Let's hope WTO ministers see common sense in December

PUBLISHED : Tuesday, 14 June, 2005, 12:00am
UPDATED : Tuesday, 14 June, 2005, 12:00am

The weekend deal between China and the European Union on textile trade was a rare triumph of common sense and compromise.

If only the same spirit of give and take could be replicated at the multilateral level, the upcoming ministerial meeting of the World Trade Organisation in Hong Kong this December could reach a comprehensive agreement.

Unfortunately, the issues are so thorny, the details so complex and the vested interests so powerful, that with just six months to go, a deal that would wrap up the Doha round of trade negotiations looks as far away as ever.

Speaking yesterday at a Pacific Basin Economic Council Meeting at the Hong Kong Convention and Exhibition Centre, WTO director-general Supachai Panitchpakdi did his best to sound optimistic, insisting a deal was still feasible but the obstacles were formidable.

The biggest roadblocks are agriculture and services. The world's poorer countries are calling for greater access to protected North American and European markets for their agricultural produce. The rich world wants developing countries to open up their domestic markets for services - banking, transport, media and the like.

Despite important concessions in July last year, which saw Europe agree to scrap agricultural export subsidies, little real progress has been made since the last WTO ministerial meeting collapsed in Cancun, Mexico in September 2003.

According to rich world observers, the sticking point was developing countries' refusal to discuss the so-called 'Singapore issues' - liberalisation of investment, public procurement and competition.

Andres Rozental, president of the Mexican council of foreign relations, offers a different perspective. He blamed the Cancun stalemate on European and Japanese reluctance to open key economic sectors, especially agriculture, to international competition.

Unless rich countries were more flexible at the Hong Kong meeting, the developing world would give nothing away on services and intellectual property, he warned.

In response, Norman Sorensen, chairman of the Coalition of Service Industries lobby group, said the US Congress would be unlikely to accept any agreement that did not encompass substantial liberalisation of services.

This tough talk could be mere jockeying for position ahead of the December meeting, but it does not bode well.

The WTO differs from other supranational institutions in that decision-making is by consensus. Each of the 148 members has an equal voice, unlike in the International Monetary Fund or the World Bank, where the contributor countries call all the shots.

That is great for small countries. But it means that reaching an agreement in December will be tortuous, especially because the negotiations will be on an all-or-nothing basis, whereby any deal must encompass all the issues on the table, or none of them.

Then, even if a deal is signed in December, it is far from certain it will ever be implemented. Enthusiasm for liberalisation is waning. People and institutions in both rich and poor countries are increasingly unwilling to bear the inevitable costs of adjustment as their local markets open to foreign competition.

That means the assembled ministers will have to ensure that any agreement they hammer out will have to be palatable to the folks back home. And as the popular rejection of the draft European constitution by France and the Netherlands proved, that is not a foregone conclusion.