Regionalism and multilateralism should converge
By Vincent Lingga
SINGAPORE (JP): Director General of the World Trade Organization Renato Ruggiero warned here yesterday that regionalism and multilateralism must converge into a global free trade area, otherwise the global trading system will move on two tracks.
Ruggiero told the two-day World Trade Congress, which opened yesterday, that regional trade initiatives are expanding and have ambitions to expand further.
Regional groupings, he said, should not be inward-looking, otherwise they would violate one of the basic principles of the multilateral trading system: most-favored nation treatment.
"The global value of a system based on rules and disciplines will be a limited one as long as some major players remain outside," he pointed out.
Singapore Prime Minister Goh Chok Tong devoted most of his address at the opening of the World Trade Congress to the logic and benefits of regional trade arrangements, which have been proliferating lately.
Goh said the compelling logic to regionalism is economics -- economies-of-scale of production generated by unrestrained access to neighboring markets, lower costs due to proximity and familiarity with markets.
"But the motivation is also geopolitical. Regional groupings will be better able to withstand the pressures of an unpredictable world, especially if it disintegrates into trading blocs," Goh said.
He also cited regional trade initiatives as being the result of the inherent constraints of the World Trade Congress, due to the diverse interests of its large membership.
Goh saw regional trading arrangements as catalysts for change, serving as laboratories of the global trading system, which undertakes experiments in controlled regional environments.
"These experiments will test the limits of trade liberalization and pave the way for further global economic integration," he added.
According to Goh, regional trade arrangements need not pose a threat to the multilateral trading system. Rather, they are the building blocs of trade infrastructure.
The World Trade Congress, Goh added, should view regional initiatives as markers or leading indicators of what can be achieved.
Goh acknowledged, though, that such arrangements pose a challenge to the World Trade Organization (WTO) to adapt itself to the changing global environment and to the pace set by those regional groupings.
"Otherwise, WTO risks becoming marginalized and irrelevant to the business community," Goh pointed out.
Confidence
Goh observed that the political and business confidence in the multilateral trading system must be buttressed, and that this can be achieved only if WTO demonstrates its ability to successfully continue the task of liberalization.
"WTO must be at the forefront in identifying threshold trade- related issues and systematically addressing them in the multilateral trade agenda," he added.
However, Ruggiero contended that only a free global market and a free global trading system can cope with the global changes.
"There is no rational alternative to an increasingly integrated global market within the rules and disciplines of the multilateral system," Ruggiero argued.
"It is not a case of imposing aims or timetables on the system from outside," he added.
South Korean Minister of Trade, Industry and Energy Jae Yoon Park, who also chose regionalism as the main topic of his speech at the conference, shared Goh's view that current and future regional trade arrangements will continue to progress in some manner. This is an inevitable fact of the world trading system.
He argued that regional arrangements may be preferable to a situation in which there is no tangible progress at the multilateral level.
Park nevertheless did not see regionalism as an alternative to the multilateral trading system.
"Therefore, WTO should improve its institutional capacity to deal with regional initiatives by strengthening its surveillance function," he said.