The term collective preferences sounds innocuous, when compared to, say, dumping or subsidies. Yet, it prompted the business community to declare itself surprised and concerned about the intensity of the discussions on this topic within the European Commission, the EUs trade arm.
These discussions give the impression that the EU is no longer bound by the WTO and could unilaterally decide not to abide by its commitments, Jurgen Strube, President of the Brussels-based Union of Industrial and Employers Confederations of Europe (UNICE), wrote to Mr Lamy this spring. UNICE describes itself as The voice of business in Europe. Its members include the Confederation of British Industries.
Rather than back down, Mr Lamy returned to the attack this week, in a long, carefully-worded speech on the emergence of collective preferences in global trade, and its implications for regulating globalisation. Politicians and trade negotiators, he said, should bear in mind that while free trade is a tremendous force for growth and employment, it also has a destabilising impact on the economic and social fabric.
Just what are these collective preferences Here is Mr Lamy, the sociology professor: Collective preferences are the end result of choices made by human communities that apply to the community as a whole. Such choices are rooted in the cultural and religious values and traditions of the country in question. In Europes case, these include multilateralism, environmental protection, food safety, cultural diversity, public provision of education and healthcare, precautions in the field of biotechnology and welfare rights. The EUs collective preferences for food safety led it to ban imports of American beef from cows treated with hormones.
WTO rules, according to Mr Lamy, do not impose uniform standards for products any more than they dictate the conditions of production. Provided there is transparency and no discrimination, a country cannot be accused of protectionism just because it applies specific health, plant health or technical rules on access to its market.
The challenge, facing both developed and developing countries is to design an open trading system that everyone accepts and that safeguards legitimate social choices, he said. Taking account of collective preferences will influence the content of future negotiations, in his view.
Meanwhile, a special safeguard clause could help integrate collective preferences into WTO rules. A country invoking the clause would have to demonstrate that there really was a coherent underlying social demand, Mr Lamy said, and that the measures adopted did not restrict trade more than other measures capable of satisfying the same demand. He said such a clause would have to be accompanied by a compensation mechanism that would partially compensate the affected exporters and test the determination and strength of the collective preferences of the country resorting to the clause.
For Mr Strube, the mechanism could transform the WTO into an organisation with two classes of members: those who can violate the rules and pay for it, and those who cannot. Ficci and CII have already joined hands with UNICE in organising the India-EU Business Summit in the Hague on October 13. Let them join forces to challenge Mr Lamy on his view of collective preferences.