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WTO Liberalizes Services Trade to Revive Doha Round

12-04 14:03 Caijing
WTO Director-General Pascal Lamy aims to liberalize the services trade in multilateral negotiations and shift to an "early harvest" approach as a way to make a breakthrough in the stalled Doha round.

By staff reporter Wang Yanchun

As the mechanism for regional and bilateral cooperation prospers, the World Trade Organization (WTO) appears to be on the road to marginalization and decline.

As the world financial crisis deepens and Europe struggles to get out of its debt crisis, trade protectionism has been on the rise in a sluggish world economy. As a result, the Doha round of trade negotiations that dates back to Nov. 2001 has fallen deeper into the mire. Developed and developing WTO member states have spent years wrangling over agricultural and non-agricultural market access, making Doha the lengthiest round of multilateral trade negotiations.

The boom of bilateral trade and regional trade has also undermined the mechanism for multilateral trade. New bilateral and regional mechanisms such as Free Trade Areas (FTA), the Trans-Pacific Strategic Economic Partnership (TPP), and Regional Comprehensive Economic Partnership (RCEP) have sprung up. Meanwhile, the global multilateral mechanism has been increasingly snubbed. Many people think that given stalled WTO negotiations aimed at promoting free trade worldwide, countries have to strengthen regional economic integration in order to offset the negative impact of economic globalization and get a leg up in the world economy.

Worried by this phenomenon, WTO Director-General Pascal Lamy has been actively campaigning for the global multilateral mechanism. Lamy argues that bilateral and regional mechanisms inflict multiple injustices on non-member nations, and underdeveloped countries in particular are likely to be left behind, unable to benefit from the rapid growth of global trade. Former U.S. Trade Representative Carla Hills said that we are in a world where the global multilateral system is shrinking; and poor countries are left out of the system, becoming "losing countries."

Lamy aims to liberalize the services trade in multilateral negotiations and shift to an "early harvest" approach as a way to make a breakthrough in the stalled Doha round. 

The world market has been depressed since the global financial crisis. Growth in goods trade dropped from 13 percent in 2010 to 7 percent in 2011, and is estimated to fall further to 3.7 percent. Therefore, both competition and cooperation are on the rise in the services trade sector, which is getting increasingly wide attention. According to the WTO, total services trade value worldwide has increased from US$ 4.9 trillion in 2005 to US$ 8 trillion (over 20 percent of total foreign trade value) by 2011, with an average annual growth rate of 8.8 percent. These figures are well above global economic growth during the same period. Hence, countries have increasingly turned to the services trade to improve their balance of payments and up their position in the international division of labor.

As the services trade expands, it is replacing goods trade as the new central topic in global multilateral trade negotiations. The services trade sector, which is more competitive and has more growth potential, is valued by emerging economies such as China and India as well as developed economies like the United States and European countries.

In an exclusive interview with Caijing, Lamy urged China, now the world's second largest economy, to play a more active role in the services trade sector. "In negotiations of multilateral trade agreements, the WTO needs a big economy like China to fully open its services market to facilitate the negotiation process," he said. "The multilateral trade system needs China to help build a bridge."

Full article in Chinese: http://magazine.caijing.com.cn/2012-12-02/112328056.html

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