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WTO Study Criticizes Free-Trade Distortions

GENEVA — An increase of preferential agreements is undermining the fairness and effectiveness of the global trade system, a World Trade Organization report said.<BR><BR>The study released Monday, and was commissioned by WTO director-general...

GENEVA — An increase of preferential agreements is undermining the fairness and effectiveness of the global trade system, a World Trade Organization report said.

The study released Monday, and was commissioned by WTO director-general Supachai Panitchpakdi, found that the even playing field created by the WTO’s global trade rules “is close to becoming the exception,” rather than the norm. Instead, there is a proliferation of discriminatory preferences, such as regional and bilateral accords, customs unions and common markets.

A long-term remedy is to lower tariffs and nontariff barriers, such as licensing restrictions, in global trade negotiations. To that end, the report suggested that wealthy countries among the 148 WTO members should commit to a date by which all their tariffs will move to zero. Some members have suggested 2015 for that goal.

Peter Sutherland, chairman of the independent eight-member board that compiled the findings, told a news conference that political involvement in the global trade system “is less than adequate.”

Sutherland, a former WTO chief and now chairman of Goldman Sachs International, partly attributed the collapse of the trade summits in Seattle in 1999 and in Cancún in 2003 to a lack of political leadership at the highest levels.

The study accused trade ministers of devoting more time to negotiating bilateral and multilateral deals than to ensuring the WTO talks deliver results. A “safe and prosperous world” has to be based on multilateral regulations, Sutherland said.

WTO ministerial conferences now held every two years should be staged annually, and the chief of the global organization should report to ministers in writing every six months, the study said.

The U.S. welcomes “the report’s call for greater transparency, particularly in its recommendations to make dispute settlement proceedings public and for greater outreach to the public.”

The report said countries that have made trade a pillar of economic growth have evolved “more strongly and become more wealthy than those that have chosen a reliance on domestic markets behind protective walls.”

The board rejected the argument made by some labor groups that trade with poor countries depresses the price of labor-intensive manufacturing goods, such as textiles and apparel, and leads to lower wages.

This story first appeared in the January 19, 2005 issue of WWD.  Subscribe Today.

On the contrary, the experts counter that the consensus of economic research shows that “technical change, not trade with poor countries, has driven the bulk of the pressure on the unskilled.”