WTO Talks To Continue in Geneva after Seattle Failure

The failure this month of the Seattle Ministerial this month effectively ends the prospects for a comprehensive round of trade negotiations in the foreseeable future. Although negotiations on services and agriculture technically are required to begin next month, despite the failure, the exclusion of other issues realistically ensures the negotiations will be inconclusive.

However, U.S. and WTO officials are eager to resume multilateral negotiations on a comprehensive agenda for a new round through low-level meetings to be held in Geneva next week. President Clinton in particular said he remains "optimistic that we can use the coming months to narrow our differences and launch a successful new round of global trade talks." It is doubtful that in the near future negotiations between low-level officials will resolve any of the substantial differences that remain between WTO members with regard to the agenda for the new round.

The failure of the Seattle Ministerial can primarily be blamed on the intransigence of the world's major economies on issues of domestic political importance and a general failure to include developing countries in substantial negotiations. Many developing nations took offense to being excluded from last-minute, "green room" negotiations between the major economies, and complained that the WTO's existing system marginalized their interests. We believe that developing countries will demand increased participation in WTO policy-making and will play an increasingly important role in future trade negotiations. The effect of the protesters and general mayhem outside the negotiations is also not to be ignored as one of the causes for the Ministerial's failure.

After a long-simmering disagreement between the United States and Japan about whether antidumping should be included in any future round of trade negotiations, the U.S. government expressed increasing willingness to compromise as the Seattle Ministerial appeared increasingly likely to fail. The U.S. government previously had declared that under no circumstances would antidumping be considered, but eventually displayed a willingness to discuss the international application of antidumping rules. We also note the personal effort at compromise made by President Clinton when he contacted Prime Minister Obuchi via telephone to request a softening of Japan's position on this issue. However, when no softening of the Japanese position was forthcoming, it appears U.S. negotiators reverted to their prior "no negotiation" posture and pushed hard for the removal of any reference to antidumping in the Ministerial's draft declaration.

The turnaround in U.S. position, however brief, is especially remarkable considering that only several weeks earlier Department of Commerce Undersecretary for International Trade, David Aaron, called Japan the "greatest dumping" nation in the world, accused the GOJ of deliberately pursuing the inclusion of the antidumping issue as a means to thwart the WTO Millennium Round, and declared that Japan's true intention was to divert attention from its own trade constraints on fisheries, timber and agriculture.

However, a mild softening on the antidumping issue appears to be as far as the United States was willing to compromise on this issue and other "key" agenda disputes in Seattle. There were no reports of U.S. negotiators showing any willingness to compromise with regard to the inclusion of labor standards and worker's rights. We believe this U.S. posture is at least partially due to domestic political considerations, including a potential labor union revolt against Vice President Gore's presidential campaign if the United States was to abandon its demands that labor issues be included.

Japan filed a complaint with the WTO regarding the U.S. International Trade Commission's (ITC) antidumping ruling against Japanese hot-rolled steel. The ruling assessed import duties of up to 67 percent. The GOJ complaint challenges the U.S. action on several grounds, including: (i) an error in the U.S. Commerce Department's method of measuring the dumping margin, and (ii) the ITC's review of only one area of consumption within the United States as part of its examination of the effects of Japanese imports on U.S. commerce. In general, GOJ officials allege that the Department of Commerce and ITC engaged in "double standards" in the treatment of information submitted by the U.S. steel industry versus data supplied by Japanese industry.

Under the Enhanced Initiative on Deregulation and Competition Policy, the U.S.-Japan "Structural Issues Working Group" met in Tokyo during November to discuss deregulation and regulatory reforms on a wide range of issues. Echoing prior requests, the United States asked for increased anti-monopoly enforcement and greater transparency in the Japanese regulatory system. A statement released by the U.S. embassy in Tokyo described the talks as "productive" and expressed satisfaction with the progress made.

On other fronts, the GOJ recently rejected a U.S. request for an extension of the U.S.- Japan flat glass agreement set to expire at the end of this month. The U.S. government also announced its intention to pursue additional bilateral insurance talks with Japan, beginning in January.

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