The U.S. representative at working party meeting for the accession of China to the WTO a mid-September used the occasion to list the nationalities of the victims of the September 11th attacks on the World Trade Center. The representative said that the dozens of nationalities indicated that the attacks were directed against world commerce and therefore required an international response. Some delegates expressed concern that the U.S. comments dangerously conflate measures to combat terrorism with measures to expand trade liberalization. Some delegates suggested that the WTO ministerial should be postponed until next year, and that instead a lower level meeting be held in Geneva to admit China and Taiwan to the WTO, and take other institutional decisions.

On September 18th, Pascal Lamy, European Union trade commissioner declared "We have to work to maintain the November meeting ... Not because of obstinacy, not because nothing has changed, but for political reasons: because the dialogue and the negotiation between states or regional bodies sharing the benefit of common legal rules is of vital importance." However, trade diplomats doubt that the ministerial can take place if the United States carries out its threats to attack countries in the Middle East that support the Osuma bin Laden network, which is widely thought to have backed the September 11th attacks.

Even if the ministerial is held, it may well begin without agreement on a draft agenda, draft mandates or a ministerial declaration, echoing the situation that lead to the failure of the WTO ministerial in Seattle in November 1999. Since Seattle, the WTO has regionalized the informal consultation ("Green Room") process for decision making, in order to launch a new round of negotiations. In the most recent iteration of this process, on August 31-September 1 in Mexico City, the "Quad" members (U.S., EU, Japan, Canada) India, Egypt, Australia, Brazil, Hong Kong, Jamaica, Mexico, Qatar, Singapore, South Africa, Switzerland, Tanzania and Uruguay met with WTO Director General Mike Moore in search of an agenda for the Doha ministerial. Malaysia and Pakistan were invited to the meeting but declined to attend. A September 12-14 meeting of the High Level Advisory Group of the Group of 77 developing countries declared that "the restricted" Green Room processes in which only some countries are invited should be discontinued, and all Members must be allowed to attend all meetings of the WTO and take part in decision-making."

The Mexico City meeting addressed a wide range of issues, most prominently agriculture and anti-dumping rules, developing countries' implementation demands, and competition and investment policy. The United States was alone in its refusal to agree to consider a Doha mandate for negotiations on anti-dumping rules or for amendments to intellectual property rules to give developing countries more affordable access to essential medicines. At a September 19-21 meeting of the WTO Council on Trade Related Intellectual Property Rights (TRIPS), the United States was joined by several industrialized countries that rejected a developing country proposal to implement the exemption from patenting provisions of the TRIPs Agreement. The developing country paper stated "Nothing in the TRIPS Agreement shall prevent Members from taking measure to protect public health." A proposal sponsored by the United States, Japan, Canada, Australia and Switzerland would have allowed countries "flexibility" in the application of TRIPS, but only in non-binding preambular language.

Though the Mexico City meeting did not issue a communiqué, Lamy is rumored to have agreed to a U.S. proposal that the agricultural mandate for a new round should be negotiated in a small group that would include the U.S., the EU and the Cairns Group of major agricultural exporting countries. Lamy said that the EU could negotiate on agricultural export subsidies, but not eliminate them, as demanded by the U.S. and Cairns Groups, as well as by many developing countries. Prior to the Mexico City meeting, EU agriculture commissioner Franz Fischler had indicated that the EU would "decouple" its support for agriculture from production decisions (as the U.S. has done in its now widely disparaged 1996 "Freedom to Farm" legislation). Instead, the EU would target supports at non-"trade distorting" and "non-productive" functions of agriculture, such as animal welfare and environmental remediation needed as a result of agricultural production practices. The U.S. and most developing countries view most proposals for support of animal welfare and the natural resource base of agriculture as "disguised trade protectionism" and outside the "core functions" of the WTO.

The United States and the Cairns Group met September 3-5 in Punta del Este, Uruguay, the resort town where the movement to create the WTO agreements was launched in 1986. Cairns members Brazil and Argentina indicated that unless there was an "ambitious text on agriculture" to reduce "trade distorting support and protection," they would oppose the launch of a new round of negotiations in Doha. In response to Cairns Group criticisms about the levels of agricultural subsidies proposed in the U.S. House of Representatives farm bill, U.S. Department of Agriculture Secretary Ann Veneman said that the Bush Administration would ensure that U.S. agricultural legislation would be consistent with U.S. WTO commitments. The USTR's Zoellick said "We very much believe that the best way, indeed the only way, to achieve significant liberalization of agricultural trade globally is through a new trade round."

As has been the case since the Seattle ministerial, the most recent developing country proposals for negotiation of the "built-in agenda" of the Agreement on Agriculture (AoA) and implementation of the AoA and other agreements have been characterized by major exporting countries as proposals requiring a new round of negotiations with additional concessions. In June, a Quad paper had responded with "dismay" to a proposal by seven WTO members that had synthesized about 50 previous developing country implementation proposals. The Quad paper was unwilling to even concede on temporary derogations from present WTO commitments, such as longer phase-in periods for implementation, much less to accept any new obligations or disciplines for the Quad. In agriculture, the Quad called for technical assistance for developing countries to enter into equivalency agreements concerning sanitary and phytosanitary (SPS) measures in trade. However, in July, Codex Alimentarius Commission members postponed for at least two years adoption of guidelines for establishing such agreements, due to myriad differences over whether agreements were to be product specific only or were to apply to entire SPS systems.

Proposals on anti-subsidy rules tabled by India, Brazil, El Salvador and Jamaica at a WTO subsidies committee meeting in early September were met with silence by the United States and with a suggestion from the EU, Japan and Canada that the proposals could be entertained after the launch of a new round of negotiations in Doha. The Brazilian and Indian proposals sought reform of the methodology of countervailing duty investigation, while El Salvador and Jamaica requested that developing countries have the liberty to provide state support for exports currently enjoyed, in one form or another, by the Quad. El Salvador said that such support should not be considered as export subsidies, insofar as it would be part of an overall program for development. One trade official said that the El Salvadoran proposal had no future in the WTO.

A late September paper by WTO Director General Mike Moore and General Council Chairman Stuart Harbinson sought some concessions from the Quad to developing country demands, including tighter anti-dumping rules. The Moore/Harbinson paper defines some implementation issues that would be decided at a special session of the General Council on October 3. Decisions on more controversial issues would be made in Doha. On September 20, the Quad tabled a proposal that was very vague on implementation issues. The United States generally considers that implementation proposals require new negotiations and new concessions by developing countries to issues of interest to the Quad, such as investment and competition policy.

SOURCES: Ian Elliott, "No delay as WTO round still in doubt," FEEDSTUFFS, September 17, 2001; "USTR Zoellick Statement on World Trade Ministerial in Doha," OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE, September 14, 2001; Stephen Norton, "Aides Stress Need For Economic Stimulus Consensus," CONGRESS DAILY, September 18, 2001; "White House Warned Against Tying Fast Track To Stimulus Package," INSIDE U.S.TRADE, September 21, 2001; "New Fast-Track Proposal Mired In Political Controversy," INSIDE U.S. TRADE, September 28, 2001; Michael Mann, "Doha summit must go ahead, says Lamy," FINANCIAL TIMES, September 19, 2001; "Mexico Meeting On WTO Will Avoid Specifics In Favor Of Big Picture," INSIDE U.S. TRADE, August 24, 2001; "TRIPS- Public Health Declaration Splits Developing, Developed Nations," INSIDE U.S. TRADE, September 28, 2001; "U.S. Official Downplays Expectations For Mexico WTO Ministerial" {sic) INSIDE U.S. TRADE, August 31, 2001; Chakravarthi Ragahavan, "G-77 High Level Advisory Group against new issues in WTO," SOUTH NORTH DEVELOPMENT MONITOR (SUNS) EMAIL EDITION, September 25, 2001; "EU Gives Ambiguous Signal On Agriculture At Mexico WTO Meeting," September 7, 2001; Ian Elliott, "Cairns Group wants agriculture at center of new trade round," FEEDSTUFFS, September 10, 2001; "Quad Paper Shows Minimal Concession On Implementation Demands," and "June Quad Paper on Implementation," INSIDE U.S. TRADE, July 13, 2001; "Quad Works To Break Deadlocks In Ministerial Preparations," and Developing Countries' Subsidy Proposals Get Cold Shoulder From Quad," INSIDE U.S. TRADE, September 14, 2001; "WTO Implementation Proposal Pushes Controversial Concessions," INSIDE U.S. TRADE, September 28, 2001.

During the summer, numerous compromises were reached that enabled the adoption of the 800-page report. Chief among these compromises for the United States concerned the amount of agricultural subsidies that China would be allowed. Part of the compromise involved China's decision to forgo special and differential treatment for developing countries and agree to allow no more than a support level of no more than 8.5 percent of the total value of agricultural production. Developing countries are allowed a 10 percent support level. Working party members rejected India's proposal to include language in the working party report that stated that the terms of China's accession set no precedent for future negotiations on subsidy issues.

Other crucial compromises involved safeguard mechanisms to protect against "import surges," particularly of Chinese textiles, and to protect against "trade diversion" to countries not able to use WTO safeguard mechanisms. China also allowed privatization subsidies, such as forgiveness of state loans to companies, to be subject to WTO dispute resolution. Perhaps most extraordinarily and breaking with precedent, the United States will allow China to join the WTO before it has had a chance to review all China's laws to determine their conformity with WTO rules. The U.S. had reviewed some Chinese laws and obtained Chinese commitments to change those laws in order to open up Chinese markets in insurance, telecommunications and distribution of traded goods.

In previous accession discussions, such as those with Russia, prior to accession the U.S. has insisted on reviewing draft and existing laws, and made suggestions on their review to make them conform to WTO agreements. The U.S. Departments of State and Agriculture are pressuring China to delay publication of regulations on genetic engineering until the United States has been able to comment on draft rules. The United States is concerned that the rules might disrupt agribusiness exports to China, because China has not issued import licenses for U.S. soybeans since announcing the impending rules on June 6. The U.S. Department of Agriculture estimates that 68 percent of U.S. soybeans are genetically engineered.

After the Chinese Congress has ratified the terms of accession, China will notify the WTO of the laws it has changed or will change to conform to WTO agreements. The U.S. defended its break with precedent by stating that many of the Chinese accession commitments are phased-in after China joins the WTO, so Chinese laws cannot be changed in advance of the phase-in periods. According to the draft protocol of accession, "China shall make available to other WTO members, upon request, all laws, regulations and other measures pertaining to or affecting trade in goods, services, TRIPS or control of foreign exchange before such measures are implemented or enforced." The protocol also stipulates that China provide a "reasonable comment period" for all WTO members before any such laws, regulations or measures enter into force. U.S. industry sources expect that such texts will be rewritten in accordance with the comments received. A June report by the U.S. Chinese Business Council believes that more than 1,300 local and national laws and regulations did not conform to WTO agreements, as of October 2000.

Another working group adopted the report and draft protocol for the accession of Taiwan. While China was not a member of the working group, the report was reworded to reflect China's contention that Taiwan is not a sovereign state, but a rebellious province of China. Approval of Taiwan for WTO membership is expected immediately after China's accession.

SOURCES: Chakravarthi Raghavan, "China hopes to quickly complete ratification," SUNS EMAIL EDITION, September 17, 2001; "Last Minute Deal Allows Consensus On China WTO Agriculture Text," and "Working Party Sets Rules To Protect Markets From Chinese Exports," INSIDE U.S. TRADE, July 6, 2001; "U.S. Breaks With Precedent On China WTO Entry Regarding Laws," INSIDE U.S. TRADE, July 13, 2001; "U.S. Pushes For Delay, Clarity On Pending Chinese Biotech Rules," INSIDE U.S. TRADE, August 24, 2001; "China Delays GMO details," (Reuters) rpt. in THE WESTERN PRODUCER, August 23, 2001; "Taiwan's WTO Accession Finalized With Last Minute Changes," INSIDE U.S. TRADE, September 21, 2001.

EU Environment Commissioner Margot Wallström, a strong supporter of GE technology, stated "[T]he provisions for traceability ensure a high level of environmental and health protection and pave the way for a proper labelling system. Certainly, there is a cost for the producers and for trade, but what is at stake is our ability to build public confidence. European companies will only be able to seize the opportunities provided by biotechnology if this confidence is established." At a September 18 meeting of EU agricultural ministers, EU Commission for Agriculture Franz Fischler underscored his support for genetic engineering by stating that "We must explain to the people out there what they risk if we turn our back on this technology. We must make clear what benefits biotech can bring to them, from hunger relief by making crops resistant against drought to responsible application in the field of medicine." Fischler reiterated this support at an European Commission "Conference on life sciences and biotechnology" on September 28 in Brussels.

The draft rules, opposed by Trade Commission Pascal Lamy as too trade restrictive, must be approved by the European Council and the European Parliament and are unlikely to enter into force before 2003. The Commission has yet to propose promised rules on environmental liability for any damages caused by GMOs approved by government regulators as safe. Such rules, insisted on by EU member states France, Italy, Luxembourg, Denmark and Greece, would be strongly opposed by the U.S. government and industry.

According to a British government memo, on July 24 U.S. Undersecretary of State Alan Larson conveyed U.S. industry concerns that the draft EU rules' proposed one percent threshold for GMOs in non-GMO foods "would undermine, not reinforce, efforts to restore public confidence in agricultural biotechnology." U.S. bulk grain and oilseed shippers have sought a ten percent threshold. U.S. industry has fought successfully efforts to set and enforce buffer zones between GMO and non-GMO fields adequate to prevent contamination of non-GMO fields by cross- pollination, most notoriously in the StarLink case.

Larson claimed that the draft rules would block $4 billion in U.S. corn and soy exports. In a July 27 memo, a U.S. lawyer urged his agribusiness clients to ask the U.S. government to take the EU to a WTO dispute over the draft EU rules: "A WTO case claiming billions in damages may be winnable." Industry has sought to portray the EU draft rules as the first domino in a series that would fall if the U.S. government accepts the rules as a cost of doing business. In an August 9 letter to USDA Secretary Ann Veneman, 26 food and agricultural trade associations wrote that "[S]uch a labeling regime, enforced through onerous traceability and documentation requirements, creates a dangerous precedent not only for biotechnology, but for labor, environment, animal welfare and other non-science based issues."

After extensive lobbying by industry and the U.S. government, the EU draft rules require exporters to specify only which GE varieties shipments "may contain" if they are used for "food, feed or processing." Draft rules pertaining to requirements for GE seed shipments will be published later in the year. EU non-governmental organizations that oppose the draft rules suggested their "may contain" exemptions vitiate GMO regulation. Gill LaCroix of Friends of the Earth commented that "All [that] companies have to do now is to say that the GMO contamination they created was `accidental' and they get away with it. It's the thin edge-of-the-wedge syndrome - they will contaminate our agriculture and food supply and that contamination will self- perpetuate as time goes on."

While characterizing EU labeling and traceabilty rules as unworkable and unfair, U.S. industry is preparing its own traceability regime for GMOs and non-GMOs, preferably on a voluntary basis, so as to avoid liability claims in the case of damage to the environment or public health. The National Cattlemen's Beef Association (NCBA) recently repudiated the contention of Harvard Business School agribusiness professor Ray Goldberg that "[M]andatory traceability of livestock will be a must in the near future, followed by crops." NCBA Chief Economist Chuck Lambert said that it would be difficult to demonstrate an economic benefit for producers to participate in a traceability system.

At a September 11th conference on traceability and GMOs, sponsored by the U.S. Department of Agriculture and the Pew Initiative on Food and Biotechnology, several speakers, including Jim Houser, of Pioneer Quality Crop Systems and Ruth Kimmelshue of Cargill, indicated that agribusiness was moving to identity preserved grain shipments requiring traceability. The industry movement to traceability is due to brand protection and industry consolidation, as well as due to the GMO controversy. Houser said that demonstrable consumer benefits from GMOs were unlikely in the next decade, and that industry would concentrate on demonstrating GMO benefits to the highly consolidated food processing industry. Having won over food processors and retailers to GMOs, industry would then focus on convincing consumers that GMOs were beneficial for them too.

Kimmelshue said "we can't afford not to absorb the costs of IP [identity preservation]. The market will make sure the costs are not too high." Another grain company official, James Stitzlein, not at the conference, noted that according to a recent U.S. Grains Council report, "[I]dentity preservation is happening as much in bulk shipping as in containerized shipping." The traceability systems needed to enforce market claims made for identity preserved products will be among the most controversial items at a special session of the Codex Executive Committee, September 26-27 in Geneva.

SOURCE: "EC Adopts Rules for GMO Labeling," European Commission Press Release IP/01/1095, July 25, 2001; Joe Kirwin, "EU Proposes Strict GMO Labeling Rule; Action Likely to Aggravate U.S. Concerns," INTERNATIONAL ENVIRONMENT REPORTER, August 1, 2001; "U.S., Canada Launch Analysis Of EU Biotech Rules for Leverage In Talks," INSIDE U.S. TRADE, August 24, 2001; Stephen Clapp, "U.S. Industry may oppose EU biotech legislation," FOOD CHEMICAL NEWS, August 6, 2001; Joe Kirwin, "Officials Make `False Claims' About GMOs For Political Purposes, EU Commission Says," INTERNATIONAL ENVIRONMENT REPORTER, September 26, 2001; "EU's Fischler Says Europe Must Embrace Biotechnology," EUROPEAN COMMISSION DOCUMENT NUMBER: SPEECH 01/421, September 28, 2001; "EU Biotech Rules Show Some Leeway in Strict Overall Regime," INSIDE U.S. TRADE, August 3, 2001; Brian Kenety, "Rules on GMOs lack safeguards, say environmentalists," INTERPRESS SERVICE, July 26, 2001; Stephen Clapp, "White House urged to oppose EU biotech legislation," FOOD CHEMICAL NEWS, August 13, 2001; Jeanne Bernick, "Time for Traceability," FARM JOURNAL, September 2001; Stephen Clapp, "Bulk vs. containers: the debate continues," and "Traceability tops Codex Executive Committee agenda," FOOD TRACEABILITY REPORT, September 2001.