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Narrowing Down the Seattle Round Agenda

Arvind Panagariya

From November 30 to December 3, 1999, representatives of the 134 member countries of the World Trade Organization (WTO) will meet in Seattle for the 3rd WTO Ministerial Conference.  Unlike its predecessor, this is not a routine Conference: it will define the agenda for a new round of multilateral trade negotiations and, thus, influence the future course of the global trading system.

Defining the agenda is the first stage of a negotiating game, which every player must take with utmost seriousness. Seasoned players such as the United States carefully choose their opening moves to ascertain that the outcome is the one desired by them.  In the same vein, it is crucial for developing countries to arrive at an agenda that will serve their interests and forcefully push for it at Seattle.

                Under the current circumstances, it is best to limit the Seattle Round agenda to liberalization in industrial products plus the Uruguay Round (UR) built-in agenda.  Since the latter already requires negotiations in agriculture and services, the inclusion of industrial good will bring all sectors into the negotiating net.  In addition, the UR built-in agenda requires reviews of certain aspects of the Dispute Settlement Understanding, and Agreements on Trade-Related Intellectual Property Rights (TRIPs), Trade-Related Investment Measures, Subsidies and Countervailing Measures, and Anti-dumping Measures.

I have offered the arguments in favor of the inclusion of industrial goods into the agenda in a previous column (Economic Times, December 14, 1998) and will not repeat them here.  Therefore, let focus here on why developing countries should limit the Seattle Round agenda in the manner just described.  There are at least three reasons.

First, to my knowledge, none of the developing countries has studied systematically either the desirable contents or the implications of likely multilateral agreements in areas other than traditional trade liberalization.  Multilateral institutions and developed country think tanks have done some work on the inclusion of investment and competition policies but the message of this work is equivocal and, in any case, remains to be carefully studied and scrutinized by developing countries themselves.  It is a mistake to enter into negotiations without some prior idea of the endgame.  Indeed, precisely for this reason, the Antitrust Division of the United States Department of Justice chose to oppose the inclusion of competition policy in the Seattle agenda.

Second, at present, virtually all the major proposals that go beyond trade liberalization and the UR built-in agenda have been put on the table by developed countries.  Not surprisingly, prima facie, they promise to serve the interests of developed countries.  There is little doubt that the proposals for a link between market access and labor and environmental standards, if accepted, will hurt developing countries outright.  In the area of competition policy, developing countries have traditionally asked for a multilateral code.  But the provisions desired by them in this code are not what developed countries have in mind when they seek the inclusion of competition policy into the WTO.  In the area of investment, even if we accept the questionable proposition that a multilateral agreement will benefit developing countries, the distribution of benefits from it will be disproportionately in favor of developed countries.  It is not immediately obvious that in a bargaining context, developing countries should accept such a deal without asking for a parallel agreement on the movement of natural persons which will give them the larger share in benefits. 

The final argument for a minimalist agenda for the Seattle Round is that developing countries lack negotiating capacity for a round with extended agenda.  Even large developing countries have few experts who understand the game of negotiations as well as their developed country counterparts.  An extended agenda spreads thinly whatever experts these countries do have, giving big developed country players such as the United States and European Union considerable extra advantage.  The developing country experts also lack the experience of their developed country counterparts.  The Uruguay Round was the first time the former participated in a negotiation of this kind whereas the latter have been at this game for half a century.

In case developing countries fail to limit the Seattle Round agenda as above, a second line of defense is necessary.  Under such circumstances, they should resist the single undertaking approach of the Uruguay Round that committed members to accept or reject the entire negotiated package.  Instead, they should insist that negotiations be carried out on two separate tracks.  Trade liberalization and the built-in agenda should then be placed on one track and all other issues on a second track.

From the viewpoint of developing countries, the two-track approach has two important advantages.  First, it allows an agreement on the trade-liberalization package without requiring an agreement on other issues simultaneously.  It even leaves the door open to plurilateral agreements among a subset of countries on subjects relegated to the second track.  Second, it makes bargains more transparent by ensuring that concessions are balanced within broad areas without undue pressure for cross-sectoral demands.

                In this latter respect, the single undertaking approach served developing countries poorly in the UR negotiations. It effectively forced them to accept the Agreement on TRIPs in return for the removal of the Multifibre Agreement (MFA).  The removal of the MFA promises to improve global efficiency and benefit developing as well as developed countries.  In contrast, the Agreement on TRIPs is expected to reduce global efficiency and redistribute income from developing to developed countries. Thus, while developed countries benefit from the bargain on both counts, developing countries benefit on one count but lose on the other. The bargain has been uneven.

A final point to note is that even under the two-track approach, developing countries must seek a clear statement at Seattle that labor standards will not be a part of any future WTO negotiation. As already agreed in the Singapore Declaration, this subject should be delegated to the International Labor Organization.

Economic Times, September 22, 1999