Services talks advancing to negotiations

At meetings, both regular and the Special Session, of the Council on Trade in Services (CTS) this week, preceded by meetings of subordinate bodies including those dealing with safeguards, subsidies, classification and scheduling of commitments, the WTO has been preparing the ground for setting negotiating guidelines and procedures for the new round of services trade liberalization, technically kicked off in February this year.
Based on the various proposals and presentations, the WTO secretariat is now to prepare a ‘draft’ text of negotiating guidelines and procedures, to be put forward as a Chairman’s text, in time for the next round of meetings in March 2001, which will set the stage for the actual new round of negotiations under the General Agreement on Trade in Services (GATS).
Before Seattle, there was a paper on negotiating guidelines that had been almost agreed in the CTS, but has dropped off the table since then, though some of it has figured in the ‘road map’ created after Seattle for the negotiations.
Secretariat officials hope to resurrect the pre-Seattle text. But several developing countries have expressed some concern and reservations over the wording of the pre-Seattle text that envisaged the next round of negotiations to include ‘technical review’ of GATS articles. They fear that the US and EC who have been forced to abandon their attempts to revisit the GATS architecture, may use the ‘technical review’ to achieve the same objective.
WTO officials in briefing the media of the progress in the services talks this week, said Thursday that there was a concerted campaign from non-governmental organizations against the GATS talks, on the basis of the effect on national democratic decision-making over a range of public services - education, health, culture etc.
They point in this connection to the on-going NGO movements in Canada and France and argue that there is nothing in the GATS that extends its jurisdiction to health or education or other services provided by a government in a country, the trade officials said.
The NGO campaigns, they claimed, are misconceived or deliberately motivated, and pointed the media to Art. 3 (b) of the GATS which defines ‘services’ and says that this “includes any service in any sector except services supplied in the exercise of governmental authority.”
But the responses and explanations of the trade officials are either naive or misleading, when they are asked about the implications of GATS Art. 3 (c), which qualifies the term ‘a service supplied in the exercise of governmental authority’ by the words “means any service which is supplied neither on a commercial basis nor in competition with one or more service suppliers.”
Even where in a country the public sector is side by side with some private suppliers, the GATS is not attracted (in terms of allowing competition from foreign suppliers, mostly transnational corporations) unless a country has made commitments in that sector, the trade officials argue, but agree that the general provisions about most-favoured-nation treatment may kick in if a country permits foreign suppliers from one country but not others.
They also note the fears of NGOs that the issues might be decided by WTO panels and the appellate body, thus over-ruling national democratic decision-making. These may become a source of disputes and decisions under the dispute settlement process, the trade officials concede, but do not believe that any panel would make such a decision.
They admit that there is scope for confusion and disputes could arise in the future in relation to public sector services of a country— education, health, water-supply, sewerage etc—where there is a charge on the service, and there are also private sector suppliers operating in competition or in a complimentary way, and perhaps it should be clarified that the GATS would not be attracted by public sector services of countries where there is private sector competition.
Though they point the finger at the NGOs for the growing campaigns against the WTO’s remit in these matters (as part of the WTO effort at discrediting the spreading anti-WTO movement), it is clear that the apprehensions about health, education and other such ‘services’ is shared by health and education ministers of countries.
This issue of the effects of the WTO and its agreements (the many agreements on goods trade, the TRIPS and the GATS), and the way they have been interpreted by the dispute settlement panels and the appellate body as creating cumulative obligations on countries, has been a source of concern among the non-trade departments and ministries of governments.
The WTO’s reach beyond the traditional area of goods crossing frontiers to domestic policies and regulations of countries, and the effect of the panel and AB decisions that the WTO agreements create cumulative obligations and the WTO dispute process could be used to correct “treaty errors” and that the AB could decide what it has not been expressly forbidden to do has certainly created public disquiet that could not be dismissed as the wild allegations of extremist NGOs or “anarchists”
Even trade negotiators have not been unconcerned, though they seem helpless against the panels and the AB which are guided by the WTO secretariat, in the face of ‘consensus’ decision-making dogma of the system.
The Indian ambassador to the WTO, Mr. S.Narayanan at the recent Special Session of the General Council (on the appellate body decision to invite NGOs to present briefs) described the WTO’s Appellate Body as “more powerful” than the Group of 8 (the seven most industrialized nations plus Russia) and said: “What the AB decides has commercial, economic and social implications for the 139 countries in the world.” The effects on health has also been figuring prominently at this week’s meetings of the Peoples Health Assembly in Bangladesh.
And while such concerns reflect not merely the GATS by itself, but the cumulative effects of the WTO agreements including its DSU, the attempts of trade officials, and the western transnational media, to discredit the civil society movements for their worries and campaigns against the GATS, is at best naive and at worst deliberately misleading.
The CTS agreed with the GATS Rules committee and agreed to extend the current (15 Dec 2000) deadline for negotiating disciplines on safeguards, subsidies and government procurement for GATS. The deadline to reach a safeguards agreement is now extended to 15 March 2002.
The safeguards agreement is seen as key to countries undertaking further liberalisation. The discussions on the safeguards issue is on the basis of a paper from the ASEAN, which has modified its original proposal, and has sought to put a threshold limit (below which) safeguards against movement of natural persons cannot be applied.
However, such an agreement can still run into problems on how, given the absence of data, a country wanting to apply safeguards could establish a prima facie case of threat or injury to its domestic industry because of the foreign service industry. Also, there are issues on how it would be applied in cases of scheduled commitments in modes of supply through commercial presence, where a foreign service supplier/investor has already ‘established’ itself and in many jurisdictions may have the protection of domestic courts for ‘equal’ treatment.
But developing country trade negotiators, while acknowledging these difficulties, say that nevertheless an agreement is needed, at least to provide reassurance to governments and policy-makers.
The United States is one of those doubtful about a safeguards agreement.
While there has been some discussions on GATS and subsidies and government procurement issues, there are no ‘demandeurs’ and is a relatively less urgent one for accords.
In the Committee on Financial Services, there has been some suggestions that there could be some disciplines or guidelines on use of prudential regulations. The financial services accord has provided a complete ‘carve-out’ for prudential regulations a country might put in place.
The GATS committee on classification of services and providing guidelines for scheduling of commitments was reported by officials as having made some progress on the scheduling of commitments issue and could agree on guidelines by the March meeting. But work on classification of services could go beyond March.
The ‘cluster’ approach to services, for example the ‘energy’ and the ‘environmental’ services cluster, has been prominent in the classification of services. The issue was originally flagged by the Dominican Republic in relation to the ‘tourism’ services sector, where the ‘benefits’ to countries in liberalising their ‘tourism’ sector is dependent on the travel and other related services.
The United States, to get around the developing country objections to a ‘review’ of the GATS architecture, ‘embraced’ the Dominican Republic suggestion and mooted the ‘cluster approach’ for negotiating commitments (like the zero-to-zero sector approach in industrial tariffs), and the EC presented it as a negotiating tool.
However, developing countries, and outside experts have been quite chary about the approach - seeing the attempts at evolving re-classification and clustering as a background attempt to weaken the GATS architecture of a ‘bottoms-up’ approach to commitments—that is countries are committed in GATS only in terms of the sectors and sub-sectors where they offer concessions and bind them in a schedule.
Trade officials say the cluster approach as a negotiating tool will not weaken the GATS architecture. But trade experts have cautioned developing countries against it—pointing to the possibility of future disputes through a ‘non-violation’ complaint (that the concession in one energy or environmental cluster is frustrated by government measures on other related sector) and the dispute panel view (in the Korean procurement dispute) that treaty errors arising out of ‘bad faith’ negotiations could be corrected by panel rulings.
Among the various papers and proposals that have been put forward at this Special Session of the GATS or just a few days before are:
· one by certain transition economies of eastern Europe assessing the trade in services on their economies which among others underscores the development implications of liberalisation of services as well as the non-economic considerations related to liberalisation;
· an Australian paper for strengthening the ‘reference paper’ (on competitive conditions) for basic telecommunications) on competitive safeguards, interconnection, transparency, independence of regulators and allocation of scarce resources.
One of the proposals in the paper is for WTO members playing a role in promoting fair competition in International Internet Charging Arrangements in cases where there are dominant players or de facto monopolies. Australia has proposed that ‘internet delivery’ services should be recognized as a basic telecom service (‘packet-switched data transmission services’) and the basic telecom reference paper should apply.
Though Australia in the discussions did not appear to have raised it in the GATS meeting, media reports have highlighted recently two sets of problems: the US internet service providers pay no fees to foreign service providers, but the latter have to pay to the US providers for accessing domain names which are located in the US; the high-speed and optical fibre cable links connecting Asia and the Pacific Region and the United States are operated in such a way that fees have to be paid to the US end.
· a 23-country developing country paper on elements for negotiating guidelines and procedures and an Indian paper on movement of natural persons (#SUNS 4779);
· an EC paper on electronic commerce, identifying the e-commerce issue as one principally involving GATS issues, and wanting ‘the current practice’ of not imposing customs duties on electronic supplies to be maintained, and for treating internet access and network services as basic telecommunication services.
While trade officials distinguish between the no duty on electronic supplies of services (such as software) and the same incorporated in products (as discs or computers and equipment) and thus covered by trade in goods, they concede the problem that may arise because of the GATT definition of ‘like products’ being treated alike.
In informal discussions on e-commerce, the US and EC have been somewhat vague on this issue. Some countries fear that future dispute panels may step in and decide that goods incorporating ‘services’ that are also supplied over internet are ‘like products’ and thus not taxable.
The services talks relating to the air transport sector and the annex (which has come up for review) has focused on traffic rights and others like this that could be strictly air transport, subject to bilateral treaties (and outside of GATS/WTO) and those air transport services which are considered to be ancillary (airport handling services, catering services etc) and thus covered.
Here again there are problems of interpretation as to what the annex means. For, Para 2 of the annex says that the agreement, including the dispute settlement procedures, shall not apply to measures affecting:
(a) traffic rights, however granted; or (b) services directly related to the exercise of traffic rights.
But the next para says: “The Agreement shall apply to measures affecting: (a) aircraft repair and maintenance services, (b) the selling and marketing of air-transport services, and (c) computer reservation system services.”
And para six, the definition para, then says ‘Aircraft repair and maintenance service’ means “such activities when undertaken on an aircraft or part therefore while it is withdrawn from service and do not include so-called line maintenance.”

TNCs, Global Compact and Davos face critical NGOs

As UN Secretary-General Kofi Annan and his aides, as well as heads of other UN system organizations head for the Swiss ski-resort town of Davos and the World Economic Forum there, to hold hands with executives of big corporations and their lobbyists and power-brokers, the United Nations and its system appears to be coming under increasing critical scrutiny from the public interest non-governmental community (once a source of uncritical support to the United Nations).
Not too long ago, the World Economic Forum, with its leaders like Klaus Schwab, went about guiding and laying down the law for the world’s governments and international institutions to promote neo-liberal corporatist economics and globalization. With a skilfully choreographed annual event, to which Third World leaders are invited to be able to mix with Big Corporate CEOs (the latter are invited to pay a heavy membership to be able to come into contact with government leaders), and a careful process of selecting access to the media (with some top media personalities invited, and paid, for participation), the forum held considerable influence and sway.
However, over the last couple of years, the forum and those hobnobbing there have come under increasing pressure - from civil society movements in Switzerland and Europe, who have been holding counter-meetings and demonstrations - despite the attempts of the Swiss authorities to frown upon and prevent them.
The public protests against the neo-liberal corporatist policies of globalization at the WTO Ministerial in Seattle, and the subsequent protests against the World Bank and the IMF, and other such gatherings, which unnerved these institutions, has now enveloped the World Economic Forum.
The forum has tried to ‘legitimise’ itself and cope with the problem by trying to coopt some of the NGOs, with invitations to participate and dialogue. It has also provided links at its website to some of the critical websites, including that of the Third World Network (but without following the net etiquette of seeking the permission of the organizations involved), and using its own ‘cookies’ to keep track of those visiting its site and the other website links it provides.
Meanwhile, the world’s big business, in a special newspaper advertising supplement in the International Herald Tribune, bankrolled by the International Chamber of Commerce, patted the UN and its agencies for their Global Compact, and egged them on to go further.
In the IHT supplement, the ICC Secretary-General Maria Livanos Cattaui praised Annan’s Global Compact, but insisted that it should remain a ‘voluntary two-way agreement’, ‘open-ended', and free from ‘command and control’. If labour unions and so-called civil society organizations are seen as full partners, it will be different from the original concept, she said.
Another WEF official, Claude Smadja, in a column in the Financial Times, talks about the need for ‘effective and efficient global governance’, but has nothing on the ‘governance’ and public accountability of corporations or of the institutions promoting globalization, like the IMF, the World Bank and the WTO.
While the two-year Global Compact, and the UN pronouncements and activities, may or may not have won total US support and backing for the UN, it has spawned a number of websites, run by public interest non-governmental groups, where the UN activities and pronouncements that are seen as supportive of corporations are receiving critical scrutiny. Two sites,have been analysing and posting articles and papers on the Global Compact and the way the alliance between the UN and corporations has developed.
A paper (in December 2000) by Anthony Judge of the Union of International Associations focuses on the totally non-transparent manner in which the Global Compact has emerged, and the “surreptitious manner” in which partnership arrangements with multinationals are being agreed or foreseen, possibly to the detriment of other partnership arrangements with the UN.
The UN, Judge says, has been ‘white-anted’ -- an Australian term for the destruction of a structure from within, while maintaining an outward appearance of normality - and the faceless conceptual henchmen of a variety of forces, essentially antagonistic to the UN, are seemingly holding the Secretary-General hostage or have duped him into supporting “what amounts to a ponzi scheme”, and warns of the danger of the UN going the League-of-Nations way.
In another paper (in October 2000) , ‘The Road to the Global Compact: Corporate Power and the Battle Over Global Public Policy at the United Nations”, Ellen Paine at the Global Policy Forum has traced the history of the Global Compact and notes that after resisting for many years the post-Keynesian Corporate (neo-liberal) ideology of the Reagan era and the conservative Washington think-tanks, UN Secretary-General Boutros Boutros-Ghali in 1992 began ‘reforming’ the secretariat, scaling the UN’s economic and social agenda (yielding ground to the World Bank and the IMF, and their alleged comparative advantage) and eliminated several of the programs that aroused corporate ire, including the winding up of the Centre for Transnational Corporations (which had been monitoring TNC activities and promoting a code of conduct) and transferring some CTC remnants to UNCTAD in Geneva, where these remnants, “far from critically monitoring TNCs, became [the] cheering section for TNCs, promoting TNC investment and commending the positive effects of TNCs in the global economy.”
After the 1992 UN reforms, says Paine, corporate chieftains and Washington-based neo-liberal policy-makers pressed forward with their campaign to erase institutions of public oversight and accountability in favour of private, voluntary forms of corporate self-regulation. But there were also progressive sections within the UN that continued to criticise the Fund/Bank structural adjustment programmes and policy tools; the UN itself held several global conferences to address social and economic issues.
In 1997, when Kofi Annan succeeded to the UN top job, and saw the need to resolve the UN’s financial crisis by ‘strategic concessions’ to the largest dues-payer (the US), he met with powerful conservatives like Senator Jesse Helms to assure them that he would ‘streamline’ the UN. Soon after, he also travelled to Davos to meet with the world’s foremost corporate chiefs (at the WEF), and held meetings with the Paris-based ICC.
The WEF, in turn, offered to connect the Secretary-General and his top officials to the WEF’s private video-conferencing system, enabling Annan and his team to converse with the Forum’s CEO members and select political leaders from international institutions. The new technology helped the cash-strapped UN with a state-of-the-art communications tool to connect the UN SG and other UN leaders with corporate executives, bypassing the intergovernmental process. At the same time, the UN secretariat moved to impose a financial charge on NGOs for electronic access to UN documents, and with these and other moves, restricted the access of NGOs while widening that of business, Paine says.
Tracing the other meetings and events leading to the Global Compact, Paine says that the UN leaders saw themselves as ‘realists’ ready to deal with slightly unsavoury corporations in the same way they dealt with less-than-ideal governments. They believed that a corporate-dominated world was already a reality, and that if they did not accept this reality, the UN would be assured of irrelevance. Annan and his aides offered the corporations a strategic bargain: in return for curbing their appetite for accumulation and agree to some regulation and social protection, the UN would mobilize public support and legitimacy to defend corporations against their most critical opponents.
The corporate chieftains on their side viewed the partnership from a different angle and had at least six policy goals which they wanted to achieve:
· first, to collectively influence the broad social and economic policy-making of the UN system to minimize regulation, taxation, trade barriers, labour codes and other initiatives;
· second, to influence the UN’s ‘ideological production’ - speeches, publications, briefing papers, meeting agendas etc - so as to confirm private corporate solutions as the only ones available and practicable, and frame giant corporations as ‘concerned and helpful world citizens’ and end the UN system’s advocacy of non-market based solutions;
· third, to counterbalance and roll back the influence of NGOs, seen as an increasingly dangerous source of criticism and profit-threatening policy alternatives;
· fourth, to shape policies, ideologies and regulations of interest to their particular business sector;
For example, the cooperative relationship of computer hardware company Cisco systems with UNDP helped create an atmosphere in which UN leaders gave prominence to the ‘digital divide’ and the need to close it by making computers available to all the world’s citizens. “These UN statements, absurd in the light of the large number of the world’s people without adequate food, shelter or drinking water, served the computer and technology industry well." UN enthusiasts joined in a public relations mania that pictured computer-based technical fixes as solutions to the world’s social problems.
fifth, promoting the public image of particular firms, by ‘blue wash’; the UN lending its good name and reputation to help corporations create a (false) positive image of themselves;
As the ICC head, Maria Cattaui pointed out, companies are enthusiastic about working with the UN because of their ‘determination .... to be seen to be good corporate citizens.’
· sixth, the goal of corporations to promote their own products.
For e.g. Ericsson, through an agreement with the UN to distribute its brand-name mobile phones for use by humanitarian workers in the UN Disaster Response Initiative, garnered a positive image and its products, positive publicity. Cisco Systems similarly boosted its high-speed internet switches and routers with its NetAid partnership with UNDP.
Firms also had other goals, like boosting employee morale and building public support in a wide range of countries for their operations. Thus, Rhone-Poulene, which had been facing intense public criticism for its agro- industrial and genetic research activities, was able to ‘rebrand itself’ by a deal with UNESCO in 1999 - to restore the Taj Mahal in India by investing ‘a paltry $237,000’ in the project.
The paper also cites examples of the rush into business partnerships, changes at the UNDP, and the call by UN Under-Secretary General for Disarmament Affairs, Jayantha Dhanapala, on 8 July 1999, for “creative partnerships” between the UN and the arms manufacturing companies “to control the illicit arms trade.”
Placing the Global Compact history in this context, the Ellen Paine paper notes that the UN has promised that it would not undertake monitoring nor would the companies be brought under any enforcement procedure or formal process of scrutiny. The approach of Annan and his advisory is one of partnership with business, “values” rather than rules, with a reminder of the threat that grassroots opposition might pose to globalization. According to the UN plan, the only test of the compliance of companies with the Compact would be a special UN website where the corporations would post information, in the form of ‘best practices’, and control the information flow, while the UN would invite the public to examine and make comments - ‘chat -room democracy’.
However, it notes, NGOs and parts of the system remain critical of this approach. A number of member-states of the UN too have expressed their opposition, but Annan has not altered his course.
“The UN’s corporate policy,” the paper says, “strains the organization’s relations with NGOs and many governments. In exchange, it will likely produce only the most superficial and cosmetic changes in company behaviour. The UN could lose its public support if it is seen as scarcely distinguishable from business-dominated institutions like the WTO or the IMF. Secretary-General Annan is gambling with the UN’s most precious heritage - its reputation as an institution that works for the well-being of the world’s people.”
Advocating NGOs, and their allies in social movements and sympathetic governments to reverse this trend at the UN, the Global Policy Forum paper says that the basis for common action must be a citizen’s compact: “We must say ‘no’ to a corporate-dominated UN. We must advocate a financially- and politically-strengthened UN that is responsive to the needs and demands of ordinary citizens. And we must insist that corporations be subject to citizen control, not the other way round.

Tobin tax, financial reforms to avert crises, says forum

Financial globalization, which left the world hostage to a string of crises, has made it necessary to adopt a series of measures to ward off future meltdowns, correct imbalances and fuel the development of poor countries, participants at the World Social Forum taking place in this southern Brazilian city have agreed.
A tariff on international flows of speculative capital, known as the Tobin Tax, and forgiveness of the foreign debt of poor countries were the principal measures defended by the thousands of representatives of primarily left-leaning non-governmental, social and political groupings from more than 120 countries meeting here 25-30 January.
The Porto Alegre gathering is serving as a sort of counterbalance to the World Economic Forum running concurrently in the Swiss ski resort city of Davos, where corporate executives, financiers and government leaders are discussing policies aimed at deepening the globalization process.
But Brazilian economist Luciano Coutinho, who outlined the most dramatic analysis of the threats to the global economy, said the 0.1-0.5% tax on international financial transactions proposed by US Nobel laureate in economy James H. Tobin to tame rapid international capital flows and protect poor nations from global market crises was “insufficient.”
He also said it would not be easy to get the world’s “heterogeneous and divided” developing countries to unite to demand a write-off of their debts, since many governments in the developing South are proponents of neoliberal policies and aligned with the international financial market.
Internationally traded stocks and bonds have increased threefold in each of the past two decades, to the current total of $60 trillion, while daily exchange rate transactions amount to $2 trillion, surpassing the intervention capacity of the central banks of rich countries, which hold combined reserves of $750 billion, underlined Coutinho, an economist at the University of Campinas, near Sao Paulo.
The imminent risk today is an abrupt fall of the dollar due to the bulky US trade deficit, he said, pointing out that “we depend on monetary authorities with limited power to stave off a disaster of unforeseeable proportions.”
The risks have increased to an extreme with the mushrooming of “derivative” funds, aimed at boosting returns in high-risk speculative operations in which up to 40 times the capital invested is put at stake, he added.
Against that backdrop, with developing countries made vulnerable by their dependence on foreign capital, the Tobin Tax should be applied, but along with a dozen additional measures, recommended Coutinho.
Among the proposed measures are the declaration of a moratorium on the foreign debt of countries experiencing exchange rate crises, a banning or reduction of derivative funds, the creation of a committee for the central banks of rich countries to work together and ban “wild flotations” of major currencies, and reforms of the International Monetary Fund (IMF) to make it more flexible and less orthodox.
In addition, said Coutinho, reducing the vulnerability of the developing South also requires mechanisms aimed at shoring up commodity prices, slashing farm subsidies in Europe and the United States, and multilateral loans with interest rates linked to the prices of the main exports of developing countries.
World Bank interest rates, although nominally low, stood at 15-18% a year over the past decade - too high “if we take into account commodity prices, the currency with which poor countries pay off their foreign debts,” since that is the source of their foreign exchange, he argued.
Eric Toussaint, chairman of the Belgian Committee for the Abolition of Third World Debt, admitted the need for a number of “convergent” measures to overcome the grave financial distortions that aggravate global inequalities and social problems in the developing South.
He underscored that the Tobin tax, as well as the write-off of the “foreign debt, which has already been paid off several times over,” are demanded by sectors that have great capacity for popular mobilisation and which could bring about the shifts in the lineup of political forces necessary for these and other complementary measures to be adopted.
The defenders of the tax, like Canada’s Halifax Initiative, estimate that $150-300 billion a year could be collected and earmarked for social and environmental programmes - sufficient, they say, to eliminate extreme poverty in the world in 10 years.
The movement for the adoption of the Tobin tax has ballooned in the past few years, said Halifax coordinator Robin Round, who pointed out that the parliaments of several countries have even begun to discuss the measure.
The Association for the Taxation of Financial Transactions for the Aid of Citizens (ATTAC), one of the groups most active in organising the Porto Alegre meet, already has branches in 20 countries, according to its president in France, Bernard Cassen, who is also director of the newspaper “Le Monde Diplomatique”. In a live debate by satellite organised by an independent French media group between participants at the World Economic Forum in Davos and the World Social Forum in Porto Alegre on Sunday, international financier George Soros said he backed the Tobin tax.
Cassen challenged the Davos panel, which also included Swedish entrepreneur Bjorn Edlund and United Nations officials John Ruggie and Mark Malloch, to convince their business and banking colleagues to sign a document in favour of the tax on financial transactions, debt forgiveness and a ban on tax havens.
Until such measures are adopted, the social and political movements and groups meeting in Porto Alegre will continue trying to make them possible, holding mass demonstrations aimed at modifying the lineup of forces, said Cassen, in a reference to the mass protests that have stormed meetings of the IMF, the World Bank and the World Trade Organisation (WTO) over the past two years.

Building confidence in the WTO Secretariat

Recently the Director-General of the World Trade Organization, Mr. Mike Moore, visited India. News reports in India indicated that he tried to persuade the government of India and others about launching a new round of multilateral trade negotiations at the WTO. According to the news reports, the Minster of Commerce and Industry, Mr. Murasoli Maran told Mr. Moore that a new round should be launched only if there was a total consensus among the membership of the WTO. Maran is also reported to have said that the implementation proposals made by the developing countries must, in any case, be given the highest priority. Maran is also reported to have been emphatic that the issues unrelated to trade must not be brought up for negotiation in the WTO.
Championing the cause of a new round in the WTO by the Director-General at this stage raises some basic institutional issues. The main point to ponder over is whether it is correct and proper for the Director-General or any other part of the Secretariat to promote a subject over which there is as yet no consensus, and in fact there are serious differences among the membership.
The subject of a new round is at present only a proposal of some countries. It has been strongly pursued by some major developed countries. The reports on the deliberations on this subject in the WTO indicate that there is no consensus so far; and, in fact, there is strong opposition to it.
The 19 October 1999 text of a draft Ministerial Declaration, prepared by the Chairman of the General Council for the Seattle Ministerial meeting, has put the paragraphs relating to the proposed new round and its modalities (paragraphs 25 and 26) under square brackets. Following the GATT/WTO practice, it means that there is no consensus on this matter. And there has been no consensus thereafter either. It continues to be a controversial subject in the WTO at present.
The initiative of the Director-General to promote the launching of a new round would thus appear to be an effort to push the proposal of a group of countries, on which there is yet no consensus and which is being opposed by a number of countries. This is a serious matter.
Article VI.4 of the Marrakesh Agreement for the establishment of the World Trade Organization (the WTO Agreement) enjoins on the Director-General and the staff of the Secretariat to “refrain from any action which might adversely reflect on their position as international officials”.
Championing a proposal put forward by some countries and opposed strongly by some others would appear to adversely affect the neutrality of the Secretariat, and thereby their position as international officials. This is despite whatever may be the merit of the proposal or their own convictions on it.
Of course, the Director-General of the WTO has been assigned a certain specific active role, e.g., in the Dispute Settlement Understanding. Also, sometimes the Director-General is made the chairman of some committees or working groups. It is expected of him to take action on his own initiative in these matters to achieve the desired results. In other matters, however, he has to tread with great caution in assuming an activist role. Wherever there are decisions of the Members to start a negotiation, he, of course, has to take an active interest and play an active role in organising the negotiations, so that they are efficiently and smoothly conducted. But he has to refrain from pursuing and pressing for any particular line in the negotiations, if the countries differ on that line.
But the position now is that there is no decision of the membership to start a new round of negotiations in the WTO and, in fact, there is strong opposition. In that situation, his active support to the new round at present will naturally appear to corrode his neutrality and effectiveness as the head of the Secretariat.
Apart from the technical question of the neutrality of the Secretariat, there is also the question of trust and confidence of the Members in the Secretariat. If the Members in general observe that the Secretariat is interested in pushing a particular line in any subject, the Secretariat will lose their trust and confidence as a useful machinery for smoothening the functioning of the WTO system, which it is expected to do.
Moreover, if it is noticed that the Secretariat is particularly supporting, even by indirect implication, the line of the few powerful countries, which is opposed by a large number of the other countries, the trust of the vast membership will be totally shattered.
Already there are rumblings about the role of the Secretariat in various matters in the WTO, including in the dispute settlement process. The system will be helped if the Secretariat takes extra care to build up confidence among the Members about its neutrality and balanced efficacy. This process will be undermined if the Secretariat, on the other hand, appears to side with a particular line to which many Members are opposed.
The Director-General is the highest authority in the Secretariat; and, in fact, he is the visible face of the organisation. When he speaks in public, it should be on behalf of the entire membership. And there lies the need for caution and restraint in his opinion and emphasis. It is expected of him to synthesise the great diversity that is inherent in the large membership of this organisation.
This takes us to a different but related matter which is also important for the confidence of the membership in the Secretariat. It is the process of selection of the staff of the Secretariat. The Secretariat should be fully cognisant of the diversity among the membership. Its approach and functioning must take into account the wide differences in the social, political and economic background and approaches of the Members.
Thus, while the Secretariat must work as an integrated unit, it must have within it the enriched and healthy plurality of talent, background, training and experience. The geographical dispersal of the sources of recruitment can only achieve a limited result in this respect; as one can have a full monolith of people of a particular type and persuasion, drawn from a range of geographical regions. What is needed is the broadening of the recruitment process, so that the staff is an ensemble of different background, training and experience. This applies to all the three types of people that get recruited to the professional and higher posts, viz., the economists, the lawyers and the diplomats.
In the WTO, as in case of the GATT earlier, the recruitment process is totally internalised. The candidates are evaluated and interviewed by some of the Directors and the Deputy Directors-General, and the recommendations are made to the Director-General who makes the appointment. This process is unlikely to bring in diversity and plurality in the staff. In fact the process ensures that there is continuation and perpetuation of the total “sameness” of thinking and approach.
If there is a will to bring about a change in the situation and to introduce diversity and plurality, one way may be to improve the recruitment process. An external role and support may be introduced for this purpose. For example, there may be a Recruitment Board, constituted of some insiders and some outsiders. This board may evaluate and interview the candidates and give its recommendation for recruitment. The Director-General will, of course, be the final authority to take the decision, as the WTO Agreement gives him the responsibility for appointment of the staff.
The role of such a board, constituted of both internal and external persons, will ensure that while the requirement of the Secretariat will be fully kept in view, there will be a possibility, at the same time, of bringing some freshness from outside into the process of recruitment.
The WTO is playing an important role in the economic life of countries. And the Secretariat is playing a significant part in this process. It is only proper that the WTO Members give a fresh look at the staffing of the Secretariat and improve the process of recruitment.

Gravity will drag the $US

Earlier this year, I compared US migration with that in Canada - one healthy, the other not so much. As a sequel to the story, the Census released its figures for migration into 2009, and the pattern in the US has worsened (you can download the data here).The picture of American mobility is one of people/workers/households with essentially nowhere to go. Unemployment is ubiquitously high, and the housing market is lousy - can't sell your home, can't get a job. This Great Recession dragged net-domestic migration (moving within the US borders) down in all regions of the country.Here are some of the headline results according to the Wall Street Journal.
The recession has had a profound effect on migration patterns in the U.S., reversing the flow of people to former housing-boom states such as Florida and Nevada, the latest data from the Census Bureau show.In the year ending July 1, 2009, Florida -- once the top draw for Americans in search of work and warmer climes -- lost more than 31,000 residents to other states, the Census Bureau reported Wednesday. Nevada lost nearly 4,000. The numbers are small compared with the states' populations, but they reflect a significant change in direction: In the year ending July 2006, Florida and Nevada attracted net inflows 141,448 and 41,640 people, respectively. There's no place to go. If you are in Michigan, for example, which state has the better prospects? And furthermore, homeowners are likely to find it very difficult to sell. It is worthwhile to compare the current experience with the cyclical downturn of 2001, when the unemployment rate increased for two years into 2003.The chart below illustrates the net-domestic migration rate in 2003 and 2009 for each state, excluding the outliers which are listed in the text box. This is the state-level compliment of the first chart, which lists changes in migration patterns by region.A 45-degree line is drawn: states above the line are seeing higher net-migration compared to 2003, while those below the line are posting lower net-migration than in 2003. Also, positive numbers indicate net-immigration (more people entering the state than leaving), while negative numbers indicate net-emigration (more people leaving the state than entering).The first observation is that the "usual suspects", Nevada, Florida, and Arizona, are the outliers. Nevada, for example, saw its net-domestic immigration rate of roughly 20% in 2003 turn negative by 2009, -1.5%. And compared to the previous recovery, which saw rising unemployment through the middle of 2003, states like Colorado, Oklahoma, Louisiana, and Utah are experiencing increased migration into their states. However, a larger share of states are seeing migration patterns slowing or even turning negative. And finally D.C., home to the US government, is experiencing large migration inflows compared to the last recession, -17.8% to +7.5% in 2009. Best to be near the spending.In the first chart, there is clearly a negative correlation between years in which the unemployment rate is rising (2003) and net-domestic migration across regions. But this time around, the magnitude is much larger - the labor market was hit harder and the housing market is in shambles.A more flexible migration pattern would further the structural shift that is underway in the labor market (generally out of manufacturing and financial services and into alternate industries). It will take some time for the migration clog to free up, and the structural re-balancing of production and jobs will likely take some time. There's just no quick fix.The chart illustrates annual growth in government employment according to the establishment survey. Like clockwork, the Census survey grows government jobs to a peak 2.5%-4.5% annual pace in April or May of the census year. This means a peak impact of 800k-900k new jobs created in April or May 2010 (I use the average annual growth rate of 3.8% and a historical monthly average to forecast the payroll until April). All else equal, the unemployment rate will drop.But consider this. It is likely that a very large share of the monthly 800,000 hires will simply be unemployed when the Census culminates - hence, the unemployment rate will rise in the early summer. And it's very possible that the increase in the unemployment rate will be larger than its decrease. If any discouraged workers - those who have not searched for employment recently and are counted as "not in the labor force" - are hired and do not secure new employment after the six-week job is over, then they will join the ranks of "unemployed".

COLUMBIA UNIVERSITY EDUCATOR, ECONOMIST AND ADVOCATE OF LAND TAX REFORM DIES

Lowell Harriss, an economist whose groundbreaking theories on land tax reform led to a widening of public spaces and improved quality of life in domestic and international urban and rural areas, died on December 14, 2009 at his home in Bronxville, N.Y. He was 97.
He died from natural causes.
An author of 16 books on economics and hundreds of articles, Professor Harriss was one of the last living economists to experience the Depression. He was known for his seminal work on taxation of land, property tax, finance reform, land values and planning land use.
He was a professor emeritus of economics at Columbia University, where he taught for 43 years, from 1938 to 1981. He also taught at Stanford University, UC-Berkeley, Yale, Princeton, The Wharton School, the New School for Social Research and Pace University. He earned Fulbright professorships from the Netherlands School of Economics (now Erasmus University), Cambridge University, and the University of Strasbourg, France.
His professional interests beyond education were extensive, including: Executive Director of The Academy of Political Science; President, National Tax Association-Tax Institute of America; Vice President, International Institute of Public Finance; Chairman, Robert Schalkenbach Foundation, Inc.; Trustee, American Institute for Economic Research; Advisory Member, American Enterprise Institute; Academic Advisor, Center for the Study of the Presidency; and Advisor, Thomas Jefferson Research Center. He was a fellow at the Lincoln Institute of Land Policy, and a board member of the American Institute of Economic Research in Cambridge, both institutions that serve as leading resources for policy makers and practitioners including the use, regulation and taxation of land.
He advised state, federal and foreign governments on tax policy including the U.S. Department of Treasury; the City of New York; New York State; the Commonwealth of Puerto Rico; the Federal District of Venezuela; the Ministry of Finance, Republic of China; the United Nations; and the Agency of International Development of the U.S. Department of State.
In addition to his academic and professional pursuits and achievements, Professor Harriss was well known for his great respect of the role that humor has in making daily life enjoyable and more civilized. He often said that "a smile costs nothing." He was known for his frequent compilations of cartoons, which he distributed in his mailings to colleagues and friends. As he said, "they get people's attention".
Clement Lowell Harriss was born Aug. 2, 1912, in Fairbury, Nebraska. He attended Harvard College and graduated summa cum laude in 1934. Upon graduation, he received a Sheldon Fellowship which enabled him to travel for 13 months throughout Europe, the Balkans, Turkey and Northern Africa, before arriving in Berlin the day Hitler assumed the presidency. This experience was the beginning of a lifetime of travel that would take him around the world nine times and stimulate his academic and personal curiosity and inquiry.
Professor Harriss met and married Agnes Bennett Murphy in 1936. While pursuing graduate studies at the University of Chicago and Columbia University, he began his teaching career in 1938 at and received his Ph.D. in 1940 from Columbia University.
Professor Harriss served as an officer in the Army Air Corps from 1943 to 1946, working on aircraft and manpower procurement, later on the economic problems of the shift of fighting to the Pacific, and finally, on the problems of economic demobilization and the postwar aircraft industry.
He is the namesake of the C. Lowell Harriss Scholarship at Columbia College, the C. Lowell Harriss Chair of Economics at Columbia University, and the Professor C. Lowell Harriss Scholarship at the School of General Studies at Columbia University. In 1996 he accepted the Nobel Prize in Economics on behalf of long-time Columbia colleague William Vickrey, who had died shortly before the ceremony.
He is survived by his sister, Marion Engelhart, of Gross Pointe, Michigan, his four children, L. Gordon Harriss, of Bronxville, New York; Patricia Harriss, of Bronxville, New York, Martha Harriss, of New York, and Brian Harriss, of Greenwich, Connecticut, five grandchildren, and by his two daughters in law, Elizabeth Harriss, Bronxville, New York, and Lucinda Harriss, Greenwich, Connecticut. His wife died in 1992.