How to move forward on liberalizing global trade? By incremental
steps of an already agreed-upon agenda or by one great leap to free trade
in a grand new negotiation? This question arises as trade ministers from
the World Trade Organization’s 120 member countries prepare to meet in
Singapore in December 1997 to chart the course of further trade
liberalization. This will be their first gathering since they met in
Marrakech in April 1994 to bring GATT’s Uruguay Round of negotiations
to a successful conclusion.
A long series of preparatory meetings at the WTO’s headquarters in
Geneva, which began in the spring and may continue until the eve of the
Singapore conference, has foreshadowed what will probably happen in
December. They suggest that the world is not ready for a leap to global
free trade by a set date early in the next century.
Unless an important issue disappears during the preparatory work, the
ministers will be asked to decide four major questions. Three of these,
although potentially important to the long term development of the trading
system, raise collateral issues not directly related to trade liberalization.
There is perhaps a 50-50 chance that the WTO will decide to address,
although not through negotiations, the question of international rules for
investment and the new question of “competition policy”, covering
government and industry practices that restrict competition. The third and
most hotly contested question will be whether the WTO should take up
internationally recognized labor rights. The United States, France, and other European countries have pushed the issue, but it has met with
considerable resistance from the Association of Southeast Asian Nations
(ASEAN), Japan, Australia, and others. Its opponents expressed concern
is that the proposal could lead to veiled protectionism, but some
governments may hold other, unspoken objections. Either way, the odds
that the ministers in Singapore will decide to address the matter in any
significant way are slender to non-existent.
The fourth and most important issue is the pace, depth, and breadth of
the liberalization of global trade. The WTO already has an extensive
“built-in agenda”, decided in the Uruguay Round, that calls for major
trade liberalization negotiations over the next decade.
It is highly probable that the ministers will stay with that agenda, but
should they? Some economists advocate a more ambitious course that
would lead to completely free trade in the early decades of the next
century.
Neither the European Union nor the United States seems to support
trade liberalization beyond the built-in agenda, although the EU might
support preparatory work for a new round of trade negotiations. And if the
Uruguay Round taught the world anything, it was that no major initiative
in the WTO stands a chance of success unless the United States and the
EU are united behind it.
Proposals to achieve global free trade in the first decade of the 21st
century clearly have visionary appeal, but vision must be tempered by a
keen sense, based on experience, of what is achievable. The Uruguay
Round was not about free trade, but freer trade, yet it almost failed.
Ministers at the Singapore meeting would show good sense and a strong
appreciation of political reality in avoiding any giant leaps to global free
trade. Few countries share the laissez-faire faith of the United States and
the United Kingdom, and even in those two countries powerful lobbies
would oppose completely free trade. The WTO has an ambitious built in
agenda that will continue to reduce barriers to trade well into the 21st
century. A premature effort to force countries out from all protection
would almost certainly fail and would probably seriously damage: WTO
negotiations already under way.
Japan and Korea fought desperately against opening their rice
markets. Only in the last weeks of the negotiations did they agree to any
opening at all. Japan finally acquiesced to initial imports of four percent of the market, rising in annual increments to eight percent after six years.
Korea, treated as a developing country, negotiated an initial opening of
one percent, rising annually to four percent after ten years. Can anyone
seriously believe that either country would accept unlimited rice imports in
the 2010-2020 period?
From the standpoint of American domestic politics, any agreement
that would strip away all protection from the textiles industry traditionally
one of the most “heavily protected in the country is difficult to imagine.
While the industry’s attitudes are changing, and it may not have as much
political influence as it once did, neither the industry nor its congressional
supporters are likely to agree to free trade early in the next century.
Furthermore, while the United States is significantly lowering agricultural
support and protection, passage of the recent farm bill revealed that not all
American agricultural groups are ready to move to completely free
markets.
Russia, the other major country still outside the WTO, has also begun
its accession process. Knowledgeable people in Geneva believe that if
things go well, Russia could enter the WTO in the next two or three years.
As with China, Russia’s tradition of a command economy will make
negotiations difficult.
Ukraine, Georgia, Belarus, Kazakstan, and other former Soviet states
are preparing to enter the WTO but would almost certainly be unprepared
to enter into an arrangement leading to global free trade. Nor would the
world’s low income, developing countries, which constitute more than two
thirds of the WTO’s membership.
FREE TRADE world-wide is a distant goal, fraught with difficulties,
but regional’ trading arrangements have been somewhat easier to attain.
Many well informed observers fear that they could go too far and that the
world could break up into hostile trading blocs.
Meanwhile, Thailand, the Philippines, Malaysia, Indonesia, and other
countries in the Asia-Pacific region may start to turn away from trade
liberalization as export growth slows and merchandise trade balances
decline or go into deficit.
said that if import purchases are not restrained, duties should be raised and
Malaysian Prime Minister Mahathir bin Mohamad is reported to have
quotas import purchases are not restrained, duties should be raised and quotas imposed on “certain non essential” goods. Attitudes can change and
briers that have been raised can later be lowered, but if the growth rates of
certain Asian economies decline and large trade surpluses disappear a not
unlikely development the task of putting an APEC trade arrangement into
place will not be any easier.
THE MEMBERS of the WTO should therefore, agree to consolidate
their regional arrangements into a global commitment to achieve world-
wide free trade by a certain date. The date could be 2010, on the APEC
and Euromed models, with a possible extension to 2015 or 2020 for the
poorest countries.
Global free trade by 2010 would enhance the prosperity of all
countries by underwriting the ultimate success for competitive
liberalization. It would preclude the risk that regional arrangements could
develop into hostel blocs. It would terminate any risk of North South
conflict by engaging both sets of countries in a co-operative multilateral
enterprise that meets the needs of both. Such a vision should guide this
area of international affairs as the world enters the 21st century.