MULTILATERALISM IS THE ANSWER

Last week leaders, ministers, officials and hundreds of journalists met in Santiago, Chile for the annual conference of the 21 members of the Asian Pacific Economic Co-Operation Forum (APEC). President Ricardo Lagos Esobar of Chile hosted this informal non-binding group which now represents the majority of world economic power. President Lagos was a Minister in the Alliende government that was brutally overthrown by the military with approval from the CIA. How the world has changed in thirty years, mostly for the good. APEC, formed 15 years is an important idea. It was the first forum where China, Hong Kong and Taiwan sat at a table together. At the time a major breakthrough. In Bogor, Indonesia, leaders in 1994 agreed to achieve free and open trade and investment, developed countries were to meet a 2010 deadline, and developing countries 2020, targets which will not be met.

It’s good that leaders and ministers called for a conclusion to the Doha Development trade round. Again. Good stuff which we hear every year, let’s hope negotiators in Geneva get the message. Yet, while leaders called for a multilateral result for trade liberalisation, they quickly go to bilateral meetings and emerged to joint press conferences about bilateral free trade deals. Great media, good TV opportunities. Front page stories that reflect well on Ministers. All roads lead to China which is now in negotiations with free trade deals with Asean, Chile, New Zealand, Australia and others. I’d be doing the same if I were still a Minister. Ministers like to sign things, it’s costly to be left out. So what’s all wrong with this? It’s OK if you are in, but it does create trade diversion, it’s a poor substitute for a WTO deal, and some have already agreed to hundreds of product exemptions. Normally, agriculture, it can create conflicting rules of origin and increase transaction costs. A web of protectionist discriminatory agreements, gives politicians and bureaucrats levers they can’t refuse to use, and has the potential to divert diplomatic energy and focus on the big WTO deal. Some argue that all this will force action at the WTO in Geneva, a tactic of competitive liberalisation. It’s not popular to point out the weaknesses of such arrangements, it would be like booing at the Special Olympics.

Recently, the World Bank produced a serious report on the result of (RTA) Regional Trade Agreements which have exploded by 400% since 1990 to about 230. It concludes what we all know. It’s the poorest, most capacity-restrained countries who lose the most. RTA’s have not resulted in helping developing countries reform their customs service, improve their communications or transport infrastructures. The report suggests that in some places it’s worked against the interests of poor countries and suggests that U.S. and EU pressure to sign up poorer countries to embrace strict intellectual property rights and abolish capital controls may not meet their current economic needs. The Bank agrees that there are great gains to be made for developing countries when they liberalise their service industries, but would gain a lot more by opening their markets to worldwide competition, not just through narrow agreements. The big players have more muscle in bilateral deals and trade has not increased for some small players. A more generous offer on agriculture by the big players would be the best way of moving things through the multilateral WTO system. Some of the most protectionist agriculture nations were at APEC, and refuse to budge. There has been some modest progress at the WTO but ambitions are now so low that at the next Trade Ministers’ meeting in Hong Kong, Ministers will congratulate themselves on a minimum outcome, which is like winning a bronze medal for jumping over a matchbox.

The important thing is to maintain momentum however slight, even if the round was to conclude next year. There’s one other issue WTO members must decide on and that’s who is to be the Director-General of the WTO? Something I know a little about. Even if you win on all criteria, the WTO being a consensus-driven organisation, the loser can veto the winner. I ensured before I left the WTO that my successor had an office and access to paper 3 months before I left, to maintain the process. This should be done again. It would be dangerous to the modest ambitions at the next Ministerial meeting if for some reason the Director-General selection process dragged on. That is possible but hopefully not going to happen this time.