Opinion of the Economic and Social Committee on the 'World Trade Organization (WTO)` (1999/C 101/12)

On 29 January 1998 the Economic and Social Committee, acting in accordance with Rule 23(3) of its Rules of Procedure, decided to issue an opinion on the 'World Trade Organization (WTO)`.

The Section for External Relations, which was instructed to prepare the Committee's work on the matter, adopted its opinion on 17 December 1998. The rapporteur was Mr Giesecke.

The Committee adopted the opinion set out below at its 360th plenary session (meeting of 27 January 1999) by 87 votes to five, with one abstention.

0. Summary

0.1. The worldwide economic growth recorded over the last few decades is showing signs of faltering. The weaknesses are to be found in the financial system, rather than in the world trade system, which has made a considerable contribution to increasing global prosperity in the course of the 50 years of operation of GATT and the work of the recently established WTO. Against the background of the present critical situation, the course is being set for a new round of world trade negotiations. The attendant stock-taking of the situation, together with the drive to open up further markets are, in the Committee's view, an appropriate way of giving a new impetus to the global economy.

0.2. In the light of the current national situation, the Committee believes that the EU must assume a leading role for a number of reasons, notably because of its distinctive experience in the field of integration. With this aim in view, the EU needs to adopt a uniform approach and engage in joint strategic preparation.

0.3. The Committee has always maintained a watching brief on the trade liberalization processes, putting forward both constructive and critical observations. In its present opinion, the Committee revisits a number of issues relating to the current global economic situation which it regards as of particular importance.

0.4. Apart from the overall gloomy prospects for the world economy, the consequences of the accelerated process of globalization are being felt by many groups of the population in almost every country of the world. The economic adjustments which have to be made tend initially to have a negative impact, in particular on employment. Positive aspects, such as security of supply, lower import prices, improved product-quality and many other benefits are less clearly recognized.

0.5. The contraction of national sovereignty attendant upon globalization gives rise to questions as to the democratic legitimacy of international organizations and their 'legislation`.

0.6. The WTO, which works on the basis of consensus between all its member countries, has developed a procedure for settling disputes which has gained widespread recognition; in view of the increasing demands placed upon it, however, this procedure will have to be extended.

0.7. The WTO's procedure for settling disputes is regarded as a success story; one of the reasons for its success is clearly to be found in the provision whereby trade sanctions may be threatened and imposed in accordance with strict rules. This provision is therefore a tool which other international regulatory sectors, ranging from protection of the environment, social rights and consumer protection to human rights, would like to use. Caution needs to be exercised here for a great variety of reasons. This must not happen if it is contrary to the official position of individual WTO member states. If unacceptable conditions are to be changed, however, the campaign by specialist international organizations to convince the relevant authorities should be stepped up and, in the final analysis, there is a need to engage in concrete negotiations. The Committee welcomes the formal declaration adopted by the International Labour Conference on 18 June 1998 and urges speedy worldwide implementation of the principles adopted in respect of minimum rights for workers.

0.8. International trade negotiations and procedures for settling disputes must not, however, continue to be carried out behind closed doors. The legitimate interests of the various organizations representing civil society should be involved in these processes in an appropriate way; care should, however, be taken to avoid blurring the responsibilities. The Committee firmly believes that lasting progress in the field of trade policy can only be made in the industrialized countries - and, in particular, also in the developing countries and the transition countries - if the ground has first been prepared by means of effective publicity through the media and NGOs.

0.9. The next round of trade negotiations will be based on the outcome of the Uruguay Round; an appraisal will have to be carried out in the meantime of the way in which the results of the Uruguay Round have been implemented. The next round of trade negotiations should, however, not be dependent on full implementation of the commitments which have been entered into.

0.10. The resumption of negotiations in respect of agricultural products and services should go ahead on time in the year 2000, as agreed.

0.11. The EU would be in a better strategic position if the next round of trade negotiations were to be carried out on a much broader basis. It is essential to win over to this standpoint both the US, which is reticent on this matter and, above all, the developing and transition countries. Whilst the latter group of countries do, at present, regard the continued existence of liberal world trade provisions as very important, attempts should,however, be made to stimulate a keen interest on their part in further moves towards liberalization.

0.12. Starting points for such an approach can be found in several fields: in the very area of agricultural products the EU should go on the offensive in the negotiations, on the basis of the implementation of CAP reform. The service sector offers opportunities for employment which should be made more readily recognizable.

0.13. It is likely to be more difficult to make progress in the environmental and social fields: the reservations and anxieties of a large number of developing countries are - still - too great. It is, however, a matter of importance to the Committee that environmental and labour standards be applied more widely; it calls upon the European Commission to stipulate that the participation of the EU in the next round of negotiations shall be conditional upon the achievement of this objective. Special efforts will have to be made to explain the situation in this field the developing countries.

0.14. It is proposed that a WTO working party on trade and employment be set up. It is also likely that the desire of many developing countries to see the introduction of international rules on competition will have increased. They will also now be more keenly interested in the subject of direct investment than was hitherto the case; a model for an agreement in this field at OECD level has however run into the sands. The introduction of global rules on electronic commerce provide opportunities for developing countries and countries undergoing reform, in particular. The initial outlines of such rules are emerging.

1. Introduction

1.1. The General Agreement on Tariffs and Trade (GATT) has been successfully promoting trade liberalization for a period of 50 years, to the benefit of an ever larger part of the world population. But the trade liberalization process is now confronted by quite serious problems and unanswered questions over the way ahead. This situation has arisen despite the fact that the establishment under international law of the World Trade Organization (WTO) has paved the way for ever-closer international economic cooperation.

1.2. The reasons for this are manifold - structural and cyclical. Some of the least developed countries whose share of world trade has declined now consider themselves to be more disadvantaged than ever.

Other developing countries and a number of transition countries have made progress as regards their participation in world trade, but continue to be sceptical about a trading system which is managed by western countries and geared to western values.

As far as the US is concerned, since the signing of the NAFTA Treaties the present Congress has been loath to endorse a wide-ranging WTO round of liberalization. Some hope is provided by the invitation of the US president to the next meeting of ministers to be held in the US in 1999.

1.3. The financial and economic crisis which is spreading from Asia to take on world-wide proportions could place a serious obstacle in the way of the achievement of further liberalization under a new round of world trade negotiations. Many developing countries and some transition countries are experiencing a decline in growth, which is essential for employment. Banking systems are under tremendous pressure; this inevitably poses a threat to the enterprises to which they have lent money. Millions of workers are going on the dole and have no adequate social protection. For many countries which have become too accustomed to success, this situation represents a setback, the full consequences of which cannot yet be calculated.

1.4. The Committee takes the view that the global trading system has not been responsible for generating these crises or aggravating them. On the contrary, an undiminished WTO system does, in the Committee's opinion, provide the only dependable platform on the basis of which collapsing economies can be rebuilt. In view of the high level of dependency on external trade (which, in the developing countries, counts for an average of 38 % of the national product) and in view of the need to bring in foreign capital and know-how, open markets provide solid benchmarks for those responsible for planning reform. At the same time special assistance needs to be provided to the developing countries to help groups which lose out as a result of structural change.

1.5. In the Committee's view lessons should be drawn from this crisis, in particular, by international institutions with responsibility for the financial sector; such bodies should make their appropriate contribution towards the establishment of a new world economic and financial order. Against this background, trade protectionism or moves to impede the flow of direct foreign investment would not only be self-defeating for the country concerned but would also pose a threat to the whole of the global economy because of the global domino effect.

1.6. As a result of the growth in international trade, the advantages - and also the drawbacks - of trade liberalization have been brought home to an increasing number of people. In view of the fact that employment issues, the protection of public health, consumers and the environment, and the maintenance of the basic labour standards are matters which are becoming increasingly important world wide, we now find ourselves at a new stage in which trade policy is being widely used as a tool; this initially represents a new experience. In order to step up the pressure to implement agreements, i.e. in order to provide sanctions, attention is increasingly being focused on the regulating machinery for international trade - the WTO - which has worked so effectively in the past. Serious questions are thus being posed as regards the perceived role of the WTO, which has hitherto concentrated on removing trade barriers.

1.7. It therefore comes as no surprise that at the most recent WTO ministerial meeting, held on 18-20 May 1998, a large number of NGOs issued a strong call for an end to the exclusive nature of earlier negotiations, for greater transparency and for a more significant role to be given to representatives of civil society. In the Committee's view the new transatlantic dialogue - which it has welcomed - is a model example of how broader interests can be included in the trade debate.

1.8. The Committee would like to draw attention, in good time, before steps are taken to chart the course for a further round of trade negotiations, to a number of issues in respect of which it has a special expertise or has demonstrated particular commitment. The Committee hopes that these issues will be of special interest to the European Council, the European Parliament and the Commission, particularly in view of the fact that, the Committee believes that, in the light of the current political and economic climate, the EU must assume a leading role.

2. Institutional issues relating to the WTO

2.1. There is, in the Committee's view, a fundamental conflict between the desire of all WTO members for free access to world markets and a wide-ranging - and fully justified - need which may be felt for regulation. In this conflict WTO members should give top priority to achieving the main objective of the WTO, i.e. the opening-up of markets on a non-discriminatory basis. All requests for regulation of foreign trade and payments should be carefully scrutinized accordingly; essential intervention in this field should respect the principle of 'minimal invasion`.

2.2. In the Committee's view new member countries should soon be brought into the WTO in order to enhance the economic weight of the expanding WTO regulating machinery.

2.3. The secret of the success of GATT and, later, the WTO, over the last 50 years is to be found, above all, in two fields: (a) the establishment of trading standards, which have always been laid down on the basis of a consensus of all the member countries and have therefore taken account of the varying needs of the affiliated states and (b) the settlement of disputes, an area in which the WTO's approach is based upon a careful blend of pragmatism and observance of legal procedure, geared to the needs of the respective cases. There is no doubt that the threat of imposing trade sanctions in the wake of decisions taken by the disputes panel was, and is, of decisive importance.

2.4. Despite considerable differences in the development level reached by WTO member states and their forms of administration, GATT and, subsequently, the WTO have succeeded in defining uniform trade rules which, however, in a number of cases will only come into force upon the expiry of various time limits.

The flexibility of the system is also demonstrated by the multilateral treaties which have been concluded within the framework of the WTO and involve only those countries involved in the particular issues.

2.5. In the light of the increasing number of complicated standards and the consequent high demands placed on the calibre of administration in the member countries, the issue of advisory services is gaining in importance. In the Committee's view this task should be largely taken over, in accordance with the principle of division of labour, by the international organization which has the necessary technical competence. A number of examples may be quoted here: cooperation with other specialized international organizations, in particular the International Trade Centre; special trade-promoting measures to help the least developed states; and the work of the World Intellectual Property Organization (WIPO) in the complex field of the Agreement on Trade-Related Aspects of Intellectual Property (TRIPS). It is clear, however, that not only problems of relations between the organizations themselves and funding arise in this respect but also problems with regard to the availability of independent experts. The industrialized countries should recognize the need for them to make a contribution with a view to promoting good governance in the developing countries and transition countries.

2.6. The disputes settlement procedure adopted by the WTO has learnt from the weaknesses of the earlier GATT procedures and has gained an international standing within a short period of time. Particularly in view of the fact that the US has had to acquiesce to the decisions taken by the disputes panel, the procedures for settling disputes adopted by the WTO are generally regarded as successful.

Observers draw attention to the emergence of an independent WTO commercial law and a move towards the establishment of legal principles. This is, however, a matter of increasing concern to the weaker member countries of the WTO. In this case, too, the Committee recommends extreme prudence; the cohesion of the body of states making up the WTO is a valuable asset.

The number of applications for arbitration in connection with TRIPS which are likely to be introduced from the year 2000 onwards will test the capacity of the bodies responsible for settling disputes and prompt a number of questions with regard to the procedure. The scope for improving the procedure - particularly in respect of disputes relating to TRIPS - must therefore be examined.

2.7. The Committee supports the proposals put forward by the European Commission for improving the procedure for settling disputes. These proposals partly tie in with criticism expressed by the US. The investigations carried by members of the disputes panel could, for example, be simplified and made more brief if full-time professional experts, who were familiar with all the details involved in the procedure, could be used for that purpose. A reduction in the period of time between the application to convene a panel and a moment where the Appellate Body issues its final recommendation could, in particular, make the procedure still more efficient, even though the present time frames are already both substantially shorter and more clearly defined than was the case under the old GATT procedure.

WTO member states not directly involved in a given procedure, but having a major interest in the issue, should be given full access to the documents and information. In this way, they should be able to put forward their views and arguments, where appropriate.

2.8. The US, in particular, regards the implementation machinery in respect of recommendations by the disputes panel as inadequate. To give an example, a state which is ruled against by the disputes panel can all too readily switch to new forms of trade restrictions which serve the same purpose. WTO member states which are injured parties in this respect then have to initiate a new procedure before the disputes panel and the full timelimits apply once again. The Committee, therefore, urges that the problem of substitute measures be examined in connection with the rules in respect of sanctions.

2.9. The Committee is pleased to note that the WTO preamble, drawn up in the 1990s, expressly mentions sustainable development as one of the goals of free trade and also contains a commitment to protect the environment. In this context, the Committee regrets that it has so far not been possible to convince a larger number of member countries that the fundamental workers' rights adopted by the ILO, the 'core labour standards` (freedom of association and the right to engage in collective bargaining; outlawing of forced labour and child labour; and a ban on all forms of discrimination over careers and employment) should also form part of the principles of international trade.

2.10. The Committee also takes the view that the world trade order, which currently has the backing of the community of nations, is a valuable asset which must not be jeopardized; this system must not be overburdened with issues additional to environmental and labour standards. These points are particularly important in view of the very clear problems of the cohesion of member countries: 80 % of the WTO member countries are either developing countries or transition countries.

2.11. The crises which have recently affected the global economy underline the need for a higher level of cohesion between the policies pursued by the international economic organizations. It has rightly been pointed out that neither national nor international institutions have been up to the task of meeting the needs of global economic structures. Since the establishment of a single global body to deal with all economic issues is likely to remain a utopian vision, the Committee calls for the vitally necessary cooperation between the maximum number of international organizations to be placed on an institutional footing without delay; the Committee does, however, fully appreciate the problems involved.

2.12. The Committee welcomes the establishment of a High Level Working Group bringing together representatives of the WTO, the IMF and the World Bank, for the purpose of setting out joint guidelines for cooperation between these bodies. The Committee does, however, deplore the fact that representatives of the ILO have not been included in this High Level Working Group; this omission should be rectified. The benefits of such cooperation had already become clear by the end of the Uruguay Round, thereby leading the ministerial conference in Marrakesh to recommend such a course of action.

2.13. The crisis in Asia and the problems involved in overcoming this crisis clearly indicate that the present close links between capital markets and markets for goods make it necessary to establish clear, general regulatory conditions. A large number of other organizations have a role to play here by cooperating closely so as to strengthen their positions on a reciprocal basis and to bring about ongoing modernization. The standards laid down by the Bank for International Settlements (BIS), could be applied to a greater extent by the international financial organizations. Turning to the non-financial sector, it is primarily the following bodies which have a role to play here: UNCTAD, WHO, FAO, UNEP, WIPO and ILO. Coordinated action by all the bodies, whose roles are partially complementary, can promote: a return to orderly financial markets; healthy macro-economic fundamentals; social security networks; and non-discriminatory access to markets in goods and services. It is only by combining these factors that it will be possible to achieve a high qualitative level of economic growth which generates employment, eases poverty-related problems and promotes sustainable development of the global economy.

2.14. In its capacity as the mouthpiece for representative groups in European civil society, the Committee draws attention to the need to make the work of the WTO more transparent for the public and the continuing low level of cooperation with the respective NGOs concerned. The Committee recognizes the progress that has been made since the last ministerial meeting in Geneva, particularly with regard to the provision of information via the Internet. It is now, above all, desirable for documents which are not particularly confidential to be released more quickly.

2.15. In view of the fact that the on-going process of globalization is giving rise to anxiety, modern trade policy should be backed up by campaigns to win over hearts and minds, above all at national level, but also at international level. In this respect, too, the particular need for measures to be explained in the developing and transition countries should be addressed. A convincing drive to provide explanations and information may, in these countries in particular, serve as an example of democracy in action. The reservations of many people in developing countries over foreign investment should be dispelled by compliance of investors with OECD guidelines for multinationals.

The Committee takes the view that, particularly in the time of crisis which lies ahead, it will only be possible to make progress in the field of world trade if the general public can be convinced of the benefits of open markets. Such a public relations exercise is labour-intensive; it is however absolutely necessary.

2.16. Participation by the relevant, representative NGOs plays an increasingly important role here. Such NGOs should be fully briefed, as soon as possible, at both national and international level; they should also be consulted, in particular in the run-up to policy-making decisions. The entitlement to make written submissions and the right to have their views taken into account and to receive detailed answers should be made available - subject to clear rules - to both sides.

The Committee notes that closer cooperation is taking place at international level between key NGOs. In this field, too, the interests of the developing countries and the reform countries should be taken into account, in particular, and, wherever possible, be given financial support. As it develops the WTO will, of course, also have to consider the issue of granting observer status to internationally recognized NGOs.

The NGOs should not participate in those areas which are the responsibility of governments or parliaments or where the effectiveness of the WTO's work would be jeopardized.

2.17. As the settlement of disputes is an area of fundamental importance to the development of WTO law, many NGOs will clearly be particularly interested in this field. The issues which are the subject of disputes and the procedures involved need to be addressed with considerable sensitivity. Not all parties to disputes will wish to take the publication of submissions and expert opinions as far as the US president has let it be known that his country wishes to do.

In all disputes a consensus should be reached between the parties involved on where the line should be drawn with regard to publicity. The secrecy which was maintained as a matter of principle in the GATT period should however be dropped. The Commission's proposal that panel members organize hearings involving representatives of groups which are involved in the issue concerned and groups which have specialist knowledge should be examined as part of the drive to improve transparency such a measure must not, however, delay the proceedings.

3. Implementation of the results of the Uruguay Round

3.1. The Committee takes the view that the stocktaking of the extent to which the commitments entered into under the Uruguay Round have been fulfilled must not be carried out in a routine bureaucratic fashion. The important point is to draw policy conclusions for the future development of free trade from the weaknesses which have become apparent. This step is particularly necessary in view of the deterioration in the world economy. However necessary further developments may be, they have to be based on a firm foundation.

3.2. Individual countries which may have been dragging their heels as regards the fulfilment of their commitments should have their attention drawn to this fact in an appropriate form. If such a failure to keep in step with other countries is due to administrative weaknesses, administrative assistance should be provided, wherever possible.

3.3. Given world economic trends, further development of the WTO system as a whole must not, however, be dependent upon whether all previous commitments have been fulfilled. The incentives to make further progress towards trade liberalization which have arisen in a large number of areas should, instead, be taken up.

4. Negotiating strategy

4.1. The further negotiations on agricultural products and services, agreed upon at the Uruguay Round, should get underway on schedule in the year 2000. The topics for the next round of negotiations, decided upon in Marrakesh and Singapore, should continue to be carefully prepared, with the agreement of all WTO Member States, so as to ensure that speedy results are achieved with the attendant urgently required boost for economic growth and employment. If the negotiations drag on for longer than three years, this would damage the credibility of the WTO system in view of the pressing economic problems to be addressed.

4.2. The Committee supports the EU's desire to incorporate the talks on agricultural products and services, on which firm agreement has already been reached, into negotiations covering the broadest possible range of issues. In this context careful consideration should be given to the extent to which the 'Singapore topics` are relevant, whilst not being too time-consuming. The interest of just the EU and possibly also the US is unlikely to be adequate justification for them to be included in the negotiations.

4.3. For various reasons, in the foreseeable future, enthusiasm for a broader round of world trade negotiations is unlikely to be very great, either in the US or in third world countries. The EU should therefore make special efforts to secure the interest of the third world countries (which make up 80 % of the member countries of the WTO) in achieving progress.

4.4. An initial starting point here could be to provide the developing countries and reform countries with more advice on how to use the WTO instruments, including the procedure for settling disputes. Whilst such a move would be labour-intensive, and therefore also costly, the OECD states and their institutions should recognize the need to expand their support. Cooperation with UNCTAD - perhaps along the lines of the work of the International Trade Centre (ITC) in promoting exports - could perhaps be stepped up in this context.

4.5. Further moves to facilitate trade would also be beneficial to the developing countries and the reform countries. One approach would be to consolidate the zero-rated tariffs on industrial products (as has happened in the case of the Lomé states); action could also be taken in the fields of customs procedures, customs values and country-of-origin rules. The removal of red tape in these areas would, of course, also benefit the business community in the industrialized countries.

4.6. The Committee regards the European Commission's Action Plan for Trans-Atlantic Economic Partnership (TEP) as providing an opportunity for the two leading global economic partners to assume a pioneering role in bringing about multilateral liberalization. The Committee expressly welcomes the realistic objectives set out by the Commission: the removal of bilateral trade barriers, the avoidance of trade disputes and the promotion of strict standards as regards the protection of the environment and consumers. The achievement of mutual recognition of product standards and test procedures (Mutual Recognition Agreement - MRA) in a number of product areas represents a success in practical terms which the Committee trusts will soon be extended to cover other areas. It is to be hoped that the TEP may help to resolve the threat posed by the dispute over EU banana imports. The recent arbitrary announcement of the US Administration that it will unilaterally impose selective sanctions against the EU products is quite unacceptable; it will damage the credibility of not only the WTO disputes settlement procedure, but also the TEP as a whole.

4.7. The Committee would, however, reiterate its warning - already expressed in its Opinion on the New Trans-Atlantic market (CES 859/98) - against undermining the WTO's system of multilateral agreements through the introduction of bilateral agreements. This could result in smaller WTO member countries, in particular developing countries, losing interest in the forthcoming round of WTO negotiations; this could lead to the benefits gained by the EU and the US from bilateral partnership turning into disadvantages as regards relations with third countries. Particularly against the background of the current delicate situation facing the global economy, there is a danger that serious damage could also be done at this level. The Committee therefore repeats its call for bilateral negotiations with the US to be conducted only in parallel with the preparations for the forthcoming round of WTO multilateral negotiations.

5. Preparation of the next round of negotiations on agricultural products

5.1. In the course of its deliberations on the agricultural proposals submitted by the Commission under Agenda 2000, it became more and more clear to the Committee that the worsening situation in the various trouble spots in the world would have the effect of increasing, rather than decreasing, the pressure for further moves to liberalize EU agricultural policy. The EU and the Cairns states are spearheading action in this respect. As is its usual practice, the Committee issued constructive and critical opinions on these proposals () in which, in the light of the forthcoming international negotiations and accession talks, it highlighted, in particular, the involvement and likely consequences in respect of all groups of the population connected with agriculture. The Committee believes that is absolutely essential to maintain the European agricultural model defined in Luxembourg.

5.2. The Committee welcomes the agricultural proposals under Agenda 2000; they will provide a detailed basis both for the continuation of the debate on the development of the CAP and for the attendant decisions. The Committee supports the Commission's view that the reform being pursued has to take account of the following four factors:

1) a growth in the global population of approximately one billion over the next ten years;

2) the resumption in the year 2000 of the negotiations on the further liberalization of international markets for agricultural products;

3) the expected enlargement of the EU to include the CEEC and Cyprus;

4) the continuation of the Euro-Mediterranean partnership.

5.3. The Committee also endorses all the specific objectives of the future CAP, namely: competitiveness of agriculture in the EU on the internal and world markets; food-safety and -quality for consumers; stable farm incomes; incorporation of environmental objectives into the CAP; sustainable agriculture and renewable sources of energy; alternative sources of income for farmers and their families; and the simplification of EU legal provisions.

The Committee does, however, regret that less attention has been paid to: a) the promotion of land use which takes account of specific regional characteristics; b) the impact of the CAP on upstream and downstream areas of activity and c) the strengthening of producer organizations. The Committee takes the view that some of the Commission's proposals veer too much towards a renationalization of CAP.

5.4. As regards the strategy to be adopted, the Committee would point out that, bearing in mind all previous experience, the EU should avoid adopting a mainly defensive position when going into the next round of WTO negotiations. The policies set out in the individual points of Agenda 2000 provide sufficient flexibility with regard to the individual negotiating positions.

5.5. It is very important that the EU should not call into question - even at the end of the negotiations - the direct payments to EU farmers for the period 2000-2006. Furthermore, in view of the possibility of a fall in prices, a residual level of external protection - adequate to meet requirements - should be maintained. Particular attention should be paid to public health and quality standards: these standards should be observed in reality.

The labelling of food products and animal feed containing genetically modified organisms, hormones, etc. will, in the Committee's view represent a major challenge in the forthcoming international negotiations. The EU should champion the recognition of EU public health and food standards in international discussions.

The Committee shares the Commission's view as regards the need to introduce global environmental and labour standards and pay greater attention to the interests of consumers.

5.6. The Committee underlines the fact that the next WTO negotiations will not be the last ones to be held. International trade agreements have become a permanent fixture. The package of CAP reform measures which are currently being targeted and are to come into force in the year 2000 must provide the EU with an adequate negotiating basis in respect of its international obligations. No effort should be spared to ensure that EU farmers will not be called upon a second time to pick up the bill. Such a pro-active approach should be employed not just in respect of cereals, oilseeds and proteins, but also in other product sectors, such as beef and veal and milk.

6. Continuation of the negotiations on trade in services [General Agreement on Trade in Services (GATS)]

6.1. The Committee regards the inclusion of services in the WTO global trading system, brought about by the GATS, as a considerable step forward. The Committee therefore finds it all the more regrettable that, in most cases, the specific obligations in respect of market access and national treatment assumed by the WTO members, hardly go beyond the status quo which is already observed by the governments. The Committee therefore expects the negotiations getting under way in the year 2000 to achieve more substantial progress in order to ensure continued worldwide interest in achieving a comprehensive liberalization of external trade. It is important that the negotiations cover all types of services, also taking in sectors not covered by the Uruguay Round, such as courier services, environmental protection services, training and medical care. Consideration should also be given to the issue of consumer protection.

Future negotiations should also extend beyond the question of market access and national treatment: national regulations and licensing requirements must be transparent, appropriate and involve the minimum extra work, so as to ensure that (a) domestic and foreign competitors are given equal opportunities; (b) employment is boosted and (c) consumers enjoy the benefits of a high level of competition in respect of price and quality.

6.2. The agreements which have already been reached under GATS suffer from being opaque. It is thus difficult to assess the benefits of these agreements to service-providers, and above all to consumers in industrialized and developing countries. The WTO should therefore make the existing treaty provisions more transparent by issuing them in a standardized form.

6.3. The Committee welcomes the outcome of the negotiations on the liberalization of basic telecommunications services and financial services (). The Committee would at the same time draw attention to the need for the same employee rights to be applied to new forms of working, made possible by electronic means (tele-working), as are applied to traditional forms of work. Efforts must also be made to ensure that all groups within the population have access to the new communications technologies and that the rights of consumers continue to be fully safeguarded. In the Community's view the successful outcome of these negotiations was facilitated by the fact that the benefits to national economies of liberalization in these sectors were readily apparent. Reduced costs and improved services in the field of communications benefit the whole economy, as do improvements in the efficiency of the financial markets. These successes have to be weighed against the disappointing impasse which has been reached in negotiations on professional services. The Committee takes the view that the overall economic benefits of liberalizing professional services are not sufficiently widely recognized, with the result that there is little pressure to negotiate in this sector.

6.4. The Committee therefore calls upon the Commission to examine the macroeconomic impact on employment and income of liberalization in key service sectors (e.g. commerce, professional services, transport), taking account of the contribution by these sectors to a modern infrastructure. Such a study would demonstrate the benefits which would accrue to the users of services - i.e. consumers in the broadest sense of the term - from liberalization, thereby boosting public interest in seeing more rapid progress in the negotiations. This would apply not only to the EU, but, perhaps to an even greater extent, also to the developing countries, which have not yet fully recognized the development opportunities available to them in the service sector. Putting across this message is also a task for UNCTAD.

6.5. In the run-up to future negotiations consideration should be given to the possibility of replacing the schedules of commitments by, lists of exemptions from across-the-board liberalization. Negotiations would then range from the achievement of full market access, with national treatment, in the respective sectors to the question of the exemptions. This approach would enable greater transparency to be achieved both in the talks themselves and as regards their outcome.

7. Trade and the environment

7.1. Even before the Singapore ministerial conference the Committee had addressed in detail, the issue of the relation between the liberalization of world trade and the environment (). The Committee underscored the point which had been made by the World Bank to the effect that the main cause of environmental problems did not lie in trade liberalization but rather in the inability of the markets and the authorities to take adequate account of the environment when setting prices. The Committee therefore urged the OECD to continue its work on the polluter pays principle (PPP). This approach would provide good possibilities for internalizing environmental costs.

The principle of taking precautionary action must, however, be given priority - both in respect of decisions which have an environmental impact and decisions which impact on public health and consumer protection.

7.2. Every state has the right to apply to imported goods the rules in force in respect of its own products. This right is, however, matched by the responsibility to keep exporters and governments in the countries of supply regularly briefed on these rules. Differences that may occur in the environmental protection policies of individual states must not lead to a situation in which compensatory levies or export refunds are introduced to offset comparative economic disadvantages in given states. In the event of cross-border regional environmental problems or global environmental problems the states concerned must find a joint solution. Supplementary commercial measures may form a key part of such multinational environmental agreements (MEA). This has already occurred in the case of 18 out of the overall total of 180 MEAs.

7.3. The Committee also agrees with the Commission that unilateral measures to resolve cross-border or global environmental problems occurring outside the sovereign territory of importing states must be avoided. Such problems should be settled through multilateral environmental protection agreement. In future, trade restrictions should be introduced only with the full agreement of the WTO and should only include such provisions as are absolutely necessary for the achievement of the objectives concerned. Such agreements must be hammered out by international environmental bodies; the United Nations Environment Programme (UNEP) will have an important role to play here in future.

7.4. The Committee also believes that the concerns of the developing countries and the countries undergoing reform have to be taken very seriously. Attention must be paid in pursuing trade and environmental policy to ensuring that the prospects of these countries for making economic progress and their export possibilities are not jeopardized. Efforts must be made to find an appropriate way to tackle excessive exploitation of the environment, taking account of the abovementioned consideration. The Committee endorses the proposals and ideas put forward at that time by the Commission and draws attention in particular to training programmes, technological research and advisory services.

7.5. In its abovementioned opinion the Committee proposed that disputes in this area in particular should be resolved in the most open possible manner and with the participation of NGOs. The panels should of course have sufficient opportunity to consult scientists and technical and environmental experts.

7.6. The Committee notes that the public and parliaments are attaching greater importance to the environmental components of international trade policy. This being the case, the Committee welcomes the invitation extended by Sir Leon Brittan, Member of the European Commission, to WTO trade and environmental ministers to hold a meeting early in 1999; this meeting could provide a fresh impetus for early coordination of trade and environmental policies. Since the Rio Conference, attempts have been made to overcome the tendency to compartmentalize responsibilities.

7.7. The Committee also believes that another key problem needs to be addressed, namely the fact that the OECD states are dealing with ever more complex issues and proposed solutions in this field at the level of their own organization. Many of the developing countries regard a large number of these issues and problems as being by no means key issues. The point has been underlined by debates in the WTO's environment committee. To quote an example, the OECD advocates national environmental audits in respect of trade instruments and agreements. OECD member states are expected to draw up environmental audits in connection with the preparation of international trade agreements whenever such agreements are likely to have a considerable impact on the environment. The developing countries clearly view such preparations with scepticism and regard themselves as being placed at a disadvantage from the outset. Assistance from the UNEP or UNCTAD should therefore be stepped up.

7.8. The Committee believes that considerable efforts will need to be made to enable the developing countries to recognize that, at least in the longer term, the debate on the principle of taking preventive action is also of major importance to them. The Committee regards this as being a task for the WTO, which should, here too, once again act in liaison with the relevant specific UN body.

8. Trade and minimum labour standards

8.1. For a considerable time now, the Committee has, on various occasions, sought to help bring about the application throughout the world - and particularly in the developing countries - of the 'Core Labour Standards` formulated by the ILO. The Committee does of course recognize the difficulty in securing application of these core labour standards in the conditions which apply in many developing countries, even if the governments concerned show an apparent readiness to accept these standards. The Committee has therefore welcomed the active advisory role played by the ILO in this context.

8.2. At the International Labour Conference (ILC) held in June 1998 attention was drawn to the fact that all ILO member states, including those which have yet to ratify the relevant conventions on core labour standards, are obliged to incorporate into their policies the four basic rights set out in point 2.9 above. As previous appeals to this end made in recent years have met with little success, the Committee welcomes the decision taken at the ILC to apply a simpler procedure for an annual check on whether the fundamental workers' rights are being applied in practice in these states. Consideration is also being given to the possibility of calling upon the services of a specially established group of experts when carrying out this task.

8.3. The Committee trusts that these new measures will have a positive effect.

8.4. Even if there appears to have been a change in the attitude of a number of states which previously rejected the binding application of the core labour standards, consideration of the use of trade restrictions continues to provoke opposition. Efforts must however be made to bring about worldwide application of these core labour standards as soon as possible. The ILO member states are obliged to bring about the application of these standards at national and international level under the three-part declaration of principle on the implementation of basic workers' rights and human rights (see point 8.2 above). The Committee therefore urges that the campaigns to convince people of the benefits of trade liberalization be stepped up and also urges that a fresh attempt be made to reach international consensus on this delicate issue. A WTO working party would provide the appropriate platform for reaching such a consensus. The Committee already welcomed in an earlier opinion the introduction of special EC tariff preferences to promote observance of labour and environmental standards (). The Committee deplores the fact that many countries have failed to avail themselves of these tariffs.

8.5. The Committee recognizes that the best way to raise labour and social standards in the developing countries is to remove poverty and to establish democratic structures. Providing market access to products from the developing countries, together with other measures which seem appropriate and offering positive incentives may help to achieve this goal. The Committee also expects that the declaration formally adopted at the ILC in June 1998 will have a positive impact.

9. Trade and employment

9.1. The Committee takes the view that consideration should be given to establishing a WTO working party on trade and employment. The welfare benefits generated by international trade do not accrue to all the partners involved in equal measure. In cases where restructuring is necessary, individual regions and sectors of employment have to meet temporary adjustment costs, some of which may be considerable.

9.2. In order to ensure that measures to liberalize the global economy meet with broad acceptance, structural change must be made as socially palatable as possible for workers. The working party should examine practical ways of achieving this, in the light of earlier experience and instruments with protective clauses.

10. Trade and competition

10.1. The Committee draws attention to the fact that, in the ongoing process of globalization following the extensive removal of national trade barriers, the development of international competition is a very important factor in improving living standards. Not only the community of states but also an increasing number of individuals are expressing their distrust of the growing number of cross-border mergers and strategic alliances. A system of rules governing international competition, covering as many countries in the world as possible, is required.

10.2. The Committee is aware that several possibilities are currently being discussed. Some experience has been gained in the extra-territorial application of national competition laws by means of cooperation between various national or regional monopoly commissions. The principle of 'positive comity` is used in this respect for the exchange of information between monopoly commissions and as a basis for reciprocal support. This form of international competition monitoring is however limited for a number of reasons. Securing the relevant information about companies and markets in other countries is an expensive business. Furthermore, whilst one competition authority can provide others with information on specific issues - provided that it is made available by the firms concerned - the individual authorities may well draw different conclusions from such information since they do not apply the same criteria. Bilateral arrangements are bound in the end to lead to the establishment of opaque provisions which always remain incomplete and open to manipulation.

10.3. In the light of the global trend towards large cross-frontier mergers, the establishment of an internationally-recognized corpus of competition law, backed up where possible, by a world anti-trust commission, would be a very important step with a view to maintaining market-economy competition structures.

10.4. The Committee believes that progress at international level is likely to be achieved only very slowly in view of the persistent strong trends in the industrialized countries - and in the developing countries and reforming countries, which are concerned about sovereignty - to pursue national interests. Furthermore, few countries have up to now focused on competition policy issues; the objective involved here is also markedly different from the goal of commercial policy, namely to open up markets and remove barriers.

10.5. The Committee has however been pleased to note that increasing participation in international trade by developing and transition countries has brought about an increasing recognition amongst those countries that open frontiers make it necessary above all for states to be internationally competitive and that any form of national preference serves to reduce this very competitiveness. These states, too, now see the introduction of their own competition laws as a means of promoting international competitiveness. Over forty developing and transition countries have introduced their own competition laws over the last two decades. At the WTO ministerial conference in Singapore, it was therefore possible to reach agreement between all the member states on the establishment of a working party to examine competition issues. In this context UNCTAD also provided clear examples in respect of its member states of how low levels of competition hold back development.

10.6. Against this background the Committee joins the EU Commissioner responsible for competition matters, Mr van Miert, in proposing that every effort be made in the next round of negotiations to achieve what is currently feasible. Even under the more difficult circumstances which we currently have to face, attempts could be made to:

a) formulate a number of core competition law criteria which should be incorporated into national provisions governing competition, including those of the developing countries. These criteria could include, for example, a definition of restrictive trade practices, the abuse of dominant market positions and a number of provisions governing mergers;

b) reach agreement on a small number of basic international principles, covering issues such as how to deal with export cartels or carving up of markets along regional lines;

c) achieve general closer cooperation between national competition authorities which could above all promote the exchange of experience and, in some cases, the exchange of non-confidential information;

d) steps should be taken at least to consider the development of machinery for resolving disputes in which enterprises are also directly involved. Account could be taken here of the experience gained in applying the WTO disputes procedure.

10.7. It is not absolutely essential to address in this context the application of the WTO anti-dumping rules, which have been criticised by a large number of developing countries. Competition law and anti-dumping law are, at least from an EU standpoint, issues which are to be tackled at different levels.

11. Trade and investment

11.1. Globalization is characterized not only by the rapid increase in international trade but also by the sharp increase in cross-border investment by enterprises over the last decade; an additional defining feature is speculative financial capital movements, which are not, however, taken into account under the WTO system. The key investing countries have in the past concluded a large number of very divergent bilateral agreements with the most important beneficiary states setting out rules governing access to the market for investors, legal protection and the settlement of disputes. Past experience and the rapid increase in international direct investment have highlighted the need for a regulatory system, applicable to as many countries in the world as possible.

11.2. Against a background of intensifying competition to attract and keep industry and under the pressure of the current economic crises, many governments - motivated by the need to create jobs - are endeavouring to offer favourable conditions to foreign investors. It has, however, so far not even been possible to conclude a Multilateral Agreement on Investment (MAI) between the OECD States. The causes of this lack of agreement are political differences of opinion, inter alia the issue of the extent to which such an agreement should incorporate environmental and labour standards. Critical observers draw attention to a desire to achieve perfectionism in the formulation of the target standards.

The Committee would, however, point out that a long-term commitment of private foreign capital, together with the desired transfer of high-calibre know-how and technology, will only be achieved if all the basic conditions meet high standards.

11.3. The question which arises, however, is whether the rules on the settlement of disputes, agreed upon in a MAI, will have to go so far as to entitle each individual foreign investor to take proceedings against the government of a country benefiting from investments. Granting such a right to private investors is bound to be viewed by many states as representing an unacceptable restriction of national sovereignty which goes well beyond the provision to be laid out in the MAI whereby domestic and foreign capital are placed on an equal footing. Many states are not prepared to subordinate their national policies to such an extent to international economic interests. The collapse of the OECD negotiations at the beginning of December 1998 was therefore greeted with sympathy by many developing and newly industrialized countries. The efforts to perfect the rules in this field have clearly gone too far.

11.4. The Committee recognizes the need for a uniform body of rules to be introduced at global level as soon as possible. It had at an early stage advocated that these issues be addressed by the WTO (). Should the OECD initiative not prove successful, the Committee proposes that the WTO working party rough out an international agreement on the basis of the OECD texts and existing bilateral treaties. The Committee does, however, feel that the cultural sector and traditional copyright (particularly for writers, artists and actors) should be excluded.

11.5. The Committee calls for the key environmental criteria and the core labour standards to be included. They should however be included in such a way as to preclude an improper protectionist interpretation of the provisions (a task which is likely to be rather difficult). Clear definitions and rules must therefore be set out. The OECD guidelines in respect of multinationals should also be taken into account in an appropriate form. National states must continue to be entitled to lay down investment conditions - which must be the same for domestic and foreign investors - under their national legislation covering the fields of labour-law, social provisions, the environment and taxation. Experience has shown that foreign investment in developing countries has helped to raise environmental and labour standards. The MAI is to stipulate equal treatment for foreign and domestic investors; this would rule out failure to meet existing national standards.

11.6. In this context it should, in the Committee's view, also be stipulated that special economic zones must comply with the labour standards applicable in the countries where they are located. Tax and customs concessions and administrative facilities would still be available as incentives for investors.

12. Electronic commerce

12.1. Whilst welcoming the progress made in telecommunications technology, the Committee has made a number of critical observations in its opinions in this field. It has recently issued an opinion on indirect taxation (). Economic transactions can now be carried out and trade can be conducted in knowledge and services through the use of electronic media. The supply available to consumers is thus becoming more extensive and cheaper. The electronic media also enable enterprises in the less competitive developing countries to improve their competitiveness. Small enterprises, in particular, are thus able to offset disadvantages which they have vis-à-vis large competitors. The use of electronic media facilitates sales of particular products, since there is no need to have a distribution network consisting of 'bricks-and-mortar` branches.

12.2. If consumers and enterprises throughout the world are to be able to exploit, from the outset and in confidence, the opportunities presented by the new technologies for facilitating, at lower costs, increased trade which promotes living standards, a suitable legal and regulatory framework will have to be introduced, particularly in respect of data protection, legal certainty, consumer protection and abuse of the Internet involving internationally recognized offences. This framework should, however, be flexible enough to avoid jeopardizing, on the one hand, the freedom of movement of suppliers and customers and, on the other hand, progress in the further development of information and communications technology.

12.3. The WTO is best placed of all the international organizations to establish a framework which strikes a balance between the above requirements. The programme of work decided upon at the Ministerial Conference held in May 1998 and enacted by the General Council in September 1998 therefore deserves the EU's full support. This does not, however, rule out a valuable contribution being made by the OECD with a view to clarifying somewhat complex issues, such as taxation, consumer protection, the protection of intellectual property, confidentiality, electronic signatures.

12.4. The proposal by the US government that the Internet be declared a free trade zone and that all products and services supplied through digital transactions be exempted from customs duties and other taxes should be carefully considered by the international community. The agreement on exemption from customs duties - which expires at the end of 1999 - sealed at the second WTO ministerial conference held in May 1998 should provide an adequate test period.

12.5. The Committee believes that particular problems also arise over the taxation of digital services. If we are to have a fair taxation system, there will have to be equal taxation for equal transactions, irrespective of whether operations are carried out physically or electronically.

12.6. The Committee takes the view that the introduction of a 'bit tax`, involving a form of transaction tax on the quantity of data transferred to data networks, would not be the right approach. Such a tax, which would only be levied on businesses transactions conducted electronically, would curb the growth and employment potential of this medium and limit the scope for private initiatives and creativity.

12.7. As the Committee pointed out in its most recent opinion on electronic commerce and indirect taxation, the European and US authorities are considering introducing tax provisions in respect of electronic commerce, working in close liaison with the business community. This consultation should embrace representatives of commerce, enterprises and all other social and economic groups, in particular consumers and employees. Concern has been expressed over the fact that tax measures taken without consideration of the global context could have damaging effects on economic achievement, investment and the employment situation (e.g. the shifting of production to other countries, the creation of a climate which hampers investment, and a loss of competitiveness). In its opinion the Committee warned against formulating ad-hoc solutions with regard to the taxation of electronic commerce. This form of commerce, which forms part of a root-and-branch restructuring of society and the way in which business enterprises operate, is creating new problems for all areas of the taxation systems. Furthermore, there is currently a tendency further to increase the tax burden on labour, thereby making taxation systems increasingly unfair.

12.8. In its opinion the Committee put forward detailed observations on the ideas set out by the Commission and drew attention to a number of contradictions.

Brussels, 27 January 1999.

The President

of the Economic and Social Committee

Beatrice RANGONI MACHIAVELLI

() See the ESC opinions on the: agricultural aspects of the Commission Communication 'Agenda 2000` - OJ C 407, 28.12.1998; Proposal for a Council Regulation establishing common rules for direct support schemes under the common agricultural policy - OJ C 407, 28.12.1998; Proposal for a Council Regulation on the common organization of the market in beef and veal - OJ C 407, 28.12.1998; Proposal for a Council Regulation on the common organization of the market in milk and milk products and the proposal for a Council Regulation amending Regulation EEC 3950/92 establishing an additional levy in the milk and milk products sector - OJ C 407, 28.12.1998; Proposal for a Council Regulation amending Regulation (EEC) No 1766/92 on the common organization of the market in cereals and repealing Regulation (EEC) No 2731/75 fixing standard qualities for common wheat, rye, barley, maize and durum wheat and the Proposal for a Council Regulation establishing a support system for producers of certain arable crops - OJ C 407, 28.12.1998; Proposal for a Council Regulation on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) - OJ C 407, 28.12.1998.

() See the ESC's Opinion on the Proposal for a Council Decision concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the results of the World Trade Organization negotiations on financial services - OJ C 407, 28.12.1998.

() ESC Opinion on World trade and the environment - OJ C 407, 28.12.1998. In this opinion the Committee set out detailed observations on the Commission's Communication No 96/54.

() OJ C 40, 4.2.1999.

() OJ C 153, 28.5.1996, point 1.2.

() OJ C 407, 28.12.1998.