January 2013

Action needed in WTO

The impending launch of negotiations to liberalize services through the WTO (see story below) is good news. Tangible results can be achieved by those members who want to do so. WTO’s key problem is that too many members are not interested in liberalizing across the board, as proposed in the now stalled Doha Round.

Agreements to liberalize services will demonstrate the system is capable of delivering further liberalization.

The search for a new Director General of the WTO is underway. Pascal Lamy has not been a success. At ITS Global we always wondered why the leaders in the WTO thought a French socialist would be a good fit. Unable to make progress on trade, like a well-trained Eurocrat, he contrived activities for WTO to show something was happening, regardless of the value of them.

To be fair, Lamy was presented with an organization that had rapidly expanded. Yet he helped craft the mandate for the Doha Round as the EU Director of Foreign Trade, along with Bob Zoellick, then USTR, who subsequently then took over the reigns at the World Bank and oversaw its continuing drift away from its core pro-growth and anti-poverty mandate.

Of the various candidates running, ITS Global considers only NZ Trade Minister, Tim Groser, has the intellectual capacity, experience as both a trade bureaucrat and a Trade Minister and the knowledge of how the WTO system has evolved, good and bad, to help return it to its core mission.

Find China a path to TPP

An unhappy development in the Asian Pacific region has been the politicization of regional trade agreements. Through Xinhua and the Communist Party, the Chinese Government is signalling it dislikes the Trans Pacific Trade Agreement because US business wants provisions that will restrict Chinese State owned enterprises. Some ASEAN economies also feel the TPP does not suit their interests (although five ASEAN states are participating). Accordingly ASEAN agreed to negotiate a grand FTA with all of ASEAN, Australia, NZ, Russia, India, China and South Korea.

Prospectively we have one grand agreement with almost everyone in the Asian Pacific region but the US and another with the US, but not with China or Japan and South Korea (both of which want to join but face domestic opposition). If the grand agreement follows the precedent of similar agreements it will have few tangible commitments. The reality is that China’s current trade and economic policies do not enable it to implement significant new commitments to open markets. It could not take on the commitments which are being negotiated in the TPP.

More disturbing is the picture this paints of competition for trade leadership between China and US lead trade groupings in the region. It is essential that Australia and other parties to the TPP ensure that it is designed to enable all other economies in the region, in particular China, to accede overtime. This should be primary goal for Australia.