Will free trade thange our lives?

Will free trade thange our lives?

By M. Sadli

JAKARTA (JP): "WTO Talks a Success" proclaimed The Straits
Times proudly, on its first page, last Saturday. Were they or
weren't they?

After the Manila APEC summit the host country also warmly
congratulated itself, while the western press and their pundits
tended to belittle results of such consensus based meetings. We
remember that the Bogor APEC summit was (for us) also a
resounding victory because it set targets, or a timetable, to the
Seattle APEC Vision. The buzzword in Osaka was guidelines or
roadmap. For Manila it was Action Plans. But the western press
already scoffed at the results of the last two APEC summits for
lack of concrete agreements. They wanted to see numbers!

The unlucky host of the next APEC summit, Canada, has a year
to fret about bringing success to the task of finding "overall
comparability" among the individual action plans (MAPA) executed
after Manila. Can they find and use numerical yardsticks? There
is the great risk that consecutive (APEC) summits will get harder
and harder to show results of the sexy kind. They may tend to
reaffirm old commitments.

The Singapore inaugural WTO ministerial confab "must succeed",
otherwise the confidence in, the credibility and the
sustainability of, this new and very important world body will be
shaken, risking the future of the global international trade. But
how to manage a high level gathering of 127 countries and 28
waiting in the wings -- while UN bodies make decisions on a one-
country-one-vote basis? Should the majority rule prevail while on
the other hand 10 top countries control the vast bulk of world
trade?

The success of the Singapore WTO meeting was judged by the
host whether or not a ministerial declaration can be produced,
after divisive confrontational debates between groups of
countries with large perceived differences of interest. Every
country felt unhappy at some time during the process, but yet
there was a sentiment of international cooperation which
prevailed in the end. In the end Singapore produced a
declaration, which all country delegations could feel comfortable
with. For instance, Minister Tunky Ariwibowo is reported
satisfied with the declaration. The WTO Director General,
Ruggiero, beamed gratification in an TV interview with ABN. But
what official, who takes part in such conferences, could tell
their folks at home that they are completely unhappy? On the
other hand, (western) international trade economists, sitting on
the sidelines and trying to find hard agreements with numbers,
can find very little.

Critical Indonesian reporters asked in Singapore whether
developing countries did not loose the battle because they could
not get assurances of speedy implementation of the Multi Fiber
Agreement (MFA) phase-out into MFN (no quotas, no discrimination)
or into the normal WTO system. The Uruguay Round agreement gave
importing countries 10 years time but they can "backload", that
is put it off until the end.

Least developed countries got mentioning in the Declaration
but had to content with "concerns" of their plight. The
possibility of trade concessions, i.e., duty free access to
developed countries for their exports, was mentioned, but no WTO
commitment. It was left to individual countries" on an autonomous
basis". But at least it may open the door for, for example, a
(future) G-7 resolution, and a step by step progress.

We have to learn to appreciate that most outcomes of periodic,
high level intergovernmental, meetings are exercises of
compromises at best, often producing only marginal results. We
cannot expect a break through at every summit and top WTO
conferences. Annual summitry is part of what social scientists
call "repeated games" with small incremental gains. Peer
pressures are expected to work in the longer run, as long as the
leaders stay with their Vision and target commitments.
Unfortunately, WTO has no Leaders, neither a Vision, like APEC.

We had three important conferences in a row recently. First we
had the APEC summit in Manila. Then we had the ASEAN informal
summit in Jakarta, unclear about its economic significance
because the most important outcome was that Myanmar will join the
ranks of ASEAN in spite of objections from the U.S. and Europe.
But it is said that the ASEAN leaders also coordinate their act
for the upcoming WTO conference. Another very important outcome
was strengthening of the summitry game. Formally ASEAN summits
are not annual affairs and the Jakarta impromptu meeting was
billed an informal encounter, but what is in a name? Moreover,
the leaders expressed the wish to see each other again next year.
Hence ASEAN summits tend to assume annual regularity.

Last week we had a ministerial meeting of the WTO attended by
some 127 country delegations, while 28 countries are waiting for
accession to this global club. There was even a suggestion of
holding WTO summits but what would be the consequences of having
150 head of states and governments descending upon one city?
Courting disaster in many ways. In Singapore many, many delegates
of small countries felt they were left by the way side when
delegates from 30 countries hurdled together cooking up
something. On the other hand, such small grouping informal
meetings, sometimes breakfast meetings, in a big confab are
probably the most important part of the process. Without such
lobbying, tough talk posturing in open sessions will never be
bridged and no final compromises forthcoming.

But old prejudices surface easily. The WTO may still be like
the old GATT, an exclusive club of the rich industrial countries,
and even so, when the crunch comes down, things are settled
between a handful of big players, that is the U.S., Europe and
Japan. That was visible at the end of the Uruguay Round when the
inclusion of agriculture became a major stumbling block for the
conclusion of the Round.

Statutory, decision making in GATT is on a one-country-one-
vote basis, but in practice on a consensus basis. In reality,
however, consensus means that everybody could block a decision,
which clearly leads to nowhere. Hence, in reality and in the end,
the big guys have a lot to say. The majority developing countries
can exercise a veto influence if they are reasonably organized,
like in the G-7, ASEAN and others. Their influence was clearly
felt in Singapore when they blocked a strong pressure from the
U.S. and Europe to include "social issues" in the agenda of the
WTO, with the prospect to becoming part of the rule based regime.
It was told that there was a contest of will between two resolute
ladies, Rafidah from Malaysia (who constantly said No, No, No)
and Charlene Barshefsky from the U.S. In the end, the No
prevailed.

But those majority developing countries cannot be always
negative. The spirit of non-confrontation in North-South
relations prevailed, also in Singapore. There was give-and-take.
The developing countries went along with the U.S. major thrust to
liberalize the Information Technology market, provided they were
given some "flexibility" (APEC buzzword) with respect to time
table and product coverage as yet.

With respect to the social issues only the linkage between
trade and labor standards was thrown out the WTO window and into
the ILO house, but the Declaration (some developing countries
perhaps grudgingly) recognized that core labor standards are a
serious international matter, but conditionality and trade
disputes arising out of different standards are declared
unacceptable to this formal international community.

Will the U.S. fret and loose its interest in the WTO because
of this outcome? Hopefully, not likely. President Clinton and his
administration can show their folks at home, and the powerful
union movement, that they did their best but could not get their
way, this or every time. The information technology liberation
was the feather that was brought home for the Clinton cap. The
Republican Party, dominating the Congress, is traditionally more
interested in unfettered international trade anyway. The WTO
bureaucracy seemed also happy with this outcome. They can
concentrate on making international trade more free, contributing
to world prosperity.

With respect to the other "new issues", that is, trade-and-
environment, trade-and-investment and trade-and-competition
policy, and others the consensus was that these issues need
further studies, before the developing countries and the majority
of members countries can feel comfortable with them. The
ministerial declaration also affirmed that any kind of
protectionism is rejected, and hence the new issues should not be
used as covert protectionism. Developing countries were not
vehement in their objections.

On the other hand, developing countries did also not get what
they really wanted, that is, faster removal of tariff and non-
tariff barriers in the importing countries in sensitive areas
like textile and agriculture. The developing countries were more
interested in the "old issues", the GATT-type issues, while the
industrial countries were interested in "new issues" and "linkage
issues".

Will ASEAN, APEC and WTO change our lives? Not tomorrow or
next year, but certainly within the next 10 years. International
trade will accelerate because of a free trade regime and the
growth of members countries will be stimulated, and certainly
developing countries. The old GATT and ASEAN have shown this over
the years. APEC will do this towards 2010. Of course there will
be greater gainers among the countries and within countries, but
it will be a win-win game rather than a win-loose game.
Developing countries, their enterprises and trade lobbies should
adopt a pro-active stance, seeking opportunities rather than
constantly complaining about lack of competitiveness.

The author took part in a Singapore symposium on Dec. 13-14,
1996, organized by PECC Trade Policy Forum and ISEAS, to evaluate
the APEC and WTO conferences.

Window: Will ASEAN, APEC and WTO change our lives? Not tomorrow or
next year, but certainly within the next 10 years.