EU trade commissioner Lamy now regularly hosts a 2-hour internet chat session, when all and sundry may question him on EU trade policy. He was at it last Thursday. The subject was the WTO trade round, launched a year ago in Doha and officially known as the Doha Development Agenda. Keeping Mr Lamy company were the Egyptian trade minister Youssef Boutros-Ghali and WWF head of European Policy office in Brussels Dr Keith Tyrell. The callers were more difficult to identify.
Mr Lamy invited everybody out there to please fire away! Most of the questions inevitably were directed at him; even the Egyptian trade minister took the opportunity to get Mr Lamy on the record on such key issues as agriculture and regionalism. Other issues covered included foreign direct investment (FDI), competition, regionalism vs multilateralism, and geographical indicators.
Mr. Lamy made it clear that the new round made multiple references to the interests of developing countries, and that its outcome had to be development friendly. The new round in fact is tackling more seriously. What is more, the EU, like many other countries, was doing its best to ensure that its trade and development policies were coherent with each other. But Mr Lamy was equally clear that it was important to make trade work for development the economic growth generated by increased trade was accompanied by appropriate national policies, to ensure that the effects of restructuring were addressed and adverse social impact was mitigated.
Although the anti-globalisation movement has been relatively quiet since the events of September 11, Mr Lamy noted that while trade was the most visible part of globalisation, finance, IT, the media, music, art and travel were also fostering globalisation. While recognising that globalisation raised a number of legitimate concerns about its social and environmental impact, he thought the answer lay not so much in demonstrations as on a globalisation based on rules rather than the law of the jungle.
The EU trade commissioner was very forthcoming on this issue. I hope for a very significant liberalisation in the agricultural sector, particularly to benefit developing countries, he said, adding, its what we all signed up to at Doha. The Egyptian trade minister pointed out to the need to prioritise issues. Agricultural negotiations come first, then negotiations on investments, he said.
A caller agreed with Mr Lamy that poor countries need both market access in agriculture and rules on competition, investment, etc but their capacity to negotiate on the latter was limited. Hence the priority for this development round should be on freer and fairer trade in agriculture and labour - intensive manufacturing. The other issues could be tackled later. But when is later, the trade commissioner shot back. Investment, he went on, is badly needed now and competition is key to good domestic governance. Mr Lamy pointed out that 40 years of preferential access (to the EU market) for developing countries had not sufficed. This was despite the fact that the EU was the most important market for the agricultural exports of developing countries and the biggest importer by far of food from these countries.
Developing countries, however, tend to focus on the restrictions to the exports. The Egyptian trade minister therefore wanted Europe to consider actively allowing greater access for all agricultural products into its market. Mr Lamy retorted that the EU will honour our commitment to increase market access, reduce export support and reduce trade-distorting internal support. The EU had begun to reform its common agricultural policy (CAP) already in 1992 and readjustment proposals were about to be translated into draft legislation, Mr Lamy noted. There would be a formidable incentive for CAP reform as a result of the EUs forthcoming enlargement. This was because expenditure under the CAP had been stabilized until 2013, despite the expected addition of 10 new member states in 2004 and consequently, a 50% increase in the number of EU farmers.
Mr Lamy stressed on the need to promote FDI flows to developing countries. A multilateral agreement on FDI will promote such flows by improving transparency and predictability. The Investment for Development agreement now proposed by the EU allows developing countries to regulate their economy and pursue their development policies, provided they do so without discriminating against foreign investors (i.e. observe the most-favoured-nation rule originally enshrined in the General Agreement on Tariffs and Trade.
The trade commissioner noted that even on the issue of non-discrimination the EU was flexible. Host countries, he declared, could screen investors, for whatever reason. However, after admission, all investors should be treated equally. Non-discrimination, Mr Lamy told the WWF representative, is an essential principle that guarantees security and transparency for economic operators, as well as ensuring the most efficient allocation of resources.
The EU nevertheless was not proposing absolute rules on non-discrimination, according to Mr. Lamy. Countries may have good reason to discriminate and they may do so by reserving certain sensitive sectors, or not taking on commitments in certain areas. Regionalism vs multilateralism
The trade commissioner noted the EU was currently negotiating regional trade agreements of one kind or another with about 100 countries, including African, Latin American, Mediterranean and Gulf countries. I believe that the mix of trade opening and rule making we are looking for is more easily attainable short term on the regional basis, because of greater proximity in collective preferences, tradition, language.., Mr Lamy said by way of explanation. Our bilateral and regional deals are with those partners who are most geographically or historically close to us, or are willing to go beyond multilateral liberalisation.
Regional integration, for Mr Lamy, is an important step for developing countries to integrate into the global economy. But regional agreements have to be compatible with the WTO and respect rules like Article XXIV of the GATT or Article V of GATS. While regionalism and multilateralism can and should be mutually supporting, multilateral liberalisation remained the bedrock, in Mr Lamys view.
Only three countries were specifically referred to during the two hours the chat session lasted. The Egyptian trade minister was asked about trade with India, but the question remained unanswered. Mr Lamy, asked whether the EU was planning to enter into a free trade agreement with Russia, replied, Not just yet. Our priority is to help integrate Russia into the world trade system (by joining the WTO). This is the foundation on which we can later start building a more preferential arrangement within a common economic space.
But it was China which attracted the most attention. The EU trade commissioner told one caller that he expected China to play a key role in making a success of the WTO ministerial meeting in Cancun (Mexico) next September. He believed that all WTO members, even the smaller ones, will find it easier to deal with China, now that it has joined us all in the WTO. He saw Chinas future growth as providing opportunities for traders in developing countries, and expected European and Chinese companies to continue to grow in each others markets.
For Mr. Lamy, the main impact of Chinas accession to the WTO will be on the Chinese people themselves. No aspect of the Chinese way of life will go entirely unchanged, he said, adding, WTO membership is a major strategic challenge and opportunity which China is grasping. Implementation is still in the first year and China is making a genuine effort to comply with its WTO commitments.
Unconvinced by the optimistic, reassuring message which the EUs trade commissioner had for all those who joined him on his internet chat session You can put your views to him directly in about two months time when he again makes himself available in cyberspace. Ask his representatives in New Delhi for the date and time.