WORLD TRADE
ORGANIZATIONWT/TPR/OV/M/4
10 February 2003
(03-0829)
Trade Policy Review Body
OVERVIEW OF DEVELOPMENTS IN THE
INTERNATIONAL TRADING ENVIRONMENT
Minutes of the Meeting of 11 December 2002
1. The Chairperson, Ambassador H.E. Ms Amina Chawahir Mohamed (Kenya), welcomed
Members of the Trade Policy Review Body and the Director-General to the Annual Overview of
Developments in the International Trading Environment, mandated under the Uruguay RoundAgreement.  She noted that this was an occasion for Members to give their views on current issues in
the trading environment.  The Review had been assisted by the report of the Director-General, issued
as document WT/TPR/OV/8.  It was a comprehensive examination of the state of the multilateral
system, giving particular attention to agriculture, market access, and rules.  She invited the Director-
General to present his report.
2. The Director-General noted that the world economy remained fragile but that the WTO had a
lot to offer.  Successful Council meetings would bolster confidence in the multilateral system and help
achieve a sustained recovery, thus benefiting all Members.  This was most necessary for developing
countries, especially the poorest and weakest among them.  The Doha Development Agenda (DDA)
promised opportunities for all Members to strengthen their economies and improve the tradingenvironment.  It also provided an opportunity to ensure the full participation of all Members,
especially developing countries.  Its success would result in large annual welfare gains, much of
which would accrue to developing countries, thus helping to alleviate poverty.
3. The Overview highlighted several key areas that were of interest to Members. Agriculture,
despite its small and diminishing share in the GDP of  various economies, received an increasing level
of special treatment in the form of protecti on and subsidies, which distorted world markets.
Notwithstanding the major achievements made in past rounds to improve market access, seriousimpediments remained to trade, competition, and economic efficiency.  Tariff peaks and escalation
were of particular concern for development and industrialization in developing countries as they
tended to be concentrated in agriculture, food products, textiles and clothing, and other manufactures
in which developing countries had comparative advant age.  High tariffs in many developing countries,
on the other hand, increased the cost of doing business while the low level of tariff bindings createdunpredictability and commercial risk.  Dealing with th ese barriers was also an essential element of the
WTO's agenda.
4. He noted that developing countries had reiterated the importance of special and differential
treatment, implementation, technical assistance, and capacity building;  success in these issues would
determine their commitment to the DDA.
5. Market access in services, which occupied a large and growing share of global GDP and was
also one of the fastest growing segments of world trade, was of major interest to Members.  Hence,
progressive liberalization of trade in services was a core objective of the ongoing services
negotiations, mandated under the GATS.  The expected gains from liberalizing trade in services
would be substantially greater than those from liberalizing trade in goods.WT/TPR/OV/M/4
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6. The increasing use of contingency measures, particularly anti-dumping, was of key interest to
Members, prompting them to place the matter on the DDA.  Safeguard investigations had also
increased recently.
7. Regional trade agreements (RTAs) posed a significant challenge to the multilateral trading
system.  When fully in line with WTO provisions , they could complement the strengthening and the
liberalization of world trade.  But, by discriminating against third countries and creating a complex
network of trade regimes, RTAs posed systemic ri sk to the global trading system.  Around 240 RTAs
were currently in force and there could be close to 300 by 2005.  This did not  imply that Members
should not open up their markets further in the context of domestic reforms, as unilateral liberalization
could also be in their national interest.
8. Thus, success in the DDA would be an arduous and challenging process, not just for
Members, but also for the Secretariat in its efforts to provide Members with the support that wasessential for the success of the negotiations.  This included technical assistance and training of
officials from developing countries.  He noted that the Doha work programme reflected the priorities
that Members had established.
9. The representative of Chile believed that the report provided a good synthesis of the current
world trading environment.  However, it lacked the richness of an economic analysis that extended
beyond a strictly commercial approach.  It would have been more beneficial to have more in-depth
economic analysis, showing major trends in trade and investment flows at the sectoral level, since this
would enable Members to compare their trade poli cies and their trends in relation to the world
economic situation.  He proposed a more in-depth analysis in support of the current exercise and more
time for discussing issues arising from the report.  The current schedule, having the discussion in themiddle of the General Council meeting, did not provide sufficient time, nor the due calm, that such a
discussion deserved.  Furthermore, he suggested using the support and vision of other international
agencies, such as the World Bank, the IMF, and UNCTAD in such discussions.
10. He noted the proliferation of trade liberalization initiatives at various levels, including at the
bilateral and regional levels.  Chile was an active participant in some of these initiatives, mostrecently with the United States.  These agreements, including those with the European Union and
Korea, were very important to Chile as they crystallized its efforts to accelerate liberalization of its
international trade disciplines, thus guaranteeing legal certainty and predictability.  They were also in
compliance with WTO rules and would be enforced carefully. With regard to this trend, he noted that
it would be helpful if the WTO Secretariat could provide data on:  how much trade in the world would
remain to be liberalized, and what percentage of trade would be governed by the MFN clause, in five
or six years, when the agreements being negotiated were operational.  He believed that the share ofnon-MFN trade would be some 70% of world trade in  the next five or six years, thus leaving an
increasingly smaller share covered by WTO negotiations.  This issue was of increasing importance for
developing countries currently liberalizing multilaterally and an analysis of this would be beneficial.
11. The representative of Paraguay, concurred with Chile on the difficulties of having a detailed
discussion on the Overview in the middle of negotiations.  He called for a more detailed discussion, as
it was important, in particular for developing countries, to increase market access for their exports.
12. Paraguay did not share the report's optimism that the WTO favoured developing countries.
He noted that within the WTO there was discrimination, in that developed countries granted certain
privileges to other countries for economic or political reasons.  This concern was reflected in
paragraphs 34 and 35 of the report.  This discrimination may be the result of some countries nothaving strategic raw materials of importance to the developed countries.  In this regard, instead of
being beneficial, all the activities of the WTO became disadvantages: reducing competitiveness,
diminishing market access, and denying smaller developing countries the privileges offered to other
countries.WT/TPR/OV/M/4
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13. Tariff escalation was one of the most important issues facing developing countries and should
be eliminated since it was the major barrier to adding value, especially for agricultural products.  It
also had an impact on industrial products.  These barriers had been counterproductive in Paraguay's
bid to participate in the multilateral trading system, and had thus led to circumvention of these barriers
via bilateral or regional agreements.  He called for more in-depth study of such trade discrimination.
14. In-depth study of the effects of bilateral and regional agreements was also required.  Such
agreements jeopardized and stifled the WTO;  whil e trade was being channelled into bilateral and
regional projects, multilateral trade was diminishing in importance. Such initiatives led to
protectionism, which ran counter to the basic principles of the WTO.  There was the need to devote
more time and seek the opinion of other international organizations to study trade policies and
determine what was desirable.  He asked whether Members preferred a multilateral trade body with
general rules for all, or disguised protectionism through bilateral or regional agreements.
15. The representative of Cuba agreed that the Overview should be subject to more in-depth
discussion.  However, the timing of the debate was appropriate, given the basic objectives of the Doha
programme of work: the elimination of trade barriers and improved market access, both of which
were very important for developing countries.  She concurred with comments in paragraph 5 on tariff
peaks and escalation.  These created serious obstacles to trade, development, and industrialization.The commodities affected were agriculture and animal husbandry, textiles, clothing and footwear, and
other manufacturing goods, in which developing countries enjoyed a comparative advantage.
Paragraph 13 of the report noted that, notwithstanding the results of the Uruguay Round, duties were
an important barrier to international trade.  Paragraph 14 noted that duties levied by the Quad on their
trading partners, in particular developing and least developed countries, delayed the growth of thesecountries by limiting or restricting their exports.
16. Paragraph 19 of the report showed that in developed countries the simple average bound tariff
for agricultural products was four times that for industrial products, thus concluding that tariff peaks
were focused in sectors that were the main source of export income for developing and least
developed countries.  She questioned the benefits to developing countries of the Uruguay Round oftariff liberalization and agreed with the statement in paragraph 30 on the undesirability of specific
duties since they were more opaque than ad valorem  tariffs.
17. Cuba agreed that the Generalized System of Preferences (GSP) was seldom generalized and
frequently excluded products in which developing countries had a comparative advantage.
Developing countries also risked being graduated out of a product just as they had begun to achieve
significant success in an export market, thereby discouraging efforts to expand exports further.
Furthermore, some of these preferences required beneficiaries to give concessions to the countrygranting GSP in non-trade-related areas, and preferences could be withdrawn, thus creating
uncertainty.
18. Cuba believed that the results to date of the Doha work programme had not been satisfactory.
The Ministerial Declaration placed high priority on development, thus placing implementation issues
and flexibility in improving market access for developing and least developed countries on theagenda.  However, negotiations on these subjects, including on TRIPS and health, had not generated
results a year later.  Cuba noted that the trading environment was difficult, and since developing
countries and LDCs shared the obligations of the multilateral trading system, they should also enjoy
its advantages.  Thus the rules developed should take into account their vulnerabilities.  There was a
need for an in-depth examination of international rules to take account of the economic, trade, and
development needs of developing countries.
19. The representative of the European Union agreed with the high priority the Director-General
attached to the successful outcome of the DDA negotiations.  However, he expressed a preference for
an annual report that emphasized the world economic outlook and the international trade environment.WT/TPR/OV/M/4
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He drew attention to the need for a detailed analysis of the present economic situation, the contraction
of international trade, and the dramatic fall in foreign direct investment (FDI).
20. In the EU's view, the report was selective, as it dealt extensively with market access in
agriculture, regional trade agreements, and anti-dumping, while neglecting other important
components of the single undertaking like environment, investment, and competition.  This could givethe wrong signal that the DDA was exclusively about market access when the rules-making
component was  equally important. The EU acknowle dged the responsibility of the Quad in market
access negotiations, being the principle importers from developing countries and LDCs.  The
European Community had taken up this responsibility in tabling its negotiating proposals on non-
agricultural products.  It had already completely opened up its markets to imports from LDCs by
giving duty-free and quota-free market access, and other Quad partners were following this example.
He called for the expansion of south-south trade, given that the markets in the industrialized countrieswere already open for LDCs.
21. The frankness of the report was appreciated, even though it had missed the chance to report
on the fullness of the negotiations.  However, he disagreed on some points.  The suggestion that
removing SPS regulations could generate welfare gains might make some sense in a macroeconomic
context but this could not be considered to be in the interest of consumer health.  He did not agreewith comments on GSP preferences, which the EU believed to be the very example of special and
differential treatment on an autonomous basis.  The report  did, however make a contribution to
demystifying the debate on agriculture by pointing out that some three quarters of welfare gains from
liberalization would accrue to industrialized countries.  Finally, he reiterated that the Overview was
not the appropriate place to discuss the state of play of the DDA, but should instead focus on theglobal development outlook, the WTO's contribution to sustainable development, the eradication of
poverty, its role in global governance and its coherence with other international organizations.
22. The representative of the United States noted that it had been a year of significant
developments for the trading system, a number of which had been picked up by the Secretariat in its
document.  Given the size of the U.S. economy and the fact that it had again been the engine forglobal economic growth, the degree of attention the United States received in the report was
understandable.  However, the United States alone could not generate global growth;  hence the need
for other partners to make their contributions and restore confidence.  In the current year,
President Bush had secured new Trade Promotion Authority (TPA), which had injected new energy
into the international trade agenda and reaffirm ed U.S. commitment to strengthening the trading
system.  The TPA also extended preferential access to the U.S. market for nearly US$20 billion in
imports from developing countries.
23. On market access, the United States had tabled a comprehensive non-agricultural market-
access proposal, recommending the elimination of tariffs.  This complemented a proposal to eliminate
tariffs in agriculture, over a two-stage process.  Taken together, these would result in nearly US$6
trillion in world goods trade becoming duty free on a permanent basis. Estimates from the World
Bank showed that free trade in goods, with related development measures, could lift an additional 300million people out of poverty by 2015.  Developing countries had the most to gain from tariff-free
trade. According to one World Bank estimate, th ere would be a permanent income gain of US$832
billion from free trade in all goods, including agriculture, of which US$539 billion (65%) would flow
to developing countries.  She noted that average tariffs on trade between developing countries were
significantly higher than on their exports to developed countries.
24. Services accounted for 60% of world GDP and were the fastest growing component of GDP
growth in both low- and middle-income econom ies, growing faster than the world average.
Furthermore, the Director-General's report clearly demonstrated the benefits that would follow from
the reduction of duties, reform in agriculture, attention to non-tariff barriers, and servicesWT/TPR/OV/M/4
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liberalization.  These market-access issues were at  the core of the DDA, and Members were reminded
of their responsibility to make a contribution.
25. On the U.S. steel action taken under the pr ovisions of Article XIX of the GATT 1994, and
Section 201 of U.S. Law, she disagreed with the suggestion in paragraph 37 that the United States was
not sensitive to the concerns of developing country partners.  First, developing countries were, withvery few exceptions, excluded from tariffs for all product categories under the provisions of Article 9
of the WTO Agreement on Safeguards.  Where developing countries were subject to the tariffs, it was
because their imports exceeded the 3% level pursuant  to Article 9 of the Agreement, and the tariffs
affected only discrete product sectors, and not all steel products.  Second, exclusion was a technical
process, not a negotiation, and all decisions were based on objective, technical criteria.  Each
exclusion request involved a thorough analysis of its technical and commercial merits, after full
consideration of the views of domestic producers and consumers.  Although all the exclusions werebeing administered on an MFN basis, the largest volume exclusions were granted at the request of
Korean, Australian, and Brazilian producers.
26. On the issue of trade remedies, the United States believed that the report did not address the
very real problems caused by injurious dumping.  Th e discussion of the increased use of anti-dumping
did not analyse whether injurious dumping itself had increased or the market distorting practices thatoften led to injurious dumping and subsidies.  It also  failed to address the issue in the context of the
increase in trade during the same period as a result of trade liberalization, which had left some
Members more vulnerable to the effects of unfair trade practices.  Thus, the report did not provide a
meaningful context to analyse the trends in the use of trade remedy measures.  She also disagreed
with the suggestion that the rising number of disputes indicated that the rules-based system was notfunctioning efficiently;  to the contrary, it indicated that the dispute settlement system was credible
and worth pursuing.
27. On RTAs, she agreed that they could be either building or stumbling blocks to multilateral
trade liberalization.  The U.S. view, on which it based its conduct of free-trade negotiations, was that
they could and should be negotiated to facilitate multilateral liberalization.  She acknowledged thatthe increase in RTA negotiations posed a challenge to the WTO on whether it was to lead or to
follow.  If the WTO were to lead, Members needed to be ambitious in their liberalization objectives
and in the strengthening of rules and disciplines.  Part of this strengthening had been addressed
through accessions.  The WTO had recently welcomed the accessions of Macedonia and Armenia and
had streamlined the accessions process for LDC applicants.  Applicants had seen the benefits of
Membership to their domestic reform programme and building of market-oriented trade regimes.  The
report showed a number of results in the last 12 months and she hoped that the report for 2003 wouldshow more significant results from agreements on modalities governing the agriculture and market
access negotiations, and a successful Ministerial Meeting in Cancun.
28. The representative of Canada agreed that there was a need for more substantive, thorough,
and interactive discussions on the international trading environment and socio-economic forces at
work.  It was important to find time to step back and look at the broader systemic issues at play and heproposed that this could take place within the context of a retreat.  He asked Members to consider
ways in which the Overview's message and related discussions could be better transmitted to the
outside world.  It was important to identify the key messages to be communicated and to listen to the
messages that the outside world was communicating to Members.  He stressed the need to address
external transparency and the way the world viewed the WTO.
29. The report had devoted attention to the continued significant export barriers faced by
developing countries.  Canada did not contradict this but shared the EU's view of the importance of
south-south trade;  the solution should not be seen to depend exclusively on developed countries but
should focus in how the solution could be shared.  In this regard, the role of the more developed
developing countries was very different from that of the LDCs.WT/TPR/OV/M/4
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30. Canada also supported the comment that trade liberalization and poverty reduction went hand
in hand and there was a need to better stress the benefits of trade liberalization, even if these had not
been equitable.  For poverty reduction to be achieved, moreover, serious reform was needed in
agricultural market access.
31. With regard to negotiations, he encouraged Members to be constructive in the face of new
proposals and to give them a chance, since withou t proposals there would be no negotiations and no
fulfilment of the DDA.  Ambitio n was important.
32. Canada was a strong believer and practitioner of the view that RTAs complemented, and did
not necessarily compete with, the multilateral trading regime.  RTAs helped understanding of the
rules of the WTO, and could also identify new issues and solutions for the global agenda.  On a
personal note, however, he was concerned that the proliferation of RTAs had had an impact on work
at the WTO, due to the political, financial, and human resources, and private-sector involvement inRTAs, which occurred to the detriment of the WTO.
33. The representative of Switzerland stressed that the slowdown in the world economy had not
been caused by a protectionist reversal of trade policies.  This showed Members' commitment to a
strong and open trading system, although the system could not make a lasting contribution to
economic growth unless it was adapted to the needs of the modern economy.  In this regard, the Dohaprogramme, by providing a unique opportunity to further liberalize trade and to enhance the
participation of developing countries in the international economy, was timely. Members had much to
gain by concluding the ongoing negotiations, especially on market access.
34. Switzerland noted the challenges faced and the progress made by developing countries in
world trade.  It was important for trade liberalization initiatives to promote trade in all its geographicdimensions including north-north and south-south.  In this regard special efforts needed to be made in
favour of LDCs.  While they had benefited from recent efforts to eliminate tariff and non-tariff
barriers to their exports, the Overview highlighted that, for many products of interest to developing
countries, protection remained high whether in developed or other developing countries.
35. The negotiations should also try to limit the potential abuse of emergency measures,
particularly anti-dumping, as their continued increase would cancel the trade liberalization benefits of
the WTO Agreements and any that would occur under the Doha mandate.  In this context, the rules
aspect of negotiations was potentially as important as that of market access.
36. With regard to the proliferation of free-trad e agreements, participants needed to ensure
complementarity between the FTAs and the multilateral trading system.  However, the best way to
achieve this, as expressed in the Overview, was to liberalize multilaterally.
37. He acknowledged efforts to assist LDCs to participate more actively in the negotiations,
through technical assistance programmes and Geneva Week, organized for Members who did not
have an office in Geneva.  In this regard, a new international organization, the Agency for
International Trade Information and Development C ooperation (AITIC), had been established to help
LDCs and those who were disadvantaged in participating efficiently in WTO negotiations.  The
AITIC's financial resources were expected to be boosted through contributions from Denmark,Finland, Ireland, the Netherlands, Sweden, Switze rland, and the United Kingdom, and it was expected
to begin operating during the first half of 2003.
38. The representative of Norway believed that th e Overview was a lost opportunity, in that it
could have presented a WTO view of the trading environment and world economic developments
seen from a trade perspective.  He concurred that it needed to be more analytical, focusing on specialthemes.WT/TPR/OV/M/4
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39. With regard to the discussion on agriculture, he called for a more in-depth analysis of the
various aspects of agriculture rather than a selective approval and he believed that the WTO
Secretariat, which was by definition neutral, should not focus solely on selective issues .  On the issue
of RTAs, he agreed with Canada's comments.  On market access for services and non-agricultural
products he noted the opportunities for both developed and developing countries and hoped that theremaining tariffs would be removed or significantly reduced in future.  The rising use of trade defence
measures, he believed, indicated their use for protectionist purposes.
40. The representative of Argentina agreed that the debate deserved a more appropriate
environment, permitting more detailed discussions.  Argentina believed that the report should redress
the balance it had struck between systemic subjects and those related to the day-to-day matters of the
WTO.  Very little attention had been paid to sy stemic matters including:  the importance of exchange
rate fluctuations between major currencies, given the implications for world trade;  the need to extendthe discussion of the global economic slowdown beyond its causes to the possible protectionist
tendencies it could generate;  and an analysis of why results had not been better for economies that
were more integrated with the world economy, given the general finding that developing countries
that had enhanced their participation in the world economy achieved better results in income and
growth per capita than those whose integration had lagged.  He suggested the use of correlation tocarry out such an analysis.  He also informed Members that Argentina's anti-dumping measures would
decline to 11 by the end of 2002 and zero in 2003.
41. The representative of the Republic of Korea said that the report was an excellent summary of
the major issues confronting the WTO, in particular, th e structure of tariffs, trade in services, trends in
trade defence measures, and the proliferation of RTAs.  He joined others in expressing concern aboutthe fall in world trade, the sharp decline in FDI and the overall global economic slowdown.  These, he
agreed, were mainly due to the slowdown in th e leading economies and the weakening of business
confidence.  He underscored the importance of completing the DDA negotiations within the given
time-frame.
42. Trade remedy measures were increasing as market access was liberalized, thus undoing what
the negotiations had accomplished.  Korea was also concerned about the rise in safeguard measures to
circumvent the strict reviews on anti-dumping measures through the dispute settlement mechanism.
The number of disputes had grown significantly, and many developing countries were involved both
as complainants and defendants.  This trend could imply a more stable multilateral system and the
resolution of disputes on the basis of the rule of la w;  however, it could also imply potential abuse of
the dispute settlement system and Korea had special concerns in this regard.
43. Korea drew attention to the potential policy incoherence between WTO Agreements and IMF
recommendations:  Korea was being challenged in the WTO for having breached the Agreement on
Subsidies while implementing financial sector reforms recommended by the IMF.
44. The representative of Thailand noted that the global economy and merchandise trade had
made a slow recovery after contracting in 2001.  WTO Members could help accelerate the recovery
by making a collective effort to complete the DDA within the set deadline.  According to the IMF andWorld Bank, the elimination of barriers to merchandise trade would result in welfare gains of
US$250 billion to US$620 billion annually.  Realization of this goal was the challenge to the WTO.
She noted that more equitable distribution of such welfare gains to Members was necessary to
encourage further commitments to liberalization;  Members should not be deprived of the opportunity
to compete fairly in their areas of comparative advantage.  The Overview confirmed that the playingfield between developed and developing countries in the WTO was still uneven, particularly in the
areas where developing countries had competitive advantage, such as agriculture, textiles and
clothing, and footwear.  Thailand called for the DDA to rectify such discrepancies so that developing
countries could truly benefit from global trade liberalization.WT/TPR/OV/M/4
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45. The high level of subsidization for agriculture by the rich countries had been marginally
reduced to US$311 billion last year.  Average bound rates for agricultural products were four times
those on industrial products.  Tariff peaks, tariff escalation, non- ad-valorem  duty, SPS, and TBT
measures were typically dominant in agricultural trade.  The new U.S. Farm Act as well as the
outcome of the mid-term review of the Common Agriculture Policy of the EC had not beenencouraging.  On the bright side, there was much room for improvement within the WTO framework,
in that the removal of agricultural support would produce an annual welfare gain of US$98 billion for
industrial countries and US$30 billion for developing countries, as observed in an IMF study.
46. The implementation of the Agreement on Textiles and Clothing (ATC) had not resulted in
meaningful progress in the phasing out of quotas by the end of 2004, and the increase in quota growth
rates had not significantly improved market access as had been expected by developing countries. In
the case of two major importing countries, only 20% of imports restricted by quotas had beenliberalized at the beginning of the third stage and it remained to be seen whether importing countries
would exercise restraint on anti-dumping or safeguard measures once integration had been completed.
She encouraged developed countries to accelerate the integration process, as Norway had done, and
not to wait until the last day of the transitional period.  She believed that developing countries would
not permit the DDA to be concluded without addressing the problem of inequitable distribution ofgains from trade liberalization;  hence the challenge was to ensure that the DDA benefited all
Members.
47. The representative of India said that the report was balanced, fair, and provided a good and
comprehensive picture of the global trading environment.  He took note of the poor performance of
the world economy and its impact on global trade.  India wanted to know the basis for and analyticalapproach behind estimates on welfare gains from trade liberalization, as this would enable a better
understanding of these estimates.  Market-access issues should not be confined to tariffs;  market
access depended on several factors including:  tariffs, non-tariff barriers, quotas, subsidies,
safeguards, and trade defence measures.  He enquired about the possibility of constructing an index
that would take all these factors into account thus giving a better measure of market access.
48. On the development agenda, he expressed concern that the deadlines were slipping very fast
and that the signals to the developing countries were extremely negative.  Hence there was a need to
put the process back on track.  He was interested in the ITC analysis showing welfare gains from
reform in the textiles and clothing sector on the U.S. economy.  RTAs discriminated against third
countries and posed systemic risks to the global trading system.  They also were increasingly signed
for reasons other than traditional economic linkages  within the region.  RTAs grossly undermined the
MFN principle and should be addressed in the ongoing negotiations.  He reiterated the importance ofcontinuing to increase south-south trade and called for a study to consider the obstacles to an increase
in south-south trade.  He also called for greater support for the Advisory Centre on WTO Law.
49. The representative of Hong Kong, China po inted out that the global economic slowdown
experienced in 2001 might, in part, explain why certain governments were being subject to
protectionist pressure from sectoral interests through unjustified use of trade defence measures.  Itmight also explain why some Members had turned increasingly to bilateral and regional trade
arrangements to provide impetus to trade and inve stment.  Hong Kong, China agreed that efforts
should be made to ensure that such bilateral or regional trade agreements complemented the
multilateral trading system and did not distract attention, or divert resources, from the WTO agenda.
50. Progress in the negotiations had been uneven in the year since the meeting in Doha.  A major
challenge was to ensure that the DDA would live up to the true meaning of its title.  So far the record
on development issues was not very encouraging and he believed that courage, flexibility, and
leadership would be needed to ensure some breakthroughs and to remove the obstacles likely to come
up in the next two years.WT/TPR/OV/M/4
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51. While it was encouraging that Armenia would become the 145th Member of the WTO,
increased membership also brought greater challenges as the costs of decision-making by consensus
might increase simultaneously.  If trade negotiators maintained a zero-sum mercantilist mentality and
demanded compensation for every concession made, the pace of negotiations would be extremely
slow and the prospects of the round fairly dim.  To bring about the benefits of multilateral tradeliberalization, the value of the multilateral trading system had to be appreciated and Members had to
set higher and more ambitious goals while being willing to compromise.  Members needed to remind
themselves of their collective responsibility to the multilateral trading system or risk their long-term
economic prosperity.
52. The representative of Romania noted that RTAs were a sensitive subject at the WTO because,
to date, no examination of a RTA had been successfully completed in the relevant body.  Her
country's experience with RTAs showed that liberalization at both the regional and multilateral levelwere not undermining each other but were rather supportive and complementary and had helped
Romania to expand trade substantially.  Drawing from the Overview, she stressed the importance of
continued discussions on agriculture, the contraction of the world market, the dramatic fall in FDI,
stagnating economic development, the fragility of the business environment, and reduced financial
confidence.  She noted that decisions by Members could help change these unfavourabledevelopments and support the role of trade in enhancing economic development, thus underscoring
the need to observe the deadlines established by the DDA.  She said that discussions on almost all
agenda items were lagging behind and that the current schedule of meetings could affect the debate on
the Overview, a debate which was very important for the WTO and the watching world.
53. The representative of Colombia agreed that there should have been more emphasis on the
macroeconomic environment.  This could have included greater detail on the impact of the downturn
on future trade levels, who the winners and losers were, what strategies had been followed by the
winning and losing regions, which sectors had deve loped best, which sectors were most affected by
the evolution of world economic activity, the implications of this downturn on the growth of
developing countries, the social impact of this evolution, and what types of policies werecomplementary to trade.  He agreed with Canada th at clear signals needed to be sent to the world.
54. On the predicted welfare gains from agricultural liberalization, he noted that these were only
the static gains accruing from lower prices for consumers and that the greatest beneficiary of these
would be the European and Japanese consumer.  He asked the Secretariat to examine the dynamic
gains as these would take into account incentives to production and investment in developing
countries and the possibility of expanding exports.  Such an analysis needed to take into account the
transition and adjustment costs of trade liberalization and ways to reduce them.
55. Another issue was that of improved coherence between international organizations.  Volatility
in trade flows was noted to be greater than that of production cycles, indicating that economies in
which trade made a greater contribution to economic activity were more vulnerable to oscillations in
world growth.  This volatility could have a disproportionate effect on financial systems as had been
observed during the Asian financial crisis.  However, some financial systems were critical forguaranteeing a speedy recovery.  In this respect,  he suggested that amongst the messages Members
needed to transmit to the IMF, the World Bank, and others, was the need to assist economies in crisis
to prevent the collapse of their financial systems, as had occurred in the past.  This was important in
that countries in crisis often experienced a loss of their trade finance, thereby worsening the crisis.
This justified the need for coherence with other organizations in order to prevent the collapse ofmonetary systems as this would prevent financial crises from becoming long-term chronic diseases.
56. The representative of Jamaica noted a clear commitment to trade liberalization and to the
fundamental principle of non-discrimination as well as a confidence in global and national benefits to
be derived even from unilateral liberalization.  However, he had detected disquiet regarding:  the
lagging pace of liberalization in certain sectors of key interest to developing countries;  the growingWT/TPR/OV/M/4
Page 10
number of disputes and a reliance on retaliation;  and the proliferation of RTAs and their changing
character.  In future, it might be useful to address these issues in depth and thematically.  He noted
that, in the past, several studies had predicted welfare gains from multilateral trade liberalization.
However, evidence of the actual benefits derived by developing countries was much more nuanced
than was acknowledged.  The export performance of most developing countries in Latin America,Africa, and Asia had been quite dismal over the past several decades.  Even in some Asian economies,
where growth had been good, a recent UNCTAD st udy had drawn attention to the gap between
growth in manufacturing exports and in manufactu ring income.  In this respect, since trade
liberalization had taken place during this period, there appeared to be a disjuncture between
predictions and reality.  He called for more careful analysis on this issue.
57. Jamaica was of the view that the Overview underestimated the value of RTAs.  RTAs, by
fostering a culture of market opening and structural reform, complemented the multilateral tradingsystem.  They could also encourage trade by providing access to lower cost inputs and expanded
markets in which firms, sometimes small and medium-sized ones, could take advantage of economies
of scale.  Small economies sometimes experienced, at the multilateral level, a reverse "free rider"
problem, in that they paid for benefits they had no capacity to utilize, especially in regard to market
access.  However, this was much less the case with RTAs.  One way of reducing the attractiveness ofRTAs, particularly for small players, was to ensure that more attention was paid at the multilateral
level to the concerns and needs of those who were not likely to become globally competitive in a wide
range of goods and services and in a multiplicity of markets.
58. The representative noted, with interest, the comments attributing the contraction in trade to
the economic slowdown, since too often the focus was on what trade liberalization would achieve,although trade performance itself was often dependent on other global and national economic factors.
For example, in 2001 the economic slowdown was due in great part to a melt-down in the technology
sector, and caused trade to shrink.  Moreover, due to the highly tradeable nature of technology-related
goods, liberalization, perversely, had served to hasten the downturn of the economic slowdown.  He
called for attention to be paid to these issues in order to sharpen Members' collective perspective onthe role of trade liberalization.
59. Jamaica thought the report was good and well researched but could have benefited from
drawing on work done by UNCTAD and the World Bank.  He hoped that the WTO Secretariat's
capability and organizational culture would evolve, enabling it to undertake itself some of the studies
and analytical work now being attributed to other organizations.
60. The representative of Japan underlined the need to recall the spirit of the DDA given the
uncertain pace and sustainability of the recovery that had been under way in 2002.  The process of
reform and the liberalization of trade policies would ensure that the multilateral trading system played
its full part in promoting recovery, growth, and development.
61. Japan was aware that RTAs had the potential to bilaterally or plurilaterally reduce the level of
tariffs bound under the WTO.  They could also provide a mechanism for creating new rules in areas
that had so far fallen outside the purview of WTO rules.  In this respect, bilateral and regional tradeagreements could complement the multilateral trading system.  On this basis, Japan would seek to
conclude regional and bilateral agreements to bring about effective liberalization and facilitation of
global trade.  The Japan-Singapore Economic Partnership Agreement (JSEPA), which had recently
come into force, was an example of this.  While being positive about trade-generating RTAs which
complement multilateral trade liberalization, Japan remained vigilant about trade-distorting RTAs.Given that there remains the potential for such RTAs to impinge on global trade liberalization, it was
essential for Members to engage in negotiations to strengthen the multilateral trading system under
the WTO.WT/TPR/OV/M/4
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62. With regard to the increasing use of anti-dumping measures, many of which had been ruled to
be inconsistent with WTO rules, he called for clarification and improvement of the rules to prevent
abuse of anti-dumping measures, to reduce the burden on respondants, and to enhance the
transparency and predictability of anti-dumping investigations.
63. Japan agreed that Members should pursue agricultural reform, as had been prescribed in the
Doha Ministerial Declaration as well as in Article 20 of the Agreement on Agriculture.  While seeking
reform, the co-existence of various types of agriculture should be ensured, and rules  established
through the current negotiations should not hinder the smooth implementation of agricultural reform.
64. Japan believed that technical assistance was one of the most important tools to enable the
effective participation of developing country Members in the multilateral trading system.  It
welcomed the WTO technical assistance plan for 2003, which reflected the needs of developing
country Members, especially LDCs.  Japan was committed to its implementation.  Furthermore, Japanhas been among the most determined Members to work toward duty-free and quota-free market
access to all LDC's products.  Japan also stressed that development issues needed to be tackled at both
the north-south and south-south levels.  Japan called for cooperation in the negotiations and believed
that the WTO could maximize benefits to Members only by accommodating their divergent interests.
Japan reaffirmed its commitment to work with Members to ensure the success of the DDA.
65. The representative of the Philippines said that the Overview was expected to follow the
structured nature of a Trade Policy Review, as it served as a background to the discussion on the
international trading environment.  Nevertheless, there were other documents which could serve as a
basis for discussion of broader issues as well as an appropriate forum where discussions of
hemispheric importance could take place.  He proposed that before the Overview was undertaken, theviews of the Members concerning important issues should be solicited.
66. The first challenge articulated in the report was the disappointing trade figures, which
underscored the importance of accelerating trade talks.  The issues of interest to the Philippines were
the need, inter alia :  for continued liberalization;  to addr ess the rejection of market-access principles
in areas such as non-tariff barriers, anti-dumping, and other contingency measures;  and to addressdevelopment needs in the negotiations.
67. RTAs, he believed, were working laboratories for accelerated liberalization and for new
issues that could not be immediately accepted in the WTO;  RTAs gave confidence and experience to
their members in progressing on challenging new issues.  RTAs could be trade distorting or trade
enhancing and it was the responsibility of the major contracting parties of RTAs to ensure that they
conformed to the WTO, so that smaller pa rties could also follow these disciplines.
68. He noted that in addition to the denial of market access through tariffs and non-tariff barriers
and trade defence measures, there had also been a rejection of special and differential treatment and
the renunciation of less than full reciprocity for developing countries.  He disagreed that some
graduation or differentiation was necessary in the special and differential treatment of developing
countries.  He stressed that there remained a long way to go in integrating developing countries into
the global trading system and called for a more balanced and equitable outcome in the negotiations.
69. The representative of Brazil supported the report's focus on the Doha mandate.  In general, he
agreed with the assessment of developments in th e international trading environment, but suggested
that the title was a bit over-ambitious.  He reminded Members that the purpose of the Overview was
to provide an analysis of the international trading environment as it related to the mandated
negotiations and to trade policy review activities.  In  future, this could be made clear in the title. To
better prepare for the debate, he suggested that the Director-General consult with delegations and
circulate the document early.  An executive summary to highlight the main facts discussed could also
be included.WT/TPR/OV/M/4
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70. The report provided a balanced assessment, and rightly stressed the detrimental effects, of
tariff peaks and escalation in developed countries and their effects on developing country exports,
including those of Brazil.  Agricultural subsidies in OECD countries remained high relative to
overseas development aid.  He drew Members' attention to the importance of better statistics to ensure
the credibility of the services negotiations and for the good functioning of the GATS.  He called forthe analysis in the services sector to be extended beyond counting the number of sectors and
subsectors in schedules, to that of the importance of  their contribution to international trade flows.  It
would also be useful if the report highlighted th e number of exceptions to MFN treatment and their
consequences for international trade.
71. Brazil shared the concerns arising from the potential negative effects of RTAs, but remained
committed to ensuring that they contributed to the expansion of trade and maintained synergy with
liberalization pursued at the multilateral level.
72. The representative of Pakistan noted the comprehensive and balanced nature of the report and
agreed with Brazil that the title could have been more specific.  He noted the high tariff barriers faced
by exports of developing countries.  It was unfortunate that, even after the implementation of the
Uruguay Round, tariffs in areas of interest to developing countries, such as textiles, clothing and
footwear, along with subsidies and border taxes in agriculture, remained disproportionately high.
73. Pakistan believed that RTAs were discriminatory and a departure from the MFN principle.
Pakistan also took note of the rise in anti-dumping initiatives.  The representative said that contrary to
suggestions in the report that Pakistan was one of the developing countries with high MFN tariffs,
substantial reforms over the past few years had significantly lowered its tariff rates.  He thanked the
Secretariat for its work on the Trade Policy Review, which had been a very beneficial exercise,leading to further reforms in Pakistan's trade policy.
74. The representative of Zambia thanked the Director-General for the emphasis he had placed on
the DDA, particularly as it related to the current and future work of the organization.  The report was
well balanced and informative, and set a firm basis for reinvigorating the ongoing negotiations.  He
noted its assessment of the poor state of the wo rld economy, and the more severe impact on poorer
segments of the global community.  In this connection, Zambia welcomed paragraph 2, which pointed
to the need for a speedy integration for the developing and least developed countries in the world
trading system, in the hope of improving their living conditions.  This would require predictable and
increased technical assistance and trade-related capacity-building measures.  The Director-General's
new vision of delivering these, and the positive response by trading partners to this challenge, was
acknowledged.  However, further assistance was needed.
75. He also agreed with the assessment of special and differential treatment, implementation
issues, agriculture, market access, technical assistance and capacity building.  He shared Canada's
view that dialogue with the outside world could be one possible outcome of the Overview, and
stressed that it was not just the negotiated written texts that were important, but also signals sent
during negotiations.
76. Zambia agreed that success in the DDA would enhance Members' welfare, which would help
the fight against poverty, and was concerned that deadlines were missed without concrete substantial
negotiating positions in sight.
77. The representative of Djibouti stated that the report contained some very valid ideas
particularly for developing countries, especially the weakest amongst them.  It was also important to
assess the situation in the developing countries, particularly in Africa, and the LDCs.  The reportshould reflect the situation on the ground and such information could be obtained from regional
organizations that dealt with development questions.WT/TPR/OV/M/4
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78. The representative of Morocco noted the persistence of tariff peaks and escalation, and export
subsidies in areas of interest to developing countries such as agriculture, and textiles, clothing and
footwear.  In textiles and clothing the Director-Gen eral's report pointed out that the process of phasing
out quotas had lagged behind;  in agriculture, subsidies continued to distort world markets.  Morocco
was concerned about the increased use of trade defence measures as they could potentially disrupt themultilateral trading system rather than correct it , and urged Members to think about reforming this
remedy.  Morocco supported the Director-General's vision on technical assistance, which should be
integrated in a short-term and long-term plan to ensure effective implementation of this development
strategy.  Morocco believed that RTAs should serve as neither substitute nor competitor to the
multilateral trading system, but should be complementary and contribute to greater integration of
developing countries in world trade.
79. The representative of Mauritius fully endorsed the view that trade policies should not be
viewed in isolation, but considered within the broad economic environment.  The contraction of world
trade was disturbing when compared with past growth trends and he suggested that the Secretariat
deepen its analysis on this subject.
80. With regard to welfare gains from global trad e liberalization, Mauritius recalled similar
estimates made during the Uruguay Round.  There was a broad view that these gains had not beenequitably shared.  He acknowledged that the di stribution of FDI flows and trade were skewed.
Studies carried out on this so far had failed to capture the specific situation of LDCs and small and
vulnerable countries.  In this regard, the one-size-fits-all approach was not appropriate.  He
acknowledged the importance of the special treatm ent accorded to such economies through specific
preferences and how these had been instrumental in sustaining reasonable rates of growth anddevelopment.  However, extensive support and techni cal assistance was still needed to fully integrate
developing countries into the multilateral trading system.
81. The representative of Australia agreed that there was a need to find time outside the context
of ongoing work in the General Council to discuss the Overview.  Such a session could benefit from
Members identifying particular themes, presentations from the Secretariat, and inputs fromdistinguished trade analysts.  He also agreed that there should have been less focus on the Doha
Round and more on the international trading environment.
82. Drawing from the observation in the report that the welfare benefits of agricultural
liberalization rested particularly with developed countries, he reminded Members that it was an
outcome of any analysis of this kind that the benefits of liberalization were greatest for those who had
the highest levels of support and distortion.
83. The Director-General welcomed the remarks by Members and was encouraged by the
enthusiasm shown in the discussion.  The focus of the Overview was such because he believed that
Members needed a report confronting all the burning issues that determined and defined the current
trading environment.  He accepted full responsibility for its shortcomings and would take into account
the recommendations, remarks, and proposals that had been made.  The report had attempted to be
more analytical in order to provide a clearer picture in addressing the tasks that lay ahead.  He stressedthat this was an annual report that was part of the Trade Policy Review Body and that much of the
information and analysis was derived from and limited to the trade policies review exercise.  He
agreed that the Overview needed to be linked to the wider picture, but resources available to do so
were limited.
84. The report focused on three key areas that needed the attention of Members.  These were the
size and scale of issues relating to inefficiencies of the trading system that needed to be addressed;
how best to integrate developing countries and the LDCs into the mainstream of the world trading
system;  and the DDA.WT/TPR/OV/M/4
Page 14
85. He informed Members of a new publication, the World Trade Report, which would analyse in
greater detail some key issues relevant to the task at hand and their macroeconomic underpinnings.
This publication would be ready before the Ministerial Conference in Cancun.
86. The Chairperson reiterated that the report submitted was an excellent basis for the debate and
was highly appreciated as reflected in the rich exchange of views.  She thanked Members and
welcomed their comments.
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