New Zealand: A New Trade Round Begins At The WTO

In the early hours of the 14th November 2001, Trade Ministers representing all 142 WTO Member countries adopted a Declaration launching a new round of global trade negotiations. The WTO Ministerial Meeting in Doha, Qatar was a marathon effort, but one which has resulted in a mandate for the new trade round that New Zealand businesses and exporters can be pleased with overall. This article by Murray Denyer takes a quick look at what has been decided at Doha, and what this might mean for New Zealand’s trading interests.

The key outcome from the Doha Ministerial was an agreement to commence a comprehensive new round of trade negotiations. This launch was supposed to have happened at the 1999 Ministerial in Seattle. Reaching agreement at Doha means that the WTO will remain the lead forum for further trade negotiations. If the Doha meeting had failed in the way that Seattle did, then countries would be looking increasingly at bilateral and regional negotiations, and the WTO would have been marginalised. Fortunately, as US Trade Representative Robert Zoellick put it – "the stain of Seattle has been removed".

The Ministerial Declaration adopted at Doha is essentially the road map for the new round of trade negotiations among WTO Members. It outlines both the general scope and the timing of negotiations that will now take place. In other words, the Declaration spells out what is on the table for negotiation, and the deadlines for reaching agreement. (The text of the Declaration, WT/Min(01)/DEL/W/1, can be found on the WTO’s website, www.wto.org).

Probably of greatest importance to New Zealand are paragraphs 13 and 14 of the Declaration, which deal specifically with agriculture. In paragraph 13, Ministers commit to comprehensive negotiations aimed at:

• substantial improvements in market access for agriculture;
• reductions of, with a view to phasing out, all forms of export subsidies; and
• substantial reductions in trade-distorting domestic support.

At the Doha meeting, the EU fought very hard to remove the "phasing out" language on export subsidies. New Zealand and other agricultural exporters in the "Cairns Group" of countries fought just as hard to keep elimination of export subsidies in the Declaration as a negotiating objective. As a compromise, the "phasing out" goal has stayed in the text, but the commitments on agriculture now have the qualification "without prejudging the outcome of the negotiations".

Paragraph 13 of the Declaration also contains a reference to so-called "non-trade concerns". The Declaration simply says that these concerns will be noted and taken into account in the negotiations. This, however, will be the language through which WTO Members like the EU and Japan will seek to maintain their existing high levels of agricultural protectionism. The EU’s concept of "multi-functionality" will undoubtedly rear its head here. The EU argues that the negotiations must take into account the "multifunctional" nature of agriculture in the EU – namely that agriculture also serves the purposes of preserving the rural environment, rural lifestyles, and so on. The EU can be expected to resort to these arguments in order to defend its existing high levels of agricultural subsidies and other forms of trade protectionism in agriculture. This will be one of the most problematic issues for New Zealand in the new round.

Most importantly for New Zealand, paragraph 14 of the Declaration makes it clear that negotiations on agriculture are to be concluded as part and parcel of the entire negotiating agenda of this round (i.e. as part of the "single undertaking"). Paragraph 14 also provides that the modalities (the "when", "what" and "how") for further commitments on agriculture are to be established no later than 31 March 2003.

The result on agriculture in the Doha Declaration is a very good one for New Zealand. It means that agriculture has not been sidelined from the wider negotiations. WTO Members are now bound to negotiate and agree meaningful commitments on agriculture as part of the negotiations as a whole. Agreement on the "single undertaking" will not be possible without agreement on further liberalisation in agriculture. For the first time, the phasing out of export subsidiaries is on the table as an agreed negotiating goal. It remains to be seen, however, just how "substantial" the agreed improvements in market access and reductions in domestic support will actually be. The only agreement so far is that there is a lot of hard work to be done between now and March 2003!

Like agriculture, a mandate to commence a new round of negotiations in the area of services was already built into the WTO General Agreement on Trade in Services (GATS) back in 1995 (the so-called "built-in agenda"). Accordingly, those negotiations got a head start, and have been under way since January 2000. The Ministerial Declaration from Doha recognises the work already undertaken to date under the earlier mandate, and sets time lines for initial requests from WTO Members for specific commitments on services (by 30 June 2002), and initial offers (by 31 March 2003).

Services will be an important area of the negotiations for New Zealand. As a result of further reforms in the second half of the 1990s, the services market in New Zealand is already a good deal more liberalised than the level of commitments we made at the conclusion of the Uruguay Round, and which are embodied in our GATS Schedule. We therefore have some negotiating room – we can offer to make binding commitments in many areas that will be relatively painless, since in many cases the new commitments will simply lock in existing levels of liberalisation and access in our domestic market. In exchange, New Zealand service industries should expect to secure gains in overseas markets.

In the Declaration, Ministers have agreed to negotiations for the reduction of tariff and non-tariff barriers on industrial products. The mandate is a comprehensive one with no sectors or products excluded. Under pressure from developing and least developed country participants, specific wording was added at Doha which clarifies that those countries’ needs and interests must be taken into account, including through less than full reciprocity in reduction commitments. The language on tariff reduction for non-agricultural products is more specific than for agriculture (it refers to the reduction or elimination of tariff peaks, high tariffs and tariff escalation). It is perhaps unfortunate that this more specific mandate was not possible for agricultural tariffs.

Ministers adopted a separate Declaration on TRIPs and public health, which addresses developing country concerns about access to medicines to combat epidemics like HIV/AIDS, malaria and tuberculosis. This TRIPS Declaration clarifies that the TRIPS Agreement can and should be interpreted and implemented in a way that supports countries’ rights to protect public health and to promote access to medicines for all. The Declaration also gives least-developed WTO Member countries longer to implement some of the TRIPS Agreement obligations that could otherwise hinder their access to medicines. While recognising the importance of intellectual property rights in the development of new medicines, this separate Declaration gives developing and least-developed countries some additional flexibility in order to combat epidemic diseases.

In the main Declaration, Ministers also agreed to negotiate a multilateral system for notification and registration of geographical indications for wines and spirits. This is an issue that has been driven in particular by the EU who wish to codify protection for geographical indications such as Champagne, Port, Chianti, and so on. New Zealand has in the past resisted such efforts as they are largely driven by the EU’s "old world" wine producers, who are seeking to close out competition from "new world" producers like New Zealand, Chile, the US and Australia. However, the growing international recognition of regions like Marlborough and the Hawkes Bay could benefit from the additional protection that such a global agreement might provide.

The WTO TRIPS Council (a standing WTO body) has been mandated to examine the possible application of geographical indication protection to products other than wine and spirits. (Again, the EU has an interest in exclusive name protection for products such as "European" cheese varieties – gouda, edam, feta, etc.) The TRIPS Council will also examine the relationship between the TRIPS agreement and the Convention on Biological Diversity as well as the protection of traditional knowledge and folk law. While all of these issues have rated a mention in the Ministerial Declaration, they have effectively been "parked" in the TRIPS Council. More analytical work will now be done on these issues, but they are unlikely to form part of the overall package which is agreed at the end of this new round, since there is no agreed mandate to commence negotiations on these issues.

The EU has pushed hard for some time to have four "new issues" included in the new trade round. These are:

• rules on the relationship between trade and investment;
• rules on the relationship between trade and competition;
• rules on transparency in government procurement; and
• clarification on the existing rules on trade facilitation (in particular rules for goods in transit, customs procedures, and other importation formalities).

The EU faced strong opposition at the Doha Ministerial from the developing countries, who did not want to commence negotiations on these issues before the results of the previous round are fully implemented. (A separate Decision on implementation-related issues was also adopted – see below).

The compromise that emerged on the "new issues" was that in each case, further analytical work will be commenced, and the Fifth Ministerial Conference (which will take place no later than two years from now) will then decide whether or not to commence negotiations proper on these issues.

This outcome effectively defers the decision on whether or not the "new issues" will form part of the final outcome of the new round until the Fifth Ministerial.

In the Ministerial Declaration, Ministers have agreed to commence negotiations aimed at clarifying and improving the existing WTO rules that deal with antidumping and countervailing duties. This was the result of a major concession by the US, which has been widely criticised (in particular by developing countries) over the use of the existing rules by its domestic industries to keep cheaper imported products out of the US market. Developing countries (who are most often the target of anti-dumping measures) will be looking to tighten up the circumstances under which WTO Members can legitimately take anti-dumping action.

Fisheries subsidies have also been singled out for special attention. New Zealand has been among a vanguard of countries that have been pushing to eliminate fisheries subsidies. It is widely agreed that these subsidies not only distort the international market prices for fish and fish products, but that they also encourage unsustainable fishing practices (over-fishing). Removal of such subsidies is therefore a "win win" outcome: fairer competition in international markets, and less degradation of fish stocks. The New Zealand fishing industry in particular stands to benefit from any newly agreed commitments to reduce and eliminate fisheries subsidies.

New Zealand has been actively involved in the negotiations to date on improvements and clarifications of the WTO Dispute Settlement Understanding. The DSU is part of the WTO Agreement and sets out the detailed rules and procedures for the bringing of disputes between WTO Members about alleged breaches of the WTO rules. The provisions of the DSU that deal with implementation and enforcement of rulings that are made by WTO dispute settlement panels and the Appellate Body are less than clear. The overall timing of the dispute settlement process could also benefit from tightening up. At Doha, Ministers agreed to further negotiations based on the work done so far, with the aim of agreeing improvements and clarifications no later than May 2003. Any agreed results will then enter into force as soon as possible thereafter. In other words, any agreement to amend the DSU will be fast-tracked into effect, possibly well ahead of the other outcomes.

The draft Declaration that was circulated prior to the Doha meeting proposed little in the way of concrete action on trade and the environment during the upcoming negotiating round. All that changed at Doha. Trade and environment was the most controversial and difficult area to resolve. There was enormous pressure from the EU to put more environmental issues on the agenda. The Ministerial Declaration that was finally agreed commits to negotiations ("without prejudging the outcome") on:

• the relationship between the existing WTO rules and the trade obligations set out in the various multilateral environment agreements (MEAs);
• procedures for regular information exchange between MEA Secretariats and the WTO standing committees; and
• the reduction or elimination of tariff and non-tariff barriers to "environmental goods and services".

There will also be further analytical work in the WTO Committee on Trade and Environment (but no negotiations proper) on:

• the effect of environmental measures on market access (in particular for developing countries);
• the relevant provisions of the TRIPS Agreement; and
• labelling requirements for environmental purposes.

The agreement to commence negotiations on the first group of issues is a new development, and one that New Zealand will need to watch carefully. While it is good to see the WTO being forced to focus on environmental issues that are relevant to international trade, the risk here is that environmental objectives will simply be a disguise for trade protectionism by the EU in particular. The scope of these negotiations has, however, been carefully limited:

• negotiations on the WTO/MEA relationship is limited to negotiation only on the applicability of the WTO rules as between the parties to the MEA in question;
• the negotiations are not to prejudice the WTO rights of any WTO member that is not a party to the MEA in question; and
• the negotiations must be compatible with the open and non-discriminatory nature of the multilateral trading system, and are not to add to or diminish the rights and obligations of Members under the existing WTO agreements, and in particular under the Agreement on the Application of Sanitary and Phytosanitory measures (the SPS Agreement).

Trade and environment is likely to be one of the most difficult areas of negotiations in the new round.

Developing countries have a wide range of concerns relating to the implementation of the existing WTO agreements. These include their ability to reap the full benefit of the existing rules, as well as their ability to full implement their existing obligations.

The Ministerial Decision clarifies (and broadens the interpretation of) a number of exceptions and other provisions in the existing WTO agreements that were originally inserted for the benefit of developing countries. The Decision also tasks some of the standing WTO Committees with undertaking further analytical work on certain existing WTO rules that affect developing countries. The Decisions also urges developed WTO Members to exercise due restraint in enforcing certain rules against developing countries, and to provide technical assistance to developing countries in their implementation of the agreements.

Fortunately, efforts by developing countries at Doha to open up the text of some of the existing WTO agreements (the SPS, TBT and Anti-Dumping Agreements in particular) were successfully resisted.

The main Ministerial Declaration provides that all negotiations pursued under it shall be concluded not later than 1 January 2005. Given what has to be achieved in the interim, that is probably an ambitious deadline. The Fifth Ministerial Session, which will take place towards the end of 2003, will be a stock-taking exercise and will provide any necessary political guidance to the negotiators. As noted above, it will also take decisions on whether to commence negotiations on the "new issues". Once the negotiations have been concluded, a Special Session of the Ministerial Conference will be held to adopt and implement the results.

The WTO’s principle political body, the General Council, has established a Trade Negotiations Committee which will supervise the overall conduct of the negotiation process. The first meeting of the Trade Negotiations Committee will take place prior to 31 January 2002.

The January meeting of the Trade Negotiations Committee is likely to be largely an organisational affair. The real work will start to take place in the various working groups that are set up by the Committee. It will be some time later before we start to see any real results emerging.

In the meantime, it will be important for New Zealand industry and other interest groups to continue to make their positions known to the Government. These groups can and do have an impact on the shape of New Zealand’s trade policy position. In turn, we are fortunate that as a nation that depends heavily on rules-based international trade, we continue to have an impact on the negotiations that is disproportionate to our small size.