*{FINANCIAL TIMES

COMMENT & ANALYSIS
 
A trade agenda for the millennium: The next wave of trade liberalisation should encompass services, investment flows and agriculture, says Otto Lambsdorff in the Financial Times.
20 October 1999
[http://www.iccwbo.org/home/case_for_the_global_economy/full_texts/trade_agenda_for_the_millennium.asp]}

As the world turns, it often seems to forget just how much international trade has contributed to its prosperity. After eight Gatt rounds, world exports have increased from Dollars 60bn in 1950 to Dollars 5,300bn in 1998, which accounted for some 20 per cent of world economic output.

The increase in trade accounts for much of the development progress in the emerging economies: developing countries with open economies grew by 4.5 per cent a year in the 1970s and 1980s. Those with closed economies grew by 0.7 per cent a year. 

Contrary to a demagoguery all too common in Europe these days, trade competition is not war. Indeed, it is the antidote to the wars that have wrecked this century. Trade can lead to war only when the rules of the game are not set clearly. 

As we move towards the "millennium round" of trade talks, due to begin next month in Seattle, it is important to remember the labour pains involved in the mammoth Uruguay Round. It took eight years and yet in 1993 achieved what few people would have thought possible: a permanent body - the World Trade Organisation - and an agreed mechanism to settle trade disputes. 

Two figures should suffice to highlight the achievement of the Uruguay Round and clear up the growing fog of propaganda that has invaded the public debate on the eve of Seattle. Global income grew by close to Dollars 100bn as a result of liberalisation in merchandise trade. These gains - when extended to investments - are estimated to amount to Dollars 215bn a year, half of them accruing to developing countries. 

This means the Uruguay Round will have resulted in the equivalent of adding a Switzerland or a Korea to the world economy by 2005. As a result, Mike Moore, director-general of the WTO, has a solid base on which to build. 

His agenda for Seattle will make or break the millennium round. As he sifts through the many issues put before him, mostly by the European Union, he will have the difficult task of keeping the spirit of "comprehensiveness" that inspired the preparations for Seattle, and the priorities for further improvements in world trade.

There are at least four of these:
Services: Further liberalisation is needed to spur growth in post-industrial societies. Stronger commitments are required from all WT0 members on market access and national treatment. In particular, it is essential that any unfinished business - on safeguards, subsidies and government procurement - be made an integral part of future negotiations.
Investment: In retrospect, it was a mistake to pursue a Multilateral Agreement on Investment in the purely northern forum of the Organisation for Economic Co-operation and Development. But with international investment flows growing even faster than trade, some sort of new worldwide agreement on investment is needed. The goal should be to secure a stable and predictable climate for investment worldwide. Leaders in Seattle should stress that investment is the most potent vector for development worldwide, particularly in the world's poorest countries. 
Agriculture: This has long been held hostage to other trade issues. But attention must now turn to this poor relation of world trade, with the proviso that Europe and other developed nations do not use alleged health     concerns as a pretext for more protectionism. European agriculture is clearly strong enough to show the way towards genuine agricultural liberalisation. 
China: It remains one of the unresolved issues in world trade. WTO membership is crucial to integrating China into the world economy. But China must also commit itself to meet WTO standards: this would also benefit its economy. Neither can Taiwan's admission to the WTO be held hostage to negotiations with the People's Republic of China. Taiwan's membership application should be allowed to proceed on its own merits. 

Focusing clearly on the difficult issues seems the best way of doing justice to what is at stake: the credibility of the WTO and the need to maintain public confidence in our multilateral trade system. And it is a system that amply deserves our confidence. 

The alternative is protectionism and a return to the days when trade disputes were settled (badly) by bilateral strong-arm confrontations. The cost of protectionism to consumers, according to the OECD, is estimated at Dollars 300bn in OECD countries.

The organisation says: "The average cost to consumers of a job protected exceeds the wages of employees whose jobs are saved." It concludes: "An agreement such as the WTO is essentially an exercise of national sovereignty rather than a surrender of it." Mr Moore also puts it well: "How would the absence of rules make globalisation more palatable? Where would the little guy go then?" 

*{The author is the European chairman of the Trilateral Commission.

The Financial Times
Page 15 
International Edition 1}