World Trade Organization: Observations on the Ministerial Meeting in
Singapore (Testimony, 02/26/97, GAO/T-NSIAD-97-92).

GAO discussed the results of the World Trade Organization's (WTO)
ministerial meeting in Singapore that took place in December 1996,
focusing on: (1) trade liberalization; (2) implementation of Uruguay
Round (UR) agreements; (3) areas of ongoing WTO negotiation; and (4)
emerging trade issues that are being debated in the WTO and in other
international forums.

GAO noted that: (1) the Singapore ministerial meeting produced progress
toward greater trade liberalization and a continued commitment to full
implementation of existing UR agreements and planned negotiations; (2)
it also took the first steps in the WTO toward addressing a new
generation of issues that challenge free and fair trade; (3)
nevertheless, the true promise for furthering U.S. interests lies in the
review, negotiation, and enforcement of commitments to be done by the
dozens of WTO committees, councils, and groups, rather than in the
outcome of what was the first of periodic trade minister gatherings; (4)
more specifically, the United States, as well as many of our major
trading partners including the European Union, Canada, and Japan,
declared the ministerial meeting a success and a reaffirmation of the
WTO; (5) while at Singapore, the members laid a foundation for an
Information Technology Agreement that would cut tariffs on certain
high-technology products; (6) the ministers were able to achieve a
consensus on a final declaration that encompassed several contentious
subjects despite their differences; (7) in the declaration, the
ministers summarized their progress regarding implementation to date and
reaffirmed their commitments to finish the "built-in agenda' of ongoing
negotiations; (8) however, most of the work regarding these two areas
took place earlier in committee meetings in Geneva as members prepared
for Singapore: (9) finally, the ministers took steps to address some
contentious new issues that were previously outside the scope of
detailed trade negotiations; (10) these new issues involved transparency
in government procurement, investment policy, competition (antitrust)
policy, trade and the environment, and trade and labor standards; (11)
after much debate, ministers agreed to language about all these issues
in the declaration and in some cases they agreed to form WTO working
groups to address them; (12) nevertheless, just as important to judging
the success of the meeting were some things that did not happen at
Singapore; (13) differences on a variety of contentious issues often
seemed to divide the WTO members along developed/less developed nation
lines before the ministerial, but fears of a stalemate in the talks
never materialized; and (14) for example, besides the new initiatives,
implementation of the Agreements on Textiles and Clothing and on Agricu*

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-NSIAD-97-92
     TITLE:  World Trade Organization: Observations on the Ministerial 
             Meeting in Singapore
      DATE:  02/26/97
   SUBJECT:  International organizations
             International trade restriction
             International trade regulation
             International economic relations
             Foreign trade policies
             Competition
             Tariffs
             Foreign trade agreements
IDENTIFIER:  Singapore
             European Union
             Canada
             Japan
             Geneva (Switzerland)
             Generalized System of Preferences Program
             North American Free Trade Agreement
             Korea
             Hong Kong
             Marrakesh (Morocco)
             NAFTA
             
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Cover
================================================================ COVER


Before the Subcommittee on Trade, Committee on Ways and Means, House
of Representatives

For Release on Delivery
Expected at
10:00 a.m., EST
Wednesday,
February 26, 1997

WORLD TRADE ORGANIZATION -
OBSERVATIONS ON THE MINISTERIAL
MEETING IN SINGAPORE

Statement of JayEtta Z.  Hecker, Associate Director, International
Relations and Trade Issues,
National Security and International Affairs Division

GAO/T-NSIAD-97-92

GAO/NSIAD-97-92T


(711251)


Abbreviations
=============================================================== ABBREV

  APEC - Asia-Pacific Economic Cooperation
  EU - European Union
  FTAA - Free Trade Area of the Americas
  GATS - General Agreement on Trade in Services
  GATT - General Agreement on Tariffs and Trade
  ILO - International Labor Organization
  MAI - multilateral investment agreement
  MEA - multilateral environmental agreements
  MERCOSUR - Mercado Comun del Sur
  MFN - most-favored-nation
  NAFTA - North American Free Trade Agreement
  OECD - Organization for Economic Cooperation and Development
  STE - state trade enterprises
  TRIPS - Trade-Related Aspects of Intellectual Property Rights
  TRIMS - Trade Related Investment Measures
  UNCTAD - United Nations Conference on Trade and Development
  UR - Uruguay Round
  USTR - U.S.  Trade Representative
  WTO - World Trade Organization

============================================================ Chapter 0

Mr.  Chairman and Members of the Subcommittee: 

I am pleased to have the opportunity to provide some observations
about the results of the World Trade Organization's (WTO) ministerial
meeting in Singapore that took place in December 1996.  Specifically,
my testimony addresses (1) trade liberalization; (2) implementation
of Uruguay Round (UR) agreements; (3) areas of ongoing WTO
negotiation; and (4) emerging trade issues that are being debated in
the WTO and in other international forums.  My observations are based
on our past and ongoing work,\1 our review of the ministerial
declaration and related documents, and our discussions with U.S.  and
foreign government officials both at the Singapore ministerial
meeting and in Washington.  Before I get into the specifics of these
topics, let me provide a brief summary. 


--------------------
\1 See attached list of some related GAO products. 


   SUMMARY
---------------------------------------------------------- Chapter 0:1

The Singapore ministerial meeting produced progress toward greater
trade liberalization and a continued commitment to full
implementation of existing UR agreements and planned negotiations. 
It also took the first steps in the WTO toward addressing a new
generation of issues that challenge free and fair trade. 
Nevertheless, the true promise for furthering U.S.  interests lies in
the review, negotiation, and enforcement of commitments to be done by
the dozens of WTO committees, councils, and groups -- rather than in
the outcome of what was the first of periodic trade minister
gatherings. 

More specifically, the United States, as well as many of our major
trading partners including the European Union (EU), Canada, and
Japan, declared the ministerial meeting a success and a reaffirmation
of the WTO.  While at Singapore, the members laid a foundation for an
Information Technology Agreement that would cut tariffs on certain
high-technology products.  The ministers were able to achieve a
consensus on a final declaration that encompassed several contentious
subjects, despite their differences.  In the declaration, the
ministers summarized their progress regarding implementation to date
and reaffirmed their commitments to finish the "built-in agenda" of
ongoing negotiations.  However, most of the work regarding these two
areas took place earlier in committee meetings in Geneva as members
prepared for Singapore.  Finally, the ministers took steps to address
some contentious new issues that were previously outside the scope of
detailed trade negotiations.  These new issues involved (1)
transparency in government procurement, (2) investment policy, (3)
competition (antitrust) policy, (4) trade and the environment, and
(5) trade and labor standards.  After much debate, ministers agreed
to language about all these issues in the declaration; in some cases
they agreed to form WTO working groups to address them. 

Nevertheless, just as important to judging the success of the meeting
were some things that did not happen at Singapore.  Differences on a
variety of contentious issues often seemed to divide the WTO members
along developed/less developed nation lines before the ministerial,
but fears of a stalemate in the talks never materialized.  For
example, besides the new initiatives, implementation of the
Agreements on Textiles and Clothing and on Agriculture were sources
of friction between members before Singapore, but they reached
consensus on language for the ministerial declaration. 


   BACKGROUND
---------------------------------------------------------- Chapter 0:2

The first biannual WTO ministerial meeting took place from December 9
to 13, 1996, in Singapore.  The purpose of the meeting was to
"strengthen the WTO as a forum for negotiation, the continuing
liberalization of trade within a rule-based system, and the
multilateral review and assessment of trade policies," according to
the ministerial declaration.  This meeting of trade ministers was to
be attended by nearly 5,000 delegates, including officials from over
150 countries, intergovernmental organizations, nongovernmental
organizations, and members of the press from around the world. 

The administration believed that this meeting would be an important
test of the WTO's credibility as a forum for continuous consultation,
negotiation, and trade liberalization.  Before this first WTO
meeting, ministers' participation was not routine, and they generally
met only to launch or conclude new rounds of trade negotiations. 
This ministerial-level meeting provided WTO member countries the
first opportunity to take stock of how well they have implemented the
UR agreements so far and to discuss new issues.  The UR agreements --
which resulted from the most comprehensive and far-reaching set of
trade negotiations ever -- generally went into force on January 1,
1995.\2 Implementation of these agreements is complex, and many
commitments are to be phased in over a 10-year period; thus, it will
take years before the results can be fully assessed. 

Prior to the meeting, participants and observers debated over what
would and should happen at Singapore.  In fact, WTO members failed in
their attempt to reach consensus on the text of the declaration in
November, before the ministerial.  As a result, a significant portion
of the ministers' time at Singapore was devoted to debating final
language for the ministerial declaration.  Before the meeting, public
statements from various foreign government officials, business
groups, and nongovernmental organizations voiced a wide range of
interests and expectations for the ministerial meeting.  For example,
Ambassador Charlene Barshefsky, the acting U.S.  Trade Representative
(USTR), viewed this as the first of many "board of directors"
meetings and argued it be "realistic in its aspirations."
Nevertheless, others, such as the European Commission's Vice
President Sir Leon Brittan, were calling for the ministers to launch
a new "round" of trade negotiations.  Also, there were differences
over whether to focus on the existing agreements or on areas of
further liberalization and whether topics like labor standards and
competition policy should be placed on the ministers' agenda. 
Ongoing disputes over members' use of unilateral trade measures,
including U.S.  sanctions related to investment in Cuba, added to
premeeting tensions. 


--------------------
\2 According to the WTO Secretariat, the almost 500 pages of text
comprise 19 agreements, 24 decisions, 8 understandings, and 3
declarations.  There are also approximately 24,000 pages of specific
market access commitments. 


   TRADE LIBERALIZATION
---------------------------------------------------------- Chapter 0:3

Much public attention was focused on a new trade liberalization
initiative, namely an Information Technology Agreement that is
intended to eliminate tariffs on products including semiconductors,
telecommunications and computer equipment, and software products by
the year 2000.\3 This was an international private sector initiative,
advanced by the United States and joined by 27 other countries at
Singapore.  This agreement could boost U.S.  exports and jobs in a
competitive domestic industry that already exports over $90 billion
and employs 1.8 million, according to USTR estimates.  Economic
benefits are to accrue in stages as tariff reductions are phased in
by each signatory.  The agreement provides that subsequent meetings
of the signatories may discuss implementation issues, such as the
classification of goods, incorporating additional products, and
related nontariff barriers. 

Nonetheless, there is still work to be done before this agreement can
enter into force on July 1, 1997, and before any economic gains can
be realized.  Under the terms negotiated in Singapore, a "critical
mass" of countries must sign the agreement for it to become
effective.\4 Since Singapore, these countries have been discussing
technical details concerning the timing of specific tariff cuts
applicable to specific products for each country.  USTR officials
recently told us that they are confident about the countries being
able to meet the April 1, 1997, deadline for completion. 

In addition to the Information Technology Agreement, some progress
toward liberalization was made in other areas.  There was agreement
by some members about tariff cuts in other products, notably
pharmaceuticals.  Also, there was an initiative to help least
developed countries. 


--------------------
\3 In some limited cases, the schedule for tariff cuts is to be
extended until 2005, according to USTR. 

\4 Members representing 90 percent of the world trade in information
technology products must join. 


      ACTION PLAN FOR LEAST
      DEVELOPED COUNTRIES
-------------------------------------------------------- Chapter 0:3.1

The members took steps to address the problems of least developed
countries that are WTO members.  They agreed to a Plan of Action that
proposes giving these countries preferential market access (such as
the Generalized System of Preferences), besides offering them
technical assistance regarding implementation.  However, such actions
by WTO members are voluntary.  The plan also outlines building closer
ties between the WTO and other international organizations, including
the United Nations Conference on Trade and Development (UNCTAD), the
World Bank, and the International Monetary Fund, to help these least
developed countries enhance their trading opportunities. 


   IMPLEMENTATION OF THE URUGUAY
   ROUND AGREEMENTS
---------------------------------------------------------- Chapter 0:4

"Implementation is the functional equivalent of enforcement,"
according to Ambassador Barshefsky.  In their declaration, the
ministers concluded that "implementation thus far has been generally
satisfactory, although some members have expressed dissatisfaction
with certain aspects." Despite this attention in the declaration,
much of the WTO members' "stock taking" took place at earlier
meetings in Geneva rather than in Singapore.  In these committee
meetings, WTO members established procedures, reviewed their
compliance with the many UR agreements, planned future work,
discussed their differences, and issued reports. 

Some WTO members have yet to implement all the commitments created by
the UR agreements.  Accordingly, the ministerial declaration exhorts
members "to complete their domestic legislative process without
further delay." Also, WTO committee reports prepared before
Singapore, including those on market access and customs valuation,
discuss how often members take advantage of waivers allowing them to
delay implementation.  Some members, including the United States, are
concerned about the number of members that have not yet amended their
domestic laws and have exercised their waiver rights with regard to
various agreements, according to USTR officials. 


      NOTIFICATIONS
-------------------------------------------------------- Chapter 0:4.1

The WTO committee reports indicate that a number of members are still
struggling to fulfill their commitments and implement various
agreements.  The UR agreements require each member to submit various
notifications; this information provides the transparency necessary
for the members to monitor each other's progress.  The ministerial
declaration states that "compliance with notification requirements
has not been fully satisfactory." Earlier reports from the Committees
on Technical Barriers to Trade, Subsidies and Countervailing
Measures, Antidumping Practices, Rules of Origin, Import Licensing,
Trade Related Investment Measures (TRIMS), and Safeguards all
recognized delays and/or deficiencies in members' notifications.  A
WTO working group on notifications issued a report and made
recommendations to facilitate members' compliance. 

Some of our past work on state trading enterprises (STE) illustrates
the importance of seemingly mundane notification requirements.\5
While STEs are recognized in the General Agreement on Tariffs and
Trade (GATT) as legitimate trading entities, their activities are
subject to GATT disciplines.  In order to provide some transparency
over STE activities, members must report regularly about their STEs'
structures and functions.  However, as we noted in August 1995,
compliance with this reporting requirement has been poor, and
information about STE activities has been limited.  U.S.  officials
are working within the WTO's working party to develop a modified
questionnaire that would help make STE activities more transparent. 
U.S.  government and agricultural industry officials hope to
negotiate additional disciplines on STEs when agricultural
negotiations resume in 1999.  The importance of STE issues may
increase as countries with historically state-run economies, like
China, Russia, and Ukraine, are considered for WTO membership. 


--------------------
\5 In our work, we define STEs as governmental or nongovernmental
enterprises that are authorized to engage in trade and are owned,
sanctioned, or otherwise supported by the government.  For example,
the Australian government has notified the WTO that the Australian
Wheat Board meets the criteria for being considered an STE.  See
GAO/GGD-95-208 noted in the related GAO products list. 


      AGRICULTURE
-------------------------------------------------------- Chapter 0:4.2

Leading up to Singapore, the WTO Committee on Agriculture studied the
implementation of the UR Agreement on Agriculture, including aspects
needing additional attention or review.  The committee's report
concluded that overall, the review process had been conducted in an
efficient and effective manner.  However, it also recognized that
some instances of apparent noncompliance with commitments had not yet
been resolved.  U.S.  officials were concerned that some countries
were balking at carrying out their commitments or implementing new,
disguised, trade-distorting measures.  At the end of the ministerial,
Ambassador Barshefsky and Deputy Secretary of Agriculture Richard
Rominger stressed that implementation issues were of particular
importance to U.S.  agriculture.  They also stated that the results
of the ministerial will allow the members to attack problems like
import barriers, STEs, export subsidies, and unjustifiable sanitary
and phytosantitary regulations. 


      DISPUTE SETTLEMENT
-------------------------------------------------------- Chapter 0:4.3

When members have particular concerns about other members fulfilling
their WTO commitments, they can use the WTO's dispute settlement
mechanism.  For example, the United States has initiated proceedings
regarding the EU's measures concerning hormones and imports of meat
and meat products.  At Singapore, members reaffirmed the fundamental
importance of this process in fostering the implementation and
application of the UR agreements.  They also noted the role the
mechanism plays in avoiding disputes through procedures that include
consultation between the parties. 


      REVIEW OF REGIONAL TRADE
      AGREEMENTS
-------------------------------------------------------- Chapter 0:4.4

Related to implementation, WTO members took steps, which were
affirmed by the ministers in Singapore, to better address questions
about the integration of regional trade policies with the
multilateral trading system.  In February 1996, the WTO General
Council established a Committee on Regional Trade Agreements that
would examine agreements upon notification by members and would
consider the implications of these agreements.  Over 100 regional
trade agreements and customs unions like the North American Free
Trade Agreement (NAFTA), the Mercado Comï¿½n del Sur (MERCOSUR), and
the Asia-Pacific Economic Cooperation forum (APEC), were established
by early 1996 throughout the world.  Their proliferation has raised
many apprehensions about their relationship with the multilateral
trading system, according to the WTO's 1996 annual report.  For
example, there have been fears that these agreements could create
incompatible obligations or fragment efforts to establish a
rule-based system for trade that would conflict with the principles
of most-favored-nation (MFN) treatment. 


   ONGOING WTO NEGOTIATIONS
---------------------------------------------------------- Chapter 0:5

Trade ministers affirmed the importance of completing the WTO's
ongoing work program, including commitments regarding both future
tariff reductions and planned negotiations.  This program is often
generically referred to as the WTO's "built-in agenda." The
ministers' affirmation of the built-in agenda at Singapore, is
significant -- if undervalued -- according to USTR officials.  USTR
has stated previously that the full and timely implementation of the
built-in agenda is critical to the WTO's credibility.  As such,
confirmation of schedules and other technical details for future
negotiations is a necessary component in assuring that liberalization
may occur. 

Some negotiations in the built-in agenda have been ongoing since the
end of the UR.  U.S.  negotiators sought to take advantage of the
ministerial meeting to build momentum for completing these
negotiations within established deadlines.  Progress in services has
been difficult.  At the end of the UR, four main areas under the
General Agreement on Trade in Services (GATS) were left uncompleted: 
telecommunications, financial services, maritime services, and the
movement of natural persons.\6 GATS set out a timetable for the
completion of these negotiations, but negotiations in the first three
areas had to be extended.  (The negotiations for the movement of
natural persons concluded in 1995.) The WTO ministerial declaration
acknowledged the difficult nature of the negotiations while noting
that results have been below expectations. 


--------------------
\6 The "movement of natural persons" refers to foreigners entering a
country to provide services. 


      TELECOMMUNICATIONS SERVICES
-------------------------------------------------------- Chapter 0:5.1

WTO members recently concluded negotiations for substantial market
opening in basic telecommunications services, taking advantage of the
momentum established during meetings at Singapore, to reach an
agreement on February 15, 1997.  "Basic telecommunications" refers to
voice telephone, data transmission, facsimile, and cellular mobile
telephone services, among others.  Although in April 1996 the WTO
Council on Trade in Services had accepted a final report by the basic
telecommunications negotiating group, the period to submit revised
schedules was delayed, essentially extending the negotiating
timetable.  By the original deadline of April 1996, the United States
was dissatisfied with the tabled offers of key trading partners and
lack of offers from a number of important countries.  However, the
United States successfully obtained an extension of the negotiations
until February 15, 1997, in hopes of developing a "critical mass" of
offers.  On that date, WTO members reached an agreement that should
open up this important sector to global competition.  The results are
expected to replace the tradition of government monopolies on
telecommunications, dramatically reduce the cost of telephone
services, permit greater foreign investment, and promote the adoption
of regulatory policies based on competition. 


      FINANCIAL SERVICES
-------------------------------------------------------- Chapter 0:5.2

WTO members face an upcoming deadline for completing difficult
negotiations on another important service sector.  The WTO financial
services negotiations are currently suspended and they are to resume
in April 1997.  Financial services, including the banking,
securities, and insurance sectors, are often subject to significant
domestic regulation, making the negotiations quite complex. 
Dissatisfied with the commitments offered in the extended financial
services negotiations in mid-1995, the United States committed to
only protect existing investments of financial services providers;
the United States exercised its right to take an MFN exemption with
respect to new and expanded activities in this sector.  As a result,
WTO members agreed to an interim arrangement.  They also agreed that
during a 60-day period beginning November 1, 1997, members will have
the opportunity to modify, improve, or withdraw all or part of their
specific commitments and MFN exemptions under GATS in this sector. 
At Singapore, the ministerial declaration reiterated that WTO members
must significantly improve their commitments with a broader level of
participation to successfully conclude these talks. 


      MARITIME SERVICES
-------------------------------------------------------- Chapter 0:5.3

Negotiations on maritime services after the conclusion of the UR were
unsuccessful and were suspended in June 1996 until the year 2000,
when negotiations for all services sectors are to be reopened.  This
sector has proven very difficult to negotiate because it is organized
in complex ways.  For example, some service providers are STEs, and
some are highly protected with strong domestic lobbies and
long-established labor union practices, according to the WTO
Secretariat.  When suspending the negotiations, participating members
agreed to refrain from applying new measures that would affect trade
in this area during this time (except in certain circumstances).  The
United States has said that other participating members to the
negotiations did not offer "to remove restrictions so as to approach
current U.S.  openness in this area."


      OTHER AREAS IN THE BUILT-IN
      AGENDA
-------------------------------------------------------- Chapter 0:5.4

Over the next several years, other built-in agenda items are to be
implemented through the process of review and negotiation in a number
of key sectors and rules.  For example, the WTO Ministerial
Conference is required to review the implementation of the Agreement
on Preshipment Inspection in 1997.  Also, WTO members must complete a
3-year work plan on harmonizing rules of origin by July 1998.  Other
negotiations will begin in upcoming years.  For example, negotiations
are scheduled to begin in 1998 to broaden and improve the Agreement
on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and
in 1999 to improve and extend the Agreement on Government
Procurement.  Even though there was some discussion in Singapore on
whether to accelerate agricultural reform negotiations, member
countries reaffirmed their intention to begin these negotiations on
schedule in 1999.  USTR officials noted the importance of the WTO
Committee on Agriculture's preparatory work to ensure these
negotiations begin on schedule. 


   EMERGING TRADE ISSUES
---------------------------------------------------------- Chapter 0:6

At Singapore, members debated what the WTO should do regarding what
many observers believe are the next generation of international trade
issues:  (1) transparency in government procurement, (2) investment
policy, (3) competition (antitrust) policy, (4) environmental
measures, and (5) labor standards.  These issues have previously been
outside the scope of detailed trade negotiations and have
traditionally been seen as domestic concerns. 

As tariff and nontariff barriers to trade are reduced, however, these
areas have drawn attention, reflecting a broader concept of what
factors may affect market access opportunities in a global economy. 
For example, although the United States has strict standards for
ethics, accountability, and transparency in government procurement
practices, many countries either lack or do not adequately enforce
domestic laws prohibiting bribery and corruption in their
procurement.  Some observers argue that this inconsistency can put
U.S.  businesses at an economic disadvantage.  Likewise, foreign
investment restrictions can limit a firm's ability to establish a
commercial presence and to conduct business operations, both of which
greatly facilitate U.S.  exports.  Foreign anticompetitive private
business practices, such as price-fixing and market sharing, raise
costs to U.S.  consumers, and government measures can restrict market
access for U.S.  exports.  Finally, some U.S.  interest groups argue
that foreign firms should not gain a comparative advantage by failing
to protect the environment or observe basic labor standards. 

Ministers considered new initiatives involving (1) transparency in
government procurement, (2) investment policy, (3) competition
(antitrust) policy, and (4) labor standards.  Specifically, the
United States forwarded a proposal for the negotiation of an
agreement on transparency in government procurement, and the
ministers agreed to establish a working group that is to study
transparency in government procurement practices.  Ambassador
Barshefsky said that this was a "first step" toward a transparency
agreement.  On the issue of investment and competition policy,
several members, including the EU and Japan, proposed that working
groups be established.  The United States and other members agreed to
support the establishment of working groups in both areas, after
securing agreement that no negotiation would move forward in either
area absent an affirmative action by all the parties.  Finally, the
United States sought the establishment of a working party to begin
examining the relationship between trade and labor standards.  The
ministers did not agree to establish such a working party but instead
affirmed their support for ongoing work on labor issues being
conducted outside of the WTO.  While the initiative on environment is
not new, members also agreed that the WTO Committee on Trade and
Environment, which had been characterized as being "disappointing"
according to some observers, would continue under its existing
mandate. 

Bringing new issues into the WTO framework has been very
controversial.  Some developing countries were fiercely resistant to
discussing these new issues at Singapore, preferring that ministers
focus their attention on how the general implementation of the UR
agreements was progressing.  Some WTO members feared that the debate
over whether to include some of the new issues might create a
"North-South" divide during the ministerial.  However, members
managed to reach a compromise on language in the declaration in each
area. 


      PROCUREMENT
-------------------------------------------------------- Chapter 0:6.1

Prior to Singapore, the United States proposed that the ministers
endorse the negotiation of an agreement on procurement that would
extend disciplines on transparency, openness, and due process in
practices to all WTO members.\7 Ambassador Barshefsky testified, in
September 1996, that under such an arrangement "suppliers from all
WTO members would have equal access to information on procurement,
the procurement process and to bid challenge mechanisms." Some
developing countries were skeptical of this initiative, questioning
its scope and purpose.  Nevertheless, at Singapore, WTO ministers
agreed to establish a working party "to conduct a study on
transparency in government procurement practices .  .  .  and to
develop elements for inclusion in an appropriate agreement."
Following the ministerial, Ambassador Barshefsky said that this WTO
effort would serve to reduce the influence of corruption and create a
fairer business environment.  Other forums that are addressing issues
related to bribery and corruption in international business
transactions include the Organization of American States,
Organization for Economic Cooperation and Development (OECD), and the
World Bank. 


--------------------
\7 The UR produced an Agreement on Government Procurement with broad
coverage that sought to promote transparency and improve access in
government procurement by requiring that countries not discriminate
against foreign or foreign-owned suppliers or otherwise allow
practices that would preclude competitive procurement.  The agreement
built on the 1979 GATT procurement code.  However, the number of
signatories to these agreements has been limited, and broadening
membership, especially to developing countries, has been an
unfulfilled objective. 


      INVESTMENT AND COMPETITION
      POLICY
-------------------------------------------------------- Chapter 0:6.2

Ministers also agreed at Singapore to form WTO working groups to
study investment and competition policy issues.  There was some
resistance to forming these groups by some developing countries,
which argued that investment and competition policy should be
addressed as part of a scheduled review of the TRIMS agreement in the
year 2000.  However, the EU and Japan were strong advocates of
creating working groups on both issues in the WTO.  The
administration stated the United States would support work programs
that were modest in scope and educational in nature.  Furthermore,
the ministerial declaration states that work undertaken by these
groups will not prejudge whether any negotiations will be initiated
in the future. 

On investment, the United States was concerned that any WTO work on
investment not undermine negotiations currently underway in the OECD
on a multilateral investment agreement (MAI).  The MAI is intended to
include high standards for foreign direct investment and is scheduled
for completion in May 1997.  Investment issues are also being
addressed in other trade forums, including APEC and the Free Trade
Area of the Americas (FTAA). 

On competition, the United States was concerned that any working
group not focus on antidumping rules, but instead on issues
concerning cartels and other private anticompetitive practices.  Some
WTO members, including Japan, Korea, and Hong Kong, had proposed that
any working group consider the relationship of trade remedies,
especially antidumping measures, and competition.  The ministerial
declaration states that the working group will study "issues raised
by Members relating to the interaction between trade and competition
policy, including anti-competitive practices, in order to identify
areas that may merit further consideration in the WTO framework."
Following the ministerial, the EU and USTR issued a joint statement
to clarify this language, which emphasized that the working group
should not cover issues already dealt with in the WTO, including
antidumping measures.  However, members did not reach a clear
consensus at Singapore on the future scope of the working group's
mission, according to one WTO official.  Some observers expect the
debate over the terms of reference for this working group to continue
until the next scheduled ministerial in 1998.  Some WTO members,
including the United States, are discussing and studying competition
policy issues in several other forums including APEC, FTAA, NAFTA,
OECD, and UNCTAD. 


      ENVIRONMENT
-------------------------------------------------------- Chapter 0:6.3

At Marrakesh in 1994, the WTO ministers decided to establish the
Committee on Trade and Environment to identify the relationship
between trade and environmental measures and make appropriate
recommendations within the context of open and equitable trade.  Some
WTO members believe that enforcing certain environmental policies can
be a disguise for imposing protectionist trade barriers.  The United
States had advocated the committee's establishment as a way to help
ensure that multilateral trade and environmental policies are
mutually supportive.  During its first 2 years of operation, the
committee has discussed several complex issues, including (1) the
relationship between trade measures in multilateral environmental
agreements (MEA) and the WTO; (2) the question of whether ecolabeling
programs\8 need greater transparency; and (3) the effect of
environmental measures on market access, particularly in relation to
developing countries.  The committee did not have recommendations for
the ministers to consider at Singapore, because of a lack of
consensus on the major issues discussed. 

The work of the committee had received mixed reviews from members and
other interested parties.  For example, the United States found parts
of the committee's final report useful, such as its recognition of
the importance of transparency in ecolabeling and its emphasis on
coordinating national trade and environmental policies, but U.S. 
officials stated that the committee has not done a great deal to
advance the understanding of environmental concerns.  On the other
hand, environmental groups have been highly critical of the lack of
progress made in the committee; as a result, some groups have called
for its dissolution.  Specifically, they were displeased with the
report's statements that recognized that WTO members have the right
to challenge MEA trade provisions within the WTO dispute settlement
framework.  Nevertheless, the committee urged parties to settle these
disputes within the MEA process and recognized the important role
that trade measures have played in some MEAs and may play in the
future.  Similarly, the EU voiced concerns over the committee's lack
of concrete results thus far. 

Because the committee did not have any major recommendations for
ministers at Singapore, the ministerial declaration directed the
committee to continue its work under its existing terms of reference. 
USTR plans to work with the U.S.  Trade and Environment Policy
Advisory Committee, among others, to develop the U.S.  agenda for the
next round of discussions.  The WTO committee's future work,
particularly with respect to ecolabeling issues, could take into
account the work of other multilateral forums, such as the United
Nations and OECD, according to its report. 


--------------------
\8 Ecolabeling programs, most of which are voluntary, allow
businesses to obtain a label indicating a product is environmentally
friendly or safe. 


      LABOR STANDARDS
-------------------------------------------------------- Chapter 0:6.4

Discussions about the relationship between trade and international
labor standards proved to be very contentious at Singapore.  The UR
implementing legislation\9 directed that the President seek the
establishment of a working party, which would examine the
relationship between trade and internationally recognized worker
rights.\10 In order to build consensus for WTO work in the face of
strong opposition, the administration proposed a modest work program
that would not entail (1) an agreement on minimum wages, (2) changes
that would take away the comparative advantage of low-wage producers,
or (3) the use of protectionist measures to enforce labor standards. 
However, because many WTO member countries in both the developed and
developing world feared that the creation of a work program in the
WTO would lead to mandated international labor standards that could
inhibit their economic development or serve as protectionist
barriers, they opposed having a trade-labor standards link through
the WTO. 

USTR was not successful in having a labor standards working party
established at Singapore, but members did renew their commitment to
the observance of internationally recognized core labor standards in
the ministerial declaration.  Members reached a compromise, and the
declaration recognized that the International Labor Organization
(ILO)\11 is the competent body to set and deal with internationally
recognized core labor standards.  The declaration also stated that
the WTO and ILO Secretariats will continue their existing
collaboration.  In statements following the ministerial, U.S.  and EU
officials argued that the declaration is a breakthrough, signaling an
opportunity to work toward further discussions about labor issues in
the WTO.  However, other members have rejected the idea that such an
opportunity was created.  Future progress on labor issues may emerge
from work ILO undertakes:  since Singapore, the ILO Director-General
announced his intention to intensify ILO's work aimed at protecting
basic worker rights.  Labor issues are also being discussed in the
OECD and under various NAFTA-related organizations. 


--------------------
\9 Section 131 of Public Law 103-465, Dec.  8, 1994. 

\10 Congress provided guidance for U.S.  negotiators in section 131
of the UR Agreements Act by specific reference to section 502 (a)(4)
of the Trade Act of 1974, as amended by section 503 of Public Law
98-573, Oct.  30, 1984.  This legislation defined internationally
recognized worker rights to include (1) the right of association; (2)
the right to organize and bargain collectively; (3) a prohibition on
the use of any form of forced or compulsory labor; (4) a minimum age
for the employment of children; and (5) acceptable conditions of work
with respect to minimum wages, hours of work, and occupational safety
and health. 

\11 ILO is a specialized agency of the United Nations that
traditionally has addressed labor issues.  Created in 1919, ILO has a
mandate to improve working conditions and living standards for
workers throughout the world. 


-------------------------------------------------------- Chapter 0:6.5

Thank you Mr.  Chairman, this concludes my prepared remarks.  I will
be happy to answer any question you or Members of the Subcommittee
may have. 

RELATED GAO PRODUCTS

International Trade:  The World Trade Organization's Ministerial
Meeting in Singapore (GAO/T-NSIAD-96-243, Sept.  27, 1996). 

International Trade:  Implementation Issues Concerning the World
Trade Organization (GAO/T-NSIAD-96-122, Mar.  13, 1996). 

State Trading Enterprises:  Compliance With the General Agreement on
Tariffs and Trade (GAO/GGD-95-208, Aug.  30, 1995). 

International Trade:  Long-Term Viability of U.S.-European Union
Aircraft Agreement Uncertain (GAO/GGD-95-45, Dec.  19, 1994). 

International Trade:  Impact of the Uruguay Round Agreement on the
Export Enhancement Program (GAO/GGD-94-180BR, Aug.  5, 1994). 

The General Agreement on Tariffs and Trade:  Uruguay Round Final Act
Should Produce Overall U.S.  Economic Gains (GAO/GGD-94-83A&B, July
29, 1994). 

General Agreement on Tariffs and Trade:  Agriculture Department's
Projected Benefits Are Subject to Some Uncertainty
(GAO/GGD/RCED-94-272, July 22, 1994). 

International Trade:  Efforts to Open Foreign Procurement Markets
(GAO/T-GGD-94-155, May 19, 1994). 

International Trade:  Observations on Issues in the Uruguay Round
Agreement (GAO/T-GGD-94-98, Feb.  22, 1994). 

*** End of document. ***