Essay on The First Ministerial Conference of WTO at Singapore in 1996 !
As per the Art. IV of WTO Agreement, a Ministerial Conference composed of trade and commerce ministers of WTO member-countries shall meet atleast once in every two years. In those biennial conferences, decisions will be taken on all matters under any of the existing Multilateral Trade Agreements and new agreements if any.
As the WTO came into existence on January 1, 1995 the First Ministerial Conference was held at Sunetec City of Singapore from December 9 to 13, 1996 for five days. The Ministerial Conference is intended to further strengthen the WTO as a forum of negotiation, the continuing liberalisation of trade within a rule-based system, and the multilateral review and assessment of trade policies and in particular to:
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(i) Assess the implementation of our commitments under the WTO agreement and decisions;
(ii) Review the ongoing negotiations and work programme;
(iii) Examine the developments in world trade; and
(iv) Address the challenges of an evolving world economy.
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Accordingly in the conference at Singapore, a review was made on the discussions and negotiations taken in Geneva and on the review of the Uruguay round implementation problems made by the WTO committees in November. At the end of the conference a declaration was made consisting 23 paragraphs. The declaration is not a new trade treaty. No deal on lowering tariffs or opening up markets was drawn up or signed in Singapore. The Ministerial declaration is a political statement negotiated by trade ministers.
Delegations headed by the Trade Ministers of 128 Member Countries and observer representatives from 28 other countries who are seeking to become members participated the conference and Singapore Prime Minister Mr. Goh Chok Tong inaugurated it.
The declaration released by the First Ministerial Conference consisted six problem areas. Four were what were called the ‘new’ issues and two were ‘old’ issues. The four new issues were core labour standards, investment, competition policies and government procurement. The two old issues were textiles and agriculture.
I. The Labour Standard:
Industrial Countries have been arguing that all members of the WTO should adhere to certain minimum commitments on workers’ rights – the right to association, the right to collective bargaining, non-discrimination, end to forced labour and abolition of child labour. They wanted the WTO to study the links between trade and labour. Many workers’ unions in the industrial world feel that a number of jobs have been lost because of cheap imports from developing countries where they believe workers have no rights and are paid low wages.
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The developing countries have been protesting that this interest in labour standards is just a smoke-screen to undermine the competitive advantage that low wages give to their exports. They say that the WTO has no business to look at labour standards since it is not a trade issue. The fear is that if the WTO takes up the issue, rules may eventually be introduced to prevent developing countries from garnering, on the basis of lower wages, a large share in the global market.
The industrial countries wanted the declaration to talk about labour standards and the developing countries fought to keep it out. But under the pressure of developed countries, the ministerial conference did discuss the labour standards and the ministerial declaration states in its para 4 thus:
“We renew our commitment to the observance of internationally recognised core labour standards. The International Labour Organisation (ILO) is the competent body to set and deal with these standards and we affirm our support for its work in promoting them. We believe that economic growth and development fostered by increased trade and further trade liberalization contribute to the promotion of these standards. We reject the use of labour standards for protectionist purposes, and agree that the comparative advantage of countries, particularly low-wage developing countries, must in no way be put into question. In this regard, we note that the WTO and ILO secretariats will continue their existing collaboration.”
The declaration has no reference to a study on the connection between labour and trade. The developing countries say that the inclusion of the above paragraph on labour standards in the declaration is not a ‘defeat’ as the statement says that the ILO is the competent body to deal with these standards that labour standards should not be used for protectionist purposes and the comparative advantage of low-wage developing countries should not be questioned.
II. Investment:
Some industrial countries wanted the WTO to start negotiating a global agreement on foreign investment i.e. Multilateral Investment Agreement (MIA). If even such a treaty comes into being, it will have uniform rules on foreign investment and set up a dispute mechanism where these companies and countries will have to settle their issues. International business is interested in such a treaty because it feels that the rules that each country draws up create uncertainty and come in the way of globalisation.
Some of the developing countries have been opposing this proposal because they say that investment has more than a trade dimension, that it is intricately linked with development. These countries argue that while they welcome foreign investment they want to remain autonomy over investment policy and not give foreign companies blanket rights to investment in whichever sector they want to.
On investment issue, the First Ministerial Conference, in its para 20, states thus:
“Having regard to the existing WTO provisions on matters related to investment and competition policy and the built-in agenda in these areas, including under the TRIMS agreement, and on the understanding that the work undertaken shall not prejudge whether negotiations will be initiated in the future, we also agree to:
(i) Establish a working group to examine the relationship between trade and investment, and
(ii) Establish a working group to study issues raised by members relating to the interaction between trade and competition policy, including anticompetitive practices, in order to identify any areas that may merit further consideration in the WTO framework.
These groups shall draw upon each others’ work if necessary and also draw upon and be without prejudice to the work in UNCTAD and other appropriate inter-governmental fora
As regards UNCTAD, we welcome the work underway as provided for in the Madrid Declaration and the contribution it can make to the understanding of issues. In the conduct of the work of the working groups, we encourage cooperation with the above organisations to make the best use of available resources and to ensure that the development dimension is taken fully into account.
The General Council will keep the work of each body under review, and will determine after two years how the work of each body should proceed. It is understood that future negotiations, if any, regarding multilateral disciplines in these areas will take place only after an explicit consensus decision is taken among WTO members regarding such negotiations.”
Thus the declaration decides to set up a working group to study the links between investment and trade. It will be done in cooperation with the United Nations Conference on Trade and Development (UNCTAD). After two years, the study will be reviewed. At that time, any decision to negotiate an investment agreement will be taken with the universal consent of all WTO member-countries.
III. Competition Policies:
Developed countries aimed at free trade. Para 6 of the declaration says thus:
“In pursuit of the goal of sustainable growth and development for the common good, we envisage a world where trade flows freely. To this end we renew our commitment to:
(i) A fair, equitable and more open rule-based system;
(ii) Progressive liberalisation and elimination to tariff and non-tariff barriers to trade in goods;
(iii) Progressive liberalisation of trade in services;
(iv) Reject of all forms of protectionism;
(v) Elimination of discriminatory treatment in international trade relations
(vi) Integration of developing and least developed countries and economies in transition into the multilateral system, and
(vii) The maximum possible level of transparency.”
Developing and least developed countries are being influenced by regional trade agreements for their development. The expansion and extent of regional trade agreements make it important to analyse whether the system of WTO rights and obligations as it relates to regional trade agreements needs to be further clarified.
Para 7 of the declaration says that “we welcome the establishment and endorse the work of the new committee on regional trade agreements.”
Some developed countries feel that competition in domestic market often hampered by certain restrictive business practices or by the absence of certain government rules. A group of companies coming together and deciding to thwart competition can adversely affect the smooth flow of international trade. Therefore WTO rules fostering healthy competition are felt necessary.
As per para 20, the Conference has agreed to establish a working group to study the interaction between trade and competition policies. The group’s work will be reviewed after two years. A decision on a possible global treaty will be taken two years later.
IV. Government Procurement:
Government procurement means contracts awarded by government for supply of goods and services, contracts for civil works etc. In a number of countries the value of government procurement adds up to 10 to 15 percent of the economy. International companies are interested in receiving a share of these contracts.
But most countries either keep out foreign companies or give a price preference to domestic supplies. At this point, industrial countries are not asking for a complete opening up of government procurement. They are only asking for greater transparency in decision-making i.e. how do governments take decision in the awarding of contracts.
The First Ministerial Conference states in para 21 of its declaration thus:
“We further agree to establish a working group to conduct a study on transparency in government procurement practices, taking into account national policies, and, based on this study, to develop elements for inclusion in an appropriate agreement, and direct the council for trade in goods to undertake exploratory and analytical work, drawing on the work of other relevant international organisations, on the simplification of trade procedures in order to assess the scope for WTO rules in this area.”
Thus as in investment and competition policies, it was decided to establish a working group to study transparency in government procurement policies. But unlike in those two areas there is a clear statement on using the result of this study for inclusion in a possible WTO agreement in the future.
V. Textile Trade:
For a long time the textiles were out of GATT and it was under Multi-Fibre Arrangement (MFA). Finally in 1994, it was decided as part of the Agreement on Textiles and Clothing (ATC) the importing (industrial) countries would dismantle the MFA and integrate textiles within WTO rules. Developing countries are very much interested as they export the textiles.
The declaration in its para 15 says on textiles thus:
“We confirm our commitment to full and faithful implementation of the provisions of the Agreement on Textiles and Clothing (ATC).
We stress the importance of the integration of textile products, as provided for in the ATC into GATT 1994 under its strengthened rules and disciplines because of its systematic significance for the rule based, nondiscriminatory trading system and its contribution to the increase in export earnings of developing countries.
We attach importance to the implementation of this agreement so as to ensure an effective transition to GATT, 1994 by way of integration which is progressive in character. The use of safeguard measures in accordance with ATC provisions should be as sparing as possible. We note concerns regarding the use of other trade-distortive measures and circumvention.
We reiterate the importance of fully implementing the provisions of the ATC relating to small suppliers, new entrants and least developed country members, as well as those relating to cotton-producing exporting members. We recognise the importance of wool products for some developing country members.
We reaffirm that as part of the integration process and with reference to the specific commitments undertaken by the members as a result of the Uruguay Round, all members shall take such action as may be necessary to abide by GATT, 1994 rules and disciplines so as to achieve improved market access for textiles and clothing products.
We agree that keeping in view its quasi-judicial nature, the Textiles Monitoring Body (TMB) should achieve transparency in providing rationale for its findings and recommendations.
We expect that TMB shall make findings and recommendations whenever called upon to do so under the agreement. We emphasise the responsibility of the Goods Council in overseeing, in accordance with Article iv-5 of the WTO Agreement and Article 8 of the ATC, the functioning of the ATC, whose implementation is being supervised by the TMB,”
The textile problems were not deeply discussed in the conference. Instead, the ministerial declaration merely retained a long paragraph which is full of innocuous observations on the need of implement the ATC.
VI. Agriculture:
The 1994 Marrakesh Agreement of Agriculture did have provisions for reducing subsidies. But it also calls for fresh negotiations on a further reduction of subsidies to begin in 2000.
The Cairns group (a group of 15 agricultural exporting countries formed after a meeting in Cairns, Australia, in 1986. They are Australia, Argentina, Brazil, Canada, Chile. Colombia, Fiji, Indonesia, Malaysia, New Zealand, Paraguay, the Philippines, South Africa, Thailand and Uruguay) wanted preparations for those talks to begin now with an exchange of information. Argentina wanted a separate paragraph on agriculture. The E.U. Japan and South Korea opposed it. As a result, agriculture was discussed in Para 19 along with all the other agreements reached during the Uruguay Round that will come up for review in 2000/2004. In para 19 of the declaration says thus: “As part of these agreements and decisions, we agree’ to a number of provisions calling for future negotiations on agriculture, services and aspects of TRIPS….”
VII. Information Technology:
The US is more interested in an Information Technology Agreement (ITA) that results in zero-tariffs on information technology products. But a trade agreement on information technology was not materialised. But the Para 18 of the declaration says:
“Taking note that a number of members have agreed on a declaration on trade in information technology products, we welcome the initiative taken by a number of WTO members and other states or separate customs territories which have applied to accede to the WTO, who have agreed to tariff elimination for trade in information technology products on an MFN basis as well as the addition by a number of members of over 400 products to their lists of tariff free products in pharmaceuticals.”
The IT deal received much attention at the WTO Conference because the industry is a growing one. 28 countries, representing nearly 85% of global trade in IT had agreed to formally endorse the ITA. Another six countries including three from Asia, declared their intent to join the agreement when the negotiations begin later in Geneva.
This declaration released by the First Ministerial Conference is not an agreement and only reflected the political will and commitment of the Ministers and their Governments on a working programme.