Quo Vadis the WTO? The Future of the Doha Round and the Management of the International Trade Regime

This session, constituting the first half of the Part 2 titled "The Role of the WTO in the Future Trade Regime," featured presentations made by expert members of the WTO Secretariat, the academic community and the business community. Focusing on the Doha Round, the presentations covered the following issues: the relation between the dispute settlement process and WTO Rounds, present state and outlook for Doha Round negotiations, and suggestions for the promotion of negotiations.

The Wilson Presentation was strictly off the record and is not included here.

The Araki Presentation examined the relation between the WTO dispute settlement process and trade liberalization negotiations from the perspective of the experiences of the Uruguay Round. The main points made in the presentation are as follows:

First, while the Uruguay Round negotiations were proceeding between 1986 and 1994, the number of complaints lodged under the provisions of GATT Article XXIII increased. This indicates that dispute settlement procedures and trade liberalization negotiations were proceeding simultaneously during the Uruguay Round negotiations. To file for dispute settlement while negotiating for trade liberalization represents a "two major theater war." This approach is frequently criticized for placing undue burdens on small countries but it can be seen that two major theater wars were already being fought during the Uruguay Round negotiations.

Second, many of the matters agreed under the Uruguay Round represented codifications of the contents of panel reports adopted during the period of the Uruguay Round. Examples of this include the FIRA case and the case of 12 agricultural products. On the other hand, panel decisions in some disputes, such as the case of EC - Audio Cassettes, were not reflected in the Uruguay Round agreement, partly because the panel reports in these specific cases were not adopted due to the then-effective "positive" consensus rule. This problem cannot occur under the current "negative" consensus rule that effectively warrants the automatic adoption of panel reports.

Third, in the case of the U.S. Tariff Act Section 337, a dispute brought before a GATT panel in the midst of the Uruguay Round, the United States, after blocking the adoption of a panel report many times, agreed to implement the panel's recommendations only as part of the effort to implement the agreements reached in the Uruguay Round. Probably, this should not be taken as a "good" lesson. Yet, given the difficulty faced by many member state governments in convincing legislators to accept panel decisions, as seen in the cases of U.S. sugar and cotton, this approach may be appreciated as a "mature solution" that should not necessarily be rejected as a political technique for ensuring the implementation of decisions that are difficult to enforce.

From the above, we can conclude that it is mistaken to think that dispute settlement procedures and trade liberalization negotiations are mutually exclusive. However, this implication is predicated on the assumption that member states have a certain degree of confidence in the legitimacy of the WTO. In light of this matter, we earnestly hope that the pessimistic predictions concerning the outlook for the Doha Round will not be realized.

The Kinbara Presentation examined the thinking and expectations of the Japanese business community concerning the WTO Doha Round and the WTO system itself through a review of the activities of the Japan Business Federation (Nippon Keidanren). The main points made in the presentation were as follows:

First, the Japan Business Federation believes that the significance of the WTO and Doha Round is and should be appreciated as an institutional foundation for global corporate activities and a realization of global liberalization and rulemaking. Regarding the relation between EPAs and the WTO and Doha Round, there are voices here and there arguing that not much should be expected of the Doha Round, and that EPAs should be promoted. However, we have adopted the position that the WTO and EPAs are complementary and that both should be promoted.

Next, the Japan Business Federation has undertaken the following activities aimed at supporting the progress of Doha Round negotiations: formulation of proposals and recommendations for early conclusion of Doha Round negotiations and realization of objectives in areas of primary interest; dispatch of missions for directly petitioning the government agencies of principal countries and executive officers of the WTO Secretariat; and, collaboration with principal countries through the formulation of joint statements and dispatch of joint missions.

The Japan Business Federation has also issued specific requests concerning individual areas of negotiation. First, in the area of agricultural negotiations, we have advocated that all countries, including Japan, should promote structural reforms and make efforts toward liberalization. Second, with regard to non-agricultural market access (NAMA), the developed countries should further reduce their tariffs and developing countries should reduce their concessionary tariff rates to such levels as will contribute to the reduction of effective tariff rates. In the area of services, we are keenly aware of the importance of promoting the liberalization of trade in services, particularly in view of Japanese companies' development of a global system of division of labor in recent years. Regarding rules for trade facilitation, we attach great importance to the formulation of such rules in light of the extensive benefits that trade facilitation rules can provide to companies and their operations.

Finally, we believe that the following are essential to resolve the problems that exist with regard to the WTO and the Doha Round negotiations: the gap that exists between corporate expectations for speed and the actual pace of negotiations should be eliminated by accelerating the pace of negotiations; companies must develop a new awareness and the business community should become more deeply involved in WTO negotiations; because of a concern that the sectionalism in Japan's government ministries and agencies leads to disadvantages in negotiations, Japan should establish a strategic "united front" for trade negotiations, both in terms of organizational structure and a decision-making mechanism, so as to better represent comprehensive national interests.

This session, constituting the second half of the Part 2 titled "The Role of the WTO in the Future Trade Regime," featured presentations made by expert members from Europe and the Indian and Japanese governments. Focusing on the Doha Round, the presentations covered the following issues: the relation between FTAs and the WTO as seen from the respective standpoints of the principal countries, present state and outlook for Doha Round negotiations, and suggestions for the promotion of negotiations.

The Bronckers Presentation reviewed the relation between FTAs and the WTO from the perspective of the European Union. The main points made in the presentation were as follows:

The FTAs concluded by the EU can be classified into the following three categories: FTAs in the "European space" that have been negotiated with countries that ultimately joined the EU; FTAs with further outlying neighboring countries and former colonies; and, FTAs with countries with whom the EU wants to maintain closer economic ties. In the third category, an FTA with Japan is a possibility for the future. Some fear that FTAs between major countries will spell the end of the WTO, and FTAs do present problems in such areas as economic welfare, discrimination and negotiating resources. However, FTAs do not at all spell the end of the WTO. In fact, as indicated in the following two instances, they may be helpful to the future agenda of the WTO.

First, FTAs can help us to think of issues that, for whatever reason, were struck from the WTO agenda, or which have failed to make good progress. For example, in the area of investment, complicated institutional questions on negotiating competency have held the EU back from achieving the same level of progress as the United States. However, in November 2006, the EU developed what is called the "minimum investment platform." This not only covers investment liberalization but also extends to the protection of investors once they are in. These types of new investment rules will be dealt with in future FTAs. Regarding the inclusion of so-called non-trade values, such as the environment and labor, on the WTO agenda, there still is considerable opposition from economists and member states. But inclusion is important because it helps to sell trade liberalization. FTAs can test these rules and accumulate empirical data concerning their impact on trade liberalization.

Second, FTAs can help show what cannot be achieved on the bilateral level, and therefore must be pursued on the multilateral level. For example, consider the question of subsidies. The EU has attempted, but failed, to introduce its internal subsidies regime (EC state aid law) into the FTAs that it negotiates. Negotiating partners have rejected this because the introduction of EC-type regulations would provide third countries with unilateral benefits. In the area of dispute settlement, the EU has changed its policy in its most recent FTAs in the direction of favoring a judicial type of dispute settlement. However, it is unlikely that bilateral procedures will continue to be used frequently in instances of asymmetrical power, as seen in the case of the EU and Southern American countries.

The Hoda Presentation assessed the present state of the Doha Round and outstanding problems from the perspective of India. The main points made in the presentation were as follows:

From the perspective of India's growing integration into the world economy and its need for continued internal and external liberalization, success of the Doha Round should benefit India. The rule-based multilateral trading system is intact, and India is benefiting from the expansion of trade and investment. However, an experience of India with its reform in two major service sectors,- insurance and retail - indicates that, depending on the political environment, external pressure for liberalization will be generally counterproductive and will only serve to increase resistance to liberalization.

The Doha Round is in disarray. But public concern is muted and businesses remain indifferent in India. The Doha Round has to end with ambitious results in order to excite India's economic operators. In this context, India's priorities are in the areas of agriculture and services. In agriculture, the elimination of all forms of export subsidies is very important. The offers made by the EC and the United States in this area are meaningful, but it is necessary to prevent the permitted domestic support from being loaded disproportionately on a particular product. Further restrictions are also needed on "fully decoupled income supports" to producers because it is now widely recognized that such supports do distort trade, contrary to the assumption based upon which the measure is permitted under the current WTO rules. However, this point was not even mentioned in the latest Chairman's text (July 2007). Unless deep reform is accomplished in domestic support by the developed countries, developing countries cannot be expected to reduce tariffs on important agricultural products that provide the means of livelihood to a large section of the population. Regarding market access, tariff gaps in sensitive products present a serious problem. Deep reforms in agriculture must be implemented to bring down tariffs that are a multiple of hundred percent.

In the area of services, and in particular in Mode 4, India is requesting the admission of independent professionals and contractual service suppliers for the provision of services. India has autonomously liberalized Mode 3 in many sectors, but there is no indication that reciprocity will be granted in areas in which India has made requests.

With regard to NAMA, India has been autonomously reducing its tariffs since the start of the Doha Round. India's objection to a lower coefficient in the Swiss formula arises from the need for assurances that India will be dealt with fairly and from the standpoint of full reciprocity to reduction commitments. The starting point should not be the current level of tariffs. The situation at the end of the Uruguay Round represented the balance that was struck during that Round, and this balance has to be the starting point in future negotiations. If the proportionate reduction by the developed countries is less than that of developing countries, reciprocal balance can be established either through the developed countries delivering additional concessions in other areas, or by allowing the adoption of an appropriately high coefficient.

The slow progress of the Doha Round has been disappointing for India. In the meantime, the geopolitical dynamic that drives regional arrangements will remain unaltered, as it did despite the successful conclusion of the Uruguay Round. On the other hand, trade disputes have increased since the demise of the peace clause, especially in the area of agriculture. But this can prove to be beneficial if it helps to create a sense of urgency among the major players and the political will to effect reform in agriculture.

The Hirose Presentation reviewed the present state and outlook for the Doha Round and significance of multilateral negotiations in the WTO and examined the problems to be surmounted for success in the negotiations from the perspective of Japan's negotiating authorities. The main points made in the presentation were as follows:

First, regarding the present state and outlook for Doha Round negotiations, agricultural issues have become the center of negotiations. The key question is how to resolve the three-way deadlock between the issues of agricultural market access, domestic agricultural support, and market access for non-agricultural products. Furthermore, the non-agricultural tariff negotiations face the following two questions. How to reduce the tariff rates of developing countries, which maintain high levels of concessionary tariffs? How to achieve a balance between such tariff reductions and the need to provide developing countries with "less than full reciprocity"? Negotiations are also being conducted in the following areas: lowering the barriers to market access for services, trade rules, and trade facilitation issues. Finally, regarding the question of development, an agreement has been reached for adopting a certain degree of flexibility regarding trade liberalization by developing countries. Specific levels and balancing of differentiation are the key issues in the forthcoming negotiations.

Next, the significance of WTO multilateral negotiations, including comparisons to FTAs, can be summarized as follows. The WTO provides for the simultaneous realization of market liberalization by 151 countries. While the WTO process requires extended negotiations, the successful conclusion of an agreement can lead to widespread liberalization. In this forum, smaller and weaker developing countries with limited bargaining power can obtain concessions from large and powerful countries. Certain matters can be negotiated only on the multilateral level, such as the reduction of subsidies. The WTO dispute settlement process provides for the enforcement of the outcome of negotiations.

Finally, a number of challenges exist in promoting and sustaining WTO multilateral negotiations. First, there is the question of how to maintain sufficient political will; it is necessary to constantly renew political commitment to the negotiating process. Second, there is the question of how to harmonize and synchronize conflicting vectors of negotiations, specifically, between the multilateral process and group-oriented consensus-building (G4, G6, etc.), and between the need for discussions on the ministerial level and discussions on the expert level. In this context, the Chairman's text will have a very important role to play in forthcoming negotiations.