Regional Outlook: Southeast Asia 2004-2005

WTO at the Crossroads and the Road Ahead for ASEAN

52 ECONOMIC OUTLOOK In November 2001, the Doha Round was launched with much fanfare, and it was hailed as a “development round”, promising real progress for the poorer nations. The Doha agenda was an ambitious one, aiming to cut barriers in highly protected economic sectors such as agriculture and services, and to write rules on new issues such as competition policy and foreign investment. The deadline for concluding the round was 1 January 2005. Two years have passed since the Ministerial Meeting in Qatar, and not much progress has been achieved by the WTO members. The fragility of the current multilateral trading system was revealed with the failure of the WTO talks at Cancun recently. The failure did not come as a complete shock because several of the issues which were supposed to have been dealt with at an early stage — such as agricultural subsidies and industrial tariffs — missed their deadlines and they had snowballed into Cancun. There was a glimmer of hope that the stalled talks could be revived when a landmark agreement was reached in August 2003 allowing the poor countries to import cheaper, generic drugs to fight deadly diseases such as Aids and malaria. Unfortunately, that hope was shortlived, as the talks crumbled at Cancun when the rich and the poor countries could not agree on 2 key areas — agriculture and the “Singapore Issues”.1 While the Cancun meetings were viewed as an interim stocktaking for negotiations, its failure has raised questions about the effectiveness of WTO and the multilateral trading system. WTO AT THE CROSSROADS AND THE ROAD AHEAD FOR ASEAN By Maghaisvarei Sellakumaran Some analysts speculate that global trade reforms may be entering a period of stagnation, particularly as the European Union (EU) prepares to accommodate new members from Eastern Europe, and the United States prepares for presidential elections in 2004. Experts also warn that the failure at Cancun could lead to a proliferation of free trade agreements (FTAs). The United States is expected to move ahead on FTAs with individual nations or regions. It is currently working on a Free Trade Area of the Americas (FTAA), and a number of bilateral deals. The EU is pursuing its own regional deals, and so is Asia. Does the Cancun debacle mean that the WTO is no longer relevant as the momentum shifts towards FTAs? How should the ASEAN countries move forward with the trade liberalization process? Future of WTO At this stage, the WTO has an even greater role to play, given the vulnerability of the global trading system. First of all, the move towards bilateralism might lead to the marginalization of the poorer and weaker countries. In bilateral trade deals, power politics will rule, and the weaker countries will not have much bargaining power to negotiate and make fair deals. They will be forced to make heavy concessions in order to secure the deals with the richer countries. In addition, some of the thorny issues such as agriculture might not be addressed in the agreements. For instance, Brazil which has one of the biggest and most productive agricultural sectors in the world has tried to include 1 At the 1996 WTO Ministerial Conference in Singapore, four issues were examined, i.e., competition, investment, trade facilitation and transparency in government procurement. These issues became collectively known as the “Singapore Issues”. 53 THE ASEAN-10 the issue of agricultural subsidies in the negotiations on the FTAA, but this has been rejected by the United States. Therefore, the WTO, which operates on a onecountry one-vote system, should seek to strengthen the rule-based global trading system, so that the poorer and weaker nations have a more level playing field in the multilateral setting. The World Bank reports that a successful Doha Round could boost global income by US$290 billion to US$520 billion a year, and lift an additional 144 million people out of poverty by 2015, and most of these benefits would accrue to the poor nations. Secondly, the rise of FTAs raises the popular debate about whether they are building blocks or stumbling blocks to multilateralism. This is still a moot issue. However, economist C. Shiells2 concludes that whether a regional trade agreement facilitates or impedes global free trade “depends upon its structure and design — including whether procedures for joining the arrangement are liberal, whether it satisfies WTO rules, and whether it is accompanied by some degree of liberalization”. Going by this interpretation, if the agreements are committed to open regionalism, then it is...