Thu, Dec 08, 2005 page9

• Hong Kong talks are make-or-break for both WTO and Lamy

  • DPA
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  Global trade talks opening in Hong Kong next week will seriously test the credibility of the WTO and Pascal Lamy, its director-general.

  Expectations for the Dec. 13-18 ministerial meeting have been radically scaled down, reflecting lack of progress in the so-called Doha round of trade negotiations launched in the capital of Qatar in November 2001.

  Instead of meeting key deadlines that were set in Doha for opening up world trade, the WTO's 148 members have spent the last four years squabbling over removing tariffs, eliminating quotas and ending farming subsidies.

  With divergences persisting, Lamy admits that ministers in Hong Kong will not even try to reach agreement on concrete figures for slashing farm duties and industrial tariffs.

  The focus instead will be on trying to break the current negotiating deadlock and getting discussions back on track, he told trade reporters in Brussels recently.

  Playing the blame game is dangerous, Lamy warned, adding that instead of pointing accusing fingers at each other, WTO members must start working together to push for free trade.

  Replacing confrontation with cooperation will not be easy.

  The run-up to the Hong Kong meeting has been marked by increasingly acrimonious exchanges between the EU, the US and developing nations, with each accusing the other of not doing enough in the interest of free trade.

  The EU is in the firing line over its offer on agriculture, which the US and Brazil as well as other developing countries say is totally inadequate.

  The EU and the US are pressing developing countries to reduce their industrial tariffs and to start opening up their protected services sector.

  Least-developed states, meanwhile, have complained that their trading interests are being ignored -- although the current Doha negotiations are supposed to put development first.

  Lamy faces an "impossible challenge" as he struggles to reconcile these conflicting interests, says Jean-Pierre Lehmann, professor for international political economy at the International Institute for Management Development in Lausanne, Switzerland.

  "Short of a miracle, the chances of anything of substance emerging from Hong Kong are very remote," Lehmann said.

  All countries participating in the Doha round have offensive and defensive trading interests. In other words, most engage in a delicate balancing act which requires that they try to trade off access to their own markets by winning entry into the markets of other nations.

  For a negotiation to succeed, all sides need to see some gains which they can sell to their respective governments and public.

  Putting together all the pieces in this vast WTO jigsaw puzzle of free trade is not easy, Lamy admits.

  But being WTO director-general does not mean he can order the organization's members around, he says. All he can do is facilitate discussions and encourage compromises between negotiators.

  "It is like being an arbiter, a navigator or even a midwife," Lamy insists.

  The stakes for Hong Kong are high. A repetition of the failed WTO meeting in Cancun two years ago could permanently dent the credibility of the multilateral trading system, Lehmann warns.

  World business leaders, tired of waiting for progress on the global level, will press their governments to clinch bilateral trade agreements, he says.

  The "big danger" if that happens is that discrimination rather than fair treatment for all will become the name of the game, he warns.

  While China, India, Brazil and other emerging economies may benefit from the quest for bilateral deals, such a prospect is bad news for poor nations which will be left out of the race.

  As recent US and EU efforts to clinch voluntary restraint agreements with China on textiles and footwear illustrate, a resurgence of worldwide protectionism is also possible.

  "The serious concern is that in the long-term the WTO could become impotent and irrelevant," Lehmann warns.

  Lamy's reputation is also at stake.

  The former EU trade chief -- who took over as head of the WTO in September -- has won accolades in Geneva for quickly switching hats and espousing his new role as honest world trade with great enthusiasm.

  A breakdown in Hong Kong could cast a shadow over Lamy's next four years in the world trade hot seat. It will also make it difficult to complete the Doha negotiations next year.

  Taking the talks into 2007, however, is extremely risky.

  For one, the fast-track authority on trade given by Congress to US President George W. Bush is due to expire in mid-2007.

  Equally importantly, French presidential elections in 2007 are expected to make it even more difficult for Paris to agree to additional concessions in farm trade.
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