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BACKGROUND >> International Trade & WTO >> Lamy's response to European NGOs on New Issues

sw D (2003) 825
MARS 2003
Dear Mr Tyrell,
Thank for your letter, which underlines the increasing importance that European NGOs attaches to WTO affairs in general and the DDA in particular. I can only welcome this interest, because I think that the WTO is an important arena for taking decisions that affect society and that with the DDA we have an opportunity to take decisions, which will benefit all societies in Europe and beyond.

In reply to your letter, I would like to address two issues, which you raise directly or indirectly in your letter. First, how should the language in the Doha Ministerial declaration be interpreted; and second, whether it is appropriate to have certain issues in the DDA negotiations.

In relation to the first question WTO members in Doha clearly have agreed to the principle of negotiations concerning investment, competition, trade facilitation and transparency in government procurement but there were some concerns over the modalities of these negotiations. This is the clear meaning of the phrasing "negotiations will take place". Indeed, if it had not been definitely decided that negotiations were going to take place, there would be no reason for those members, which had concerns over the modalities to insist on agreement of a decision on this issue. There is, therefore, in my reading, a clear obligation of WTO members to arrive at an agreement on the modalities for the negotiations at the latest at the 5th Ministerial in Cancun -just as there is the obligation of Members to reach agreement on modalities in other parts of the negotiations, e.g. in the field of agriculture or non-agricultural market access. It is true that if there is no agreement on "modalities", negotiations cannot proceed, but this is neither uncommon, nor unique. It only means that WTO Members have committed themselves to proceeding in steps and have to agree on them.

On the second point, i.e., whether it is appropriate to embark on the negotiations on the Singapore issues in the context of the already ongoing DDA negotiations, it is our clear conviction that this is a necessary element to achieve international trade rules adapted to the needs of countries today.

It is necessary because taking effective international action on investment, competition, trade facilitation and government procurement is essential for creating more stable and predictable trade and investment relations between nations and will also contribute positively to global governance. Rules in these issues are in fact of particular interest to developing countries. Let me try to explain why.

Mr Keith Tyrell
Trade and Investment Policy Officer WWF European Policy Office
36, Avenue de Tervuren B-12
1040 Brussels
TELEPHONE: LIGNE DIRECTE (+32-2) 2981300 -FAX (+32-2) 2981399
Foreign direct investment is recognised as one of the key factors in economic growth and wealth and in helping countries achieve sustainable development. Developing countries in particular need to attract more long-term foreign direct investment to meet and pursue their development needs and priorities. But such investment needs the stable, transparent, predictable and non- discriminatory climate that only multilateral rules can provide. The benefits that multilateral rules would bring are notably that it would improve the legal framework for FDI world-wide by contributing to the creation of investment-friendly legal and administrative environment for all investors, based on the WTO principles of non-discrimination and transparency, but of course preserving the right of governments to regulate investors' activities in their territory in a non-discriminatory manner. Multilateral rules will also increase investment flows by reducing the risk of investing abroad and help developing countries attracting a fairer share of whatever FDI is available. Another important benefit of multilateral rules would be to establish a level playing field among host countries and among investors by addressing the problems caused by the current patchwork of investment rules established at the regional and bilateral level, which result in inefficient and non-transparent investment rules, given the variations in treatment in various countries -a situation particularly unsatisfactory for SMEs. Investment, of course, is not a new subject for the WTO -we have it already in the GATS. This has proved very useful for developing countries and so there is interest in similar arrangements for manufacturing investments.

Competition rules are crucial to ensure that the agreement by Governments to remove trade barriers are not negated by the actions of business -to the detriment of governments and all citizens alike. WTO rules will help fulfil three 3 essential objectives. Through agreeing on core competition policy principles to be reflected in domestic competition laws, this would reinforce and support the process of trade and investment liberalisation through commitments by countries to transparent and non-discriminatory competition polices. It would address one of the most important anti-competitive practices by stipulating a ban on hard-core cartels -a particularly important problem, since these cartels; which are often made up of powerful multinationals, cost consumers literally billions of Euro, as they keep their prices for goods and services artificially high and hurt small companies. These costs to consumers -both intermediate and final -are felt globally, in developed and developing countries alike. It would enhance the capacity of all countries to address anticompetitive practices of an international dimension through modalities for international co-operation. The agreement would also support the progressive reinforcement of competition institutions in developing countries -fulfilling important objectives in terms of capacity-building and possibilities of developing countries to create the internal structures for well- functioning economies. Finally it should be noted that enhanced cooperation on competition matters can lead to better export opportunities for DCs as well, e.g. by cracking down on shipping cartels and the like.

Trade facilitation measures are of high importance to all countries that want to be part of the international economy, raise revenues from customs duties and increase incentives for FDI. Studies show that the cost of trade procedures represent even as much as 4-5 percent of the overall costs of trade transactions. This is about the same cost as the current tariff average on trade in industrial goods of industrialised countries, which is 3.8 %. Halving the costs would mean saving 325 billion a year -money currently being wasted -largely on the shoulders of SMEs and developing country traders. Trade facilitation measures would mean reduced costs and delays for all traders, but the gains would be particularly beneficial for small and medium-sized companies and traders in developing countries for whom the costs of compliance with trade procedures -often at a fixed amount, regardless of the value of the transaction -are proportionately higher. Trade facilitation measures are crucial for encouraging inward investment, because it shows the commitment of a country to be an integral part of the global economy. When investors decide where to place their capital, a key factor is the ease and transparency of the export/import procedures, whether for export of goods or for bringing in inputs to the production process. Trade facilitation measures also result in better controls and bigger customs duties revenues for governments. It has been proven time and time again that simple, modern procedures enhance border control and fraud prevention, and lead to higher revenue intakes. This is particularly important for those developing countries, which depend on customs duties as an important contribution to their national budget Rules on transparency in Government procurement have also a number of benefits for both governments, business and citizens. Public procurement applied in a transparent environment with a clear set of rules defined in advance and respected by all participants allows tendering companies to compare their respective financial and technical advantages. It will contribute to better value for money and lower budget expenditure for public authorities, since transparent and fair tendering enables effective competition by comparing offers from different bidders. When tendering is open to foreign suppliers, then the differences in terms of value and quality forces prices down, as in any other auction system. Governments and public entities have a political duty to purchase goods, services and works through the most economically advantageous offer. By [**]opening public tendering to foreign competition, governments obtain lower prices, thereby reducing budget expenditure.[**] Finally, it will improve governance, since transparency in public procurement is one of the best ways of combating undesirable practices, such as bribery and corruption in the public sector. Using a transparent set of rules helps establish a level playing field. Transparency in procurement would allow other bidders to compete and would therefore prevent these practices.

A final important consideration is that that since these rules are win-win and not classical market access issues, they will contribute to spreading the gains of the content of the DDA even more widely across the WTO-membership and thereby facilitate the conclusion of the negotiations with a result which is in the interest of all Parties.

Yours sincerely,

Pascal Lamy

  • To read Keith Tyrell's original letter, signed by some European NGOs, as well as useful or pertinent WTO information, please visit the following URL here: http://www.icda.be/wtomc4/wto/petitions.htm.
    Please click here to go back to WTOMC4 Information Page
    Last Updated: Tuesday 1 April 2003 @ 10:40am EST

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