World Trade Organization : DAY 2: Amid global economic problems, WTO reforms urged

4-traders, September 26, 2012

Speakers members of the Director-General’s Panel on Defining the Future of World Trade. Director-General Lamy opened the discussion by asking two questions: Is multilateralism in crisis? And if it is, how is that affecting your work and objectives?

Ms Sharan Burrow, Secretary-General of the International Trade Union Confederation, said that there was no doubt that multilateralism is in crisis, as shown by current economic indicators, including record unemployment and the falling income share of working people. She pointed to growing despair among workers and surveys indicating that two-thirds of the people believe their children will be worse-off in the future. She said capitalism is not working, and that trade and economic institutions must be reformed.

Former President of Botswana Festus Gontebanye Mogae said that while African countries have been experiencing the crisis for a long time, they are not glad that big nations are finally experiencing it. He said that 40 to 60 per cent of African youth remain unemployed. He said big countries are withdrawing from multilateralism and engaging in bilateral trade deals where they can gain more concessions over smaller countries. This is the reason, he said, why African countries prefer the multilateral approach where the rules apply equally for everybody.

Mr Frederico Fleury Curado, President and CEO of Embraer S.A, Brazil, said that multilateralism has been important for Latin America’s recent economic growth. He said the proliferation of regional trade agreements is a threat to private industry and urged a conclusion to the Doha Round, even if it does not cover the entire package. He said businesses need multilateral institutions to ensure a level playing field.

Mr George Yeo, former Foreign Minister of Singapore and Vice Chairman of Kerry Group Limited, said that people do not really want a global government, which can create even bigger problems. He said people also want big powers to lead but not to dominate. He commended the WTO for helping move economic policies in the right direction.

Mr Talal Abu-Ghazaleh, Chairman and founder of Talal Abu-Ghazaleh Overseas Corporation, Jordan, said the WTO rules go back some 50 years ago but the world has changed since then. He called for revisiting the function of the WTO as a negotiating forum, including finding an alternative to decision-making by consensus. More attention should be given to making the WTO a knowledge organization like the World Bank, and to enable direct participation of the private sector. Finally, he urged making accession into the WTO less difficult, noting that half of the Arab world was still outside the organization.

Mr Fujimori Yoshiaki, President and CEO of JS Group Corporation, Tokyo, said that private industry has been working in an environment of protectionism for a long time. Businesses have to adapt to the exchange rate issue, the rise of RTAs, new non-tariff measures, and various national laws and regulations. He said that the WTO must have a mechanism that would allow participation of private industry in its work.

Mr Pradeep Singh Mehta, Secretary-General of CUTS International, India, said that multilateralism has to deal with issues other than trade that cross borders, like climate change, energy issues and security concerns. He said that the Doha Round is at an impasse because of differing levels of ambition, and this is sending very negative signals. Finally, he said that despite all these factors, multilateralism is still the way to go.

The questions from the floor included one that asked if poor countries should wait for multilateral solutions that would be a long time coming, or go for bilateral agreements instead. A member of civil society urged changing WTO rules to promote employment.

Mr Festus Gontebanye Mogae said that bilateral agreements are not the answer, and that multilateral agreements are better, especially for small countries with little bargaining power.

Ms Sharan Burrow urged changing trade rules to allow policy space for governments to help people and sectors in need of help. She emphasized that labour must have a voice in the WTO.

Mr Pradeep Singh Mehta said that the WTO has to take on board the concerns of farmers and workers.

Mr Talal Abu-Ghazaleh said that the WTO should develop a mechanism that would directly involve traders, businesses, workers and consumers in its work.

Mr Fujimori Yoshiaki said that from his experience, companies thrive if they contribute directly to the welfare of communities. Thus, multilateral institutions should always be cognisant of providing benefits on the ground.

Director-General Lamy welcomed the discussions as interesting and useful, noting that there can be no easy solutions. He urged participants to send comments and suggestions to panellists through a special facility on the WTO website.

Session 14: Labour Rights: Value Chains, Labour Rights and Development

The session discussed the various implications of global value chains (GVCs) on labour rights, wages and development. Some panellists shared the view that trade does not have direct implications on labour conditions. Others argued that labour standards should be brought into trade agreements. The panellists shared the view that GVCs are not a novelty, but their expansion has created new trade flows that were not predicted by traditional trade statistics. What is new is that, in terms of development, trade has lifted millions of people out of poverty.

Mr Hubert Escaith, Chief Statistician of the WTO, explained the concept of global value chains and how trade is measured in value added. He highlighted that progress in technology led to global outsourcing. In GVCs, it is difficult to measure “who produced what”. GVCs’ impact on jobs is that high-skilled workers have increased.

Mr Douglas Lippoldt, Senior Economist and Trade Policy Analyst at the OECD, argued that as an impact of the GVCs, the industrial perspective and comparative advantage have changed. Tasks that go into the production of a finished product – for example, services – are increasing, leading to increased specialization. GVC expansion has made things less predictable, demanding policy responses. These responses include open markets, avoiding protectionism and simplifying ways of doing business.

Ms Jenny Holdcroft, Policy Director of IndustriALL Global Union, highlighted that 90% of workers in Export Processing Zones are women. Employment conditions are not optimal and not stable. She emphasized that there should be a transfer of economic upgrading into social upgrading and that the benefits of global trade be passed on to workers. She concluded by stressing the need for integrated industrial policies that encourage freedom of association and collective bargaining to enable workers to be more involved.

Ms Emily Sims, Senior Specialist at the ILO, underscored the importance of helping governments in the enforcement of labour rights protection and legislation. Complaints mechanisms should be put in place and labour standards should be embedded into trade agreements. Businesses need to discuss with each other a culture of rule of law and employees’ protection. She concluded by saying that workers should be treated as a critical component of an effective trade regime.

Mr Anthony Miller, of UNCTAD, presented a study on corporate social responsibility. He argued that countries have the responsibility of legal compliance with human rights and labour practices and standards. The study recommended that hard laws should be implemented and become more regulatory rather than voluntary. There is a need to raise the capacity of governments in issues of labour, human rights and environmental practices. International investment agreements are also a promising area where labour issues should be addressed and incorporated.

Session 15: New Models for Trade and Development in the 21st Century: An Opportunity-Driven Approach to Building African Regional Markets and Increasing Trade and Food Security

This session focused on the challenges facing the African agricultural sector, and the implications for trade in agricultural products. The panel provided a largely economic analysis, which was illuminated by anecdotes and real examples of how such impediments affect different economic actors across the continent.

The panel identified different obstacles to the development of a healthy agricultural industry in Africa. All speakers identified barriers to trade – be they regulatory barriers or impediments created by poor infrastructure – as significantly affecting the growth of the industry.

The panel also highlighted that responses to food crises – such as, for example, export restrictions – may have deleterious effects to which poor farmers in Africa are particularly vulnerable.

The panel questioned the extent to which regional trade agreements are genuinely assisting the development of the industry, concluding that they may not be affecting domestic farmers and entrepreneurs in the manner envisaged by the drafters.

While there was support for liberalization of, and growth in, agricultural trade through the multilateral system, one of the main conclusions of the panel was that empirical research, informed by the experiences of farmers, investors and other private actors, should form the basis of identification and analysis of impediments to the development of the industry. Such empirical research could help remedy what Ms Katrin Kuhlmann, moderator of the session and President of TransFarm Africa, described as the “missing middle”; that is, the lack of local entrepreneurialism and investment required to develop a functioning agricultural sector in Africa.

Session 17: A Menu for Renewed WTO Relevance: Natural Resources and Preferential Trade Agreements

The session revolved around the relationship between the WTO system and preferential trade agreements (PTAs). The panel shared the view that there is a boom in PTAs in the last decades, especially after the rise of emerging economies, such as the Asian countries, particularly India and China, and the BRICS. The main question of the session was how does the WTO system deal with these agreements? Or what is the capacity-building needed by the WTO system to deal with these changes in the economic powers?

The panellists agreed that the WTO has to find or create a new system which can achieve coherence between the old rules of the WTO and the PTAs because up to now the WTO system has not been involved in these agreements.

The session was divided into two parts, the first hour was for the speakers’ interventions and the second was for questions and comments from the audience.

Mr Pablo Heidrich, senior researcher at NSI and the moderator of the panel, started the session by asking what contributions can the WTO provide to PTAs?

Ms Sandra Polonia Rios, Director of Centro de Estudos de Integracào e Desenvolvimento (CINDES), sees that the problem of multilateralism as shown in the Doha Round impasse is just a symptom of other problems. The great recession, the deep changes in the global economy and in the balance of power and the surge in the international prices of resource-intensive commodities during the last decade reveal two important questions: 1) how to guarantee access to essential and scarce resources? and 2) how to better distribute the extra rents resulting from this context? Concerning natural resources and security concerns, WTO rules have been designed to deal with import restrictions and ban quantitative restrictions but do not discipline export duties. All these factors reduce the capacity to define a common agenda for international trade and consequently reduce the role of the WTO.

Professor Debra Steger, Senior Fellow of the Centre for international Governance Innovation (CIGI) and Professor, Faculty of Law, University of Ottawa, stated that it is not clear what the mandate of the WTO is: is it trade or development? This is the main problem facing the conclusion of the Doha Round. This is also the reason why the WTO cannot move to new issues e.g. the financial crisis, climate change, etc. Since 2011, a lot of not only PTAs have been notified to the WTO but also bilateral investment treaties (BITs) and plurilateral agreements, which are discussed outside the WTO. The WTO has to find an institutional way to deal with PTAs in terms of Article XXIV of the GATT. This institutional mechanism could be assumed as follows: 1) As some of the PTAs go further than WTO rules (e.g. competition rules, environmental issues…etc.), a working party or a committee allowing the members to discuss these new issues or PTAs is a must. 2) Article 24 of the GATT recognizes PTAs so the dispute settlement mechanism should have jurisdiction over these PTAs. The WTO and PTAs are part of the broader multilateral system.

Mr Eduardo Bianchi, Co-chair of FLASCO-WTO Chair and former Secretary of Industry of Argentina, said that the increase in prices of natural resources will continue after the emergence of Asian countries and especially China. There has to be a new agenda for the WTO for dealing with the impact of China and India’s emergence. There is a demand for more complex rules at the multilateral level, linking PTAs, regional trade agreements (RTAs) and the WTO system. There should be a WTO+ where new areas are discussed and implemented, such as capital movement, competition rules. etc.

Mr Rolf Traeger, Economic Affairs Officer at UNCTAD, started his presentation by asking about the consequences of the South’s emergence in natural resources, particularly least developed countries (LDCs) and low-income countries? What is the attitude of LDCs vis à vis bilateral relations? In one sense, they are happy. It means a new market for these countries but at the same time, they face a huge challenge because of the asymmetry between the economies of the parties. LDCs will not be developed by an increase in its raw materials prices as there are a lot of other issues on the technological side which also have to be considered. That is why the WTO will maintain a very important role for the development of LDCs.

During the Q&A with the audience, it was asked whether the WTO should intervene or have the capacity to intervene in scientific issues. A representative from the University of Colombia commented that China exploits the lack of rules in the WTO by concluding these agreements

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