The Hindu : Business : Bilateral FTAs harm small nations: Lamy

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Thursday, May 11, 2006

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Business

Bilateral FTAs harm small nations: Lamy

Sushma Ramchandran

`WTO talks not yet in the red part of the red zone'

NEW DELHI: The Director-General of the World Trade Organization (WTO), Pascal Lamy, is opposed to bilateral free trade agreements (FTAs) as these may not always be in the interest of developing economies. He feels that mid-sized and small countries especially may end up making major concessions in areas of investment and intellectual property rights in order to gain access to the large markets of the U.S. or Europe.

The Geneva-based WTO chief made this comment during a conference call on Tuesday with select journalists from across the globe. Stressing the advantages of multilateral trade agreements, he said bilateral FTAs usually did not provide the kind of equitable system that was provided by the WTO for mid-sized and smaller developing economies. Only in the case of some countries like Singapore and Chile, he said the FTAs provided some specific advantages.

Mr. Lamy's remarks come in the backdrop of a growing debate in India over the need for FTAs, especially whether these could affect the interests of farmers. The WTO Director-General, who described India as one of the major players in the Doha Development round of trade negotiations, noted that India's concerns over the need to protect millions of subsistence farmers were widely accepted in the multilateral organisation.

On the outlook in case the global trade talks fail, he felt that it might not have an immediate impact on the world economy but would surely affect many countries in the longer term. He felt that the existing WTO rules were outdated and needed to be replaced since the world had a changed a great deal over the past decade.

Besides, he felt that there could be prospects of the currently strong dispute settlement mechanism being used more actively to resolve issues. He said three-fourths of the WTO members, who were either mid-sized or smaller countries, might have to take recourse to the bilateral route which would be more in the interests of the bigger developed countries. He argued that if the talks failed, whatever proposals were on the table would disappear and it would be a blow to the multilateral trade system.

Mr. Lamy described the current status of talks as being in the "red zone" but not yet in the red part of the red zone.

Outlining the state of play in the Doha round, he said the main player in the area of agricultural subsidies was the U.S., while in the area of agricultural tariffs, it was the European Union. In the case of industrial tariffs, he said it was the G-20 countries including India, Brazil, and South Africa. He felt that all the players in these three critical areas would have to top up their existing offers.

Besides, he noted that most countries had both offensive and defensive interests. For instance, India had big offensive interests in services, while it had defensive interests in the area of agriculture. Similarly, the U.S. was offensive in agriculture and defensive in textiles and clothing.

The WTO chief pointed to the potential differences within the G-20 camp as several members had differing interests in the negotiations. For instance, India might not share the same concerns regarding farm products imports as Thailand or Malaysia.

As for whether he regretted taking up this time-consuming job, Mr. Lamy said he would have preferred the negotiations to be faster "but I'm not complaining.''

Concluding the session, he added, "my wife, however, is not too happy though she is an enduring person.''

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