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The WTO and the millennium round: between standstill and leapfrog

Listed author(s):
  • Langhammer, Rolf J.

The Third WTO Ministerial Conference in Seattle in November 1999 is expected to pave the way to the ninth multilateral round of trade negotiations, labelled Millennium Round (MR). Like the preceding Uruguay Round (UR), it will have the twin targets of preventing domestic measures from discriminating against foreign supply and of dismantling border measures such as tariffs and non-tariff barriers. The core challenge of the MR will be to defend the WTO framework against efforts to sacrifice its genuine target of guaranteeing and enforcing access to markets by compromising this target with other targets such as protecting the environment, workers' rights, foreign investors' rights and competition. The GATT experience with a contradictory and inefficient mixture of aid targets (special treatment for developing countries and least-developed countries) and trade principles (non-discrimination between all WTO member states) underlines the importance of clearly separating targets, instruments and responsibilities of actors through different institutional set-ups instead of forcing them into a single framework. This holds especially for the protection of the environment and of workers' rights, where existing frameworks should be used and/or new frameworks be founded. For competition and investment, existing elements of the WTO can be used to keep markets open and to level the playing field between foreign and domestic investors. Liberalising trade in services and enforcing free access to service markets through the General Agreement on Trade in Services (GATS) will be the most important concrete liberalisation objective in the MR. As the GATS principle is bottom-up (service-industry-specific liberalisation with many loopholes) while the GATT principle for goods is topdown (across-the-board cut of border measures), the best liberalisation results would be achieved if the top-down principle could be applied to services as much as possible. Linking services to goods as joint products bound to GATT rules and/or defining services as goods wherever possible (for instance, in e-commerce) could be instrumental to anchor the top-down principle in services. In traditionally highly protected sectors with special entitlements like agriculture and textiles (including clothing), the MR must counter efforts of big players like the EU and partly the US to play for time by postponing UR commitments to the latest possible date. In doing so, they will deliberately create an adjustment jam, which would trigger requests for further safeguards. Should the WTO fail to discipline the players in these sectors, frustration in developing countries can weld the vast majority of WTO members into a stumbling block against the MR. Further needs to reform the current WTO framework can be identified in disciplining mushrooming regional integration schemes, which undermine the most-favoured nation treatment principle, in dismantling still existing tariff escalation, which discriminates against manufactured goods exporters, in fundamentally redressing the abuse of contingent protection measures such as anti-dumping and safeguards and, finally, in solving the still pending issue of China's accession to the WTO. The MR without China refutes the WTO's claim to be a universal institution. In a mercantilist world, negotiation strategies matter. Notwithstanding the lack of a fast-track mandate for the US administration, it seems that the US together with Asian countries prefer sector-specific negotiations with a focus on agriculture, services, and government procurement. In contrast, the EU prefers negotiations on all issues in a socalled comprehensive round. Developing countries still hesitate to participate at all but their hesitancy can prove to be a promising strategy to push the EU and the US toward accelerating the implementation of UR commitments. All participants will experience that there are first-mover advantages and that leapfrogging technological progress in the cross-border movement of persons, goods and services will impose high costs on those who get stuck in old-style nitty-gritty trade diplomacy.

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Paper provided by Kiel Institute for the World Economy (IfW) in its series Kiel Discussion Papers with number 352.

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Date of creation: 1999
Handle: RePEc:zbw:ifwkdp:352
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