FUTURE OF THE GLOBAL TRADING SYSTEM

1. FUTURE OF THE GLOBAL TRADING SYSTEM ISSUES, CHALLENGES AND IMPLICATIONS

2. Scope of GTS • Starting point is domestic policies on trade and investment • integral part of an economy’s overall policy framework • should be seen as part of competition framework: transparent, comprehensive, non discrimination

3. Scope of GTS • Clarity of trade and investment policy objectives important • efficient allocation of resources -- growth • sustainability of growth (equity, distribution, environment etc) --- pace or sequencing of opening up, role of complementary policies

4. Scope of GTS • Influenced by regional and multilateral trading system and processes -- reinforce an open and rules based trading system (framework, binding)

5. Unilateral trade and investment policies • Unilateral reforms • no reversals, continued trend of liberalization but peaks remain and not bound, can reverse if protectionism rises • increased challenges in responding to domestic constituencies (democracy, slow down in growth, greater anxiety about globalization)

6. Unilateral Trade and Investment Policies • Implications: • Clarity of objectives and end point • Confidence and capacity to continue reforms

7. Regional Trends • Proliferation of RTAs • China factor, some bilateral tensions • APEC Process --Shanghai outcomes

8. Proliferation of RTAs • Main Trends • since late 1990s: many are in MOU or discussion • includes economies in past not follow preferential route (Korea, Japan) • many are bilateral led by small/medium sized more developed countries (Singapore, Aust, NZ) • potential for larger groupings (FTAA, East Asia, AFTA-CER) • content: some exclude agriculture, some encompass all, some are facilitation agreements

9. Proliferation of RTAS • Implications: unintended risks and effects • proliferation likely to continue and need to respond to net trade diversion effects and unintended effects • spaghetti bowl -- more dimensions, more difficult to bolt down • back door to sensitive issues --- labor, environment • diversion of attention and resources • potential regional tensions

10. Proliferation of RTAs • Way ahead • Improve and strengthen WTO consistency test and enforcement • APEC: strengthen consistency test, transparency, call for adoption of most liberal rules of origin if form RTA etc. • Unbundling different elements -- facilitation agreements or closer economic partnerships

11. APEC: Shanghai & beyond • Regional processes: APEC and Shanghai Accord. • focus of last two years on strengthening economic and technical cooperation • progress, consolidation and focus (HCB, new economy), EAP (Ecotech Action Plans) • but still elusive

12. APEC: Shanghai & beyond • How about Bogor Goals - free trade and investment? Shanghai Accord • back to basics --- strengthening APEC process • Review Osaka Action Agenda • Peer Review Mechanism • Path finder initiatives • Bogor goals achieved also by progress in WTO and APEC role as catalyst -- relatively positive.

13. Multilateral: assessing Doha outcomes • Start of a new round - yes, good news for confidence • Ability to launch: more preparation, quad leadership, respond to developing countries, greater push post Sept. 11, balance • Doha issues: agriculture, implementation, environment, rule making (anti dumping), Singapore issues, TRIPs (pharmaceutical)

14. Assessing Outcomes • What are the main issues? • Are there differences in the way these issues are being handled compared with previous round? • Is it balanced, participatory, green enough? • Development round? • Environment • Role of civil society/NGOs, process of negotiations

15. Main results • Built in Agenda: agriculture and services -- breakthrough in agriculture • Market Access Non-agricultural products • Singapore issues(investment, competition policy, govt procurement, trade facilitation) in: • talk for two years to prepare for negotiations

16. Preliminary Assessment • Development Round? Yes • market access • BIA – agriculture and services • non agriculture products • very clear: tariff peaks, escalation, products of interest to developing countries. • unclear how to proceed, formula or request offer wont work? Research needed • labor out, environment in • enough specifics and constraints • further study on other issues (labelling, TRIPS)

17. Preliminary Assessment • TRIPS - pharmaceuticals • Trade rules: discipline on anti dumping • Implementation: clearer distinctions (areas where there are clear capacity issues vs. faithful implementation and just delaying implementation) • Framework for S&D • Capacity building: strong push • Singapore issues (investment, competition, trade facilitation, govt proc) in, but • with well defined constraints? • Linked to capacity building

18. Preliminary Assessment • Enough for developed countries? • Singapore issues in, with stronger language that presumes negotiations in two years • Environment in -- green round? • Yes agree to negotiations and have specifics with relationship to although still a lot of clarification work needed

19. Preliminary Assessment • Is there more transparency? • Developing country, green room process • NGOs and civil society inputs • Not much on RTAs and strengthening rules

20. Preliminary Assessment • Will there be enough liberalization outcome? Will it be finished in 3 years? • Clarifications of ambiguity in text -- homework, research to outline options • Technical cooperation and capacity building also needs to be spelled out • Two year period of negotiating and negotiating to enter into negotiations (preparation)

21. Preliminary Assessment • What happens if after two years developing countries say no? • stall whole negotiations (even agriculture and services) and MANA -- not enough for developed countries? • Plurilateral agreements? Vs a more GATS type model (all are in, but positive list approach)

22. Way forward • Still a lot of homework -- clarification, options so not loose sight of end goal • But national governments should prepare starting now, because two years in preparation • APEC important complementary process • already have Singapore issues on agenda • thinking, flexibility on capacity building