Examination of Witnesses (Questions 423-439)
Dr Miguel Rodriguez Mendoza and Mr Trineesh Biswas
11 JULY 2008
Q423 Chairman: Good
morning, Dr Mendoza. It is very good of you both to come and see
us to give evidence. Welcome. I would just like to say a few words
about the general rules of giving evidence, which are that Sue
is taking down every word you say and it will be printed as part
of the final report, but you will get a look at the transcript
before it is published. This is not intended to cause embarrassment
or difficulty. I know that you have seen the topics we want to
discuss. Would you rather make an opening statement or shall we
start asking questions?
Dr Mendoza: We can start by you asking
questions and us trying to answer them. We have seen the questions
that we received via the Mission.
Q424 Chairman: Thank you very much.
I will start. I was wondering if I could get you to talk a little
about what you think Aid for Trade should be spent on and how
it should be spent.
Dr Mendoza: Thank you very much. Before
making some comments on that, can I say that we are very honoured
to be here to provide you with our views on these issues that
are of interest to you and to us at ICTSD. Aid for Trade funds
should be spent on issues identified by the developing countries
themselves. In our view, broadly speaking, Aid for Trade resources
should address three types of developing countries' needs. First,
the need to ensure a more equitable participation of developing
countries in the multilateral trading system. For example, developing
countries can receive assistance to enable them to make full use
of their rights under the WTO, such as full use of trade remedies,
the dispute settlement understanding, and also they should be
able to participate more effectively in multilateral trade negotiations.
The second need, in our view, is the need to assist developing
countries in implementing their WTO commitments, be they past
commitments coming from past negotiations, mainly the Uruguay
Round, which by now are supposed to be implemented by all WTO
members, as well as the new commitments coming out of the current
Doha negotiations. In that context, particularly if the Doha negotiations
are completed, as we all expect, in the next few months, they
should also give consideration to the adjustments needed for developing
countries to go with the liberalisation measures that the Doha
negotiations entail. Finally, and I think this is a very important
issue, developing countries should be given the possibility of
using Aid for Trade funds to increase their supply capacity, their
production capacity. This is the main reason behind the whole
idea as presented initially of Aid for Trade which was presented
by the Director-General, Pascal Lamy. It is good to have developing
countries participate in the WTO, good to have them being part
of the multilateral trading system, good to have them as part
of the negotiating package that is being worked out now, and it
is good to have them benefiting theoretically from liberalisation
of the market access commitment that will come out of the negotiations.
But if they do not have the capacity to produce, the capacity
to supply markets, market access will mean nothing to them. That
is a critical issue for developing countries. There are many developing
countries in the WTO that do not really participate. They are
members of the WTO, formally members of the multilateral trading
system, but they do not participate in international trade or
their participation is very limited because of that. If we manage
to direct some of the Aid for Trade funding to these ends that
would really help developing countries and make a difference because
they would feel more comfortable being in the WTO if they were
also active participants in international trade. That being said,
and I conclude on this point, the definition of where Aid for
Trade funds should be allocated should be done by the developing
countries themselves and in this sense they need to prepare some
needs assessments. They need to identify what it is that they
need and they need to convey these needs assessments to the donor
countries, to the donor community, which in that case should be
prepared to help. It is a two-way situation. It is not a question
of donors deciding where to allocate Aid for Trade resources or
for developing countries to do so alone, it is a process of understanding
between donors and developing countries that will produce better
results.
Q425 Chairman: Thank you. We have
not heard a huge amount of evidence about Aid for Trade or the
least developed countries. I think I could identify by a process
of commonsense the sort of countries you are talking about, but
of the least developed countries how many would you say are not
really participating much in international trade?
Dr Mendoza: It is difficult to give a
precise number, but if you look at the global trade figures you
will find that the LDCs are a minor part.
Q426 Chairman: All lumped together,
tiny.
Dr Mendoza: A very tiny part. They are
not very active in international trade. Some of them are. If you
take Bangladesh, Bangladesh is making an impact on the textiles
trade and doing well, but that may be an exception. Another problem
the LDCs face is proportionately they face more tariff barriers
in the developed countries' markets than, say, the industrialised
countries themselves. In short, I would say that the majority
of LDCs are not active participants in international trade, although
some of them are. In linking this to Aid for Trade, I would say
that the Aid for Trade mechanism as defined by the Aid for Trade
taskforce and approved by the WTO General Council puts an emphasis
on LDCs, and rightly so, they are the countries that need more
help, although other developing countries may find themselves
in situations which are very similar to those of LDCs.
Q427 Chairman: Other witnesses have
told us that the other difficulties faced by LDCs in terms of
production support are lack of technical capacity. If you cannot
certify your food exports, for instance, you probably do not make
any food exports, the world being what it is.
Dr Mendoza: Exactly. This is applicable
not only to LDCs but a situation that you can find in many other
developing countries. Many developing countries lack the institutions,
the technical capacity, to really make a reality of these commitments
agreed at the multilateral level. That is why I said before one
of the areas where Aid for Trade resources should be directed
is precisely the implementation of WTO commitments, the real implementation.
In the WTO, as you know, countries have made commitments to implement
an Intellectual Property Agreement, say, but we have to ask ourselves
how many countries have the institutions and means to enforce
these commitments. The same applies to other areas, such as sanitary
and phytosanitary regulations, technical regulations. The capacity
of developing countries to handle those issues is very limited
and in that sense we see Aid for Trade as perhaps helping us in
that regard.
Q428 Chairman: Thank you very much.
The question on the paper we sent you now feels to me a bit off
the point, but I will ask it just the same. Some of our evidence
suggests that less developed countries have a lack of negotiating
capacity and are not capable of giving attention to the WTO while
effectively having to talk about bilateral agreements. Is this
the least of our worries or is there also a problem there?
Dr Mendoza: There is a problem for LDCs,
no doubt, but I must say that they are making progress in that
regard in the sense that they are now getting together, working
together, defining their negotiating positions, getting help from
some institutions. By pulling together different resources from
different countries and different institutions they are making
a better impact on the negotiating process. That is not to say
they do not need help with that, they need to strengthen their
negotiating capacity, but they realise that and that is why they
are trying to get together and make progress on that front.
Q429 Lord Woolmer of Leeds: Could
I turn to the question of the European Union's Economic Partnership
Agreements. What do you think is likely to be the impact of the
Economic Partnership Agreements on developing countries? What
do you think the impact is likely to be on trade?
Dr Mendoza: Most of the EPA agreements
are still in the making so it is difficult to make an assessment
of the likely impacts. What I can tell you is that we have analysed
the agreement between the EU and the Caribbean countries, CARIFORUM,
which is the agreement that is being completed and is about to
be signed in the next few days. We have compared that agreement
with agreements previously negotiated by the EU with other developing
countries, like Mexico and Chile. We have looked at these three
agreements and tried to identify the coincidences, the divergences
and the commonalities. We have done so on areas like market access,
trade and services, investment, government procurement and intellectual
property. As I said, we have tried to establish the differences
between the agreement with Mexico, the agreement with Chile and
the agreement with the CARIFORUM countries. Our main conclusions
are as follows. On market access, the EPA agreement with the CARIFORUM
countries grants deeper and more stable access to EU markets,
notably in agriculture, than the agreements with Chile or Mexico.
The EPA agreement also provides CARIFORUM countries with more
flexibility in dealing with the implementation of their market
access commitments in the sense that they are given the possibility
of a very large number of permanent exclusions from the agreement,
longer transition periods for sensitive commodities and greater
access to safeguards. The EPA agreement also adopts a more restrained
approach to liberalisation of financial services and government
procurement than the agreements with Mexico and Chile. On the
other hand, the EPA agreement with the Caribbean countries produces
more and deeper commitments than the agreements with Chile and
Mexico in areas such as intellectual property, services and investment,
areas that were practically non-existent in the old agreements
with Chile and Mexico. This indicates, in a way, a new direction
for the EU in terms of negotiating objectives in these agreements.
The EPA agreement with CARIFORUM contains full-blown sections
on intellectual property and investment, which did not exist in
the previous ones. Also, the EPA contains stronger general obligations
on services and investment. It goes beyond the EC agreements with
Chile and Mexico in the areas of interest to Caribbean countries,
notably tourism services and movement of professionals and service
supplies. This is what we found in our analysis of one of the
EPA agreements, the one that is being completed with the CARIFORUM
countries. We know, however, there are other views on this and
some concerns have been expressed regarding the fact that the
EPA negotiations were not completed the way they were supposed
to be with different groups signing different EPA agreements.
The question is whether this may have consequences for the integration
processes of African countries which, by the way, was one of the
objectives set out by the EU in these negotiations.
Q430 Lord Haskins: Would it be fair
to characterise the EU's position in today's negotiation compared
with the Uruguay Round as in the Uruguay Round the EU was seen
generally to be the villain of the piece in terms of its attitude
towards agriculture and access to its markets? I am getting the
impression that the EU has moved its ground pretty positively
over the last 15 years and is no longer top of the list as villain
of the piece.
Dr Mendoza: I would agree with that assessment.
I happened to participate in the Uruguay Round and was at the
WTO by the time the Doha negotiations were announced. I happened
to be in charge of agriculture issues at the WTO and when we look
back and see what was the position of the EU on agriculture during
the Uruguay Round and their position at the beginning of the Doha
discussions and what it is now you can see a lot of change and
progress that has been made in the right direction. I agree with
that. For instance, we now take it for granted that export subsidies
will be eliminated at some point. At the beginning of the Doha
negotiations that would have been considered an impossible objective.
In fact, countries thought a lot about how to deal with this in
the mandate for the negotiations and now it is a fact, that is
going to happen. That shows progress in the negotiations on agriculture.
That being said, where progress does not seem to be coming as
forcefully is in the area of internal support and one of the main
criticisms of the current proposals on agriculture is neither
the EU nor the United States are prepared to really cut their
internal support in practical terms. They are prepared to cut
the bound rates of support, but even by cutting that drastically
they are still left with a lot of flexibility to increase the
current support they are providing to their farmers. That is why
it is one of the main concerns of the developing countries which
are asked, many of them but not all of them, to cut their tariffs
for industrial goods. They see that they are making an important
concession in opening their industrial goods markets whereas in
terms of internal support the industrialised countries, the EU
and US, are not making an effort of the same dimension. That is
one of the issues.
Q431 Lord Haskins: While you have
got reservations about the EU's position, you have much more serious
reservations about the United States' position because they still
have the subsidy element behind their policies.
Dr Mendoza: Exactly. I agree.
Q432 Lord Trimble: I would like to
look beyond the present talks that are taking place. Looking at
the longer term, what do you think should be the objectives of
the World Trade Organisation? Are there any roles that you think
it should take on in particular? Do you think there is any need
for reform of the WTO? In particular, should there be any changes
to its decision making process?
Dr Mendoza: I know that the decision
making process of the WTO has been on the table and a matter of
public debate for a long time. If by changing the decision making
process of the WTO it means it will eliminate the rule of consensus,
that would be a very bad idea. The WTO is as transparent and democratic
as it could possibly be. Part of this democracy is that countries
are able to say "yes" or "no" when they look
at new commitments. That should be preserved. Working on the basis
of consensus in an organisation of 150 members is extremely difficult,
as you will all realise, so there has to be a way to ensure that
all countries participate in the consultation process so that
when the time comes for a final decision to be made they are fully
informed of what is going on and they have fully participated
in this consultation process. The consensus formation of the WTO
is more difficult today than it used to be in the GATT years,
say. It requires more political skills, more negotiating skills
from the leaders of the WTO and, after all, that is what we are
all looking for at the WTO, leadership and a way to ensure that
the decision making process is as transparent and participative
as possible. Knowing the WTO from the inside, the issue of the
consensus decision and decision making process is less significant
today than it was in the past. What I see now is a lot of consultations
going on, a lot of participation from different countries. As
I mentioned before, LDCs are getting together and participating
in the consultation process through their leaders that they select.
In the last few years I have not seen many concerns expressed
on transparency and the decision making process of the WTO. I
would say that the way it is working now is okay. It is more difficult
today than it used to be to take decisions but that is because
of the large number and diversity of members, and there is very
little you can do to change that. On the relevance of the WTO,
it is relevant. If we do not have the WTO we may have to invent
a similar organisation. It is important because the world's problems,
including trade problems, require multilateral and not bilateral
solutions. The mandate of the WTO is quite large. It has been
expanded since the GATT years. Perhaps that is why the WTO is
so sensitive to public opinion because it touches on a number
of areas that were the domain of national policies in the past.
We may have to accept the fact that as large as the WTO mandate
is, it may have to be expanded in the future once the Doha negotiations
are over. Why? Because there are new issues like the relationship
between trade and EU commitments on climate change, for instance.
Are they not going to be dealt with by the WTO? Of course, they
will at some point, issues like investment. We know we had a big
fight in the WTO on the issue of investment and competition policies,
but what is now happening is most countries are negotiating these
bilateral investment treaties. I do not know how many thousands
of treaties are in force today. There is an international system
of investment policies that is outside of the WTO and we have
to ask ourselves whether this is convenient for countries.
Q433 Lord Trimble: Is that not to
some extent a consequence of the complexity and difficulty of
operating within a system that has 150 different countries in
it? If it is becoming too difficult to get decisions in that context,
are you not then forcing people to move into a different context?
Dr Mendoza: This is part of it, certainly.
The fact that the investment policies were not included in the
WTO at some point may have helped increase this tendency toward
the negotiation of bilateral investment treaties.
Q434 Lord Trimble: There is a slightly
different aspect to this. A lot of the emphasis hitherto has been
on tariffs and tariff reduction and yet the greater part of the
world's trade is now in services, and increasingly the valuable
area of the world's trade is in services, and the WTO handles
discussions on services in quite a different way from the way
it handles discussions on tariffs and the two categories in which
the tariffs are considered. Is the slightly different decision
making process that takes place with regard to discussions on
services more likely to be the model for the future in terms of
the increasing focus that there will be on services?
Dr Mendoza: I agree that on services
progress in the WTO has been slow and will probably be slower
by the end of the Doha negotiations. The services negotiations
have an advantage today in a framework of so many members. This
advantage is that they allow countries to move forward without
necessarily waiting for everybody. Without saying it, it allows
variable geometry in making services commitments. This is the
way to go with the WTO in the future. It will be difficult to
think that the WTO will move at the pace of the slowest countries
forever. In that sense this is a good model, but it is not easy
to replicate that methodology in other areas and that is the main
problem. What we are talking about is the single undertaking,
that everything has to be agreed by everybody, it has to move
forward or is there a possibility of agreeing on some aspects
of the negotiations and then waiting for the others to move. The
idea of agreements between significant groups of countries should
be made more acceptable by the WTO provided—this is an important
proviso—that the agreement reached by this significant number
of countries is on an MFN basis, so we will have the problem of
the free riders, but if the free riders are not important in the
area where the agreement is happening that may not be a big problem.
Q435 Lord Haskins: In your introductory
remarks I thought I heard you say that you expect a breakthrough
on the Doha talks, but maybe it was a slip of the tongue. What
do you think are the major obstacles facing the negotiations over
the next two or three months?
Dr Mendoza: In a week's time we will
be initiating this new mini Ministerial Meeting of the WTO. I
understand you have met with the Director-General, Pascal Lamy,
and I am sure he ha given you his thoughts about the meeting and
the possibilities of success. We all hope that the meeting will
be a success. It is perhaps the last opportunity to move forward
and make the necessary decisions so that a final deal on the Doha
negotiations can be completed by the end of the year. I really
hope that this is the case because, if not, if no agreement comes
about in the next few days rather than weeks, I guess that the
Doha negotiations will go into hibernation for a while waiting
for the new leadership in the US, waiting for new elections somewhere
else, so we will have a long period of inactivity. If, at the
end of the road, the Doha negotiations fail that will be a problem
for the WTO. A failure of the next Ministerial will cause a problem
for the negotiations and the failure of the negotiations will
cause a problem for the WTO. If you have an organisation that
does not move forward then you start losing interest in it and
member countries will start thinking of different options, an
agreement between the EU and US, for instance, that has been discussed
in several circles, or a more pronounced move to more regional
or sectoral agreements. That would be bad. A failure of the Doha
negotiations would be bad for the WTO. What are the chances of
that? Broadly speaking, I think the papers on the table contain
all the technical elements to make a deal. There is very little
we can do technically to improve these proposals. The work is
there, it has been done over the last few years. There is very
little we can invent. The technical work is there and what you
now need is political leadership. That leadership can only come
from the countries that play a significant role in the WTO and
international trade, and that includes the EU, the US and also
the large developing countries. There was a time when any decision
by the EU and the US would be a final decision for all GATT members,
but that is not there any more so the decision will have to come
through political leadership in developed and developing countries.
In the US trade is not very popular and it seems to be less and
less popular as time goes by and the economic situation deteriorates.
Many people keep blaming trade for their economic difficulties.
Trade is not very popular in the US Congress with the majority
of Democrats being very critical of trade deals, particularly
bilateral trade deals. The question there is whether the US will
have the political ability in the next few weeks to agree to a
deal in Geneva and then get this deal passed by Congress. There
is a big question mark there. We do not know. The perception in
many countries here is in the absence of trade negotiating authority
in the US and, given the political environment, there are many
people here who are concerned that the US may not be in a position
to move forward. I guess they could prove us wrong. In the EU,
on the other hand, what we have seen recently is very conflicting
statements and comments from the leadership in many European countries
regarding the validity of the Doha negotiations, the commitments
that the Doha deal would imply for, say, the agricultural policies
of the EU, and certainly that is not helping to create a good
environment for the coming meeting. On the developing countries'
side, as I mentioned before, there are some concerns that the
deal that is on the table may impose some important burdens on
them whereas the burden on developed countries, the policy particularly
in the agricultural sector, will not be that significant. We will
have to overcome all of these difficulties if we want to have
a successful conclusion of the negotiations.
Q436 Lord Haskins: Would it be a
gross overstatement, simplification, to say if the United States
and Brazil can agree the rest would fall in behind them?
Mr Biswas: I would say the United States
and India.
Q437 Lord Haskins: The United States
and India, more critical.
Mr Biswas: No, just because India is
more constrained in its negotiating position.
Q438 Lord Haskins: And it has got
political problems ahead too.
Mr Biswas: Absolutely.
Q439 Lord Woolmer of Leeds: What
if the current government lose the vote of confidence and there
is an election?
Mr Biswas: I would be very surprised
if the next government followed a different policy economically.
The current opposition party followed a fairly liberal economic
agenda when it was in government and it only got reconverted to
nationalism once it found itself in opposition again.
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