The WTO at the crossroads

Source:  Manila Times

IS the World Trade Organization still useful?

That’s the question that President Gloria Macapagal-Arroyo asked at the APEC summit.

Trade liberalization, in theory, is good for everyone. Free trade practiced by everyone benefits everyone.

By eliminating or reducing tariffs, quotas and subsidies, each country is able to use its resources competitively and efficiently.

In today’s world, however, this is a fiction. The rules-based trading regime that the WTO was supposed to promote had not prevented Japan, the US and the European Union — that together account for over half of world trade — from subsidizing their exports.

Third-world producers, therefore, find it difficult to compete, much less to penetrate, first-world markets.

President Arroyo was moved to say: “The rules of trading are stacked in favor of developed countries who preach liberalization to the developing countries … but practice protectionism against developing countries …”

Hence, the benefits of globalization are not shared equitably between rich and poor countries.

She hoped that the new director-general of WTO, Mr. Supachai Panitchpakdi, would return the organization to its primary mandate in the ongoing negotiations under the Doha Round.

Specifically, President Arroyo wants a gradual reduction of farm subsidies by all members and more flexibility in the licensing of generic drugs in order to make them affordable.

Her wishes will almost certainly be thwarted by both the US and the EU. EU leaders are reluctant to make those reforms that will reduce farm subsidies. The US likewise is dragging its feet although in fairness it has reduced its export subsidies to $15 billion a year.

At the Doha Round negotiations, President Arroyo put three additional items on the table.

The first is the opening of markets of member countries to tropical agricultural products, tuna and textiles.

The second is the liberalization of trade in information and communication technology, health care and education services.

And the third is to build the capacity of developing countries, to negotiate and implement trade agreements and to improve the competitiveness of their products.

The President thinks mistakenly that “early harvest” could be reaped. The fact, however, is it will take the WTO many years to dismantle policy and institutional barriers in member countries.

That’s the reason that at APEC there was a scramble for regional and bilateral trade pacts — outside WTO.

Even the original aim of APEC in 1994 to create a free trade zone among developed countries by 2010 and among developing countries by 2020 is increasingly getting blurred.

The US, for example, signed a “trade and investment framework agreement” with Thailand and a free trade agreement with Singapore.

Similar bilateral deals are being worked out between some Asean countries and Australia and New Zealand; between Japan and Mexico; between Chile and South Korea, and so on.

The WTO, we are afraid, is unraveling. Probably its original concept was too grandiose — and unworkable.

Instead of the WTO, the Philippines should look for partners with which it can enter into bilateral and regional trade and investment agreements.

The WTO is fast becoming irrelevant.