SINCE the fourth ministerial conference of the World Trade Organisation in Doha in November, the prospects of a new round of negotiations on a framework for global trade have hinged on the resolution of a singular anomaly. WTO negotiations typically follow the 'single undertaking' format, in the sense that a gamut of agreements are concluded as part of a package that must be accepted or rejected in their totality. Once the deal is clinched, there are no piecemeal options available.
Yet the U.S., as the most influential voice within the WTO, has to surmount a major legislative hurdle to participate meaningfully in this single undertaking process. Under the U.S. Constitution, Congress retains the ultimate power to regulate external trade and could amend any deal that is reached within the WTO. This power of amendment can be surrendered under a specific clause of the Trade Promotion Authority Act, through the grant of 'fast track' authority to the President. Once so authorised, the President can conclude bilateral and multilateral trade deals on the understanding that Congress will either accept or reject these in totality, and not press for piecemeal changes.
Fast track authority was a top legislative priority for the George Bush administration which took office in January. But Congress, facing a multitude of sectional demands and the looming prospect of an economic slowdown, was in a truculent mood. The House of Representatives was scheduled to take up the legislation prior to the Doha conference, but postponed a vote. On December 6, following a week of hectic lobbying by the administration, the House approved fast track authority by the narrowest of margins. The bill will now go to the Senate, where approval is virtually assured by prevalent supportive attitudes towards trade liberalisation. But the mood that was manifested in the House provides certain indications of the U.S.' likely priorities in the next round of trade negotiations.
Despite the intense efforts of the U.S. administration and the moral halo of the war effort it is pursuing in Afghanistan, the vote in the House seemed a lost cause till the very last gasp. Representatives from the States of North Carolina and South Carolina, where textile interests have a substantial influence, were insistent that they would not allow the fast track vote to pass. They were joined by legislators from States where citrus farming and steel manufacture are of crucial economic importance. These largely conservative States tend to have Republican legislators who were under pressure from the Republican President and his floor managers in the House for a favourable vote.
Leading the charge against the grant of fast track authority were Democratic legislators concerned about the overall impact of multilateral trade agreements on employment. In the picturesque phrase of a Democratic member of the House, for the people fast track authority would only mean "a bullet train to the unemployment line".
Environment pressure groups constituted another strong lobby that opposed the fast track authority. Between them the labour and environment lobbies have ensured that there is a powerful constituency within the U.S. to push for the inclusion of these factors in the global trade negotiations process. This is an outcome that India and all other developing countries had firmly opposed. And though the ministerial declaration in Doha was ambiguous on this point, the recent vote in the U.S. might be the prelude to the furtive introduction of these elements into the WTO agenda.
Two legislators from the textile States made the final difference in the fast track vote. One reserved his counsel till the end, determined to cast a favourable vote only if it was indispensable to ensure victory for the administration. Another changed his vote from 'no' to 'yes' just when Democratic members, sensing victory, were clamouring that the gavel be brought down and the proceedings be declared closed. The final outcome was 215 votes in favour and 214 against.
One of the key clauses that members from South Carolina and North Carolina inscribed into the bill mandates that garment imports from certain Caribbean and Latin American countries be made from fabric finished and dyed in the U.S. The lobbying that was mounted by textile interests provides an interesting retrospect on the U.S. stance in Doha, when among the developed countries it alone chose to block an outcome favourable for developing country exporters.
In August this year, before terrorism became central to U.S. policy, a group of Senators had addressed a letter to U.S. Trade Representative Robert Zoellick, insisting that "no further concessions" be granted in textiles and clothing, "beyond those already agreed in the Uruguay Round". The hardline attitude, they said, was necessary because of the conspicuous "lack of reciprocity in... currently negotiated textile agreements".
U.S. sensitivities on textiles cast a long shadow over the proceedings in Doha, holding up progress along a broad range of fronts. A coalition of developing countries has been arguing since the 1998 WTO ministerial meeting in Geneva that the Uruguay Round agreements, which went much beyond earlier such negotiations in terms of scope and depth, needed to be reviewed not just for the compliance of various countries, but for their impact in different areas. Notably they pointed out that the agreement to dismantle restrictive import quotas in textiles had first been worked out to the developing countries' disadvantage and then been further vitiated in practice.
Variously, the U.S. and the European Union took the plea that to review the Uruguay Round necessarily meant renegotiation - which could only be done as part of a comprehensive new round of talks. This rather reverential attitude towards the written text of the Uruguay Round was quite remote from reality, since there are standing bodies within the WTO which monitor compliance with various agreements and undertake any other work that they might be entrusted by the membership. The Council on Trade in Goods, for instance, monitors the Uruguay Round Agreement on Textiles and Clothing (ATC).
Where the ATC was concerned, the developing countries had a substantive grievance. The advanced countries which maintain restrictive quotas only agreed most grudgingly to dismantle them in accordance with a back-loaded schedule, that is, one which defers almost half the job to the year 2005. And secondly, shortly before the agreement came into effect, they notified a number of quota restraints on items that were earlier free of such fetters. This constituted a much larger bulk from which to begin the process of quota dismantling, allowing them to simulate an elaborate pretence of compliance with the ATC while remaining secure in old ways.
A few weeks before Doha, WTO Director-General Mike Moore seemed to think it expedient to acknowledge the developing countries' concerns on implementation. "Member governments have worked very hard on the issue of implementation and there is a growing recognition that implementation is central to our work. Developing countries have won," he said. But the trophy of victory he awarded seemed distinctly like a poisoned chalice: "It is also clear that further efforts to rebalance past agreements in any significant way will require new negotiations. Implementation can thus become another key building block in our future work."
At the mini-ministerial meeting held in Singapore in October in preparation for Doha, U.S. Trade Representative Robert Zoellick put the case with much less subtlety and guile. Addressing the implementation concerns that had been raised by Commerce Minister Murasoli Maran, Zoellick demanded that India pay a price to gain further benefits in textiles and enter a new round of negotiations.
The draft decision on implementation that was circulated among member-states prior to Doha embodied five proposals in the area of textiles and clothing. Of these, three were mere affirmations of the principles of flexibility, effective utilisation of provisions for early elimination of quotas, and restraint in launching investigations on exports from developing countries. These could be of benefit in a longer-term context, particularly when - and if - developed countries comply with the Uruguay Round timeta-ble and dismantle all quotas by the end of 2005.
Of the two provisions of substantive economic benefit, one pertained to small suppliers and least developed countries. The sole proposal of interest to the other main textile exporters including India was one that applied quota growth rates applicable for the years between now and 2004, retrospectively to the year 2000. This meant that the gradual acceleration of quota growth rates (the "growth on growth" scenario) would be applied backwards, so that the current year would yield a much larger base upon which to calculate quota entitlements in the three years remaining before final dismantling of quotas.
Developing countries were insistent that neither of the two proposals of immediate economic benefit involved an amendment of the ATC. Rather they only implied that the flexibility available under the agreement would be fully exploited in a gesture of good faith to the developing countries. Zoellick, with the admonitions of the U.S. Congress ringing in his ears, was not prepared to look at things this way.
On Day Two at Doha, the U.S. and Canada, which have generally been adopting similar methodologies in dismantling textile quotas, placed on record "significant difficulties" in accepting the draft decision on textiles. With that the WTO ministerial meet lost a vital element of flexibility, impeding progress across a broad front. In bilateral interactions with delegates from other countries, the U.S. and Canada took the plea that the proposal to abolish quotas on an accelerated basis would put many jobs in their countries at stake.
Subsequent bargaining produced an agreement on referring the entire matter to the Council on Trade in Goods. But the developed countries had yet again squandered an opportunity to restore the faltering confidence of the poorer nations in the WTO. The far more decisive test will come in 2005 - significantly enough, the year following the U.S. presidential elections - when quotas are expected to be finally eliminated. If the recently manifested militancy of the U.S. Congress on textile imports - not to mention labour and environment issues - is any indication, then the prospects for the credibility of the WTO are rather bleak.