The Doha Round and the stakes for business: What's next?

Date January 25, 2002
Speaker Amelia PORGES, Andrew SHOYER, Michael FINE, Andrew STRENIO, Lawrence WALDERS(Powell, Goldstein, Frazer & Murphy LLP)


Andrew Shoyer

Doha was a success because it wasn't a failure. But I am not sure if there is a real negotiating agenda. The question will be: How will the negotiations be organized? It will set up the dynamic. The negotiations will cover services, agriculture, other market access (tariffs), TRIPS, trade & investment, trade & competition, transparency in government procurement, trade facilitation, WTO rules, dispute settlement, and trade & environment.

Amelia Porges

Who will chair the trade negotiations committee? Will there be permanent chairs for each negotiating group? If so, who will they be? Yearly chairs means you will get yearly fights. China has spoken out: it wants a Geneva ambassador to chair. China is now a big player. Here are some of the names that have come up to lead the various groups: Stuart Harbinson for agriculture; David Hartridge for services; and Hugh McPhail for rules.

Andrew Shoyer

How will negotiations on agriculture be held? Europe will be on one side, the Cairns Group on the other. Agriculture will be important for getting the US motivated for the round; agriculture is the number one commercial interest for the US because the WTO is the only forum where the US can change Brussels export subsidy policy. To the US, Argentina will be seen as a threat because the growing seasons of those two countries overlap. The Cairns Group expects support from the US.

Amelia Porges

Services is moving forward. The Doha Declaration reinforces negotiations that began in 2000. Ministers have set a timetable for market access negotiations: requests have to be tabled by June 2002, offers by March 31, 2003. Developed countries want more access. Developing countries are reluctant to make concessions. Some food exporting countries are likely to hold financial services hostage for progress in agriculture talks. As for the service negotiations, a request-offer approach under the existing GATS framework will be used.

Industrial tariffs can be a motor for selling the negotiations. Reducing tariffs that businesses pay to governments will be a key topic for any trade negotiation. Businesses need to communicate with government on the impact of tariff cuts on their competitiveness domestically and in export markets.

The major issue for 2002 will be the modalities for bilateral negotiations: a request-offer approach, formula tariff cutting, sectoral tariff harmonization, or some combination of approaches. The EC will push for formula cuts to attack tariff peaks, and the US will push for sectoral approaches, such as "zero for zero." Developing countries will seek tariff cuts on textiles and resist making any tariff concessions on their imports.

Regarding WTO rules, Japan has succeeded in getting antidumping on the agenda. Ministers at Doha agreed on negotiations to clarify and improve disciplines on antidumping, subsidies, and countervailing duties, while "preserving the effectiveness" of WTO agreements in these areas and their "instruments." This phrasing was an EC compromise between Japan, Korea, and developing countries, and the US. Ministers also agreed to clarify WTO disciplines on regional trade agreements.

Lawrence Walders

USTR Robert Zoellick said that the US would talk about antidumping as long as it does not have to change its antidumping law.

Amelia Porges

The longer the round, the greater the number of issues. We are already seeing changes on antidumping. Some countries are slowing down efforts to change antidumping now that China is in the WTO.

The first step will be to identify provisions of the antidumping agreement for clarification or renegotiation. Ministers at Doha agreed that the new round would address special treatment for developing countries in antidumping investigations. The new round could also address proposals raised during the 1999-2001 Ministerial preparation process.

Japan, Korea, and exporting developing countries will raise a broad agenda on dumping issues. The US will try to keep the agenda narrow and will try to exclude proposals that it believes would weaken "instruments," such as domestic antidumping laws. India and other developing countries may change position on antidumping because of China's entry into the WTO.

Andrew Shoyer

The US will want to make FSC consistent with the WTO, but it has little leverage unless it offers some kind of compensation to stall retaliatory trade measures. Also, asking for this concession will reduce the US's leverage on future negotiations. The US and Canada will seek to gain more flexibility to subsidize. Canada will seek to restore "green light" status for regional and R&D subsidies. Japan, EC, and Korea resist special regulation in fisheries subsidies and will seek to have it dealt with as a subsidies issue, not environmental.

There is no broad mandate on TRIPS coming out of Doha. Developing countries will seek more flexibility, more incentives for technology transfer. Developing countries with generic drug industries, such as India and Brazil, wish to expand possibilities for compulsory licensing of drug patents, which the US and Switzerland oppose. The EC seeks a full international system for GIs. Japan, the US, Canada, and Chile want notification only. The EC, Switzerland, Czech Rep., Thailand, and India want GIs for more products, which the US Argentina, Australia, Canada, Chile, and New Zealand oppose.

The "new issues" are actually pretty old. Japan has an interest in trade & investment. The US already has several bilateral investment treaties (BITs) with developing countries. Within BITs, investors can arbitrate directly and seek money damages (this process is not available through the WTO). Japan may want to rethink its position on investment arrangements. Japan does not have any BITs, but it could take advantage of existing BITs through subsidiaries in countries that do have BITs.

Andrew Strenio

The GE-Honeywell case illustrates that it is possible to reach different results on a single case. The EC and US had opposite views. The US was preaching antitrust for so long, and now it got what it wanted. It will make clearing mergers much more difficult. It would be good to harmonize positions on antitrust, but the US officials do not want antitrust on the next round's agenda. Informal talks would be better to reach consensus-through the OECD or the ICN.

Andrew Shoyer

Since 9/11, it has become more difficult to ease barriers on trade facilitation.

Michael Fine

These negotiations will take eight to ten years. The US will find that the negotiations will be the easy part; convincing Congress will be much more difficult. Looking at trade promotion authority (TPA), I ask: What is TPA about? Will TPA pass? And does it matter?

First, TPA is about globalization. Trade liberalization is no longer the consensus. There has been a movement away from the elites, towards a public debate. The US is moving away from trade liberalization; there are concerns about fairness. People distrust the business community after the Enron debacle. It is no longer about free trade versus protection. Now everyone is a fair trader; the discussion is about the details. The latest movement to protect US steel is happening under the watch of the Republicans.

Will TPA pass? That is still an open question. There are still obstacles. But does TPA matter? I see it more of a symbolic rather than procedural issue. Over the years, members of Congress have found ways to get around TPA. So the onus will be on whether or not a trade agreement has the substance to sell. If TPA does not pass, other countries that are facing political pressures will just use it as an excuse to take a pass.

Questions and Answers

Q: Some are calling this a "development round." Do you agree?

Andrew Shoyer: I don't really understand what that phrase means, so I don't use it.

Amelia Porges: Agriculture will be on the agenda.

Lawrence Walders: The developing countries want more leniencies when it comes to antidumping (AD). Poor countries do not have the wherewithal to deal with AD cases.

Q: Why haven't you mentioned the environment? Might addressing environmental concerns be a way to reconcile the globalization debate?

Michael Fine: Labor and the environment are contentious issues even in the US. There will be a continuing debate in Congress. We have to broaden the discussion in order to satisfy the public and the developing countries.

Q: Are the poor countries more willing to negotiate compared to their position in Seattle?

Amelia Porges: The world economy has gone from bubble to a downtrend. This is good for trade negotiations. Maybe bad times will convince people that we need trade.

Michael Fine: On AD, there will be a small window for reform before the poor countries see the value in using AD themselves and positions flip.

Q: You need explicit consensus on the modalities of negotiations. Otherwise, there will be stonewalling. What about BITs and rules of origin issues?

Andrew Shoyer: The document says that there will be negotiations, but the modalities are yet to be agreed on. So, we will have a talk about talking. There is not necessarily consensus about negotiating. In some BITs, the host government can exclude benefits if the company is merely a shell.

Amelia Porges: The company should be doing substantial business in the host country. So far, this has not been an issue.

Q: Are you implying that BITs benefits will be on an MFN basis?

Amelia Porges: A pluralateral agreement would require an attitude adjustment by the WTO. Brussels would want BITs handled in Brussels for the EU.

Q: Can the round be concluded quickly?

Andrew Shoyer: No. Agriculture will preclude a quick conclusion.

Ameila Porges: The date March 31, 2003 is seen as a small milestone along the way. In order to get movement, deadlines will be necessary.

Q: How does limiting steel capacity fit with WTO philosophy?

Lawrence Walders: There is only an agreement to discuss limiting capacity. US politics makes this difficult.

Q: Groups like the American Chamber of Commerce do not care about the WTO round. Dumping is not central to the American political process.

Michael Fine: Yes, but Americans care about the process of globalization. They sense a trend.

Q: Japan's economic health is in the interest of the American people. Japan employs 3 million Americans. When the Japanese economy shrinks, the Japanese companies cut FDI first.

Michael Fine: We are trying to get this kind of message out there. Check the OFII's website. People don't see the benefits of trade in the media.

*This summary was compiled by RIETI Editorial staff.