Office of the Minister for Trade Negotiations - Chair, Cabinet

WORLD TRADE ORGANISATION: NEGOTIATING MANDATE FOR THE LAUNCH OF A NEW ROUND OF TRADE NEGOTIATIONS

Proposal

1 This paper seeks a mandate from Government on New Zealand’s approach to a Ministerial declaration for the 4th WTO Ministerial Meeting. If agreement can be reached, this declaration would launch a new multilateral trade round.

Executive Summary

2 WTO Members are debating the launch of a new trade round at the next ministerial meeting, and the scope of a possible negotiating mandate. For New Zealand, core interests in a round include further liberalisation of market access for agriculture, non-agricultural goods (including fish and forestry), and services; strengthened trade rules to guard against protectionism and unfair trade practices; and better integration of the work of the WTO with other international priority areas, such as sustainable development. Ministerial agreement is sought to proposed negotiating objectives and guidelines for New Zealand as negotiations proceed on a ministerial declaration to launch a new round. Ministerial endorsement is sought for proposed principles to underpin a communications strategy for both the WTO ministerial meeting and post-launch negotiations.

Comment

3 The key issue before the World Trade Organisation this year is whether the 4th Ministerial Meeting, scheduled to be held in Qatar from 9-13 November, will launch a new trade round.

4 The Prime Minister’s Statement to Parliament on 13 February 2001 noted that the Government would be active in promoting the launch of a new WTO round this year. This is because the Government has judged that multilateral trade liberalisation and rule-making through the WTO give New Zealand the best chance of sustained improvements in living standards through growth in trade.

5 As a small economy, a credible multilateral system supported by robust disciplines is at the core of advancing and protecting our interests. New Zealand made significant economic gains through improvements in trading opportunities in the Uruguay Round and since that time has also successfully protected its interests through the use of the WTO dispute mechanisms, eg. with respect to US lamb trade barriers. A new round of negotiations will provide enhanced trading opportunities and ensure a continuation of our ability to use the WTO system to “box above our weight” in the international trading arena.

6 Unlike the Uruguay Round, which incorporated new sectors under the WTO umbrella (eg, agriculture, services, textiles and clothing, intellectual property), the focus this time will be on expanding market access, strengthening the rules, and ensuring that the WTO’s approach is more integrated with other areas of international activity, such as sustainable development. A number of new issues under debate point to the increasingly close relationship between trade issues and domestic economic policies. These include competition policy, investment and environment, which are central to sustainable development policies. These may increase the complexity of the WTO’s work in future. Developing country interests will also be more of a focal point this time.

7 Against this background, even a more focused round is proving difficult to launch. The first attempt failed at Seattle. Another failure would severely damage the WTO and further delay the prospects of multilateral trade liberalisation. Given the complexity and range of interests, efforts leading up to Doha are focusing on a negotiation about the content and coverage of a new round, and not detailed mandates on each area. The latter will be addressed after a round is launched.

8 The feeling amongst the WTO membership is that a short, general Ministerial declaration is all that is achievable in the four months remaining before Doha – something more like the declaration that launched the Uruguay Round, rather than the lengthy, detailed document that went to Seattle. This means New Zealand’s negotiating mandate will be best expressed in terms of our key objectives for a round.

Key Issues in a WTO Round

9 The key issues being discussed for possible inclusion in the Doha declaration are:

Market access: agricultural and non agricultural (including fish and forestry) goods, and services

Further development and implementation of the WTO rules: trade facilitation, anti-dumping, rules of origin, trade-related intellectual property, special and differential treatment for developing countries (including Uruguay Round implementation issues)

New issues (the so-called “trade and” issues): trade and environment, trade and labour, competition, investment

10 Annex A contains a description of the main issues that arise under these headings. There are a number of ways that specific topics might be addressed. Some will be incorporated into a negotiating mandate, some may be the subject of statements of Ministers’ views in the declaration, and analytical work programmes may be established for those that are not ready for negotiation.

11 New Zealand is in a good position in that few proposals are potentially damaging to our major interests. Our core economic interests in a round lie in the trio of market access negotiations and related rules issues, especially for primary resource goods which continue to face some of the highest barriers and most distorted market conditions. The emphasis New Zealand places on better market access internationally is shared by many developing countries, especially in the areas of agriculture and textiles and clothing.

12 For agriculture and services negotiations, which are already underway, we already have negotiating mandates (CAB (00) M 13/1C(1)). These negotiations will continue whether or not a round is launched, but the chances of useful results for New Zealand without a round are small; countries with strong defensive interests would be unable to bring the necessary flexibility to bear without the opportunities for trade-offs available in a round. We would therefore want to use Doha to create the right conditions to secure the right outcomes for these sectors.

13 The new issues are being pushed predominantly by a range of developed countries. However, they are by no means unified on the priorities among these issues, leading to a great deal of tactical manouvering. The majority of developing countries have been resistant to adding these issues to a negotiating agenda, and have instead emphasised “implementation” issues, eg the need to implement fully the Uruguay Round agreements first and build their institutional capacity before taking on new commitments.

14 The trade-offs that must be made to launch a new round will include compromises across the three broad categories of issues listed above. New Zealand’s ability to achieve its objectives in key areas such as agriculture and services will require recognition of the place of these other issues in the overall balance of the package. So will our interests in integrating legitimate labour and environment standards better with trade agreements.

15 However, we will need to manage some particular risks that could restrict present access levels and conditions, increase compliance costs, or compromise current domestic policies. These include unjustified demands to restrict agricultural market access and a poor agreement on investment.

Negotiating Objectives and Guidelines

16 We propose the following negotiating mandate for the lead-up to the Doha ministerial meeting.

A. Key objectives

1. Enhance New Zealand’s welfare through:

progress towards a world trading system operating on the basis of fair competition;

improved market access for New Zealand goods and services;

improvements to trade rules to ensure they facilitate the flow of goods and services and discipline unsustainable, anti-competitive and trade protectionist behaviour.

2. Ensure the round contains a sustainable development perspective:

sustainable development (including environmental) objectives are supported in any negotiating mandate;

legitimate interests of developing countries are taken into account.

B. Guidelines

Uphold the principle of universality - agreements reached in the round should be a single undertaking, binding on all WTO members.

Give priority to areas that support domestic economic development and transformation policies, including issues of particular interest to Maori.

For subjects where there is an existing negotiation (agriculture and services) seek a strengthened mandate in the declaration, including definition of the level of ambition and a timeframe for concluding the negotiations.

Seek progress towards the defence of legitimate labour standards within the context of trade liberalisation, without allowing these to be used as protection against fair competition.

In any areas where New Zealand has defensive interests, ensure that the declaration does not commit us to unwanted outcomes.

Keep up regular communication with stakeholders in New Zealand

New Zealand Approach So Far

17 The approach New Zealand has taken so far is consistent with these objectives and guidelines. New Zealand has been actively participating in a range of processes in the WTO aimed at clarifying the issues for inclusion on the negotiating agenda.

18 One focus has been the negotiations already underway on agriculture and services. A second focus has been participation in a range of small groups (which include many developing countries) that have been meeting to explore specific issues and bring about compromises on contentious ones in order to get a round launched. These groups have included non-agricultural market access, trade facilitation, trade and environment, trade and labour, trade and investment, anti-dumping, transparency in government procurement, and Uruguay Round implementation issues.

19 With Switzerland, we have established a group of about a dozen small and medium sized, developed and developing, active members of the WTO to brainstorm how a Ministerial declaration might be drafted, bearing in mind the very wide range of competing interests the 141 WTO members are bringing to the issue of a Round.

20 Through all these approaches, New Zealand has been drawing on its reputation for being an independently-minded, active player in the WTO, which relies on the strength of its case and networking with like-minded Members to address its interests, backed up by a solid record of commitment to the trade liberalisation objectives of the WTO and domestic enforcement of our WTO obligations. In many areas we are seen as a bridge builder, able to understand and reflect disparate interests in compromise positions. Maintaining this reputation is the key to ensuring that New Zealand is in the room when issues critical to our interests are being hammered out.

Communication Strategy

21 The Ministry of Foreign Affairs and Trade is developing a communications strategy in consultation with relevant departments that will guide consultations before the Doha Ministerial meeting. It will also provide the basis for intensified and more detailed consultations after Doha and throughout negotiations. It is based on the following principles:

it will promote informed public debate of the issues and inform the development of New Zealand negotiating positions;

it will be as transparent as possible;

Ministers will be kept informed on progress and their guidance sought where necessary;

Other stakeholders (and civil society), including the business sector, trade unions, Maori, and NGOs, will be kept informed on progress, and asked for their input into New Zealand positions;

22 Immediate steps being developed include:

releasing publicly the key elements of this paper and updates on progress on the MFAT website;

releasing publicly papers on trade and labour and trade and the environment;

discussions with stakeholders to ensure that all key New Zealand interests that need to be taken into account in the negotiation of the Ministerial declaration are identified;

inviting those who made submissions prior to the Seattle Ministerial Meeting in 1999 to update their positions.

Next Steps

23 The WTO will be holding a stocktake meeting at the end of July to assess the state of play on a possible negotiating agenda for a new round. I expect this stocktake will reveal areas where consensus already exists or is close to being realised, and key outstanding issues that will require further clarification. At this point the WTO will begin work on drafting and negotiating the Ministerial declaration.

24 It will not be until we see the initial drafts of the Ministerial declaration that we will be able to assess clearly the extent of outstanding issues for New Zealand. I propose to brief Cabinet at that stage on the progress we have made, and will also seek further guidance where necessary on the positions that New Zealand should take in the final negotiations on a round agenda. I will also brief Cabinet on the results of initial consultations with stakeholders and civil society. I expect to provide this report in late September, early October. A separate report on integration of labour standards issues and trade agreements has already been prepared for Cabinet’s Policy Committee and officials are commencing work on a report on trade and environment.

Consultation

25 The Treasury, the Ministry of Economic Development, the Ministry of Agriculture and Forestry, the Ministry for the Environment, the Department of Labour, the Ministry of Transport and NZ Customs Service have all been consulted on the development of this paper and agree with its recommendations. Te Puni Kokiri has been consulted on the development of this paper. The Ministry of Fisheries has been provided with the opportunity to comment.

Financial Implications

26 This paper has no financial or budget implications.

Human Rights Act Implications

27 This paper has no implications under the Human Rights Act.

Legislative Implications

28 This paper has no legislative implications.

Regulatory Impact and Compliance Cost Statement

29 A regulatory impact statement is not required.

Publicity

30 I propose that this paper be made publicly available to assist consultations.

Recommendations

31 It is recommended that Cabinet:

1 note that the 4th Ministerial Meeting of the World Trade Organisation (WTO) is scheduled to be held in Doha, Qatar in November 2001

2 note that promotion of the launch of a new round of multilateral trade negotiations by the WTO this year is the main trade policy priority for New Zealand;

3 agree to the following initial negotiating objectives and guidelines:

3.1 Key Objectives

3.1.1 Enhance New Zealand’s welfare through:

3.1.1.1 progress towards a world trading system operating on the basis of fair competition;

3.1.1.2 improved market access for New Zealand goods and services;

3.1.1.3 improvements to trade rules to ensure they facilitate the flow of goods and services and discipline unsustainable, anti-competitive and trade protectionist behaviour;

3.1.2 Ensure the round contains a sustainable development perspective:

3.1.2.1 sustainable development (including environmental) objectives are supported in any negotiating mandate

3.1.2.2 legitimate interests of developing countries are taken into account;

3.2 Guidelines

3.2.1 uphold the principle of universality - agreements reached in the round should be a single undertaking, binding on all WTO members;

3.2.2 give priority to areas that support domestic economic development and transformation policies, including issues of particular interest to Maori;

3.2.3 for subjects where there is an existing negotiation (agriculture and services) seek a strengthened mandate in the declaration, including definition of the level of ambition and a timeframe for concluding the negotiations;

3.2.4 seek progress towards the defence of legitimate labour standards within the context of trade liberalisation, without allowing these to be used as protection against fair competition;

3.2.5 in any areas where New Zealand has defensive interests, ensure that the declaration does not commit us to unwanted outcomes;

3.2.6 keep up regular communication with stakeholders in New Zealand;

4 note that officials will seek further guidance from Ministers on New Zealand’s position when the nature of decisions required for a negotiating mandate for a WTO round is clear;

5 note that officials will be seeking guidance on detailed New Zealand negotiating positions for each issue once the agenda of a WTO round negotiation has been agreed;

6 note that on 9 July 2001 Cabinet agreed that sustainable development principles should underpin the Government’s economic, social and environmental policies and that its decisions of 22 May 2000 on sustainable development should be used as an interim guide to government departments undertaking relevant work;

7 endorse the following approach for a communications strategy for both the pre-launch and post-launch phases of a round negotiation;

7.1 The communications strategy will:

7.1.1 promote informed public debate of the issues and inform the development of New Zealand negotiating positions;

7.1.2 be as transparent as possible;

7.1.3 keep Ministers informed on progress and their guidance will be sought where necessary;

7.1.4 keep other stakeholders (and civil society), including the business sector, trade unions, Maori, and non-governmental organisations informed on progress, and they will be asked for their input into New Zealand positions;

7.2 Immediate steps being developed include:

7.2.1 releasing publicly the key elements of this paper and including updates on progress on the Ministry of Foreign Affairs and Trade website;

7.2.2 releasing publicly papers on trade and labour and trade and the environment;

7.2.3 discussions with stakeholders to ensure that all key New Zealand interests that need to be taken into account in the negotiation of the Ministerial declaration are identified;

7.2.4 inviting those who made submissions prior to the Seattle Ministerial Meeting in 1999 to update their positions;

8 note that officials will provide Ministers with regular reports on the outcome of consultations throughout the negotiations;

9 note:

9.1 the Cabinet’s decisions on the integration of labour standards and trade agreements;

9.2 that officials are commencing work on a further report on trade and environment issues;

10.1 agree that this paper should be made publicly available to contribute to consultations on launching a round;

10.2 invite the Minister for Trade Negotiations to arrange for the paper to be recast as a position paper that the Minister of Labour could use for the purpose of briefings following the ILO conference.

Hon Jim Sutton - Minister for Trade Negotiations

ANNEX KEY ISSUES IN A WTO ROUND

Agriculture

Negotiations on agriculture have been underway since March 2000. The key issues are how to: improve market access through further commitments on reducing tariffs and expanding tariff quotas; eliminate government subsidies on agricultural exports; and reduce other trade-distorting government support. Special treatment of developing country agriculture (from both an agricultural and developmental perspective) will also be pivotal. A range of non‑trade concerns are being pursued by some countries. These include food safety; animal welfare; food security; rural development; environmental aspects of agriculture, and food geographical indications.

Industrial Goods

Negotiations on industrial tariffs (which include fish and forestry) are core WTO business. There is currently no mandate for further negotiations in this sector, but there is widespread support for this issue to be included in a round. Key issues for New Zealand include comprehensiveness (ensuring that all industrial tariffs are included for negotiation), greater security of access through bindings on all tariff lines, addressing tariff peaks (very high tariffs), tariff escalation (tariff regimes where the rates increase as the value added content increases), and nuisance tariffs (very low tariffs that serve no protective purpose).

Services

Negotiations are already underway, based on the GATS (General Agreement on Trade in Services). Good progress has been made. Key issues include clearer rules, extension of sectoral coverage, and improved access to markets. New Zealand will be seeking credit for the autonomous liberalisation we have already undertaken through better market access commitments by our trading partners.

Environment

There is little clarity at present on the range of issues that could be the subject of negotiation under the heading of trade and environment. New Zealand along with others has proposed the removal of trade distorting fishing subsidies which contribute to over-capacity and over-fishing. The EU has proposed launching negotiations in three areas: “clarifying the relationship between MEAs and the WTO”; the inclusion of the precautionary principle in the WTO in respect of environmental issues; and eco-labelling. While all of these issues are important internationally, most WTO members do not agree that there is a need for negotiations on them in a WTO context.

Trade and Labour

The relationship between trade and labour standards has been the most contentious issue for WTO members. Important work on this subject is going on in the International Labour Organisation (ILO) and there is a consensus in the WTO not to undermine the ILO’s status as the pre-eminent international organisation responsible for labour issues. But there is a divergence of view among the membership over how far this work should be recognised within the WTO.

Investment

Proponents have been arguing for negotiations to commence on new WTO rules on investment to promote transparency and clarity in international investment. Key issues include a focus on foreign direct investment; an emphasis on development benefits for poorer countries; investment incentives; an approach to negotiations that would enable members to buy-in to broad principles but allow for flexibility in the level and nature of commitments; the need for transparency; and the exclusion of investor-state dispute settlement. Many members, including a number of developing countries, remain sceptical about the need for new WTO rules on investment.

Competition

The proponents pushing for new WTO rules on competition argue that this will help address anti-competitive practices internationally. Key issues include core competition principles and appropriate elements for domestic competition frameworks (without implying international harmonisation); transparency in competition policies; non-discrimination; international cooperation on enforcement of competition laws; and capacity building for developing countries. A number of developing countries have expressed opposition to inclusion of this issue in a round- noting that many of them do not have formal domestic competition rules or competition authorities.

Trade Facilitation

Trade facilitation is the term used to cover work on simplifying the bureaucracy associated with international trade; all those procedures and information flows required to move goods internationally from seller to buyer, and pass payment in the other direction. Key issues include improving the predictability and transparency of border requirements, use of electronic information exchange, applying a risk management approach to customs clearance, and clarifying relevant provisions of the General Agreement on Tariffs and Trade (GATT). New Zealand is looking for an approach that would be enabling rather than prescriptive, and allow for innovation rather than establish a rigid set of rules.

Rules of Origin

The key issue in this area is whether work mandated under the WTO Agreement on Rules of Origin to harmonise “non preferential” rules of origin can be concluded in time for the Doha Ministerial. Emerging concerns include the impact on business transaction costs of complying with an international system of rules of origin, since at the present time the bulk of world trade is not affected by non-preferential rules.

Trade Remedies: Anti-dumping

A range of WTO members are concerned about the proliferation of anti-dumping cases being taken internationally. Many argue that anti-dumping is being exploited for protectionist purposes instead of addressing unfair trade practices. The key issue is whether the agreement as currently drafted provides sufficient discipline to ensure anti-dumping actions address real instances of injury caused by dumping.

Trade Related Intellectual Property (TRIPs)

Several issues have been proposed on intellectual property. A number of developing countries have proposed work on the TRIPs Agreement and public health issues, to contribute to work underway within the UN system on managing the HIV/AIDs epidemic. Other issues include a push to extend the existing protection given to geographic indications for wines and spirits (which limit the use of terms such as “champagne” to those producers from the specific region) to all other products, including food. A third issue, of particular interest to New Zealand, is whether to make provision for protection of traditional knowledge within the TRIPs Agreement. It is currently up to individual countries to decide whether to recognise traditional knowledge and expressions of indigenous culture as forms of intellectual property.

Implementation of the Uruguay Round Agreements

Developing countries have argued that implementation of the Uruguay Round by industrialised WTO members in particular was not undertaken as they had expected, and that they have therefore not received the benefits they anticipated from the existing WTO agreements as a result. They have raised a wide range of issues that they would like addressed, including bringing forward scheduled liberalisation in areas like textiles and clothing, and more flexible application of a range of trade rules. However, many of the issues go beyond implementing the existing Agreements and would require changes to the these texts to be addressed. WTO members are currently looking at which issues could be addressed now, with industrialised members noting that they would be prepared to include negotiation on the rest in a new trade round.

ENDS

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