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.