RIETI Report Aug 2005

New Players in the WTO and Prospects for the Doha Round <RIETI Featured Fellow> KOTERA Akira

Greetings from RIETI

Summer in Japan, though it offers many delights, does have one drawback: mosquitoes. Katorisenko, a type of mosquito-repelling incense, however, helps keep the bugs at bay. Katorisenko was first developed about 115 years ago by Eiichiro Ueyama, a businessman who discovered that a variety of chrysanthemum called pyrethrum had insecticidal properties. He created an effective mosquito-repelling incense made from the flowers, but found that the traditional cylindrical incense sticks burned for less than one hour. Turning to his wife for ideas, Mrs. Ueyama suggested the simple but ingenious solution of shaping the incense into a coil, which extends the life of the incense to as long as seven hours. Although electric repellants using a similar active ingredient are more common today, the traditional coils can still be found and are preferred by many consumers for their convenience and quick effect.

International trade, which has been fostered by the WTO, gives people around the world access to such clever innovations. On July 22, 2005, RIETI held a Policy Symposium entitled "Prospects for the Doha Round - Major Challenges in the Multilateral Trading System and their Implications for Japan-" At the Symposium, a distinguished panel of experts gave presentations and held discussions on a wide range of issues facing the WTO. As a wrap-up to the symposium, in this issue of RIETI Report, we include an interview with Faculty Fellow Akira Kotera on the current difficulties of the Doha Round negotiations and the shape of an ideal international trade regime. Excerpts are below. To read the entire text of the interview, please click here.


Dr. Kotera graduated from the University of Tokyo's Faculty of Law in 1976. Since 1980, he has served as associate professor and professor of International Law at Tokyo Metropolitan University and the University of Tokyo. His fields of research interest are international law, international economic law, and the legal aspects of the WTO system. Dr. Kotera was a member of the Permanent Expert Group (PEG) of the Agreement on Subsidies and Countervailing Measures at the World Trade Organization (1996-1999). His major works include Legal Structure of the WTO System, University of Tokyo Press, 2000 (in Japanese); Keywords of International Law (co-editor), Yuhikaku, 1997 (in Japanese); Economic Globalization and Law (co-author), Sanseido, 1994 (in Japanese); and "Deregulation of the International Telecommunication Business in Japan," Japanese Annual of International Law, No. 34, 1991.


RIETI Report: Could you explain why your project, "Current Status of and Prospects for the Multilateral Trade System," was launched and what issues you are working on now?

Kotera: The Doha Development Agenda (DDA) started in 2002. Many difficulties had to be overcome even before launching the new round. However, things have been just as difficult after the launch and it is now certain that the Doha Round will once again miss its deadline. Furthermore, as exemplified by a shift in Japan's trade policy, the general postwar trend toward the institutionalization of international relations seems to have come to a turning point. Japan, which used to pursue multilateralism almost single-mindedly, began to seek regional trade arrangements including bilateral free trade agreements or economic partnership agreements (EPAs) in 1999. It has already concluded EPAs with Singapore and Mexico and is currently undertaking negotiations with many other countries.

Against this backdrop, I thought that it was extremely important for Japan to get a clear picture of how the international economic regime should develop in the future and that in particular, it is necessary to examine, from Japan's viewpoint, international economic relations centered on the WTO. The WTO and its predecessor, the General Agreement on Tariffs and Trade (GATT), have played a pivotal role in postwar international economic relations. Today, however, the presence of the GATT/WTO regime is receding somewhat. Given these circumstances, it is necessary to examine the current situation at the WTO and its prospects for the future. This is why I launched the project.

RIETI Report: What problems do you see at the moment in the multilateral trading system embodied by the WTO?

Kotera: We need to understand that the problem we see today is that WTO negotiations not moving forward smoothly. It is not that the WTO regime as a whole has become dysfunctional. Since ever the launch of the WTO, the trade regime has made steady progress, supported by the WTO dispute settlement mechanism. The WTO system itself and liberalization under the WTO framework constitute the foundation of Japan's trade diplomacy. The same holds true for other WTO members, including the United States, the European Union and developing countries. What we are facing now is various problems arising in the course of our efforts to strengthen the WTO mechanism.

In this regard, the problem of developing countries is one of the factors we need to focus on. Increasing attention is being given to the deadlock in WTO negotiations between developing countries and developed countries such as the U.S. and the EU. The U.S. and the EU are demanding that developing countries lower tariffs on manufactured products, which are still at extremely high levels, while developing countries are urging the U.S. and the EU to abolish their agricultural protection policies. Both of these are long-standing problems that have continued to this day.

In addition, unlike in the past, when developed countries such as the U.S., the EU and Japan were able to lead the negotiations under the GATT/WTO, developing countries will not easily follow the lead of developed countries today. In other words, the greatest problem is that the game is becoming complicated, with more players involved in the decision-making process.

Making this already complex game still more complicated is the fact that nongovernmental organizations (NGOs) have come to exert a certain degree of influence on the decision-making process of the WTO. NGOs had shown interest in the WTO as early the Uruguay Round, but the rapid progress of globalization in the later half of the 1990s prompted them to raise objections to WTO-led liberalization. And now NGOs are beginning to tie up with developing countries.

Thus, not only have developing countries themselves come to exert significant influence on the decision-making process of the WTO, NGOs are also exerting a certain degree of influence through these countries. As a result, there has been a series of cases where developing country governments have overturned an agreement reached by their delegations in Geneva after NGOs critical of the agreement directly lobbied government officials back in the capital.

There is an important link developing between NGOs and traditionally protectionist industries. Every country has certain sectors that are unable to compete in the global market. The agricultural sector in Japan and the steel industry in the U.S. are typical examples. Such uncompetitive sectors have always resisted to moves toward greater trade liberalization. And these sectors tend to have an extremely strong influence over politicians, as one can see from the strength of farm lobbies in Japan.

Such traditionally protectionist forces are beginning to ally themselves with NGOs. As a result of globalization, the wealth gap between developing and developed countries has been widening, as has the gap between competitive and uncompetitive sectors within each country. Having observed and analyzed what is happening on the international and domestic fronts, NGOs are fiercely criticizing globalization as the culprit behind both of these problems. Here, it should be noted that NGOs are quite different from conventional domestic pressure groups. Taking advantage of the Internet, NGOs have established an international network through which they can mobilize expertise to appeal to people across national borders.

Moreover, sectors that can be easily liberalized have already been opened up under the WTO's existing agreements. All the remaining sectors that are the subject of liberalization negotiations are extremely sensitive. And today diverse opinions are being voiced by NGOs and others concerning the liberalization of such sensitive sectors, which is one big reason why the WTO negotiations have had difficulty moving forward.

The NGOs raise certain issues that need to be taken into consideration, such as poverty and the environment. It is impossible to institutionalize international relations without taking these problems into account. There is no doubt that NGOs are saying something we should be listening to, but at the same time, NGOs are also contributing to the ongoing deadlock of the WTO negotiations.

Another problem is the rise of regionalism. Frustrated with the slow pace of multilateral negotiations under the WTO, many countries, including Japan, are leaning toward a regional framework and this is putting yet another brake on the WTO negotiations because the more government officials are assigned to FTA negotiations, the fewer there are available for the WTO negotiations.

Thus, defining the relationship between such regionalism and the WTO is a major issue not only in Japan but also internationally. When Japan began to negotiate its first FTA, some people went so far as to say that the WTO would become unnecessary once enough FTAs were concluded. However, negotiations on the Free Trade Area of the Americas, which were slated for completion by the end of 2004, missed the deadline and they are still dragging on. From this we can see that we cannot afford to rely solely on FTAs. We need both FTAs and the WTO. And we must use them based on a clear understanding of the different roles they play.

The bottom-line question is how to institutionalize the liberalization process in the international economy. From the viewpoint of global governance, this is the question of how to combine the two existing trends, regionalism and multilateralism, to create an optimal global regime. Naturally, this will involve the problem of developing countries. Also, it is not enough to look at the relationships between countries. In promoting the liberalization of the international economy, we need to closely monitor relations on various levels, including the grass-roots and industry levels within each country.

In the WTO negotiations, we must solve highly complex, multiple simultaneous equations. When you understand this, you begin to see the degree of difficulty WTO negotiators face.

RIETI Report: What, in your view, would the ideal multilateral trading regime look like?

Kotera: It is important to clearly define the WTO as the linchpin of the multilateral trade regime. Based on this foundation, we can and should turn to FTAs/EPAs where the WTO cannot provide sufficient liberalization - in the area of investment rules, for instance - so that we can pursue further liberalization together with other like-minded countries. I think that is how the multilateral trade regime should operate in the future.

Geographic factors count in deciding whether or not to pursue an FTA. For instance, should Japan seek to conclude an FTA with an African country with which it does not have strong economic ties? Such a country would rank low on Japan's list of prospective FTA partners, particularly compared to countries in Southeast Asia, where a number of Japanese companies operate. Yet even in such a low-priority country, we want to see a certain set of rules in place, and it is in the WTO where general rules must be accommodated. On the other hand, vis-a-vis Southeast Asian countries, China, and South Korea, Japan needs to seek the kind of liberalization and rules that are suited to the depth and intensity of our economic linkages with these countries. It is important to keep these facts in mind when developing an overall negotiation strategy.

The Doha Round is indeed dragging on. But we must recognize that no matter how long it may take to complete the round, substantial liberalization and institutionalization under the WTO have already been achieved. What we are working on now are unresolved problems carried over from earlier negotiations. It is inevitable that these problems will take time to resolve. We must avoid responding in a simple-minded way, such as giving up on the WTO, just because the negotiations do not move forward smoothly. We must keep thinking about how to promote liberalization, and, in doing so, how to balance the roles of the WTO and FTAs.

Interview conducted by Toko Tanimoto, chief editor of the RIETI website (July 7, 2005).


The handouts for the RIETI Policy Symposium "Prospects for the Doha Round: Major Challenges in the Multilateral Trading System and their Implications for Japan" are available at: http://www.rieti.go.jp/en/events/05072201/handout.html



Brown Bag Lunch Seminars

Coming Soon
All BBLs run 12:15 - 13:45, unless otherwise stated.

08/23 Jaeho YEOM (Professor, Department of Public Administration, College of Political Science and Economics, Korea University)
"The Political and Economic Situation in Korea and its Implications for Japan" (in Japanese)

08/24 UMETANI Kenji (Director for Macroeconomic Analysis, Director-General for Economic Research, Cabinet Office)
"On the Annual Report of the Japanese Economy and Public Finance 2004-2005" (in Japanese)

08/25 MAEDA Yasuhiro (Director, MONODZUKURI Policy Planning, Manufacturing Industries Bureau, METI)
"The White Paper of MONODZUKURI 2005" (in Japanese)

09/07 ICHIKAWA Masakazu (Director, Industrial Finance Division, Economic and Industrial Policy Bureau, METI)
Title: TBA (in Japanese)

For a complete list of past and upcoming BBL Seminars, http://www.rieti.go.jp/en/events/bbl/index.html

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This month's featured article

New Players in the WTO and Prospects for the Doha Round <RIETI Featured Fellow> KOTERA Akira

KOTERA AkiraFaculty Fellow, RIETI

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