The News International (Pakistan)

8 December 2005

Regional, bilateral trade pacts to mushroom if WTO talks fail

SINGAPORE: Regional and bilateral agreements will proliferate further and protectionist tendencies are likely to increase if the World Trade Organisation (WTO) talks in Hong Kong fail, business leaders and analysts say.

While regional and bilateral trade agreements (RTAs and FTAs) will help in tearing down barriers, they could also divide the world into trading blocks and lead to more confusion because of differing rules and standards, they added. "Without an agreement (in Hong Kong), we will see increased protectionism... I am a strong believer in multilateralism," former Hong Kong governor Chris Patten said in a public lecture in Singapore last month.

The APEC Business Advisory Council (ABAC), a group of business leaders advising the Asia-Pacific Economic Cooperation (APEC) forum, said in a recent report the benefits of regional and bilateral trade agreements were limited.

"If the WTO fails to achieve a successful conclusion to the Doha Development Round next year, the focus of trade liberalisation will turn in earnest to the negotiation of RTAs/FTAs," it said.

"While welcoming the opening of markets resulting from RTAs/FTAs, ABAC is concerned that the proliferation of many separate agreements with different terms and rules could result in trade diversion and increased costs and complexity of doing business in the region."

It urged the 21 Pacific Rim nations and territories belonging to APEC to have a "Plan B" as a fallback if the WTO process fails, that is, work towards establishing an Asia Pacific free-trade accord.

This includes establishing a "high-level task force" to study the feasibility of a free-trade area and developing a model to encourage "convergence" in the design and content of what has come to be called the "spaghetti bowl" of RTAs and FTAs.

With the current round of WTO talks, launched in the Qatari capital Doha in 2001, stuck in a gridlock due to a dispute largely over farm subsidies, RTAs and FTAs have mushroomed in various continents.

Trade-reliant Singapore has signed freed trade pacts with Australia, Japan, New Zealand and the United States, among others, and is negotiating with more partners.

The Association of Southeast Asian Nations (ASEAN), which is aiming to wipe out intra-regional tariffs by 2015 under the ASEAN Free Trade Area, is in talks for accords with China, Japan, South Korea, India as well as Australia and New Zealand.

Washington has signed a free-trade deal with Australia and is negotiating a similar pact with Thailand. Last year, the United States signed a Trade and Investment Framework Agreement with Malaysia which could lead to an FTA.

On the sidelines of last month’s APEC summit in Busan, South Korea, China ended tariffs on nearly all Chilean exports with the signing of its first free-trade agreement with a Latin American country.

Also in Busan, Canada and Japan took preliminary steps towards negotiating a free-trade deal. Thailand and Peru agreed to implement an FTA from next year covering more than 70 per cent of their trade following a meeting between Thai Prime Minister Thaksin Shinawatra and Peruvian President Alejandro Toledo at the APEC talks. This is Thailand’s first accord with any Latin American nation. Dennis Hew and Rahul Sen, research fellows at the Singapore-based Institute of Southeast Asian Studies, said there was a need to "multilateralise" the current web of FTAs to facilitate economic integration.

This means countries must "develop a common understanding about FTA negotiations so that business does not perceive the costs of implementing FTAs to be unacceptably high," they said in a paper published in the Straits Times on November 30.

Singapore Prime Minister Lee Hsien Loong said that if the Hong Kong talks ended in failure, the city-state would fall back on its free-trade pacts.

But he said a multilateral trading framework was still necessary as FTAs can put small nations like Singapore at a disadvantage.

Under WTO "there are rules which apply to everybody" and "small countries like us, we get our fair share, otherwise we’ll be disadvantaged. It’s a more level playing field," Lee said.