LexisNexis(TM) Academic - Document
Copyright 2005 The Financial Times Limited
Financial Times (London, England)

January 18, 2005 Tuesday
USA Edition 2

SECTION: LEADER; Pg. 14

LENGTH: 486 words

HEADLINE: Trading up: Panel says WTO ain't broke, but still needs some fixing

BODY:


The World Trade Organisation has not done at all badly in its first 10 years. Carved out of the General Agreement on Tariffs and Trade in 1995, it has produced major deals in telecommunications and financial services, brought in new commercial giants such as China, and resolved more disputes than Gatt did in nearly half a century.

But its main rationale is as a forum for multilateral trade negotiations to produce commercial benefits for all, and progress in the Doha round of such talks that it launched four years ago has been painfully slow. At the same time, bilateral and regional trade deals have proliferated to the point they risk undermining the WTO. This is the main warning in yesterday's report by a panel of businessmen and economists, chaired by Peter Sutherland, a former head of the WTO.

Central to the principle of non-discrimination is the notion of Most Favoured Nation treatment, requiring countries to offer their best trading terms to each and every other member of the WTO. But the Sutherland panel notes this has effectively degenerated into LFN, or Least Favoured Nation, treatment between major economies because the latter give so many other countries preferential market access in what the panel describes as a proliferating "spaghetti bowl" of bilateral or regional trade deals on the side.

The European Union, for example, applies MFN - LFN really - tariffs to only nine of its trading partners, though the volume of trade is large since they include the US, Japan and China. The US is just as bad in using bilateral deals as a political reward.

One suggestion from the panel is that developed countries should set a date by which they would reduce all their tariffs to zero. This would reduce the incentive for developing countries to strike bilateral deals. It would also save richer countries from the complicated rules of origin needed to administer different tariff regimes.

But the best way to undermine bilateralism is to make multilateralism succeed, and the best way the panel believes, probably rightly, to achieve that is to give the WTO more political impetus from its entire membership. At present, groups of leading WTO members meet several times a year, but any success this vanguard might have is largely irrelevant in an organisation founded on consensus that gives each of its nearly 150 members an effective veto. No wonder Pascal Lamy, the former EU trade commissioner who is now a candidate for the top WTO job, called the WTO's workings "medieval", compared with the snappy majority voting he knew in Brussels.

This consensus requirement may be unavoidable, and indeed useful in that it gives poorer and smaller countries leverage. In these circumstances, the Sutherland panel may be right to suggest government leaders and ministers of the entire WTO membership should meet more often to break the deadlocks that their WTO diplomats in Geneva cannot, or will not, shift.

LOAD-DATE: January 17, 2005