SUMMARY

The four “Singapore Issues”, Investment, Competition Policy, Trade Facilitation and Transparency in Government Procurement, have until now been treated together at the insistence of the EU and Japan, the main demandeurs for negotiations on investment and competition. The EU and Japan have not wanted to separate investment and competition from the less controversial issues of trade facilitation and government procurement since this would probably doom any hope of a negotiation on investment and competition. At the Doha Ministerial, this insistence coupled with resistance to investment and competition by some developing countries, resulted in the four being bundled together.

Investment in particular is strongly opposed by some developing countries, notably by India, and certain African states, which have said that under no circumstances would they agree to launch negotiations on the subject in Cancun. The United States, while not a demandeur for either investment or competition, has until now given quiet support to the EU - as for example at the Doha Ministerial in 2001. The United States recently broke ranks, indicating that it does not wish to see negotiations on trade facilitation and government procurement held up by disagreements on the other two. One issue at Cancun will be whether to decouple the negotiations on the four issues.

The draft Ministerial text contains virtually identical language on each of the four issues, presenting two stark alternatives - to commence negotiations on the basis of “modalities” annexed to the Declaration, or to remit the subject to officials for further clarification. The draft modalities are in each case short: each stresses the need of developing countries for technical assistance and capacity building, and for flexibility in the application of any agreements to them. The draft on investment contains more details on the elements to be contained in an agreement.

It is believed by most Geneva delegates that there is little possibility of an agreement at Cancun to launch negotiations on investment. An agreement to launch negotiations on competition policy will also be difficult. Whether the Members let trade facilitation and procurement go forward at Cancun will depend on the tactics of the EU and Japan. If the EU and Japan continue to insist on keeping the four issues together, Members may have to relegate all four issues to further study, despite a considerable amount of preparatory work since 1996. In any case, navigation of the Singapore Issues will be difficult, and unpredictable as the weather patterns in Cancun during the current hurricane season.

ANALYSIS

I. Political Background: EU and Japan Becoming More Isolated

Two stark alternatives are presented by the drafters in paragraphs 13 - 16 of the draft Cancun Ministerial Text for each of the Singapore Issues - either to start negotiations on Investment, Competition Policy, Trade Facilitation and Transparency in Government Procurement pursuant to “modalities” annexed to the draft Declaration, or to seek “further clarification” in the Council on Trade in Goods, thereby delaying formal negotiations.

African countries, in particular, have been strong proponents of delaying negotiations on all four Singapore issues. Furthermore, the “modalities” have been subject to criticism by developing countries, led by India, and joined by Botswana, China, Cuba, Egypt, Indonesia, Kenya, Malaysia, Nigeria, Philippines, Venezuela, Zambia, and Zimbabwe, which complain generally that the modalities were formulated by small groups and not discussed by the Members. On August 27, these countries wrote the Chairman of the General Council identifying many issues for further clarification and recalling that the Members can only commence negotiations on the Singapore issues on the basis of an “explicit consensus” - the language in the Doha Declaration on these issues. By emphasizing the need to clarify important issues, these developing countries are seeking to prevent negotiations or to delay the commencement of negotiations.

Despite the either/or tenor of the debate, resulting in part from the draft Declaration and the European view that linking the modalities on all four issues preserves balance, the United States is coming under domestic pressure from its Democratic party critics, industry representatives and others to de-link trade facilitation and transparency from investment and competition, recognizing that the latter issues pose greater challenges. These same critics have warned that investment may not be “ripe” for negotiation and that a weak investment agreement could undermine existing U.S. investment treaties. In any case, the US has always given lukewarm support to investment and competition policy throughout the study phase.

Bangladesh, Thailand, Colombia and Pakistan are reported to have complained that the draft Declaration “lacks middle ground” on the Singapore issues. The intermediate options being mooted include negotiating a “soft agreement” for competition, and perhaps other Singapore issues, that would not be subject to the terms of the dispute settlement understanding. One variant of this soft option calls for creation of a peer review mechanism for the review of competition authority decisions. Another option would be to link clarification of the modalities with a firm agreement to begin negotiations once an agreement on the modalities is reached. The EU remains opposed to a soft approach.

II. Investment: Strongest Winds Ahead

The EU and Japan, backed by Korea, Switzerland and Taiwan, have already begun to lower expectations on investment even as they clarify their position in the run-up to Cancun. Their latest proposal identifies specific negotiating objectives, but suggests limiting the scope of the negotiation to foreign direct investment (excluding portfolio investment) and would not permit investor-state disputes to be heard by WTO panels. Among other issues, the proposal addresses transparency, non-discrimination, pre-establishment commitments and special and differential treatment. The proposal also calls for balance-of-payment safeguards and a clarification of the relationship between an investment agreement, the existing Agreement on Trade-Related Investment Measures (“TRIMS Agreement”), and bilateral and regional investment agreements, raising concern among some Members that the negotiations could undermine existing bilateral investment agreements.

Developing countries and non-governmental organizations (“NGOs”) continue to be skeptical (if not hostile) about the investment negotiations, in part because any inclusion of portfolio investment could limit the ability of developing countries to impose capital controls and to take other steps in the event of a financial crisis. Many NGOs have opposed investment negotiations since the OECD attempted, and failed to conclude an agreement. These groups have also expressed concern that an investment agreement may have unintended negative consequences for public health, the environment, labor rights, etc.

III. Competition: Another Problematic Forecast

Competition is also proving to be among the most problematic of the four Singapore issues. Developing countries propose exempting possible disciplines away from the applicability of the Dispute Settlement Understanding to this issue. The United States is providing some backing for developing countries in this regard, indicating support for a peer review mechanism (a “soft option”), instead of the normal dispute settlement rules.

IV. Transparency in Government Procurement: A Better Outlook

The EU and Japan, backed by Korea, Switzerland and Taiwan, have also tabled a proposal on transparency in government procurement. The proposal is modest in nature, explicitly limiting the negotiations to transparency, and providing for special and differential treatment for developing countries, including transition periods and flexibility concerning the extent of commitments. The proposal also calls for capacity building and technical assistance during the negotiations. The United States has gone further, indicating support for a developing country proposal that an agreement on transparency only cover developing country procurement above a certain threshold. Most developing countries have not expressed strong resistance to launching negotiations on transparency, even though a large majority are not part of the plurilateral Agreement on Government Procurement.

V. Trade Facilitation: More Promising Conditions

Although WTO Members are closer to an agreement on trade facilitation than any other issue, India and other developing countries have criticized the modalities Annex on this issue, calling for clarification of many points. Importantly, they suggest that the costs of trade facilitation for developed countries be assessed, and they propose compensation for the costs of developing countries that implement new rules and procedures to facilitate trade. They also propose that developed countries make special and differential treatment and technical assistance available.

Many developed and developing countries, gathering together as the “Colorado Group” in Geneva have been proponents of an agreement on trade facilitation. These countries have insisted that the conclusion of this long-delayed agreement would enhance the efficiency of trade overall, including for developing countries.

OUTLOOK

If the EU and Japan drop their demand that all four Singapore issues be treated together, progress may be possible on trade facilitation and transparency. Competition and investment have attracted considerable developing country opposition and it would take major concessions by the developed countries in other areas of interest to developing countries (in particular on agriculture) for progress to be made on these two issues.

It is no coincidence that the most protectionist countries on agriculture are also the main demandeurs for launching negotiations on complex new agreements on investment and competition. The EU since the first Ministerial in Singapore, under the direction of Commissioner Leon Brittain, had sought to balance the agenda and EU interests by insisting on these new and ambitious negotiations. Since the Singapore Ministerial, these two issues have become far more contentious and perhaps too difficult to expect even the start of negotiations.

Nonetheless, it appears that the climate has improved since Members last met at the port of Doha. There appears to be growing support to separate the four issues and allow the less controversial (and commercially meaningful) issues of transparency and trade facilitation to chart their course towards land. In the meantime, rough seas are ahead as Members gather in Cancun.