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The emphasis in international trading arrangements has shifted to more regionally-based pacts between countries

 

TRADE

Freeing things up around the world

SOMPORN THAPANACHAI

Though Thailand had a busy year hosting international trade conferences, especially the United Nations Conference on Trade and Development (Unctad) and the annual meeting of Asean, those conferences had very little impact on the Thai public.

International trade negotiations have had a similar fate - 2000 was a quiet year without any real changes, although negotiators insist that multilateral trade talks were progressing in Geneva, the headquarters of the World Trade Organisation (WTO).

As the WTO has made little progress, its 140 members are discussing more bilateral or regional free-trading arrangements, which some observers believe would help stimulate world trade, and others caution might endanger the multilateral trading system.

The organisation was pushed by both developing and developed nations to start a new round of trade talks - either a full, comprehensive round or an addition to current negotiations over agriculture and services. The organisation needs to restore confidence in the world trading system after the failure of the ministerial meeting in Seattle in 1999.

Leaders of the Asia Pacific Economic Co-operation (Apec) forum issued a statement calling for a new round to be launched in 2001, but a Thai trade negotiator said it would be premature to predict multilateral trade circumstances for 2001 as there are many uncertainties, especially the new leader of the United States and changes in other powerful countries.

Supachai Panitchpakdi, the deputy prime minister who will head the WTO in 2002, said members had to agree on an agenda for negotiations in 2001 as there was only slight movement in 2000.

''Developed countries have to show their sincerity to increase flexibility in the negotiations if they want to ensure benefits to developing countries. The new round must be effectively based on the benefit to all members," said Dr Supachai.

He said the developing countries should stick together to ensure that a new round included issues of interest to them, such as textiles and anti-dumping, in the agenda. ''There is no need to rush to the new round of negotiations,'' he said.

Dr Supachai suggested at the Apec meeting in November that the negotiations in the WTO should start from two issues, agriculture and services. Members were committed to resume negotiations on these issues under the present WTO agreements from the 1986-1994 Uruguay Round.

''It will be easier to add more issues with less sensitivity to the negotiations than having a new comprehensive round that requires consensus from all members,'' said Srirat Rastapana, minister-counsellor (commercial) at the Commerce Ministry.

Ms Srirat said that although the WTO had not announced plans for launching a new round, members had already mapped out a negotiation process. Proposals for the agriculture sector were submitted in December while the negotiations are to start in March.

By November, there were 16 proposals and three discussion papers signed by 79 countries on the table for further negotiation. Proposals were submitted from both developing and developed countries including the United States, the European Union, and the Cairns Group of major agricultural exporting countries including Thailand. More proposals are likely to be submitted before the deadline.

Similarly but different in nature, the discussions on service sectors have been done with more emphasis on setting up negotiating procedures and identifying negotiation areas such as financial services and telecommunications.

Peter Mytri Ungpakorn, an information officer of the WTO Secretariat, said members had actively submitted proposals, showing good progress, although there was no new round of negotiations. He said progress had also been made on helping developing countries implement various agreements and creating more transparency in the international trading system through notification and review, in which members must inform each other of what they are doing under the WTO agreements.

China, which struggled for more than a decade to join the WTO, made substantial movement in 2000 in negotiations with WTO members for its accession to the organisation.

Developing members of the WTO, meanwhile, were struggling to achieve recovery in their economies and did not have much excess time to participate in multilateral negotiations, said Assoc Prof Sompop Manarungsan of Chulalongkorn University.

He saw a clear signal of the return of bilateralism, in which countries pair off to make free-trade agreements, after the 10 members of Asean failed to push forward the Asean Free Trade Area (Afta). The sentiment toward bilateral free trade arrangements arose in 1999 and became much stronger in 2000.

Malaysia insisted on not including automobiles and parts in the Afta tariff-reduction scheme to protect its Proton national car. Leaders of Asean agreed in November to allow members with difficulties implementing the tariff-cut plan to temporarily delay its progress, on condition that compensation must be granted to other members.

If members fail to reach agreement within 180 days, disputing countries are allowed to withdraw any benefits granted to the member breaching the agreement.

Though the decision diminished the competitiveness of the region to attract more foreign direct investment, it is necessary to give leeway to Asean members to move toward liberalisation as some members have realised that their commitments do not genuinely benefit their industries and people.

Thailand and other members of Asean have already studied the possibility of having a free-trade agreement with Australia and New Zealand similar to those countries' existing Closer Economic Relations (CER) agreement, by 2020.

However, Asean members still have different ideas as some countries, especially Malaysia and Indonesia, want the economic co-operation between the two trading blocs to be taken step by step.

They believe that the CER is more prepared for a merger than the Asean side.

Therefore, only the Closer Economic Partnership agreement was signed at the 32nd Asean economic ministerial meeting in Chiang Mai in October.

Dr Sompop said signs were also clear that China, Japan and South Korea would have a tripartite economic co-operation deal. The trio has already strengthened co-operation with Asean through the Chiang Mai Initiative, creating a currency safety net through a swap scheme. Moreover, China is keen to have a free-trade agreement with Afta.

Against this backdrop, Asean members have already reduced tariffs to 0-5% for 85% of all items.

The situation helped spur both intra-regional trade as well as direct investment from outsiders.

Thailand's exports to Asean from January to September in 2000 were US$9.7 billion, a 24.5% increase on the same period in 1999.

Apec is another forum stimulating bilateralism as its voluntary liberalisation plans are unlikely to work effectively. Many of the plans hinge on the success of liberalisation in the WTO. The 21-member group set a target to reach full liberalisation of countries along the Pacific Rim by 2010 for developed members and 2020 for developing countries.

The group has shifted its focus from trade liberalisation and facilitation to building the capacity of its labour force with the aim of helping developing members have more readiness to implement the WTO agreements and reduce the digital divide in the knowledge-based economy.

Observers viewed that Apec had recently moved away from successful economic co-operation as its members were now discussing bilateral trade agreements.

Dr Sompop said, however, that the trend toward bilateral talks would not benefit Thailand in the long term as more subregional agreements would affect exports and foreign direct investment in the country.

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