Dismantling trade barriers is hard and controversial work. That was clear during the World Trade Organization ministerial meeting in Seattle in 1999 that failed to launch a new round of world trade talks against a background of civil unrest. Subsequent meetings of the World Bank and the International Monetary Fund proved no easier. But it is also clear that greater openness has brought economic benefits to the world in recent years, and that further liberalisation would create more benefits, many of them accruing to the developing world.
That is why the fourth WTO ministerial meeting due to be held in Qatar in November will be a decisive point for the world trading system. Once again, ministers from 140 trading nations will decide the next steps for the global trading system. Some WTO members are convinced of the need for a new round, and are in the process of examining what its nature should be. Others, especially among non-OECD countries, remain to be swayed. A stalemate in Qatar is not an option.
OECD member countries have begun the long fight to win over the sceptics to a new round. They are engaging their public in ongoing debates on the costs and benefits of further trade liberalisation, including how best to improve working conditions and the state of the environment worldwide. The OECD countries have also been engaging developing countries in confidence-building discussions.
These discussions have taken place in many fora, including the WTO, the World Bank, the IMF, and the OECD. The OECD Trade Committee also held consultations with non-governmental organisations before the Seattle meeting and in October last year, with further consultations planned before the Doha meeting. It is clear that the developing countries have much to gain. Worse, without new negotiations, they might lose out.
While one can debate the appropriate context for addressing the concerns of developing countries, there is no disagreement about the critical need to respond to them. Access to OECD markets for developing countries’ exports is still the single most important trading issue between the two groups of countries. Despite all the rounds of negotiations, too many trade barriers remain – reducing them is one more reason why new multi-lateral trade negotiations are needed. Tariff peaks and tariff rate quotas in particular are difficult but necessary issues to tackle, along with trade facilitation questions such as the removal of “procedural barriers”, for example in the field of customs clearance or automatic licensing of imports.
Research shows that there is still ample scope for benefits to accrue from multilateral tariff liberalisation. A recent OECD study estimated the potential gains from full tariff liberalisation by 2010 at US$1,200 billion in 1995 prices, equivalent to 3% of world gross domestic product that year. Developing countries as a group stand to gain more from multilateral tariff liberalisation than OECD countries, with aggregate gains amounting to nearly 5% of GDP in 2010.
Eliminating restrictions on exports of services from developing countries would also be likely to bring significant gains worldwide. Greater liberalisation would allow many more developing countries to “export” at least the significant labour component of services, particularly in industries such as construction, distribution, transportation and environmental services. This is particularly true of what is dubbed “mode 4” trade, where expertise rather than equipment is exported; for example in the case of an Indian computer programmer who is asked to travel to the client’s country to carry out a contract.
The key challenge is to find the best way to address all these concerns, and enable the multilateral trading system to evolve rather than to stall. It is clear that the larger the number of issues to be negotiated, the greater the possibility of achieving balanced results for each and every member. However, among the “new” issues proposed, such as investment, competition, environment, labour or social questions, a distinction should be made between those already embodied in existing WTO agreements, those which require new rules, and those which clearly do not belong to the multilateral trading system as defined and administered by the WTO.
So should there be a new round? Unfortunately the word “round”, a heritage from the WTO’s predecessor, the General Agreement on Tariffs and Trade (GATT), seems to evoke unpleasant memories of forced agreements or undue expectations. Certainly negotiations are needed, for all the reasons mentioned above, but isn’t it time to recall that when the WTO was created at the end of the Uruguay Round in 1994, one of the definitions of this new organisation was as a “permanent forum of negotiations”? Indeed, a leaflet published by the WTO soon after its creation said, “No more rounds”.
The negotiating agenda should be permanently evolving, in line with the needs of the world and the concerns voiced by members. Unlike the GATT, the WTO has established a rule of regular meetings of ministers, and it should be their task to assess the results of these ongoing negotiations periodically. We should forget about “negotiating rounds” and replace them with “implementing rounds”, drop the oft-cited mantra of “early harvest” and instead talk about “regular harvest.”
As any farmer would tell you, you can only harvest what is ripe. In WTO terms, this should mean that every single member must be satisfied that the results, even if they are partial, are balanced. But ministers must also be willing to implement, and periodically review, the outcome. This will certainly require a very strong political will, perhaps even stronger than that needed to take the plunge of launching another round of trade talks.
There is still the question of how far developing countries are committed to the multilateral trading system and to new negotiations. Developed countries should be clear among themselves not only about the subjects up for negotiation but also how far these negotiations should go. Developing countries do not wish to be dragged into an exercise that, in the end, might force them to approve open-ended commitments. To avoid this, some of the developed world’s ambitions, and above all rhetoric, about a new round should be scaled down. The most important immediate question is how this is to be done.
Finally, it seems important that if the industrial countries want developing countries to take them seriously from the political, economic or even moral point of view, market access issues will have to be tackled in such a way that decisions evoke enthusiasm in the poorest countries, not suspicion or disappointment. Benefits and action should be immediate and not postponed to a remote future. The economic reality of the efforts made has to be taken seriously.
Developed countries have advocated the multilateral trading system and its openness as the way forward for a global world. But “global” means that the system must work for everyone. In the prologue to Goethe’s poetical drama, Faust, the figure of God sighs, “Man errs, till he has ceased to strive.” The OECD must strive to make openness work. We want history to remember Seattle as a false start and Qatar as the way for the future.
• International Trade and Core Labour Standards, OECD 2000.
• Trade and Competition policies: Options for greater coherence, OECD 2001.
• Tariffs and Trade: OECD Query and reporting system, CD-ROM, OECD 2000.
• OECD Development Centre Policy Brief No. 18: Multilateral tariff liberalisation and the developing countries, OECD 1999.
©OECD Observer No 226/227, Summer 2001