Bilateral, regional trade focus at Boao meeting
By Xu Binglan (China Daily)
Updated: 2004-04-26 09:16

Long Yongtu, a former Chinese trade official, was not on the panel of trade ministers at the Boao Forum for Asia. He was, however, responsible for masterminding the session on Saturday and invited most of the speakers, if not all of them.

The forum held its 2004 annual conference on Saturday and Sunday at the resort town in South China's island province of Hainan.

Long, now the secretary-general of the forum, is no longer China's trade negotiator and vice foreign minister, but he still follows developments in the global trade system, which has seen difficulties after encountering failure at a ministerial meeting of the World Trade Organization (WTO) last year in Cancun, Mexico.

Organizers of the Boao forum, including Long, said they hoped the forum would serve as a platform for discussions on the integration of Asian economies.

The topic is also hot for trade ministers because, so far, bilateral and regional trade arrangements are the most noteworthy moves in Asian economies' efforts towards regional co-operation.

There have been worries that bilateral and regional trade arrangements will make a multilateral system irrelevant.

At the trade ministers' session, however, they agreed that the Doha Round of global trade talks may still have a good chance of concluding successfully.

The multilateral trade system, they said, will continue to work.

The ministers also agreed that subregional and bilateral trade agreements will not undermine the multilateral system. Rather, they are complementary.

Doha Round

"I have faith that the WTO Doha Round of trade negotiations will still come to a successful conclusion," said Australian trade minister Mark Vaile.

While negotiations essentially stalled following Cancun, there have been some encouraging signs in the last few months that members are willing to re-engage in the Doha negotiations.

Both the Unites States and the European Union have indicated they are willing to work towards a framework for agriculture negotiations by mid-year.

Talks were held on agriculture issues last week in Geneva.

But still, there are doubts the Doha Round will conclude on schedule.

"I wish to allay fears and projections as to adverse implications of missing the deadline of January 1 2005 to complete the Doha Round," said Cesar Purisima, Secretary of Trade and Industry of the Philippines.

"While we remain hopeful that we can find consensus on the complex issues we face, if the WTO were to miss the deadline, the results would still be within the range of what is normal, judging from the experience in the Tokyo round of the 1970s and the Uruguay Round that concluded in 1994."

Ministers on the panel which also included Chinese Vice-Minister of Commerce Yu Guangzhou, Japanese Vice-Minister of Economy, Trade and Industry Goji Sakamoto, South Korean Minister of Trade Hwang Doo-yun, and New Zealand's Minister for Trade Negotiations Jim Sutton all said that WTO members still take the trade body and global trade talks seriously.

The WTO is the only international body that provides a global framework of enforceable rules and discipline in international trade these rules ensure fairer and more secure access to world markets for all members, said Australia's Vaile, whose point was echoed by all the other panelists.

Disagreements on hard issues such as agriculture caused the breakdown of the Cancun meeting.

But WTO members have also realized that "the most intractable problems in global trade especially agricultural subsidies need resolution through multilateral channels, with all key subsidizers acting together to remove distortions," Vaile said.

Sakamoto said promoting liberalization and transparency within the WTO is the basis for trade policy in Japan, the biggest economy in the region.

He said that, in the renewed talks, WTO members need to "flexibly balance aspirations and reality" and focus on growth in developing economies.

China's Yu has similar views.

He stressed that concerns and interests from developing economies must be reflected in the outcome of the negotiations.

Regionalism pondered

Asian countries have been showing great interest in regional trade arrangements particularly the building of free trade areas (FTAs) since the setback in Cancun.

Critics such as former Australian Prime Minister Bob Hawke said the blossoming of these regional deals will divert countries' efforts away from the multilateral system and should not be encouraged.

But none of the trade ministers seemed to agree with him.

"We believe the WTO will continue to function at the centre of the multilateral trading system. Nonetheless, we also recognize that trade and investment flows are not distributed evenly among all the countries," said Sakamoto.

This is the reason it is sometimes possible to achieve much higher levels of liberalization with certain countries and regions than within the WTO's very diverse membership make-up, he said.

In fact, Asia is a relative newcomer to the trend of regionalism.

Europeans have the EU. And Americans have the North American Free Trade Agreement (NAFTA). Asia hadn't seen its answer to these economic unions, even smaller in size, until recently.

Currently, of the approximately 200 regional trade arrangements (RTA) worldwide, Asia only accounts for 5 per cent, according to South Korea's Hwang.

With the exception of the Association of Southeast Asian Nations (ASEAN), which began to build their FTA in the early 1990s, it was only recently that Asian countries became involved in RTAs.

Some observers said that it was the sweeping financial crisis in 1997 that made Southeast Asian countries become acutely aware of the need to accelerate their integration.

"Economic history also indicated that integration is beneficial," said Purisima.

Asia's RTAs "will be conducive to developing the internal market of Asia and defending external shocks," said China's Yu.

So far, East Asian and South Asian economies have signed 14 RTAs. Many bilateral FTAs are being negotiated or explored among major economic players in the region.

However, the ministers did agree that there are pitfalls to regionalism.

FTAs are discriminatory and preferential by definition. A patchwork of preferential arrangements around the globe does challenge the core WTO principle of most favoured nation (MFN).

Blind regionalism could lead to the creation of a complex web of rules that only increases the cost for businesses and governments, South Korea's Hwang said.

In addition, if sensitive items are put aside for political expediency, RTAs would only make limited contributions to the global liberalization process, he said.

So RTAs should be encouraged only when they are based on multilateral rules, the ministers agreed.

And RTAs must be comprehensive in their coverage.

"We should make sure that our regional approach does not become a substitute for multilateralism," Hwang said.

Only when RTAs are managed with the appropriate approach can they serve as "building blocks" rather than stumbling blocks for the multilateral process, New Zealand's Sutton said.

"To achieve this, they need to be WTO-plus, not WTO-minus, Integration, but without turning inwards," he said.

Hwang also suggested Asian economies look into linking up the various FTAs so as to create a regional arrangements that cover all of Asia.

Hwang said Asia's effort in trade relations "should take us beyond trade, into such issues that are not yet fully dealt with by the multilateral system."

Investment is one area where regional co-operation is needed to supplement the lack of multilateral rules, he said.

The need for co-operation in finance is equally strong, he said. "In the long run, we should address such issues as setting up an intra-regional exchange rate co-ordination mechanism, regional bond markets and even a common currency system," he said.

The co-operation could extend much further to include human resource development, region-wide information networking and other issues that would help lay the foundation for even deeper economic integration in Asia, he said.

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