Rebalancing the power

Date: 08/12/05

Towards the end of the 1990s, when officials in the developed economies of the G7 nations sat down to plot the next round of trade liberalisation talks, few would have envisaged that by the time the talks were reaching a climax two of the most powerful players at the table would be China and India.

In preparing at that time to grant China the benefits of membership of the World Trade Organization (WTO), the US and EU governments took the precaution of attaching some special protective conditions, just in case. But the idea that three years later the US would be running a trade deficit of $200 billion (EUR 179bn) with Beijing and the EU a bilateral deficit of EUR 100bn, or that, if you exclude intra-EU trade, China would have vaulted to number three behind the EU and

the US among the world's leading trading blocs, was not at the forefront of their minds.

But India is coming up fast too. A working paper from the International Monetary Fund last year suggested that India had put the days of its sluggish 'Hindu' rate of growth behind it and, on plausible assumptions, could expand at 7% a year over the next 20 years. That is not far short of the 9% growth rate which China has reported since 1990.

Over the past year the pressures and tensions from the rise of the Asian giants have become more visible. More conflicts are on the way. A recent US Congress report raised doubts, shared privately by EU companies, about the extent to which China was living up to its responsibilities under its WTO membership agreement, in particular in terms of protecting the intellectual property of US companies, providing unfair state subsidies and not opening up its markets to EU and US financial services firms.

For the EU, the biggest looming challenge is the probability that a dollar decline in the next few years would raise the value of the euro, damaging exports from the eurozone, to the benefit of the booming Asian economies.

The rebalancing of power between Western and Asian economies is one of the underlying themes of the Doha round.

Article takes a look at the major players at the forthcoming WTO Ministerial Conference in Hong Kong, 13-18 December 2005. Article is part of a European Voice Special Report: 'WTO negotiations'.

WTO: The WTO: Ministerial Conferences: The Sixth WTO Ministerial Conference, Hong Kong, China, 13-18 December 2005 http://www.wto.org/english/thewto_e/minist_e/min05_e/min05_e.htm

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