TCS Daily

Asia Matters Most

By Alan Oxley - September 11, 2003 12:00 AM

CANCUN, Mexico -- Bringing China into the global market economy is the single most important challenge facing the global economy and the most important challenge facing the WTO. It is more important than reform of world agricultural markets.


You wouldn't think so reading the press in the lead up to the Cancun Ministerial meeting. It has concentrated on what the WTO could do for Africa and AIDS drugs. That has all been a great hoax. There was little the WTO could do. Its business is trade, not health.


This is understood in Asia. Economies are joining the WTO to build market systems and growth through trade. At the Doha WTO conference in 2001, China and Taiwan joined the WTO. At Cancun, Cambodia and Nepal will join. Laos and Vietnam are negotiating their accession.


What if after joining the Organization these countries find that the WTO is anything but an organization for trade and open markets. It would not only be a trust betrayed. It would be one of the greatest acts of delinquency in international policy in modern times.


The drugs and aid issue was an unwelcome development in the WTO. In upped the ante for playing politics with trade. Unlike most other international organizations, the WTO has stuck pretty closely to its core business -- making rules and enforcing them to promote free markets in trade. It has a tradition for being business-like which is unusual in international diplomacy. Ministers will only meet in Cancun for four days. UN meetings run for weeks.


Western NGOs have made the WTO a political target since the Uruguay Round of negotiations ended in 1994. The WTO meeting in Seattle was their greatest moment and they have succeeded in demonizing the WTO to an entire generation in the West.


They now demand that the core business of the WTO be anything but trade -- environment, labor rights, consumer rights even human rights. If these issues are tagged on trade, in particular making them conditions for access to markets, this will wreck the WTO. Its most precious asset is the right it gives countries to trade free of politics, free from threats of trade sanctions unless they change environment policies or raise labor standards, free to use their comparative advantage to trade and prosper.


This is why Zhu Rongji took China into the WTO. Communist economics suppressed comparative advantage. China's leadership wants the free market to develop in China. The WTO supports that process and guarantees that China can export what it produces best and others can export their best to China. Everybody understands the fundament importance of integrating China in the global economy. It will be one of the most important developments in the twenty-first century.


Putting China into the WTO two years ago was an enormous gamble. China is not yet a full market economy. Its capacity to operate properly in the WTO depends entirely on completing the transition to a market economy. So does its growth. And if China remains a mixture of command and control and free market economic systems, its economy is so large, it would risk corrupting the core values of the WTO.


This is the magnitude of the importance of making China's membership of the WTO a success. It is vital that the capacity of the WTO to serve its free market mission is not weakened.


This does not seem to enter calculations in Brussels. It seems happy to play politics with the WTO as well, either oblivious or unconcerned about the consequences. It pretended the drugs controversy was a real issue for the WTO. It is willingly pushing proposals from NGOs such as Greenpeace, the Worldwide Fund for Nature and Oxfam that trade sanctions be used to enforce environmental objectives and raise labor standards and that the WTO accommodate these interests.


The EU has said these are backburner issues at Cancun, but two months ago the EU made it formal policy to push labor rights in trade negotiations. And at Cancun, Trade Commissioner Pascal Lamy has announced that the EU was considering using trade sanctions to stop illegal logging.


Cancun is all about getting the Doha trade negotiations back on track. They have a long way to go yet before significant results can be secured. Whatever result comes from the Doha Round, it must have the effect of reaffirming that the core business of the WTO is to foster free markets through trade and nothing else. Too much is a stake to fiddle with the WTO. Let us hope Trade Ministers in Cancun don't lose sight of the big picture.


Alan Oxley is host of the Asia Pacific page of TechCentralStation and a former Ambassador of Australia to the GATT.


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