WORLD TRADE

ORGANIZATION

Seattle Ministerial:

Outcomes and Lessons

Learned

Statement of Susan S. Westin, Associate Director, International Relations

and Trade Issues, National Security and International Affairs Division

United States General Accounting Office

GAO Testimony

Before the Subcommittee on Trade, Committee on Ways

and Means, House of Representatives

For Release on Delivery

Expected at 1p.m., EST

Tuesday,

February 8, 2000

GAO/T-NSIAD-00-84
Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to provide some observations about the World

Trade Organization’s ministerial conference in Seattle that took place in

December 1999. Specifically, my testimony will address (1) the outcome of the

ministerial conference, (2) the factors contributing to the outcome, and (3) the

lessons learned from the meeting.

My observations are based on our past and ongoing work; our review of World

Trade Organization and executive branch documents; related literature;

discussions with experts on the World Trade Organization and international trade;

and U.S. government, World Trade Organization, and foreign government officials

from 14 countries. In addition, I along with members of my staff attended the

Seattle ministerial conference.

The ministerial conference, composed of the trade ministers of all the WTO

member countries, is the highest decision making body in the WTO and is

required to meet at least every 2 years. Ministerial conferences are intended to

evaluate current trade agreements and set the agenda for future work with a

ministerial declaration that identifies issues for negotiation and specifies how

negotiations should proceed.

The Seattle ministerial conference was to be particularly significant because it

was expected to launch a major new round of negotiations and it was hosted and

chaired by the United States for the first time. The core of the new round was to

be negotiations on agriculture and services (such as telecommunications); these

negotiations, referred to as the “built-in agenda,” were already mandated to begin

on January 1, 2000. Ministers intended to decide on what other trade issues, if

any, to include in the agenda for a new round. They also expected to review the

implementation of past agreements and to address calls from nongovernmental

organizations and some WTO members to improve the WTO's openness. In

addition, they were to develop a plan to assist least developed countries in several

ways, such as providing technical assistance to help them meet their trade

obligations.

SUMMARY

WTO member countries failed to meet their goal of launching a new round of

multilateral trade negotiations at their biennial ministerial conference last

December in Seattle. The conference was suspended without initiating a new

round or issuing a ministerial declaration. No one factor, but a combination of

circumstances, led to the impasse. However, two themes emerged. First, there

was lack of agreement on many issues both among major trading partners and

between developed and many developing countries on the eve of the ministerial

conference. Disagreement centered on the scope of the round and stemmed from

the sensitivity and complexity of the issues being addressed. Second, the Seattle

negotiation process had inherent difficulties. For example, the document used as
2

the basis for negotiations was a poor starting point for reaching consensus. It was

a lengthy amalgamation of countries’ divergent positions rather than a text

reflecting members’ common objectives. In addition, the negotiating process was

hampered by the newness of the WTO leadership team. Further, the process was

made difficult by the challenge of accommodating the needs and interests of a

large and increasingly diverse WTO membership.

Several lessons can be learned:

• Efforts to a launch a new round may have been premature.

• Ministerial conferences are more likely to succeed if they address only a

handful of politically difficult decisions, having reached consensus on most

issues in advance.

• The WTO needs to find ways to address the institutional challenges posed by

increases in the number and diversity of its members.

• Holding high profile WTO meetings in countries that are major trading

partners, such as the United States and the EU, may present difficulties.

BACKGROUND

The World Trade Organization (WTO) was established on January 1, 1995, as a

result of the Uruguay Round of international trade negotiations. The WTO

provides the institutional framework for the multilateral trading system. It

administers rules for international trade, provides a mechanism for settling

disputes, and provides a forum for conducting trade negotiations. The WTO

succeeded the General Agreement on Tariffs and Trade (GATT), which had

provided the institutional framework for world commerce since 1948. The 1994

Uruguay Round agreements brought agriculture, services, intellectual property

rights, trade-related investment measures, and textiles and apparel under the

discipline of multilateral trade rules for the first time and established a stronger

dispute settlement process. Two of these agreements also mandated a "built-in

agenda" for further negotiations on agriculture and services to commence January

1, 2000.

Membership in the WTO has grown to 135 members, up from about 90 GATT

members in September 1986, at the start of the Uruguay Round. Not only has

there been an increase in membership, but also increased diversity in WTO

members. Roughly 80 percent of the current members are developing countries,

although some are at more advanced stages of development than others and thus

they do not all have the same needs. According to WTO, virtually all of the 30

countries currently applying for membership are also developing nations or

economies in transition. Unlike many other international organizations where

decisions are based on a majority of member votes, decision-making in the WTO

is largely based on consensus among member governments.

There have been three ministerial conferences since the creation of the WTO: one

in Singapore in December 1996, one in Geneva in May 1998, and the third in
3

Seattle in December 1999. The WTO General Council makes major decisions in

the periods between ministerial conferences. The Director General, chosen by

members, heads the WTO Secretariat that supports the membership and the

institution.

The 1996 Singapore ministerial conference reviewed the implementation of the

Uruguay Round agreements and considered proposals for trade issues to be

addressed in the future. The ministers in Singapore reaffirmed their commitment

to complete the built-in agenda and also addressed several trade issues that were

previously outside the scope of detailed trade negotiations. Among other things,

they authorized the creation of working groups to study transparency in

government procurement, investment and competition, and agreed to continue

ongoing analysis of trade and environment issues. The ministers in Singapore

rejected attempts led by the United States to establish a working group on trade

and labor, stating that this issue was best handled by the International Labor

Organization.

The Geneva ministerial conference coincided with the 50th anniversary of the

GATT. Ministers agreed to begin preparing an agenda for further trade

liberalization. Ministers also accepted President Clinton’s offer that the United

States host the next ministerial conference. Seattle was selected as the host city

in January 1999.

SEATTLE MINISTERIAL DID NOT ACHIEVE ITS OBJECTIVES

The ministerial conference failed to achieve its goal of initiating a new round of

multilateral trade negotiations with a ministerial declaration. After 4 days of

intensive talks, the conference was suspended on December 3 without agreeing

on a round, or issuing a ministerial declaration or any other formal documentation

of its deliberations. As a result of the inconclusive nature of the meeting, the

status of the ministerial conference remains unclear. For example, members have

not decided if and when the conference might reconvene. Even without a new

round, negotiations to further liberalize trade in agriculture and services are

scheduled to begin in the year 2000 under the Uruguay Round agreements’ built-in

agenda. Progress on these negotiations, however, may be slow, partly because

the agenda lacks a deadline for completion. The negotiating impasse also left

several issues unresolved, such as addressing some developing countries’

concerns about expiration of certain Uruguay Round agreement deadlines.

In a brief statement at the end of the meeting, the Conference Chair, U.S. Trade

Representative (USTR) Charlene Barshefsky, noted that the issues before WTO

ministers were complex, and divergences too wide to be bridged rapidly.

Ambassador Barshefsky stated that it was the collective judgement of those

present that it would be best to, “take a time out, consult with one another, and

find creative means to finish the job.” She then announced that the ministers had

agreed to suspend the work of the ministerial conference. In the interim, the

Chair asked WTO Director General Mike Moore to consult with delegations in an
4

effort to bridge differences, develop an improved decision-making process, and

prepare for a successful conclusion of the ministerial conference.

The Chair and other delegations emphasized that the progress that was made at

Seattle would not be lost. But those assurances were quickly dismissed by other

participants, who refused to “freeze” their positions and said that any draft texts

of a declaration on the table at Seattle were no longer valid. Even if members

were to agree in principle to restart negotiations from where ministers left off at

Seattle, no text reflects the state of countries’ positions at the end of the day.

One outstanding issue due to the suspension of the Seattle meeting concerns

developing countries’ efforts to delay their end-of-1999 deadlines for conforming

to certain provisions in a number of Uruguay Round agreements, such as those on

intellectual property rights and investment measures. The WTO General Council

met on December 17 but could not agree on whether to grant extensions for all

developing countries, or to consider them on a member-by-member basis. The

General Council postponed until early 2000 a decision on how to proceed. In the

meantime, WTO members were asked by the General Council Chairman to

exercise restraint and understanding in dealing with these deadlines. USTR

officials told us that the United States retains the right to bring cases based on the

deadlines, which have since passed.

NO ONE FACTOR CONTRIBUTED TO MINISTERIAL OUTCOME

No one factor, but a combination of circumstances, led to the WTO’s inability to

launch a new round. Nonetheless, seemingly unbridgeable gaps on major issues

both among the major trading partners and between developed and many

developing countries were at the root of the outcome of the ministerial

conference. First, disagreements centered on the scope and direction of a new

round. They also stemmed from the increased sensitivity and complexity of the

issues on the table. Further, Seattle negotiators faced inherent difficulties in their

negotiation process both in Seattle and Geneva. These included the challenge of

accommodating the needs and interests of a large and increasingly diverse WTO

membership. In addition, negotiators were working from an unwieldy draft text

symptomatic of the lack of agreement among countries in Geneva on the eve of

the ministerial meeting. Further, U.S. and foreign officials noted that WTO

members’ selection of a new Director General earlier in the year had been lengthy

and divisive. This experience left members without leadership during a good part

of their preparations for Seattle and lingering hard feelings. Adding tension to a

difficult situation, protesters marching against the WTO in Seattle during the week

disrupted the proceedings.

No Agreement on the Scope of Negotiations

U.S. and foreign officials with whom we met said that fundamental differences

between the major trading countries contributed greatly to the ministerial

conference’s ultimate lack of consensus. The United States wanted to pursue a
5

narrow agenda in the new round, while the European Union (EU) and Japan

promoted a broad framework for negotiations to bring many new areas under

international disciplines. Officials we interviewed generally felt that without

agreement among these major players in international trade, it would be

impossible to build consensus among the rest of the members.

The United States favored limiting negotiations primarily to address market

access concerns and to focus on the areas of agriculture and services as called for

under the Uruguay Round agreements. With the backing of the other major

agricultural exporting countries, known as the “Cairns Group,” the United States

insisted that negotiations on agriculture address a number of tough issues,

including the elimination of export subsidies and substantial reduction of tradedistorting farm supports. Such far-reaching goals in agriculture were difficult for

the EU to accept. According to European officials, they simply could not support

language calling for the elimination of agricultural export subsidies as the starting

point of negotiations. Instead, the EU viewed the new round as an opportunity to

establish international rules in other areas of the global trading system. In

addition to agriculture and services, the EU proposed including investment,

competition policy, government procurement, and other issues in a broad

framework for negotiations. Japan largely supported the EU’s position on these

issues. Although U.S. negotiators indicated support for continued study of

investment and competition policy by WTO working groups, the United States and

many other WTO members were unwilling to include these issues in the

negotiating agenda.

In addition to differences among the major trading countries, there was also a

serious gap between developed and many developing countries on the scope of a

new round. Like the United States, developing countries generally backed a

narrower scope for negotiations. Although developing countries’ positions

differed on some issues, many of them called for a reassessment of the

commitments of the Uruguay Round agreements. The United States did not want

to reopen existing agreements to new negotiations. Some developing countries

felt they had received few benefits from the Uruguay Round and had found it

difficult to meet their obligations under its agreements. For example, certain

developing countries insisted they lacked the financial and technical resources to

implement the complex requirements called for under the intellectual property

agreement. Developing countries also wanted to re-negotiate areas of the

Uruguay Round, such as the agreement on textiles that they argued had not given

them the benefits they had anticipated. U.S. negotiators indicated they would

consider ways of helping developing countries meet their Uruguay Round

commitments on a case-by-case basis, but they rejected any attempt to reopen

negotiations on the hard-fought agreements.

Finally, officials from some developing countries we interviewed noted that 5

years did not provide enough time for them to cope with the changes mandated

under the Uruguay Round. Given the difficulties they were having in

implementing the Uruguay Round agreements, many of these countries expressed
6

reservations about undertaking further trade liberalization. One developing

country official remarked that in comparison with the situation in 1994 when the

Uruguay Round was concluded, starting a new round at this time would be

considerably more difficult. In 1994, the ideas of market reforms and trade

liberalization were still fresh and held tremendous promise. It was also a time of

economic growth in many of the developing countries engaged in the

negotiations. The current situation is very different. Much of the developing

world is going through a difficult time economically, even though many countries

have already undertaken far-reaching market reforms and trade liberalization.

Sensitivity and Complexity of Issues Impeded Progress

The most sensitive and complex area of negotiations between the EU on the one

hand and major agricultural exporters including the United States on the other

was on agriculture. Although the EU has been reducing subsidies to agriculture

since the Uruguay Round, it remains by far the world’s largest user of agricultural

export subsidies.1

In the WTO, the United States and other major agricultural

exporting nations, such as Australia, Brazil, and Canada, have put increased

pressure on the EU to abandon its reliance on export subsidies. Export subsidies,

however, are a key mechanism in the EU’s Common Agricultural Policy. The

Common Agricultural Policy is intended to preserve farm incomes and rural

economies by supporting high domestic prices for a wide variety of agricultural

commodities and products. EU member states have taken a very strong position

on maintaining the Common Agricultural Policy, which is a central element in the

EU’s institutional system and is regarded as essential to its cohesiveness.

Like the EU and its position on agricultural export subsidies, the United States

was virtually isolated on the issue of antidumping regulations in the negotiations.

Major trading partners like Japan and Korea, as well as some developing

countries, called for reconsideration of the agreement on anti-dumping reached

under the Uruguay Round. These countries felt that the current antidumping rules

allow countries to use trade remedies to unfairly protect certain sectors. The

United States argued that re-opening the complex agreement was premature and

risked weakening the strength of the existing U.S. anti-dumping regime. U.S.

negotiators said they would consider holding discussions on how WTO members

were implementing the agreement’s procedural requirements, but this U.S. offer

attracted limited support.

Developing countries were very concerned about U.S. and EU initiatives to bring

labor into the WTO. They feared that addressing labor standards under the WTO

was simply a veiled form of protectionism aimed at undermining one of the few

competitive advantages they enjoy as lower-wage producers. At the Singapore

ministerial conference, it had been agreed that labor standards were best

addressed in the International Labor Organization rather than in the WTO, and

1

See Commitments by the European Union and the United States to Reduce Agricultural Export

Subsidies (GAO/NSIAD-99-198R, June 18, 1999) for more details.
7

many developing countries felt the issue had been put to rest. According to some

officials from developing countries, the U.S. insistence on resurfacing the issue of

labor in Seattle and the President’s remarks potentially linking labor standards to

trade sanctions were counterproductive.

Seattle Negotiation Process had Inherent Difficulties

The difficult task of accommodating the needs and interests of a large and

increasingly diverse WTO membership hampered progress in Seattle. Efforts to

balance efficiency with allowing the maximum participation of all WTO members

in negotiations presented a challenge to reaching consensus.

In an effort to give all WTO members the opportunity to take part in the

negotiations, Chairperson Barshefsky and Director General Moore set up five

large working groups on the major issues including agriculture, market access,

implementation, Singapore issues (such as investment), and systemic issues (such

as the structure of the WTO). The working groups were open to all WTO member

delegations and convened on the second day of the conference. Working group

chairs--trade ministers selected in Seattle--were to facilitate consensus and refine

the Geneva draft text into a consensus document. Next, working group

consensus texts were to be brought together later in the week to produce a

complete ministerial declaration to be issued at the end of the conference.

Ultimately however, the working groups were not able to achieve the necessary

consensus to avoid the more traditional less inclusive “green room” process.2

Chairperson Barshefsky had told ministers at a meeting on Wednesday that she

intended to proceed with the large working groups, but if they were unsuccessful

she would initiate a green room to facilitate consensus. After 2 days of large

working group meetings, the green room process began Friday morning, the last

day of the conference.

One difficulty in achieving consensus may have been that the chairpersons of the

working group meetings were not in place until Tuesday during the ministerial

conference. This may have prevented parts of the leadership team from effectively

preparing for their roles—such as developing compromise texts and meeting with

key delegations before Seattle—as some have claimed. Officials said that it had

been difficult to find chairpersons because trade ministers had to volunteer their

time to lead the sessions as opposed to their own country delegations.

The green room had only 1 day to work out compromises across the range of

unresolved issues and then gather the support of the rest of the delegation.

Furthermore, the green room worked sequentially—issue by issue. Negotiators

began in the morning with agriculture and spent until mid-afternoon on this issue.

2

Traditionally, negotiations have taken place among a smaller number of key WTO members,

which would work out privately some of the more difficult compromises. This smaller group

negotiation of 20-30 members is known as the "green room" process.
8

Although many officials said that the green room did make progress in agriculture,

others argued that too much time was spent on this issue to the exclusion of

others. However, officials expressed mixed views about whether additional time

would have resulted in consensus on a round. Some said an additional day would

have sufficed with the progress made in agriculture, while others were more

pessimistic or said outright that no agreement could have been reached.

Despite efforts to the contrary, some countries still expressed frustration about

being left out when the negotiations shifted to the green room. In fact, a group of

Latin American and Caribbean countries and a group of African countries stated

publicly in Seattle that they would reject the outcome of these smaller sessions.

However, some officials noted that a green room process involving a smaller

number of countries is necessary to efficiently handle the negotiations. Some said

the particular problem with the green room process in Seattle was that countries

were selected to participate in an ad hoc, informal manner. They recommended a

more formalized or transparent process of determining the members invited to

participate in the green room.

A number of officials with whom we spoke said that hosting the Seattle WTO

ministerial meeting posed both substantive and procedural challenges for the

United States, given its large stake in the world trading system. First, perceptions

about the U.S. role as chair may have affected the negotiating dynamic. For

example, it may have raised questions about U.S. neutrality in brokering

compromise, or raised WTO members’ expectations about U.S. willingness to

make concessions to ensure the ministerial conference’s success. Second, the

United States was wearing two hats, that of host and key participant, a difficult

job that was made harder by the newness of the WTO team and the number of

issues to be resolved at Seattle. Overall, several U.S. and foreign officials said that

a major trading nation hosting such meetings inevitably poses problems.

Another major factor affecting the outcome of the Seattle negotiations was the

inherent weakness of the draft text used as the basis for negotiations. When WTO

ministers arrived in Seattle in late November, the draft declaration officially on

the table was some 32 pages long and contained nearly 400 bracketed items

indicating disagreement among members. The draft was, in fact, an amalgamation

of all the proposals, or position papers, members had submitted to the WTO

General Council during their 15-month, pre-Seattle preparatory process. The

problems with the draft conveyed the wide differences over substance and

philosophical approach that remained at the conclusion of those preparations.

Also, one WTO official noted that because the text included many strongly held

competing proposals, negotiators had to "build down," or remove text, to reach a

consensus document. In his view, this is more difficult to do than "building up," or

negotiating to add desired language. Thus, he believed, in Seattle, countries

automatically perceived agreeing to remove text as a loss.

Contributing to members’ inability to reach consensus before Seattle were the

difficulties they had experienced in selecting a new Director General. In Geneva
9

in early 1999, WTO members had had great difficulty reaching consensus on a new

Director General, whose 4-year term had expired. There were two final

candidates, Mike Moore from New Zealand and Supachai Panitchpakdi from

Thailand, from a developed and developing country, respectively. Ultimately,

members selected both candidates to serve a split term, with Mike Moore serving

first. Many U.S. and foreign officials said that the divisiveness of that experience

had dampened the mood for compromise in Seattle.

In addition, the lengthy and contentious selection process left WTO members

without leadership for 5 of the 11 months they had available to prepare for Seattle.

Mike Moore did not take the helm at the WTO until September, when drafting of a

declaration started in earnest. His principal deputies were named less than a

month before the WTO ministerial conference. While the WTO is largely a

member-driven organization, the WTO Director-General and his deputies can play

an important role in facilitating consensus and organizing work so as to ensure

maximum progress. The diversity of member interests and lack of institutional

leadership meant that fewer informal, consensus-building meetings took place

both in Geneva and Seattle.

During the ministerial conference, nongovernmental organizations representing

labor, the environment, and other interests demonstrated and marched against the

WTO in the vicinity of the Seattle convention center. The protests interfered with

the convention by causing delays and dampening the general mood among the

delegates but were not a major cause for their ultimate inability to launch a new

trade round. The most frequent comment we heard from foreign government

officials was that the protests cost them 1 to 2 days of work. Some foreign

officials attending the ministerial conference said that limitations on moving

safely about the city interfered with delegates’ normal ability to resolve

differences through informal social contacts. Another foreign embassy official

said that, while not a deciding factor, the protests raised questions about the U.S.

ability to conduct trade negotiations without being unduly influenced by domestic

politics. Overall, however, delegates did not believe that the protesters changed

the outcome of the conference.

Lessons Learned

Several lessons can be learned from the experience in Seattle:

• Efforts to launch a new round may have been premature. Countries, for

various reasons, may not have been ready to launch a new round. Due to

current strong domestic concerns, the EU and United States each found it

politically difficult to make concessions and exert leadership. Many

developing countries were resistant to calls for the WTO to address new

issues such as labor and skeptical about the benefits of the last round.

• Ministerial conferences are more likely to succeed if they address only a

handful of politically difficult decisions, having reached consensus on most
10

issues in advance. WTO members had not reached agreement on most issues

on the eve of the conference. As a result, ministers in Seattle faced a long list

of unresolved items. This left ministers with an overwhelming task to be

accomplished within a short time frame. Efforts to sort through and agree

upon a manageable number of issues should be made before a ministerial

conference takes place.

• The WTO needs to find ways to address the institutional challenges posed by

increases in the number and diversity of its members. The Seattle

negotiations demonstrated the importance of taking into account the

different views of the WTO’s large and diverse membership on issues such as

the scope and nature of any further trade liberalization. Since the ministerial

conference, the WTO Director General has been consulting with WTO

member governments on ways to help developing countries engage in world

trade and has been examining how the WTO can better gauge and act on its

varied members’ interests.

• Holding high profile WTO meetings in countries that are major trading

partners, such as the United States and the EU, may present difficulties. It is

not easy for major trading countries to host ministerial conferences, given

their significant interests in international trade and possible concerns about

their influence on the negotiating agenda.

-----------------------------

Mr. Chairman and members of the subcommittee, this concludes my prepared

remarks. I will be happy to respond to any questions you may have.

Contacts and Acknowledgement

For future contacts regarding this testimony, please call Susan Westin or Beth

Sirois at (202) 512-4128. Individuals making key contributions to this testimony

included Nina Pfeiffer, Howard Cott, Kim Frankena, Juan Gobel, Richard Seldin,

and Tim Wedding.

(711469)
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