Policy Update 043
Plurilaterals and Bilaterals: Guardians or Gravediggers of the WTO?
Consulting Fellow, RIETI
Director, Global Economic Policy Unit, Minister's Secretariat, Ministy of Economy, Trade and Industry, METI
Nobody opposes the idea that a multilateral approach is the best way to promote trade liberalization. It is difficult in the short run, however, to solve the impasse of the Doha Round.
My short answer to the theme of the session is that FTAs can be building blocks for multilateral trade liberalization. FTAs enable us to keep the "bicycle" of trade liberalization moving forward. With the right design, they stimulate economic activities to adapt to new environments, and can help persuade the public about the benefit of trade liberalization. FTAs could also generate policy innovations that might eventually be adopted at the global level.
FTAs do, however, have some drawbacks.
First, LDC Members tend to be left behind in the trend towards FTAs. They cannot benefit from the opportunity that trade liberalization is to offer.
Second, the geographic coverage of an FTA does not extend as far as global supply chains. Different rules in different FTAs add complexity to globally spread business operations.
Third, as the WTO issues get less attention from the Members and stakeholders such as the business community, the indifference makes it more difficult to move the negotiations forward, creating a vicious cycle.
In order to revitalize multilateral negotiations in the WTO, as well as making serious efforts towards the successful conclusion of the Doha Round, we need to explore areas where we could deliver results relatively quickly, build on small successes, and gain momentum that would eventually lead us to a breakthrough in the impasse.
Exploring new approaches
Now, ITA expansion is one of the most important new initiatives at the WTO. Japan, together with other ITA members, is committed to play a leadership role in bringing the negotiations to expand the product coverage to an early conclusion.
This, however, is just an initial step. We need to start carefully exploring other approaches in which we could reach conclusion in the short term. A series of successful examples would help rebuild confidence in the WTO.
Four key elements: lessons from ITA expansion
Why, then, is ITA expansion making headway? In my view, four factors may be at work.
First, the business community has been the driving force. ITA product list has not been updated for 15 years and has become outdated by rapid technological progress. Last year, 41 industrial associations in 18 Members jointly called for the expansion of ITA product coverage. This motivated governments to start the negotiations.
Second, there is a lot of enthusiasm to promote information technology because it provides solutions to many social and economic challenges. It helps solve problems in all aspects of human life, such as communications, education, environmental protection, transportation, agriculture, medical treatment, and so on. It helps improve productivity and create new jobs. In a sense, IT-related products form "social infrastructure" to deal with social and economic challenges. The more pressing these challenges are, the more incentives each government has to procure "best available technologies," including through imports.
Third, the ITA brings broad benefits to WTO Members at various levels of development through globally developed "supply chains". Global deployment of IT-related manufacturing operations has brought investment and export opportunities, created jobs, and accelerated economic growth in many developing countries. The trade volume of "ITA-related products" increased from 1.3 trillion dollars to 4.8 trillion dollars over the last 15 years. In the same period, the share of developing countries in "ITA-related trade" increased from 31% to 64%.
Last but not least, because IT creates new markets through rapid technological progress, governments and stakeholders are more receptive to making new rules.
With these "key success factors" in mind, what might be some other promising areas? Other than Trade Facilitation that's already on track in Geneva, a number of areas came to my mind.
In Vladivostok earlier this month, 21 APEC economies agreed to reduce tariffs of 54 environmental goods to 5% or less by the end of 2015. Environmental goods have similar attributes to those of the IT sector. They provide solutions to achieve green growth. Also, producers of environmental goods such as solar cells and wind turbines are interested in greater overseas business opportunities. These factors could help not only APEC economies but also other WTO Members to work on liberalization of environmental goods.
Another example is the ACTA, the Anti-Counterfeiting Trade Agreement. It is not an agreement within the WTO, but it aims to strengthen the enforcement of intellectual property rights, building on the TRIPS Agreement. Earlier this month, the National Diet of Japan approved the ACTA and Japan is likely to be the first to ratify it among the signatories. Japan is committed to work with other signatories to bring the agreement into force as soon as possible. It is encouraging to see many other countries show their interest in joining the ACTA. I hope the ACTA will gain a lot of new members and one day come under the WTO system.
The so-called International Services Agreement (ISA) is also a unique effort that combines high ambition and pragmatic approaches. Currently, more than 20 like-minded Members are working on this effort, which I would like to support.
To conclude, we should make more efforts to deliver results in the WTO negotiations.
The 9th WTO Ministerial Conference (MC9) will be held in December next year in Bali, Indonesia. To achieve meaningful outcomes in MC9, as well as making serious efforts towards the successful conclusion of the Doha Round, we should each collaborate with stakeholders and start carefully exploring areas where interests could converge. These areas could be identified as possible negotiating areas where we could reach conclusion in the short-term.
October 10, 2012
This article was discussed by the author at the WTO Public Forum "Is Multilateralism in Crisis?" held on September 24, 2012.
October 10, 2012
Article(s) by this author
October 10, 2012［Policy Update］
The U.S., China, and Japan in an Integrating East Asia
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January 18, 2010［Policy Update］
June 9, 2003［Newspapers & Magazines］
April 22, 2003［Column］
December 5, 2002［Newspapers & Magazines］