Getting Ready For The Big Event

Not quite fireworks, perhaps, but arguments and tension are inevitable when East meets West next Monday, at the inaugural session of the 125 member World Trade Organisation. The stakes are high indeed. The WTO reckons that the Uruguay Round, the eighth and last round of negotiations under Gatt, would yield annual income gains of $235 billion and annual trade gains of $755 billion by 2002. Little wonder that the Asian countries are getting ready to put up a stiff fight to an expected western assault.

The bettering rams, they say, will be multilateral investment rules, a formula to harmonise international competition, ostensibly for the purpose of fair trade, and a linkage between trade liberalisation and labour standards, workers rights and environmental protection. These are highly contentious issues and they constitute the single greatest challenge to the sovereignty and economic prosperity of the developing countries in the future, says Rafidah Aziz, Malaysias international trade and industry minister. In other words, Asian governments suspect the US and Europe of trying to deprive them of their cost advantage of disguised protectionism, and of trying to force market access. Even Jagdish Bhagwati, the distinguished Columbia university professor who was tipped at one time as a possible WTO head, said in the course of a lecture in Singapore that the US human concerns sounded suspiciously like they were motivated for commercial purposes.

 

A taste of the struggles ahead was provided at the recent Asia Pacific Economic Cooperation forum in Manila. Bill Clinton had to put up a tough fight before the Asian members agreed to endorse his proposed information technology agreement (ITA) to abolish all tariffs on computers, semiconductors and telecom equipment by the year 2000. The Asian representatives felt that while their infant domestic industries would suffer, the only beneficiary would be the US, which already exports IT equipment worth more than $100 billion. If this was the way to free trade, then why not also set an early target date for abolishing duties on textiles which Asian countries export to the West?

Under the new Agreement on Textiles and Clothing, restrictions on the export of textiles will be removed only in phases, spread out over 10 years ending in 2005. After that the textiles trade will be fully covered by Gatt/WTO rules. This is a far cry from the leap that Clinton proposed for telecom. It was only with extreme reluctance, and then only at the US Presidents personal intervention, that Asia-Pacific heads of government agreed to go accept the 2000 target date. Even so, they entered a caveat in favour of flexibility.

That debate will come up all over again, when the ITA comes up for ratification by the WTO. It was in the hope of being able to influence the future of such measures, and of liberalisation in general, that Singapore, with one of the worlds most externally oriented economies, fought so hard to host the first WTO meeting. Singapores Trade Development Board believes that full implementation of the Gatt/WTO recommendations by its five top export markets Malaysia, US, EU, Hongkong and Japan will save the island state an annual $236 million.

The US opposed the bid, more out of pique, when Singapore caned an American teenager for vandalism.

But Singapore stuck to its guns, lured no doubt as much by the prestige as by the potential tourism gains. No it is going all out to make the event a spectacular success. It will be the biggest global conference on trade to be held in Asia since 1986, and the facilities alone in the 100,000 sq meter Suntec City convention centre will cost Singapore the equivalent of a cool $5.25 million. More than 4,000 delegates from 160 countries are expected. Proudly describing itself as the premier global city, Singapore is determined to dazzle the world.

Suntec City has been in a frenzy of sprucing up 50,000 man hours of labour these many weeks. Among the facilities are 200 offices, a media centre equipped with TV studios, 115 km of cables and wiring, 300 computers, more than 35,000 meals prepared by 190 chefs, 4,500 rooms and 500 suites in 40 hotels etc.

At a substantive level, the WTO gives teeth to the concept of free trade, providing for a dispute settlement mechanism that, in the opinion of many, would make it illegal for the US to threaten other countries with Super 301 sanctions any longer. Under the new rules, the developed countries have promised to reduce tariffs by 26 per cent over six years and the developing countries by 24 per cent over a decade. But problems are bound to arise over the most favoured nation (MFN) and national treatment clauses, whi-ch underpin the system. How can the US threaten to deny China MFN status if this is virtually mandatory? How can Indonesia extend special protection to a South Korean made national car (imported by Suhartos son) and deny the Japanese the same tax concessions?

But as of now, the controversy will centre on three moves. First, with the backing of France, Norway and Belgium the US is pressing for a WTO working group to promote core labour standards. Second, the EU, Japan and Canada want another working group to push for a multilateral investment agreement. Finally, the EU, Japan and South Korea want tougher rules to check anti-competitive practices, both official and private. Over all this looms the question of Chinas membership. For the time being, also, the free trade dispensation will be far more to the advantage of the developed than the developing countries.

All that may not matter too much in the long term, however, if the WTO does move ahead, unlike the Apec, which seems to have made a fine art of resounding rhetoric to mask blissful inaction.