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EC and US Agree to End Eight-Year Banana War; Ecuador Threatens WTO Action

On 11 April, the US Government and the European Commission reached an agreement to resolve their long-standing dispute over bananas. Under the accord, the EC will abandon its contentious first come - first served (FCFS) import system of bananas in favour of a new regime that will provide a transition to a tariff-only system by 2006. Washington argued that the FCFS favoured banana growers in former European colonies over Latin American producers and US marketing companies such as Chiquita Brands International. Until 2006, bananas will be imported into the EU market through import licenses distributed on the basis of past trade as pushed for previously by the US (see BRIDGES Weekly, 10 April 2001). In return, the US will suspend sanctions it imposed on US$191 million worth of EU exports following a WTO ruling that declared the EC banana import policy in violation with world trade rules.

EC Trade Commissioner Pascal Lamy, in a declaration following the conclusion of the agreement, qualified the deal as a "balanced compromise between the interests of the diverse parties involved," but cautioned the agreement must now be endorsed by the EU Council of Ministers and the European Parliament.

The new system is scheduled to take effect on 1 July 2001, at which point the US will also suspend trade sanctions against the EU. The US will lift sanctions definitively once the accord is fully in place.

Under the agreement, EU import licenses will be allotted based on the way they were distributed during a 'historical reference period' of 1994-1996. The European Commission will also initiate the necessary procedures to propose to the EU Council of Ministers an adjustment to expand access for Latin American bananas and to secure a market share for a specific quantity of bananas of ACP (African, Caribbean, and Pacific) origin.

According to Pascal Lamy, the new scheme still guarantees ACP producers a share of the EU market, but would not contravene WTO rules. A special quota of 750 000 metric tons of ACP produced bananas -- a slightly smaller amount than the 850 000 metric tons proposed previously -- will still be reserved the right to enter the EU market free of duty.

Since quotas are being treated as a transitional measure, the EC will begin negotiations with main suppliers as mandated by WTO rules (Article XXVIII GATT) in time to introduce a flat tariff system ("tariff-only") in 2006. The Commission has also agreed to table the necessary proposals to the EU Council of Ministers and the European Parliament in order to fully implement the agreement as soon as possible.

German Economics Minister Werner Muller said the agreement, and the lifting of the sanctions, were positive signs for conciliation in EU-US relations. "This could have a positive influence on attempts to launch a new round of global trade liberalisation talks this year," he added.

For its part, Chiquita said it was pleased by the agreement, which it expected would lead to a "partial recovery" of the company's market opportunities in the 15-Nation EU. Chiquita, which currently faces bankruptcy, recently sued the European Commission for US$525 million in damages it said it had suffered due to EU banana restrictions. The historical reference period retained in the new proposal - 1994-1996 - is seen as benefiting Chiquita, which posted strong sales to Europe during that period.

Ecuador unhappy with new arrangement

While several small Caribbean growers and most Latin American officials and producers have pronounced themselves in favour of the new agreement, both Ecuador and Chiquita's rival Dole are fiercely opposed to the proposal.

Ecuador, the world's largest banana exporter, said on Tuesday 17 April that the EC-US plan contravened global trade rules, and Ecuadorian officials threatened to take the dispute back to the WTO if the EC didn't amend its proposals. In a statement from its Brussels mission to the EU, Ecuador accused the EU and the US of reaching the agreement behind its back and said aspects of the pact were in flagrant violation of WTO rules. "It is disconcerting...that the US and the EU...believe that their will can prevail over the principles of the multilateral trading system," the statement said.

In a letter to EC Trade Commissioner Pascal Lamy and Farm Commissioner Franz Fischler, Ecuador's Ambassador to the EU Alfredo Pinoargote said Ecuador would give the EU a chance to "rectify" its proposal. If it failed to do so, Ecuador would have no alternative but to ask for WTO consultations with the EU - the first stage in the global trade body's dispute settlement procedure, Pinoargote said.

Ecuador -- the world's largest exporter of bananas -- and Dole both backed "first come, first served" because they saw a chance to expand their exports to Europe. In a statement issued last week, Dole's chairman and chief executive David Murdock said the FCFS system would have been "the most pro free trade, open competitive system possible." Concerning the new deal, the statement claimed that "this action gives one company, Chiquita Brands International Inc., a dominant, fixed market share of the European Union's closed quota market, and continues to allocate licenses to protectionist European Union traders."

"To be legally valid, any agreement must win Ecuador's approval," Ecuador said Tuesday. It particularly faulted the new proposal for refusing access to the European market for new exporters from developing countries and advocated a return to the FCFS system. If that isn't possible, Ecuador Agriculture Minister Galo Plaza Pallares said Monday, Ecuador wants the reference period moved to 1995-1997, when the Andean Community exported more bananas to Europe.

"Ecuador threatens new WTO move on bananas," REUTERS 17 April 2001; "Ecuador To Seek Adjustments To US-EU Banana Accord," DOW JONES 16 April 2001; "Dole Blasts Accord to End Banana Dispute," REUTERS 13 April 2001; "Sanctions to go as EU, U.S. end banana row," REUTERS 11 April 2001; "Latin nations mostly praise new EU-US banana deal," ATP 11 April 2001; "Caribbean growers welcome end to EU-US banana war," REUTERS 11 April 2001; "La Commission et l'Administration Américaine d'accord sur une solution au conflit de la banane," DECLARATION DE PASCAL LAMY 11 April 2001; "EU, US reach agreement to resolve long-standing dispute on bananas," EC PRESS RELEASE 11 April 2001; "EU-US banana dispute over? - Ecuador under pressure to challenge new deal," EURO STEP 13 April 2001.

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Hemispheric Leaders Agree to Americas Free Trade by 2005

At the Third Summit of the Americas held from 20-22 April in Quebec City, Canada, heads of state representing 34 North American, South American and Caribbean countries reaffirmed their political commitment to strengthening hemispheric relations by approving the finalisation of a Free Trade Area of the Americas (FTAA) by January 2005.

The meeting was accompanied by widespread street protests and parallel civil society events (see related story, this issue) that highlighted a host of concerns from many sectors over the impact of unfettered regional trade on the environment, human rights, and social issues.

For their part, leaders drew tentative linkages between freer trade and social concerns. The declaration that emerged from the Summit -- the Declaration of Quebec City -- states that "free trade...will promote regional prosperity, thus enabling the raising of the standard of living, the improvement of working conditions of people in the Americas and better protection of the environment."

Mexican President Vicente Fox said that unless poverty and inequality were reduced, democracy could not be strengthened. Echoing Fox's statement, US President George W. Bush said that trade liberalisation was the "best weapon against tyranny and poverty". Owen Arthur, Prime Minister of Barbados, said poverty had undermined his people's confidence in the future. "They tend to see on the dark side of globalisation and trade liberalisation," he said. "They dread the coming of a 'new world' dominated by an impersonal technology and an even more impersonal market."

Building upon the results of a 7 April meeting of trade ministers from the Americas in Buenos Aires (see BRIDGES Weekly), leaders agreed that the design of the FTAA should take into account differences in the size and levels of development of participating economies, though they did not specify how this should be accomplished. The Declaration further states that the FTAA should be "balanced, comprehensive and consistent with WTO rules and disciplines and should constitute a single undertaking."

In response to transparency concerns, the leaders noted in the Declaration that they would make public the preliminary draft of the FTAA Agreement, though no date was specified.

On environment, the Summit Declaration built upon the results of the Montreal Environmental Ministers meeting of the Americas, where discussions between representatives of the environment authorities across the hemisphere focused on environmental management; environment and health; and biodiversity protection across the hemisphere. Echoing this initiative, the leaders committed their governments to environmental protection and sustainable use of natural resources "with a view to ensuring a balance among economic development, social development and the protection of the environment".

But while leaders stated that their goal was to achieve sustainable development throughout the hemisphere, no explicit link was made between the environment or sustainable development and the FTAA itself. Existing sub-regional accords in the Americas promote sustainable development in different ways. For example, the North American Free Trade Agreement (NAFTA) between Canada, the US and Mexico contains side agreements on environment and labour that aim to promote these concerns in the context of the trade accord, and the Andean Community has a council of Environmental Authorities which is taking the lead on biosafety and intellectual property rights issues in the sub-region.

A Democracy connection

Government leaders also discussed the linkage between trade and democracy in the context of the forthcoming hemispheric trade accord. The Declaration contains a clause stressing that having a democratic government is a condition for participation in the Summit of the Americas process. Officials indicated that this would also apply to the FTAA, with the proviso that such efforts go hand-in-hand with increases in financial support for democracy through the Organisation of American States. The Southern Cone Common Market (Mercosur) -- comprised of Argentina, Brazil, Paraguay and Uruguay -- contains a democracy clause excluding any Mercosur member from the trade grouping should it fail to meet certain democratic norms.

estment provisions figure in FTAA text

A draft FTAA text on investment leaked to the public on 19 April indicates that the forthcoming trade agreement may contain strong investor-rights language. Although the text appears entirely in brackets -- denoting specific language yet to be finalised -- it confirms many civil society groups' fears that the FTAA investment provisions will closely resemble those found in NAFTA's Chapter 11. NAFTA's investor-state Chapter has been used in several instances by foreign investors to challenge domestic regulation in the three NAFTA parties, including environmental regulation (see BRIDGES Weekly, 20 February 2001).

Concerns that a finalised FTAA will generate a similar result have led many non-governmental organisations within the region to demand that governments rethink the logic behind the investment provision. According to Canada-based International Institute for Sustainable Development (IISD) Senior Advisor Aaron Cosbey, "Certainly we strive for increased investment and economic growth, but we also want environmental integrity, human health and safety and scores of other non-economic goals. The problem with the Chapter 11 cases to date is the [NAFTA] tribunals have been unable to find that kind of balance. They've promoted increased investment, but with terrible consequences for the environment."

Governments plan to start talks on removing regional trade barriers in May next year and to conclude an FTAA agreement by January 2005. The accord would come into force by the end of that year. The free trade area would be the world's largest trade grouping, with 800m people and a third of world economic output. The next Americas Summit will take place in Argentina.

"FTAA Investment Text Includes Proposal For Investor-State Disputes," INSIDE US TRADE, 20 April 2001; "Leaked FTAA Investment Chapter Cause For Concern," IISD PRESS RELEASE, 20 April 2001; "Western hemisphere leaders agree to free trade deal," FINANCIAL TIMES, 22 April 2001; ICTSD Internal Files.

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UNCTAD Report Warns on Global Economic Slowdown

In its new Trade and Development Report, released 24 April, the United Nations Conference on Trade and Development (UNCTAD) raises awareness of the implications of a global economic slowdown and calls for systemic reform of the Bretton Woods institutions (The International Monetary Fund and the World Bank).

The report begins by emphasising that the 2001 global economy is less stable than that of 2000. The organisation points to the US economy as an indicator of what the future may hold and sees slim prospects for continued global economic growth. UNCTAD states that the prospects for the US economy should be a worldwide concern, as the country had a "pivotal role in bolstering global demand in recent years." Because of this, and due also the increasing integration of the global economy, "real and financial shocks are transmitted much more rapidly across regions, countries and sectors. At the same time, because of the intertwining of finance and production, such shocks can have unexpected consequences, as has been demonstrated by the financial crises which began in Asia in 1997."

UNCTAD does not foresee either of the other G-3 economies (Japan and the EU) taking on the United States' global economic responsibilities, nor boosting global demand. UNCTAD notes that the effects of the US economic slowdown will vary in different regions of the developing world. According to the report, those economies that rely heavily on exporting to the US, such as East Asia, China, and Mexico, will experience the greatest difficulties, particularly terms-of-trade losses and declining export earnings.

The report targets excessive financial liberalisation for "creating a world of systemic instability and recurrent crises". UNCTAD recommends that an effective reform of the Bretton Woods arrangements "should seek to improve, not eliminate, counter-cyclical and emergency financing for trade and other current transactions."

The Trade and Development Report promotes proposals for new international mechanisms designed to regulate and stabilise international capital flows. It discourages the types of reforms that have in past sought to establish increasing conditionality as a way of strengthening domestic financial systems in debtor countries. UNCTAD believes that this line of reform lacks the "prospect of fundamental change in policies and practices in the creditor countries", and pushes instead for improved transparency and regulation of currently unregulated cross-border financial operations.

The UNCTAD report calls on developing countries to lead the way in promoting the reform process. Reform will depend on developing countries' willingness to organise their efforts around common objectives, it says, and on "acceptance by developed countries that accommodating these objectives will be an essential part of building a more inclusive system of global economic governance."

For information on how to obtain a copy of the Trade and Development Report 2001, visit UNCTAD's website.

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Banana Dispute Resolved As EU-Ecuador Reach Agreement

The EU and Ecuador on 30 April announced they had reached an agreement to resolve the impasse over the EU's proposed banana import regime, bringing an end to the longstanding dispute over bananas in the WTO.

Welcoming the agreement, Ecuadorian Foreign Minister Heinz Moeller, European Trade Commissioner Pascal Lamy, and European Commissioner for Agriculture Franz Fischler said in a joint statement, "This is a decisive step to put this saga to rest. It is a landmark result in that the European Commission and Ecuador, a developing country and the single largest exporter of bananas, have achieved this satisfactory outcome."

In a milestone development last month, the EC and the US resolved their longstanding differences concerning US companies' access to the European banana market with the introduction of a transitional 'historical reference' based import licensing scheme before a tariff-only system is introduced in 2006. (see BRIDGES Weekly, 24 April 2001).

Ecuador was initially unhappy with the EC-US deal, citing concerns about decreasing European market shares for its producers and threatening to take the dispute back to the WTO if the EC did not change certain aspects of the import licensing system. But in discussions between the two parties last week, Ecuador said it sought assurances that its operators would be able to obtain import licenses under the EC system's "newcomer" category.

The EC - Ecuador agreement, contained in an 'Understanding' (available here), provides Ecuadorian producers with a sizeable part of the 17 percent of the market reserved for newcomers. In return, the DSB will eventually withdraw the authorisation Ecuador has to impose trade sanctions against the EC. Quito will also lift its opposition to a WTO waiver requested by the EC to implement a preferential tariff quota for African, Caribbean and Pacific (ACP) countries signatory to the Cotonou preferential trade arrangement. Ecuador has also engaged itself to work actively to secure acceptance of a second EC request for the necessary WTO authorisation.

For their part, Caribbean countries generally welcomed the EC-US agreement, but voiced concern that the transition period to a flat tariff system in 2006 is too short in order for them to complete the restructuring of their banana-export based economies.

"EU banana deal with Ecuador", FINANCIAL TIMES 30 April 2001; "EU and Ecuador reach agreement to resolve banana dispute", EC PRESS RELEASE 30 April 2001; EC-Ecuador Understanding on Bananas 30 April 2001; "Mixed Caribbean Views on EU-U.S Banana Agreement", EFE/COMTEX 22 April 2001; "Caribbean producers applaud 'political will' of EU, USA to end banana dispute", FINANCIAL TIMES 22 April 2001.

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G-7 Optimism, G-24 Concern At Washington Meetings

Meeting in Washington, DC on 28 April, Finance Ministers and Central Bank Governors from the G-7 countries -- France, Canada, UK, US, Italy, Germany, Japan and the EU -- discussed, inter alia, recent developments in the world economy, in particular the implications of slowing global economic growth. In their communiqué, however, the ministers were optimistic that an economic slowdown would be manageable and were encouraged by the growth prospects that would follow from vigilant implementation of sound macro-economic management, structural reform and international cooperation. The G-7 affirmed its commitment to free trade as an "important driver of economic growth" and pledged its support of "efforts to launch a new WTO round this year." The group lauded efforts undertaken by other industrialised countries to improve market access conditions for developing country exports in order to facilitate their entry into the world economy.

In a parallel gathering, Finance Ministers from the G-24 -- a group of prominent developing countries -- also met in Washington to discuss the position of developing countries in the global economy. Offering quite a different appraisal than their G-7 counterparts, the G-24 ministers accused industrialised countries of protectionism, citing high levels of subsidised agriculture, lowering levels of aggregate aid flows, and a concentration of foreign direct investment (FDI) in a small number of developing countries. Moreover, with developed country capital markets becoming increasingly risk averse, the group said that reduced FDI to the developing world could be expected. The group also expressed collective concern that a slowdown in the global economy would hurt developing country exports "against the backdrop of weakening demand in advanced economies and a secular decline in non-fuel commodity prices."

"G7 Signals Commitment To Global Free Trade", GUARDIAN, 1 May 2001; "G24 Accuses First World Of Protectionism", 1 May 2001; "Verbatim Text Of G7 Communique", DOW JONES, 29 April 2001.

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US-Brazil War Of Words Over Pharmaceuticals and Intellectual Property

An ongoing Brazil-US trade dispute at the WTO over Brazil's intellectual property rights regime intensified on 30 April after the release of the US Trade Representative's (USTR) annual Section 301 Report - a compilation of the USTR's enforcement priorities. In its report, the USTR reiterated its concern over Article 68 of Brazil's Industrial Property Law, a pending measure that imposes "local working", i.e. local production, of a patented invention as a condition for enjoying exclusive patent rights over it. The report called the provision "a protectionist measure intended to create jobs for Brazilian nationals."

Brazilian authorities maintain that Article 68 is an integral component of Brazil's comprehensive anti-HIV/AIDS strategy, considered by many as a model programme among developing countries (see BRIDGES Weekly, 24 April 2001). The law, once enabled, would require patented pharmaceuticals used in the treatment of people living with HIV/AIDS to be manufactured locally. Undoing the law, they argue, would jeopardise the future success of Brazil's attempt to combat the spread of the disease.

For its part, US Trade Representative Robert Zoellick has said that the US challenge is not meant as an attack on Brazilian public health policy, but rather to ensure that the rights of all US patent holders -- not simply pharmaceutical producers -- are not violated. According to Zoellick, by conditioning the benefit of exclusive patent rights on local production, Brazil's Article 68 discriminates against US patent holders with production capacity outside of Brazil and therefore violates Article 27.1 of the WTO's Agreement on Trade Related-Aspects of Intellectual Property Rights (TRIPs).

As for the treatment of HIV/AIDS, the Section 301 report states that, "should Brazil choose to compulsory license anti-retroviral AIDS drugs, it could do so under Article 71 of its patent law, which authorises compulsory licensing to address a national health emergency, consistent with TRIPs, and which the US is not challenging." Compulsory licensing is a WTO-compatible measure whereby governments can permit the domestic use of a patent without the consent of the patent holder in certain cases.

Brazil upbraids UNAIDS

At a recent UN conference, Dr. Paulo Teixeira, Director General of Brazil's anti-HIV/AIDS programme, criticised UNAIDS, the UN Agency responsible for coordinating the fight against the virus, saying that not enough emphasis is placed on strategies to improve domestic access to antiretroviral HIV/AIDS medications. According to Teixiera, UNAIDS does not go far enough in specifying the types of treatment needed to address the HIV pandemic and instead chooses to emphasise policies such as disease prevention, a policy consistent with the USTR Section 301 report.

Of the Section 301 report, Teixiera said he was "very, very surprised" the Bush Administration was taking such a hard line with Brazil and added that in leaving the global AIDS strategy to the USTR, "we are lost on this issue."

Brazil challenges US patents code

In what many consider a retaliation against the US case against Article 68, on 31 January the Brazilian government requested consultations with the US over aspects of the US Patents Code, which Brazil believes violates the WTO Agreement on Trade Related Investment Measures (TRIMS), TRIPs and Articles III and XI of GATT 1994 (see BRIDGES Weekly, 6 February 2001).

"Brazil Defends Policy On Anti-AIDS Drugs," AFP, 2 May 2001; "Brazil Slams UN, US For Short Sighted AIDS Policies," 2 May 2001; "US To Crack Down On Intellectual Property Rights," REUTERS, 30 April 2001; "USTR Zoellick: US Won't Hinder Brazil's AIDS Program," DOW JONES, 7 May 2001.

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UN Conference Mandates 10-Year Programme For LDCs

The third UN Conference on the Least Developed Countries (LDC-III), held in Brussels 14-20 May 2001, adopted in closing a 10-year Programme of Action aimed at bringing the poorest countries into the economic mainstream and breaking a cycle of deepening poverty. A new aid and trade partnership was agreed among LDCs and developed countries in which wealthy countries would increase their efforts to help the poorest, while the poor countries would act to strengthen their governance and improve the climate for investment.

In the Conference's Declaration and Programme of Action, signing countries pledged, inter alia, to: lower trade barriers to LDC exports; reduce the debt burden through quick and effective implementation of the enhanced Heavily Indebted Poor Countries (HIPC) initiative; cancel outstanding official bilateral debt and debt relief to post-conflict countries within the flexibility provided under the HIPC framework; and reverse declining trends of official development assistance (ODA) while expeditiously meeting the targets of 0.15 per cent or 0.20 per cent of GDP as ODA to LDCs. Both the Declaration and the Programme of Action are supportive of the multilateral trading system and the WTO as means of advancing these pledges or 'deliverables', reflected also in the LDCs' own commitment to "seizing the opportunity of the Fourth WTO Ministerial meeting in Doha in November 2001, to advance the development dimension of trade, in particular for the development of LDCs" (see Draft Declaration at: Developed country commitments to provide support to infrastructure development for energy resources and promise to establish a revolving fund for natural gas resources management are also mentioned as 'deliverables' by the United Nations in its final meeting and round-up document (see United Nations, DEV/BRU/24, 20 May 2001).

UN officials claimed success in promoting a host of already-existing initiatives directly through the momentum of the LDC-III conference. This included the EU's 'Everything But Arms' (EBA) Initiative, which allows duty-free access to its market for virtually all products from LDCs, and an agreement by the Organisation for Economic Cooperation and Development (OECD) to make less aid conditional on recipients buying products from donor countries. More recently, Commissioner Lamy has committed the EC to pushing forward a multilateral initiative to forego the use of anti-dumping instruments vis-à-vis LDCs. In addition, the EC is currently pursuing fast-track accession to the WTO for LDCs: a common understanding among Quad countries (US, EC, Canada, and Japan) was reached prior to LDC-III on the core elements of fast-track accession.

According to a recent UNCTAD study (Duty and Quota Free Market Access for LDCs: An analysis of Quad initiatives, May 2001; see Resources section, this issues), significant market access was already provided by the EU prior to its EBA Initiative, with less than 3 per cent of LDCs' exports facing a tariff barrier, compared to tariff barriers from Canada, Japan and the US that amount to up to 50 per cent of the total value of LDC exports. The study concludes that, if these other Quad countries followed the EU lead, "LDC exports will increase by a moderate amount".

Critics commented that measures adopted by the LDC-III conference in the areas of trade, aid and debt were in fact insufficient to meet the UN objective of halving poverty by 2015, as agreed at previous UN summits. David Earnshaw, of OXFAM UK said, "the results were very meagre and disappointing. Almost everything announced last week was there before".

Traditional Generalised Systems of Preferences (GSP) schemes such as the EBA are thought, in general, to suffer from a number of common deficiencies. These include: the benefits of privileged market access that are traditionally concentrated in only a few countries and products; GSP schemes suffer from complex procedural requirements with respect to rules of origin, quotas and ceilings; and there are often mismatches between the exports of beneficiaries and the coverage of preferences, due to the exclusion of many sensitive products (i.e., products from agriculture, processed food and textiles and clothing sectors). In assessing the performance of GSPs over the period 1976-1996 with regard to the Quad countries, recent UN research shows that the average utilisation ratio of GSPs remained at the low range of 50-55 percent in the 1990s, and that GSP imports from LDC beneficiaries amounted to less than 2 percent of total GSP imports from all beneficiaries in 1996.

In terms of institutional and financial arrangements to support the outcome of LDC-III, some countries announced contributions to a new Integrated Framework for trade-related technical assistance to LDCs. A World Trade University was launched, devoted primarily to assisting developing countries in training their entrepreneurs and policy makers. Twenty-eight bilateral investment treaties were signed by nine LDCs, paving the way for increased foreign direct investment. The Programme of Action also calls for several trust funds to be established to improve food safety and foreign investment, as well as a $US 10 billion global fund to combat AIDS and other diseases.

"U.N. meeting backs ambitious plan for poor nations," World Trade News 21 may 2001; "Positive Gains seen for LDCs if QUAD implements full quota- and duty-free market access," UNCTAD MEDIA SUMMARY, 17 May 2001. "International Economy: Progress for poor hard to spot at UN conference," Financial Times 21 May 2001. "EU acts to integrate Least Developed Countries into world trading system," EU Press release 17 May 2001. Kiichiro Fukasaku (2000) "Special and Differential Treatment for Developing Countries: Does it Help Those Who Help Themselves?", Working Papers No. 197, United Nations University, World Institute for Development Economics Research, Helsinki.

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New World Trade University Launched

A new 'World Trade University' was launched at the third UN Conference on Least Developed Countries (LDC III) last week (see related story, this issue). The institute is designed to foster a broader understanding of the multilateral trading system by catering to the training needs of entrepreneurs and policy-makers from least developed, developing and transition economies in an affordable, accessible and adaptable way. The University will be based in Toronto, with campuses in Africa and Asia. WTO Director-General Mike Moore emphasised the important role it would play in capacity-building throughout the world.

"New World trade university launched at UN conference on the world's poorest states," UN NEWS SERVICE, 18 May 2001.

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Membership Increases In Africa's Overlapping Quilt Of Economic Blocks

The 20 member states of the Common Market for Eastern and Southern Africa (COMESA) met on 17-18 May in Mauritius for their first summit since the establishment of the Free Trade Area (FTA) in October 2000, to discuss moves toward a common market and an eventual monetary union in east and southern Africa (see BRIDGES Weekly, 31 October 2000). At the conclusion of the summit, Secretary General Erastus Mwencha announced that at least three more states would join the FTA by the end of 2001, thereby moving one step closer to establishing the customs union intended to follow the FTA.

COMESA members urged to encourage free trade

Mwencha did not name the states set to join the FTA, but said that the trading zone will include at least 12 nations by the end of the year. The news signals progress in one of the three principal areas identified as challenges for COMESA in Mwencha's report to the sixth summit, namely to attract more countries to the COMESA FTA. The other two challenges are: (i) to make the FTA function more effectively so that traders and governments are drawn to its viability, and (ii) to move members of the FTA to a customs union. The meeting's draft final statement urges member states to join the FTA "as soon as possible", reiterating the goal of establishing a customs union by 2004 -- the first major step towards a common market for east and southern Africa and monetary union in 2025. The calls for a customs union were also echoed by Egyptian President Hosni Mubarak who predicted that "the realisation of free trade among our countries will ultimately benefit all of our people".

In a bid to protect member states' interests, the statement furthermore calls on the COMESA to adopt a unified stand over issues to be discussed during the upcoming WTO Ministerial Conference in Doha, Qatar. The draft statement also encourages members to implement the schedule on removing non-customs barriers hindering the movement of trade between COMESA members and the outside world. In addition, it exhorts floating proposals to enhance investments in the private sector and recommends the establishment of a regional investment agency as a nucleus for enhancing inter-COMESA investments.

In terms of implementation of the FTA, Mwencha's report recommends that the COMESA secretariat deal with issues of rules of origin, issuance of certificates of origin, unfair trading practices and accusations of dumping. The report states that a proposal is being forged for development of a regional competition law and policy to address anti-competitive practices. Member states are urged in the report to participate in establishing a special fund for cooperation, compensation and development for tackling special problems arising from the regional integration process, including under-developed product sectors, balance of payment difficulties, and increased macroeconomic spending.

FAO calls for greater emphasis on food security

FAO Director-General Jacques Diouf called on the members of the African trade bloc to "give fully-fledged priority to food security in national policies". "We need to make sure in the priorities and policies of COMESA countries the problem of food security will be a prominent element," he said. He added that food insecurity affects a higher proportion of the population in Africa than that of any other continent. The FAO has set a target of halving the number of under-nourished people in the world by 2015.

With a recent increase in membership from the accession of Egypt, Kenya, Malawi, Sudan, Zambia, Zimbabwe, Djibouti, Madagascar and Mauritius, a total population of the around 380 million, and intra-regional trade among members totalling USD 2.4 billion, COMESA is classed among the big, multipurpose groups. It is thought that the complete cancellation of customs fees on imports and exports within COMESA would increase the volume of commercial exchange and contribute to meeting the COMESA's stated target of USD 4 billion volume of trade. Other major economic blocks that aim to accelerate Africa's industrialisation and growth include the Economic Community of Western African States (ECOWAS), the Economic Community of Central African States (CEEAC), the Southern African Development Community (SADC) and the Arab Maghreb Union (AMU).

"Egypt urges COMESA members to join free trade area," REUTERS, 22 May 2001; "Three more nations to join Africa free trade area," AP, 23 May 2001; "African trade bloc urged to target food insecurity," REUTERS, 23 May 2001; "African states meet for talks on free trade zones," AP, 22 May 2001; ICTSD Internal Files.

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APEC Promotes New Trade Round And Early China WTO Accession

Trade ministers from the Asia-Pacific Economic Cooperation (APEC) forum are meeting 6-7 June in Shanghai, China, where they are expected to support the launch of a new WTO round, step up efforts towards increased trade and investment liberalisation in the APEC region, and call for the speedy accession of China to the WTO.

APEC set to support new WTO round

At their two-day annual meeting, APEC trade ministers are likely to make a joint call for the launch of a new round of free trade negotiations under the WTO this year while at the same time attempting to revitalise APEC's objective to create free and open trade and investment between developed economies by 2010 and developing countries by 2020.

According to a draft statement prepared by senior APEC officials, APEC members have expressed their commitment to a new trade round. A final statement will be released at the end of the meeting in China's financial capital. Sensitive issues such as tariff reductions and agriculture are, however, expected to be left unresolved. In addition, APEC trade ministers are set to pledge support for the so-called "Shanghai Charter" -- a US initiative designed to speed up trade and investment liberalisation in the APEC zone -- which will also be discussed at the forthcoming APEC leaders' summit in Shanghai in October 2001.

In order "to give some sort of political input or political push" to a new trade round at the WTO Ministerial in Doha, Japan is expected to announce a programme at the APEC meeting aimed at assisting less-developed APEC members in the implementation of existing WTO rules.

Calls for early China accession

During preparatory talks in Shenzhen, China, last weekend, senior officials from the 21 APEC members expressed their support for China's early entry to the WTO. "The early accession of China to the WTO benefits not only China but also the WTO itself," said Wang Guangya, Chairman of the meeting. "My own personal view is that if China can become a member of WTO before the launch of a new round of WTO negotiations, this will play a positive role in facilitating a new round." According to trade sources, however, it is very unlikely that China will become a WTO member before the end of this year, even if significant progress is made in China's bilateral trade talks with WTO members (see BRIDGES Weekly, 29 May 2001).

Zoellick to review the US-China accession talks

US Trade Representative Robert Zoellick met on 5 June with Chinese Trade Minister Shi Guang Sheng in the lead-up to the APEC meeting to discuss the status of China's 14-year bid to accede to the WTO. As BRIDGES Weekly went to press, officials reported that although the meeting ran longer than scheduled, no progress had yet been made. China's levels of agricultural subsidies remain the main impediment to China's entry. The US wants Beijing to limit its level of subsidisation to five percent of total production, while China insists that it should be allowed to subsidise at a level equal to ten percent of total production, a provision permitted other developing countries in the WTO. The bilateral meeting follows President Bush's announcement that he intends to renew China's Normal Trade Relations (NTR) status this year, a prerequisite for China's accession to the WTO.

A fresh round of talks on China's admission to the WTO has been set for 28 June through 4 August, WTO officials said Tuesday. APEC members are: Australia, Brunei, Canada, China, Chile, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, Taiwan, Thailand, the US and Vietnam. APEC's members generate 60 percent of world output and half of global trade.

BRIDGES Weekly will report further on the 6-7 June APEC meeting in the next issue.

"APEC To Focus On New WTO Talks, Reviving Liberalization Drive," KYODO NEWS INTERNATIONAL, 5 June 2001; "APEC Urges New Trade Round, Early China WTO Entry," REUTERS, 3 June 2001; "APEC To Urge WTO Action As China Starts Trade Talks," IWON, 5 June 2001; "USTR Zoellick To Push For WTO Round At APEC Meet," REUTERS, 1 June 2001; "WTO Entry Stalls As China Balks At Tariff Restrictions", NATIONAL POST, 6 June 2001. ICTSD Internal Files.

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G-15, COMESA, SADC Meet On Trade

G-15 meeting in Jakarta

Gathering in Jakarta from 30-31 May, members of the Group of 15 developing countries agreed to establish a G-15 taskforce on information and communication technology (ICT) which would focus on ways of bridging the digital divide between the developed and developing world.

Despite this agreement, Zimbabwean President Robert Mugabe and Malaysian Prime Minister Mahathir Mohamad used the meeting as an opportunity to attack globalisation, urging radical reform of the WTO, the World Bank and the International Monetary Fund, all of which, in the view of Mugabe, are "instruments of much of the social instability and poverty in the undeveloped world."

The G-15 pledged to be more proactive in the reform of the international financial architecture. The group also addressed the issue of increasing trade among the G-15 membership, which is estimated to be worth less than $US1 billion a year. According to one trade lobbyist, "trade relations need to be backed by political agreements and support. If there is no green light, nothing can happen".

In its section on international trade, the G-15 Eleventh Summit joint communiqué strongly reiterated that non-trade issues such as labour standards and environmental conditionalities should not be included in the WTO agenda, and called for the exclusion of 'labour, health, safety and environmental standards' in the implementation of Generalised System of Preference (GSP) schemes. The communiqué took note of the recent initiative to grant improved market access to products originating from least developed countries (LDCs). It further noted that measures should be taken to avoid possible negative impacts from such initiatives on other developing countries.

Established in 1989, the G-15 was created to promote South-South Cooperation and North-South dialogue in trade, investment and technology. Members of the G-15 are Algeria, Argentina, Brazil, Chile, Egypt, India, Indonesia, Jamaica, Kenya, Malaysia, Mexico, Nigeria, Peru, Senegal, Sri Lanka, Venezuela and Zimbabwe.


Assistant Secretary General of the Common Market for Eastern and Southern Africa (COMESA), Sindiso Ngwenya, late last month urged African industry to provide evidence of their claims that the COMESA Free Trade Agreement (FTA) is harming local business. According to Ngwenya, "we want the countries and companies to demonstrate that there is actual material injury on a particular industry due to the free trade area before they pull out services or cry foul." Doing so would enable the COMESA Secretariat to invoke specific treaty provisions designed to mitigate these sectoral adjustments.

In related developments, on 1 June the Indian government and COMESA reached an agreement designed to increase cooperation between the African regional bloc and the Asian country. Although not signed as yet, the memorandum of understanding (MOU) between the regions seeks to improve inter-regional cooperation in the areas of pharmaceuticals, information technology, agriculture, human resources development, low cost housing, non-conventional energy and regional infrastructural development.

According to Ashok Attri, India's High Commissioner to Zambia, even though the level of economic activity between his country and COMESA still underperforms its potential, the COMESA zone is becoming an increasingly attractive location for Indian foreign investment. The success of the COMESA-India FTA would depend critically on the ability of producers to exploit economies of scale arising from an increase in market size, where size of the market would in turn depend on the volume of expenditure inside the bloc and not on its population. At the conclusion of COMESA's sixth summit on 22-23 May, COMESA Secretary General Erastus Mwencha announced that at least three more as-yet-unnamed states would join the FTA. It remains to be seen if the added members will enhance the FTA's purchasing power to increase and sustain a wide range of industries of minimum efficient scale.

Members of COMESA include: Angola, Burundi, Comoros, Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Sudan, Swaziland, Zambia and Zimbabwe.

Southern Africa Economic Summit 2001 to be hosted by WEF & SADC

The World Economic Forum (WEF) and the Southern African Development Community (SADC) is co-hosting the 11th Southern Africa Economic Summit in Durban, South Africa, from 6-8 June. Entitled "Acting on Realities, Confronting Perceptions", the Summit is addressing some of the most pressing challenges facing the South African region: public health, the digital divide, governance and democracy, and regional economic integration. Over 800 participants are expected to attend the event.

Although high ranking delegates from across the region and from the international community are expected to attend the meeting, many analysts remain sceptical that the conference will achieve anything concrete. According to one South African political relations expert, "it could be a platform in which people could come up with solutions informally, but we haven't seen any result so far...the question is what will be different this year."

Members of SADC include: Angola, Botswana, Democratic Republic of Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia, Zimbabwe.

"G-15 Summit ends with call for unity," AFP, 31 May 2001; "G-15 leaders lash out at IMF, lop-sided globalisation," AFP 30 May 2001; "Zimbabwe's President Mugabe Says Poor Nations Still Being exploited," DOW JONES 30 May 2001; Africa's COMESA seeks proof free trade area harms members, "REUTERS, 1 June 2001; "India, COMESA Finalise Agreement on Cooperation," XINHUA 1 June 2001; "World Economic Forum to Hold its Southern Africa Economic Summit 2001 in Durban," WEF PRESS RELEASE 23 May 2001; "Southern Africa forum faces thorny issues, scepticism," REUTERS, 4 June 2001.

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UN Development Commission Focuses On Biotech Capacity Building

The UN Commission on Science and Technology for Development (CSTD) met for its fifth session from 28 May to 1 June. Discussions focused in particular on capacity building for biotechnology -- the CSTD's main substantive theme for its inter-sessional period 1999-2001.

The CSTD recognised that biotechnology had significant potential to support national efforts towards food security, health, environmental sustainability and increased competitiveness, but also acknowledged the possible negative impacts on the environment and human health, as well as socio-economic and ethical concerns. In order to maximise the benefits of biotechnology while at the same time managing and minimising risks and uncertainties, the CSTD suggested that national governments should develop strategies, policies and action plans to develop and manage the technologies.

In accordance with the conclusions presented in the General Secretary's report on "National Capacity-building in Biotechnology", the Commission stressed the need for enhanced access to information and knowledge in order to facilitate acquisition, development and diffusion of biotechnology, and the development of legal and policy frameworks. In addition, the report recommended that institutional structures and linkages should be encouraged, including a closer relationship between public sector research and the private sector. Furthermore, the CSTD recognised the difficulties of establishing a global regulatory framework for biotechnology due to the differing levels of technological capacity and development, and the wide variation in socio-economic and cultural concerns between countries.

The General Secretary's report acknowledged the still unresolved relationship between a strong intellectual property rights (IPR) regime and technology transfer, but also pointed out that -- since the foundation of the WTO -- this debate has largely been superseded by the imperative to conform to the provisions of the WTO Agreement on Trade Related Aspects of IPRs (TRIPs). However, issues related to IPRs in general and the TRIPs Agreement in particular were hardly raised during the CSTD meeting, only featuring briefly in discussion on traditional knowledge, but without further discussion. According to one participant, the CSTD might not be the appropriate forum for this debate due to a lack of expertise in this area and the large number of other international fora better equipped to deal with these issues.

The CSTD -- established in 1992 as a functional commission of the UN's Economic and Social Council (ECOSOC) -- functions as a forum for improving the understanding of science and technology issues, and for the formulation of recommendations and guidelines on science and technology matters within the UN system on all science and technology related matters. ECOSOC is the principal organ, under the authority of the UN General Assembly, mandated to promote: (a) higher standards of living, full employment, and conditions of economic and social progress and development; (b) solutions of international economic, social, health, and related problems; and international cultural and educational cooperation; and (c) universal respect for, and observance of, human rights and fundamental freedoms for all without distinction as to race, sex, language, or religion.

The agenda and documents for the meeting are available here.

ICTSD Internal Files.

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US, EU Leaders Meet On New Round, Climate Change, Sustainable Development

In summit sessions marked by violent street protests, the EU and the US met on 14 June in Gothenburg, Sweden, followed by a 15-16 June meeting of EU leaders for the Council of EU Heads of State. While the US and EU failed to resolve their differences over climate change, they did highlight their common stance regarding the need to work together to promote the launch of a new round of multilateral trade negotiations. The EU Council, inter alia, adopted Europe's first-ever Sustainable Development Strategy.

EU, US agree on need for new WTO round

According to European Commission President Romano Prodi, the EU and the US agreed on a common approach "for an ambitious and inclusive WTO Round". Concerning inclusiveness, the Summit Conclusions stressed that a new round must "equally address the needs and priorities of developing countries, demonstrate that the trading system can respond to the concerns of civil society, and promote sustainable development." The two countries added that they would reinforce and improve their provision of technical assistance for developing countries "so as to aid both their implementation of WTO agreements and help them integrate more fully into the trading system, including the dispute settlement mechanism."

However, while Swedish Prime Minister and Summit Chair Göran Persson said the Conclusions sent "a clear signal" that a round was necessary to revive global economic growth, officials said the summit achieved no substantive breakthroughs on the issue of a new round.

Climate divisive

EU leaders and US President George W. Bush did not bridge the wide gap on their positions on climate change and the Kyoto Protocol -- the international instrument addressing this issue. "We agreed to disagree on substance," Persson ironically summarised the differing stances at a press conference. "The European Union will stick to the Kyoto Protocol and go for a ratification process," he added. For his part, Bush during the summit repeated his objections to the Protocol, namely that it exempts developing countries such as India and China and that its goals are not realistic. "But that doesn't mean we can't work together," Bush added.

The environmental group Friends of the Earth strongly criticised the US stance. "President Bush's decision to ignore scientific warnings and world opinion of global climate change is a total disgrace. It means business as usual for the planet's biggest polluter," said Kate Hampton, Friends of the Earth Climate Change coordinator.

In related developments, Dutch Environment Minister and Chair of the ongoing climate change negotiations Jan Pronk earlier this month issued a coherent proposal to finalise the Kyoto Protocol. The paper could possibly form the basis for world agreement on how to implement the Protocol even without the US. Key political elements in the text include concessions to Japan regarding carbon sinks and to Russia and central and eastern European countries regarding payments into a proposed "adaptation fund".

Talks on the Kyoto Protocol will resume in Bonn next month. The battle promises to be tough, in particular around continued developing country concerns over the limited scale of financial assistance offered by the industrialised world.

EU sustainable development strategy short of original goal

Following the US-EU summit, European Heads of State met in Gothenburg on 15-16 June for the annual summit of the European Council, where, in accordance with its mandate, the Council issued "political guidance" for the EU.

While the EU adopted its first ever Sustainable Development Strategy at the summit meeting, the version finally agreed upon fell short of the original goal of Sweden (which currently presides over the EU) and the European Commission to set precise environmental targets.

The Strategy was designed to form the environmental dimension of the Lisbon agreement, which contains social and economic policy strategies to make the EU become the most competitive region in the world by 2010.

The paper submitted for adoption proposed to focus the sustainability strategy on four of the seven key areas identified by the Commission: climate change, public health, transport congestion and natural resource depletion. But it contained no dates or quantitative policy targets, and the long series of specific actions proposed by the Commission were not taken up by the Council.

"What you'll see is a text which on overall objectives and principles is ok, but which is short on actions. On that you'll find very, very, very little," a senior Commission official said Friday.

As it stands, the strategy calls on member states to develop national sustainability plans. Major EU policy will include sustainability impact assessments, and EU institutions will improve internal policy coordination between different sectors. Progress will be reviewed annually.

The leaders declared that, "clear and stable objectives for sustainable development will present significant economic opportunities." They also anticipated that the new emphasis on sustainability will "unleash a new wave" of technological innovation and investment, generating growth and employment.

The EU's Sustainable Development Strategy is a part of the region's preparations for the World Summit on Sustainable Development (Rio + 10), scheduled for Johannesburg, South Africa in September 2002. The EU is expected to seek to achieve a "global deal" on sustainable development at the Summit.

"Conclusions of the EU/US Summit," 14 June 2001; "Bush and EU pledge to launch a new trade round," FT, 15 June 2001; "Pronk Injects New Life into Kyoto Protocol," ENS, 12 June 2001; "Accord à Göteborg pour relancer les négotiations commerciales multilatérales," LE MONDE, 16 June 2001; "Bush and Allies Split on Climate," IHT, 15 June 2001; "Presidency Conclusions," 15-16 June 2001; "EU agrees to speed up enlargement 'momentum'," FT, 17 June 2001; "Europe Incorporates Sustainable Development Strategy," ENS, 18 June 2001; "EU Sustainability Plan Heading for a Fall," ENS, 15 June 2001; "Climate Divisive at Trans-Atlantic Summit," ENS, 14 June 2001.

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IPRs For Development Take Centre Stage At WTO

At a forthcoming 18-22 June meeting of the WTO Council for Trade-Related Aspects of Intellectual Property Rights (TRIPs), the WTO will set aside one day for debating issues related to intellectual property rights (IPRs) and access to essential drugs. The discussions come in the wake of a recently announced initiative by the WTO and the World Intellectual Property Rights Organization (WIPO) to "help Least-developed Countries (LDCs) maximise the benefits of IP protection".

IPRs and access to medicines

Following a request by the African Group at the last TRIPs Council meeting in April, the Council will spend one day on 20 June to discuss issues related to 'Intellectual Property and Access to Medicines' (see BRIDGES Weekly, 10 April 2001). The discussion will be held in a formal session and on the record to allow for the presence of representatives of intergovernmental organisation observers. So far, only two papers have been submitted for this agenda item, but more submissions are expected, a WTO official said. The WTO Secretariat has prepared an information paper listing meetings relevant to intellectual property and access to medicines in which the Secretariat has been involved over the past two years; issues that were covered in the meetings; and where additional information can be found.

In its communication to the Council (IP/C/W/280; available on the WTO website), the European Communities (EC) examine the relationship between the provisions of the TRIPs Agreement and access to medicines. The submission outlines recent EC initiatives in this area, including the European Commission's Programme of Action -- endorsed on 14 May -- targeted at combating the major communicable diseases (see here).

Regarding the relevance of intellectual property, the EC recognises the importance of IPRs as a stimulus for creativity and innovation, but also acknowledges recent criticisms that the TRIPs Agreement stands in the way of "developing countries' efforts to implement an effective public health policy". The EC expresses willingness "to engage in a positive manner in discussion", in particular regarding, though not limited to, issues addressed in the submission, including compulsory licensing (Art. 31, i.e. governments can allow the use of a patent without the consent of the patent-holder in certain cases), exceptions to patent rights (Art. 30) and protection of undisclosed information (Art. 39.3).

The WTO has recently come under strong criticism for allegedly impeding developing countries' access to cheap drugs by protecting pharmaceutical patents (see BRIDGES Weekly, 20 February 2001). International outcry has focused in particular on a court case brought by a group of pharmaceutical companies against the South African government over a law that would allow the country to import cheaper drugs allegedly in violation of patent rights (see BRIDGES Weekly, 24 April 2001). After the case was eventually withdrawn, attention then shifted to an ongoing US-Brazil dispute over Brazil's IPR regime, which Brazil claims is an integral component of its comprehensive anti-HIV/AIDS strategy (see BRIDGES Weekly, 8 May 2001).

Derestricted submissions to the TRIPs Council are available. Additional EU documents on IPRs and access to medicines can be found here.

WIPO/WTO initiative for LDCs

On 14 June, WTO and WIPO launched a joint initiative to support developing countries, in particular LDCs, in their efforts to effectively use IP as a tool for technological advancement, economic growth and wealth creation. In a joint communication, WTO Director-General Mike Moore and WIPO Director-General Kamil Idris underlined their organisations' commitment to help LDCs comply with the TRIPs Agreement on time and to use the IP system to promote their development. The initiative will build on existing cooperation, and on each organisation's own technical assistance programmes. Technical assistance will be provided for preparing legislation, training, institution-building, modernising IP systems and enforcement. All LDCs will be eligible under the initiative.

ICTSD Internal Files.

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WTO Links E-Commerce to Development

In a report last week on the WTO programme on e-commerce, WTO Director-General Mike Moore highlighted the development dimension of e-commerce. While the relevant rules for e-commerce continue to be widely debated by WTO's Members, Moore's report says that e-commerce should be covered by the General Agreement on Trade in Services (GATS) as a channel for retailing and wholesaling goods and services, or as a means of delivery of services in the form of digitised information. According to Moore, the WTO's work programme seeks to ensure that developing countries are not marginalised by a digital divide, which requires the liberalisation of trade on technological hardware and telecoms services, together with governmental or private initiatives to train personnel. In the run-up to a WTO General Council Meeting on Electronic Commerce held on 15 June, General Council Chairman Stuart Harbinson urged WTO Members to clarify their positions on cross-cutting issues relevant to e-commerce, including development-related ones such as participation of developing countries in e-commerce, access to infrastructure and technology, and market access for developing countries.

"Electronic Commerce and Development," "US Pressures in WTO on E-Commerce", WASHINGTON TRADE DAILY, 13 June 2001; ICTSD Internal Files.

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WTO Looks At IPR Flexibility In Access To Medicines

In what Zimbabwean Ambassador and Chairman of the WTO Council for Trade-related Aspects of Intellectual Property Rights (TRIPs) Boniface Chidyausiku called a "rich discussion", delegates at the TRIPs Council spent one day of their 18-22 June meeting addressing issues related to intellectual property rights (IPRs) and access to medicines. Other issues discussed at the meeting included geographical indications and the review of TRIPs Article 27.3(b).

"Historic" discussion on access to medicines

Members on 20 June devoted a full day of discussion to IPRs and access to medicines following a request by the African Group at the last TRIPs Council meeting in April (see BRIDGES Weekly, 10 April 2001). In what one delegate referred to as a "historic" event, over 40 countries presented their views on this issue, mainly representing individual and groups of developing countries, including the African Group, the Association of Southeast Asian Nations (ASEAN), and the Least-developed Countries (LDCs). Members generally acknowledged the importance of patent protection as an incentive for new pharmaceuticals and agreed that the TRIPs Agreement contained flexibilities that allowed governments to deal with public health.

Specifically, discussions focused on the general principles of the TRIPs Agreement, in particular the extent to which Articles 7 (Objectives) and 8 (Principles) of the Agreement allowed countries to meet their public health objectives. Members furthermore addressed the degree of countries' flexibility when issuing compulsory licences (Art. 31, i.e. governments can allow the use of a patent without the consent of the patent-holder under certain conditions), including compulsory licenses issued for import rather than local production by smaller developing countries that do not have the capacity to work the patent. The degree of flexibility was also raised in relation to parallel imports (i.e. allowing the government to obtain a patented drug more cheaply from foreign suppliers rather than from the manufacturer's local subsidiary).

Submissions addressing access to medicines were received from the European Communities (IP/C/W/280; see BRIDGES Weekly, 19 June 2001) and a group of around 50 developing countries, including the African Group (IP/C/W/296). The latter paper stressed that the special discussion at the Council was not a "one-off event", but rather part of a process, including the next WTO Ministerial Conference in Doha, Qatar, in November.

Regarding compulsory licenses, the submission by the group of developing countries stated that Members are free to determine the grounds upon which to issue compulsory licenses, adding that "nothing in the TRIPs Agreement will prevent Members to grant compulsory licenses to supply foreign markets". The submission also demanded that Art. 6 (Exhaustion) "should be implemented in such a way as to ensure the broadest flexibility for Members to resort to parallel imports". While generally favouring discussions on differential (or tiered) pricing, they should not be covered by TRIPs nor be used to limit the flexibility of the Agreement. The paper furthermore calls on the Council to consider extending deadlines for developing and least-developed countries regarding the implementation of TRIPs. In addition, the paper addressed in more detail issues related to compulsory licences, parallel imports, differential pricing, and possible extensions of transitional periods for developing and least-developed countries.The TRIPs Council will continue discussions on this issue, but "in a

more structured and systematic way," said TRIPs Council Chair, Boniface Chidyausiku. Specifically, the WTO Secretariat will compile a checklist of all relevant TRIPs provisions and issues identified with them; the Chairman will hold an informal meeting on 25 July; and a full day (19 September) will added to the next TRIPs Council Session (20-21 September) for formal discussion. In the longer term, discussions are likely to develop along either of two tracks, according to one WTO official, namely as part of the preparatory work for the Ministerial Conference in the General Council, leading to a political statement within the Doha Declaration; or a legal interpretation of the Agreement's relevant provisions within the TRIPs Council.

Non-governmental organisations (NGOs) generally welcomed the meeting as an "opportunity to shift the balance of global patent rules in favour of the public interest and the protection of public health." In a joint statement signed by over 100 NGOs (available here), they called on WTO Members to, inter alia, strengthen the existing public health-safeguards within TRIPs, and adopt a pro-public health interpretation of the Agreement.

The TRIPs discussion on access to medicine is only one of various recent developments on this issue, in particular related to HIV/AIDS, including the now settled court case brought by a group of pharmaceutical companies against the South African government over a law that would allow the country to import cheaper drugs allegedly in violation of patent rights (see BRIDGES Weekly, 24 April 2001) and most recently the Brazil-US settlement regarding the US challenge to the Brazilian IPR regime at the WTO (see related story, this issue).

Submissions to the Council on access to medicines, a summary of the meeting and other relevant documents are available on the WTO website.

27.3(b) and geographical indications also on the agenda

Members during the remaining week discussed the usual issues related, inter alia, to review of Article 27.3(b) and geographical indications (GI). Switzerland (IP/C/W/284; available online) and Norway (IP/C/W/293) submitted papers on the review of Article 27.3(b) (exclusion from patentability). The Swiss submission proposed that the review should focus mainly on "the scope of exclusions from patentability" as set out in the first sentence of Art. 27.3(b), and on appropriate sui generis systems for plant variety protection. In addition, the Swiss paper stressed the importance of IPR protection for biotechnological innovations. The submission also followed up on an idea previously raised by Switzerland in the TRIPs Council of setting up a database for traditional knowledge (TK) related to genetic resources.

The Norwegian submission stressed that there was no apparent conflict between the Convention on Biological Diversity (CBD) and the TRIPs Agreement, but acknowledged the complexity between access, transfer and benefit-sharing and the IPR regime which that paper said should be further looked at. Norway also expressed its willingness to consider whether provisions requiring disclosure of origin of genetic resources should be inserted into the TRIPs Agreement in order to implement the CBD more effectively. The Council will continue discussions on Art. 27.3(b) at the next Council meeting.

Regarding geographical indications, a new joint submission was received from Argentina, Australia, Canada, Chile, Guatemala, New Zealand, Paraguay and the US (IP/C/W/289) on the implications of extending GIs to products other than wines and spirits, which highlighted the potentially high costs for administration, producers and traders; the possible misuse of GIs for protectionism; and likely customer confusion if terms traditionally used to describe products disappear. The Council will revert back to the matter at the next meeting. As trade sources pointed out, discussions on GIs appear to have reached a stalemate, which Members are unlikely to resolve before the next WTO Ministerial.

"Governments share interpretation on TRIPS and public health," WTO NEWS, 20 June 2001; "WTO members to press on, following 'rich debate' on medicines," WTO NEWS, 22 June 2001; ICTSD Internal Files.

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ILO Leads Discussion On Trade and Labour

On 19 June, after seven years of indecision, the International Labour Organization (ILO) agreed to take the lead in multilateral discussions over the social dimension of globalisation, which some believe may take the pressure off of the WTO on the issue of trade and labour.

The ILO's existing Working Party on the Social Dimension of Globalisation -- which includes representatives from government, employer groups, and labour unions -- has agreed to boost its mandate, commissioning the ILO's Director-General Juan Somavia to prepare an authoritative and comprehensive report on "the social dimension of globalisation, particularly the interaction between the global economy and the world of work." The Working Party avoided the specific mention of trade and labour, but details of the mandate, composition of the commission, and funding are expected to be approved at the next ILO Governing Body meeting in November.

Commenting on the ILO initiative, EU Ambassador Carlo Trojan said the report could provide a politically acceptable solution for both advocates and opponents of the trade and labour linkage. He declared that if the report is done properly, "there is no particular reason why we have to deal with this in a new round of negotiations in the WTO."

For their part, several developing country diplomats welcomed the ILO's plan on the condition that labour standards are not used for protectionist purposes. According to one Cuban official addressing the ILO meeting on behalf of the G77/China, "labour standards must not be used as trade barriers to their exports and (for) competitive advantage." And in a strongly worded statement to the ILO delegation, Pakistani Ambassador Munir Akram reiterated his country's position on the relationship between trade and labour. "[Labour] has never has been in the WTO and never will be in the WTO," Akram said.

However, some developing countries -- Brazil for instance -- were not as dismissive as Pakistan, and took the view that the discussion on the social dimensions of globalisation should be broadened to include dimensions other than the negative effects of trade liberalisation. According to Brazil, the discussion should also be concerned with the impact of trade protectionism and cross-border financial flows on employment and social development.

The preparation of the report, intended to take two years, is expected to include input from the secretariats of other international organisations, including the WTO.

Trade and labour at the WTO

In the final Declaration of the 1996 Singapore Ministerial Conference, WTO Members agreed that the ILO was the competent body for setting and dealing with core labour standards and trade. The decision was meant to assuage a standing dispute among developed and developing countries members over whether the issue of labour should be on the WTO's work agenda.

Despite this decision, the labour-trade debate has continued to be a contentious feature of the multilateral trade system. The issue came to the fore during the failed 1999 Seattle Ministerial Conference, when then-US President Bill Clinton suggested linking labour standards to trade sanctions. In the lead-up to the Doha Ministerial Conference, unresolved debates over whether to include labour and environment standards in the WTO have re-emerged.

For his part, US Trade Representative Robert Zoellick has made it clear that to obtain domestic and Congressional support for a new round of multilateral trade negotiations and for 'trade promotion authority' -- formerly 'fast-track' -- the labour and trade issue will have to be addressed in some form.

"UN's ILO agrees to tackle globalisation's impact on labour," BridgesNews, 19 June 2001; "IlO Director General targets decent work deficit," ILO press Release, 11 June 2001, "ILO Members Agree to Asses Social Impact of globalisation to settle Labor, Trade Debate,2 WTO REPORTER, 20 June 2001; "India urges Developing Countries to Rally Against Linking Trade to Labour, Environment," WTO REPORTER, 25 June 2001.

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Expert Panel Calls for WTO Reform And Launch Of 'Development Round'

An international panel of 11 experts under the chairship of former Mexican President Ernesto Zedillo issued its report last week calling, inter alia, for the launch of a "Development Round" at the next WTO Ministerial Conference in Doha, Qatar, in November, and for further trade liberalisation, in particular in agriculture and manufacturing. The experts also highlighted the need for providing special assistance to Least-developed Countries (LDCs), and called for "reform and support" of the WTO.

The high-level panel was set up by UN General-Secretary Kofi Annan late last year to identify practical means to fulfil international commitments to fight poverty -- as set out by world leaders at the Millennium Summit in New York in September 2000 -- and to build political momentum for the upcoming International Conference on Financing for Development in Monterrey, Mexico, on 18-22 March 2002 (see here).

New 'development' round

In its report, the panel concluded that "by far the main beneficiaries of trade liberalisation have been the industrial countries," adding that developing countries continue to be confronted with significant barriers in developed country markets. To address this problem, a new round of trade liberalisation talks should be launched at the next WTO Ministerial "with the principal objective of fully integrating the developing countries into the global trading system". This "Development Round" should focus, inter alia, on the implementation of the Uruguay Round commitments by industrial countries; trade liberalisation in agricultural products; elimination of trade barriers in manufacturing (in particular textiles and clothing); and considering the possibility of introducing rules governing the temporary movement of labour.

Special support for LDCs

The panel concluded that LDCs "cannot wait for the outcome of a new trade round". To deal with their immediate needs, the panel therefore recommended increased financing efforts for the Trust Fund established to implement the Integrated Framework for trade-related technical assistance for LDCs (see; immediate implementation of Uruguay Round commitments, particularly in products important to developing countries such as textiles; the prompt implementation of the EU 'Everything but Arms' initiative (which will grant 48 LDCs quota- and duty-free access to the EU market with phase-in periods for sugar, bananas and rice; see BRIDGES Weekly, 30 January 2001); and the restoration and improvement of the International Monetary Fund's Compensatory Financing Facility.

Systemic reform

The panel also concluded that the WTO was "in urgent need of reform and support" which was "unlikely to be achieved from within". In particular, it recommended that Members should address the decision-making system, rightly perceived as "selective and exclusionary" by many developing countries; technical assistance to facilitate developing countries' participation in multilateral trade negotiations; and the problem of underfunding and understaffing. The International Labor Organization (ILO) should be strengthened to address labour standards, while environmental issues should be dealt with by a "Global Environment Organisation" which would integrate the various organisations currently sharing policy responsibility.

The panel report -- which will be considered at the resumed third session of the UN Financing for Development preparatory committee meeting on 15-19 October -- is available online here.

"UN panel urges rich states to give more aid," UN WIRE, 29 June 2001; "UN panel: end barriers to poor nations' exports," REUTERS, 28 June 2001; ICTSD Internal Files.

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GM Labelling Update: Asia

Sri Lanka suspends GM food ban

Sri Lanka has temporarily suspended its ban on imports of all genetically modified (GM) foods following a request by the WTO that the country should give its trading partners 60 days to prepare for the restrictions. "This is merely a suspension consequent to some communication with the WTO and we are not backtracking," said S. Nagiah, Chief Food Inspector of the Health Ministry, adding that the ban would be reinstituted on 1 September. Sri Lanka currently has no facilities to test for the presence of GM ingredients, but would set up a certification laboratory to implement the ban, Nagiah said. Until then, Sri Lanka would rely on certification in the country of origin and would not import products not certified to be free of genetic modifications. While Nagiah expected some problems with processed food imports, he did not believe that the ban would seriously disrupt trade.

The ban, which came into effect on 1 May, requires 21 categories of food imports to be completely free of GM products. The US, which does not require certification of its exports for GM products, has strongly criticised the ban, saying that there was no credible scientific evidence to justify the measure. The ban will affect only four percent of US agricultural exports to Sri Lanka.

Thailand to introduce compulsory GM labelling

The Thai government said last week that it would introduce regulations by the end of the year which will require compulsory labelling of products containing genetically modified organisms (GMO) sold in the domestic market. The rules will apply to all food and raw materials, both locally produced and imported. "Food products that contain at least 3 to 5 percent of GMO ingredients are likely to be required to be labelled accordingly," said Chanin Charoenpong from the Thai Food and Drug Administration (FDA). The FDA will meet on 3 July to consider the labelling threshold. The new regulations are expected to take effect by the end of the year, but will have to go through a public hearing process before they can be implemented.

Various other countries in the region have tightened their labelling regulations in recent months. China's rules, which came into effect on 23 May, require mandatory safety assessment of GM products before they are approved, as well as labelling of such products. Japan, in turn, introduced new labelling standards for GM food on 1 April, which set a zero-tolerance level for imports containing unapproved GM products, but allow food products containing less than 5 percent of approved GM crops to be labelled as non-GMOs. South Korea requires labelling of products containing GM soybean, corn and soybean sprouts as of 1 March 2001 and GM potatoes as of 1 March 2001, with a 3 percent threshold for the accidental presence of GMOs.

"Sri Lanka to suspend GM food ban at WTO's behest," REUTERS, 26 June 2001; "US official slams Sri Lanka ban on GM food," AFP, 11 May 2001; "Thailand to introduce GMO food labeling," DOW JONES, 27 June 2001; "Thailand: Govt likely to label 3% GMO food imports," REUTERS, 29 June 2001; "China issues regulation for GM crops, animals," AP, 20 June 2001; "Japan's new rules for biotech crop imports," REUTERS, 29 May 2001.

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News From The Regions: The Balkans, Mercosur-EU

Towards a South Eastern Europe Free Trade Area

At a meeting of the Stability Pact for South Eastern Europe in Brussels on 27-28 June, seven South Eastern European countries signed a Memorandum of Understanding (MOU) which aims to establish a network of free trade agreements (FTAs) by the end of 2002. Moldova -- which is scheduled to enter the WTO by the end of July -- has also expressed interest in joining the trade bloc.

According to the MOU on Liberalisation and Facilitation of Trade, Albania, Bosnia-Herzegovina, Bulgaria, Croatia, Macedonia, Romania and Yugoslavia committed themselves to implementing a harmonised system of tariffs within six years. To this end, the seven countries, with an aggregate population of 55 million people, are to set up a network of bilateral FTAs which will allow for at least 90 percent of goods to be exchanged free of tariffs. The FTAs will feature WTO-consistent provisions for applying antidumping, countervailing and safeguard measures; transparent and non-discriminatory measures on public procurement, state aid and state monopolies; and a clause for the future liberalisation of services.

The MOU further states the signatories' intention to harmonise their legislation with that of the EU, in particular regarding company law, company accounts and taxes, banking law and competition law as well as customs procedures and methodologies for the collection of trade statistics. The EU, under whose guidance the agreements will be worked out, welcomed the MOU as an important step towards the goal of stabilising South Eastern Europe and promoting its economic integration with the EU.

EU discusses free trade with Latin American countries

On 2-7 July, officials of the EU and the Latin American trading bloc Mercosur (Mercado Común del Sur) are meeting in Montevideo, Uruguay, to discuss a prospective Interregional Association Agreement. In the following week (9-12 July), negotiations between the EU and Chile will continue on the EU-Chile FTA.

The EU-Mercosur talks are expected to launch tariff and services negotiations, and include discussions on the institutional structure of the agreement as well as issues related to political dialogue and economic co-operation. In addition, the EU will present proposals covering trade in goods, services, government procurement, and business facilitation. Observers expect that a potential EU-Mercosur FTA will affect negotiations over a future Free Trade Area of the Americas (FTAA), as the dialogue with the EU may strengthen the role of Mercosur members within the framework of the FTAA and vis-à-vis the US.

Since the EU-Mercosur negotiations began in November 1999, agriculture has proven to be a major stumbling block for an early agreement between the two trading blocks (see BRIDGES Weekly, 21 June 1999). According to EU calculations on the possible costs of an FTA with Mercosur, in order to compensate European farmers for competition from Mercosur agricultural products, the EU Common Agricultural Policy (CAP) should spend between an additional sum of 5,700 and 14,300 million euros per year.

Talks on the EU-Chile FTA are expected to proceed more rapidly than the EU-Mercosur negotiations, since the agricultural products are not the key sector in Chile-EU trade relations (counting nearly 20 percent of Chile's export to EU, compared with 40 percent exports for Mercosur). According to one trade analyst, Chile would represent the most important Latin American door to Asia for the EU.

Mercosur members include Argentina, Brazil, Paraguay and Uruguay, with Chile and Bolivia as associate members. Venezuela (which is already part of the Andean Pact) has recently applied for joining the trade bloc.

"Stability Pact brokers Trade Liberalisation and overcomes decade-old problem of Refugee Returns in South East Europe", SCSP PRESS RELEASE, 27 June 2001; "Seven Balkan nations agree to set up free-exchange zone", AFP, 27 June 2001; "EU Optimistic Heading into Key Trade Talks with Mercosur, Chile," AP, 26 June 2001; "The European Union gears up to enter next stage of negotiations with Mercosur & with Chile," EU PRESS RELEASE, 29 June 2001; ICTSD Internal Files.

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NGOs Air Concerns On Trading System At WTO Symposium

At a 6-7 July symposium organised by the WTO in Geneva, representatives from non-governmental organisations (NGOs), governments, the media, the private sector, intergovernmental organisations and academia met to address a range of contentious issues confronting the world trading system. NGOs used the opportunity to forward their concerns to Member governments and the WTO Secretariat in sessions covering topics such as intellectual property rights and medicines, trade and environment, trade and development, and services. Chairpersons from the individual sessions recognised that there was a diversity of views in each area, and reflected these in their final reports (for audio playbacks of the Chair's reports see:

The symposium attracted over 400 participants from about 300 organisations. Apart from some of the prominent Member delegations, few country representatives attended. The event was structured around workshops on agriculture; Trade-Related Aspects of Intellectual Property Rights (TRIPs) and access to essential medicines; trade and environment; services; WTO and civil society - NGOs and capacity-building; food safety and the Agreement on Sanitary and Phytosanitary Standards (SPS); TRIPs and biotechnology/biodiversity; trade and development; and WTO institutional reform.

Symposium Chair Mrs. Touré Alimata Traore -- Minister for Industry, Trade and Transport, Mali -- said the event was "an attempt at solving a crisis" around the WTO and civil society, and was intended as an important exchange of views that should lead to smoothing out areas where formerly misunderstandings prevailed.

In his opening speech, WTO Director-General Mike Moore denounced protestors who use violence to disrupt international economic gatherings such as the WTO's Ministerial Conferences. "It would strengthen the hand of those who seek change if some NGOs would distance themselves from masked stone-throwers who claim to want more transparency, anti-globalisation types who trot out slogans that are trite, shallow and superficial," he said. (see Moore's speech at:

NGOs sceptical of progress; call for change

Many NGOs remained critical of the WTO and its decision-making processes, and some called the symposium a public relations tactic rather than a real attempt to discuss 'critical issues'. On the first day of the event, a grouping of over 100 citizens' groups from 20 countries launched a global campaign opposing the WTO's support for 'corporate globalisation'. Called 'Our World Is Not For Sale', the campaign voiced its scepticism of the symposium's ability to effect change, and called for the WTO to take into account concerns of developing countries and civil society. "The WTO staff is leading the push for a new WTO round and is launching meetings like this with much fanfare, but no real intention of changing the agenda," said Tony Tujan from the IBON Foundation in the Philippines, part of the Our World Is Not For Sale campaign.

In a statement distributed at the symposium, WWF International, a global environmental NGO, challenged the WTO to respond to the critical challenge of promoting sustainable development. "The demands of developing countries, as well as many of those raised by concerned citizens around the world, reveal the continuing failure of the WTO to deal seriously with the problems of poverty, economic inequity, and the environment," the paper stated.

A paper made available by the 'Indonesia NGO Coalition on WTO' urged that agriculture should no longer be dealt with by the WTO, but rather by the UN Food and Agriculture Organization and others, "by prioritising sustainable agriculture and reform of the agrarian structure in the interests of justice and welfare." Rejecting a new round of negotiations, the coalition further called on the WTO to create a fairer and more sustainable system of world trade. "This means developing a more comprehensive and detailed special and differential treatment system, for the interests of developing/poor countries, so that they can participate in creating a fairer global economic order."

Working groups spur debate

In the working sessions, panellists addressed the state-of-play of ongoing negotiations, reviews, and discussions in various WTO fora in the leadup to Doha. A range of views was expressed by panellists and participants alike, with animated discussions emerging in particular within the working groups on TRIPs and access to essential medicines, agriculture, and WTO & Civil Society.

TRIPs and access to essential medicines

The discussion on TRIPs and access to essential medicines -- chaired by Director of the WTO's Intellectual Property Division Adrian Otten -- were marked by a sometimes heated and often polarised exchange between NGOs and private sector representatives. According to one of the discussants, the substantive input from participants tended to be limited despite the high-profile nature of this issue and the attention paid to recent discussions at the TRIPs Council meeting last month (see BRIDGES Weekly, 26 June 2001). Even among the widely diverging views, however, participants generally agreed that the debate on the relationship between the TRIPs Agreement and access to essential drugs needed to be broadened.

One industry spokesperson pointed out the need to move away from focusing exclusively on patents as the obstacle to obtaining medicines, and compulsory licensing and parallel imports as the only solutions, towards addressing other constraining factors, such as lack of financing and inadequate infrastructure. Compulsory licensing enables governments to allow the use of a patent without the consent of the patent-holder under certain conditions, while parallel imports allow governments to obtain a patented drug more cheaply from foreign suppliers rather than from the manufacturer's local subsidiary. Some NGOs, however, questioned the reasons behind the industry's strong resistance to greater flexibility in the TRIPs Agreement, especially in African countries whose market share in pharmaceutical products is extremely low.


In a session well-attended by NGOs, discussions on agriculture mapped closely the debates currently underway in the ongoing WTO agriculture negotiations. For many, the multifunctional nature of agriculture production had to be maintained in order to address the non-trade concerns -- rural development, food security and environmental protection -- of specific societies. For others, the inefficient use of resources associated with excessively subsidised agriculture, primarily in Europe and the US, should be curtailed so that countries with comparative advantage in agriculture production can fully benefit from the trade system. Interventions from several developing country NGOs pointed out that in absence of special and differential treatment, developing countries would continue to suffer from inadequate agriculture systems. One US-based NGO drew attention to the power asymmetries in world agriculture trade, arguing that large private interests distort commodity markets and benefit the most from state support. Accordingly, it was argued that more effective domestic and multilateral competition policy is required to re-balance these power asymmetries.

WTO & civil society

At the meeting on WTO and civil society, participants indicated that substantial asymmetries continue to exist between Northern and Southern NGOs in terms of their expertise and resources. Long discussions on capacity-building revealed that no consensus existed on the meaning of this term. In her concluding remarks on 'WTO and institutional reform', Chair of the civil society sessions Dr. Sylvia Ostry from the University of Toronto reported that strong concerns were raised about the transparency and inclusiveness of the WTO decision-making process. "The WTO Secretariat was viewed as not being totally neutral and was seen to be acting incorrectly by canvassing a new round...these concerns reflect the marginalisation which certain developing countries feel in the WTO, and of course this is not unrelated to the capacity-building issue," she said.

A detailed report of the symposium by the International Institute for Sustainable Development will be available at the end of this week at: Summaries of the different sessions will also be available on the WTO website shortly (see:

"Citizens' groups and movements launch global campaign on the WTO and corporate globalisation," FOEEUROPE, 6 July 2001; ICTSD Internal Files.

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Codex: Biotech and Food Safety, New Standards On Toxins And Organics

Convening in Geneva from 2-7 July, the members of the Codex Alimentarius Commission -- the United Nations agency mandated to regulate global food safety -- met to discuss how best to universalise food safety standards. In particular, the delegates considered proposed safety guidelines for foods derived from biotechnology and agreed upon standards for organic livestock production and for toxic contaminants in food.

Codex membership decides domestic GM approval is necessary

Regarding the safety of foods derived from biotechnology, it was agreed, in principle, that foods produced with biotechnological inputs should be approved by domestic governments prior to commercialisation. According to Gro Harlem Brundtland, Director-General of the UN World Health Organization, "this is the first step toward the safety assessment of genetically modified (GM) foods." Although precise risk assessment methodologies were not agreed upon at the meeting, there was consensus that any risk assessment should take into account the potential for GM foods to catalyse allergic reactions.

Observers noted, however, that debate on the safety of GM foods remained in its infancy as the Ad Hoc Intergovernmental Task Force on Foods Derived from Biotechnology -- the Codex body mandated to develop safety guidelines for GM foods -- has not yet finalised GM food safety guidelines. Thus far, the Task Force has only offered Codex proposals on risk analysis in the development of GM foods, guidelines for safety assessment and a list of methods for detecting GM inputs in food. The Task Force's final guidelines are meant to be completed by 2003.

Mandatory GM food labelling rejected

On the question of GM food labelling, delegates rejected the proposal that all GM foods be subject to mandatory labelling. Instead, they agreed that labelling should be mandatory only in cases where specific GM foods and inputs are scientifically proven allergens.

However, closely related to the food safety and labelling debate, the question of traceability -- how, and the extent to which, GM inputs are detected in food -- was not addressed at the Codex meeting due to time constraints. As such, this agenda item will now be dealt with by the Codex Executive. Some advocacy groups are concerned that moving the debate on traceability to the Codex Executive will limit the range of positions submitted to the debate and thus preclude an equitable outcome.

Risk analysis and precautionary principle

Nevertheless, regarding risk analysis, there was consensus that core principles governing risk assessment should be developed within the Codex General Principles Committee. Should such principles fail to be decided at the committee level, they would instead be decided by the Codex Alimentarius Commission itself.

Although the precautionary principle was not explicitly referred to at the Codex meeting, the question of risk uncertainty was raised. Notably, the Codex membership did agree that in cases where evidence of risk existed, but where such evidence was insufficient or inconclusive, Codex should not elaborate a specific safety standard per se, but should instead elaborate a text, such as a voluntary code of conduct or practice. One non-governmental observer noted, however, that under WTO rules the difference between elaborated standards and texts remained unspecified and could therefore generate unintended trade consequences.

New standards for tood contaminants and organic livestock production

On the question of food contaminants, the delegates reached consensus on new maximum levels of environmental contaminants, notably lead, cadmium and aflatoxin. On organic farming, the Codex meeting approved new guidelines for organic livestock production. Accordingly, organic livestock farming should aim to use natural breeding methods, minimise stress in animals, prevent disease and progressively eliminate the use of certain chemical veterinary drugs, including antibiotics. The new standard recommends that animals should be fed with quality organic feedstuffs, not meat and bone meal, and prohibits the use of growth hormones.

Although the Codex Alimentarius Commission maintains a membership of 165 states, less than 100 were in attendance. Observers noted that while several developing countries did not attend the meeting, there was nevertheless a relatively strong presence of developing countries as compared with previous meetings.

The Codex Alimentarius Commission is recognised by the WTO Agreement on Sanitary and Phytosanitary Measures (SPS) as the international organisation responsible for standard-setting related to food safety and the harmonisation of food safety measures affecting trade. WTO Members are required to base their food safety measures on the Commission's standards, guidelines or recommendations. The other two international standard-setting bodies recognised in the SPS Agreement are the International Plant Protection Convention (IPPC) for plant health and the Office International de Epizooties (OIE) for animal health and zoonoses (see BRIDGES Weekly, 20 March 2001).

"FAO/WHO Call For More International Collaboration To Solve Food Safety and Quality Problems," WHO/FAO PRESS RELEASE, 5 July 2001; "World Guideline For Pre-Market GM Testing Agreed," REUTERS, 9 July 2001; "UN To Set Modified Food Guidelines," AP, 6 July 2001; "UN Agencies Call For Testing Of Biotech Foods," ENS, 9 July 2001; ICTSD Internal Files.

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FTAA Draft Text Released

On 3 July, the Free Trade Area of the Americas (FTAA) Secretariat made publicly available the draft negotiating text of the proposed FTAA. Included in the draft are nine chapters covering the following policy areas and sectors: Agriculture; Government Procurement; Investment; Subsidies, Antidumping and Countervailing Duties; Intellectual Property Rights; and Competition Policy. In releasing the draft, the FTAA Secretariat upheld a promise issued by the 34 FTAA member states that the text be made public sometime following the Summit of the Americas in Quebec City, Canada, in April this year. A draft copy of the investment chapter was previously made public after being leaked in the lead-up to the Quebec City Summit. The draft text is available from the FTAA Secretariat website.

ICTSD Internal Files.

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UNDP Launches Human Development Report 2001

The UN Development Programme's Human Development Report (HDR) 2001, released this week, focuses on ways that biotechnology, information and communications technology influence development. The report addresses controversial issues such as GM foods, intellectual property rights (including access to AIDS drugs) and the South-North brain drain. The Report introduces a "technology achievement index", designed to rank countries' abilities to create and use technology. The publication classifies 162 countries according to their level of human development, based on life expectancy, achievement in education and standard of living. The report also checks the progress and achievements of countries in regard to the goals for development and poverty eradication agreed on by world leaders at the UN Millennium Summit 2000, held last September in New York. The report argues that developing countries need to invest in both economic and intellectual openness in order to benefit from the investment and innovation brought by international competition. Eventually, in order to counterbalance global market failures, new international initiatives should focus especially on areas such as medicine, agriculture, low-cost computers and wireless technologies, or low cost energy such as fuel cells and solar power. To order a copy of the report contact: UN Publications at (1-212) 963-8302 in New York or Oxford University Press at (+44-1865) 556-767 in Oxford.

"Human Development Report 2001 will spotlight technologies' role in reducing poverty", UNDP Newsfront, 9 July 2001; ICTSD Internal Files.

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  • The Internet's Dilemma: What Good Is the Stupid Network If the Other Guys Own It?
    COOK Report Sept 2001

    The Internet's Dilemma: What Good Is the Stupid Network If the Other Guys Own It?

    Future to Offer Access to a Public Highway Grid or Exile to Corporate Controlled Walled Gardens and OS?

    How are we to understand reality as we shake off the hangover of our Internet intoxication and face huge, corporate controlled "Walled Gardens" of content delivery and monopoly OS? These "Walled Gardens" are carefully controlled 'parks' of vendor content combined with software designed to encourage users not to stray out of the content Garden. On the monopoly OS side of things (Windows XP) the user finds a Microsoft provided family of compatible software tools and services (dot Net) designed to lure customers into tying more and more of their daily lives to the vendors products and services. The AOL/Time Warner model is built on the old assumptions of top down user control and manipulation to sell as much content and connect time directed to appropriate web sites as possible. The Microsoft model the customer as a reliable source of recurring revenue on a monthly basis for the vendor's software and services.

    During the consolidation of the "content-is-king model," the Internet industry has built up huge capacity of both fiber and bandwidth - one that far exceeds the ability of the AOL/Time Warner business model and related developments to absorb in the short term. Consequently, the old dot com Internet industry has fallen into limbo while people are suddenly looking for a basis on which to rationalize its future existence. This state of affairs would have been unthinkable a year ago to all but a few. Even now it is not adequately understood by the industry. The decline of the last six months has been precipitous. Unfortunately, we likely have not yet neared the bottom. We are in a serious muddle with the captains of infrastructure companies refusing to treat stockholders with sufficient candor. The situation is worsened by the fact that neither the FCC, the Congress, nor the Bush administration has a clue that anything is seriously amiss.

    Trying to bring some focus to our dilemma, this essay points out that the edge-controlled organizational principals of the Internet, where no central authority dictates precise behavior, can develop, given some assistance from government, into an alternative model to that of the central control of the "Walled Garden" and monopoly OS. This alternative model is centered on exploring a slowly emerging reality of customer owned networks. Telecom as an asset and not a purchased service.

    After a decade of the commercial Internet, that system, while it has adopted many Internet technology tools, has ownership constraints and customer structures that have supplanted the open, anarchistic and innovative style of the edge controlled Internet in its early commercial stages. This alternative, innovative model remains most alive in the Canadian's work on customer owned networks. Despite Chicago's Civic network, this model is not like to take hold in the United States unless and until national policy makes possible an arena of the local ownership and control of infrastructure. Preserving the opportunity for local ownership and control, will permit experimentation with the innovative research into reducing the cost of high speed networks as has been done in Canada. The combination can create an environment where the next bandwidth killer application is much more likely to emerge. (Some do suggest however that new telephony, video and audio capabilities in XP also may have an impact on bandwidth demand.)

    This essay argues that sound public, economic and technology policy depend on the development of the alternative model in order to ensure the survival of diversity in our media and telecommunications. Finally, it argues that the introduction of the customer owned network model is likely the only means of returning liquidity to the telecommunications section any time soon. Pump priming in local communities could begin to do much to soak up the extra capacity. Thus, the establishment of a public sector alternative is in the interests of many large IT companies. It may also be an idea whose time has come. According to the June 25, Interactive Week: "today more than 260 sate and local governments operate telecommunications businesses ranging from cable television to local phone and Internet services." (See here).

    Note that sixteen findings of fact summarize this essay on pages 45-46 below. Readers are asked to study them before finishing this essay. Editor's note: They are also available on the web at

    Let's begin the journey that has brought us to these conclusions.

    As the "smoke" clears, serious issues exist, both at the application and the infrastructure levels. Above TCP/IP, at the application layers we have the Microsoft death star slugging it out with the AOL-Time Warner death star. Huge vertically integrated, would be monopolies of transport and content or OS and content. Not the most efficient way to do business, but because of market share, both companies have great inertia as they move forward. Control of content by those who also own the distribution channel is a serious public policy issue. If you have any doubts, see for example the statement by Scott Cleland in a June 27 Precursor Group Advisory: "Invest in the 'legal' exercise of market power. Precursor believes an investment 'sweet spot' exists with companies that have the market power to unilaterally lessen competition and raise prices, but do not abuse it to the extent that it results in serious antitrust enforcement. The best examples are: AOL-TW bundling "tele-applications" like instant messaging; cable integrating vertically into broadband services and content; . . . ; and finally maybe Microsoft bundling "tele-windows" applications into XP."

    On June 28th San Jose Mercury, Technology Editor, Dan Gilmor commented. "Microsoft and its acolytes are purring with delight today, at least publicly. But, they didn't win the overwhelming victory that you're hearing about. Not even close. From the ruling (PDF file, about 420K) by the U.S. Court of Appeals for the District of Columbia: Given the limited scope of our disqualification of the District Judge, we have let stand for review his Findings of Fact and Conclusions of Law. . . . . The court may have overturned the breakup order. But by the same unanimous ruling it accepted Judge Thomas Penfield Jackson's findings of fact and ruling that Microsoft a) has a monopoly in the relevant market; b) used unfair business practices to maintain its dominance; and c) has to be restrained from further abuses." Gilmor continues: "What Microsoft has won is time. It can continue its brutal practices for a while longer, building into Windows and Internet Explorer and Office any and all technologies that will further solidify the monopoly. It can extend its reach into new markets, using its $30 billion in cash (which grows by a billion dollars a month. The company surely figures that it'll be entirely above the law by the time the law catches up. It may work. It has so far." Ironically if the opinions of some who have seen Windows XP are correct in addition to driving a new generation of corporate PCs, its exceptional capability in real time messaging, voice (through its sip client), and video could also begin to soak up some of the industries surplus bandwidth.

    This battle is also one over control. Control of the ICANN DNS root. One had better watch whether the Internet Routing Registries are arm-twisted into accepting contracts with ICANN requiring recipients of IP number to use only the ICANN root for their DNS or loose their IP numbers. If ICANN wins the DNS wars we shall see the price of maintaining websites rise. We shall also likely see attempts at websites licensure. To the extent that these issues are all entwined with moves by conglomerates who see their intellectual property threatened by the Internet to build safe controllable distribution channels, the rest of us need to be afraid. Walled Gardens are indeed being built to minimize the possibility of the linking of opinion and speech beyond what the concentrated corporate global media are willing to allow.

    Moving down to the infrastructure level, we must realize that the "nethead" versus "bellhead" dichotomy may have outlived its usefulness. The bellheads have spent billions on building their own IP networks. A sober look at reality says phone companies will not turn into stupid network Internet companies over night as their only path to survival. The are doing quite well as phone companies thank you. In fact, how well they do seems based, more and more, on the facilities that they own. Every telecom player has built TCP/IP data networks and in this respect is playing in the internet game. Depending on its customer base, one companies network will be structured a bit differently from that of its competitor. But contrary to the expectations of some pundits, its hard to see any "pure" internet plays out there. Hard as Level 3 and a few others tried, the PSTN was simply too big to swallow. Everyone had access to both Internet (nethead) and circuit switched (bellhead) technology and everyone used that access.

    No Longer Internet Versus Telco

    Despite the protestations of folk like George Gilder, there is no longer any such thing as technology that is inherently "right" for use by "netheads" and different technology, the choice of which condemns "bellheads" to abject failure. For example, gigabit Ethernet versus SONET. Since products first introduced by Cyras and Cerant in 1999, the cost curve of SONET for lighting new fiber pairs is way down and performance substantially increased. (Much more about this in next month's issue.) SONET is more likely to be used by the "bell heads" simply because of who their customers are and experience gained in operating their voice networks. Rather than a tool chest of ideologically right or wrong technologies, what we have is the ongoing development of a general tool chest of transport technologies that is delivering astounding increases in available price performance for moving bits. Telecom providers' choices of tools from the tool chest are governed by their understanding of who their customers are, what their geography of service for those customers is, and whether or not they own the physical fiber on which they will deliver the bits.

    It no longer makes much sense to think of Internet versus telco. Business model and approach is determined by the mix of facilities owned. Plans to force the sharing of facilities simply haven't worked. The last two or three years have taught us that ownership of the physical transport media is likely to be the major determinant of architecture and characteristics of one's network. The Internet began as a collection of voluntarily interconnected private networks. There was no single owner of the Internet and no one to establish top down rules as in the case of phone companies with their vertically integrated infrastructure that was centrally managed and controlled in the manner of the 19th century railroads. However, the multiple national and metro fiber nets that have been built since 1995, have been perhaps just as expensive to build as the railroads of the 19th century.

    This infrastructure was built quickly on what turned out to be the myth of Internet time as well as bandwidth. Build it and the customers would come. The problem was that suddenly you had the carriers building data networks to sell to enterprise customers that were to a varying extent subject to ILEC control in the local loop. You had the new Greenfield players going after the same business market. The question was how would these businesses go up against the local loop. Some like Level 3 and Metromedia tried building their own local loops. Trying to do some reasonable portion in five years of what the ILEC had done over a century, they went deeply in debt.

    Others with business plans in hand sold policy makers on the idea of the CLEC. Competitive Local Exchange Carriers were to be structured on the assumption that legislation could convince the incumbents to grant 'equal access' to competitors. We now have had five years of experimentation with the theory that local loop competition is obtainable by forcing the owners of the local loop to enable competitors to sell access at the IP layer and above. Such was the CLEC idea. By the summer of 2001 the CLEC concept of competition has crashed and burned.

    The ILEC is more entrenched than ever in the local loop. Companies like Next Link were supposed to bring competition at least to office buildings in its metro markets. Instead it is deep in debt and cash strapped and will likely soon be joined by Yipes!, Telseon, and Sigma rushing into metro markets where owners of the fiber itself such as Metromedia Fiber Networks and Level 3 are ready to sell against them.

    What one has therefore at the transport level are the ILECs as firmly entrenched in the huge PSTN as ever. Some business CLECs are still trying to compete for enterprise services against the ILECs. The old line carriers are being squeezed in the middle as new competition drains their long distance voice revenues and everyone joins in a throat cutting frenzy of using fiber, wireless and even copper to bring broadband to the enterprise. Welcome to the chaos of the 'free market." A structure that can't sustain itself has been created. As it sorts itself out the critical public policy questions will be first whether government does anything to maintain open and equal access to physical rights of way. The second critical issue will be what policy does to move toward enabling customer owned networks.

    How the Internet Arrived at Its Current Position

    Over the last decade the technologists have who have created the internet revolution have carried Moore's law into telecommunications for the first time. Although for political and structural reasons, prices do not yet reflect this, they have given us technology that could bring a gigabit of bandwidth into every home school and business in the nation for $100 a month. They kicked off an enormous speculative frenzy that is now in the process of collapsing. The irony is that after a trillion dollars of investment the difference that has been made in our lives may be turning out to be relatively trivial. The greatest revolution in the history of telecommunications that came in with a roar six years ago looks to have been rendered impotent by a combination of political and ideological short sightedness. The technology is there. The fiber is there. The tools to deliver the bits are there. There's only one small problem. They are for the most part tantalizingly out of reach. The ILEC local loop monopoly in the wake of a grand failure of public policy stands unchallenged. For some the thought that the ILEC may soon provide long distance is seen as heralding a return to the pre 1984 monopoly.

    The internet revolution has led us to this state of affairs where over the ILEC ramparts we can just make out our promised broadband Nirvana. It is cordoned off in fiber rich trenches belonging on a national scale to perhaps two dozen fiber network companies who bet the bank that if they only borrowed enough, they could obtain first mover advantage and build a global infrastructure that they could control. Having grossly overestimated the growth of demand for Internet bandwidth, they borrowed billions to enable themselves to meet the size of the most expansive reality they could imagine. With everyone racing to grab the free riches of their new start ups' IPO, it became in the interest of each new entrant into the field to maintain the myth of bandwidth demand because then there would really be room in the marketplace for them as well. Everyone did it because everyone else was doing it and - for a while - they got away with it.

    In the US a lack of regulation left freedom for rapid technology evolution. It also made gathering of information across the industry difficult enabling perpetuation of the bandwidth myth. Isenberg's analysis of the Stupid Network in the summer of 1997 was 'spot on.' But, while it spoke the truth, it also helped to nurture an unhealthy arrogance among the Internet faithful. One which said that since the cost of building and operation of the stupid network was 100 times and eventually 1,000 times less than the money needed to power the intelligent network, the stupid network would inevitably drive the intelligent network, wedded as it were to the preservation of its antiquated copper local loop, out of business. The figures were writ large said the net heads. It was time for the bell heads to realize they were the dinosaurs and obediently die. The detachment from reality was profound. Even as PSI was sinking under a billion dollars of freshly accumulated debt, Bill Schraeder, PSI founder and CEO allegedly told his December 2000 Christmas party that the company that would collapse and go out of business long before PSI did was AT&T. Possession of the politically correct technology, Internet technology, was thought by the net heads to be the requisite ingredient for success. The libertarian philosophy that ran strongest through the net heads reassured them that their Internet was not regulatable nor controllable. Lawrence Lessig in his seminal 1999 book, Code and Other Laws of Cyberspace argued persuasively to the contrary. Most did not listen.

    It was the bell-headed dinosaurs who in the end turned out to have a political intelligence that has trumped the netheads. The national infatuation with what lobbyists portrayed as a free market gave us the 1996 Telecom Deregulation Act. Restrictions on combined ownership of transport and content and on ownership of telecom broadcast and print media in geographic markets were thrown out in exchange for a baby bell promise to allow competitors access to their networks. The act created whole new families of jargon. RBOCs became ILECs to distinguish themselves from the newly arisen and supposedly nimble CLECs. No one chose to notice that the freedom given the guardians of the local loop was the freedom to merge and use their guaranteed rates of return to buy each other up. The net heads had no guaranteed rates of return. They had instead a blind faith that their technology was so disruptive that it would sweep everything else away. They seemed not to notice that they had had to do such things as gain access to DSLAMs under the physical control of their ILEC competitors in order to give acceptable service. They seemed to believe that the ILECs really had no choice but to sit back and watch the CLECs eat their lunch. Northpoint is gone. Covad is on the brink and what broadband Internet has reached American homes is primarily from the Cable companies. Eight RBOCs have become four giant ILECs with legal and lobbying staffs and boundless flows of money to point the finger at the foolish net headed Internet innovators.

    Barred from long distance, with the help of Al Gore and Jay Rockefeller, the ILECs made their shrewdest move in the 1996 Telecom Reform Act. The emergence by then of the first two to three thousand independent ISPs demonstrated that barriers to entry into the internet flavor of telecommunications at the edge of the network were low. Given the libertarian bent of the times one of the most remarkable triumphs of the bell heads was their successful passage through congress of a government controlled program straight out of the best socialist traditions of the 1960s. The Schools and Libraries Corporation was created and merged with the remnants of the universal service fund with the task of making sure that all of Americas public schools and libraries had access to the Internet. Although the enabling legislation made it very clear that the means of connection to the Internet that this tax would support was to be technology neutral, the RBOC-friendly legal staffs at the FCC were able to implement a fix. As Dale Hatfield who was the Director of the FCC Office of Engineering at the time told me in June of this year it was the FCC's own lawyers who looked at the legislation and assured the FCC's technologists that the legislation gave the FCC no choice but to restrict the use of the funds to buying local wireline connectivity services, year after year after year. Spread spectrum wireless radios that could create an infrastructure independent of the ILEC local loop were forbidden.

    With a single flourish of the pen the ILECs were handed a new local tax that now exceeds 8% on every phone bill, business and residential in the United States. Starting at just over two billion a year, the SLC is now pouring more than four billion a year almost entirely into ILEC coffers. The massive paperwork required to receive funds from this huge bureaucracy has meant that few small locally-owned or community-based ISPs have managed to receive any of the subsidies for connecting schools. What the program has done is taken control of local school and library internet connectivity away from the communities that pay for it and delivered it into the hands of a federal bureaucracy where congress with requirements for filtering software reduce all local standards to the lowest national common denominator. Unfortunately, few understand how the SLC has defrauded them by removing from the community's control what the community is paying for anyway. Moreover the program distorts the market by incentivizing the local communities to utilize the ILECs (to the detriment of community-based providers) while it provides national subsidies for ILECs to further amortize their obsolete copper infrastructures and learn the internet business. It forces all Americans to provide a second subsidy to the ILEC's copper local loops. In doing so it ensures that the United States will never be able to repeat the condo fiber build pioneered by the Canadians. It ensures that local taxes enforce remote stock holder guaranteed rates of return instead of enabling local communities to buy or build their own locally owned and controlled fiber infrastructure.

    Cisco pares 20% of its work force, Lucent teeters on the edge of bankruptcy. Nortel sheds 30% of its work force and ties General Motors for the largest quarterly corporate loss in history. The makers of the hottest new optical transport technology are on the ropes. Level 3 lays off 25% of its work force and Global Crossing losses 50 percent of its value in less than a week. We are downing in a glut of unlit fiber and suddenly unsalable 'new and wonderful' Internet transport technology. We may be on the edge of a 500 billion dollar fire sale of net head Internet technology.

    On the Edge of a Fire Sale?

    The stark question that may soon be asked both here and in Canada is who will be allowed to buy? Who is able to buy? For the last 3 to four years the Canadians have had a ready answer. Their schools and municipal governments, through a fortuitous combination of services, have been building customer owned dark fiber nets. Canada's national policy has been well preparing its citizens for what they now face. An era of customer-owned and operated networks. American policy on the other hand has left us with an infrastructure where, when the fire sale begins the ILECs, with their guaranteed rates of return, are likely to be the only ones with enough cash to purchase and then hold what they have bought off the market to ensure that they enjoy another 20 years amortization on their copper loops.

    We might fantasize that, if we were actually capable of enunciating a public interest in Washington DC, lawmakers might craft a means to return the school and library fund taxes to the local citizens who pay for them and provide some guidance on how local communities could select and acquire the most advantageous and appropriate solutions for their communities instead of having everything go to the ILEC and its distant stock holders. The only problem is that, unless they could be found among local ISPs, we may not have local technology leaders who have the potential ability to help local communities carry out their march to local telecommunications independence. We were developing them within schools and within local ISPs before the SLC inserted the ILEC fifth column into our communities. If we look for leadership nationally we may find that missing as well. We might hope that the pending five year review of the Schools and Library Corporation would provide an opportunity for congressional inquiry into the current situation.

    The Internet revolution has come and, in the absence of intelligent public policy, it may have already gone. It has created a tremendous burst of innovation. A burst that now looks to have been mismanaged to the extent that the people who did the least to advance the new technologies seem most likely to control them. We may be left not with the edge-controlled intelligence of the Stupid Network but with the central authoritarian control of the likes of AOL Time Warner owning the content and leasing the conduit from "ma bell," while together they carefully plan to influence public thought and "monitize" every customer minute. This happens while Microsoft plans to use its OS monopoly to let it insinuate its software into controlling all our personal data while charging us a monthly rental fee for what we used to own and control ourselves. Divestiture of the ILEC local loop is an attractive looking answer to our problem. But Verizon with its political muscle has just killed that in Pennsylvania. In the absence of an extraordinary upheaval, the bell heads may well have won.

    Is Public Policy About to Become as Important as Technology?

    Given the situation that we have just described, it seems increasingly inevitable that we are facing two choices. The imposition on telecommunications in general and the Internet in particular of the centrally owned top down telco controlled model where everything is run via central authorities like a vertically integrated railroad. Under such a model the demand for profit by those exercising the central control will stifle any further serious innovation. This is the current situation in the United States. It stands in stark contrast to the direction that Canada has just outlined for itself in its new National Broadband Task Force Report.

    We have argued before that locally owned infrastructure free to be run by local schools governments and research institutions with continuing innovation of the internet protocol and tool set is for the national and global economy in the 21st century what the interstate highway system was in the middle of the 20th century for the US. Tim Denton and Francois Menard two of Canada's leading netheads understand this very well.

    What they enunciate below in a few short paragraphs is a description of why the internet is fundamentally different from the telephone system. This difference is overwhelmingly important and it is understood by almost no one in the United States where the libertarian fundamentalists have allowed the debate to be framed in terms of free market success and failure. The result is that the older, wealthier forces of the centrally top down controlled telephone system are in command and in control of access. In the US public policy is subsidizing the ILECs through the SLC tax to put schools and libraries on the internet. Public policy instead needs to be enabling community control through finding ways to make community ownership of local networks feasible.

    For several years - especially in Canada the debate has been over open access to carrier owned facilities. In the United States this debate has rarely made it out of the barrel of specialist think tanks or lobbyist cabals. The debate has simply never reached the level of general public awareness. Experience has begun to convince those who have fought to define public access as mandate to be able to attach devices directly to carrier owned fiber that - short of a network of government financed inspectors and enforcers - access to facilities owned by others is simply unworkable. There will always be things that the carrier owner will do to favor its operation of its own physical media above that of everyone else. With facilities ownership the storied "level playing field" is a pipe dream.

    The concept of customer owned networks is just beginning to come into focus. Therefore it is not yet possible to point with certainty to any set of preordained outcomes. We may watch what is happening in Canada and see that more and more bandwidth at prices far cheaper than the carries can provide is an integral part of the equation. Edge control and local experimentation will be enabled. For example, if a municipal network owns its own fiber, it will have its own set of customers who come to it because it will be able to provide a service of a kind that ILECs, carriers or IXCs find it uneconomic to provide. Customer owned lambdas more over will enable users to waste bandwidth and do things that are not feasible in the commercial world of companies struggling for enough customers to pay the interest on their bonds.

    Such customer owned networks will have to provide their own operations staff and assume responsibilities that many other customers of commercial networks would not want to do. One danger of the current consolidation is that the will likely be fewer clueful local ISP staff to assist in operation of new local public network. Oc course they could outsource to those local universities whose staffs have a clue. Unfortunately those universities are generally in Canada. In the US we have Internet 2. Like the schools and libraries corporation, Internet 2, in the name of subsidizing meritorious bandwidth usage, has primarily helped to offset the cost of high speed pipes from the traditional telcos. Research and development on spreading the deployment of broadband and making it cheaper has never been a serious concern within Internet 2.

    At the most fundamental level, we maintain that public policy must begin to address the question of moving access to the physical network level. In other words it must decide how to deal with those entities wishing to build customer owned and operated fiber networks. Aside from the current severe problems of the industry, the motivator for these actions is the fact, as we have seen, that many of the private owners of buried fiber may not be able to meet the interest payments on their debt. It appears likely that we will offered a short window in time to build a customer owned distribution and access system that will use new transport technologies not yet viable in the commercial network. We maintain, that we should take as our model something like the individual ownership model enabled by the federal home mortgage agencies. Yes, it *is* time legislative bodies in North America, Europe and the rest of the world to offer their citizens an alternative to the alarming concentration of media and transport that they have just given to the corporate titans. The US Congress has an opportunity to show the rest of us that it has individual constituents. It must build an insurance policy to maintain individual rights. It must recognize that small scale edge controlled publishing is in danger. It must realize that edge controlled entrepreneurship enabled by the rise of the Internet is in danger. It must show that it cares about small business as much as AOL Time Warner. If it is not to preside over the final demise of deeply held beliefs that the individual is sovereign, it must give the rest of us an opportunity to launch a lifeboat. It must ensure open access to physical rights of way and enable the edges to experiment with alternative models to the corporate Walled Gardens being built to fence the rest of us in.

    It must do this because we made an important choice in this country for individual ownership and local community control of the important physical necessities critical to the local economy. For example, housing, cars, telephones and local highway systems. It has been our economic preference and it is a wise one, that individual ownership stimulates and local control generates far greater economic incentive and economic activity and much higher gross national product than does central economic planning at the national level. By far the more robust choice is to enable the end user to own and be responsible for as much of the physical system as is possible and doable. It may be that local stock companies arise in the way that local water and electric companies exist where only those directly served by the compa ny are shareholders. In any case it is crucial at this singular window of opportunity to find the political will to empower our traditional American model of individual ownership and individual responsibility for as essential property as possible. It simply works out better in the long run for our national prosperity and social order. But, given that national and even international scope of the problem, action by our Federal government will be necessary to enabling positive community action.

    The question becomes one of whether the government in the US or in Canada steps in with a policy to enable small businesses or local communities that want to buy fiber to operate their own networks to do so. We could design a national fiber bank set up to guarantee payments to cash strapped national fiber networks that sold fiber strands to local governments, schools, hospitals or even businesses that wanted to operate their own networks and interconnect with each other in the manner of the internet. Given that the government has enacted a four billion dollar plus aid package for the incumbent local exchange carriers in 1996 in the form of the national schools and libraries bureaucracy, it doesn't seem to be too much to do to ask it to make possible entrepreneurship on the part of local communities, including community ISPs. It can do this by taking the user taxes now collected from local communities and given to the new handful of mega ILECs and initiating programs that reward those who want to become entrepreneurs within their own community via the building of customer owned networks.

    Doing this would not only provide a means of stabilizing the current chaotic market. Doing this would also set up a very healthy local market and resale structure of local communication networks and channels through local resellers who look to a federal loan guarantee and standards agency modeled after FHA or FreddieMAC, for instance. Very few would argue that local housing should be better served if sales and rentals were managed from the corporate headquarters of giant monopoly national and international corporations. By opening up the possibility of community control, would also help to ensure that diversity of telecommunications content is maintained. The government would merely enable liquidity in the bandwidth and fiber market and in so doing would also enable continuing edge controlled innovation.

    The Canadians Understand

    In Canada the Canadian government is completing the build out of the new highway system with a requirement of open access to fiber highways built at least in part with public money. Blind obedience to the idol of the "free market" in the United States is resulting in the exportation of leadership in the foundations of Internet technology to Canada. The short article below explains very clearly what is happening.

    The Broadband Task Force Report Votes for the Internet

    By Timothy Denton and François Ménard June 20, 2001

    On the 15 th of January 1991, Tim Berners-Lee made the World Wide Web program free for anyone to pick up, and thus began the revolution that made the Internet a household word. He did not need the permission of the owners of the Internet to make it available for free to everyone. There are no owners of the Internet. Just like the English language, it is available to all who wish to use it. At its core, the Internet is an Esperanto for computers.

    The most important fact about the Internet is that no one can tell you in advance what you can put onto it, just as no one censors novels before they are written. The creators of e-mail and web browsers, together with the web itself, did not need to ask anyone's permission. New music sharing formats (Napster and Gnutella) are out before the copyright interests can stop them. Being an open standard, a common language, the net allows new services because no one has to seek the permission of anyone to innovate. This openness presents a fundamental challenge to the legacy systems of telephones and cable television. They run on the principle that the owners of the networks define what services are. They are highly specialized for a very few purposes, whereas the Internet is a general language enabling computers to communicate packets, without specifying what they are to be used for. No one owns that language; it is shareware. The best analogy of the Internet to the telephone or cable systems is the contrast between highways and railways. The owner of the highway does not determine, beyond very broad limits of weight and size, what shall travel on the highway. No one files a flight plan; you get on and off as you choose. No one exercise central control over traffic, with the result that there are crashes and traffic jams. Drivers coming on traffic jams re-route themselves. The same applies packets on the Internet.

    Railways require central control. The path and movement of trains are centrally managed. The owner of the railbed owns the cars that travel on it, or has strict rules of interconnection with other railways to pass traffic. You cannot put rail wheels on your car and get on the track. The ideal of the railway, as with the phone system, is a completely pre-specified result: telephone calls go through. It is highly conservative to change because the whole is engineered for a narrow set of purposes. Not so with the Net. The chief fact enabling innovation on the Internet is that the owner of the transmission path does not own or control the vehicle (application) that uses it. This has allowed creators to innovate and people to select what will succeed or fail.

    The National Broadband Task Force, which published its report a few days ago, had a choice before it: whether to extend the old model, or opt for the new, where the users of the network rather than the owners define what services will be. To their great credit, they have opened the door to the new model.

    At the back of the report ( is the key recommendation. It says that, for any build-out of a network employing government funds, there must be what is called "open third-party access", and more important, it specifies what is meant by that term. A third party is you or me, and by defining the terms on which people can get onto the network, they are establishing the bill of rights for people to use the networks of the future.

    Among those rights were: The owner of the network cannot knowingly plan for a limitation in the types of services which could be offered to other service providers or end users; · End users could freely choose among different service providers; · Neutral meeting points have to be provided. ( english/appendix_g.htm)

    This is the adoption of the Internet model. Open access permits innovation without permission. It stands as a remarkable advance in government policy. It puts Canada well ahead of the United States, where federal lawmakers are proposing to entrench the old model in a new telecommunications bill, at the request of the telephone companies.

    There are reasons to think this Internet-friendly model could be thwarted. Canada has adopted open-access policy before, in the case of cable television, and four years later we have still made no real progress in defining what it could mean. In this case, however, there is reason for hope: with the right conditions set down from the beginning, new Broadband Task Force Votes for the Internet. It decrees that new networks can be built on new principles, and avoid the constrictions of the legacy networks.

    Anyone who appreciates what a difference the Internet has made in their lives should encourage the government to implement this part of the report. The Task Force has voted for the future. Let the government know that the Task Force recommendations on open access have the support of people who use the Internet.

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