What if Cancun talks fail?
Razeen Sally, The Straits Times, Asia News Network, Singapore
The Doha round has made very little progress since its launch. Negotiations have been stalled in key areas: Agriculture, trade- related aspects of intellectual property rights, or Trips, public health, the Singapore issues, and developing countries' implementation of Uruguay round agreements.
All major deadlines have been missed. However, the last-minute United States-European Union initiative on agriculture has restored a little momentum in several negotiating areas. It could save the round from outright failure in Cancun, where the World Trade Organization's (WTO) fifth ministerial conference will be held.
Cancun is supposed to keep the round on course for completion by the end of next year. This looks improbable. At the other extreme, the nightmare scenario of total breakdown at Cancun, a la Seattle, cannot be discounted, especially if political preparations are botched. There is, however, a halfway-house scenario -- of Cancun as a modest holding operation. This would keep the round alive and implicitly extend it by about two years.
Snail-like movement in the round is but a symptom of the WTO's deep-seated malaise. Three underlying trends ring alarm bells.
The WTO is in danger of regulatory overload. Detailed, intrusive regulations -- for example on environmental, food safety and other product standards -- artificially raise developing countries' costs and have a chilling effect on their labor-intensive exports.
Developed country governments are trying to fill in regulatory gaps in WTO agreements through litigation. This is a dangerous and slippery slope. WTO members must make policy choices through negotiation, not by default through dispute settlement.
The WTO is increasingly politicized; buffeted by non- governmental organizations outside and fractured by internal divisions. Its vast membership expansion has made serious decision-making almost impossible. It risks becoming a United Nations-style talking shop.
In short, the WTO as a negotiating body is semi-crippled: It seems to have lost the ability to make concrete policy choices. Its drift and deadlock make one wonder whether it will ever be capable of crossing writer Joseph Conrad's "shadow line" -- from a world of callow irresponsibility to an adult world of real, solid, fixed things.
What if Cancun fails? Looking beyond it, what if the Doha round remains stuck, or delivers only modest gains?
Real business will then switch even faster to bilateral and regional trade negotiations. The WTO will continue to have residual importance, especially through its dispute settlement functions. But its days as a vehicle for liberalization will be numbered.
This is not a catastrophic 1930s-style scenario. But there will be a sacrificial victim: The non-discrimination principle. The world will be sliced into overlapping, discriminatory trading arrangements. Power relationships will dominate at the expense of rules. The losers will be the poorest and weakest developing countries; denied preferential market access or forced to accept inappropriate conditions, like minimum labor and environmental standards.
What would be the implications of WTO-failure for Southeast Asia?
As a region dependent on trade with and inward investment from the rest of the world, Southeast Asia has a long-term stake in a WTO that delivers freer trade worldwide, that is multilaterally rather than bilaterally or regionally. Free trade agreements (FTA) are simply not enough.
Hence Singapore, in addition to its new FTAs, has a clear WTO focus on market access and strong rules. Malaysia and Thailand are also active WTO members, with a mix of open-market and protectionist positions.
Indonesia and the Philippines, on the other hand, are overwhelmed by fire-fighting at home, and have insufficient capacity to deal with the WTO's burgeoning and increasingly messy agenda. Vietnam, Laos and Cambodia are in the queue for WTO accession, which is integral to the progress of domestic reforms. Cambodia is due to join imminently.
If the Doha round does not deliver, the "new regionalism" in East and Southeast Asia is bound to spread even faster and wider. The desire for FTA partnerships with major powers will become a categorical imperative. Strategic foreign policy reasons will figure prominently, as will economic motivations to secure preferential access to large markets and to defuse future trade tensions.
With this scenario, chances are that a loose East Asian trade block revolving around China will emerge more rapidly, taking its place alongside U.S.-led and EU-led blocks, all interlinked by a cross-regional patchwork of bilateral and plurilateral FTAs.
Japan's internal sclerosis and trade policy defensiveness make it an unlikely regional leader. China presents a different picture. On the back of the most substantial market-oriented reforms seen anywhere during the past decade and with the strongest WTO commitments of any developing country, it views FTAs as a means of exercising strategic leadership in the region.
The U.S. will also likely step up its FTA initiatives in the region. Thus, the two major powers -- the U.S. and China -- will set the regional trade policy agenda to a greater extent than would be the case in a well-functioning multilateral rules-based trading system.
Given continuing intra-ASEAN divisions, serious FTA negotiations will proceed more bilaterally than through ASEAN collectively, as is already happening within the ASEAN-China FTA framework. Singapore, Malaysia and Thailand are in a position to negotiate good terms, but poorer and weaker ASEAN members with less bargaining power risk getting worse deals.
A MORE welcome scenario would, of course, be one in which the new regionalism proceeds benignly in tandem with non- discriminatory multilateral liberalization in the Doha round. But what needs to be done to get the WTO out of its rut and across that shadow line?
Mending the WTO's broken negotiating mechanism depends on the key developed, and developing member governments. For the WTO to be workable again, its political template must be adjusted in line with broader geopolitical, as well as economic policy, realities. The necessary condition is robust, constructive U.S. leadership.
The raw reality is that multilateral rules and cooperation cannot work without a U.S. lead. Only the U.S. -- not the EU -- can push the WTO in a liberalizing direction. But it can't act alone: It needs pragmatic "coalitions of the willing". They can be found mainly in Asia-Pacific: Agricultural exporters in the Cairns Group; industrial exporters in East Asia; and the services-oriented cities of Hong Kong and Singapore.
Ultimately, the matrix of underlying power relationships will prevail -- with or without multilateralism. "Liberal imperialism" -- overwhelming U.S. power and coalitions of the willing -- is more potent for a stable and secure global order than international organizations, international law and associated bureaucratic processes.
The question is whether WTO-style multilateralism will mingle positively with power politics and temper its ill-effects, or whether it will recede to distant horizons.
Dr. Razeen Sally, lecturer and head of the International Trade Policy Unit at the London School of Economics, is a senior visiting fellow at the Institute of Southeast Asian Studies.