World Ready To Trade

Dec. 21, 2004
But protectionism could stall progress.

Six weeks before representatives of 134 nations gather in rainy Seattle under the umbrella of the World Trade Organization (WTO), there's remarkable consensus that the world is ready for a new round of international trade negotiations. Formally known as the WTO's Third Ministerial Conference, the Nov. 30 to Dec. 3 confab is expected to give a go-ahead to the trade talks, the ninth such round since 1948. However, with national bargaining positions now differing dramatically, the content of the final product is far from certain. For example, the U.S., at $8.11 trillion the world's largest single-country market, is seeking a limited agenda and a limit on the negotiations of about three years, indicates Commerce Secretary William M. Daley. Notably absent from Daley's agenda: the drafting of international investment rules, a highly contentious matter that continues to divide the world's economically developed and still-developing countries. On the other hand, the 15-nation European Union (EU), collectively an $8.09 trillion market, is pushing a sweeping agenda for what it dubs "the Millennium Round." Proposed topics range from adjusting industrial and agricultural tariffs to writing rules on investment, nonfinancial services, antitrust matters, and trade-related environmental issues. Asian nations want the WTO to come up with rules covering e-commerce and other Internet traffic. But "let's make sure that whatever is done is done in a very thoughtful way that grows e-commerce and doesn't stifle it," cautions Michael C. Maibach, Intel Corp.'s Washington-based vice president for government affairs. Singapore specifically wants to see agreements on telecommunications, information technology, and financial services fully implemented. "Together these three agreements will help maintain the momentum of multilateral trade and liberalization under the WTO," states Singapore's Ministry of Foreign Affairs. However, the greatest concern of Gran Lindahl, president and CEO of the Zurich-based ABB Group, is that the upcoming talks "will not be able to move [trade liberalization] forward." His concern is shared by David L. Aaron, the U.S. undersecretary of Commerce for international trade. "Unless this [trade] bicycle is going forward, it's going over," he warns. "Protectionist pressures are building in Europe. They are certainly alive and well in the United States. And there are opportunities to improve U.S. exports [to Asia] -- if only we can get some of [the] tariffs down." Adds the U.S. Alliance for Trade Expansion, a Washington-based coalition that includes the CEO-dominated Business Roundtable and the National Assn. of Manufacturers, "It would be a shame if mainstream WTO opponents allowed their rhetoric and actions to descend into isolation from the rest of the world." Nevertheless, U.S. labor and environmental groups are among organ-izations worldwide sounding alarms as negotiations approach. The Pittsburgh-based United Steelworkers of America, for example, opposes reopening WTO agreements covering antidumping and countervailing-duty actions. Complains Carl Pope, executive director of the Washington-based Sierra Club, "The blunt fact is that the present world trade regime is [advancing] the values of multinational corporations." And, asserts Rodger Schlickeisen, president of the Defenders of Wildlife, Washington, "Given all the flaws that exist with present commercial trading agreements on forest products, I find it incomprehensible that the [Clinton] Administration is creating a carnival-like atmosphere of trade wheeling and dealing . . . while simultaneously doing nothing to resolve thorny biotechnological issues such as genetically engineered foodstuffs, which recent scientific surveys show could have disastrously negative impacts on biological diversity, including the monarch butterfly." What's the trade bottom line for manufacturing? Significantly, both Lindahl and Aaron say action on agriculture in a new negotiating round is essential. One reason, contends Aaron, is that agricultural subsidies "are the biggest distortion of the world economy." And dramatically reducing or eliminating them presumably would free up funds for more productive purposes. What's more, as both sellers and buyers, manufacturers stand to benefit from any moves to liberalize agricultural trade, stresses Asim Erdilek, an economics professor at Case Western Reserve University's Weatherhead School of Management, Cleveland. As trade becomes freer and the U.S. is able to export more, the market will expand for fertilizer and such capital goods as tractors and harvesters, he explains. Meantime, less protectionism in the U.S. -- coupled with greater efficiency and economies of scale -- will produce lower prices for food processors and other manufacturers "that use agricultural inputs as raw materials or intermediate goods," he says. Erdilek believes agriculture will be the "most contentious" issue in a new bargaining round. He could be right. In Europe, the U.S., and Asia, farmers will fight liberalization. Japan, for example, is urging that "due consideration . . . be given to food security and other aspects of multifunctionality in agriculture." That translates to trade protectionism -- and the unstated political reality behind the statement is that farmers are the backbone supporters of Japan's ruling Liberal Democratic Party. Contentiousness also promises to take a seat at the bargaining table if antitrust issues end up on the final agenda. The EU, for example, is seeking a new and binding set of international "competition" rules, covering the adoption and enforcement of antitrust laws, common approaches to "hard-core" cartels and other anticompetitive arrangements, and the resolution of disputes. Yet the U.S. Justice Dept. and Federal Trade Commission, "understandably don't want to give up benefits we get from ferocious competition," says Gary Horlick, a partner at O'Melveny & Myers LLP, Washington, and a former international trade counsel for the U.S. Senate's Finance Committee. "Because not everyone is close to being on the same wavelength intellectually, there's a danger that you'd get some sort of compromise where we'd end up with worse rules." Finally, if the negotiators decide to reform the WTO's overall trade-dispute settlement mechanism, "a real flash-point there is the conflict between efforts to protect the environment and efforts to promote world trade," advises Sydney M. Cone III, counsel at the New York-based law firm of Cleary, Gottlieb, Steen & Hamilton. "That's going to be a very tough one to resolve, because the U.S. Congress comes under pressure from environmental groups to take action to protect the environment and developing countries don't like the U.S. to take unilateral action in that area." Some sleeplessness at the WTO ministerial in Seattle? You can bet on it. Tanya Clark in Tokyo and William H. Miller in Washington contributed to this article.

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