TCS Daily

Is the WTO Relevant? Can It Be?

By Charles Finny - November 14, 2005 12:00 AM

With major players doing their best to dumb down expectations for the WTO Ministerial next month in Hong Kong, it looks increasingly likely the meeting will produce, at best, an outcome far short of expectations set earlier in the year. Some are even questioning the value of having a meeting at all.

But while recent developments are a serious set back for the WTO and ultimately the global economy, it is still worth trying for an outcome, even if only to cement with legal bindings commitments made unilaterally and regionally since the conclusion of the Uruguay Round, ten years ago. This achievement would give a firmer foundation on which members could ponder the future of the Organisation. Members must decide whether the WTO should seek to do more than devise and police rules, set by members, for the conduct of international trade in goods and services. The Doha Development Agenda raises serious questions about the WTO's ability to facilitate further liberalisation globally.  

The fact that the WTO is having difficulties is disappointing, but it should not come as a surprise. It is a very different beast from its predecessor the GATT. It is much larger and more diverse in its membership and the items on the agenda are much more complex than in the pre-Uruguay Round era.  

Moreover, developments in the global economy have to a certain extent left the WTO behind. In particular the impacts of capital flows, technology, electronic commerce and of course the proliferation of regional and bilateral free trade agreements over the past twenty years have shaped the global trade agenda. The WTO in theory has a role in policing these FTAs, but has failed to enforce its standards. WTO rules do have an impact on investment, but this impact is at best marginal. Developments in technology and the growth in electronic commerce have largely been unaffected by WTO rules -- thank goodness.  

There is a disconnect between the negotiating agenda and the real needs of the business community. Instead of an aggressive pursuit of the best possible outcome for export interests, most countries are more focused on protecting vested interests at home. Little wonder that very little of any real value has been offered yet in the WTO negotiations on non-agricultural market access and services (in services no real liberalisation seems to have been offered). But without a chance of progress on non-agricultural products and services, it is difficult for the EU and other agricultural protectionists to justify to their farmers that the pain that they will supposedly suffer from increased competition will be more than outweigh the gains in other parts of the economy. Trade officials should focus on exports first and consult export interests fully.  

Over the next few months it is going to be critical to empower the WTO Director-General to do all he can to unblock negotiations and to improve the process. Having Pascal Lamy in the job is a huge step up, and the membership should take full advantage of having someone of such obvious capability in the position. Strengthening the role of the Director-General in the negotiations and listening to his recommendations on reforming the institution and the way in which it negotiates would be beneficial.  

Finally, the focus has to stay clearly on the way forward, not on the blame game that inevitably accompanies a failed Ministerial meeting. Yes, Europe could have offered a bit more and with fewer conditions on agriculture, but the ridiculous insistence by many participants on achieving progress on agriculture before offering anything in other areas of the negotiation sure hasn't helped the EU to deliver more. The full membership of the WTO should take responsibility for the poor progress so far and move forward, with a collective will to liberalise in 2006, not to become bogged down in politicking and moral grandstanding. The fate of the WTO as it currently operates lies partly in the balance.  

Charles Finny is CEO of the Wellington Regional Chamber of Commerce and formerly director of New Zealand's Ministry of Foreign Affairs and Trade China FTA Task Force.

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