WTO meet `make or break' for trade

Original Publication Date: 
16 October, 2005

Pascal Lamy, director general of the World Trade Organization, warned in two separate speeches in Hong Kong Sunday that the meeting in the city in mid-December would be the critical make-or-break few days for the future of world trade.

Pascal Lamy, director general of the World Trade Organization, warned in two separate speeches in Hong Kong Sunday that the meeting in the city in mid-December would be the critical make-or-break few days for the future of world trade.

If ministers leave Hong Kong without agreeing on at least two thirds of the agenda on critical issues like agriculture, industrial tariff reduction and services, then the world can probably say goodbye to trade gains of hundreds of billions of dollars that the so-called Doha Round is seeking to achieve. Lamy cited a figure of almost US$600 billion (HK$4.68 trillion) as the benefit from a reduction in tariff barriers by just one third.

In the afternoon Lamy, wearing jeans and a T-shirt, spent three hours laying out his stall to several hundred representatives of nongovernment organizations. In the evening, wearing a suit and smart tie, he spoke to a packed house at the Foreign Correspondents Club.

He told both audiences that the Hong Kong meeting is critical because the US mandate for its trade promotion authority expires at the end of June 2007. This means that the US president must send a Doha agreement to Congress in early 2007. Working backwards, there is so much technical work to be done in translating promises into binding agreements that unless the deals are struck before or during the Hong Kong meeting, the Doha Round will be dead in the water.

Lamy was eloquent on the virtues of trade, but his words fell on largely deaf ears. To Lamy, trade is the essential fuel for development and prosperity. "Locally, the enhanced competition created by trade stimulates innovation, keeps prices in check and can lead to the creation of new jobs.

"Globally, trade facilitates the more efficient allocation of resources and increases overall welfare gains. The evidence is overwhelming that nations which are open enjoy higher economic growth and levels of development than those that are closed. And it is an irrefutable truth that no poor nation has ever become rich without trade," he declared.

If you seek a monument to trade, look around, Lamy added, "From its somewhat humble origins as a fishing village and fortress, it [Hong Kong] has emerged as one of the world's great cities," thanks largely to trade.

"Incredibly," he noted, the gross domestic product of Hong Kong - US$234.5 billion in 2004 - is exceeded by both gross exports (US$268.1 billion) and gross imports (US$275.9 billion).

To many of the NGOs, the WTO is to blame for all the world's ills, from hungry farmers to the march of greedy multinational corporations.

Elizabeth Tang , chairperson of the Hong Kong People's Alliance on WTO, was on the panel sitting next to Lamy and called for the abolition of the WTO. "The WTO in its 10 years of existence, has done more damage than good to people in both developed and developing countries.

"Farmers are forced into suicide, as many of them literally die of hunger from loss of land and livelihood because of policies like the Agreement on Agriculture. Studies also reveal that since China's accession to the WTO, the average income for rural households decreased by 1 percent and for those people in the poorest bracket, it decreased 6 percent," Tang argued.

Her position was supported from the floor, including domestic helpers and construction workers from the Philippines who claimed they had been forced abroad by trade policies to work in wretched jobs in Hong Kong.

Lamy protested that the WTO could only help secure the potential gains from trade. It was not in the business of distributing those gains, which was where governments came in, since they possessed the votes in the WTO.

Lamy noted that he had always been prepared to meet with NGOs and admitted that "sometimes" he was prepared to change his position because of good arguments by "some NGOs."

The deal for an agreement on export subsidies for agricultural products by rich countries is on the table. If an overall deal is reached these subsidies will be "e-lim-in-ated", said Lamy, pausing on each syllable to make the point.

He refused to give a percentage to chances of a Hong Kong deal. He and John Tsang used flying metaphors. "Pascal is the pilot of the plane," said Tsang. "We have offered to provide an intermediate landing place on the way to its final destination."

Lamy's use of a flying metaphor was to warn that no one should expect to get everything, but small deals would not fly. "It's like a plane, you need some speed to fly. You can reduce speed, but there comes a zone where the speed is insufficient to give you the lift you need and - BOOM - you fail."

His hope is that momentum is now gathering: "Last week in Zurich and Geneva we saw real commitment on the part of ministers. We saw constructive proposals and real numbers in the area of subsidy reduction and some numbers of tariff cuts which should allow real negotiations to start. Not everyone will agree with these proposals, but everyone agrees that they are serious and constructive ... I fly back tonight to prepare for ministerial meetings this week which will hopefully bring us closer to accord on market access improvements in agriculture which we need to unlock the rest of the negotiations."