DOHA ROUND BRIEFING SERIES Developments Since the Fourth WTO

The International Centre for and Sustainable Development (ICTSD) and the International Institute for Sustainable Development (IISD)

Vol. 1 No. 6 of 13 February 2003

Doha Mandates The Singapore Issues: Investment, Competition Policy,Transparency in The Doha Ministerial and Declaration provides identical mandates for investment, Background Relationship between competition policy, transparency in government The 1996 Singapore Ministerial Declara- Trade and Investment tion mandated the establishment of Paragraph 22 instructs the Working procurement and trade working groups to analyse issues related facilitation: negotiations will Group on the Relationship Between to investment, competition policy and Trade and Investment to focus on the “take place after the fifth transparency in government procure- clarification of seven issues: Session of the Ministerial ment. It also directed the Council for Conference on the basis of a Trade in Goods to “undertake exploratory • scope and definition; and analytical work […] on the • transparency; decision to be taken, by simplification of trade procedures in explicit consensus, at that order to assess the scope for WTO rules in • non-discrimination; Session on modalities of this area.” Most developing countries • modalities for pre-establishment negotiations.” were unconvinced of the necessity or commitments based on a GATS-type, (Paragraphs 20, 23, 26 and 27 value of negotiating multilateral rules on positive list approach; these issues, which they see as being of of the Doha Ministerial • development provisions; Declaration) primary interest to developed economies. • exceptions and balance-of-payments In return for agreeing to a stronger safeguards; and mandate for post-Doha agricultural Each of the mandates also negotiations, the EU and other main • consultation and the settlement of refers to the “need for demandeurs managed to secure a disputes between Members. enhanced technical assistance conditional negotiating track for the Some Members have argued that this and capacity building in this ‘Singapore issues’. However, stiff list is not exhaustive and should, for area” and commits opposition from mainly developing instance, include performance require- countries made any future negotiations ments. The paragraph also requires that governments to providing subject to a decision to be taken at the such support. In the case of the “special development, trade and next WTO Ministerial Conference, by financial needs of developing and least- investment and competition explicit consensus, on their scope and developed countries should be taken policy, the Declaration adds timeframes. into account as an integral part of any that such assistance for An agreement on modalities before framework, which should enable developing and least- Cancun seems increasingly unlikely given members to undertake obligations and developed countries should the lack of meaningful progress in commitments commensurate with their individual needs and circumstances.” include “policy analysis and ongoing negotiations of interest to developing countries such as special and development so that they differential treatment (S&D) and Current State of Play may better evaluate the agriculture. While a perception of the The major controversies have revolved implications of closer Singapore issues as being ‘bundled around a number of key issues, such as multilateral co-operation for together’ persists, trade sources point to definitions of ‘investment’ and ‘investor’ their development policies the possibility of agreement on ‘modalities and implications thereof; transparency; of negotiations’ along different lines. and objectives, and human technical assistance; development provisions in a possible WTO investment and institutional Mandated Deadline framework and on a GATS-type positive development” list approach on modalities for pre- (Paragraphs 21 and 24 of the Fifth WTO Ministerial Conference (10-14 establishment commitments. Doha Ministerial Declaration) September in Cancun, Mexico), modalities for all Singapore issues, Technical assistance and capacity- including when — and whether — to building: The Working Group has re- launch negotiations, are to be decided by affirmed the importance of technical explicit consensus. The assistance and capacity-building in provides no guidance on how to proceed enhancing developing countries’ under- if consensus cannot be found. standing of the implications of a possible WTO investment framework, so that they

INTERNATIONAL CENTRE FOR TRADE AND SUSTAINABLE DEVELOPMENT DOHA ROUND BRIEFING SERIES

can be in a position to make informed WGTI/W/133) have agreed with India’s affiliates or partners, but also upon the decisions when the matter comes up in assertions. On the strength of certain ability of economies to absorb the Cancun Ministerial. Developing studies showing that foreign investment technology as a result of various types of countries have proposed that the can reduce host country welfare, knowledge ‘spillover effects’. technical assistance and capacity building- developing countries have advocated for programme should extend beyond the introduction of exceptions to take General and Balance-of-payments technical and training issues and their needs into account. Suggestions safeguards: Members broadly share the encompass human and institutional have been made to the effect that a view that the kind of general and security capacity-building in developing countries, GATS-type positive list approach to exceptions usually found in WTO and address policy analysis and undertaking commitments is more Agreements would also apply in any development. flexible and development-friendly than a future investment framework (Canada, negative list approach of scheduling WT/WGTI/W/146; Korea, WT/WGTI/W/ Scope and definition of ‘investment’ and specific exceptions to general obligations 143; and Japan, WT/WGTI/W/146). The ‘investor’: This issue has seen a lengthy (Canada, WT/WGTI/W/130). Others have flexibility for governments to respond to debate. Members have discussed a narrow proposed a dedicated ‘Development public, security, or balance-of-payments (enterprise- or transaction-based) defini- Clause’ in the substantive part of any concerns should be an integral part of any tion of ‘investment’, as well as a broader investment agreement, which would investment framework, reflected in its one based on assets, with options to carry more weight than declaratory basic structure, as well as its relevant include or exclude various categories of preambular language. provisions. At the same time, as in the investment. The US and Canada insist on a relevant GATT and GATS Articles, broad definition (WT/WGTI/W/142 and Consultations and the settlement of Members feel that there must be clear WT/WGTI/W/113 respectively). There disputes: Members differ on the need to conditions attached to these provisions to have also been suggestions that a anchor any prospective investment ensure that they do not involve arbitrary distinction should be made between agreement to the WTO dispute settle- or unjustifiable discrimination, or create different types of foreign direct investment ment system. Canada, for one, has disguised restrictions. As in the GATT and (FDI). Some Members believe that the suggested that the Dispute Settlement the GATS, additional flexibility should be Doha mandate only requires a discussion Understanding (DSU) should apply to provided to developing countries in of long-term investment that contributes investment disputes under the new meeting those objectives. to the expansion of trade, while others agreement (WT/WGTI/W/147). Others have proposed that developing countries have raised the need to identify ways of Proposals and other documents can be should be in a position to regulate strengthening the consultation phase of found at http://docsonline.wto.org/ under portfolio investment, which on the whole the dispute settlement system so that it WT/WGTI/* is seen as a less stable and flightier form of would effectively serve the needs of host investment than FDI. There is a more and home country interests (EU, Interaction between general understanding regarding the WT/WGTI/W/141). Concerns have also Trade and Competition definitions of ‘investor’, ‘natural persons’ been raised about the scope for non- and ‘legal entities’. This issue is likely to be violation complaints if an investment Policy of little importance if the possible dispute was brought under the DSU. Paragraph 23 of the Doha Declaration multilateral framework includes a most- recognises that a multilateral framework favoured-nation (MFN) obligation. Another fairly controversial issue involves the remedies that should be awarded to could enhance the contribution of Transparency: Many Members agree that a party successful in an investment competition policy to transparency is essential for creating a dispute. Members have noted that in the and development. Para. 25 provides for stable, predictable and secure climate for case of international investment the Working Group on the Interaction foreign investment. Japan (WT/WGTI/ agreements that include investor-to- between Trade and Competition Policy W/112), the EU (WT/WGTI/W/110) and State arbitration, if a host State is found to focus on the clarification of: Taiwan (WT/WGTI/W/129) have made to be in breach of the agreement, the • core principles, including transpar- written submission in this regard. tribunal is typically empowered to order ency, non-discrimination and proced- Discussions have mainly focused on the that the investor be awarded monetary ural fairness, and provisions on nature and depth of transparency damages and/or restitution of property hardcore cartels; provisions and the scope of their with applicable interest. The arbitral application. Developing countries have tribunal cannot, however, order a host • modalities for voluntary co-operation; expressed concern over possible resource State to revoke or modify an inconsistent and constraints in meeting new transparency measure or policy. This differs a great • support for progressive reinforcement commitments in investment, especially deal from the WTO dispute settlement of competition institutions in given their significant difficulties in system, where neither panels nor the developing countries through capacity complying with existing WTO Agree- can recommend the building. ments. payment of monetary damages. Current State of Play Development provisions in a multilateral FDI and technology transfer: Discussions framework for investment: Members view have focused on the different ways that Discussions thus far have revealed a wide development provisions as a horizontal technology is transferred by multinational rift between the demandeurs of a issue, i.e., one that would have an effect firms: through internal transfers between multilateral framework on trade and on the other subjects set out for a parent company and its foreign competition policy, such as the EU and clarification by the Working Group. India affiliate, external transfers from a Japan on the one hand, and developing has strongly supported the need for multinational enterprise to a firm that it countries like India on the other. There ‘policy flexibility’ for developing does not own or control, through are, however, differences even among the countries to be able to determine the licensing, minority joint ventures or supporters of a multilateral framework, form of investments that would technical co-operation. Members have mainly centred on the scope and nature contribute to the expansion of trade in noted that the impact of FDI on of exceptions that could be built in. Korea, the light of national interests (WT/WGTI/ technological development depends not for instance, wants MFN exemptions to W/148). In substance, Canada (WT/ only upon the formal transfer of be considered, especially in the context of WGTI/W/131) and (WT/ technology by multinational firms to its regional trade agreements (WT/WGTCP/

2 Copyright ICTSD and IISD, Feb. 2003 W/212), while the EU is not happy with allowed to adopt any new WTO The multilateral Working Group on watering down the ‘core principle’ of non- obligations regarding a domestic Transparency in Government Procure- discrimination (WT/WGTCP/W/222). Costa competition regime in a flexible and ment established by the Singapore Rica is among the few developing country progressive manner. In addition, the EU Ministerial Conference is mandated to demandeurs for multilateral competition stresses the need to include the principle conduct a study on transparency in policy disciplines. of non-discrimination in any framework government procurement practices, agreement on competition through a taking into account national policies and, Hard-core cartel rules: Even if most separate specific provision that would based on this study, to develop elements developing countries concede vulner- 1 take into account the peculiarities of for inclusion in an ‘appropriate agree- ability on ‘hard-core’ cartels, the EU is the national circumstances. ment’. only Member to actively support a WTO agreement on competition policy While Korea has recognised that the Para. 26 of the Doha Declaration banning such practices. In contrast, other alleviation of regulation and technological recognises the “case for a multilateral developed countries — notably the US, developments have made competition agreement on transparency in govern- Canada and Japan — as well as Thailand possible in areas where corporations ment procurement and the need for and Korea emphasise the importance of previously enjoyed a monopoly, it has also enhanced technical assistance and promoting voluntary co-operation. India, pointed out that many Members have capacity building”, taking into account supported by Pakistan, Malaysia, Cuba exempted public service industries such as the development priorities of particip- and Venezuela and , has telecommunications from competition ants, especially least-developed count- stressed that other multilateral rules and law obligations on the understanding that ries. The Declaration also clarifies that the agreements offer better guidance for such sectors have inherently monopolistic negotiations “shall be limited to the dealing with restrictive business practices. aspects (WT/WGTCP/W/189). transparency aspects and therefore will Some Members have also called for a not restrict the scope for countries to clearer definition of ‘hard-core cartels’, as Technical assistance: The inclusion of give preferences to domestic supplies well as the extent to which some of them technical assistance provisions in the and suppliers.” In addition, Members could be defended on efficiency grounds. Doha Declaration (see mandate above) committed themselves to “ensuring was one of the key elements that made it adequate technical assistance and Core principles of competition policy: New possible for many developing countries support for capacity building both Zealand has requested adding ‘compre- to accept potential WTO negotiations on during the negotiations and after their hensiveness’ (WT/WGTCP/W/210), while competition policy, and both developed conclusion.” Thailand has insisted on the inclusion of and developing countries have ‘special and differential’ treatment for recognised the need for technical Current State of Play developing countries to the core assistance in post-Doha Working Group principles of competition policy discussions. The US would like to focus Apprehensive over the ‘intrusiveness’ of (WT/WGTCP/W/215). Many developing such assistance on the development of new rules, many developing countries and even developed countries have sound domestic competition policies and support India’s attempt to limit the scope singled out ‘flexibility’ and ‘different- institutions while Canada has proposed of the discussions in this area. The US, iation’, as well as assistance and positive economic efficiency and the protection the EU and Switzerland on the other measures. India (WT/WGTCP/W/216) of competition and the competitive hand are seeking as broad a range as and Thailand (WT/WGTCP/W/21) have process as two principles of technical possible. While India has underlined the called for differentiation in treatment for assistance. However, many countries importance of using government domestic firms as opposed to big including the US, Japan and Egypt, have procurement as one of the few policy multinational companies, and several recognised that technical assistance tools available for achieving socio- other Members have proposed affirm- should be tailored according to the economic objectives, the US maintains ative action to ensure the viability, diversity of needs and distinct national that greater transparency would not development and efficiency of local firms conditions. The EU has also recognised diminish that function. and institutions in developing countries. that certain aspects of transparency Australia has outlined a widely supported requirements would entail administrative Switzerland has suggested an non-prescriptive approach to procure- costs and called for their progressive ment methods, leaving it up to the interpretation of the ‘national treatment’ introduction while identifying them as a principle subject to transparency and the discretion of each government to decide priority for technical assistance program- what method to use (WT/WGTGP/W/ rule of law, which could allow in specific mes (WT/WGTCP/W/222). instances the use of industrial policy 31). With respect to information on based on a public benefits test (WT/ Proposals and other documents can be national legislation and procedures, WGTCP/W/214). India does not support found at http://docsonline.wto.org/ under Brazil has noted that its procurement unconditional and unqualified ‘national WT/WGTCP/* laws and regulations are already available treatment’ either, citing the ‘develop- on the Internet. Like India, it is opposed ment dimension’ as valid grounds for Transparency in to any obligation to notify Members of differential treatment for countries with all tenders or to translate them into the different capacities. Government official languages of the WTO, as well as Procurement to WTO reviews or examination of Attempting to respond to some of these domestic laws and regulations. concerns, the EU has argued that a Transparency is one of the three areas of framework agreement would not require work being done in the WTO on Canada has stated that while Members a harmonisation of domestic competi- government procurement. The other require flexibility to choose criteria for tion laws (WT/WGTCP/W/222). Accord- two relate to (i) government procurement awarding contracts, as well as for ing to the paper, the WTO should avoid in services (discussed in the Working Party separate qualification or registration a detailed definition of the substantive on GATS Rules) and (ii) the 25 Member process, decisions should be transparent scope of domestic competition laws Plurilateral Government Procurement (WT/WGTGP/W/36). Information on the (except for basing them on the core Agreement, initially negotiated during the criteria as well as decisions taken should principles and banning hard-core Tokyo Round and subsequently consolid- be made available to suppliers, but cartels), and least-developed countries ated (with expanded sector coverage) governments should not be obliged to and smaller economies should be during the . disclose confidential information. The US

Copyright ICTSD and IISD, Feb. 2003 3 DOHA ROUND BRIEFING SERIES has proposed four categories around have reminded Members that the land-locked countries. The EU and some which to organise the elements of an exercise consists merely of a review and other WTO Members have noted that agreement: general parameters of a not negotiations. new problems and difficulties have arisen potential agreement; transparency of since GATT Article V (Freedom of Transit) procurement systems; transparency of Brazil has suggested that refraining from was originally drafted in the 1940s. As an specific procurements; and operational the abusive and protectionist use of trade example of unjustified restrictions, the EU provisions to fulfil the objectives of a instruments, as well as completing the has pointed to more onerous customs potential agreement (WT/WGTGP/W/ WTO harmonisation work programme procedures for goods intended for transit 35). While countries such as Japan want on rules of origin (i.e. harmonising the than for those destined for immediate a legally-binding and effective transpar- diverging methodologies in use for import. Consequently, it has called for ency agreement (WT/WGTGP/W/37), calculating the origin of a good), could improving and clarifying Article V most developing countries feel this area also be included in trade facilitation, especially through the application of should not be open to dispute settle- adding that the best way to facilitate non-discrimination with regard to modes ment proceedings. trade for developing countries would be of transport, individual carriers and types to eliminate trade barriers to their of consignment among others EU Proposals and other documents can be products. Responding specifically to an (G/C/W/222). found at http://docsonline.wto.org/ under EU paper (G/C/W/363), Brazil noted that WT/WGTGP/* a sufficient case had not been made of Many developing countries prefer trade GATT Article X’s (Publication and facilitation measures to be taken Trade Facilitation Administration of Trade Regulations) autonomously. The need to address the inadequacy to warrant amending the implications of binding rules on human Para. 27 of the Doha Declaration provides provision. The EU paper along with and financial resources, as well as that until the fifth WTO Ministerial submissions from Japan, Canada and differences in levels of development, has Conference, the Council for Trade in Korea called for widening the scope of been stressed by some delegations. In Goods “shall review and as appropriate information to be published, a response, the EU has outlined elements clarify and improve relevant aspects of consultation mechanism for affected of special and differential treatment with Articles V (Freedom of Transit), VIII (Fees parties prior to the finalisation of customs regard to implementation of future WTO and Formalities Connected with Import- regulations, the legal right of appeal commitments in trade facilitation to help ation and Exportation) and X (Publication against customs decisions, a single reduce some of these burdens. These and Administration of Trade Regulations) inquiry point for trade-related include differentiation in commitments of the GATT 1994 and identify the trade information and expanded technical particularly for least-developed countries, facilitation needs and priorities of assistance to developing countries. transition periods to enable progressive members, in particular developing and implementation and technical assistance least-developed countries.” Most developed countries, including the (G/C/W/222). EU (G/C/W/394) and Japan (G/C/W/ The post-Doha work programme has 401), have called for streamlining the Endnote been organised around the following processing of imports under Article VIII three ‘core’ agenda items: (i) GATT (Fees and Formalities Connected with 1 The OECD defines hard-core cartels as Articles V, VIII and X each to be addressed Importation and Exportation). The EU anticompetitive agreements, anticompetitive in consecutive meetings (ii) trade considers this article to be at the heart of concerted practices or anticompetitive facilitation needs and priorities of arrangements by competitors “to fix prices, trade facilitation and wants ‘operational’ make rigged bids (collusive tenders), establish Members, particularly developing and rather than ‘aspirational’ rules. An output restrictions or quotas, or share or least-developed countries and (iii) agreement on trade facilitation would divide markets by allocating customers, technical assistance and capacity ensure a ‘locking-in’ of reforms that suppliers, territories or lines of commerce.” building. Of these points (ii) and (iii) (OECD Recommendation of the Council would make WTO rules on customs Concerning Effective Action Against Hard were to be addressed as standing items. procedures ‘irreversible’. Mirroring the Core Cartels; March 25, 1998). trend in the other Singapore issues, So far, proposals have mainly been developing countries such as India and submitted by developed countries. Brazil question the need for new binding Pointing to limited implementation obligations on Article VIII, with Brazil For an overview, see Review, capacities of a number of Members, expressing particular concern over the Clarification and Improvement of many developing countries continue to potential benefits of ‘excessive discipl- GATT Articles V, VIII and X – question the need for further rule- ines’ in comparison with the costs. Proposals made by Delegations making. In the spirit of para. 27 of the (G/C/W/434). Doha Declaration, Uruguay, Pakistan, Broader potential for agreement exists Malaysia, India, Indonesia and Cuba on issues related to transit, especially for

This series of Doha Round Briefings is published by the International Centre for Trade and Sustainable Development (ICTSD) and the International Institute for Sustainable Development (IISD). Mark Halle (IISD) and Ricardo Meléndez-Ortiz (ICTSD) conceived the Briefings. Contributing writers at ICTSD included: Heike Baumuller, Hugo Cameron, Anja Halle, Ricardo Meléndez-Ortiz, Victor Mosoti, David Primack, Mahesh Sugathan, David Vivas and Alexander Werth. Trineesh Biswas (IISD) served as copy editor, Donald Berg as graphic designer and Stuart Slayen (IISD) as publication manager. Funding for this project has been provided by the Swiss Agency for Development and Cooperation through IISD and by ICTSD’s supporting donors. Series Editor: Anja Halle, [email protected]. Series Directors: Ricardo Meléndez-Ortiz, [email protected] and Mark Halle, [email protected]. The full series as well as upcoming updates can be found at www.ictsd.org and at www.iisd.org. Copyright: ICTSD and IISD, February 2003. The International Centre for Trade and Sustainable Development (ICTSD – http://www.ictsd.org) is an independent non-profit and non-governmental organization based in Geneva. Established in 1996, ICTSD’s mission is to advance the goal of sustainable development by empowering stakeholders in trade policy through information, networking, dialogue, well-targeted research and capacity building to influence the international trade system. ICTSD is the publisher of BRIDGES Between Trade and Sustainable Development©; and BRIDGES Weekly Trade News Digest©. Co-publisher of PASSERELLES entre le commerce et le developpement durable© (with ENDA Tiers-Monde); PUENTES entre el Comercio y el Desarrollo Sostenible© (with Fundación Futuro Latinoamericano - FFLA and Centro Internacional de Política Económica para el Desarrollo Sostenible - CINPE);and BRÜCKEN Zwischen Handel und Zukunftsfähiger Entwicklung© (with GERMANWATCH). The International Institute for Sustainable Development (IISD – http://www.iisd.org) contributes to sustainable development by advancing policy recommendations on international trade and investment, economic policy, climate change, measurement and indicators, and natural resource management. By using Internet communications, we report on international negotiations and broker knowledge gained through collaborative projects with global partners, resulting in more rigorous research, capacity building in developing countries and better dialogue between North and South. IISD’s vision is better living for all—sustainably; its mission is to champion innovation, enabling societies to live sustainably. IISD receives operating grant support from the Government of Canada, provided through the Canadian International Development Agency (CIDA) and Environment Canada, and from the Province of Manitoba. The institute receives project funding from the Government of Canada, the Province of Manitoba, other national governments, United Nations agencies, foundations and the private sector. IISD is registered as a charitable organization in Canada and has 501(c)(3) status in the United States.

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