EU and WTO cooperate to create global trade agenda

Date: 02/05/1996

By Shada Islam

THE European Union and the Geneva-based World Trade Organisation have started work on an ambitious new agenda for global trade liberalisation, to be unveiled at the agency's first ministerial meeting in Singapore in December.

The new free trade plan is designed to boost the clout and authority of the 128-member multilateral trading system.

It comes amid warnings from international trade experts that unless the WTO is reinforced rapidly, it could be undermined by the preferential tariff deals being negotiated by members of regional trade groupings, including the North American Trade Agreement (NAFTA), the Asia Pacific Economic Cooperation forum (APEC) and the EU's free trade agreements with South Africa and Mediterranean states.

Two parallel and ultimately converging plans are being hammered out to strengthen the global trade organisation.

Trade Commissioner Sir Leon Brittan favours launching a new round of comprehensive trade negotiations, possibly by 1999, while WTO Director-General Renato Ruggiero is pressing the organisation's members to commit themselves to creating a world-wide tariff-free zone, perhaps by 2020.

Both men want the WTO's meeting in Singapore in December to begin preparations for a qualitative leap forward in global trade relations.

In a series of recent statements, Brittan has urged the organisation's members to endorse the idea of a new round of trade negotiations, arguing that the organisation needs a “clear strategic vision” to underpin the market-expanding commitments made by countries in the Uruguay Round on trade liberalisation which ended in December 1993.

While the ministerial meeting in Singapore should not actually decide to launch the new round, Brittan argues that the encounter “must launch the preparatory work programme that will make a negotiating decision possible in a few years' time”.

Ruggiero is tackling the problem from another angle. The emergence of new regional groups, he said recently, must “converge” with the WTO's multilateral system so that at the end of the process, there is only one global free trade area.

Unless regional groupings accept this objective, warned Ruggiero, the world would be divided in 20 years' time into two or three intercontinental blocs, each with its own rules. There would be regional free trade, but each bloc would put up barriers against the rest of the world.

“I leave you to imagine the consequences of this vision in terms of economic and political equilibrium,” he said.

“The problem of those who did not fit into any of the blocs would be a serious one.”

WTO officials say that about 100 regional groupings have been registered with their organisation.

Washington is not totally convinced, however. US deputy trade representative Jeffrey Lang said recently that instead of attempting to launch a new round of multilateral negotiations, WTO members should focus on ensuring the implementation of trade commitments made in the Uruguay Round.

Many Asian countries also believe that the WTO agenda should not be overloaded. Asians relish the idea of global free trade, but there are fears that the region's manufacturing, farming and services sectors could crumble in the face of foreign competition.

They are also unhappy about persistent Union and American demands that the WTO should study a range of new issues, including the link between trade and labour standards, competition policy, corruption and graft, and a treaty covering international investments.

Asian trade negotiators insist that most of these new issues should be dealt with outside the WTO because they are not directly related to trade.

Their fear is that industrial countries are really pushing for a dangerous protectionist agenda designed to erode Asia's competitive edge.

Plans for global free trade have at least some support inside the Union. Although the question has not yet been formally discussed by member states, the Federation of Swedish Industries has just published a study calling for an across-the-board scrapping of EU tariffs.

EU customs tariffs are already low, says the Swedish Federation. When the Uruguay Round is fully implemented by the year 2000, average tariffs will fall below 4&percent;.

At this level, tariffs will offer no protection to European industrialists, argues Thomas Hagdahl, head of the federation's trade policy unit.

In fact, by the year 2005, the cost of collecting customs duties will exceed revenues: EU revenues from tariffs will fall to 7.7 billion ecu (from the current 11.2 billion ecu), while the administration cost of collecting the duties will stand at 9.5 billion ecu.