Wed, Aug 04, 2004 page9

• What the WTO needs is a new Reformation

  Trade ministers have agreed on a framework that will allow the Doha negotiations to continue, but in a system where negotiators talk of the benefits of removing trade barriers but act like old-fashioned mercantilists, talks will continue to drag on. Change is inevitable

  • By Larry Elliott / THE GUARDIAN
  • • 
    • 
    • 

  They made it in the end, and in time-honored fashion. Early Saturday morning, after bucket loads of midnight oil had been burned, negotiations for a new round of trade liberalization were put back on track. It was, everybody agreed, a historic moment.

  This is poppycock. What happened in Geneva this week was that the trade ministers from 147 countries faced up to the possibility that a fresh failure could scupper the round launched in Doha almost three years ago for good.

  

  ILLUSTRATION: YU SHA

  They were prepared to sign up to a framework agreement safe in the knowledge that there will be plenty of chances over the coming weeks, months and probably years to carry on haggling. Geneva, to adapt former British prime minister Winston Churchill, was not the end. It was not even the beginning of the end. It is, however, the end of the beginning.

  In the first flush of euphoria, there was talk of a final deal being completed at the next WTO ministerial meeting in Hong Kong in December next year. That is strictly for the birds. Nothing significant is likely to happen for six months as a result of the US presidential election and the arrival of a new European commission. An agreement is at least two years away.

  Developing countries may have left Geneva encouraged that the US and the EU have promised deep cuts in farm support, but they have little concrete yet to show for their efforts. Brussels and Washington are experts in obfuscation and delay, superb at extracting the maximum political advantage from the smallest of concessions.

  As Oxfam International noted, there are no cast-iron commitments and no clear timetable. The US says, for example, that it will do something about its subsidies to cotton farmers, but is vague about the what and when.

  Developing countries would do well to remember how in the last round of talks, which ended in 1993, the West agreed to eliminate protection on textiles, an industry where the low-cost producers in poor countries had an advantage.

  In the final agreement, the developing world found that access to North America and Europe would be phased in over the course of a decade, with most of the cuts in protection occurring next year.

  The first message from Geneva, in other words, is that disaster may have been avoided but triumph has yet to be secured. Supachai Panitchpakdi, the WTO's director-general, was right to warn that a repetition of the breakdown in Cancun 10 months ago would have been the kiss of death for the talks. The WTO's authority as a multilateral institution would have been shattered; the prospect of the global trading system fragmenting into regionalism and bilateralism would have been real.

  The second message is that developing countries have consolidated the strong negotiating position they established in Cancun.

  There is little doubt that the US, the EU and the rest of the developed world will try every trick in the book to limit the concessions they eventually make, but they will find that much more difficult now that the developing world has shown it can act in concert. Brazil, India and China provide the nucleus of a formidable force.

  The final message from Geneva is that change to the way the WTO operates is inescapable. In his gloomier moments, Pascal Lamy, the EU's outgoing trade commissioner, says the WTO is a medieval institution, and events in Geneva over the past seven days have proved him right.

  Despite the mobile phones and the laptops, the way the WTO does business would have been instantly recognizable to the Catholic church of six or seven centuries ago. There is the way the talks are always veiled in secrecy, the way the rituals of negotiation are conducted in a language that few outside the hallowed walls can understand, the way that a small group of influential players hold the fate of the meeting in their hands.

  Just as with the medieval popes, however, this is seen as the only way of keeping the show on the road. Europe was divided up into princedoms, all of which shared the same faith and owed allegiance to the papacy.

  Now the world is divided up into princedoms that owe allegiance to free trade. Geneva has its own articles of faith and a court for prosecuting wrongdoers. Its aim, like that of Rome, is to embrace the world.

  But while spiritual power rests in Geneva, temporal power resides in the capitals. Supachai can cajole, plead and persuade, but in the end he cannot force the WTO's members to stop fighting like ferrets in a sack. Everybody pays lip-service to free trade just as they once did to Catholicism, but they spend most of the time at war with each other, seeking territorial advantage. The bigger you are, the more influence you wield.

  So it is that Geneva over the past week has had no more to do with Adam Smith than the intrigues of the Vatican had to do with true Christianity.

  Trade negotiators talk the language of free trade -- how breaking down barriers helps everyone -- but when it comes to it they act like good old-fashioned mercantilists. In other words, your negotiating position is to grab as much as you can in concessions from other countries while giving as little as possible in response.

  This creates problems. If every country wants to receive twice as much as it is prepared to give, negotiations are going to be painfully slow. No trade minister in his right mind is going to say he is happy with a deal until he or she is sure he has squeezed the very last concession out of the talks.

  In theory at least, any one of its 148 members could blackball an agreement. While this rarely happens in practice, it does mean that alliances of countries can delay and derail talks.

  So let's recap. The WTO is an institution where the membership acts in flat contradiction to its professed beliefs. It is an institution that encourages the rich and powerful to steamroller aside all opposition, if they can. And it is an institution where efficient policymaking runs smack up against democratic involvement. It can be pretty hard going, as the events of the past week have shown.

  There are some thinkers who say that globalization will eventually turn the clock back to the political structures of medieval times. Trans-national business, they argue, threatens to make the nation state as it has developed over the past 500 years increasingly powerless and redundant. Instead, there will be one over-arching philosophy -- liberal capitalism -- and a patchwork quilt of "enabling" states.

  If this is so, the WTO could be the perfect template for the future. It would, however, have been hard to persuade many of the delegates in Geneva of that. Far from being the model of the future, the WTO is in need of fresh structures and fresh thinking.

  With 147 members, the organization can either be fully democratic or it can be efficient: it can't be both. Some form of Cabinet system, in which the interests of rich and poor countries were balanced, might help.

  The reality gap has to be closed between the way the global trading system operates in theory and the way it operates in practice. Developing countries know that the US, Germany and Japan relied on protection rather than free trade in the early stages of industrialization. They look at the way the west currently behaves with a mixture of envy and contempt. The Catholic church was in a similar position in 1500. What happened next was the Reformation.

  Comments will be moderated. Keep comments relevant to the article. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned. Final decision will be at the discretion of the Taipei Times.
• Most Popular

  • 1

    Ko Wen-je arrested in corruption case

  • 2

    China wants new world order, Lai says

  • 3

    Court orders Ko Wen-je’s detention

  • 4

    Silicon photonics alliance formed

  • 5

    Taiwan and Czechia plan EU semiconductor cluster