*{[Letter to the OECD Trade Chairman]
Paris, 6 March 2001

Dear Mr. Chairman,}

The members of the BIAC delegation to the Consultation of our respective Trade Committees
would like to congratulate you again on your assuming the Chair and thank you for offering
us the opportunity to engage with the Committee. We considered your debut in the Chair
particularly thoughtful. We were especially gratified by the attendance-enhancing effect of
your election and will work to provide equal impetus from our end. We look forward to
increasing our individual, informal contacts.

Because of the pressures of time, we were unable to elaborate or specify to a satisfactory
degree on many issues of importance. While our numerous BIAC papers and submissions
contain further detail, we offer this letter to capture the dynamic of the meeting, to push the
envelope and to stimulate additional dialogue with the members of the committee.

Of all the questions, the most frequently asked and extensively answered were those
pertaining to the enthusiasm of the business community for the multilateral trading system
itself and for the prospects of a new Round. I believe that our solid reliance on the WTO rules
based system was and is clear. It is our prime and our preference. In addition, we do see great
potential value in other vigorous efforts at liberalisation in goods, services and other relevant
elements of the commercial algorithm, e.g. investment. The APEC meeting in Manila had
direct value to the success of the ITA in Singapore. The US-Canada FTA and NAFTA
negotiations have illuminated numerous issue areas currently under discussion in Geneva. We
are convinced that regional efforts that are undertaken with a clear reference to the
multilateral system will most likely result in a generalisation of progress.

With regard to a Round, we have no hesitancy in saying that there is broad support in the
OECD business community for a jump-start to get the system moving again. After all,
business was extensively present in Seattle to express that interest. Companies and their
leadership have invested a great deal in encouraging closure to the accession process for
China.

*{Mr. Luzius WASESCHA
Ambassador, Delegate for Trade Agreements
WTO World Trade
State Secretariat for Economic Affairs
CH-3003 Berne}

Business associations have consistently called for a Round, and of course, it is within those
institutions that democratic debate forges the consensus that underpins those declarations. Are
there companies and sectors that are less sure of the benefits that they will see? Of course
there are; that is always the case. Are there those who are still wary of a Round that may
attract provisions and promises to solve all the world’s ills on the back of the trading system?
Of course there are; those fears need to be dispelled by a resolute crafting of an agenda that
recognises the magnitude of the workload prescribed by the on-going agenda, the need for
considerable liberalisation on many fronts and the clear constraints of the dispute settlement
mechanism.

When we say a “shorter” Round, we do not mean abbreviated in any sense other than
duration. That implies, preparation, clarity as to scope, an understanding of the inclusive
balance required for fruitful participation and firm political commitment to produce results.

While some are searching for nuances, the position of the OECD business community with
regard to labour and environmental issues has not changed.

The Singapore Declaration was right on the mark. Labour matters are most appropriately dealt
with in the context of the ILO. There has been considerable effort to invigorate the
instruments and the processes of the ILO, with considerable success. There can be no
legitimate object for an effort to inject labour terms into the WTO other than access to
sanctions for “teeth” or enforcement. That is totally unacceptable to the business community.
We are convinced that it is unacceptable to a majority of member governments.

With regard to the environment and health, we have confidence in the SPS disciplines as they
stand. Science-based risk assessment and management combined with peer review is well
recognised and has proven to be effective. Protectionist winds are blowing on the door, and
governments should continue to guard the effective status quo. In addition, the WTO
Committee on Trade and Environment appears to provide an adequate forum for discussion
and should not take on any pretensions for rule making that stretch the WTO into the purview
of multilateral environmental agreements. The WTO could not carry Kyoto.

The support for the WTO is centred on a consensus about commercial issues. WTO should be
cautious about moving beyond this consensus to non-commercial issues.

With regard to precaution, we see this concept as one of science-based risk management, with
government exercising its assessment role as close as possible to the appropriate expertise and
as far as possible from political whim. We oppose any interpretation of the “precautionary
principle” that does not rely on a risk-based, science-justified approach as embodied in the
SPS Agreement and, in particular, any effort to weaken or reopen Article 5.7 of that
agreement. We see potential abuses of the precautionary principle as a tangible threat to open
trade and innovation, and we urge the OECD Trade Committee to counteract tendencies in
this direction in the on-going OECD horizontal analysis of precaution.

Our observation of the workings of the WTO dispute settlement mechanism tells us that it’s
future success will depend on member governments availing themselves more frequently of
the consultative facilities of the Organisation and that fewer differences be escalated in the
form of cases that result in hardened positions and bitter conflicts. The dispute settlement
process has established a good record overall. However, it is clear that there can be problems
with member compliance in highly political issues.

We presented the rudiments of our case with regard to investment rules. As you know BIAC
was a vigorous supporter of the OECD effort to launch a set of rules for investment and
continues to believe that the goal of a “world trading and investing system”, consistently
robust, is simply common sense. The source of all these commercial transactions is the private
sector, companies. Within each company, the balance of trading and investing is a matter of
resource allocation.

To have one side of the balance governed by a clear set of negotiated rules and the other side
dependent on ad hocery does not make sense. In an era in which investment was equated with
exploitation by many countries, such a failure of multilateralism could be explained. Now, the
benefits of investment are better understood, and the contrast in terms of development
between those countries that have welcomed investment and those that have not has never
been more vivid.

We believe that it is also increasingly well understood that investment brings with it a broad
range of societal benefits with few negatives. The OECD, the World Bank and various other
centres of facts and analysis have poured out the categories: consumer choice, competition to
bring down prices, diffusion of technologies, management know-how, employment, fiscal
contribution (both direct and through employee payments), high standards in employment
practices, a level of sophistication in environmental management systems, international
corporate governance, etc.

There is a small investment footprint in TRIMS and a significant presence within the GATS.
That we move forward is imperative.

We were asked how those countries that genuinely remain dubious as to the benefits of
investment might be persuaded. We believe that those are relatively few, and it is more than
curious that they are unconvinced by the facts and analysis. There may also be a number of
countries that see the negotiating process as an opportunity for high stakes leverage to win
concession in other areas. While the very nature of the WTO process may make this
unavoidable, those countries need to understand that resistance to investment is a poor choice.
Trade transfers wealth relatively slowly. Investment spurs the pace.

For the “high stakes” group, we believe that there is an essential step that is necessary, and
that is an “up-front” package of liberalisation on the part of the more developed countries
directed at the product classes most important to the less developed world. Call it catch-up, if
one insists, but we submit that without such a move, much other negotiated progress will be in
jeopardy. This will take political backbone. Some would call it leadership.

Also, BIAC was asked to define what is meant by developing countries. Business does not
have such definitions. This is the domain of governments and international agencies such as
the United Nations. We seek a WTO system that will set common and predictable trade
disciplines for the broadest number of countries, and we believe this approach is the best way
to bring the benefits of open trade to all countries that have the capacity to participate. We
recognise that capacity building and extended phase-in may be necessary for some disciplines
and in some countries.

We were asked what we were doing to convince society as a whole of the value of a new
Round. Without repeating the terms of our commitment recounted above, it might be added
that business demonstrates its support for the world trading system and its process of Rounds
by dramatically increasing its use of the system every day through company strategies to
address global markets. That which is called globalisation is quite simply the advance of the
market economy around the globe. It has long been accepted by business that Rounds are the
main vehicles for increasing liberalisation and adapting rules to new market developments.

Thus, we would argue that, just as the “management” or conducting of the Rounds is
essentially a responsibility of government, so is that of preparing them. That includes the
preparation of the polity. Governments have the facts produced and arrayed by their various
analytical bodies. They have the surging reality of global commercial transactions and a
plethora of estimates of global economic potential. What they need is the political will to
address the anti-growth critics and move forward more confident of their political choices
with regard to national and international stewardship.

We were asked about further liberalisation in goods. This subject was understated because
our presentations were on selected topics because of time constraints. We elaborated on some
points in our paper of last October. There are enormous opportunities for further
liberalisation. Indeed, many of the product categories of interest to the “developing” world
would be important to a significant number of developed trading partners. Further, there is an
opportunity to extend the ITA in significant ways. There are peaks that need reduction and
tariffs that should be eliminated. New efforts, however important, never dim our enthusiasm
for lower tariffs and thus lower costs and less market distortion.

As noted, BIAC did table a paper on the subject of agriculture which asserted the enormous
scope of that sector and the importance of societal interest in raising the level of movement
through the total food distribution system.

The notion of certain sectors producing positive societal externalities sufficiently profound
that they should be accorded special protection was mentioned in passing. It was asserted that
there are many sectors that might legitimately lay such a claim, including those that are
universally accorded recognition as enabling for the fundamental advance of the economy as a
whole, such as information and communications technology. It is ironic that the ICT is a
sector that has been pushing for and largely received a zero protection status.

Our abbreviated presentations did not fully address our priority on services. For some time,
BIAC has pressed for higher priority for services and movement within the context of GATS.
Further, we urge the OECD member governments to support, at the March meeting of the
Council on Trade in Services in Special Session, movement to the next level, that of going
beyond the technical phase to set the modalities and begin actual negotiation of requests and
offers.

While the focus of our Consultation turned out to be the Round, we were mindful of the
Committee’s work programme on services. Understanding the constraints of budget on what
is all helpful work, we would underscore our support for the focus on domestic regulation and
Mode 4 movements of natural persons. Finding ways to liberalise services trade while
maintaining legitimate regulatory missions is the fundamental issue that permeates all
services sectors and the OECD has unique resources in this area in its work on trade and
regulatory reform. Among BIAC member companies there is an acute need for rules to permit
short-term, cross-border movement of skilled personnel in a great many sectors. If OECD
countries can find a path forward to respond to developing country interest in this element of
the GATS negotiation, it may assist the advancement of other OECD objectives.

In the presentation by Mr. Sorlie of the Norwegian Federation of Industry, we addressed the
fundamental role of the spread of innovation via the trading and investing of businesses. This
role is extensively treated in Chapter 2 of the BIAC paper, Innovation and Global Growth.

However, we believe that it merits special mention, in the context of specificity for the
agenda, that business recommends that the commitment to the substance and particulars of the
TRIPs agreement be rock solid. As with any provision, there is room for country requests for
extensions of time. The linchpin of success is assistance to laggard countries for effective
implementation, not erosion of property protection. Nothing could be more crippling for the
massive investments in research, experimentation and innovation.

Ideally, WTO members would see liberalisation to be per se in their interest, conduct ongoing
discussions on the range of issues before the body, add new issues as appropriate and
meet every three years or so to harvest what was ready. Seemingly, governments are still
committed to the notion of broad trade-off based Rounds. So be it, we need new round
launched as soon as possible, hopefully at Qatar, recognising that it would be a serious blow
to the WTO if there were another failed launch attempt as at Seattle.

One last thought might be helpful. We spoke extensively of sustainable development and
sustainable growth. Our point is that all efforts with regard to sustainability begin with
growth. Business is as interested in sustainability as any part of society. We are not businesses
that are operated for tomorrow’s horizon. Many confuse an attention to the rapidity of change
as an obsession with the short term. For, if a company dreams only of twenty years from now,
the competition will devour it while it is dreaming.

But, sustainability of the financial health of the firm is no more important that of the
employees, shareholders, creditors, suppliers or the environment and communities in which
we operate. We do not see sustainability through the prism of any one of those constituencies.
The CEO of a company, in a manner not dissimilar to that of a Prime Minister, strikes a
balance every day for the long term.

*{Thank you for your warm welcome on February 13th and we look forward to a productive
relationship.

Sincerely,

Frank J. Farfone
Chairman, BIAC Trade Committee
Vice President, Dow Chemical
Company}