WTO talks: What’s really at stake at Hong Kong?

Vice-chair of the OECD Trade Committee

Every now and then the world community faces an opportunity to draw on past lessons and grasp the moment to make real progress together. Right now such a moment could present itself in the guise of the Ministerial Conference of the World Trade Organization which takes place in Hong Kong, China, 13–18 December. No responsible government can afford to let this opportunity slip. 

The current round of trade negotiations, which are shaped by the development agenda set at Doha in 2001, hang in the balance. This should not be so. Naturally, after collapsed talks in Seattle in 1999 and Cancún in 2003, people are asking uneasy questions. Will Hong Kong, China be another failure? And if the talks collapse, will the multilateral trading system under the WTO survive?

Multilateralism may be a mouthful to pronounce, but it describes a simple ambition: A trading system which everyone builds by reducing the costs and maximising the gains of trade for all. It sounds great in theory, but demands patience and real leadership in practice. Bilateral deals and regional arrangements may seem faster, but while they may have a role to play, they are far more limiting and cannot achieve what a multilateral approach can: a truly global market.

Only multilateral discussions can deliver the substantive trade liberalisation of politically sensitive items that is needed to bring about the necessary structural adjustments for growth and development to take place. Trying to resolve agricultural subsidies between a few players, for instance, merely alters the distortions, but does not remove them. Nor do regional approaches provide effective dispute settlement procedures. Weaker countries simply lose out.

The prospects at Hong Kong, China will depend on the result we are seeking. Not walking away from the table prematurely or stirring division would be a first positive sign of determination to make progress. A challenge could come from growing protectionist feelings arising from anti-globalisation movements. This should be resisted. The world is not black and white as some seem to fear. Further liberalisation of cross-border trade will not result in complete winners and losers, but a lack of progress in the round would reinforce distrust and make further liberalisation difficult.

Of course, most political leaders understand that there is no real alternative to multilateralism, yet they are in danger of taking the World Trade Organization for granted. Strong backing for the round is needed. The voice of those who genuinely support the WTO should make themselves heard more clearly.

Is Hong Kong going to be another failure? The fact is that the negotiations have already come a long way since Doha. Cancún, though it ended prematurely, helped set the agenda, which consists of agriculture, non-agricultural market access, services, trade facilitation rules and development-related issues. Members of the WTO finally agreed on a framework in July 2004. In agriculture in particular, the elimination of export subsidies, the principle of greater reductions of higher tariffs and deeper cuts in larger subsidies were all agreed.

Now, ministers at least have a clearer idea of where they want this round to go. Even if they disagree on the level of ambition for the forthcoming meeting itself, the summit will not necessarily be a failure. What the ministers must do is set forth a sound basis for liberalisation negotiations that will take place thereafter. The general view is that they will have one year to conclude such talks. This should be achievable, but it will not be easy because too much attention has been paid to agriculture and not enough on other areas, such as services.

The popular mantra that agriculture is the engine of the round, while partly true, is misleading. What really matters is the political determination to correct the uneven trade landscape we find ourselves in. Liberalisation has progressed at different paces for different countries and in different sectors, reflecting previous trade rounds.

There is much less wiggle room left as a result, making it more difficult than in the past to make trade offs within any given area, whether agriculture or services. Negotiators will have to seek complex cross-sectoral trade offs as a result. Meanwhile, they cling to the age-old method of striking deals through tit-for-tat trade offs. They will not be paying attention to the overall balance of the Doha round results or the linkages between the different areas of negotiations until afterwards, if at all.

Why is this? One reason is political reality, as WTO members bid to sell (and absorb) sensitive agreements. But perhaps the most important element missing in the negotiations is the true multilateral dimension which can only come with the full and active participation of those that will gain the most from the talks. At present, the negotiations are led by US and EU again, with Brazil and at times India being the main interlocutors.

For instance, will Brazil, the EU and the US further open their markets to all members or just to each other? Those who need the multilateral system the most, in particular the emerging economies of Asia and the poorer developing countries in Africa, watch from the sidelines, unable to push the round. A common sense of ownership is still missing. Yet, without wider involvement and support, it will be almost impossible to muster the necessary momentum in Hong Kong, China for a truly multilateral breakthrough for development.

Multilateralism is not an end, but a means. What is at stake at the forthcoming summit and beyond is world development via trade. Every effort must be made, however late, to bring the global community on board. We have been here before and people will only become fed up if we fail. It is time to build on the lessons of the past and score some real successes for a change.

©OECD Observer, December 2005

Economic data


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