Asian business views on WTO

I spent a cou­ple of days in the last week at a con­fer­ence orga­nized by the UN Inter­na­tion­al Trade Cen­tre in Mani­la (Philip­pines) in which 45 busi­ness lead­ers (CEOs of export com­pa­nies, indus­try asso­ci­a­tion exec­u­tives) and gov­ern­ment offi­cials from 16 Asian and Mid­dle East coun­tries dis­cussed thes­tate of the mul­ti­lat­er­al trad­ing sys­tem and the Doha round of trade nego­ti­a­tions. The con­fer­ence ranged over almost the whole agen­da of nego­ti­a­tions in WTO. The par­tic­i­pants, because of their back­grounds, were well-informed and like­ly to influ­ence nation­al approach­es to the nego­ti­a­tions. So their opin­ions pro­vide a good barom­e­ter of Asian region opin­ion about the WTO sys­tem. Only Chi­na was miss­ing; it’s del­e­gates were unable to take up the UN’s invi­ta­tion. Per­haps they sensed the mood of busi­ness in oth­er cout­nries on tex­tiles and cloth­ing. They are glad that the WTO nego­ti­a­tions are back on track fol­low­ing the agree­ments reached in Gene­va last July. But in the poor­est coun­tries they are wor­ried that the ter­mi­na­tion of the long-stand­ing tex­tile and gar­ment quo­tas on 1 Jan­u­ary, 2005 will put a bid dent in their export earn­ings. Most busi­ness lead­ers are wary about the prospects for gains from WTO agree­ments in goods or ser­vices mar­kets and they have a sense that the rapid growth in the num­bers of bilat­er­al and region­al agree­ments is bad news for open mar­kets . They are keen to see progress on trade facil­i­ta­tion and were sur­prised that the sub­ject was con­tro­ver­sial at the WTO Canc√∫n meet­ing last year. Here’s some more of my impres­sions from the discussions:

The July ‘framework’ package of agreements on how to move the WTO negotiations past the disagreements at the Canc√∫n Ministerial meeting was welcome, although most of those present at the conference were sceptical about the progress that would be made on either agriculture or industrial market access agreements. Most of the officials were focussed on maintaining the status-quo in developing country markets: not indicating any high level of ambition for reducing developing country trade barriers and offering to argue in minute detail about the need to maintain margins of developing country tariff preference that—in reality—offer little commerical advantage. The business leaders were more interested in accelerating liberalization in developing country markets: after all, that’s where developing country exporters are seeing the most rapid growth.

In the agriculture negotiations, the agreement to eliminate export subsidies has already been assimilated into business expectations. To impress the participants there had to be more: progress on reducing or eliminating domestic supports in industrialized countries and more open industrialized country markets. Officials dominated the discussions on agriculture and quickly fell into an eye-glazing negotiating mode; they talked only about their vulnerability as food importers and the impossibility of rapidly reducing their high market-access barriers on account of the number of ‘subsistence farmers’ whose livelihoods would be jeopardized by open markets.A customer focused approach is going to help them succeed in those markets, this is what they use

The textiles and garment markets in Asia are very jittery as the 1 January 2005 deadline for the elimination of the supplier-tied import quotas in North Ameria and Europe approaches. Footloose garment manufacturers and investors, especially, are looking hard at their bottom-lines and nervously at China. Most expect China to grab the opportunity to expand supply into the industrialized countries once the quotas now allocated to countries such as Bangladesh, Nepal, Cambodia, Pakistan and Philippines are opened up to competitive supply. Officials and garment industry executives at the conference were uncertain how to maintain national textile and garment export performance.  China probably can’t hold onto it’s current competitiveness forever (market success tends to push up the costs of labor, for example) and it can’t undercut all its competitors while commanding the same returns (Chinese export returns _per tonne of textiles are falling). So the market adjustments that flow from the 1 January ‘big bang’ won’t all go China’s way. But there’s much at stake for other Asian countries.

WTO negotiations to open other industrial product markets have not made any recent progress. The so called NAMA (“non-agricultural market access”) talks have been in stall mode for the past eighteen months while negotiators tried to re-start the agriculture talks. Even the title of these negotiations seems a nonsense in Asia where industrial products make up more than eighty percent of imports and exports of goods. In the absence of real opportunities to make a deal, most of the talk is just positioning in which developing countries are seeking to preserve their easy options (see #1).

Many business leaders are worried that the rapid growth of discriminatory bilateral and regional trade agreements in Asia—a phenomenon that has been accelerated by offers from China—is going to make it more difficult to do business. I was surprised to see how clearly they ‘got’ the problems that discriminatory agreements pose for the global trading system. They sense, correctly, that these agreements have a lot of transaction costs associated with them in the form of additional rules of origin and complicance requirements.

The discussion on trade facilitation excited a lot more interest from the business leaders than the more traditional WTO agenda items. They recognized that TF is about competitiveness: having efficient ports, small administrative and regulatory overheads and access to on-line creation and clearance of documentation allows a firm to cut costs and achieve higher returns. They aked, however, how the WTO could create a reciprocal agreement to achieve minimum standards in this area.

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