EU should stand firm in China WTO talks

Date: 27/04/2000

Ever since the failure of the Seattle ministerial meeting last year to launch a new round of global trade liberalisation talks, it is the EU which has led the struggle to get a comprehensive set of negotiations off the ground.

Trade Commissioner Pascal Lamy has invested an enormous amount of time and energy in trying to persuade governments in developing countries that the World Trade Organisation can serve their interests and not just those of the world's wealthiest nations. He has rightly argued that poorer countries stand to gain if the next talks examine the problems they face as a result of the deal struck in 1994 at the end of the Uruguay Round.

A recent WTO report showed that developing countries are taking a bigger share of growing global trade flows worth €6 trillion a year, accounting for 27.5% in 1999 - the highest figure in 15 years. At next week's meeting of the organisation's general council, the world's four biggest trading powers will seek to boost this figure even higher by signing up to an Union initiative to scrap tariffs and restrictions on virtually all imports from the 48 poorest nations. Yet it seems unlikely that this will be enough to rally support for a new round. In reality, it is hard to see what the rich countries could offer at this stage to get the developing world to throw its weight behind the launch of fresh talks. The consensus among trade negotiators is that there is little chance of launching a comprehensive round until a new US president takes office next year and is in a position to inject new energy into the process.

In the meantime, the priority for the Union must be to secure a good trade deal with China. Despite the perception that Beijing is in no hurry to strike a deal because many of its industrial sectors remain uncompetitive, it does in fact have much to lose by wasting time. China knows that securing WTO entry would put an end to the annual shadow boxing with the US over whether to grant Beijing Most Favoured Nation status, which gives it vital trade concessions. WTO membership would also do much to buoy up confidence in the Chinese economy, forestalling a devaluation of the renminbi which could spark a new Asian economic crisis.

In light of this, Lamy should continue to hold out for more concessions from the Chinese when he travels to Beijing next month. For as the Commissioner himself has stressed, 'substance is more important than timing'.