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States chase regional trade deals despite Doha call

Geneva, November 17, 2010

A flurry of calls for free trade pacts at last week's G20 and Apec summits suggests participants are hedging their bets on the long-running global Doha talks.

Both the G20 rich and emerging economies and the group of Asian-Pacific states in Apec agreed to push for a conclusion to the Doha negotiations, launched nine years ago last Sunday, with the G20 saying 2011 offered a narrow window of opportunity.

World Trade Organization director-general Pascal Lamy says work on Doha is 80 per cent complete and a deal is possible - if leaders show political will and negotiators the give and take.

But countries are aware of the difficulties remaining for 153 countries to agree a deal covering everything from fishing subsidies to rules for short-term migrant workers, not to mention trade in farm produce, cars and banking services.

So a less comprehensive and demanding deal between two countries or group of states is attractive to leaders wanting to show they are tackling economic problems by boosting trade.

At the Apec meeting in Yokohama leaders called for the 21-economy Pacific rim group to become one vast free trade area, building on existing local pacts.

In the run-up to both summits and on their sidelines there was talk of bringing Japan into negotiations between the United States and other economies to create a Trans-Pacific Partnership (TPP), launching trade talks between Japan and the European Union and between Canada and India, and reviving talks between South Korea and Japan, among other projects.

For all the talk of finishing Doha, politicians evidently see more promise in reaching smaller deals closer to home.

This long-running piecemeal approach does liberalise trade, if only at the regional level, but at the risk of distracting from the global effort, said Jeffrey Schott, senior fellow at Washington's Peterson Institute for International Economics.

'On balance it's positive, but there's certainly some attention diversion, some trade diversion and some investment diversion that are costly,' said Schott.
 Some policy-makers see it that way too.

'For Indonesia, we think the best thing to do is to conclude the Doha round,' Indonesian Trade Minister Mari Pangestu said in Yokohama when asked whether Jakarta should join the TPP talks.

According to the WTO, as of this month members had notified 479 bilateral or regional free-trade agreements (FTAs), counting goods and services separately, of which 288 are in force.

A recent paper by 10 WTO members including Canada, China, India and Japan, calling for the WTO to improve its understanding of how such deals work, said the number was growing and accounting for an increasing share of world trade.

Many economists say free trade agreements simply divert existing trade rather than creating new flows of commerce.

And because they cover only two or a small number of countries, they impose a bureaucratic burden on businesses, which have to prove that products originate in the countries concerned - no easy task in an age of global supply chains.

'Companies are finding that origin rules, as they are in the Asian FTAs, are too much trouble to bother with,' said Roderick Abbott, a former WTO deputy director-general, who says states should agree a slimmed-down Doha deal and move on to new issues.

One bilateral deal expected to be wrapped up at the G20 in Seoul was the US-South Korea pact, sought by many US businesses after Seoul agreed a similar deal with the EU.

But the two sides did not reach a deal there, as US carmakers and unions were still worried that South Korean standards shut foreign cars out of the local market.

Many WTO members believe Doha is stalled because trade is not a US priority, and President Barack Obama's promise at the previous G20 summit in Toronto to push for the Korean deal,  Korus, was seen as evidence that trade was back on the agenda.

'Finishing the Korus FTA is really a litmus test of the political will of the US to continue on its broad trade agenda,' said Schott.-Reuters




Tags: FTA | economy | commerce | bilateral trade |

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