Source: http://worldcityweb.com/home/MIA/publications/magazine/36/745/

Q&A with Pascal Lamy

by Mary Dempsey

Pascal Lamy, director general of the World Trade Organization, returned to the Internet in late October for a global chat on international trade. He fielded more than 150 questions from around the world answering in French, Spanish and English at a time when the Doha Round of trade negotiations was deadlocked. Participants in the chat ranged from professors at the University of Piura in Peru to trade watchers in Malta, France, Colombia and the United States. WORLDCITY begins its excerpt of the exchange with a question from Jos Sergio Osse, a reporter for the online edition of Brazil’s financial newspaper, Valor Econmico.

The Doha Round has been in place for almost five years. What has been achieved?

These negotiations are based on the principle of the single undertaking. That means nothing is agreed until everything is agreed. Much as there have been a number of decisions for example the one relating to the elimination of all export subsidies or the transparency mechanism for regional trade agreements all of this is subject to the success of the whole round.

You said poor countries are more likely to suffer if Doha fails. An Organization of Economic Cooperation and Development (OECD) official recently said every country, rich and poor, would be affected the same. Who’s right?

This is primarily about the integrity of a rules-based system. Small countries are less able to influence their external environment than larger ones. So a rules-based system where countries have pre-committed to certain ways of doing business is likely to be of particular benefit to smaller players.

What are the major issues blocking the progress of Doha?

Agriculture, agriculture, agriculture. It is a politically sensitive issue for countries, whether developed or developing.

The economic importance of the agricultural sector is much lower than the priority given it at Doha. Could we simply exclude agriculture from future negotiations?

After hearing agriculture in such detail for so long now I sometimes wish it was not part of the agenda as well! But it is and for the good reason that it is vital for the economies of many countries. Also, in general, the poorer the country, the more important agriculture is to the economy. Producers in these countries face high barriers to their exports and competition from subsidized production and exports in other countries. They want agriculture on the agenda.

What reforms to the WTO structure could have been implemented to avoid the collapse of the Doha Round?

Collapse is too harsh a word at this time. Let’s call it suspension or timeout. We are deadlocked not because of structural or functional issues but because of the inability of the main players to unblock a deal on agricultural subsidies and agricultural tariffs. Existing procedures are not, in my view, the problem.

I believe that if we do not find a solution to the impasse in these negotiations, we are, indeed, risking the integrity of international trade relations in the WTO.

Both the United States and the E.U. are intensifying their bilateral trade and investment agreements. Aren’t they really giving up on the WTO, or at least hedging their bets?

This is indeed a worry. I’ve been in regular contact with [U.S. Trade Representative] Sue Schwab and [European Trade Commissioner] Peter Mandelson and I know they are committed to the Doha Round. But you’re right in saying that they are looking to other forms of trade deals as well. Bilateral and regional deals offer substantially less than a successful Doha agreement. They don’t cover key issues like subsidies, anti-dumping and trade facilitation. Moreover, bilateral deals in goods and services don’t bring the same level of efficiency. A global deal on express delivery brings much greater benefit, for example, than a hodgepodge of bilateral deals. Then there is the fact that the poorest countries are left at a big disadvantage in regional and bilateral deals. Either they are excluded altogether or they are at such a disadvantage in the negotiations that they have to accept conditions to which they would never agree in the WTO. There are resource constraints for developing countries, too. They just don’t have enough negotiators to back two horses at the same time.

There are rumors of a trans-Atlantic free trade agreement. Even German Chancellor Angela Merkel is said to have sympathy for such an agreement. Is this realistic? Wouldn’t that mean the end of WTO?

Rumors, rumors. In my view, there would be no real U.S.-E.U. problems in industrial goods, but there would be for standards. Good luck on agriculture. The agreement might make sense on services. But for the United States and the E.U., cooperating on the multilateral field would yield better results for both of them and for the other 131 WTO members, three fourths of which are developing countries.

The number of bilateral agreements is growing exponentially. Are there WTO controls? Or is each country free to negotiate as it wants?

The WTO is trying to equip itself to exercise a more strict surveillance over regional agreements. Members are about to approve a mechanism of transparency of regional trade agreements, which will allow for more comprehensive and detailed supervision.

The WTO just published its annual world trade report. The main theme is subsidies. Could you sum up the lessons for developing countries?

Subsides can be useful, subsides can be bad. There is no substitute for solid analysis. Developing countries may be able to make some use of subsidies in a positive developmental sense, but there are real risks, too.

Shouldn’t the WTO be ensuring the poorest nations on earth are paid for the carbon storage services that they currently supply to some of the richest countries?

I do not think it is the WTO’s function to determine whether countries decide to trade environmental assets. Some environmental assets are already traded, and in the absence of complete markets, it is for governments to decide how such issues should be addressed.

The only way to bring Africa into the 21st century is by involving it in trade negotiations. Instead of handing out money to help with debt, I would like to see African countries develop industries. Can the WTO play a role?

Africa is helping itself, and many institutions and governments are trying to help Africa in that endeavor, including the WTO in a modest way. I believe engagement in trade, which can involve trade negotiations and talks as well, is a vital ingredient in the development process. But it is by no means the only element. Other economic policies, infrastructure, institutions and the quality of government are all crucial determinants of the development process, all in need of attention. We all need to work together, but the core impetus must and will come from Africa itself

The global textile industry is anxiously waiting for the outcome of Doha. What is your opinion about this sector?

As you know, the Agreement on Textiles and Clothing expired in 2005, bringing to an end the regime of quotas in this area. So from this aspect, trade in textiles is relatively liberalized. However, certain countries still maintain relatively higher duties on textiles and apparels. These duties, I hope, will get reduced as part of the negotiations covering all manufactured goods.

What, if anything, can the WTO do to assist countries in curbing internal corruption? Do you feel that corruption in large economies, such as China, has a significant impact on trade?

Internal corruption is mainly a domestic issue in which the WTO can have only a limited role. There is some work in the areas of trade facilitation and government procurement that could help in this area.

E-commerce has been growing, but developing countries don’t have the security or technologies of the developed countries. How is the Doha Round addressing electronic commerce?

Electronic commerce has not been given any priority, although it is very important. The basic position is that WTO members should not impose barriers to electronic commerce.

Will mid-term U.S. elections affect the agricultural subsidy issue?

I do see the period after the mid-term elections in the United States as being a possible opportunity to get things moving again. Certainly, some WTO members have made it clear that the United States must show, perhaps through a new farm bill, that it can do more on reducing its subsidies.

Do you expect the Doha Rounds to resume?

I don’t know. All countries want to resume, which is good, but if they come back to the negotiating table with the same positions, deadlock is guaranteed.