Presentation by Dr Supachai, Director-General Designate of the WTO, 5 July 2001
Notes, prepared by Peter Willetts, Professor of Global Politics at City University, London, on a presentation by Dr Supachai Panitchpakdi, Direct-General Designate, World Trade Organisation, on 5 July 2001. The occasion was a Wilton Park Conference, The World Trade Agenda. Dr Supachai has given permission for these notes to be on the record. Text in square brackets and in the Annex is solely from Peter Willetts.
The Global Trading System: Where do we go from here?
The presentation was divided into three sections: comments on the current status of the WTO; the situation in the global economy; and Dr Supachai's activities in preparation for taking office in September 2002 as Director-General.
The Current Status of the World Trade Organisation
Dr Supachai agreed that the WTO has a crisis of legitimacy. The response must be no less than institutional change. The problems include the increase in the number of members, the broadening scope of its activities, the complexity of its work, and demands for transparency and participation. Seattle was a wake-up call, not just a one-time event.
The situation will become more complex. Civil society involvement will increase. Questions about the role of the WTO in developing countries will become more pronounced, as its role can supersede that of national politicians. The WTO is accused of working on behalf of multi-national corporations. The number of trade disputes is increasing.
With such complexity, no one organisation can solve all the issues. There is need for change in the whole international economic order: not much has changed since the demands for a NIEO in the 1980s. We still need the "development decades"; developing countries still need trade and not just aid; the target of 0.7% for ODA is still not being met. At a recent seminar in Geneva, there was a discussion of Gary Sampson's new book, [The Role of the World Trade Organization in Global Governance, (Tokyo, New York and Paris: UN University, 2001)] and the idea arose of a Globalisation Summit, because the multiple issues should at times be considered together in a composite globalisation agenda.
The Global Economy
Economics has been referred to as the dismal science. Dr Supachai is pessimistic. In mid-1997 the Thais tried to warn the world that the initial crisis was not just their own predicament and it would affect others. Everyone just said Thailand was experiencing a small cyclical adjustment. At the Vancouver APEC summit in November 1997, the Korean Minister stood up and said he hoped that the Thais did not mean to include Korea. When the crisis did come to Korea, they obtained more substantial support and the IMF was ready for Brazil. We must beware of being too complacent.
Now we have to prevent fearful stagflation. Inflation in the G7 is increasing and is at the highest average for the last eight years. At the same time US output is falling. There is a deep need to restructure the US economy after the dot-com failures. Asia used to be the engine of trade growth, but now the growth is not continuing and Japan is in recession.
In the year 2000, trade grew strongly, despite the failure at Seattle. The driving force was a boom in IT. WTO conferences may or may not help to sustain trade. We need assessment of what brings about change. Contrary to some attitudes within the WTO, research is not a waste of time. What are the driving forces and the linkages?
The developing country share of world manufacturing exports expanded in the 1990s from 17% to 25%. Advances have been made for developing countries, but not for the Least Developed Countries. Their share of trade is shrinking.
Transatlantic issues do not just relate to the health of the US and Europe, but they can introduce uncertainties for all others. The banana dispute is yesterday's problem and it should never have lasted so long. Now we have differences over mergers (notably GE and Honeywell). If they cannot agree on such a basic question, how long would it take to negotiate on new rules for competition? The EU has just won a WTO panel case against the US, with a ruling against the tax subsidies worth $4 bn for US exporters via "foreign sales corporations". [Financial Times, 'Export tax ruling set to increase EU-US tension', 23 June 2001, and 'WTO rejects US tax break', 25 June 2001.] It will be hard for Congress to do something about this, so the EU will become entitled to retaliate. In addition the role of the EU as a global food safety court will produce more conflicts.
Dr Supachai's Preparations for taking Office
Dr Supachai has worked closely with UNCTAD, including the experience of chairing UNCTAD X in Bangkok. Last year he went to a symposium on regionalism versus globalism. He is trying to work with a variety of groups. They need to exchange views and to open up. Geographical proximity is not relevant. For example, he is promoting links between ASEAN and Mercosur.
Dr Supachai has been working with the WHO. He is part of the commission set up by Gro Harlem Brundtland, looking at essential drugs and TRIPS. He is pleased with the settlement between the drug companies and the South African government. Dr Supachai is consulting with Dr Somavia and he thinks the ILO should have more teeth. UNIDO now appreciates that there is no value in industrialising for its own sake and the WTO and UNIDO will have to work together. He wants to have relations with the World Bank and the OECD. The commodity organisations should also work more with the WTO, with his priorities being rice, coffee and sugar.
Dr Supachai is trying to work with business groups–––the WTO is accused by civil society of working too closely with them and by business of not doing so. He has encouraged business to set up forums to relate to the WTO. Dr Supachai wants to encourage the development of codes of practice on social accountability of companies. It is necessary to demonstrate that the WTO cares about the issues related to trade. Dr Supachai also has been meeting with NGO groups around the world. [The next day he met the UK Trade Network in London.]
Improvements in global governance are needed. This is understood by the heads of institutions, but the understanding is not there yet at the operational level. Dr Supachai recommends the G8 to include developing countries in its annual meetings. The arrangements made at Okinawa should be institutionalised [see the Annex to this report]. Other measures are needed to increase the involvement of developing countries in policy-making.
The WTO can be expected to reach more than 170 members. This produces problems of manageability. Can we always work in plenary and by consensus? There needs to be more inventive arrangements to support decision-making. Dr Supachai is preaching on the need for a "Consensus-Building Council". Some members want a body like the Interim Committee of the IMF or the Executive Boards of the Fund and the Bank. More discussion on these questions is needed. The role of the Green Room, having a smaller group provide leadership in the discussions, was needed, but it must be done in a more transparent manner. [One participant later suggested the Green Room should attain the visibility of a greenhouse. Several expressed dissatisfaction with the Green Room, because it leads to domination by the larger members. However it was agreed that some such mechanism was needed and that the process had opened up somewhat since the Seattle collapse.]
It should not be automatic for the host of a major meeting to take the chair. There should be a role for the Director-General, not as the chair, but perhaps as a co-chair, with the responsibility of promoting consensus. The host will not necessarily be up to date on issues nor impartial. [During the discussions, it became evident that the WTO often does not work by consensus. At times, individual members interpret consensus as a "unit-veto system", whereby they assert a unilateral right to block decisions. While this is legally valid for the final decision point, it was not seen as being a valid tactic to block the negotiating process.]
Dr Supachai has not thought out in full the basis for deciding the composition of the Consensus-Building Council, but he has held some consultations. It must be a fluid arrangement and it must be linked to all the political groups that want to be involved.
Internal transparency of the organisation [primarily meaning the availability of information to developing country members] must be improved. There should be a greater number and variety of informal groups of members and they should be strengthened by having small secretariats. Then there can be contact between them. [It was unclear whether Dr Supachai meant group secretariats should be provided by the organisation's own staff, as UNCTAD does for some groups, or by the group's own members, as at the UN. Note that even the most conservative of the governmental delegates agreed with Dr Supachai on the need to improve internal transparency.]
Panels should not make crucial decisions on implementation. We are kidding ourselves that the WTO is "member-driven". It is panel-driven.
The process of acceding to membership must be simplified. It should just take two or three years not seven or eight years. [At the meeting, participants from two new missions in Geneva expressed intense resentment at the need to agree to "WTO plus", with many conditions beyond the requirements of the WTO Agreement being imposed unilaterally on candidate countries. Comment: this is particularly pernicious as, under Article XII, accession is the sole area of decision-making in which individual members do not have the right to insist on consensus.] Now the majority of countries outside are poor. It is not fair that they are required to meet more conditions than the existing members. There are also many provisions that are irrelevant, inappropriate or difficult for them to implement. Perhaps there should be a form of associate membership.
On external transparency and exposure to civil society, it is necessary to be reasonable. The WTO is not always similar to other global intergovernmental organisations. Dr Supachai agreed with the rapid derestriction of documents, but maintains the need for confidentiality in negotiations. There can be a system of accreditation for rational NGOs. [Subsequently, it became evident that Dr Supachai meant this system to provide mechanisms for greater exchange of information with the staff and not full implementation of Article V(2) of the Agreement on "appropriate arrangements for consultation and co-operation" between NGOs and the WTO.]
Controversial issues gravitate towards the WTO. Trade should never be used to penalise countries on environmental questions. We need to strengthen UN institutions. Those countries advocating stronger protection of the environment should back this by providing adequate financial support for UNEP and upgrading its authority.
Further Points of Interest During the Discussions
One participant expected the WTO to be invited to speak at the next meeting of the Development Committee. [The Annual Meetings of the IMF and the World Bank due at the end of September 2001 were cancelled because of the terrorist attacks upon New York and Washington.] It would be useful if concrete proposals could be made about how to promote coherence in international economic policy-making.
When questioned on the prospects for his relations with the US government, Dr Supachai said he had already held discussions with some key people in the Congress and he did expect to be able to work well with them.
One participant said there was much heated discussion in Geneva about the role of the Director-General. Seattle demonstrated the chaos of members going in different directions, so she did not understand the resistance to a stronger role.
There was uncertainty about the need for research and one participant expressed suspicion because most of the researchers come from the North.
A trade lawyer pointed out that the panels cannot be blamed for the importance of their role. Once a case has started, they have to make interpretations of the language. Not to make a formal decision on a case would be to take a decision. The WTO did needed alternatives to litigation. There should be more use of mediation. Dr Supachai wanted to lengthen the time between filing disputes and convening panels, so that there was more opportunity for negotiated settlements.
Annex: Relations between Developing Countries and the G8 in 2000
This is an extract from 'The Non-Aligned Movement and Developing Countries' by Peter Willetts, in
Relations between the developing countries and the industrialised countries underwent substantial improvement during the year. The pressure over the previous decade from the NAM for discussions with the G8 had led to various ad hoc meetings in the past. Immediately prior to the Okinawa G8 summit in July 2000, this was extended for the first time, by holding a full series of parallel meetings: a preparatory meeting of senior officials, a ministerial meeting of the NAM Troika, the G77 Chair and G8 ministers, and then the first summit-level dialogue. In Tokyo on 20 July, President Obasanjo of Nigeria, Chair of the G77, President Mbeki of South Africa, Chair of the NAM, President Bouteflika of Algeria, Chair of the OAU, and Prime Minister Chuan of Thailand, Chair of ASEAN, held a general discussion on debt and development with the G8 leaders, followed by a specialist exchanges on information technology, on infectious diseases and on human resources. In reporting back to the NAM in New York, the South Africans were pleased to assert that "for the first time the G8 Summit focused on the agenda of the South". The final G8 communiqué made several commitments to reduce poverty, accelerate debt relief, bridge the digital divide, fight AIDS, malaria and tuberculosis, promote education for all, and remove barriers to developing country trade. This was all welcomed by the NAM, but with regret that promises from the Uruguay Round on trade measures were still not being implemented.
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