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Developed world undermining WTO spirit through FTAs

Financial Express, India

17 October 2005

Developed world undermining WTO spirit through FTAs

Ashok B Sharma

Given the rigid positions of the major negotiating blocs, it seems unlikely that the trade talks in progress in the WTO general council meeting in Geneva will lead to a draft paper acceptable to all. Such a paper would have formed the basis of agriculture negotiations in Hong Kong in December.

G-20, the European Union, US and G-10 have already submitted their proposals. The gap between the WTO general council meeting and mid-November is too short for a consensus to appear.

Much behind-the-scenes activity is on at Geneva.

The developed bloc is interested in undermining the unity of the developing countries to achieve their goal. Lucrative offers, outside the ambit of WTO, are being made to developing countries.

The developed bloc knows for certain that if the unity of the developing countries is weakened by any means, they can aggressively push their agenda for gaining greater market access in the Third World. Even then, there are reports that the unity within G-20 is at stake.

The agenda of the developed bloc is clear - to maintain their level of protection and gain greater market access in the developing country markets.

The developed nations are determined to achieve their goal either through WTO or through free trade agreements (FTAs).

Incidentally, the FTAs are being designed by the developed countries to get more than what the WTO and Trips could give at this stage.

When the developed countries get what they wanted through FTAs, they would then later attempt to place these FTA rules inside WTO.

In most bilateral agreements so far signed by the US with the developing countries, there are rules on investment, government procurement and competition policy. The WTO draft of July 2004 had shelved these Singapore issues and US has brought back these issues through FTAs.

The US in its FTAs with Singapore and Chile has covered not only foreign direct investment, but also portfolio investment, loans, intellectual property issues, investors’ rights including pre-establishment rights. The defination of expropriation has been broadened to include indirect expropriation.

The FTAs signed by the US have rules on market access, national treatment of foreign firms and products and prohibiting preferential treatment for national firms. This is in contrast to the WTO working group discussions where only transparency aspect had been mandated for consideration.

Similarly, the developing countries are obliged to open up their services sector, much to their disadvantage when striking FTA deals with the US. FTAs make use of the “negative list approach” for opening up of the services sector, while the WTO services agreement talks of “positive list approach”.

In the negative list approach, if a particular sector, by mistake, escapes mention as an exception, it is presumed to be open for foreign investment.

FTAs, thus reduces the flexibilities accorded to developing countries under WTO. Besides the dedeveloped countries cite Article XXIV of the GATT to make a case for tariff elimination by parties on “substantially all trade.”

Thus developing countries should be careful in striking any FTA deal with a developed country. They may lose the flexibilities accorded to them under WTO.

The developed bloc are more eager to strike WTO plus and TRIPS plus deals through FTAs. Many developing economies are suffering on account of FTA deals struck with the developed world.

 source: Financial Express