EU sets out to write new Asia agenda

Date: 21/12/1995

By Shada Islam

THE European Commission, preparing for a landmark meeting of world trade ministers in Singapore next December, has started to consult Asia's top economic players on setting a new world trade agenda.

Trade Commissioner Sir Leon Brittan is to visit India on 21 December to sound out government and business leaders on their ambitions for the Singapore meeting of the World Trade Organisation (WTO).

Brittan has already met economic ministers from the influential Association of Southeast Asian Nations (ASEAN) in Bangkok to discuss new WTO issues, including EU demands for an international treaty guaranteeing foreign investments, the introduction of worldwide competition rules and a possible link between trade and labour rights.

“It's clear that if the WTO meeting is to be a success, Europe and Asia will have to work together,” says a senior Commission official. “We share the same commitment to the multilateral trading system.”

Persuading Asian countries to accept discussions on the controversial 'new issues' will not be easy, however. “Most Asians believe that we should be focusing on implementing the trade liberalisation commitments made last year within the Uruguay Round,” argues a South Asian diplomat in Geneva. “We are wary about overloading the WTO agenda.”

But EU officials insist that the momentum generated by the Uruguay Round must be maintained. If talks on a “new generation” of trade issues do not open immediately, officials fear that WTO members may take refuge behind emerging regional trade blocs and lose their enthusiasm for free and open trade.

Having cooperated closely with Asian countries in clinching the agreement on liberalising financial services in July this year, the EU is now seeking Asian support in preparing a new WTO work programme for the coming years.

“When the Americans decided to stay out of the financial services deal this summer, it was the Asian states that helped the EU to win a WTO agreement,” said a Commission official.

Now the EU is particularly keen to get Asian backing for efforts to prise open the world's telecommunications sector.

Brittan will seek to persuade the Indian government to join the negotiations under way in Geneva, stressing that a first-ever agreement on telecoms liberalisation must be sealed as scheduled by April 1996.

A similar message has already been conveyed to ASEAN.

“We believe that the telecommunications sector will be opened up gradually. But we need Asian countries to make their contributions now,” says a Commission official. “The implementation will come later.”

Brittan is also pushing for a new WTO-sponsored treaty boosting cross-border investments. Although competition for foreign funds has never been fiercer, many developing countries still maintain a range of restrictions barring foreign investors from taking a majority stake in companies, participating in privatisation programmes or receiving state concessions.

“Investment is the next great challenge for the WTO,” says Brittan. “Investment in developing countries is good for investors and good for the host countries. But it will only happen on a sufficient scale if there are clear, publicly-known rules protecting investors' rights and clarifying the framework for investment that may be applied by host countries.”

The US would prefer to negotiate new investment rules within the smaller OECD group of countries.

But Brittan insists that “this is a global issue”.

He adds: “Over half of all new investment flows go to the developing world. It is only by discussing the issue in global organisations such as the WTO - as well as continuing the OECD negotiations - that we can create the conditions needed for us to sustain high volume of worldwide investment.”

The EU and the US agree that it's time for new WTO-based rules on free and fair competition. But discussions on harmonising international competition rules between the EU and Japan, let alone between the EU and developing countries, are likely to be extremely difficult. Brittan insists, however, that WTO members must work together to fight cartels and other anti-competitive practices.

After some initial opposition from developing countries, the WTO has started studying the impact of trade on the environment. But a much more fraught discussion lies ahead on the link between trade and labour rights.

EU countries remain deeply divided on the issue.

France, Belgium and some others believe that the WTO should include a so-called 'social clause' allowing developed countries to take trade sanctions against countries which abuse workers' rights. The UK and Germany are against any trade-labour connection, believing that this could be viewed as protectionism by the EU's foreign partners.

Brittan insists that the WTO cannot remain silent on the problem. “I think it is important to open up dialogue. It is legitimate to look at issues such as child labour, prison labour and the right of association,” he insists.

But the Commissioner has been seeking to reassure Asians that the issue will not be dealt with unilaterally.

“We are talking about multilateral agreements to which developing countries would be party,” he says. “And we do not believe that low pay is an unfair trade practice.”

Such clarification may be useful, but most Asians still oppose any discussion on labour rights in the W TO.

“The International Labour Organisation is already looking at the question,” says an Asian trade expert.

Euro-Asian discussions on trade are also likely to top the agenda of the first-ever meeting of EU and Asian heads of government to be held in Bangkok on 2 March.

“One of the things that I hope will flow from the Asia-Europe summit will be an enhanced working together as we approach Singapore,” says Brittan.