CommentInsight & Opinion

Move WTO to Hong Kong to reflect new global trade order

Jean-Pierre Lehmann says the world trade regime needs a Pacific Charter and a new rules-making body based in Hong Kong to reflect the growing role of Asian players in global trade

PUBLISHED : Wednesday, 13 August, 2014, 5:45pm
UPDATED : Thursday, 14 August, 2014, 4:30am
 

If the definition of insanity is doing the same thing over and over again and expecting different results, the World Trade Organisation can be deemed to be insane. The latest failure in an unending stream of failures occurred on July 31 when India refused to implement the Trade Facilitation Agreement that had been reached (in extremis) in Bali at the WTO ministerial meeting in December last year.

Next year, 2015, will mark the 20th anniversary of the founding of the WTO - with 14 of the 20 years having been taken up by the elusive pursuit of the Doha Development Agenda.

It is time to have a radical rethink of the structure and the spirit of the organisation. Former Indonesian trade minister and thought leader Mari Pangestu has proposed that the forthcoming G20 summit in Brisbane should set up an eminent persons group to do precisely that. Her proposal deserves support.

However, ultimately, it will only have an impact if the rethinking is really radical. Tinkering about with or conversing in what tend to be incestuous circles of the like-minded simply perpetuates the state of insanity.

It has to be stressed that the world desperately needs a robust rules-based global trade regime. The fact that currently there is no such thing and that there is no crisis should not be taken to mean that the institution does not matter. The world is experiencing profound and turbulent transformations in a time of increasingly fragile and contested global governance.

The 21st century differs dramatically from the 19th and 20th centuries when the global economy was dominated by a handful of Western powers (along with Japan) that both set and broke the rules. The emergence of a number of very powerful Asian players, China in particular, is the key force. This, combined with technological developments, is transforming the nature of trade, notably global supply chains that are primarily located in East Asia.

For much of the previous two centuries, China featured in the global trade arena only as a victim of Western and Japanese rapacity. Today there are no trade wars as such, but nor is there trade peace. Confusion reigns in a global minefield.

The cause of the failure of the Doha agenda and of the erosion of the legitimacy of the WTO is primarily the fact that while global reality has experienced exponential change, global institutions (the WTO, but also the International Monetary Fund) and policymakers' mindsets have, at best, seen only linear evolution. The WTO, known as the General Agreement on Tariffs and Trade (GATT) in an earlier incarnation, is still obstinately in the 20th century.

This also applies to the location of the institution. Geneva is a marvellous city, but its role and relevance relate to the 20th century when Europe was the centre of the universe. The buildings of the old League of Nations still stand. In 1999, after the WTO protests in Seattle, the then director general, Mike Moore, expressed the fear that the WTO would become the League of Nations of the 21st century world economy: impotent and irrelevant - a prophesy that is coming closer to being true.

The WTO needs a radical rethink in a new and different environment. The genesis of the GATT lay in the Atlantic Charter co-authored and signed by Franklin Roosevelt and Winston Churchill in 1941. The world trade regime needs a Pacific Charter.

Though the US and EU will remain major markets, the key actor of 21st century global trade will be China, accompanied by other Asian economies, mainly in East Asia - Korea, Japan, Indonesia, Vietnam, Thailand, Singapore, Taiwan and, of course, Hong Kong - but also in South Asia, notably India, but also Bangladesh.

It is proper that the setting for global trade's negotiations, reflections, dispute settlements and rules-making body should be in their vicinity. Members, their representatives and the WTO secretariat would benefit greatly from being exposed to Asia-Pacific's dynamic and often turbulent developments.

Hong Kong is the preferred location in Asia-Pacific for various reasons. The whole history of Hong Kong is about trade, from both a negative and a positive perspective. Hong Kong was ceded by China to Britain in the 1842 Treaty of Nanking, which followed the first opium (trade) war. During the Maoist period, Hong Kong remained a haven of regional trade and production. Hong Kong's phenomenal growth after the second world war was propelled by trade. Following the 1979 reforms, Hong Kong entrepreneurs played a crucial role in involving the People's Republic of China in global trade.

Furthermore, Hong Kong has all the necessary infrastructure for hosting the global trade institution - academe, think tanks, the rule of law, a free press (with both local and international media), law firms, finance and business including a growing number of Western multinationals that have located their regional and, in some cases, global headquarters in the city. With use of English widespread in Hong Kong, it is linguistically an easy place to navigate.

Moving the WTO from Geneva to Hong Kong would have great significance symbolically, but also in real terms. It would demonstrate the institution's willingness to escape from an outdated environment that has generated too much outdated thinking. It would lead the world trade regime back to sanity.

Jean-Pierre Lehmann is emeritus professor at IMD, founder of The Evian Group, and visiting professor at the University of Hong Kong

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