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Trade Differences Dog WSSD PrepComm

Issues related to trade and finance, including the relationship between multilateral environmental agreements (MEAs) and WTO rules, continue to deeply divide countries at the fourth and last official preparatory meeting (PrepCom IV, 27 May - 7 June, Bali, Indonesia) for the forthcoming World Summit on Sustainable Development (WSSD, 26 August - 1 September). Fundamental differences are also emerging around the purpose of WSSD and its relationship to the Fourth WTO Ministerial Conference in Doha (November 2001) and the International Conference on Financing for Development in Monterrey (March 2002). With the high- level segment set to begin on 5 June, it now lies in the hands of Ministers whether and how the World Summit can complement and/or go beyond Doha and Monterrey.

Painfully slow progress in Bali

PrepCom Chair Emil Salim issued a text on Sunday (2 June) combining all ten sections of his previous Chair's paper into a Draft Plan of Implementation for the WSSD, including brackets for text not yet agreed-upon. While trade-related references are spread throughout the document, most attention has focused on provisions related to trade and finance in section IX (Implementation), and on the relationship between MEAs and WTO rules, addressed in section X on an 'Institutional Framework for Sustainable Development'.

Informal negotiations on trade and finance issues at WSSD continued on Tuesday night (4 June) among selected delegations, reportedly including the US, EU, G-77 and Japan. Several of the smaller delegations, including Norway and Switzerland, which were turned away from the meeting, expressed concern with the process and stated that they would reject any text if it was agreed upon in this "green room" style setting. As BRIDGES Weekly went to press, negotiations had still not been completed in the working group on an 'Institutional Framework'.

Meanwhile, delegates are putting together possible elements of a political declaration and will continue discussions on draft guidelines for partnerships. A large majority of the trade-related provisions in the text remain bracketed, with little movement on either side of the debate, which is split broadly along North-South lines. As one trade source speculated, the EU and the US are likely to still be awaiting the outcomes of the work on 'good governance', with compromises on trade provisions far more likely with a strong text on governance, including national-level commitments by developing countries. It was unlikely, however, the source added, that all brackets could be resolved before the World Summit.

Disagreement over 'added value' of WSSD underlies trade discussion

On trade-related areas, the US and Australia, and to a lesser extent Canada and Japan, have again proven most reluctant to go beyond what was agreed in the Doha Declaration and the Monterrey Consensus on Financing for Development, restricting themselves to references to the relevant paragraphs of the two documents, arguing that they represent a sensitive balance that should not be upset by reopening the agreements. The US and Japan furthermore cautioned against prejudging the outcomes of the WTO negotiations launched at Doha, scheduled to conclude by 1 January 2005. In addition, the US repeatedly emphasised the need for national-level action and commitments by developing countries. According to one US delegate, the US believes that WSSD should focus on environmental protection, thereby providing the third pillar of sustainable development in addition to poverty reduction and sustained economic growth, which were addressed by Monterrey and Doha.

Describing the trade and finance provisions in the Implementation section as "possibly the most important chapter in the whole document", the G-77 group of developing countries strongly resisted extensive references to the Doha and Monterrey paragraphs, which they said were making the text look like a "banking agreement". Instead, more "productive, ingenious and legitimate" language was needed to ensure that WSSD would "build on" Doha and Monterrey in an effort to achieve the political objective of sustainable development. The G-77, however, also resisted the inclusion of environmental language that might add new obligations for developing countries or thatcould be used by industrialised countries to justify protectionist measures, arguing that the trade and finance provisions referred to the economic pillar of sustainable development and should aim to support economic growth.

In the course of the negotiations, the EU repeatedly pointed out the need for action-oriented, sustainable development-related language, arguing that the added value of WSSD should be to bring a sustainable development perspective into trade and finance issues by building on the outcomes of Doha and Monterrey "as part of a process of achieving sustainable development". Nevertheless, with regard to commitments made at Doha, the EU preferred to cite Doha language, arguing that the Declaration was a "complete package" with an "internal equilibrium". Also, while advocating a "minimalistic approach" to changing the proposed text, the EU again introduced the highly contentious issue of core labour standards in the context of trade despite a request by the chair of the contact group to avoid such references, leading some to suggest that this move should be seen as part of the EU's broader negotiating strategy.

Amongst the key negotiating countries, Norway proved to be most constructive and progressive, repeatedly stressing the need to go beyond Doha and Monterrey by including follow-up initiatives. Efforts were also made by Switzerland to help find compromises between the increasingly polarised positions of the US and G-77.

The meaning of coherence

In the context of section X on an 'Institutional Framework' (formerly 'Sustainable Development Governance'), significant differences were apparent during negotiations on the relationship between WTO rules and MEAs. This is one of the key issues repeatedly raised by civil society groups, which have called on governments to reaffirm the relative jurisdictions of MEAs and the WTO. Discussions focused primarily on the term "coherence", proposed by the EU and supported by the US. The G-77 strongly opposed this term, fearing that it might open the door to bringing this issue into the WTO beyond the mandate agreed at Doha to negotiate on the relationship between existing WTO rules and specific trade obligations set out in MEAs.

Instead, the G-77 proposed language calling for building the capacity of developing countries to effectively participate in trade negotiations. As one source speculated, countries are most likely to agree on the concept of "mutual supportiveness" -- subsequently put forward by the EU in response to developing country concerns -- which had also been included in the Doha Declaration. One observer stressed the importance of this section of the text, noting that it could become the most important trade-related outcome of WSSD given that the trade and finance discussions in the Implementation section are unlikely to go beyond the previously agreed texts.

Civil society frustrated with excessive trade focus

Non-governmental organisations (NGOs) have expressed growing frustration with the intransigent position of the US in the trade and finance negotiations. They strongly criticised the text discussed in the contact group as a "trade document" that lacked sustainable development elements. In particular, WWF, Friends of the Earth and Oxfam attacked the EU for what they called a "remarkable U-turn" with regard to subsidies, contrasting a previous commitment made at the WSSD preparatory meeting of the UN Economic Council for Europe in September 2001 to the "removal" of trade-distorting and environmentally harmful subsidies, while now restricting themselves to "encourage reform of subsidies that have considerable negative effects on the environment". The three environmental NGOs furthermore urged governments to recognise in the text that trade liberalisation cannot be presumed to automatically lead to sustainable development and has in fact already led to negative impacts on the environment and poverty alleviation.

While one financial expert asserted that the current trade and finance provisions were largely restricted to development, they cautioned that trying to renegotiate Doha and Monterrey was a lost cause, and that delegates should rather focus their efforts on environmental issues as the added value of WSSD. One environmental source, however, questioned the point of WSSD if it did not go beyond Doha and Monterrey, suggesting that the World Summit could complement the other two processes by providing guiding principles for and conducting an environmental assessment of the WTO negotiations. The source further said that WSSD could help enhance the coherence between economic and environmental governance, in particular between WTO rules and multilateral environmental agreements (MEAs), and assist in defining in more detail the type of technical assistance and capacity building needed to ensure that trade policies become supportive of sustainable development.

Regarding the political declaration of the Summit, WWF called on delegates to make a clear statement that trade measures taken pursuant to MEAs should be presumed consistent with WTO rules unless there was overwhelming evidence that their application involved arbitrary and unjustifiable discrimination, and to strengthen the dispute settlement, compliance and enforcement mechanisms in MEAs. WWF also stressed the need for governments to assert that "global economic liberalisation" was a "process driven and controlled by national governments" which governments must use, alongside other policy instruments, "to deliver greater social and environmental well-being".

Still to come....

The World Summit will take place on 26 August - 4 September in Johannesburg, South Africa. According to press sources, a pre-summit meeting in Brazil is currently scheduled for the end of June, reportedly involving Sweden, Brazil and South Africa. Heads of State attending the meeting are expected to issue a communiqué designed to encourage their peers to join them in Johannesburg.

Documents of the meeting are available at http://www.johannesburgsummit.org and http:// baliprepcom.org. For daily coverage see IISD Linkages at http://www.iisd.ca/2002/pc4/ Civil society coverage of the meeting: "Eco-equity" and "Taking Issue", http://www.sdissues.net/SDIN/.

ENB, Vol. 22 No. 31-37, 28 May - 4 June 2002; "NGOs Petition Annan To Intervene At Bali," UN WIRE, 31 May; ICTSD Internal Files.