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9 Dec 2005

Trading

WTO Trade Ministerial Meeting in Hong Kong: Dictating Future of Doha Round Talks

The fate of multilateral trade talks, or the so-called 'Doha Round' is becoming the main focus of attention again. On December 13-18, 2005, trade ministers to the World Trade Organization (WTO) are slated to gather in Hong Kong. The Doha Round, started in 2001, still came to no conclusion being reached on at the scheduled conclusion on January 1, 2005. Signs have emerged from many parties that there may not be all the breakthroughs that were hoped for from this meeting, even though developed countries like the US and European Union (EU) have proposed cutting their domestic agricultural subsidies. Still, most WTO member countries are not satisfied with these proposals, particularly, those offered by the EU, because they are regarded as insufficient. Key points on liberalization in different sectors and the Thai stance can be summarized in the following:

Liberalization in the Agricultural Sector

This WTO trade ministerial meeting will involve negotiations on liberalization of the agricultural sector, tariff reductions on farm produce, and negotiations with developed countries on cutting farm subsidies, both in farm production and exports. If this is achieved, Thailand stands to benefit from market liberalization in the agricultural sector, in particular, on rice and sugar, of which Thailand is the world's largest producer and exporter. The World Bank estimates that if developed countries reduce tariffs on farm produce and cut farm subsidies, the world's rice and sugar output may increase by 20 percent. A successful Doha Round would result in a reduction of farm subsidies that would help boost the economic cashflow some USD300 billion by 2015.

Liberalization in the Industrial Sector

Hindrances to global trade lay in the high tariff rates on industrial goods in various sectors of each WTO member country. So far, countries have yet to reach a breakthrough in negotiations on a tariff reduction formula for industrial goods, due to the different tariff structures of each country. For Thailand, it supports the Non-Agricultural Market Access (NAMA) resolutions and agrees with the "Swiss Formula" for tariff reductions, as do most WTO member countries. Under this formula, high tariff rates would be cut more than lower rates, allowing greater flexibility for developing and less developed countries. Thailand is expected to benefit from reductions in tariffs on non-agricultural products by WTO member countries, given that around 78 percent of Thai exports are industrial products. Such tariff reductions would help Thai products to better access foreign markets. Among those products that would benefit from reductions in industrial product tariffs by WTO members are gems and jewelry, fishing and fishery products, electrical appliances, electronics and wood products.

Liberalization of Service Sector

Developed countries have approached developing countries to liberate more services because developed countries have progressed more in this area, and have more potential in service trade than developing countries. Developed countries view that liberating the service sector using the 'Request and Offer' model would delay service sector liberalization of WTO states, and would inhibit the service sector liberalization of developing countries from achieving the goal. Therefore, they have raised 'benchmarking proposals' to liberate service markets by defining clear targets in fields and categories of the service sector that should be liberalized, plus acceptable levels of liberalization by measuring increased market penetration in the quantity and quality of each field, and each mode of services offered.

Thailand, along with most developing and underdeveloped countries, is opposed to these benchmarking proposals because they are against the principles of flexibility which allow developing countries to liberate some fields of service, and grant each country the right to define targets and policies, as well as define service fields/categories that should be liberated consistent with the development of each country. In addition, Thailand wants to liberate the service sector in gradual steps, in fields that Thailand is ready for, and supports negotiations to liberate service markets through the 'Request and Offer' system.

The Future of DOHA Global Trade Negotiations

During this round of DOHA global trade negotiations in Hong Kong, it is projected that many countries will realize the significance of multilateral trade negotiations as the best way forward for trade liberalization, because obligations for the liberalization would cover all of the 148 WTO member countries. (Saudi Arabia is scheduled to be become the 149th WTO member after this WTO trade minister meeting in Hong Kong.)

These negotiations must attempt to reach a conclusion in the models and formulae for market liberalization in each field because this would lead to preparation for tabling reductions/liberalization in 2006, and enforcement in 2007. If the DOHA Round does not yield a mutually satisfactory conclusion, the above processes will be further delayed and this would negatively affect global trade. Then, WTO members would turn to bilateral liberalization (FTAs) instead, neglecting multilateral trade negotiations. Moreover, if the DOHA Round is prolonged until the US Fast-Track Negotiation Authority ends in June 2007, it is quite likely that the DOHA Round of global trade negotiations will be further prolonged for many years. Therefore, the political decisions of WTO member countries, particularly on the point of farming sector liberalization of developed countries at the WTO Trade Minister Meeting in Hong Kong, December13-18, 2005, will be vital to pushing the DOHA Round forward and finally achieving agreement.

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