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EU renews plea for new WTO trade round

G. Srinivasan

NEW DELHI, Jan. 4

IN a significant bid to avoid drift in multilateralism towards bilateral and regional trade pacts, the European Union (EU) has proposed that the next WTO ministerial should launch the New Round of Trade Negotiations, stalled since November 1999 in Seattl e, US.

In a surprising softening of its earlier stance on several contentious issues in which developing countries like India voiced serious reservations, a recent note prepared by the European Commission (EC) on the ``State of play and strategy for the new WTO Round'' calls for the urgent need to ``rebuild developing country support for the WTO and its further development through new negotiations''.

EU conceded that Seattle Ministerial held in November 1999 both confirmed the growing weight and importance of developing countries in the multilateral system and at the same time demonstrated that the WTO system has not, so far, adequately responded to their interests and needs. This is the stance that the Union Commerce and Industry Minister, Mr Murasoli Maran, has been taking since 1999 and it was also reflected by the EU.

Even as the EU has over the last year continued to press the case in favour of a comprehensive trade round, a number of developing countries led by India are opposed to what is still perceived as an ``excessively ambitious'' or in other respects ``insuff icient'' rule-making agenda, including that relating to investment and competition or measures taken for the protection of the environment.

EU felt that despite this reticence over the rule-making agenda, several developing countries have albeit pressed for a wide review of WTO rules under the rubric of implementation, as well as for improved access to developed country markets. India is one such country in this regard, as Mr Maran has been steadfastly favouring implementation agenda and greater market access for developing country exports to be on the agenda for any new Round.

Though strong economic and systemic reasons prevail as to why all members of the WTO should hail the introduction of investment and competition rules in WTO, the EU concedes that as far as the specific rule-making agenda is concerned, ``... we need to ex amine, in each area that has met with significant developing country opposition, the reasons for this and how to best to accommodate these concerns''.

It may be noted that many developing countries, including those of the SAARC region and India do not buttress any negotiation on the issue of trade and investment and trade and competition as they do not like to ``overload'' the WTO's agenda.

Besides there is no evidence to suggest that such rules for investment would enhance FDI flows. Moreover, the development dimension of the trade-investment linkage has to be fully addressed, including the freedom of developing countries to direct investm ent in priority areas.

Similarly, developing countries feel that while competition as such might enhance economic efficiency, in practice, conditions of perfect competition are rarely available. These countries are confronted with low levels of technological and industrial dev elopment and structural rigidities, with the chasm between them and the developed world being very large. As such, developing countries argue that any competition should be based on similar initial conditions.

For the first time, the EU has openly expressed itself that (i) new rules should be realistic and sufficiently flexible to meet developing country needs; (ii) any new rules should go together with a substantial capacity building exercise and (iii) develo ping country market access concerns must be an integral part of any trade and environment agenda.

In fact, the EU has ``climbed down'' from its earlier stance by stating that agreements on investment and competition need not be concluded by all WTO members, i.e. openness to plurilateral agreements. Negotiations on both subjects would be launched and concluded at the same time as other subjects in the Round and be open for participation by all members, but the negotiating mandate for a Round would state explicitly, that countries will retain their freedom to subscribe or not to the results in these t wo areas at the end of the Round.

Even on other rules, questions such as trade defence measures, developing countries are interested in modifying the provisions of the Anti-dumping and Subsidies Agreement to make more operational the concept of special and differential treatment. The EU is not seeking modification of either agreement, it recognises the right of developing countries to seek improvement and ``we must be prepared to address this, in a Round'', the EU said.