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

10:00 a.m., EST

Wednesday,

February 26, 1997

WORLD TRADE

ORGANIZATION

Observations on the

Ministerial Meeting in

Singapore

Statement of JayEtta Z. Hecker, Associate Director,

International Relations and Trade Issues,

National Security and International Affairs Division

GAO/T-NSIAD-97-92

Mr. Chairman and Members of the Subcommittee:

I am pleased to have the opportunity to provide some observations about

the results of the World Trade Organization’s (WTO) ministerial meeting in

Singapore that took place in December 1996. Specifically, my testimony

addresses (1) trade liberalization; (2) implementation of Uruguay Round

(UR) agreements; (3) areas of ongoing WTO negotiation; and (4) emerging

trade issues that are being debated in the WTO and in other international

forums. My observations are based on our past and ongoing work,1

 our

review of the ministerial declaration and related documents, and our

discussions with U.S. and foreign government officials both at the

Singapore ministerial meeting and in Washington. Before I get into the

specifics of these topics, let me provide a brief summary.

Summary The Singapore ministerial meeting produced progress toward greater trade

liberalization and a continued commitment to full implementation of

existing UR agreements and planned negotiations. It also took the first

steps in the WTO toward addressing a new generation of issues that

challenge free and fair trade. Nevertheless, the true promise for furthering

U.S. interests lies in the review, negotiation, and enforcement of

commitments to be done by the dozens of WTO committees, councils, and

groups — rather than in the outcome of what was the first of periodic

trade minister gatherings.

More specifically, the United States, as well as many of our major trading

partners including the European Union (EU), Canada, and Japan, declared

the ministerial meeting a success and a reaffirmation of the WTO. While at

Singapore, the members laid a foundation for an Information Technology

Agreement that would cut tariffs on certain high-technology products. The

ministers were able to achieve a consensus on a final declaration that

encompassed several contentious subjects, despite their differences. In the

declaration, the ministers summarized their progress regarding

implementation to date and reaffirmed their commitments to finish the

“built-in agenda” of ongoing negotiations. However, most of the work

regarding these two areas took place earlier in committee meetings in

Geneva as members prepared for Singapore. Finally, the ministers took

steps to address some contentious new issues that were previously outside

the scope of detailed trade negotiations. These new issues involved

(1) transparency in government procurement, (2) investment policy,

(3) competition (antitrust) policy, (4) trade and the environment, and

1

See attached list of some related GAO products.

Page 1 GAO/T-NSIAD-97-92
(5) trade and labor standards. After much debate, ministers agreed to

language about all these issues in the declaration; in some cases they

agreed to form WTO working groups to address them.

Nevertheless, just as important to judging the success of the meeting were

some things that did not happen at Singapore. Differences on a variety of

contentious issues often seemed to divide the WTO members along

developed/less developed nation lines before the ministerial, but fears of a

stalemate in the talks never materialized. For example, besides the new

initiatives, implementation of the Agreements on Textiles and Clothing

and on Agriculture were sources of friction between members before

Singapore, but they reached consensus on language for the ministerial

declaration.

Background The first biannual WTO ministerial meeting took place from December 9 to

13, 1996, in Singapore. The purpose of the meeting was to “strengthen the

WTO as a forum for negotiation, the continuing liberalization of trade

within a rule-based system, and the multilateral review and assessment of

trade policies,” according to the ministerial declaration. This meeting of

trade ministers was to be attended by nearly 5,000 delegates, including

officials from over 150 countries, intergovernmental organizations,

nongovernmental organizations, and members of the press from around

the world.

The administration believed that this meeting would be an important test

of the WTO’s credibility as a forum for continuous consultation, negotiation,

and trade liberalization. Before this first WTO meeting, ministers’

participation was not routine, and they generally met only to launch or

conclude new rounds of trade negotiations. This ministerial-level meeting

provided WTO member countries the first opportunity to take stock of how

well they have implemented the UR agreements so far and to discuss new

issues. The UR agreements — which resulted from the most

comprehensive and far-reaching set of trade negotiations ever — generally

went into force on January 1, 1995.2

 Implementation of these agreements

is complex, and many commitments are to be phased in over a 10-year

period; thus, it will take years before the results can be fully assessed.

Prior to the meeting, participants and observers debated over what would

and should happen at Singapore. In fact, WTO members failed in their

2

According to the WTO Secretariat, the almost 500 pages of text comprise 19 agreements, 24 decisions,

8 understandings, and 3 declarations. There are also approximately 24,000 pages of specific market

access commitments.

Page 2 GAO/T-NSIAD-97-92
attempt to reach consensus on the text of the declaration in November,

before the ministerial. As a result, a significant portion of the ministers’

time at Singapore was devoted to debating final language for the

ministerial declaration. Before the meeting, public statements from

various foreign government officials, business groups, and

nongovernmental organizations voiced a wide range of interests and

expectations for the ministerial meeting. For example, Ambassador

Charlene Barshefsky, the acting U.S. Trade Representative (USTR), viewed

this as the first of many “board of directors” meetings and argued it be

“realistic in its aspirations.” Nevertheless, others, such as the European

Commission’s Vice President Sir Leon Brittan, were calling for the

ministers to launch a new “round” of trade negotiations. Also, there were

differences over whether to focus on the existing agreements or on areas

of further liberalization and whether topics like labor standards and

competition policy should be placed on the ministers’ agenda. Ongoing

disputes over members’ use of unilateral trade measures, including U.S.

sanctions related to investment in Cuba, added to premeeting tensions.

Trade Liberalization Much public attention was focused on a new trade liberalization initiative,

namely an Information Technology Agreement that is intended to

eliminate tariffs on products including semiconductors,

telecommunications and computer equipment, and software products by

the year 2000.3

 This was an international private sector initiative, advanced

by the United States and joined by 27 other countries at Singapore. This

agreement could boost U.S. exports and jobs in a competitive domestic

industry that already exports over $90 billion and employs 1.8 million,

according to USTR estimates. Economic benefits are to accrue in stages as

tariff reductions are phased in by each signatory. The agreement provides

that subsequent meetings of the signatories may discuss implementation

issues, such as the classification of goods, incorporating additional

products, and related nontariff barriers.

Nonetheless, there is still work to be done before this agreement can enter

into force on July 1, 1997, and before any economic gains can be realized.

Under the terms negotiated in Singapore, a “critical mass” of countries

must sign the agreement for it to become effective.4

 Since Singapore, these

countries have been discussing technical details concerning the timing of

specific tariff cuts applicable to specific products for each country. USTR

3

In some limited cases, the schedule for tariff cuts is to be extended until 2005, according to USTR.

4

Members representing 90 percent of the world trade in information technology products must join.

Page 3 GAO/T-NSIAD-97-92
officials recently told us that they are confident about the countries being

able to meet the April 1, 1997, deadline for completion.

In addition to the Information Technology Agreement, some progress

toward liberalization was made in other areas. There was agreement by

some members about tariff cuts in other products, notably

pharmaceuticals. Also, there was an initiative to help least developed

countries.

Action Plan for Least

Developed Countries

The members took steps to address the problems of least developed

countries that are WTO members. They agreed to a Plan of Action that

proposes giving these countries preferential market access (such as the

Generalized System of Preferences), besides offering them technical

assistance regarding implementation. However, such actions by WTO

members are voluntary. The plan also outlines building closer ties between

the WTO and other international organizations, including the United

Nations Conference on Trade and Development (UNCTAD), the World Bank,

and the International Monetary Fund, to help these least developed

countries enhance their trading opportunities.

Implementation of the

Uruguay Round

Agreements

“Implementation is the functional equivalent of enforcement,” according to

Ambassador Barshefsky. In their declaration, the ministers concluded that

“implementation thus far has been generally satisfactory, although some

members have expressed dissatisfaction with certain aspects.” Despite

this attention in the declaration, much of the WTO members’ “stock taking”

took place at earlier meetings in Geneva rather than in Singapore. In these

committee meetings, WTO members established procedures, reviewed their

compliance with the many UR agreements, planned future work, discussed

their differences, and issued reports.

Some WTO members have yet to implement all the commitments created by

the UR agreements. Accordingly, the ministerial declaration exhorts

members “to complete their domestic legislative process without further

delay.” Also, WTO committee reports prepared before Singapore, including

those on market access and customs valuation, discuss how often

members take advantage of waivers allowing them to delay

implementation. Some members, including the United States, are

concerned about the number of members that have not yet amended their

domestic laws and have exercised their waiver rights with regard to

various agreements, according to USTR officials.

Page 4 GAO/T-NSIAD-97-92
Notifications The WTO committee reports indicate that a number of members are still

struggling to fulfill their commitments and implement various agreements.

The UR agreements require each member to submit various notifications;

this information provides the transparency necessary for the members to

monitor each other’s progress. The ministerial declaration states that

“compliance with notification requirements has not been fully

satisfactory.” Earlier reports from the Committees on Technical Barriers

to Trade, Subsidies and Countervailing Measures, Antidumping Practices,

Rules of Origin, Import Licensing, Trade Related Investment Measures

(TRIMS), and Safeguards all recognized delays and/or deficiencies in

members’ notifications. A WTO working group on notifications issued a

report and made recommendations to facilitate members’ compliance.

Some of our past work on state trading enterprises (STE) illustrates the

importance of seemingly mundane notification requirements.5

 While STEs

are recognized in the General Agreement on Tariffs and Trade (GATT) as

legitimate trading entities, their activities are subject to GATT disciplines. In

order to provide some transparency over STE activities, members must

report regularly about their STEs’ structures and functions. However, as we

noted in August 1995, compliance with this reporting requirement has

been poor, and information about STE activities has been limited. U.S.

officials are working within the WTO’s working party to develop a modified

questionnaire that would help make STE activities more transparent. U.S.

government and agricultural industry officials hope to negotiate additional

disciplines on STEs when agricultural negotiations resume in 1999. The

importance of STE issues may increase as countries with historically

state-run economies, like China, Russia, and Ukraine, are considered for

WTO membership.

Agriculture Leading up to Singapore, the WTO Committee on Agriculture studied the

implementation of the UR Agreement on Agriculture, including aspects

needing additional attention or review. The committee’s report concluded

that overall, the review process had been conducted in an efficient and

effective manner. However, it also recognized that some instances of

apparent noncompliance with commitments had not yet been resolved.

U.S. officials were concerned that some countries were balking at carrying

out their commitments or implementing new, disguised, trade-distorting

measures. At the end of the ministerial, Ambassador Barshefsky and

5

In our work, we define STEs as governmental or nongovernmental enterprises that are authorized to

engage in trade and are owned, sanctioned, or otherwise supported by the government. For example,

the Australian government has notified the WTO that the Australian Wheat Board meets the criteria for

being considered an STE. See GAO/GGD-95-208 noted in the related GAO products list.

Page 5 GAO/T-NSIAD-97-92
Deputy Secretary of Agriculture Richard Rominger stressed that

implementation issues were of particular importance to U.S. agriculture.

They also stated that the results of the ministerial will allow the members

to attack problems like import barriers, STEs, export subsidies, and

unjustifiable sanitary and phytosantitary regulations.

Dispute Settlement When members have particular concerns about other members fulfilling

their WTO commitments, they can use the WTO’s dispute settlement

mechanism. For example, the United States has initiated proceedings

regarding the EU’s measures concerning hormones and imports of meat

and meat products. At Singapore, members reaffirmed the fundamental

importance of this process in fostering the implementation and application

of the UR agreements. They also noted the role the mechanism plays in

avoiding disputes through procedures that include consultation between

the parties.

Review of Regional Trade

Agreements

Related to implementation, WTO members took steps, which were affirmed

by the ministers in Singapore, to better address questions about the

integration of regional trade policies with the multilateral trading system.

In February 1996, the WTO General Council established a Committee on

Regional Trade Agreements that would examine agreements upon

notification by members and would consider the implications of these

agreements. Over 100 regional trade agreements and customs unions like

the North American Free Trade Agreement (NAFTA), the Mercado Común

del Sur (MERCOSUR), and the Asia-Pacific Economic Cooperation forum

(APEC), were established by early 1996 throughout the world. Their

proliferation has raised many apprehensions about their relationship with

the multilateral trading system, according to the WTO’s 1996 annual report.

For example, there have been fears that these agreements could create

incompatible obligations or fragment efforts to establish a rule-based

system for trade that would conflict with the principles of

most-favored-nation (MFN) treatment.

Ongoing WTO

Negotiations

Trade ministers affirmed the importance of completing the WTO’s ongoing

work program, including commitments regarding both future tariff

reductions and planned negotiations. This program is often generically

referred to as the WTO’s “built-in agenda.” The ministers’ affirmation of the

built-in agenda at Singapore, is significant — if undervalued —according

to USTR officials. USTR has stated previously that the full and timely

Page 6 GAO/T-NSIAD-97-92
implementation of the built-in agenda is critical to the WTO’s credibility. As

such, confirmation of schedules and other technical details for future

negotiations is a necessary component in assuring that liberalization may

occur.

Some negotiations in the built-in agenda have been ongoing since the end

of the UR. U.S. negotiators sought to take advantage of the ministerial

meeting to build momentum for completing these negotiations within

established deadlines. Progress in services has been difficult. At the end of

the UR, four main areas under the General Agreement on Trade in Services

(GATS) were left uncompleted: telecommunications, financial services,

maritime services, and the movement of natural persons.6 GATS set out a

timetable for the completion of these negotiations, but negotiations in the

first three areas had to be extended. (The negotiations for the movement

of natural persons concluded in 1995.) The WTO ministerial declaration

acknowledged the difficult nature of the negotiations while noting that

results have been below expectations.

Telecommunications

Services

WTO members recently concluded negotiations for substantial market

opening in basic telecommunications services, taking advantage of the

momentum established during meetings at Singapore, to reach an

agreement on February 15, 1997. “Basic telecommunications” refers to

voice telephone, data transmission, facsimile, and cellular mobile

telephone services, among others. Although in April 1996 the WTO Council

on Trade in Services had accepted a final report by the basic

telecommunications negotiating group, the period to submit revised

schedules was delayed, essentially extending the negotiating timetable. By

the original deadline of April 1996, the United States was dissatisfied with

the tabled offers of key trading partners and lack of offers from a number

of important countries. However, the United States successfully obtained

an extension of the negotiations until February 15, 1997, in hopes of

developing a “critical mass” of offers. On that date, WTO members reached

an agreement that should open up this important sector to global

competition. The results are expected to replace the tradition of

government monopolies on telecommunications, dramatically reduce the

cost of telephone services, permit greater foreign investment, and promote

the adoption of regulatory policies based on competition.

6

The “movement of natural persons” refers to foreigners entering a country to provide services.

Page 7 GAO/T-NSIAD-97-92
Financial Services WTO members face an upcoming deadline for completing difficult

negotiations on another important service sector. The WTO financial

services negotiations are currently suspended and they are to resume in

April 1997. Financial services, including the banking, securities, and

insurance sectors, are often subject to significant domestic regulation,

making the negotiations quite complex. Dissatisfied with the commitments

offered in the extended financial services negotiations in mid-1995, the

United States committed to only protect existing investments of financial

services providers; the United States exercised its right to take an MFN

exemption with respect to new and expanded activities in this sector. As a

result, WTO members agreed to an interim arrangement. They also agreed

that during a 60-day period beginning November 1, 1997, members will

have the opportunity to modify, improve, or withdraw all or part of their

specific commitments and MFN exemptions under GATS in this sector. At

Singapore, the ministerial declaration reiterated that WTO members must

significantly improve their commitments with a broader level of

participation to successfully conclude these talks.

Maritime Services Negotiations on maritime services after the conclusion of the UR were

unsuccessful and were suspended in June 1996 until the year 2000, when

negotiations for all services sectors are to be reopened. This sector has

proven very difficult to negotiate because it is organized in complex ways.

For example, some service providers are STEs, and some are highly

protected with strong domestic lobbies and long-established labor union

practices, according to the WTO Secretariat. When suspending the

negotiations, participating members agreed to refrain from applying new

measures that would affect trade in this area during this time (except in

certain circumstances). The United States has said that other participating

members to the negotiations did not offer “to remove restrictions so as to

approach current U.S. openness in this area.”

Other Areas in the Built-in

Agenda

Over the next several years, other built-in agenda items are to be

implemented through the process of review and negotiation in a number of

key sectors and rules. For example, the WTO Ministerial Conference is

required to review the implementation of the Agreement on Preshipment

Inspection in 1997. Also, WTO members must complete a 3-year work plan

on harmonizing rules of origin by July 1998. Other negotiations will begin

in upcoming years. For example, negotiations are scheduled to begin in

1998 to broaden and improve the Agreement on Trade-Related Aspects of

Intellectual Property Rights (TRIPS) and in 1999 to improve and extend the

Page 8 GAO/T-NSIAD-97-92
Agreement on Government Procurement. Even though there was some

discussion in Singapore on whether to accelerate agricultural reform

negotiations, member countries reaffirmed their intention to begin these

negotiations on schedule in 1999. USTR officials noted the importance of

the WTO Committee on Agriculture’s preparatory work to ensure these

negotiations begin on schedule.

Emerging Trade

Issues

At Singapore, members debated what the WTO should do regarding what

many observers believe are the next generation of international trade

issues: (1) transparency in government procurement, (2) investment

policy, (3) competition (antitrust) policy, (4) environmental measures, and

(5) labor standards. These issues have previously been outside the scope

of detailed trade negotiations and have traditionally been seen as domestic

concerns.

As tariff and nontariff barriers to trade are reduced, however, these areas

have drawn attention, reflecting a broader concept of what factors may

affect market access opportunities in a global economy. For example,

although the United States has strict standards for ethics, accountability,

and transparency in government procurement practices, many countries

either lack or do not adequately enforce domestic laws prohibiting bribery

and corruption in their procurement. Some observers argue that this

inconsistency can put U.S. businesses at an economic disadvantage.

Likewise, foreign investment restrictions can limit a firm’s ability to

establish a commercial presence and to conduct business operations, both

of which greatly facilitate U.S. exports. Foreign anticompetitive private

business practices, such as price-fixing and market sharing, raise costs to

U.S. consumers, and government measures can restrict market access for

U.S. exports. Finally, some U.S. interest groups argue that foreign firms

should not gain a comparative advantage by failing to protect the

environment or observe basic labor standards.

Ministers considered new initiatives involving (1) transparency in

government procurement, (2) investment policy, (3) competition

(antitrust) policy, and (4) labor standards. Specifically, the United States

forwarded a proposal for the negotiation of an agreement on transparency

in government procurement, and the ministers agreed to establish a

working group that is to study transparency in government procurement

practices. Ambassador Barshefsky said that this was a “first step” toward a

transparency agreement. On the issue of investment and competition

policy, several members, including the EU and Japan, proposed that

Page 9 GAO/T-NSIAD-97-92
working groups be established. The United States and other members

agreed to support the establishment of working groups in both areas, after

securing agreement that no negotiation would move forward in either area

absent an affirmative action by all the parties. Finally, the United States

sought the establishment of a working party to begin examining the

relationship between trade and labor standards. The ministers did not

agree to establish such a working party but instead affirmed their support

for ongoing work on labor issues being conducted outside of the WTO.

While the initiative on environment is not new, members also agreed that

the WTO Committee on Trade and Environment, which had been

characterized as being “disappointing” according to some observers,

would continue under its existing mandate.

Bringing new issues into the WTO framework has been very controversial.

Some developing countries were fiercely resistant to discussing these new

issues at Singapore, preferring that ministers focus their attention on how

the general implementation of the UR agreements was progressing. Some

WTO members feared that the debate over whether to include some of the

new issues might create a “North-South” divide during the ministerial.

However, members managed to reach a compromise on language in the

declaration in each area.

Procurement Prior to Singapore, the United States proposed that the ministers endorse

the negotiation of an agreement on procurement that would extend

disciplines on transparency, openness, and due process in practices to all

WTO members.7 Ambassador Barshefsky testified, in September 1996, that

under such an arrangement “suppliers from all WTO members would have

equal access to information on procurement, the procurement process and

to bid challenge mechanisms.” Some developing countries were skeptical

of this initiative, questioning its scope and purpose. Nevertheless, at

Singapore, WTO ministers agreed to establish a working party “to conduct a

study on transparency in government procurement practices . . . and to

develop elements for inclusion in an appropriate agreement.” Following

the ministerial, Ambassador Barshefsky said that this WTO effort would

serve to reduce the influence of corruption and create a fairer business

environment. Other forums that are addressing issues related to bribery

7

The UR produced an Agreement on Government Procurement with broad coverage that sought to

promote transparency and improve access in government procurement by requiring that countries not

discriminate against foreign or foreign-owned suppliers or otherwise allow practices that would

preclude competitive procurement. The agreement built on the 1979 GATT procurement code.

However, the number of signatories to these agreements has been limited, and broadening

membership, especially to developing countries, has been an unfulfilled objective.

Page 10 GAO/T-NSIAD-97-92
and corruption in international business transactions include the

Organization of American States, Organization for Economic Cooperation

and Development (OECD), and the World Bank.

Investment and

Competition Policy

Ministers also agreed at Singapore to form WTO working groups to study

investment and competition policy issues. There was some resistance to

forming these groups by some developing countries, which argued that

investment and competition policy should be addressed as part of a

scheduled review of the TRIMS agreement in the year 2000. However, the EU

and Japan were strong advocates of creating working groups on both

issues in the WTO. The administration stated the United States would

support work programs that were modest in scope and educational in

nature. Furthermore, the ministerial declaration states that work

undertaken by these groups will not prejudge whether any negotiations

will be initiated in the future.

On investment, the United States was concerned that any WTO work on

investment not undermine negotiations currently underway in the OECD on

a multilateral investment agreement (MAI). The MAI is intended to include

high standards for foreign direct investment and is scheduled for

completion in May 1997. Investment issues are also being addressed in

other trade forums, including APEC and the Free Trade Area of the

Americas (FTAA).

On competition, the United States was concerned that any working group

not focus on antidumping rules, but instead on issues concerning cartels

and other private anticompetitive practices. Some WTO members, including

Japan, Korea, and Hong Kong, had proposed that any working group

consider the relationship of trade remedies, especially antidumping

measures, and competition. The ministerial declaration states that the

working group will study “issues raised by Members relating to the

interaction between trade and competition policy, including

anti-competitive practices, in order to identify areas that may merit further

consideration in the WTO framework.” Following the ministerial, the EU and

USTR issued a joint statement to clarify this language, which emphasized

that the working group should not cover issues already dealt with in the

WTO, including antidumping measures. However, members did not reach a

clear consensus at Singapore on the future scope of the working group’s

mission, according to one WTO official. Some observers expect the debate

over the terms of reference for this working group to continue until the

next scheduled ministerial in 1998. Some WTO members, including the

Page 11 GAO/T-NSIAD-97-92
United States, are discussing and studying competition policy issues in

several other forums including APEC, FTAA, NAFTA, OECD, and UNCTAD.

Environment At Marrakesh in 1994, the WTO ministers decided to establish the

Committee on Trade and Environment to identify the relationship between

trade and environmental measures and make appropriate

recommendations within the context of open and equitable trade. Some

WTO members believe that enforcing certain environmental policies can be

a disguise for imposing protectionist trade barriers. The United States had

advocated the committee’s establishment as a way to help ensure that

multilateral trade and environmental policies are mutually supportive.

During its first 2 years of operation, the committee has discussed several

complex issues, including (1) the relationship between trade measures in

multilateral environmental agreements (MEA) and the WTO; (2) the question

of whether ecolabeling programs8

 need greater transparency; and (3) the

effect of environmental measures on market access, particularly in

relation to developing countries. The committee did not have

recommendations for the ministers to consider at Singapore, because of a

lack of consensus on the major issues discussed.

The work of the committee had received mixed reviews from members

and other interested parties. For example, the United States found parts of

the committee’s final report useful, such as its recognition of the

importance of transparency in ecolabeling and its emphasis on

coordinating national trade and environmental policies, but U.S. officials

stated that the committee has not done a great deal to advance the

understanding of environmental concerns. On the other hand,

environmental groups have been highly critical of the lack of progress

made in the committee; as a result, some groups have called for its

dissolution. Specifically, they were displeased with the report’s statements

that recognized that WTO members have the right to challenge MEA trade

provisions within the WTO dispute settlement framework. Nevertheless, the

committee urged parties to settle these disputes within the MEA process

and recognized the important role that trade measures have played in

some MEAs and may play in the future. Similarly, the EU voiced concerns

over the committee’s lack of concrete results thus far.

Because the committee did not have any major recommendations for

ministers at Singapore, the ministerial declaration directed the committee

8

Ecolabeling programs, most of which are voluntary, allow businesses to obtain a label indicating a

product is environmentally friendly or safe.

Page 12 GAO/T-NSIAD-97-92
to continue its work under its existing terms of reference. USTR plans to

work with the U.S. Trade and Environment Policy Advisory Committee,

among others, to develop the U.S. agenda for the next round of

discussions. The WTO committee’s future work, particularly with respect to

ecolabeling issues, could take into account the work of other multilateral

forums, such as the United Nations and OECD, according to its report.

Labor Standards Discussions about the relationship between trade and international labor

standards proved to be very contentious at Singapore. The UR

implementing legislation9 directed that the President seek the

establishment of a working party, which would examine the relationship

between trade and internationally recognized worker rights.10 In order to

build consensus for WTO work in the face of strong opposition, the

administration proposed a modest work program that would not entail

(1) an agreement on minimum wages, (2) changes that would take away

the comparative advantage of low-wage producers, or (3) the use of

protectionist measures to enforce labor standards. However, because

many WTO member countries in both the developed and developing world

feared that the creation of a work program in the WTO would lead to

mandated international labor standards that could inhibit their economic

development or serve as protectionist barriers, they opposed having a

trade-labor standards link through the WTO.

USTR was not successful in having a labor standards working party

established at Singapore, but members did renew their commitment to the

observance of internationally recognized core labor standards in the

ministerial declaration. Members reached a compromise, and the

declaration recognized that the International Labor Organization (ILO)11 is

the competent body to set and deal with internationally recognized core

labor standards. The declaration also stated that the WTO and ILO

Secretariats will continue their existing collaboration. In statements

following the ministerial, U.S. and EU officials argued that the declaration

9

Section 131 of Public Law 103-465, Dec. 8, 1994.

10Congress provided guidance for U.S. negotiators in section 131 of the UR Agreements Act by specific

reference to section 502 (a)(4) of the Trade Act of 1974, as amended by section 503 of Public Law

98-573, Oct. 30, 1984. This legislation defined internationally recognized worker rights to include

(1) the right of association; (2) the right to organize and bargain collectively; (3) a prohibition on the

use of any form of forced or compulsory labor; (4) a minimum age for the employment of children; and

(5) acceptable conditions of work with respect to minimum wages, hours of work, and occupational

safety and health.

11ILO is a specialized agency of the United Nations that traditionally has addressed labor issues.

Created in 1919, ILO has a mandate to improve working conditions and living standards for workers

throughout the world.

Page 13 GAO/T-NSIAD-97-92
is a breakthrough, signaling an opportunity to work toward further

discussions about labor issues in the WTO. However, other members have

rejected the idea that such an opportunity was created. Future progress on

labor issues may emerge from work ILO undertakes: since Singapore, the

ILO Director-General announced his intention to intensify ILO’s work aimed

at protecting basic worker rights. Labor issues are also being discussed in

the OECD and under various NAFTA-related organizations.

Thank you Mr. Chairman, this concludes my prepared remarks. I will be

happy to answer any question you or Members of the Subcommittee may

have.

Page 14 GAO/T-NSIAD-97-92
Page 15 GAO/T-NSIAD-97-92
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International Trade: Implementation Issues Concerning the World Trade

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(711251) Page 16 GAO/T-NSIAD-97-92
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