Negotiating History of the Uruguay Round

Transcription

1 Negotiating History of the Uruguay Round The Uruguay Round (UR) of trade negotiations conducted under the auspices of the General Agreement on Tariffs and Trade (GATT) was the most comprehensive and ambitious among the multilateral trade negotiations (MTN). The Uruguay Round (named after the country where the trade negotiation was launched) initiated during the mid 1980s substantially increased the involvement of developing countries in the liberal trading system. It also resulted in the formation of the World Trade Organisation (WTO) which replaced the GATT to bring the multilateral trade under a rule-based system. The negotiating process of the UR was not a smooth affair because the agenda did not confine to the traditional areas of global trade negotiations but spread into several new areas hitherto untouched by the GATT. Furthermore introduction of trade related themes in the agenda especially those concerning intellectual property rights, investment, i.e. new issues created sharp differences among the contracting parties. This briefing paper provides a sketch of the negotiating history of the UR.. The purpose of this paper is to revisit the intricacies involved in the UR negotiating process and also to highlight the loopholes of the major agreements at a point of time when the industrial countries are once again preparing for a new round of negotiations under the WTO. Why and how the Uruguay Round was launched? The Uruguay Round of Multilateral Trade Negotiations of the General Agreement on Tariffs and Trade (GATT) launched in 1986 can be termed as the most ambitious post second world war attempt to bring down trade barriers among nations. The effort to launch a new round of Multilateral Trade Negotiations began immediately after the Kennedy Round of The stated reasons behind the move to launch a new round were: recession in the world economy and the growing fear of protectionism at large; the inability of the existing trade instruments to cover growing areas of trade such as services, intellectual property rights such as patents and trade marks; the dissatisfaction of the United States (U.S.) with the prevailing trade agreements; the growing balance of payment deficit of the US against the developing countries in trade in goods, which forced the US Congress to press for many protectionist measures. The United States was the main driving force behind all the previous GATT Rounds and this was true for the Uruguay Round too. The efforts towards launching the Uruguay Round took a definite turn during the GATT ministerial conference held in Dispute over the agenda The preparations for a new round and also drafting of the agenda took a tumultuous four years. First of all, the proposals for a new round did not receive much support from a vast majority of developing countries. Secondly, there was no agreement regarding the agenda for negotiations among the member countries known as Contracting Parties in the trade jargon. The disagreement over the agenda emerged not only between the developed and developing countries but also between the developed country groups led by the U.S. and the European Community (EC). BRIEFING PAPER CUTS CENTRE FOR INTERNATIONAL TRADE, ECONOMICS & ENVIRONMENT N o.9/1999

2 The final text that emerged at the end of the Ministerial Meeting in 1982 was not a consensus document. The developing countries led by India and Brazil strongly opposed the inclusion of services mainly pushed by the US and its allies in the negotiating agenda. The other contentious issues in the agenda pushed by the developed countries were the Trade Related Aspects of Intellectual Property Rights (TRIPs) and Trade Related Aspects of Investment Measures (TRIMs). The major demands of developing countries were to integrate the then existing trade rules governing textiles and clothing (multi fibre arrangement) and trade in agriculture with the evolving GATT disciplines, put in place special and differential treatment in different Agreements and evolve a broad understanding about common but differentiated responsibilities. The sharp disagreements over the negotiating agenda led to the major stakeholders to carry forward the matter to their regional groupings and other plurilateral fora in order to gather support for their respective positions on the agenda, for nearly four years since Ministerial Declaration of 1986 The GATT Ministerial Meeting of September 1986 began with three texts competing against each other and representing three different entities. The three texts expounded the views of the Group of Ten (GT) of developing countries and Group of Forty (GF), a formation of developing and developed countries and Argentina. The GT text faced some major opposition from the U.S., which was demanding inclusion of new issues viz. services, TRIPs and TRIMs into the negotiating agenda (also GF position). Finally, a growing consensus was reached around the US position once the US threatened to pull itself out of the negotiations. The Ministerial Declaration of 1986 contained two sections, one launched by the Ministers and included services as a non-gatt subject of negotiations and second one launched by the Contracting Parties to the GATT meeting at the Ministerial which included the rest of the negotiating agenda. There were 15 negotiating mandates in the Ministerial Declaration; six related to market access, four to the reforms of the GATT rules, three pertaining to the new issues such as TRIPs, TRIMs and Services and two related to the functioning of the GATT as an institution. Course of negotiations The course of negotiations of the Uruguay Round had certain special features, which requires a reference 2 here. As per the original plan the negotiations were to take place in Geneva with a mid-term review meeting in Montreal in December 1988 and the round to be concluded in December The negotiations between December 1990 and December 1993 were not part of the initial plan of activities. Mid-term review meeting of 1988 Right from the beginning, the negotiations moved at a very slow pace due to sharp difference of opinion among Contracting Parties on several issues. At the time of mid-term review meeting in December 1988 only six of the 15 negotiating groups had a clear text for approval by the ministers. The meeting ended inconclusively with agreement in a few areas such as tropical products, interim reform of GATT dispute settlement procedures, commitment to reduce tariffs on an average by a third, and the provisional introduction of a new trade policy review mechanism. However, agriculture, textiles and clothing, TRIPs, and safeguards remained as disputed subjects for an early agreement and these subjects were left to the Director General of GATT who was then going to pursue the matter with the Contracting Parties and report back to the Trade Negotiating Committee (TNC). That is how Arthur Dunkel, who played a major role in reaching an agreement in several subjects especially agriculture came to the centre -stage of Uruguay Round negotiations. Brussels meeting of 1990 The Trade Negotiating Committee did present a 320- page but an incomplete draft of the Final Act at the Brussels ministerial meeting. Although progress was made at this meeting with respect to TRIMs, TRIPs and Services, the disagreement between the U.S. and EC over agriculture made it impossible to conclude the round as per the initial plan. Arthur Dunkel was once again authorised by the Ministerial meeting to pursue the matter again and reconvene the TNC at his discretion. Geneva Meeting of 1993 The final two years of the negotiations was characterised by a deadlock between major players especially the EC and the US on agriculture. The developing countries at the same time had major differences with the nature of ongoing negotiations in the area of services. The hectic parleys between the EC and the US and also their allies at different fora, including the G-7 meetings, APEC, Cairns Group contributed to iron out differences substantially. The efforts of the then Director General of GATT, Peter Sutherland also facilitated to reach an agreement on

3 the Final Draft. The Ministerial Meeting held in Geneva examined the draft and a broad consensus was reached on the Final Draft and this concluded the negotiation process. Marrakesh Agreement of 1994 The UR formally concluded with the signing of the Final Act on April 15, 1994, at Marrakesh, which embodies all multilateral and plurilateral agreements of the round (the agreement came into force on 1 January 1995). The Final Act also included the decision to establish a formal organisation called WTO to provide the common institutional framework for the conduct of trade relations among its members in matters related to the agreements and associated legal instruments included in the Annexes to this Agreement. Developing countries and the Uruguay Round Until the Tokyo round, participation of developing countries in the GATT Rounds in general had been relatively low and they had no significant say in influencing the outcomes of the rounds. Some of large developing countries such as Brazil, Chile, India, Pakistan, and Syria, had been participating in the negotiations right from the first round. Developing countries who participated in the initial rounds mainly focussed on acquiring special and differential treatment that would address their development dimensions. They did not have much to offer in reducing tariffs as many developing countries followed inward oriented trade policies. The UR witnessed large participation of developing countries not only in trade negotiations but also in offering tariff concessions. Between the launching of the UR in 1986 till its conclusion in Marrakesh in 1994, more than 60 developing countries reported unilateral liberalisation measures to GATT, 24 acceded to GATT and 24 others were in the process of doing so. The Uruguay Round negotiations coincided with the decision of a Box 1: Special Features of the Uruguay Round The Uruguay Round was the longest of the eight rounds of Multilateral Trade Negotiations ever held under the auspices of GATT. It was launched with the GATT Ministerial Conference at Punta del Este, Uruguay in September 1986 and continued until its formal conclusion in April 1994 at Marrakesh, Morocco with the signing of the Final Act. The Uruguay Round saw for the first time the large participation of developing countries in the multilateral trade negotiations. The membership of GATT numbered 23 in 1947 and it increased to nearly 100 at the beginning of the Uruguay Round in The developing countries mainly under the banner of the group of ten could take a common position on many issues of their common concern until the mid-term review meeting of Afterwards the unity of developing countries slowly disappeared and they had to go back from their initial position on most of the issues including the introduction and possible agreements on new issues on the GATT platform. The Uruguay Round negotiating agenda was the most ambitious of all the multilateral trade rounds held under the GATT framework. Besides including traditional GATT concerns of reducing tariff barriers on the cross border movement of goods; it also extended the GATT disciplines which did not so far fall in the categories of trade in manufactured goods viz. trade in agriculture and textiles & clothing. Another unique feature of the UR was the introduction of traderelated issues for the first time in the 48-year history of the GATT in the negotiating agenda. The Uruguay Round agenda extended the scope of the multilateral trade rules and disciplines beyond trade in goods to include services, intellectual property and investment measures. Finally, the UR negotiations culminated with a decision to form a formal organisation called WTO, which has a larger mandate than the GATT to regulate the global trading system. The importance of this lies to the fact that the efforts to form an International Trade Organisation (ITO) had not succeeded in number of developing countries to restructure the trade and economic policies away from import substitution and export oriented growth. The Uruguay Round Agreements The three major legal agreements arrived at Uruguay Round were (a) GATT 1994 and its associate agreements, which are mainly applicable to trade in goods; (b) GATS, (c) TRIPs. The multilateral legal instruments resulting from the Uruguay Round are treated as single undertaking. WTO is responsible for facilitating the implementation, administration and further the objectives of the Agreement. All the WTO member countries are required to harmonise or develop national legislations and regulations to implement these respective Agreements at the national level. 3

4 GATS and TRIMs are two amongst the other important agreements that have been packaged with GATT (1994). Furthermore, the Agreement on Agriculture (AoA) and Agreement on Textiles and Clothing (ATC) have the capacity to influence the market access potential of two major product groups of interest to developing countries. The dispute settlement system framed as per the Agreement on Dispute Settlement Understanding is to shoulder the responsibility of settling disputes arising out of trade policy decisions of the member countries. The following section provides a brief analysis of some of the UR agreements. Agriculture For many countries especially the low cost agricultural exporters and also net food importing countries agriculture was the crucial element of UR negotiations. The UR agenda for agriculture was aimed at bringing all measures affecting market access and export competition under more effective GATT rules and disciplines. The Agreement on Agriculture (AoA) was the result of a compromise between the US, EC, Japan and Korea and the developing countries had only a little role in it. Interestingly, much of the background work on the negotiation was done on the OECD platform. In spite of the AoA, agriculture still remains to be the most protected sector and is mortgaged to domestic political agendae in many countries. Loopholes in the Agreement allow countries to replace quantitative restrictions with tariff peaks and continue with their subsidy programmes by packaging it in a GATT compatible manner. Importantly, countries are now resorting to frequent use of non-tariff measures like sanitary and phytosanitary measures to protect their markets from competing agricultural imports. The review of the AoA is due in 2000 and developing countries expect atleast some breakthrough in the area of export subsidies, given that US appears to be ready to support their case this time. Textiles and Clothing This was an area where the developing countries had showed considerable interest during the negotiations. The Agreement on Textiles and Clothing (ATC) which envisages the three-stage phase out of the quota based Multi Fibre Arrangement was a important achievement for developing countries. The ATC aims to integrate the quota-based textile trade with the emerging liberalised textile trading system under the WTO. However, the agreement has a number of drawbacks, which adversely affects the developing country exports. For example the process of integration as envisaged in the agreement is not taking place true to the letter and spirit of the ATC. Important MFA-importers are backloading their commitments and this is slackening the pace of the integration process. More so various other instruments like, rules of origin, technical barriers etc. are being erected to ensure that domestic industries in the major importing countries are insulated from the impacts of trade liberalisation. Furthermore, some of the major importing countries are also using loopholes in Agreement on Subsidies and Countervailing Measures pertaining to regional development initiatives et al to continue subsidising their producers under the garb of financing structural adjustment. Traded Related Aspects of Intellectual Property Rights Negotiations on the TRIPs Agreement were an important highlight of the Uruguay Round negotiations. Many developing countries did not participate in the negotiating process initially, thinking that a subject like intellectual property having a remote relationship with trade would not make into the final GATT package. But as one started approaching 1993, they were left with no choice but to participate as US threatened to boycott the Uruguay Round negotiations if IPRs were not included into the final GATT package. Many of the trade theorists have also been against this Agreement as it confers limited monopoly rights to the intellectual property holders, which goes against the basic premise of multilateral trade liberalisation. TRIPs covers seven forms of intellectual property: copyrights, trademarks, industrial designs, patents, trade secrets, geographical indications and integrated circuits. Out of these seven, patents remains to be the most controversial. Developing countries with vast pool of natural resources and traditional knowledge are worried that this Agreement would limit their ability to protect the interest of concerned communities and other players given the complex and costly litigation process. The Agreement on TRIPs is basically unbalanced as it primarily focuses on the protection of the rights of the owners of the IPR without paying much attention to the interests of the consumers. More so developing countries find that they have very little time to put 4

5 the needed institutions in place to help their countries benefit from this Agreement. Trade Related Investment Measures The TRIMs proposal mainly put forward by the US had specific goals of reducing or eliminating tradedistorting barriers to the entry of Foreign Direct Investment (FDI). The developing countries at the same time wanted to have the freedom to devise and apply investment measures that would oblige the foreign investors to observe the host countries national and developmental priorities. The agreement on TRIMs identifies five investment measures, which are deemed to be inconsistent with GATT provisions. They are: local content requirements, import balancing, import limitation, foreign exchange limits and exports limitation. After the multilateral agreement on investment (MAI) being negotiated on the OECD platform went into coma, WTO has once again been identified as the forum to launch negotiations on investment by the EC. EC is very keen that the Working Group on Investment set up during the Singapore Ministerial Meet should make a recommendation in this regard. General Agreement on Trade in Services Trade in Services was an altogether new area brought into the GATT agenda by the industrialised countries in The introduction of services became controversial even before the UR was launched. During the Round the developing countries found that it would no longer possible to prevent the advent of services in the Uruguay Round what they could do was to try to safeguard their interests. The Agreement evolved known as the GATS provides a multilateral framework of principles and rules which could govern the trade in services under conditions of transparency and progressive liberalisation. The developing countries did succeed in bringing the movement of natural persons (MNP) as one of the four modes of providing service, into the GATS framework. This is an area in which the developing countries are assumed to enjoy some comparative advantage. However, the proper implementation of the MNP mode of services has still remained a promise made in the agreement. The developing countries have kept on demanding substantial liberalisation in this sector by asking the developed countries to do away with the various barriers like the economic needs test (ENT). Presently, industrial countries, especially the US has been proposing to enlarge the scope of the service sector liberalisation, by introducing the sectors such as education and health, audio visual, construction, tourism, etc in the negotiating agenda for the proposed new round. More so they have been in favour of comprehensive liberalisation of the service sector, a demand that has till date fetched the support of the EC. The developing countries at the same time are demanding a sectoral approach in terms of negotiating modalities. Conclusions There seem to be no two thoughts that the outcomes of the UR have been unbalanced against developing countries in several respects. More so, developing countries are thought to have given up much more than what they have gained in UR. For example, the UR agreements have done little to improve market access for developing country exports of goods and services. The best examples are the Agreement on Textiles and Clothing (ATC), Agreement on Agriculture (AoA) and General Agreement on Trade in Services (GATS). In these examples the developed countries failed to implement Special and Differential treatment and favourable market access rules for the developing countries. Furthermore Agreements contain a language that makes it discretionary for developed countries to address the development problems of the poor countries. Most of the clauses or articles addressing development dimensions are in the form of best endeavour clauses. It is in this context that developing countries insist on assessing the implementation of UR agreements before getting down to a new round of negotiations loaded with new issues. The carrot being put forward by the proponents of the new round is that implementation concerns would be dealt with seriously, but as a part of larger package that includes government procurement, competition policy, biotechnology, and electronic commerce. More so developing countries might also be asked to swallow the bitter pill of labour standards becoming a mainstream issue at the WTO to get what they want in the area of implementation. Now as the developing countries are getting ready for the new round of negotiations it is important that they capitalise on the knowledge they have gained in the last five years, especially in the area of negotiations. As a first step in this direction it is strategic for them to revisit the errors they committed during the Uruguay Round negotiations. 5

6 Recommendations The negotiating history of the UR and the drawbacks in the Agreements must be taken as a lesson by the developing countries while preparing for further multilateral negotiations under the WTO. The developing countries need to invest in strengthening capacities as they prepare to face new commitments under new Agreements on the WTO platform. Developing countries should realise that during the forthcoming negotiations they have many allies from the developed world Governments from developing countries need to understand the importance of civil society in their territory in helping them to keep labour standards and environment out of the mainstream discussions at the WTO CUTS, These Briefing Papers are produced by CUTS under a grant from the Friedrich Ebert Stiftung to inform, educate and provoke debate on issues of trade and sustainable development, and economic equity. Readers are encouraged to quote or reproduce material from this paper for their own use, but as copyright holder, CUTS requests due acknowledgement and a copy of the publication. This Briefing Paper is researched and written by K.S. Sajeev and Raghav Narsalay of and for the CUTS Centre for International Trade, Economics & Environment, D-218, Bhaskar Marg, Bani Park, Jaipur , India. Ph: / , Fx: , cutsjpr@jp1.dot.net.in, cuts.jpr@cuts-india.org, Website: and printed by Jaipur Printers (P) Ltd., M I Road, Jaipur The Freezing Effect - Lack of Coherence in the New World Trade Order Sustained Advertising Promoting Unsustainable Consumption Competition Policy In A Globalising And Liberalising World Economy Globalising Liberalisation Without Regulations! - Or, how to regulate foreign investment and TNCs (Revised, May 1997) The Circle of Poison - Unholy Trade in Domestically Prohibited Goods (Revised, January 1998) DPGs, Toxic Waste and Dirty Industries - Partners in Flight (Revised, January 1998) WTO: Beyond Singapore - The Need for Equity and Coherence 1997 The Uruguay Round, and Going Beyond Singapore Non-Tariff Barriers or Disguised Protectionism Anti-Dumping Under the GATT - The Need For Vigilance By Exporters Subsidies & Countervailing Measures Textiles & Clothing - Who Gains, Who Loses and Why? Trade in Agriculture Quest For Equality Trade in Services-Cul de Sac or the Road Ahead! TRIPs and Pharmaceuticals: Implications for India SELECTED BRIEFING PAPERS Movement of Natural Persons Under GATS: Problems and Prospects Regulatory Reforms in India TRIPs, Biotechnology and Global Competition Tariff Escalation A Tax on Sustainability Trade Liberalisation, Market Access and Non-tariff Barriers Trade, Labour, Global Competition and the Social Clause Trade Liberalisation and Food Security 1999 The Linkages: Will It Escalate? Trade and Environment An Agenda for Developing Countries Dispute Settlement at WTO From Politics to Legality? TRIPs and Biodiversity Eradicating Child Labour While Saving the Child Who Will Pay the Costs? Overdue Reforms in European Agriculture Implications for Southern Consumers Liberalisation and Poverty: Is there a virtuous circle for India? The Non-trade Concerns in the WTO Agreement on Agriculture Our Briefing Papers inform the layperson and raise issues for further debate. These have been written by several persons, with comments from others. Re-publication, circulation etc are encouraged for wider education. They are available for free, but contributions towards postage (Rs.50/$5) are welcome. Other publications are also available; please ask for a list.