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

The session started with wrap-up comments on the significance of the Doha Round. After this, Professor Kawase presented the following four issues for discussion by the panelists.

1. Why has the Doha Round become stalemated?
2. What is the significance of negotiating a small package, and how does the size of the package impact the interests of developing countries.
3. Judiciary law-making through dispute settlement procedures, and the imbalance between the rule making and dispute settlement functions.
4. The tension between the WTO and FTAs.

This discussion was followed by questions from the floor and responses from the panelists.

The Kotera Presentation featured wrap-up comments on the symposium, and addressed the question of the past and present significance of the Doha Round. The main points made in the presentation were as follows:

It can be said that GATT/WTO Round negotiations contain three elements: market access, the reinforcement of discipline (elimination of non-tariff barriers), and the expansion of the scope of coverage. The Doha Round started with a focus on the expansion of the scope of coverage, but later underwent major changes in its character that shifted the focus of its negotiations to issues of market access. In this context, the slow progress in Doha Round negotiations can be explained as follows. First, as the Doha Round underwent a change in character, a great deal of time was spent in determining the agenda and the players in the negotiations. Second, issues of extreme political sensitivity, which had mostly been left out from previous Rounds, came up as principal topics for negotiation in the Doha Round.

At the present juncture, there is a sharp conflict of interest between the United States and the developing countries, led by India, in the following three areas: domestic support for agricultural products, reduction of tariffs on agricultural products, and reduction of tariffs on non-agricultural products. It is hoped that the United States and India, and particularly the United States, will act as the first mover in the negotiations. With its focus on the liberalization of agricultural and non-agricultural products, the Doha Round negotiations do not denote a change the present structure of the WTO. As such, the negotiations will probably be completed within two or three years. However, an early conclusion would be undermined if India were to start making strong demands in the area of services.

We have already come to a point in time where we should begin thinking of the structure of the next Round of negotiations, including the question of what to do in the area of services. Moreover, we should be taking the next Round into consideration as we engage in negotiations in the current Round. Be that as it may, the Doha Round has made it clear how difficult it is to make changes in the structure of the present trade regime. The question remains: Can the WTO transform itself from a trade regime to an economic regime? The answer will depend on whether the principal players in the WTO are able to develop a clear perspective and vision for the negotiating process.

On the topic of "Why has the Doha Round become stalemated," Professor Kawase asked each panelist to describe the prevailing views and conditions in their respective countries and regions.

Mr. Bronckers stated the following: It is not easy to give a European view on the state of the Doha Round because the situation is constantly changing. Three problems can be identified that obstruct the successful conclusion of the negotiations. First, in the area of international agricultural production, the United States has lost its competitive advantage in commodities and has fallen behind the EU and Brazil. Therefore, the U.S. agricultural community cannot hope to gain much from the Doha Round in terms of exports. This makes it hard to gain their support. Second, whatever meaning the Doha Development Round may have, it cannot be meaningful unless distinctions are made between the developing countries. But it is very difficult to say to the leaders of the developing countries that they may have to assume a bigger burden than other developing countries. Third, the developing countries are exposed to severe competition from China. This makes it very difficult to ask these countries to make further concessions.

Mr. Hoda stated the following: India has three principal concerns regarding the Doha Round. First, regarding NAMA, if real effective market access implies the acceptance of a low coefficient (in the Swiss formula), this would minimize the value of reductions that India has already implemented since the start of the Doha Round. This would mean that India's autonomous and unilateral tariff reductions are not being properly valued. Not only is this "less than full reciprocity," but it also fails to apply "full reciprocity." Second, in the area of services, India has made substantial progress in the liberalization of Mode 3. If other member states expect India to implement further liberalization in the WTO framework, that would require reciprocal liberalization in Mode 4 liberalization of the movement of independent professionals and contract service suppliers. Lastly, in the area of agriculture, trading partners have to understand that agriculture provides for the bulk of employment in India and that agriculture is an important and politically sensitive issue. If India is to reduce its tariffs, the Indian government will have to show to its people that effective measures have been taken to protect Indian agriculture from the unfair impulse of domestic support.

Mr. Hirose stated the following: Concerning the present status of the Doha Round, Japan was extremely disappointed by the exclusion of investment and other new issues. However, there has been no change in the commitment to improving competitiveness through trade promotion and the Doha Round remains one of Japan's priority commitments. In the area of agriculture, there is no question that agricultural negotiations represent an area of defense for Japan. But this does not mean that Japan is completely running away from these negotiations. Instead, Japan is engaging in these negotiations while moving forward on structural reform in its domestic agriculture. The Japanese stance is to continue discussions while negotiating on various conditions. Regarding the question of "less than full reciprocity," the current Chairman's text, as well as the Japanese proposal, provides for the introduction of certain arrangements designed to promote global economic development. These include the provision of flexibility to developing countries and the making of distinctions among developing countries. It is necessary to understand that the negotiations have gone forward in a way that reflects the autonomous liberalization implemented by India and other developing countries.

Professor Kawase presented the following two questions:
Is it meaningful to continue negotiating a small package?
Where do the interests of the less developed and advanced developing countries clash in choosing between a large package and small package?

Mr. Bronckers addressed the first question, and Mr. Hoda the second question.

Mr. Bronckers stated the following: A Round should be concluded however modest in scope it would be, and a limited Round would not imply the end of the WTO. On the other hand, it is not realistic to adopt a broad agenda that contains many areas of concern for developing countries. However, many countries that have been reluctant to discuss a broader agenda (including such issues as investment and the environment) in the context of the WTO are now talking about the same issues in FTAs. Whether these issues should be discussed in FTAs or on a multilateral level will become known within a few years as the world accumulates more experience from FTAs.

Mr. Hoda stated the following: On the question of agenda, a consensus had already been reached on this matter in the July 2004 framework agreement. Reopening this issue would push the Doha Round further away from a quick conclusion. Based on experiences in past Rounds, I am personally very skeptical about the development agenda. Reviewing the present state of the Doha Round, it is clear that there is tremendous diversity in the position of developing countries. All of these have to be dealt with, but they have to be dealt with in a way that is consistent with the overall objective of liberalization.

Professor Kawase presented the following two issues: recent criticism of the judicial law-making of the WTO dispute settlement process, and the imbalance between the rule making and dispute settlement functions of the WTO. Professor Kotera and Mr. Hirose commented on these issues.

Professor Kotera stated the following: Dispute settlement procedures can be used in gaining an advantage in negotiations, as seen in the dispute involving the U.S. practice of "zeroing." The consequence of such strategies would be the formulation of rules based on presuppositions of the decisions that may be handed down in dispute settlement cases. In other words, it becomes necessary to formulate rules so as to control the dispute settlement process. However, in reality, this would be quite difficult to accomplish. The ability to gain a negotiating advantage through dispute settlement procedures threatens to slow the pace of negotiations and to render the agreement process more time consuming.

Mr. Hirose stated the following: No matter how detailed the rules, the need for interpretation will naturally remain. In this sense, it is perfectly healthy for the Dispute Settlement Body (DSB) to render interpretations of the rules within a reasonable range. The most serious concern lies elsewhere. That is, it lies in the possibility of non-compliance with DSB decisions. It would be extremely problematic if DSB decisions were to provide objecting countries with an incentive to advocate the creation of new rules or, conversely, if rule-making were to have the effect of postponing the implementation of DSB decisions until after the conclusion of the Round.

Professor Kawase asked how the tension between the multilateral trade regime and regional trade liberalization should be interpreted. Mr. Bronckers, Mr. Hoda and Professor Kotera commented on this question.

Mr. Hoda stated the following: It is futile to discuss whether regionalism is a stumbling block or building block. It is necessary to reconcile ourselves to the fact that regional agreements are a reality and every WTO member is participating in one or more. The motivation of regional agreements is geopolitical, which means they cannot be stopped. The proliferation of regionalism creates a situation in which WTO member states discriminate against each other. In this situation, the only way to go is to have an ambitious and strong awareness of non-discriminatory liberalization of barriers to trade in both goods and services. For this reason, India desires a Doha Round that ends on a high level of ambition.

Mr. Bronckers agreed with most of the points made by Mr. Hoda but expressed somewhat differing views on the Round. He stated as follows: FTAs should be reviewed as critically as the WTO has been in recent years, and it should be examined whether FTAs are actually delivering the results they were supposed to deliver. It is impossible to conclude the Doha Round on a very ambitious level. We should conclude an agreement in a more constructive way and start asking how we should go about making the next Round more effective.

Professor Kotera stated the following: In their current state, the relation between the WTO and FTAs can be summarized as the relation between laws and contracts. FTAs can be considered to be making minor adjustments in the rules of the WTO. In this context, the WTO is functioning effectively by providing a background for FTAs. Therefore, it is not necessary to become too nervous about the relation between the two.

The discussion was followed by questions from the floor and responses from the panelists.

Q: For the business community, speed is an extremely important factor. Given the stalemate in the Doha Round, how can the business community contribute to maintaining a strong WTO?

A (Mr. Hirose): The WTO performs various functions. These include the legislative function of the Doha Round, the judicial function of the dispute settlement process, and the administrative function of the various committees. By advocating the more active use of the various functions of the WTO, the business community can contribute to heightening the presence of the WTO in the real economy.

Q: Tariff reduction benefits one's own country more than anyone else. Rather than insisting on reciprocity and thereby delaying the conclusion of the Doha Round, would it not be more beneficial to the developing countries to achieve liberalization, even if this is done through unilateral tariff reduction?

A (Mr. Hoda): I am emphasizing nothing other than full reciprocity. India has benefited from unilateral liberalization, and that is why it will continue the process autonomously and unilaterally. But when liberalization is implemented in the context of the Doha Round, the WTO framework comes into place. The WTO framework says, as interpreted over the years, that reciprocity should be shown in negotiation, and reciprocity as interpreted over the past Rounds has meant the "depth of reduction and trade coverage." If the coefficients are applied as suggested by Mr. Hirose, then this reciprocity rule will not be fulfilled.

A (Mr. Hirose): The awareness that tariff reductions benefit the economic development of the country itself should be the starting point. The negotiating position of participating countries should be one of using these tariff reductions to gain concessions from other countries. Standing on this foundation, what is at issue in the negotiations is the following question. What indicators can be used as criteria for the realization of reciprocity and "less than full reciprocity"?

Q: There are growing expectations of a Cabinet reshuffle and a further power shift in Japanese politics following the Upper House elections. Will it be possible for Japan to maintain a high level of political commitment to the WTO?

A (Mr. Hirose): There may be some differences between the ruling and opposition parties in how they view some of the local and unemployment problems generated by liberalization. However, it is unthinkable that there will be a change in Japan's political commitment to WTO negotiations and FTA negotiations.

A (Professor Kotera): Some differences in nuance may emerge in domestic policies, particularly in the area of agricultural policies. However, there is no need for concern because these are issues that are completely separate from Japan's commitment to WTO negotiations.

Q: The importance of services and interest in services is growing throughout the world. However, almost no progress has been made in this Round in the area of services. What are the reasons for this?

A (Professor Kotera): Negotiations will naturally go forward in areas where the will to liberalize exists among participating countries. But if we start negotiating on such critical issues as the provision of contracted services, the Doha Round would never be concluded.

Q: India wants the liberalization of contracted service providers to be placed on the agenda. What is the scope of service providers that India has in mind? Is there a possibility that this could undermine control over the problem of non-legal immigration?

A (Mr. Hoda): This is what India is saying. If there is a firm of service providers, which has a one or two year contract to provide services in the host country, then it should be able to send personnel to the host country to execute the contract. India is not advocating the floodgates be opened for illegal immigration. Instead, India is proposing to put this in a rigid framework of contract service suppliers in order to give comfort to the host country that the floodgates are not being opened. In light of the principle of full reciprocity, the unilateral and autonomous liberalization of Mode 3 that India has implemented must be met with reciprocal action in the areas in which India has made its requests.

Q: It was stated that it was unnecessary to become too nervous about the relation between RTAs and the WTO. Do you also think that it is unnecessary to worry about the provisions of GATT Article XXIV and GATS Article V?

A (Professor Kotera): What I meant is that none of the RTAs that have been concluded thus far and none of the RTAs being currently negotiated are so ambitious as to require discussion of GATT Article XXIV.

Q: It was pointed out that the level of NGO activities has declined in recent years. What are the reasons for this?

A (Professor Kotera): There is a very broad range of NGOs in existence. Among these, NGOs subscribing to various positions of anti-globalism have had the greatest impact on the WTO. Why are these types of NGOs less conspicuous in their activities today? The first reason may be that issues related to investment, the environment and competition laws have been removed from the agenda. Second, these NGOs may have shifted the arena of their activities and appear to be lending their brains to the developing countries.

A (Mr. Bronckers): There may be resurgence in NGO activities as the conclusion of the Doha Round draws closer and people begin drawing up their balance sheets.

* Statements made by Mr. Wilson and questions put to Mr. Wilson have been excluded from this record.

This symposium was planned with the aim to ascertain the direction that the WTO negotiations are taking at this very critical juncture. While FTAs have proven to be effective in certain respects, we have seen that they also pose a wide range of highly diverse and complex problems and challenges. Awareness of these problems and challenges drives home the need to constantly re-examine the situation from the perspective of the fundamental principles of the WTO. What conclusion have we reached on the question, "Quo Vadis the WTO"? While our individual views will certainly vary, I believe the greatest common denominator is to be found in the expression, "cautious optimism."