Mon, Oct 23, 2006 page11

• Lamy expounds on Taiwan's WTO role

  WTO Director-General Pascal Lamy talked with 'Taipei Times' staff reporter Jessie Ho and other Taiwanese reporters on the role that Taiwan plays in the international trade body. Speaking at the WTO headquarters in Geneva, Lamy highlighted the difficulties that lie ahead and the benefits that membership in the world body brings

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  After 12 years of negotiations, Taiwan officially joined the World Trade Organization (WTO) on Jan. 1, 2002. However, the benefits brought by multilateral trade may be discounted following the suspension of the WTO's Doha round of trade negotiations in July over agricultural issues.

  Speaking to a group of reporters from Taiwan, Lamy talked about the role that Taiwan plays in the global trade body. Lamy started the interview by giving his view on Taiwan.

  Pascal Lamy: Chinese Taipei [Taiwan's official title in the WTO is the Separate customs territory of Taiwan, Penghu, Kinmen and Matsu] is a rather a big fish in the pond in terms of trade volume.

  

  Pascal Lamy, director-general of the World Trade Organization (WTO), makes a point as he answers questions during a meeting with reporters from Taiwan on Oct. 13 at the WTO's headquarters in Geneva.

  PHOTO: JESSIE HO, TAIPEI TIMES

  Taiwan is the ninth-largest trader in the WTO [the EU itself as a whole], a very serious and big position. Chinese Taipei can be a big winner in negotiations on the manufacturing and service sectors. But at some stage, Chinese Taipei will have to pay in the agricultural sector like other members of G10 [Group of 10, consisting of 10 countries that include Taiwan, Switzerland, Japan, South Korea, Liechtenstein, Israel, Bulgaria, Norway, Iceland and Mauritius, identified by the WTO as "vulnerable" to imports due to ongoing reform in the agricultural sector].

  For the moment, I don't think there are hot issues for Chinese Taipei. But if the negotiation resumes, the problem of specific sensitivity on agriculture will come back to the table.

  There will also be potential rewards on a number of issues to Chinese Taipei, including systematic issues such as anti-dumping, where Chinese Taipei has a rather offensive position in strengthening the rules. But if the negotiation remains suspended, there will be no reward on manufacturing and service sectors for Chinese Taipei.

  Taipei Times: As you mentioned in your statement, Taiwan is a major player in terms of world trade. But Taiwan is also a relatively young member of the WTO, and therefore we still have a lot to learn. At this very difficult and critical juncture, is there any role Taiwan can play to restart the negotiation?

  Lamy: Yes. The first is sending political signals. Making sure that Chinese Taipei joins the club of movers that try and do the necessary political lobbying in promoting the resumption of negotiations. Making use of this phase of time-out for re-engaging politics around.

  Failure is not an option, because it would be too costly collectively. It [the suspension] will weaken free trade policies that all WTO members subscribed here against the protectionism. Keeping steam into the machine, so that the temperature and tension on the negotiation will not be reduced.

  Second, Chinese Taipei should prepare, in case, for the negotiation results and re-engage into necessary compromises.

  TT: There is a rising trend of signing free trade agreements (FTAs) among WTO members after the Doha round of talks collapsed. Do you think the rise of FTAs will hurt the WTO system? Do you worry that bilateral trade agreements will replace multilateral ones?

  Lamy: There has always been some sort of cooperation between countries, such as [members of] the European Union. The US has restarted bilateral trade agreements after NAFTA [North American Free Trade Agreement] in 1999 to 2000. But most of them are driven by politics, not economics. So the trend is not new.

  The big change that took place is Japan. Japan had no new bilateral trade agreements until 1999 to 2000, when it signed FTAs with Mexico and some Latin American and Asian countries.

  One notable country is China, which became an important trade actor. Like any trade actor country, it has its own bilateral drive.

  So I'm not so worried about the number of the FTAs, but whether the FTA is a complement or a substitute. It will be good if it's a complement, as multilateral trade does not address many detailed trade issues.

  But it's also true that [a] multilateral system can address a lot of issues that are beyond the reach of bilateral trade, such as agriculture and anti-dumping rules. The easy part of trade opening is done bilaterally. By multilateral system, we have a hard nut to crack. Therefore the basic system of multilateral trade cannot be replaced by bilateral trade.

  Besides, unlike [a] multilateral trade system where members are treated equally, [a] bilateral trade system is politically much more unbalanced.

  TT: Do you think Taiwan is more vulnerable than other member states after the failure of the WTO talks? Because of political problems, it's quite impossible for Taiwan to establish FTAs with other countries. Do you think the WTO is the only option for Taiwan?

  Lamy: The answer is yes. That's why the WTO is even more important for your economy than others.

  TT: Taiwan has been advised to fulfill the commitments of WTO accession. But in the case of signing government procurement agreements (GPA), Taiwan has problems because China and Hong Kong disagreed on the government titles Taiwan uses. How can Taiwan solve this problem?

  Lamy: If there is a big interest in joining the GPA on the side of those who want to join it, and the side who are already members of the agreement, this problem will be overcome. At the end of the day, if it's a win-win situation, then the rationality of economic benefit will prevail

  TT: The emerging markets are a leading power in the global macro trading system. What do you think of China's performance in the WTO?

  Lamy: The most powerful engine in world trade now is in emerging markets. Those markets accounted for one-third of world trade 10 years ago, and half of world trade now, and the proportion is increasing rapidly.

  China, like a number of other members who joined recently, has been focused a lot on implementation of the commitments that they have taken. Little by little, the period of accession will fade away.

  China, like your economy, is becoming more and more like a normal member, not just a fresh [member]. This can be the participation in all the negotiations, where China has big presence.

  In general, Asians do not hold press conferences everyday and won't bang on the table expressing directly what they want. Asians are more subtle. They are very much result-oriented. Whether they make a big noise or not, sometimes has less importance than getting to the right result and making sure their points are heard.

  This is like Japan in many trade sectors 20 years ago. Japan is important in the trade system, but negotiated in quieter and different ways.

  TT: One principle of the WTO is that members agree by consensus. But consensus can be easily used as a tool by one country to block the whole negotiation like what is happening now. Do you think another decision-making system should be adopted, such as vote-taking?

  Lamy: Consensus is only a part of the system. In the WTO, we also have two other systems called single undertaking and bottom-up negotiations.

  Single undertaking bundles various topics into a single agenda, which is a very big constraint. The principle is nothing is agreed, until everything is agreed.

  Bottom-up means initiatives and proposals come from the members, not from the top or me, which is a very important feature [of] many international organizations. So consensus is not the only element that makes the system work.

  Consensus is a complex notion, also a game of pressure. A country of five million inhabitants [that] stands in the way of the whole WTO agreement is different from a country of 250 million inhabitants standing in the way of WTO negotiations.

  Consensus has a different meaning depending on the size of the pond. It may not be politically correct, but it's a reality.

  So the question is how to run the system with rules or procedures that would make the possibility of a blockage smaller.

  Making decisions simply by majority of the members, or voting by the proportion of trade of each member, would create problems.

  If you look at the negotiation of the Doha Development Agenda, the blockage on agriculture held the rest hostage. The negotiation had been structured and framed in 2001 with the agenda and the principle of single undertaking.

  People do not accept any change before the negotiation finishes. The US and EU disagreed on agriculture from the pressure of their domestic constituency, which leveraged on negotiators. Changing the rule will not address this problem.

  For the moment, we have to finish this negotiation and then look at whether our methodology and procedures can be streamlined or more flexible.
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