TCS Daily

WTO and Lowered Expectations

By Charles Finny - March 27, 2006 12:00 AM

March 22nd in Washington (March 23rd in Wellington) was an interesting day for trade policy. At the Hyatt Regency Hotel in Washington, USTR Ambassador Rob Portman gave a speech to the Agribusiness Group of Washington. At the WTO Headquarters in Geneva, US Ambassador Peter Allgeier spoke at the Eighth Trade Policy Review of the United States. Here in Wellington, the President of the Combined Trade Unions took a shot across the bow of Government for its role in the WTO services plurilateral negotiations, and a shot at me for regarding India's participation in the negotiations as "positive".

Ambassador Portman's comments in Washington were of particular interest for two reasons. First, he continued to emphasize that 30th of April is a firm deadline for establishing modalities on agriculture and Nama (while noting that the WTO negotiations have a history of missed deadlines). But he said he views April 30 as the "real" deadline because, without progress on the modalities, negotiators will not be able to meet another important target -- concluding the Doha round by the end of 2006.

What was interesting was the absence of the word "full". The term agreed at the WTO Hong Kong Ministerial was "full modalities". It was the term used frequently up until the unsuccessful London meeting of the so-called G-6. Now we see reference to "modalities". Might this suggest that the way forward is agreement on "some modalities" not "full modalities" by 30 April to keep the WTO talks alive? Watch this space.

This potential dumbing-down of expectations seemed to be confirmed by some of Portman's other comments, which suggested "some of the energy [in the negotiations] was dissipating a little bit." The US State Department Information Service went so far as to suggest in its summary of Portman's comments that "Portman has expressed concern that hope for forward movement in World Trade Organization talks is somewhat fading."

The Allgeier comments in Geneva were interesting in their confirmation of the links between US trade policy and security policy and their clear suggestion to the world that should the WTO Round fall over the United States has a well developed 'plan B' -- on the bilateral front. Of course, Allgeier went to pains to stress that the bilateral route was not an alternative but a complement to the WTO process, but the message will hopefully not be lost on the rest of the WTO. For New Zealand, of course, the message is a bit depressing as we are not even on the long list of those who have been, or who are, negotiating with the US on the bilateral front. This is despite the fact that Allgeier made the point of emphasizing that one of the criteria they use in selecting their free-trade negotiating partners is a clear, consistent commitment to WTO-based trade liberalization, and it is worth noting that our partners include some of the strongest supporters of MFN-based liberalization in Geneva.

For New Zealand, a FTA negotiation with the United States has long been a key trade policy goal -- one that was being pursued long before the WTO Doha Round was launched. But as it looks increasingly as though the Doha Round is unlikely to deliver much beyond the liberalization that key players are already proposing for domestic policy reform reasons, and as New Zealand is beginning to lose market share to key competitors in markets where we don't have FTAs negotiated (in the US to Chile and Australia, and in Korea to Chile, and maybe soon the US) a "plan B" is looking increasingly necessary. The FTAs under negotiation with China, ASEAN and Malaysia may provide some breathing space, but we can't afford to lose market-share in our largest export markets. If the US keeps on saying no to New Zealand then I suggest that New Zealand start turning its attention elsewhere. Why not Europe? And we have to keep trying to interest Japan and Korea in our type of high quality, comprehensive FTAs. This will be a challenge but medium-term I am confident that we (and Australia) can get there.

The fact that the New Zealand Trade Union movement is starting to get worried about the WTO services negotiations is the most encouraging news I have had for a long time. It suggests that there is a prospect of real progress in these negotiations, and that some liberalization might be discussed.

New Zealand has a Labour Government. The influence of organized labor is even greater on the New Zealand Labor Party than it is on US Democrat Administrations. So it will be interesting to see how the Government will react. I hope that the Government will continue to remain as active as it has been in recent weeks in the plurilateral negotiations on services in Geneva. Frankly, I don't yet think that organized labour or any other groups with vested interests have anything yet to fear from the WTO negotiations, but we certainly shouldn't be ruling out any possibilities until such time as we have available to us details of potential liberalization being offered by important trading partners.

The comments by the New Zealand Combined Trade Unions have highlighted the absurdity of a position adopted by the New Zealand Government in 2003 when preparing New Zealand's initial services offer for the WTO negotiations. This contained as its fourth principle the following:

Fourth, the government does not intend to make any initial offers to change actual current policy settings (including for local government), and would be well within them. In other words, whatever decision is ultimately made as to the coverage of New Zealand's initial offer, at most we would be offering to commit to, on a conditional basis, settings that reflect our settled policy in certain areas. There is sufficient negotiating coin in this respect.

Being charitable, I note that this principle was thought up in 2003, and it related to an "initial offer". However, the logic of this position, if adopted widely throughout the WTO membership would see no liberalization of significance being put on the table in these negotiations.

I am therefore grateful to the President of the New Zealand Combined Trade Unions for raising concerns about the continuing relevance of the New Zealand 10 guiding principles. It is time that this guiding principle was officially removed from New Zealand's negotiating position.

Charles Finny is CEO of the Wellington Regional Chamber of Commerce.


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