EUROPEAN COMMISSION
Directorate-General for Trade

Directorate G - WTO, OECD, commercial questions with respect to agriculture and fisheries; export credit policy, Multilateral commercial policies and WTO and OECD questions

Brussels, 25 January 2000
I.G.1/JC D(2000)

Note for the attention of the 133 Committee
Subject: WTO New Round - Way Forward
Purpose: The attached note sets out a possible post-Seattle strategy for the EC, for discussion by Members.
Origin: DG Trade (J Clarke tel 90164; K Falkenberg 92220)

Note for Discussion at the 133 Committee (Full Members)
WTO New Round - Post Seattle Strategy

This note suggests that the Community pursues an active strategy aimed at maintaining momentum and building support for the launch, as soon as possible, of a comprehensive trade round. First, the note sets out why Seattle did not achieve the outcome we hoped for, and lessons that might be drawn from this. For example, it seems clear that the divergent views of, on the one hand, several developing countries, and on the other our civil society, were underestimated. The note then sets out the way in which we might pursue the launch of a new round and make progress on other parts of the WTO's work programme.

The suggestions below represent only initial thinking on the part of the Commission services. More time, and more discussion with our trading partners will be needed to get a complete picture of the prospects and timing for beginning a new round of negotiations. We need also to consider the views of the European Parliament, the business community and civil society.

There are several related reasons why Seattle did not succeed in launching a Round. One is that the ground was inadequately prepared in Geneva in the run up. Delays over the appointment of a Director General, and over-concentration on the built in agenda to the virtual exclusion of other subjects, meant that not all issues were properly aired. No mechanism for considering the ensemble of topics, or building consensus on a package was developed. Organisation of the work in Geneva was also sub-optimal.

As a result divergences in positions continued up to and through Seattle. This included differences on issues such as implementation, textiles and clothing, anti-dumping, TRIPS, TRIMS market access, the inclusion of labour standards, investment and competition, in agriculture the attempts by some partners to have a text agreed as a precondition to agreeing texts on other subjects, and lack of clarity on how to deal with issues of concern to the broader public, such as the relationship between trade rules and environment and consumer safety policies.

The lack of time available for serious negotiations, difficulties in the management and organisation of the conference, and the exclusion of many developing countries from the discussions, made it difficult to bridge these differences. No real negotiations took place where we could look at a complete package of issues and find consensus. It is difficult to know whether, given more time, agreement could have been reached. Certainly some WTO Members are convinced it could have been.

We were therefore left with a situation in which no agreements were reached on any issues at Seattle, the ministerial meeting was "suspended" (strictly speaking it is of course formally over), and the emerging texts are formally speaking null and void.

A number of lessons should be drawn from Seattle that should influence our approach in the coming months. First, on procedures, WTO needs to work in a more inclusive and transparent way viz-a-viz all Members, and improve communication to the outside world. Work also needs to be organised more efficiently. There may be scope for short term improvements in working methods, particularly in preparing for and managing ministerial conferences, where greater transparency, efficiency, and means to ensure fuller participation by developing countries seem warranted. In the longer term, we may need to examine options for broader improvements to the system. However, we should not draw over hasty conclusions, nor let "institutional reform" detract from the goal of launching a Round. Nor should the WTO system be made the scapegoat for failure to bridge gaps on the substance of negotiations.

The Commission has presented a separate paper setting out options for procedural and institutional improvements to the WTO.

The second – and key – conclusion that we draw from Seattle is on the substance of the discussions. Despite continued differences on several points of the negotiating agenda, it would be wrong to conclude that those differences could not have been bridged given better preparation in Geneva, more time in Seattle, and more flexibility all round. It should therefore be possible to bridge them in the future.

Concerning the EC's agenda, we should recall that a large range of countries – both developed and developing – had joined with the EC in supporting a comprehensive approach, in view of which it cannot credibly be argued, as some have, that over-ambition on the EC's part (or the EC position alone) was the root cause of Seattle failing. Many developing countries had also recognised the benefits in the proposals made by the EC and other "Friends" on implementation, market access and rules, all of which demonstrated genuine willingness on our part to take decisions that, notwithstanding our own domestic difficulties, would have addressed real concerns of developing countries. The least developed countries could also have substantially benefited from the EC's proposal, supported thus far only by Japan, to grant tariff and quota free treatment to essentially all their products.

The EC and other Friends of a comprehensive Round had also, before and at Seattle, indicated openness to consider proposals from others aimed at making issues like investment, competition and environment more readily acceptable. On agriculture, ideas emerged that, with some further work, could have provided a basis for negotiations within an overall package of results.

In the light of the above, the Community should reconfirm its attachment to the broad-based Round that was supported by a large group of countries before and at Seattle, provided it continues to include issues of value to all WTO Members. The fundamental reasons in favour of a broad agenda remain valid. Both developed and developing countries seek improved market access for their products and services, in order to increase economic growth. It was clear at Seattle that only a comprehensive approach, covering all sectors, can enable all Members to exploit their comparative advantage and thus increase their trade.

The WTO also needs to update its rules to respond to the effects of globalisation, so that our traders and investors can enjoy a predictable, transparent and non-discriminatory framework in which to make their economic decisions and to compete. Basic rules on investment and competition are necessarily part of such an agenda and will go some way towards providing this environment. There continues to be solid support from a large group of "Friends" of a new round for the inclusion of these issues in a negotiation, and it is a matter of regret that negotiations on two subjects of such systemic importance and of benefit to companies around the world could not be launched. It is similarly regrettable that it was not possible to begin negotiations on either trade facilitation or on improvements to rules in areas like trade defence or technical barriers to trade, all of which would contribute to more predictable market access conditions and to the freer flow of goods.

Seattle also highlighted acutely the need to better integrate developing countries into the trading system through better market access, improved special and differential treatment, better coordinated capacity building, and a more active role within the WTO mechanisms. A new round will enable the developing countries' trade agenda – including more sensitive issues – to be comprehensively addressed.

And finally our societies remain concerned over the potential influence of the trading system on the environment, sustainable development, and consumer health and safety, and seek answers that both safeguard the trading system and these societal concerns. We recognise however that the EC position on some of these issues has, thus far, gained little support, and that there is still strong suspicion in developing countries regarding the real aims or consequences of the proposals put forward by the Community to meet civil society concerns. This situation will have to be taken into account as we review our position in this area, as in others, over the coming months. Our fundamental objectives remain valid, but we will have to consider the options available to achieve them, in order to ensure that any further clarification of the rules resolves a very complex equation: meeting legitimate societal and ethical concerns while bringing greater legal security to all Members and their companies, preserving the fundamental principles of the WTO, and preventing unjustified discrimination or disguised restrictions on trade.

At the practical level, what should we now do? The Community has, of course, already an agreed approach in the form of the Council Conclusions of 26 October 1999, and the Council in Seattle on 3 December confirmed that the elements of the EC's comprehensive approach, as set out in those conclusions, should continue to be pursued. As the top priority, we should continue actively to make our case for a comprehensive new round and prepare the terrain further for launching negotiations, including, most obviously, with the Friends of a Round such as Japan, with the US, but also with Canada, Australia and other Cairns' members, with India, Pakistan, Malaysia, Egypt, Brazil, South Africa and others, and with our ACP partners. With all our partners we should work to maintain and broaden support for a Round.

As part of this process, we must of course be prepared to adjust our positions, and the presentation of them, in the light of the reactions of other countries, and taking account of the discussions and proposals made at Seattle. We expect other WTO members to review and adjust their positions as well, including the US, whose (so far negative) stance on several issues of critical importance to developing countries will be key in reviving prospects for a round.

An intensive process of consultation, review and alliance building with our partners will also allow us to better prepare the ground for launching negotiations in areas like investment, competition, trade facilitation and environment. In the meantime, continued analytical and educational work in these areas would improve understanding of the issues and help the search for common ground. The basis for further preparatory work would be the work programme to prepare for negotiations begun at the WTO's 1996 Ministerial meeting, and supplemented by the preparatory work launched at the 1998 Ministerial, both of which remain valid (both in the legal and practical senses of the word).

In addition to rebuilding momentum for the successful launch of a new round, we need to make progress in all other aspects of the WTO's work programme through a number of actions in the short and medium term. In particular:

1. The implementation concerns of developing countries must be seriously addressed. Discussions both before and at Seattle show that those concerns cannot be ignored or underestimated. In addition to what might be done in the short term to alleviate problems, we should be willing – as we were at Seattle – to launch a work programme within the WTO to address other outstanding implementation issues. As a general principle, issues that cannot be resolved by the next ministerial meeting should be taken up in negotiations. We should in addition remain open to including, in a new round package, the substantive proposals made by the Friends' group. The Commission is preparing a more detailed paper setting out an approach to implementation to be taken in the WTO.
2. Second, with regard to the built in agenda, the Community should participate in good faith in the scheduled negotiations, which in the absence of any new mandate at Seattle will begin on the basis of Article 20 of the Agreement on Agriculture, and Article XIX of GATS. We note that in the absence of a decision at Seattle to launch a new round as a single undertaking, there remains no timeframe for the conclusion of these negotiations.
3. Third, there remain some other issues that should have been decided in Seattle and which now need addressing. A priority among these is the initiative to grant duty and quota free access to products of least developed countries. Decisions on coherence and capacity building, and the adoption of the results of the DSU review are also needed. We may also need to revisit other issues such as the expiry of certain Articles of the Subsidies Agreement, the non-violation provisions of TRIPS, the continuation of the E-commerce moratorium and work programme, and the expiry of transitional periods in TRIMS and Customs Valuation. On these latter two agreements, the Community should be prepared to act flexibly in cases where developing countries have encountered problems. The way forward on all of these issues hase been set out in the separate 133 note on implementation.
4. Fourth, the Community should put forward proposals on improving the functioning of the WTO, as mentioned above, to ensure more propitious conditions for the launch of negotiations. As noted earlier, these proposals should encompass both short term improvements in working methods and in the longer term some reflection on whether there is a case for more substantial institutional improvements.

In sum, the proposed approach reflects the Community intention to continue to provide leadership within the WTO and to maintain the momentum for further liberalisation and rule making. The further work we envisage will ensure that the future negotiations are put on the most solid basis possible, that the new issues are fully understood, that the problems identified by developing countries are being properly addressed, and that the functioning of the WTO is being improved.

It is currently difficult to estimate how far, and how quickly, these measures will take us to a formal launch of negotiations. But we believe however that it would be premature at this stage to convene a further Ministerial Conference. Instead consultations should be carried out at senior officials' level to review the substance of the negotiating agenda and the rest of the WTO's work programme, the prospects for relaunch and the best timing. The programme of work we envisage and the consultations we will have with our trading partners should enable us, in the next few weeks and months, to get a better idea of what is feasible. We would then envisage an initial review of the situation and our own position at the informal meeting of EU trade ministers in Porto in March.