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What’s on the WTO’s Agenda in Cancún:
An overview of the WTO’s Fifth Ministerial Conference Cancún, Mexico, 10 – 14 September 2003

Ronnie Hall, FoE International Trade Environment and Sustainability (TES) Coordinator, gives an overview of WTO negotiations in 2003 and prospects for the Cancún Ministerial. For a detailed explanation of FoEI’s position on each of these issues, please refer to FoEI’s 200 3 Cancún position papers .

Following the Doha Ministerial, the EU and US Governments, along with the WTO Secretariat, have many of the negotiations they want up and running, as a package or ‘round’ that is supposed to be completed by the end of 2004. Bearing this in mind, one would expect the EU and the US to portray or ‘spin’ the WTO’s 5th Ministerial meeting in Cancún as little more than a mid-term review of the set of negotiations already agreed. Their main priority should therefore be to give the impression that negotiations are proceeding reasonably well and that the trade ‘bicycle’ is riding along smoothly.

However, there are numerous pot-holes in the road, which may well cause the trade bicycle to fall over completely. Curiously, most of them are of the US’s and the EU’s own making. They can be broadly categorized as tensions between (i) the EU and developing countries; (ii) the US and developing countries; and (iii) the EU and the US. These tensions have developed dramatically in the months since the Doha package was agreed and look all set to bring the Cancun ministerial grinding to a halt. (They are also remarkably similar to the intergovernmental dynamics in position before the 3rd Seattle Ministerial).

In particular, the EU’s determination to force the new ‘Singapore’ issues onto the WTO’s agenda in the face of developing country opposition, whilst at the same time resisting pressure to alter its domestic agricultural support systems, is likely to be a key flash-point. (see ‘ Agriculture ’ and ‘Investment’ , below).

This is likely to be compounded by US intransigence when it comes to issues that are of most importance to developing countries – in particular, the implementation (or lack of implementation) of previous WTO agreements; special and differential treatment for developing countries; and the conclusion of a working agreement on TRIPs and public health, all of which have stalled in pre-Cancun negotiations in the WTO.

Finally, in spite of the fact that they are both members of the powerful ‘Quad’ grouping (which also includes Canada and Japan), the EU and the US fail to see eye to eye with each other on a number of issues (although this is not necessarily true of their chief respective trade negotiators, Pascal Lamy and Robert Zoellick). Apart from lingering disagreements over numerous previous WTO disputes, current rows over trade in biotechnology and food aid, could all contribute to what is shaping up to be an explosive mix in Cancún.

A failure to reach agreement in Cancún would mean that the WTO would be most unlikely to meet its overall negotiating deadline, which has been set at 1 January 2005. It would also severely damage the WTO’s credibility.

Key issues being negotiated include the following:

Agriculture

As with all WTO negotiations, those focusing on agriculture are ostensibly about liberalisation (ie opening markets and reducing domestic and export support). They began in early 2000, under Article 20 of the WTO Agriculture Agreement. The Doha declaration then set deadlines for the negotiations (1 January 2005).

The Cairns group of agricultural exporters is targeting agricultural subsidies in Europe. (The Cairns group consists of Australia, Canada, New Zealand and a number of developing countries including Argentina, Brazil, Malaysia and Thailand, all of whom operate with few or without agricultural subsidies). However, any such change (which would be delivered via reforms to the EU’s Common Agricultural Policy) can be expected to generate intense opposition amongst European farming and rural communities and is likely to be extremely difficult for the EU as a whole to deliver (although it may try to argue that is has already delivered through previous reforms of the CAP).

A number of developing countries are also pushing to be allowed to protect their domestic agricultural production from the impact of cheap imports (which undercut local production and undermine domestic food security) through special safeguard measures.

As countries jockey for position on this issue, all eyes will on the EU in Cancun. If it makes or is perceived to have made no significant movement on this issue, talks will stall. However, if it succeeds in convincing other countries that it has or will change its agricultural support systems or market access limitations, there may then be movement in other sectors. But would this be a good move?

The answer is no. What has actually happened over the last decade (since the Uruguay Round was completed and the Agreement on Agriculture signed) is that the developed world has succeeded in maintaining high levels of domestic support, continuing to subsidise its own farmers (primarily the wealthiest ones), whilst forcing open developing country markets and inducing those same countries to focus their own production on export markets. At the same time, the TRIPs Agreement is being used by large agribusiness transnationals to expropriate knowledge from farmers and indigenous peoples in developing countries. As far as large farms and agribusiness are concerned, both in the North and the South, this mix has been a recipe for success. For small farmers, local food economies and the environment it is an ongoing disaster.

These factors need to be borne in mind when considering the current state of negotiations. What might further agricultural liberalisation be expected to achieve? One can only answer that, on the basis of past experience, any outcome will probably benefit large agribusinesses able to invest in and benefit from increased international trade in agricultural products. There is little on offer in the current negotiations for small farmers in the South (with the possible exception of the special safeguards clauses if they survive negotiations) or for the maintenance or development of sustainable agricultural systems.

(For further information from FoEI about food sovereignty and about the impacts of trade liberalisation on people and their environment, go to www.foei.org).

Services

GATS 2000, the WTO’s negotiation to liberalise services, is now well underway, with many countries, including the US and the EU, having tabled requests for others to open various service sectors, including water and energy services, air and maritime transport, tourism, and health and education services. Many of these could have extensive environmental and developmental implications, for example access to water supplies, increased pollution from transport and increased fossil fuel extraction. Furthermore, environmental services listed focus on ‘end-of-pipe’ post-pollution services (in other words, remedial services that apply after a problem ash occurred).

Although countries should now be responding with offers and entering into bilateral negotiations with each other, what is actually happening is that various countries (those whose markets are most likely to be opened) are waiting to see what happens with other negotiations in which they have an interest and negotiations are proceeding very slowly (for further information go to www.gatswatch.org). The Doha Declaration set a deadline of 1 January 2005 for the conclusion of the GATS negotiations.

(For more information on FoEI’s position on GATS go to www.foei.org)

Non-agricultural goods

Another key strand of negotiations focuses on increasing market access for industrial (ie non-agricultural) goods, particularly by targeting high tariff ‘peaks’ and tariffs that discriminate against value-added products (this tariff ‘escalation’ discourages exporters from processing their raw materials before exporting them and, as a result, protects processing industries in the importing countries).

Pre-Cancun proposals have included the complete elimination of tariffs in seven sectors, including electronics and electrical goods, fish and fish products and stones, gems and precious metals (with potential environmental impacts in all three sectors). The way in which liberalisation negotiations will take place in other industrial sectors is also up for grabs, with deep divisions emerging between developed and developing countries. In particular, the outcome of obscure negotiations over tariff-reducing ‘formulae’ – which will determine the extent to which different countries open their markets - could have very significant impacts on developing countries with higher tariffs and on tariffs in environmentally-sensitive sectors. These negotiations will also, at some point, focus on non-tariff barriers (ie health and environmental standards), but nothing specific is known about these discussions yet.

Investment

Investment liberalisation is one of the highly contentious ‘new’ issues that the European Union has been trying to insert into the WTO’s agenda since before the first Singapore Ministerial in 1996. In Cancun, WTO member states are scheduled to decide whether to proceed with investment negotiations based on an “explicit consensus” concerning the modalities (parameters) for those negotiations. This was finally agreed at the Doha Ministerial, when the European Union and its allies applied extraordinary pressure to the many developing countries that do not want these negotiations to take place. Since then, however, there has been much debate about whether or not developing countries will be able to use the Doha language (including a final clarifying note from the Chair in Doha, written at India’s request) to block further negotiations.

To a certain extent, investment is already dealt with under the WTO’s Agreement on Trade-Related Investment Measures (TRIMs). TRIMs – which only applies to trade in goods - bars countries from imposing several kinds of performance requirements (conditions) on foreign investors. TRIMs obligations were supposed to apply to developing countries from 1999/2000 but this is now the subject of further negotiation within the WTO under ‘implementation’ (as developing countries have experienced great diffulty in implementing even the Uruguay Round agreements). Investment in services is also under discussion as part of the ongoing GATS Negotiations (where it is referred to as ‘Mode 3’).
A key question in Cancun will be whether the EU and its partners succeed in their efforts to establish what is effectively a bill of rights for transnational corporations, significantly extending the reach of existing provisions. For example, a new investment negotiation could:
- stop governments acting to develop their domestic industries, with severe implications for developing countries;
- be used to challenge environmental and public protection policies and to claim compensation for ‘expropriated’ investment (as has happened in North America under NAFTA);
- establish a new dispute settlement system that allows companies to challenge governments directly, at the international level (again, as in NAFTA);
- prohibit the use of capital controls that can be critical to creating a stable context for sustainable development; and
- make the considerably more stringent provisions of some existing bilateral investment treaties (BITs, between two countries) multilaterally binding.
Investment liberalisation remains hugely controversial following the demise of the Organisation for Economic Co-operation and Development (OECD)’s similar proposed Multilateral Agreement on Investment (MAI) (MAI negotiations ceased in 1998 due to disagreements between governments and pressure from civil society groups.)

The strongest proponents of WTO investment negotiations have been the European Union, Japan, Switzerland, Norway and South Korea. However, investment negotiations have been opposed by a number of developing countries, including India, Malaysia, Zimbabwe, Tanzania, Zambia, Kenya, Belize, Uganda and Sri Lanka. India remains outspoken in its opposition and may refuse to agree to the required ‘explicit consensus’ in Cancun. The US, whilst not a vocal supporter of an investment treaty in the WTO (no doubt because of the benefits it derives through its own bilateral investment treaties), is nevertheless calling for any agreement to apply to a broad range of types of investment (ie portfolio investment as well as FDI).

Competition policy, government procurement and trade facilitation.

These three issues are also ‘Singapore issues’. Like investment, they were proposed by the European Union at the WTO’s first Singapore Ministerial in 1996. In spite of stiff opposition from developing countries, the EU continues to try to force these issues onto the WTO’s agenda (and to insist that that they be accepted as a package). They are also likely to be controversial in Cancun.

'Competition policy' may turn out to be a deceptive term for proposed negotiations. International rules that would effectively stop the mega-merger-mania that has recently been sweeping the globe and placing larger amounts of trade into the hands of a smaller and smaller number of giant transnational corporations, would indeed be beneficial (if developed outside the WTO). However, whilst hard core cartels do get a mention, the European Union’s proposals are primarily focused on another kind of competition – domestic competition regulations that might constitute trade barriers to foreign TNCs. Removing these regulations could in fact undermine the ability of developing countries to control their economies and foster their own domestic companies. Furthermore, the EU’s proposal would allow the WTO to oversee the development of national competition law, ensuring conformity with WTO rules.

Government procurement is particularly significant for some of the poorest developing countries, where the government is the main economic agent (ie a significant proportion of GDP is being handled via government contracts). Developing countries are suspicious of any discussions that could lead to deregulation and the prohibition of their right to control government procurement. However, the industrialised countries are keen to gain additional market access in the developing world by forcing government procurement decisions to be as transparent as possible, 'non-discriminatory' and subject to the WTO's binding dispute resolution system.

Government procurement could also be an issue of concern for local authorities in many different countries. For example, binding WTO rules on procurement could discourage officials from promoting 'green procurement' that favours environmentally beneficial products (such as certified wood from sustainable sources, minimum recycled content in paper or energy efficient vehicles). Whilst it is difficult to predict the precise nature of investment liberalisation or government procurement negotiations, should they go ahead, there is certainly a possibility that any such negotiations could eventually undermine local or national government mechanisms to protect local economies and the environment, including procurement conditions. At worst, even if an agreement were only to focus on transparency (as currently proposed) there could be a risk of local authorities facing significantly higher implementation costs and the risk of being drawn into international legal disputes and massive compensation payments, which would undoubtedly see off all but the bravest of legislators.

There is already an Agreement on Government Procurement in the WTO. It covers such issues as transparency and non-discrimination but it is plurilateral and is only signed by about 30 countries. At the First WTO Ministerial in Singapore, it was agreed to set up a working group on Transparency in Government Procurement to further transparency issues with the intention of developing elements to include in an eventual multilateral agreement. Many developing countries remain adamantly opposed to launching negotiations on Government Procurement, as proposed by the EU.

Trade facilitation negotiations are intended to dismantle the bureaucratic hurdles importers have to jump. Whilst this sounds reasonable, from the environmental perspective, such negotiations could be significant were they to focus on removing 'bureaucratic' health and environmental regulations enforced at borders.

TRIPs

The Agreement on Trade-Related Intellectual Property Rights (TRIPs) impacts on peoples' ownership of and access to food and seeds and has the potential to significantly reduce genetic diversity. It permits northern TNCs to claim traditional plant varieties or plant uses as 'inventions' that must be respected the world over. TRIPs was first brought into the GATT in the Uruguay Round and implemented in a way that favoured large Northern corporations. TRIPs and the use of patents expropriates knowledge from farmers and indigenous peoples in developing countries who, in many cases, have been cultivators, researchers and protectors of plants for thousands of years. This practice is commonly referred to as 'biopiracy'. Biopiracy is not the result of the absence of intellectual property right (IPR) systems in the developing world but a direct consequence of the imposition of western style IPR systems (based on the US patent regime) through the TRIPs Agreement.

The TRIPs negotiations are currently focused on the issue of public health – may developing countries sidestep the provisions of TRIPs if they need to provide cheap ‘generic’ medicines, to combat malaria and HIV/AIDS as well as other diseases, such as cardiovascular disease, to the poor in their countries? It was thought that agreement had been reached on this in Doha – indeed it was considered by many to be one of the only positive outcomes of that Ministerial. However, the US, at the insistence of its pharmaceutical industry, has since backtracked on this agreement, and negotiations have focused on the import of such generic drugs by countries that don’t have any productive capacity (with the implication that those countries might sell them on, simply to make a profit). This also promises to be a flash-point in Cancun.

The TRIPs negotiations are also focusing on ‘geographical indications’ (labels which indicate that a product is from a particular region). The 5th Ministerial is the deadline for developing a register of geographical indications for wines and spirits. There is also debate as to which products from which countries should receive what level of protection.

Mandated reviews of TRIPs in its entirety (including its compatibility with the Convention on Biodiversity) and TRIPs Article 27.3(b) (which deals with patentability or non-patentability of plant and animal inventions, and the protection of plant varieties) appear to be moving slowly if at all.

Multilateral environmental agreements (MEAs)

Environmental issues continue to be pushed strongly by the EU. Negotiations in the Committee on Trade and Environment (CTE) have focused primarily on the compatibility or otherwise of existing WTO rules and specific trade obligations in multilateral environmental agreements. They are scheduled to be concluded by 1st January 2005.

There are approximately 200 multilateral environmental agreements in place today, a number of which contain provisions related to trade and trade rules. In addition, trade measures constitute one of the most important instruments for effective national implementation of MEAs. The CTE's task is to clarify the relationship between these trade obligations and WTO rules. Some Member states have suggested focusing on the relationship between the WTO and those six MEAs whose trade obligations are considered to be ‘specific’ and ‘mandatory’ in nature. Other countries propose to focus not only on specific and mandatory trade obligations but to include the national trade measures used to implement MEAs as well. As a result, the discussion currently underway in the WTO is focusing primarily on the following MEAs and the ‘specific trade obligations’ they establish, although it has not ruled out a broader approach:

- The Montreal Protocol, which regulates the production, consumption and export of substanceswhich damage the ozone layer (chlorofluorocarbons - CFCs);
- The Basel Convention which controls trade or transportation of hazardous waste across international borders;
- The Convention on International Trade in Endangered Species (CITES);
- The Cartagena Protocol on Biosafety, which regulates trade in genetically modified organisms;
- The Stockholm Convention on Persistent Organic Pollutants; and
- The Rotterdam Convention on the Prior Informed Consent Procedure (PIC) for Certain Hazardous Chemicals and Pesticides in International Trade.

Most of the intergovernmental discussion since the Doha decision to negotiate on the relationship between MEAs and trade rules has focused on how to structure the negotiations. The principle question has been how to define a specific trade obligation (STO). Whereas most countries support the initial proposal of Australia to look at specific and mandatory trade provisions only, some countries, led by the EU and Switzerland, are in favour of a broad definition which includes national implementation measures, Conference of the Parties (COP) decisions and other MEAs such as the Convention on Climate Change and the Kyoto Protocol.

These apparent details could have extremely important consequences for MEAs. For example, the use of trade measures that are left to the discretion of MEA members could be deemed to be WTO-inconsistent. So too could decisions taken by the MEAs’ COPs that are not codified in annexes or protocols or ratified by the full membership.

In general, there is a very significant risk that the negotiations could result in the WTO:
- setting rules or criteria for the use of trade obligations in current and future MEAs;
- defining a set of MEAs, or a set of specific trade obligations, that are WTO-consistent and thereby deeming others to be WTO-inconsistent regardless of their merits;
- making provision for WTO supervision of national implementation of MEAs resulting in a limitation of governments’ rights to regulate in favour of the environment; and/or
- setting rules that may effectively prevent the adoption or implementation of MEA-mandated trade measures by any WTO Member or MEA Party.

The alternative conceptual approach, asking for a political statement about the relationship between the WTO and MEAs, as proposed by the EU and Switzerland, is also unlikely to offer any safeguards for MEAs. The main reason for this is that the WTO will never decide any wording that would go beyond "mutual supportiveness", which is effectively the status quo. The WTO would certainly not put environmental rules above trade rules. A statement about mutual supportiveness will mean little should a conflict between a MEA and a WTO agreement arise.

There has also been debate in the CTE on trade measures in specific sectors such as forests and energy, with clear lines of disagreement emerging between those who think these issues should be considered in the WTO; and those who believe they should be dealth with in other ‚appropriate’ fora (such as the Kyoto Protocol). This presents another potential hazard for MEAs.

In short, whatever approach is taken, no ‘safety net’ for MEAs is likely to be forthcoming in Cancun. As a result, FoEI and other NGOs are calling for the negotiations to be removed to a more neutral forum, such as the UN.

(For details of FoEI’s position on MEAs see www.foei.org)

Biotechnology and other issues

Notwithstanding the successful negotiation of the Biosafety Protocol, there is still a possibility that trade in biotechnological products could creep onto the WTO's agenda before or during Cancun, not least because of ongoing transatlantic hostility over hormone-treated beef and genetically-modified organisms and products (including the new US challenge to the EU’s de facto moratorium on GM products). It is possible that talks on biotechnology could crop up in any one of a number of the proposed WTO negotiations, including reviews of the TRIPs Agreement (see TRIPs above), as part of agriculture, or separately, as a new, 'stand-alone' issue.

(Full details of all of FoEI’s positions on the above issues can be found at www.foei.org.)

CONCLUSIONS

The world needs trade rules that reflect society's current values and needs. Existing trade rules and institutions and indeed the current global economic system are out of date and do not do this. Instead, they have contributed to increasing global inequality as well as undermining biological and cultural diversity. They are still based on the pursuit of profit regardless of social and environmental costs; and inequitable access to, and the overuse of, limited natural resources. Critically, current rules also prevent the maintenance and development of locally-appropriate and sustainable systems of commerce. A new and sustainable framework for the regulation of trade for the twenty-first century needs to be based on the principles of democracy, equity, reduced consumption, co-operation and caution. In order to achieve such a framework, broad reform of the global economy is a prerequisite.

For these reasons, it is vital that governments reject proposals to expand the mandate of the World Trade Organisation. They should agree instead to review and rectify both the current trade system and the economic context within which that system operates. It is time to develop a system of international trade that promotes self-determination, environmental protection, sustainable livelihoods, equity and cultural diversity, amongst all nations and people.

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Contact Details for Friends of the Earth International’s Trade, Environment and Sustainability Programme

INTERNATIONAL

Ronnie Hall
FoE (England, Wales & Northern Ireland)
26-28 Underwood St.
London N1 7JQ
United Kingdom
Tel: 44 20 7490 2665
Fax: 44 20 7490 0881
E-mail: ronnieh@foe.co.uk
Web Site: www.foe.co.uk

AFRICA

Theo Anderson
FoE Ghana
Private Mailbag
General Post Office
Accra
Ghana
Tel: 233 21 512312
Fax: 233 21 512313
E-mail: foeghana@africaonline.com.gh

ASIA

Meenakshi Raman
Sahabat Alam Malaysia
27 Lorong Maktab
10250 Penang
Malaysia
Tel: 60 4 227 6930
Fax: 60 4 227 5705
E-mail:
Web Site: meenaco@pd.jaring.my

CENTRAL AMERICA

Ambika Chawla
COECOCEIBA-FOE Costa Rica
PO Box 12423-1000
1000-San José
Costa Rica
Tel / Fax: 506 223 3925
E-mail: ambika_chawla@yahoo.com

EUROPE

Alexandra Wandel
Friends of the Earth Europe (FoEE)
29, rue Blanche
B-1060 Brussels
Belgium
Tel: 32 2 5420185
Fax: 32 2 5375596
E-mail: alexandra.wandel@foeeurope.org
Web Site: www.foeeurope/trade/about.htm

LATIN AMERICA

Alberto Villarreal
REDES - FOE Uruguay
San Jose 1423
11 200 Montevideo
Uruguay
Tel/fax: 598 2 9082730
E-mail: comerc@redes.org.uy

MIDDLE EAST

Hanan Awwad
Friends of the Earth Middle East
PO Box 9341
11191 Amman
Jordan
Tel: 962 6 5866602/3
Fax: 962 6 5866604
E-mail: hanan@foeme.org
Web Site: www.foeme.org

NORTH AMERICA

David Waskow
FOE (United States)
1025 Vermont Ave, NW, 3rd Floor
Washington DC 20003
United States
Tel: 1 202 783 7400
Fax: 1 202 783 0444
E-mail: dwaskow@foe.org
Web Site: www.foe.org