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Why The Wto Is Stuck In The Muck


International Business: TRADE

WHY THE WTO IS STUCK IN THE MUCK

The trade group is snarled in spats over its own mission

With Singapore hosting the first ministerial meeting of the World Trade Organization, local officials are grabbing the chance to showcase the island nation's commercial success. The government is offering delegates daily tours of its bustling container port, high-tech laboratories, and state-of-the-art airport. Hope is also high that the meeting will make big strides toward wiping out trade barriers in new areas. Boasts a Singapore official: "We're charting the future direction of the WTO."

As it stands, the Singapore meeting could highlight the standoffs inside the WTO a lot more effectively than any progress of the group. The WTO is stuck at a crossroads. Two years after negotiating a pact to end most tariffs on goods and setting up a mechanism for mediating disputes, officials from the U.S., Europe, and Asia still can't agree on where to take the organization next. Sharp disputes remain on setting standards for labor conditions, the pace of opening protected markets to information technology companies, and China's entry into the group. Compounding the confusion is President Bill Clinton's delay in naming a foreign policy team.

Perhaps the most serious challenge is the widening philosophical gulf between the developed and developing worlds. Western governments believe the WTO must open world markets in services and wipe out such nontariff barriers as protectionist industrial policies and curbs on foreign investment. The Clinton Administration, under pressure from both unions and corporations, also wants to battle "invisible" impediments to trade. These include corruption, which drives up the cost of entering a market, and miserable labor conditions in emerging economies, which U.S. unions say give Asian producers an unfair edge. Such barriers, argues former Clintonite trade specialist Jeffrey E. Garten, now dean of Yale University's business school, "mean the most to the U.S. today and tomorrow."

But much of Asia, which accounts for 40% of global commerce, has a more minimalist view of the WTO. Japan wants it to focus on foreign investment and trade in manufactured goods. Developing nations such as Malaysia, India, and Indonesia see Western initiatives on corruption and labor as an unwarranted intrusion into their societies. "Where do you draw the line?" fumes Zainal Aznam Yusof, deputy director general at the Institute of Strategic & International Studies, a Kuala Lumpur think tank. "Do we discuss the climate or traffic jams? You could go on and on."

A split also is widening between the U.S. and Europe. The Europeans dismiss corruption as an American domestic issue and instead emphasize defining rights for foreign investors and ending limits on the repatriation of profits. Also, being sensitive about antagonizing Asian trade partners, European Union Vice-President Leon Brittan has decided to downplay worker rights at Singapore. "We don't want the developing world to fear that this is disguised protectionism or an attack on their right to have cheap labor," says Peter Guilford, Brittan's chief aide.

RELAXED RULES. The EU also is breaking ranks with the U.S. over China, which wants to join the WTO under the soft terms reserved for "developing nations." The U.S. demands Beijing meet stronger criteria because of its enormous role in world trade. But in October, Brittan flew to Beijing to offer a European plan that would give China far more leeway in reforming its trade policies in order to join the club. Clinton, under pressure over America's growing trade deficit with China, is likely to block such a deal.

As the disagreements mount, Washington is showing signs of backing

off on some issues for now. On labor rights, the U.S. is asking the WTO merely to establish a "discussion group" rather than start defining a set of standards. Months ago, it pushed back the deadline for reaching an accord on telecommunications to Feb. 15, as opposed to this WTO meeting.

Asian officials hope a declaration can be prepared that mollifies everyone. But no one should be fooled. These sensitive issues won't remain on the back burner for long. "We've done all the easy things," says Carolyn L. Brehm, director of Asia-Pacific trade policies and strategy for General Motors Overseas Corp. in Hong Kong. "Now comes the hard stuff." Tackling the hard stuff is essential to keep the free-trade momentum from stalling.By Bruce Einhorn in Hong Kong, with Amy Borrus in Washington and William Echikson in BrusselsReturn to top


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