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WTO talks in trouble
Wednesday, 03 May 2006

Signs from the World Trade Organisation (WTO) negotiations suggest, while the rhetoric remains positive, in reality time is running out for a meaningful deal to be achieved.

It is absolutely in our interests to fight long and hard to bring everyone to the table and wring out appropriate concessions, so we do get much greater access to the key markets that truly give high added value to our agricultural products.

While it is difficult to get hard data on negotiations, it does seem the significant changes we need are being severely watered down. There may still be some good news for New Zealand agricultural exports though, if the EU confirms its reduction of export subsidies.

The round has been fraught with difficulty from the beginning, and the changing global dynamics brought about by the economic pressure that firstly China, and to a lesser extent India, has caused, plus increasing exports from South America, is certainly part of the reason for the lack of progress.

The big players – the US and the EU - are facing major challenges at home politically, in considering freeing up their markets.

Nowhere is this more starkly revealed than in France, with its ill-fated attempt to change employment law to assist disadvantaged youth find gainful employment. However well intentioned the Government might have been, it has caused a back down with considerable loss of face. It’s hardly surprising France is unwilling to press forward with radical change. Consequently, getting them to agree to further market access as part of the WTO round is almost certain to flounder.

This nervousness of politicians in many countries is a key part of the difficulty in agreeing to the major changes needed for a successful WTO round. UK Prime Minister, Tony Blair, recognises this and on his recent visit to New Zealand indicated he would be pushing hard to get a leaders’ forum to address the issues so the round could progress.

It is important though that we continue to free up global trade if the poorer countries are to raise their standard of living. But the effects of globalisation and the fast pace of change being forced on western economies are causing concern.

Initially globalisation delivered great gains with cheaper consumer goods from low cost countries, while the strong western economies took the gains from investments, from increased margins, use of intellectual property (IP) and sales of high added value goods. However, as China and India continue to grow their internal expertise and IP, the threat of serious competition to several multi-national corporations is real and daunting.

If the WTO round does result in a watered down agreement, countries will seek preferential trading agreements on a one-to-one country basis or with specific regional groups. This WTO round might therefore prove to be a turning point in the way global trade is developed.

• Bob Walters is chief executive of Export NZ.