平和
和平
평화
ASIA
26 March 2014
The July 2008 package

WTO in the Asian Century

The next Director-General of World Trade Organization should be Asian, and Indonesia's Mari Pangetsu is an excellent candidate.

Asia must bring its negotiating energies back to the World Trade Organization, WTO Director-General Pascal Lamy told a recent conference on Asian perspectives on the future of the world trading system.

We agree.

In this context, we believe that the next Director-General of WTO should be Asian, and that Indonesia's Mari Pangetsu is an excellent candidate.

In his remarks, Lamy stressed Asia's "huge economic and systemic interests" in the maintenance of an open, well-functioning trading system. The region "must proactively contribute to strengthening the global trading system".

"Asia is a living example of how trade can contribute to economic development", argued Lamy. Indeed, the importance of trade to its economies has grown from 13% of GDP in 1960 to 70% in 2007.

The special feature of Asia's trade has been the development of webs of supply chains and production networks, often known as “Factory Asia”. The high degree of complementarity among Asian industries has resulted in intra-regional trade growing from about 20 per cent of Asia's total trade in 1960 to over 50 per cent in 2011. In fact, some two-thirds of Asia's trade is in parts and components, rather than finished products.

Asia has turned to bilateral and regional free trade agreements (FTAs) to pursue its trade agenda.

Why are FTAs so popular in Asia? Disenchantment with multilateral trade negotiations is the reason, according to Lamy. FTAs provide a means to press ahead more quickly with their trade agenda.

Lamy argued that the time has come for Asia to “multilateralize” these FTAs to enjoy greater benefits of open markets. And that the region should bring its negotiating energies back to the WTO. Asia could benefit from a conclusion of the Trade Facilitation negotiations and the WTO can partner with the Asian Development Bank in ensuring that Aid for Trade helps build trade capacity in poor Asian countries.

Pascal Lamy is right to exhort his Asian counterparts to re-invest themselves in the WTO and multilateral trading system. Asia's trade-driven development has benefited from the progressive liberalization of trade over the past 60 years.

Further, the WTO has done a lot of good work. Thanks in part to its efforts, substantial rises in protectionism have been held at bay over these past five years of economic crisis. True, there has been a rise in "murky protectionism", such as through buy-local policies, and distorted currencies and financial markets. But the excesses of protectionism that exacerbated the Great Depression have been avoided.

The WTO's dispute settlement mechanism has also proved its metal, even though some Western companies are shying away from filing complaints against Chinese companies because they fear retribution from Beijing in the form of loss of market access or unfair regulatory treatment. The WTO also does some very good research, such as its joint initiative with the OECD which measures trade in value-added terms.

But the WTO has not succeeded in its principal mission of trade liberalization. The last successful multilateral trade negotiations, the Uruguay Round, were completed in 1994, and the current Doha Development Agenda trade talks have been dragging on since 2001. There is very little likelihood of a successful conclusion.

The Doha trade talks are widely considered to be overly ambitious and complex, covering as they do agriculture, industrial products and services. And yet the US has a clear lack of interest in them because they would yield very few benefits to American business.

The past decade of WTO paralysis has coincided with a boom in most Asian economies, and also an explosion in FTAs. The US has now turned to FTAs through the Trans Pacific Partnership which it is actively promoting with certain Asia-Pacific economies, and more recently it has decided to launch Transatlantic Trade and Investment Partnership talks with Europe. And the Asia-Pacific region is presently mired in a "noodle-bowl" of FTAs and various trade discussions, that have been very well documented by PECC in its "State of the Region" report for 2012-2013.

The multilateral trading system and the WTO can only work if there is strong leadership, and such leadership could only come from the US. China is not willing to take a leadership role. But the US is patently little interested in the WTO, even though it is very useful for its trade relations and disputes with countries like China and India.

The WTO was created with great fanfare in 1995 as the missing link in global governance. The US Congress had failed to agree to an International Trade Organization, at the time of the creation of the UN, IMF and World Bank some 60 years earlier.

Many also saw the WTO as a leader in the global governance of globalization. And it certainly attracted great attention from the anti-globalization movement, most notably at the WTO Ministerial conference in Seattle in 1999. But today, the WTO is suffering from a global lack of interest, as hot global issues like migration, tax havens, exchange rates, investment and so on are handled in other organizations.

As Pascal Lamy steps down from his position as Director-General on 1 September this year, the WTO is now very much at a crossroads.

An impressive field of candidates is nevertheless lined up for the Director-General position, with five still in the running. Two are from Latin America - Mexico's Herminio Blanco and Brazil's Roberto Azevedo - and three are from the Asia-Pacific: New Zealand's Tim Groser, South Korea's Taeho Bark and Indonesia's Mari Pangestu, the only woman still under consideration. Their views on the challenges confronting the WTO and how to address them are laid in an excellent e-book by Voxeu.org.

The WTO has already had two directors-general from the Asia-Pacific, namely, Mike Moore from New Zealand, and Supachai
Panitchpakdi from Thailand. This would suggest that a Latin American candidate should have a better chance.

But we believe that Indonesia's Mari Pangestu would be an excellent choice for bringing Asia's negotiating energies back to the WTO. She has all the necessary qualities -- vision, academic, political, negotiating, management, and political skills. Would she be able to convince the Americans to take the WTO more seriously? That is still an open question.

Author

John West
Executive Director
Asian Century Institute
www.asiancenturyinstitute.com
Tags: asia, trade, WTO, Pascal Lamy, TPP, FTAs

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