The Doha Round and the stakes for business

Date March 17, 2003
Speaker Andrew W. SHOYER(Partner, Sidley Austin Brown & Wood LLP)Amelia PORGES(Counsel, Sidley Austin Brown & Wood LLP)
Moderator ARAKI Ichiro(Director of Research, RIETI)


Our main business is to give corporations, trade associations, and the like an understanding of the significance of what is being negotiated in Geneva or not being negotiated, and to give them a sense of how they can use the agenda to create opportunities.

Some of the problems that are emerging in the Doha Round are a product of the WTO's own success. As the WTO has broadened its base and increased the number of members, it has become more difficult to reach consensus. The developing countries that are coming in have a different view on the issues than the rich countries. In addition, we have remaining very difficult questions, in particular, liberalization of agriculture. It is no surprise that you see so much activity on the bilateral front. After completing an agreement with Singapore, Japan is now negotiating with Mexico. Yet the promise of what can be achieved in Geneva can only be accomplished multilaterally.

The Doha Round started with a ministerial meeting in November 2001. The new Round has been launched as a "single undertaking," meaning that nothing is decided until everything is decided. The negotiations will proceed at the pace of the slowest element. The deadline for conclusion of the talks is January 1, 2005, which is fast, considering the fact that the Uruguay Round lasted more than seven years.

An upcoming deadline will be the ministerial meeting in Cancun, Mexico in September 2003, where ministerial decisions will provide stocktaking and guidance on negotiations. At Cancun, the modalities will be decided for how to launch negotiations on new issues (or the four Singapore issues, such as trade and investment). Members' comprehensive agricultural commitments must be submitted and the registration system for geographical indications must be negotiated.

Negotiating subjects will include the following. Negotiations will include services, agriculture, tariffs, TRIPS, WTO rules, dispute settlement, and trade and the environment. After Cancun, others will be added on the basis of "an explicit consensus": trade and competition, trade and investment, transparency in government procurement, and trade facilitation. Working groups will cover trade and debt and technology transfer.

The agricultural component will be an acceleration of negotiations that began in 2000 on improvements in market access, reductions of export subsidies, and reductions in trade distorting domestic support. The first deadline will be the establishment of modalities on March 31, 2003. Draft country schedules are to be submitted by the Cancun ministerial, but there is general discontent over the Chairman's draft on modalities. Positions are still far apart on many critical issues.

Services negotiations will cover market access commitments in a "request-offer" process. Improvements in the rules for services trade will also be on the agenda. In 2002 and 2003, more than 30 countries tabled requests for new market access. The official due date for offers in response is also March 31, 2003. A linkage between services and agriculture is likely.

Commitments made by each WTO Member in bilateral negotiations will be extended multilaterally to services and suppliers of all WTO Members. The US and EC are interested in broad comprehensive negotiations. Japan will make a broad offer by the end of March; its special interests include audiovisual services. Developing countries will resist further concessions but will be interested in some sectors (for example, India will be interested in computer services).

A key topic of any trade negotiation is tariffs. Businesses need to communicate with governments on the impact of tariff cuts on their competitiveness. Each WTO Member negotiates bilaterally on tariff cuts with its trading partners. Concessions are then incorporated into the WTO tariff schedules at the end of the round.

Japan supports formula tariff cuts that cut higher tariffs more and target an average bound tariff rate. The EC would like to compress a range of duty rates, cut textile tariffs more, and eliminate low nuisance tariffs. The US would like to see the elimination of all industrial tariffs by 2015. Developing countries will seek tariff cuts on textiles and resist other concessions.

Ministers at Doha have agreed on negotiations to clarify and improve disciplines on antidumping (AD), while "preserving the effectiveness" of WTO agreements in these areas. Ministers also agreed that they need to clarify and improve WTO disciplines on regional trade agreements. There will be one negotiating group for all WTO rules subjects.

Ministers agreed to launch negotiations to clarify WTO Subsidies Agreement on same terms as antidumping. The mandate is essentially open ended. Negotiations will include fisheries subsidies and could possibly include steel subsidies as well. The US and Canada may seek more flexibility to subsidize.

The Doha Declaration mandated talks to clarify and improve disciplines on regional trade agreements (RTAs). There are now over 200 RTAs in existence, most of which were formed in the last ten years. Even multilateralists such as Japan have joined the movement. Of total world trade, 55% is duty free; but only 6% of trade is bound duty free under the WTO.

Despite pressure from developing countries, the Doha Declaration did not reopen the intellectual property rights (TRIPS) Agreement for the new round. Ministers endorsed a political declaration on TRIPS and public health, reaffirming the importance of patent rights and highlighting areas of flexibility in TRIPS Agreement for some developing countries to address public health. Developing countries with generic drug industries sought more possibilities for compulsory licensing of drug patents.

The Cancun Ministerial is the deadline to conclude negotiations on establishment of a notification and registration system for geographical indications for wines and spirits (such as Champagne or Cognac). The EU seeks a full enforcement system. Japan, the US, Canada, and Chile want notification only. And the EU, Switzerland, the Czech Republic, Thailand, and India want GIs for more products.

New issues include investment, competition, transparency, and trade facilitation. Ministers at Doha agreed that negotiations in these areas would take place after the 2003 Ministerial Conference. But the final decision at Cancun on modalities for negotiations will require explicit consensus. Suspension of talks on special and differential treatment in the Committee on Trade and Development may cause developing countries to block Singapore issues in Cancun.

Regarding trade and investment, the WTO working group has been debating the following: scope and definition of investment to be covered in the agreement; transparency; non-discrimination; modalities for pre-establishment based on a GATS-type positive list approach; development provisions; and consultation and dispute settlement. The EU, Japan, Canada, Chile, Costa Rica, Australia, and Korea support a WTO investment agreement to replace bilateral investment treaties. India, Pakistan, Malaysia, Egypt, and the Dominican Republic oppose such an agreement. The US favors an agreement only if it is as strong as BIT provisions.

Trade and competition negotiations are likely to focus on whether to limit WTO competition policy to core principles or to be more ambitious, and how to provide WTO aid to developing country competition institutions. The EU and Canada would like WTO rules to be more ambitious, address antitrust cooperation, hardcore cartels, and technical assistance. The US wants to limit multilateral rules and limit the WTO role in developing substantial rules. Japan would like to see rules that balance competition policy with specific development policies. Meanwhile, India, Thailand, and Singapore feel that technical assistance should come first; and they would like to resist new resource burdens.

There is broad support for moving forward on transparency as well as trade facilitation negotiations after Cancun. Ministers at Doha agreed to conclude negotiations on improving dispute settlement rules by May 2003. Negotiations are taking place in the Special Sessions of the Dispute Settlement Body. The EU, Norway, New Zealand, and Korea support a US proposal on transparency, but most developing countries oppose.

Dates to watch include the following: March 31, the deadline for service offers and for agreement on modalities for agricultural reform offers; May 31, the deadline for DS negotiations and for agreement on modalities on non-agricultural market access; and September 10-14, the Cancun Ministerial Meeting.

Questions and Answers

Q: Given the US does not want minimalist investment treaties, which points from multilateral and bilateral investment treaties are complementary?

Andrew W. Shoyer: While there are complimentary positions, the US position has become controversial, which is a problem. The problem in the dispute settlement mechanism would be the possibility of investors suing governments for returns or promises unfulfilled. Environmental groups are strongly opposed to this in the NAFTA context. So it is a political problem too.

Q: Why are US BITs at higher levels than those of other countries?

Amelia Porges: Actually, in the US, there is a whole range of BITs, standards and remedies. You cannot generalize the level of protection. They will have to be carefully compared with BITs concluded by Germany, for example. My question is why Japan was so reluctant to conclude BITs. Maybe Mr. Araki could give us some insight here.

Ichiro Araki: One reason Japan does not have many BITs is that Japan only negotiates with countries that offer to negotiate; and those BITs are at a high level. The situation is changing, though, with JSEPA and the Japan-Korea BIT.

Q: We appreciate the complexity of WTO negotiations, but I see Japan's interest shifting toward RTAs and FTAs. The business community is less interested in the Doha Round compared to previous Rounds.

Amelia Porges: This is similar to what is happening in the US. From the US standpoint, the US-Chile FTA took place in one or two years. The service sector likes RTAs because they use a negative list approach, which is much more comprehensive.

Andrew W. Shoyer: In the US, aside from agriculture, there is little interest in the Doha Round. In agriculture, only multilateral trade negotiations can achieve liberalization. One problem is that the recent Farm Bill has given farmers more to protect.

*This summary was compiled by RIETI Editorial staff.