TCS Daily

Go-Around Redux

By Charles Finny - March 10, 2006 12:00 AM

The EU's Commissioner for Agriculture and Rural Development was in town yesterday and I had the pleasure of both hearing her speak as well as talking with her afterwards. Mariann Fisher Boel painted a picture of a fragile WTO Round which is a long way from being able to secure even the offers on agriculture that are currently on the table.

I asked her what can countries like Australia, New Zealand and U.S. do to secure the outcome on agriculture — particularly the possibility of eliminating export subsidies? She replied that the best thing that we could do is work harder to secure better outcomes on non-agricultural market access and on services.

It is a brave EU Agriculture and Rural Affairs Commissioner that comes to speak to a New Zealand audience. Not everyone that met her last night was pleased with the Commissioner's message. But she did confirm a point that I have been trying to hammer home for over a year. There are three key pillars to the Doha Round — agriculture, industrials and services. They are linked. Without good progress in all three areas, don't expect a good result in any one area. And without a good outcome in all three areas, there is a risk that there will be no outcome at all from this Round.

In my last contribution, "Going Around the Protectionists," I suggested that the negotiation of a range of plurilaterals was the way to achieve the good result that is needed on services. I believe that the same tactic could usefully be employed for non-agricultural goods market access (often shorthanded to "industrials").

In 1998 and 1999 APEC showed the way by identifying nine sectors which were of importance to developed and developing economies alike, of importance to APEC and EU, and on which APEC's willingness to liberalise is already on the table. The initiative didn't gain traction because the Seattle WTO Ministerial meeting ended in failure and because the EU chose not to play ball. However, if the EU is genuine about wanting a good outcome on industrials from the Doha Round, I can think of few better places to start than by taking up where things were left in 1999. An added benefit is that China and Taiwan have already implemented their offers on these sectors as part of their WTO accession packages. There will be no risk of free-riding from these two important trading economies.

The nine sectors identified for complete liberalisation were:

  • Chemicals;
  • Energy;
  • Environmental goods;
  • Fish and fish products;
  • Forest products;
  • Gems and jewelry;
  • Medical equipment and instruments;
  • Telecommunications equipment;
  • Toys.

I am a bit rusty on the figures but I recall that these sectors accounted for something like 26 percent of U.S. exports and 31 percent of EU exports in 1999. Free trade in these sectors would therefore seem to me to be pretty much win-win for both sides of the Atlantic.

Many developing countries have strong export interests in most, if not all these sectors. And in some, there is still heavy protection in some markets. If this protection were reduced in a sector such as fisheries — and if it were combined with improved discipline on subsidisation in the sector (fisheries subsidies are a major cause of over fishing and stock depletion and an outcome from the WTO Round on new disciplines looks possible) — this would be win-win-win. It would be good news for developing countries, good news for trade in fish products and good news for the environment. An agreement to liberalise environmental goods would achieve the same result.

Now, I know that there are economic purists out there that don't like the idea of sectoral liberalisation (they don't like free trade agreements either). But don't forget that this proposal is being made in the context of a WTO Round, and that good outcomes are being sought for agriculture and services also. And on industrials I would not be suggesting that the list of products subject to liberalisation be restricted to these nine sectors. I would personally welcome a zero tariff across the board. Unfortunately, this might have to await a new WTO Round or a new WTO.

So Europe, you say you want an ambitious outcome on industrials — let us see you do your part, by agreeing to some "zero-for-zero" outcomes in these nine important sectors. And New Zealand, Australian and U.S. negotiators — the challenge for you is to listen to what Europe is saying, take it seriously, and agree to promote an ambitious outcome, such as that proposed in these sectors, over these crucial few weeks of negotiations in Geneva. If you don't, do not expect to get away with pinning the blame for failure in these negotiations on Europe. You will all be held to account.

Charles Finny is CEO of Wellington Regional Chamber of Commerce in New Zealand.


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