No easy bargains to be had in Marrakesh: This week's talks will have to get to grips with new tensions in world trade, says Vincent Cable

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THIS WEEK's trade 'summit' in Marrakesh will try to put the finishing touches to the delayed and battle-scarred Gatt world trade negotiations that ended in December. It will also prepare the ground for a successor to Gatt: the World Trade Organisation (WTO), which is to be the centrepiece of a stronger, multilateral system of trade rules. It offers the prospect of economic law and order where the law of the jungle has often prevailed.

Through the fog of jargon and aggressive rhetoric that invariably envelops trade negotiations, it is possible to see that governments have already travelled a good way towards order. They signed up in December for progressive liberalisation of agricultural services and agricultural trade; they will surrender considerable sovereignty over the use of trade restrictions; and they have accepted that disputes will be resolved within the disciplines of a global regime. The chief industrial countries have pressed ahead with liberalisation despite recession and rising unemployment, while more than 60 developing and former Communist countries are in the process of opening up their economies unilaterally.

There remain, however, risks that the infant WTO will be stillborn. Whatever governments agree has to be ratified by unpredictable legislatures in Washington, Strasbourg and New Delhi, and elsewhere, where angry farmers and economic nationalists lie in wait.

Even if the WTO survives birth, its infancy is threatened by some serious conflicts that have surfaced within the past few months: trade disputes between the US and Japan, and the US and China, and the simmering argument about whether environmental and social 'dumping' provide a legitimate pretext for trade sanctions.

These disputes reflect a deep and growing tension in the world economic system between the traditional industrial powers - the US and the EU - which dominated Gatt, and other increasingly important states, especially in Asia. What is at issue in Marrakesh is whether a system can be designed to control that tension. Asia and the West clashed earlier in history when the West was achieving commercial ascendancy. The US has been trying to prise open Japan for its exports since Commodore Perry used force in 1853, in an example of Victorian gunboat diplomacy. The West's attitudes towards the two Asian giants, China and India, have long been shaped by competing prejudices: on the one hand, the mouth-watering prospect of big markets and on the other, deep fears of large-scale but low-cost competition. Three centuries ago British workers rioted in London against 'unfair' competition from Asia (Indian calico) while the East India Company was emerging to capture Asian markets.

Those historical controversies have come full circle. Asia's share of world exports has grown from 22 per cent to 32 per cent in the past 10 years (and of world imports by only a little less). A combination of extraordinarily rapid growth in East and South-East Asia and spontaneous import liberalisation almost everywhere in the region except Japan are reinforcing the trend. Unless trading relationships are better managed than in the past, they will quickly degenerate into a battlefield.

There are three flash points. The first is the US's unilateral trade policy. In any system of weak law enforcement and disorder, the vigilante comes to the fore. The US administration has adopted this role, using special trade provisions to force open the markets of its trading partners. The spirit of Commodore Perry is strong: a recent US public opinion survey found that 90 per cent were in favour (70 per cent 'strongly') of 'pressuring' Japan to open its markets to US products.

The US's action is, in any case, of dubious economic value. Large trade surpluses and deficits cannot be willed away by piecemeal trade restrictions or by setting quantitative targets. The slow but steady liberalisation of the Japanese distribution and import system will not be accelerated by giving bureaucrats additional power to manage trade. But even if the US were wholly justified in its complaints and efficient in its methods, this would not be the way to resolve the dispute. The US will have to surrender its guns to the sheriff in Geneva if any meaningful, rule-based international system is to emerge.

A second trigger for conflict is a clash over political and cultural values. It is inconceivable that China, the emerging economic giant of Asia, should be excluded from the new trading order. But neither can it be admitted unless the US drops its insistence on the country's improved human rights performance. Another US demand (supported by France and Italy among others) - that labour rights be enshrined in the new trading regime, with penalties for countries that fail to meet minimum standards - is not only a cynical form of covert protectionism; it stems also from the same humanitarian idealism that saw child labour and slavery outlawed long ago in the West.

Yet the outrage with which the proposal has been greeted - even by democratic elected governments in India and Malaysia - should give us pause. It indicates the depths of suspicion with which Western human rights evangelism is regarded in Asia. India's counter proposal - that the WTO should also deal with the issue of Western immigration controls imposed on labour from the East - has no less a moral basis than the West's concern over labour rights. The opportunities for self-righteous posturing and ill-will are endless. The new trading order will die a quick death if it has to carry the burden of policing universal human rights as well as keeping markets open.

The third road to conflict is the accumulation of weapons of 'commercial defence'. The EU - which has kept a low profile in the US's disputes with China and Japan - has, by moving to simple majority voting in the council of ministers, quietly acquired greater powers to activate anti-dumping measures. It has Asian (and Eastern European) competition mainly in mind. There are also strong pressures in Europe, as in the US, for trade instruments to counter both 'environmental' and 'social' dumping. In its crudest form such pressure is a rejection of competition from countries that happen to be poorer and consquently have lower standards.

Whatever the other failures and tribulations of the British government, it has kept a commendably cool head in trade diplomacy, helping to bring the Uruguay round of Gatt to a conclusion and heading off populist protectionist sentiments within Western Europe. Its mettle and persuasive powers will be sorely tested if it is to keep at bay the primitive instincts of protectionism and economic nationalism that still lurk within the international trading system.

The writer is head of the international economics programme at the Royal Institute of International Affairs in London.

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