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.
# 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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