World Trade Organization: Observations on the Ministerial Meeting in Singapore

Published by the Government Accountability Office on 1997-02-26.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                          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
                          WORLD TRADE
February 26, 1997         ORGANIZATION

                          Observations on the
                          Ministerial Meeting in
                          Statement of JayEtta Z. Hecker, Associate Director,
                          International Relations and Trade Issues,
                          National Security and International Affairs Division

          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.

          The Singapore ministerial meeting produced progress toward greater trade
Summary   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

           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

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

              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.

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

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

Action Plan for Least   The members took steps to address the problems of least developed
Developed Countries     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 is the functional equivalent of enforcement,” according to
Implementation of the   Ambassador Barshefsky. In their declaration, the ministers concluded that
Uruguay Round           “implementation thus far has been generally satisfactory, although some
Agreements              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

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

                           Trade ministers affirmed the importance of completing the WTO’s ongoing
Ongoing WTO                work program, including commitments regarding both future tariff
Negotiations               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

                     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   WTO members recently concluded negotiations for substantial market
Services             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.

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

                 At Singapore, members debated what the WTO should do regarding what
Emerging Trade   many observers believe are the next generation of international trade
Issues           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

                 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

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

               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

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

Page 14                                                   GAO/T-NSIAD-97-92
Page 15   GAO/T-NSIAD-97-92
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              International Trade: The World Trade Organization’s Ministerial Meeting in
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              International Trade: Implementation Issues Concerning the World Trade
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              State Trading Enterprises: Compliance With the General Agreement on
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              International Trade: Long-Term Viability of U.S.-European Union Aircraft
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              International Trade: Impact of the Uruguay Round Agreement on the
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              General Agreement on Tariffs and Trade: Agriculture Department’s
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              International Trade: Efforts to Open Foreign Procurement Markets
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              International Trade: Observations on Issues in the Uruguay Round
              Agreement (GAO/T-GGD-94-98, Feb. 22, 1994).

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