateral
agreements. Also it is important to recognise that the European
Union has proposed what is called a GATS-style approach for a
new agreement on investment. GATS is negotiated on a bilateral
basis, the so-called "request-offer" process; so if
you use the same process within a WTO agreement on investment
then what you have is a series of formalised bilateral negotiations
within the WTO. Therefore the proposed WTO investment agreement
will create a process where bilateral pressure can be put on developing
countries—making it no better than a bilateral investment
agreement.
(Mr Hilary) If I might just reply as well. In terms
of the competition policy suggestions, where the European Union
also is pressing for a multilateral framework agreement on competition
policy, it is often put forward in very unambiguous terms that
this is a very pleasant, a very positive thing for developing
countries because it is going to be tackling the problems of hard-core
cartels, particularly in some of the industries where they have
actually had particular experience, and negative experience, of
those. And I think everybody would agree that hard-core cartels
are one of the things which the world does need to tackle. However,
there is no need at all to embark on a whole round of new negotiations
into the issue of competition policy at the WTO for that; it is
perfectly possible, as indeed the UK Government itself has acknowledged,
to pursue hard-core cartels and the international co-operation
needed to deal with them within a discussion framework, as currently
it is, at the WTO. The negotiation process is about introducing
national treatment provisions into the domestic competition laws
of WTO member countries, and for that reason developing countries
themselves are extremely wary of it. Your question was: what is
the developing country view on this? We have had very strong statements
from developing country representatives, from African and Asian
countries, in particular, but also from some Latin-American countries,
that, just as before Doha, they simply do not wish to see the
WTO agenda expanded to include these new issues. And I think there
is a growing body of civil society opinion across the world which
really supports developing countries in their resistance to what
is, in effect, quite an aggressive EU agenda.
234. We have heard some really quite compelling
evidence about the capacity of developing countries to operate
these agreements, even if they were to sign up to them, and so
we have heard a lot about that. Leaving that aside, what are the
reasons given by developing countries for not engaging in the
debate about this issue; after all, they want investment, they
want to drive corruption out of their systems; apart from the
capacity issues, what are the other reasons why they would want
to resist making agreements in the WTO about these matters?
(Mr Hilary) The key one is the policy space which
they are allowed, as sovereign governments, in order to maximise
the positive effects of foreign investment, because it is that
policy space which is under threat, particularly, for example,
where a country will be requiring of a foreign investor that it
joins with a domestic partner in a joint venture, or indeed putting
levels on the equity participation of foreign investors. Also,
performance requirements, where a foreign investor will have to
provide a certain number of jobs at a high management level, or
indeed will be committed to technology transfer. All of these
provisions allow developing countries to make the most of foreign
investment, and it is precisely those provisions which are under
attack from the proposed multilateral investment agreement. So
that policy space argument is absolutely key.
(Mr Hardstaff) If I can just follow up on that, I
think that the recent paper by the Indian Ambassador, at a seminar
a couple of weeks ago in Geneva, set out a range of arguments
why India currently is opposing insertion of an agreement on investment
in the WTO[50]
As John said, the critical issue is policy space and the flexibility
which developing countries have to use the different measures
to maximise foreign investment. It is not that they, or we, oppose
FDI. This is not about whether or not to attract foreign investment,
it is how then you can regulate it to maximise benefits. If I
can just quote from the Indian Ambassador: "We are of the
view that we do not want an MAI in the WTO," and by MAI he
is referring to proposals for investment rules in the WTO. So
I think it is important to recognise that there is a range of
opinion against inserting investment into WTO because of its core
principals of national treatment, which over time will affect
the ability of countries to maximise the benefits of FDI.
Alistair Burt
235. You are very cross about GATS, you are
very, very cross about GATS, and you are in contact with people
who support you and you ask them to write to us about GATS. We
have tested this out, when we have been going round taking evidence
from other people, and I will come back with one or two things
they have said in a second, but could you explain just why you
are so concerned about it, do you not believe there is any opportunity
for developing countries to benefit from the liberalisation of
trade in services, and what evidence do you have that developing
countries really are opposed to this?
(Mr Hilary) The first thing, which I think is a critical
distinction to make, is to distinguish between the liberalisation
of trade in services and GATS; they are two very, very different
things. We do believe that in certain sectors there are certain
benefits which developing countries can gain from liberalising
and opening up to competition from foreign providers, but that
is a completely different issue from making a binding commitment
under GATS. Under GATS, your commitment introduces a whole range
of disciplines, which again, very similar to the investment argument,
close down the policy space which governments have to maximise
the positive use of FDI. Also in GATS, as we know, there is the
lock-in clause, which makes any commitment irreversible, effectively,
and that means that you are setting up a particular policy choice
into the long-term future without the prospect of being able to
bring it back if it turns out to have been a mistake. The document
which we have circulated to you just today—which is hot
off the press, so you will excuse me that it was not circulated
earlier—is on GATS and water[51],
and it looks particularly in that sector at the damaging results
of liberalisation, in country after country, across the developing
world. Now, given that some of those countries have had such negative
experience, in our view, it would be madness for them to commit
these sectors under GATS.
236. Do you mean liberalisation, or privatisation?
(Mr Hilary) In this case, in water, liberalisation
is akin to privatisation because it is a natural monopoly. If
you have one particular provider within any geographical locality,
opening up the sector to competition ipso facto opens it
up in some way to privatisation, not wholesale privatisation maybe,
not even the transfer of assets, but, in terms of privatisation
of service, that certainly is what it opens up in terms of a particular
sector like water.
(Mr Hardstaff) Again, just to follow on from that,
I think to reiterate the point that you do not need GATS to liberalise,
and you do not need GATS to attract foreign investment. The United
Nations Conference on Trade and Development have done research[52]
suggesting there is no link between signing up to GATS and attracting
more foreign direct investment. So in order to retain the kind
of policy flexibility to maximise the benefits from services investment
then signing up to GATS does not make sense. Our problem is, with
GATS, not so much with investment, our campaign is not a kind
of anti-FDI campaign, it is pro-flexibility, pro-regulation, and
so our problems with GATS are about the ability of countries to
regulate, to change, in the light of experience, and in the light
of changed political or social circumstances. Recently WDM has
produced a report[53]
looking at the European Union's requests, which were leaked, and
one of the examples we draw on in that report is of Thailand,
which submitted a paper to the WTO last year looking at retail
liberalisation. Thailand some years ago liberalised in retail,
attracted a lot of foreign direct investment from European companies;
over time, Thailand has realised that there have been some adverse
impacts on domestic retailers and now is looking to re-regulate.
Critically, it is able to do that because it has not made a GATS
commitment, although the European Union now has requested it to
do so. But the whole idea of locking in liberalisation under GATS
is one of the critical issues, and the ability of countries to
change over time, in the light of adverse impacts or changed political
circumstances, is crucial.
237. The response we tended to have, from World
Bank, from IMF, from the EU, was a sense that GATS they felt was
not well understood by NGOs, they felt that if there had been
poor privatisations it should not knock out privatisations per
se. I think we have been a bit more flexible with what you
have said now. Putting to the EU, putting to Pascal Lamy, the
straightforward point about why the commitment, he said, "Well,
it's a trade-off, in return for this opening up," and there
was a necessary trade-off in terms of a commitment. Do you think
you have taken a stance which has been very anti, and actually
that there might be more flexibility in what you said, because,
with so many of the people we spoke to, the whole concept of the
liberalisation of trade being beneficial to developing countries
was almost always set in a context that said you had to take account
of lots of other circumstances, they were not absolutely prescriptive
about, in every case, it always works because, and do you feel
that that flexibility matches some recognition of flexibility
on your own account?
(Mr Hilary) No. I think that the people who have said
that we are not very well acquainted with GATS actually are trying
to pull the wool over your eyes. Certainly I have been working
on it for five years now, and we tend to have much stronger arguments
than the Government and the European Commission officials which
we talk to. In particular, in relation to flexibility, we know
that the architecture of GATS, the way in which the positive list
approach works, is intended to give developing countries more
flexibility in which sectors they will commit under their national
schedules. But the process of GATS negotiations at the WTO negates
that flexibility, because it brings completely unequal partners
into bilateral negotiations, in secret; and we have heard from
many of the developing country representatives at the WTO that
this puts them at a terrifically unfair disadvantage, they cannot
withstand the overwhelming pressure which comes at them from those
countries which are trying to push them to liberalise. And in
the case of the European Union we know that they have the most
aggressive interests in opening up developing country markets,
which they say, and the UK Government fully admits, are for the
benefit of business interests in the UK and in Europe. And what
we are saying is, it is not just about pushing forward the business
interests of Europeans, actually it is looking at the impact on
the poor and the most vulnerable in developing countries, which,
of course, from Save the Children's point of view, also includes
the children in those poorer communities.
Tony Worthington
238. I have been trying to read your "water"
paper[54],
at the same time as listening to you, so I may have got it wrong.
You say you are arguing for flexibility and for policy choice,
and in "water" you say "We're going to take away
that policy choice, we're going to ban any WTO country from choosing
to go the GATS way"; that is right, is it not?
(Mr Hilary) Not at all, no, we do not
say we are going to ban anything. I think it would be presumptuous
of a single NGO to suggest that we could "ban"; we are
recommending that WTO members do not commit their water sectors
under GATS, precisely because that would then eradicate their
choice, if they wanted to bring back their water sectors into
public control, as so many have.
239. Well I am trying to find it, but it does
say that water should be withdrawn; it should not be?
(Mr Hilary) We agree that water should not be a sector
in which countries make commitments, in their national schedules,
under GATS—
48 Preparatory process in Geneva and negotiating procedure
at the Ministerial conferences. Communication from Cuba, Dominican
Republic, Egypt, Honduras, India, Indonesia, Jamaica, Kenya, Malaysia,
Mauritius, Pakistan, Sri Lanka, Tanzania, Uganda and Zimbabwe.
24 April 2002. WTO document: WT/GC/W/471. Available at www.wto.org. Back
49
Not printed. Copy placed in the Library. Also available at: www.scfuk.org.uk/development/resources/gen-dev-agenda.pdf Back
50
"Trade and Investment: Some Issues". Paper by the Permanent
Mission of India in Geneva. Copy placed in the Library. Back
51
"GATS and Water: The Threat of Services Negotiations at
the WTO", Paper by John Hilary, Save the Children UK. See
Ev for Executive Summary. Back
52
UNCTAD paper on "Assessment of Trade in Services of Developing
Countries: Summary of Findings". Available at: www.un.org/esa/socdev/docs/unctad3e.pdf Back
53
WDM paper on "Whose development agenda? An analysis of the
European Unions GATS requests of developing countries", April
2003. Available at: www.wdm.org.uk/cambriefs/Whose%20development%20agenda%20v-4.pdf Back
54
See Ev x for the Executive Summary. Also see: www.scfuk.org.uk/development/global-pub/GATS%20and%20water.pdf. Back
|
