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Next Phase in the WTO System

In the World Trade Organization, governments have been gearing up to tackle the liberalization of agricultural trade and the anti-competitive aspects of domestic regulations bearing on trade and investment in financial, professional, transport and other services. They have also been exploring, in working groups established in 1996, whether to extend the WTO system to investment regulations, competition laws, “transparency” in public procurement and “trade facilitation”.

Threat of "Ethical" Protectionism: Rapidly integrating markets, however, along with dramatic technological advances in transport, communications and production methods, are leaving some people bewildered, even frightened, by what is happening around them.

  • Adjustment to changes in patterns of demand, advances in technology, shifts in comparative advantage and so on are not always smooth. Citizens and their governments, usually at the behest of sectional (special) interests, try to stop, offset or slow down change — often by restricting foreign products, interests and other influences.

  • Protectionism in new and surreptitious forms remains the most pressing threat to the stability of the international economic environment. This can be seen in some of the “ethical” demands of labor unions and environmental, consumer and food-safety groups which, although espousing legitimate concerns, are mistaken in their assertions about the impact of trade on those concerns. For this reason there needs to be a more constructive dialogue between those groups and experts in the trade policy community.

Importance of Consensus Building: Building support for initiatives in the WTO system, given its large and diverse membership, requires a greater effort by governments to put across economic arguments, to take into account the interests of others and to participate in informal discussions aimed at raising the sights of governments.

  • At domestic level in the United States, securing support in Congress for trade liberalization and reform has always been a close call, for legislation on both fronts is often opposed by those worried about industries vulnerable to foreign competition. Much more has to be done to promote public understanding of the need to adjust to changing economic circumstances. Trying to stop, offset or slow down change simply stores up problems for the future. As a result, when adjustment becomes unavoidable, it is bound to be painful.

  • Good policy has to be supported by a domestic consensus if it is to be properly implemented, effective and durable. What's more, given the growing interdependence of national economies, there needs to be an inter-governmental consensus if international negotiations are to yield worthwhile results. Keeping trade policy on track requires coherent and consistent ideas and, most of all, leadership.

Need for Renewed Leadership: The WTO was established at the end of the Uruguay Round negotiations to administer the agreements reached on trade in goods, services and ideas (intellectual property rights) and the understandings reached on the dispute-settlement and policy-review processes.

Negotiators and close observers realized, however, that remaking the world trading system had only just begun. Many issues were papered over, others were put off for another day and, inevitably, new ones were surfacing.

  • Since then there has been concern about the lack of leadership in the WTO system where for a long time the United States took a back seat. Moreover, with the end of the Cold War and widespread doubts about the direction of American policies, other countries are not as ready as before to follow the United States.

  • An important consequence of the last GATT round (it bears repeating) is that the developing countries, having made multilateral market-opening commitments for the first time, are now parties to all the WTO agreements. Today they recognize their stake in the new WTO system, as they did not in the old GATT system, and have to be persuaded that proposals for further trade liberalization and reform are going to be in their long-term economic interests.

  • As a result of these changes and challenges, governments in the WTO system failed in 1998-99, in the preparations for the third Ministerial Conference, to get close to agreement on the agenda for a new round of multilateral trade negotiations. Anti-globalization protesters in Seattle were able to turn that failure of the major trading powers into the fiasco seen on front pages and television screens all round the world.


Launch of the Doha Round Negotiations: On the initiative of the European Commission and Japan, the effort to launch the first WTO round was resumed early in 2001, chiefly through informal discussions conducted by the chairman of the WTO's General Council, Stuart Harbinson, of Hong Kong, in cooperation with the then Director-General, Mike Moore.

At the fourth WTO Ministerial Conference, held in Doha on 9-14 November 2001, the new round of multilateral trade negotiations was finally launched, but on two tracks:

  • Track One: Market-access Negotiations on (i) liberalizing trade in agricultural products, industrial products and services, (ii) extending the WTO agreement on the trade-related aspects of protecting intellectual property rights, (iii) reviewing the WTO rules on anti-dumping actions, subsidy-countervailing measures and regional trade agreements and (iv) improving dispute-settlement procures.

  • Track Two: "Preparatory Studies" on the modalities for negotiations on extending the WTO system to (i) investment regulations, (ii) competition laws, (iii) “transparency” in public procurement, (iv) trade facilitation and (v) electronic commerce, which are to be settled at the fifth WTO Ministerial Conference, to be held in Cancun, Mexico, in September 2003.
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Next Phase in the WTO System
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Cartoon by KAL on the cover of Jimmye Hillman and Robert Rothenberg, Agricultural Trade and Protection in Japan (Aldershot, Brookfield and Sydney: Gower, for the Trade Policy Research Centre, 1988).

Importance of MFN Treatment

In the mid-1980s dispute between the United States and Japan over the latter’s restrictions on beef imports, a bilateral agreement looked as if it would hurt the interests of third countries. Australia and others insisted on their GATT rights and the agreement on opening the Japanese market was extended to all other suppliers on a most-favored-nation basis.

MFN treatment and national treatment are two expressions of the principle of non-discrimination, the cornerstone of the multilateral trading system, which has been increasingly under threat for three or four decades. In the 1960s, the principle began to be undermined by the first wave of regional trade agreements, nearly all of which failed to meet the requirements of GATT Article XXIV for departures from the principle to form customs unions or free trade areas. The principle also began to be undermined by bilateral “voluntary” export restraints (VERs).

Bilateralism was one of the mistakes of the 1930s when it took the form of import quotas, which were substantially dismantled in the 1950s, at least in trade among industrial countries. In the 1970s and 80s, bilateral VERs threatened to overwhelm the GATT system, but they were eventually prohibited in the Uruguay Round negotiations. Today bilateral RTAs, more or less ignoring GATT Article XXIV, are threatening to overwhelm the WTO system and are on the agenda of the Doha Round negotiations.

Stuart Harbinson, Chairman of the WTO General Council in 2001-02, played a crucial part in the launch of the Doha Round negotiations by securing agreement on the negotiating agenda ahead of the WTO ministerial meeting in November 2002. In April 2002, he set out, in an address to the Cordell Hull Institute in Washington, DC, the lessons to be drawn from the success of the preparatory process he conducted.

“The business community has a substantial stake in the multilateral trading system… That is too little understood in business circles and the public at large. But it is not a function of business to provide leadership in the WTO system. That is the function of governments, of their political leaders, their ministers of trade…

“Trade ministers look to the business community for support, as they do to other sections of society that also have a stake in the WTO system’s role in promoting economic growth and development, but the responsibility remains that of political leaders. In fact, political leadership, especially from the majors, is a sine qua non in maintaining, developing and extending the multilateral trading system.

“Even so, the WTO system needs the support of businesses, both individually and through their organizations. In the absence of business leaders speaking up for the rules-based trading system, the WTO is identified with 'corporate greed', rather than corporate responsibility”

STUART HARBINSON, “Lessons
from the Launch of the Doha Round Negotiations”, Washington, DC,
18 April 2001