DDA Negotiations - where we are now and what other developments are in the trade remedies area

Date November 9, 2006
Speaker Jan WOZNOWSKI(Director, Rules Division, World Trade Organization)
Commentator HIROSE Naoshi(Director, Rules / Director, WTO Compliance and Dispute Settlement, Multilateral Trade System Department, Trade Policy Bureau, METI)
Moderator KAWASE Tsuyoshi(Faculty Fellow, RIETI)


Jan Woznowski

The WTO Doha Development Agenda (DDA) negotiations have been suspended since July, the main reason being a lack of a breakthrough in negotiations on agriculture, particularly between the so-called G6 countries. The director general, after consulting members, proposed to suspend the negotiations temporarily, and we are still in this period. Officially the suspension will continue until the major players decide to take a decisive step forward, bringing extra flexibility in their negotiating positions that will allow us to close the gap on the very substantial trade agreement. This is quite a serious condition and perhaps not a very easy one to meet. Therefore resumption of DDA negotiations does not appear to be in sight at the present.

So what went wrong? First, at the beginning of the DDA negotiations the seeds of crisis were already planted. Despite appearing to adopt a common attitude, major players actually had their own priorities and approaches for the round. The second factor, which is quite visible, is the fact that there was not much enthusiasm and interest in the round by business communities around the world. Realistically speaking, the origins of this particular round were more political than economic, and this has to be taken into account.

The Doha Round did not start with the same momentum as the previous rounds. In the Tokyo Round there was an effective negotiation process. Texts would be brought for discussion by delegations, proposals for changes would be made, and the texts would be amended. The role of the secretariat and the chairman was largely to take notes, provide background information, and introduce amendments in the texts presented by delegations so that the participants could see whether they reflected what they were agreeing on at each stage. The effectiveness of these negotiations was due to the limited membership, the negotiations generally being conducted only between interested parties, and the negotiations taking place behind closed doors, so that people were talking to each other rather than to a public audience.

However, after the Tokyo Round this began to change. Increases in membership and the transparency of the organization meant that it became very difficult to maintain the direct, business-like negotiation process of the Tokyo Round. The process moved toward much more public discussions where delegations were engaged in presenting their positions and trying to clarify the positions of other delegations, but not really negotiating.

In the Uruguay Round, in anti-dumping negotiations an attempt was initially made to follow the Tokyo Round approach, with disastrous results. The atmosphere in the room was extremely heated and the possibility of compromise was destroyed. But in subsidies negotiations we adopted a more realistic approach, having noted that people were not talking to each other so much as just presenting their positions. We looked for a way to find a result without forcing people to constantly commit themselves to decisions. This is how the negotiations on the basis of the "chairman's text" were initiated. Interestingly, subsidies were considered to be an irresolvable issue, but subsequent versions of the Chairman's text allowed to build up a compromise, and we finally ended up with a chairman's text which nobody rejected.

After the WTO was created, the problem of how to organize the negotiations became even more acute because it became a highly politicized organization. Negotiations also became politicized and this and the number of participants made a businesslike approach very difficult. Of course, negotiations cannot be completed without high-level political involvement; but having this involvement too early significantly increases complexity. One could hardly use the Tokyo Round negotiating technique but not at the experts level but at the ministerial level.

What I think has been missing from the Doha Round was what we call the "Geneva process" of long, slow, detailed, and technical discussion between experts, where they build understanding of other people's proposals and even of their own proposals, gradually reaching convergence and a sense of reality. Only in these long discussions do people realize that they perhaps need to modify their proposals, to be more flexible and understand better what is possible and what is not. This was clearly missing in some areas of the negotiations. People were impatient, wanted to move too fast, and put things on the table too early. They were also under pressure to say yes too early. Within the highly politicized process it is very difficult, if not impossible, to say yes because you have to say it in public, and people are not prepared to do that, even if they have some flexibility.

I would say that the only way to proceed in the future is, rather than forcing people to say yes, presenting them with something which is an outline of a possible compromise, letting them scream and kick, and then presenting them with a subsequent version, perhaps a little revised, until everybody has a picture of what is going on in all areas of the negotiations. You cannot have results in one area without having results in other areas. You have, therefore, to wait, with presenting these possible compromises, until everything is on the table; then decisions can be made based on what has been offered in the Round as a whole. Without this Geneva process it becomes very difficult to move forward.

Where are we in rules negotiations, and what is at stake? In the rules negotiations we followed the subsidy negotiations model from the Uruguay Round. The whole process was aimed at the chairman's text. Initially nobody was prepared to accept the idea. People were agreeing that there must be text-based negotiations, but would not accept any of the submitted texts. Slowly the idea was generally accepted that we had to end up with a chairman's text. The reflection of that was in the Hong Kong ministerial declaration, where it is clearly stated that the final stage of negotiations will be on the basis of the chairman's text. So we had a very intensive process which has not forced anybody to formally accept anything. The aim of the process was to give the chairman as much input as possible so that he could judge where the possible compromises lay. The Chairman was more or less ready with a substantial text to put on the table by the deadline, whilst the other groups had neither agreement on something nor the Chairman's text.

The proposals put forward in the negotiations would imply a profound reform of the disciplines governing trade remedies in various areas, and I believe that we made remarkable progress in this direction. The convergence of minds in the discussion established a solid basis to fulfill the mandate of the negotiations, which was to clarify and improve the existing rules.

Will we somehow manage to make this progress materialize, or is it going to be completely lost? Some key negotiators are saying that even in the case of the collapse of the round, the chairman's text should perhaps be circulated as it is. But I do not see any reason why it should not materialize if the round is resumed even if nobody knows whether that is going to happen.

However if the round were to resume, there are three possible scenarios how this may happen. I think the easiest and most useful would be a seamless resumption, starting with a quiet, informal process involving small groups which would gradually become normal negotiations. There should be no big declaration of resumption, because people would question why the negotiations were stopped in the first place. However we are still in the second scenario of requiring an important breakthrough and big concessions just to restart the round. This possibility is not totally excluded, because miracles do happen. The third scenario is a mixture of the first two, in that the technical process would start, but there would also be some attempts to present what would at least appear to be major concessions, even though they would be the same offerings simply wrapped differently.

Whatever happens, the round will not be finished any time soon. Hopefully this time there will be no more deadlines. Even in GATT times the deadlines were never observed. The process will hopefully be left to mature, the way it has to. But should the round ultimately fail, I do not believe that will mean the end of the multilateral system. There are already rules in place, even if they are not perfect, and there is much left to do to improve their implementation.

Turning to anti-dumping, its use is spreading everywhere. Since the beginning of the WTO, 13 new countries have started using anti-dumping, and the biggest users now are not necessarily from developed countries. India is the largest, using more anti-dumping actions than the United States and Canada combined, and the top six big users are developing countries. So anti-dumping is becoming quite a popular instrument among newcomers to the world trade scene.

Also interesting is that the main victims of anti-dumping are other developing countries. A similar trend can also be seen in the safeguards area, where developing countries are among the most active users, with 46 of the 76 safeguard actions having been taken by developing countries. The area of countervailing is much more traditional, with the U.S. as the primary user, followed by the European Union and Canada.

In the case of Japan, it is not a big user, but it is a big "victim" of anti-dumping actions. An interesting trend can be seen in the 10 year period within which, although the U.S. brought the greatest number of actions against Japan (21), it is followed very closely by India and China with 17 each, and Korea with 10. The picture is clearly changing, and it might soon be that these countries, which are close to Japan and which are more and more Japan's focal markets, are the most active in bringing anti-dumping actions against Japan.

Another important trend is that the big users of anti-dumping are also countries with big markets, and this is where anti-dumping becomes a real problem. Undoubtedly this trend will continue, particularly in China where they are taking the use of trade remedies very seriously. I would say that the development of the Chinese investigating authority is really impressive, both in the number of investigators and in the level of their training. This is a long-term project. China need to use anti-dumping because they are opening their market, increasingly exposing their industry to foreign competition, and eliminating other instruments that in the past made the use of anti-dumping unnecessary. Industries are exercising increasing pressure on the government which, if not responding to in a positive way, would create social troubles.

Putting aside the ongoing discussion of whether anti-dumping is an acceptable price to be paid for trade liberalization, there is a problem for many new user countries, in that these countries are confronted with enormous technical difficulties which have nothing to do with their level of economic development. There is a lot to learn; the rules are complicated and require a lot of experience in their application. A country cannot really become a consistent WTO user in a short time, but can in the meantime cause a lot of damage.

Transparency is therefore a significant issue, and this will increasingly become a problem which must be resolved. Compared to the amount of information provided in U.S. anti-dumping cases, there may be very little information provided in some other countries. So one important conclusion of our negotiations is that in addition to technical improvements there is a real need to improve transparency and the due process and enforce its application, because otherwise we may be confronted with big problems in the future.

Regarding dispute settlement in the rules area, we have the dubious privilege of being the main area of disputes in the WTO. You may hear differently, because everything depends on how you calculate certain data, but my calculations are based on the number of original panels established. Based on the numbers that I have, there were 102 disputes so far in the WTO, 68 of which were in the rules area. In particular, there were 32 anti-dumping disputes, 14 subsidy disputes, 12 countervailing disputes and 10 safeguards disputes. In anti-dumping, the main defendant is the U.S. with 18 cases, followed at a much lower level by the EC and Mexico with three cases each, Guatemala, Egypt, and Argentina with two cases each, and then Thailand and Korea with one case each. In the countervailing area the U.S. is again by far the main defendant with nine cases, followed at a much lower level by the EC, Japan, and Brazil with one case each. In safeguards disputes, the U.S. is again the main defendant with five cases, followed by Argentina with two, and Chile, Korea, and the EC with one.

What are the reasons for this concentration on the U.S.? Certainly some may say that the U.S. is less conscientious in implementing the agreement than some other countries, but this is hardly the full explanation. A partial explanation could be that the U.S. system is more transparent, in the sense that everybody can know with ease how calculations are made, on what basis injury decisions are made, and so on. Knowing these things, it is easier to formulate a case. Another explanation is the importance of the U.S. market. The cost of bringing a case is high - lawyers are not terribly cheap - so it becomes more worthwhile to bring a case if it is a big market into which there is a high volume of sales, rather than a small market.

Another interesting point is that the U.S. is also a relatively big victim of anti-dumping action. So why does it not bring more cases? My impression is that the U.S. is avoiding bringing anti-dumping cases because it is not sure whether a panel, upon deciding in their favor, would establish certain rules which may then be used against it when a case comes against it. I would certainly say that dispute settlement has contributed to clarifying a number of rules, and in some cases has created new rules or re-interpreted rules in a manner unintended by the negotiators.

This has led some people to suggest that dispute settlement is sufficient process to clarify and amend the rules, and that negotiation on the rules is therefore not required. I disagree; this is a totally different process. Dispute settlement is rather reactive, implementation is not always clear, and there can be many cases on the same issue. It also creates a lot of tension, which should not be underestimated; one day it may even stop the dispute settlement system from functioning properly. At the moment reports are adopted almost automatically; however if some countries began refusing to implement the report, that would provoke the spread of that behavior and other countries would do the same. Therefore I would say that dispute settlement is not an alternative to the negotiations.

An important lesson from that, which the negotiators should bear in mind, is that the rules must be as clear as possible and must be tested before they reach their final form. My experience from the Uruguay Round was that when a rule is negotiated and a great deal of time is spent discussing a certain legal text, everything becomes clear and everybody participating in the drafting knows what that text means. However following that, a lawyer who was not involved in the negotiations at all may read the text in a completely different manner. Therefore in order to reduce the number of disputes in the post-Doha period, should such a period materialize, a very important consideration is that the Doha Round text must be very clear, and we must be sure that everybody understands it exactly in the same way.

Naoshi Hirose

The technicalities of anti-dumping issues are very complex and very difficult for newcomers to understand. But they are important to understand, as anti-dumping rules govern how investigating authorities shall determine whether the price of a certain export transaction was fair or unfair, whether the domestic industry has been injured by the dumped imports, etc., which is an analysis of real world business. The difficulty of the anti-dumping negotiations is that the issue is too political for technical-level people to make decisions, but is too technical for ministers to understand what the details are. This is exactly the dilemma on how to negotiate and reach an agreement among members.

Looking at the overall process beyond rules, there is a similar tension between the political process and the technical process. Unfortunately areas other than rules have become highly politicized. There is a certain feeling in Geneva that we have to return to the Geneva process. In addition, given the vast number of countries who are now involved, we need to consider how we can have real negotiation in small group meetings, and then move to multilateral negotiations.

In the anti-dumping negotiations there is a group called the Friends of Anti-dumping Negotiations which consists of 15 countries, most of which are developing countries. However, naturally when there are small group meetings in the negotiations not all 15 countries can be present; and those countries worry that they do not know what is being discussed and may be forced to simply accept the outcome of those discussions. So there is tension between transparency and real negotiation, but some transparency is needed to ensure that all the participating countries can know what is going on in small group negotiations, and provide input.

We are also discussing internally what the process should be to restart negotiation. Perhaps we should not make a formal decision to restart, but rather embark on some technical discussions to get countries together and start negotiating. However, because we have had negotiation for some time on a ministerial level, it is a real issue how we can pull the process back towards those technical discussions.

In the 1980s, the main victims of anti-dumping actions were East Asian countries, but now the structure is far more complex, and anti-dumping actions are increasingly brought by developing countries, with the U.S. also being one of the major victims, and Japan increasingly becoming a victim. There is a lack of transparency and due process in actions by these new users, so one of the other aims of the negotiations would be to have more discipline for those new users, which is a goal shared by many developed countries including Japan and the U.S .

Questions and Answers

Q: Do you think that the WTO will survive, even were the Doha Round not resumed?

A: After the Uruguay Round, nobody wanted another round of negotiations. The more visible the event, the stronger the pressure to have some major outcomes, and multilateral negotiations are one such event. Therefore even if this round fails, within the next four or five years there will probably be another attempt to have negotiations.

One problem the WTO and the multilateral system are facing is the spread of regional trade arrangements. But these are attempts to create within which people have more rights and obligations. There is a feeling among some members of the WTO that many members have rights but no obligations. If we could find a way to ensure full implementation of the existing rules that would already be a big step forward. That would give us a good reason to continue to operate, and would also weaken this trend towards regional trade arrangements. So although it would be very bad not to have this round, the WTO would certainly survive.

Q: What is China's current status in regard to WTO settlements?

A: There is always a grace period at the start of a membership, and perhaps this is what is happening. However we already see some movement toward bringing China to dispute settlement; in particular there is a lot of pressure from the U.S. to bring some more cases against China.

Q: Why do some countries fail to respect their WTO obligations in terms of implementing what has been set out in panel reports?

A: There are two main reasons behind not implementing panel reports. One is purely political, in that certain practices are consistent with existing domestic laws or procedures, and therefore cannot easily be changed. The other factor is that often countries simply do not agree with the dispute settlement interpretations, so there is strong resistance to implementation. This second phenomenon is much more dangerous than the first, because it can lead to an erosion of confidence in dispute settlement.

Q: Would the initiative for a better system of ensuring implementation of WTO rules come from the secretariat, and if not, where would it come from?

A: It would not come from the secretariat because the Secretariat has no such powers. We have been trying to bring improvement in the implementation of subsidy notification requirements, but we cannot force Members if they are not interested in doing that. This is perhaps because they feel that negotiations would bring new rules under which the implementation problems would be resolved. Most notifications do not operate the way they should, but the committees responsible for reviews of domestic legislation, anti-dumping legislation, and so on no longer receive much attention. So there is a lot to be done.

Q: What is your impression of the effects of regional trade agreements on the DDA negotiations?

A: The reason for the proliferation of regional trade arrangements is dissatisfaction with the existing level of obligations in the WTO and the difficulties in negotiating new rules. With the addition of new members, the renegotiation of rules seems possible in only one direction, namely to loosen the disciplines rather than to strengthen them. This is probably why many members do not believe that it will be possible to strengthen certain rules or to ensure a better opening of markets in negotiations involving 149 countries.

I think that they feel the only way to achieve their objectives concerning access to those countries is through regional trade arrangement negotiations. Certainly this is weakening the appeal of the multilateral trade negotiations. Furthermore the WTO negotiations are increasingly politicized and the representatives of some countries are not really concentrating on the economic aspects of the negotiations.

*This summary was compiled by RIETI Editorial staff.