The
World Trade Organization (WTO) is looking for a new director general to
replace Pascal Lamy. Several candidates come from developing economies,
including Indonesia. What would Indonesia benefit from having an
Indonesian elected the WTO chief and what are the chances?
Indonesia is
certainly not a newcomer to multilateral trade diplomacy. It has gained
experience in maneuvering in a world dominated by major trading nations.
In the 1990s, Indonesia as WTO member went through a rough patch when its
National Car Policy was challenged by three major automobile-producing
countries, namely the US, EU and Japan (the big three). To explain the
reasons and the basis of the policy to the countries that had been
dominating the Indonesian automotive market for a very long time, the
government pursued bilateral negotiations.
Just when the
talks almost bore fruit one country jump-started the WTO dispute
settlement panel. After heavy spending on legal consultants and sending
delegations to Geneva, and lengthy debates and arguments, the WTO
nevertheless decided to penalize Indonesia. Since then, Indonesia has
placed a senior diplomat (including a WTO ambassador) in Geneva and sent
numerous delegations to participate in the WTO negotiating rounds
(Uruguay and Doha Rounds) with a view to voicing its concern for the
right of developing countries to build their own industrial capacity.
The Uruguay
Round of trade negotiations succeeded in establishing the WTO agreements,
but still far from empowering developing countries like Indonesia to
survive through immense restrictions embodied in the agreement. Then came
the Doha Round, with what is popularly known as the Doha Development
Agenda (DDA), supposedly looking for ways developing countries could
accelerate their economic development. Until today DDA has not made much
progress, however.
WTO members
consist of countries from a wide range of development levels, from the
most developed countries to least developed nations. They are all bound
by the principle of “most favored nations” (MFN). The rules that every
member has sworn to comply with are binding, so much so that if a country
reneges on its commitments, it has to “compensate” each and every other
member that has significant interests in the product(s) concerned.
As a country
that has ratified “The Marrakesh Agreement” (The WTO Agreement),
Indonesian trade policy and regulations therefore must be in line with
the agreement. In other words, WTO agreements (or the multilateral trade
regulations) are superior to any member countries’ trade regulations.
One
fundamental issue in endeavoring to regulate global trade is the
significant difference in economic development of WTO members, which
ultimately created the wide gap in competitiveness among the members. The
WTO Agreement recognized this phenomenon; hence developing-country
members are given “special and differential treatment [S&D]”. But
these S&D articles, which already existed long before the WTO
Agreement came into being, as Part IV of the General Agreement on Tariff
and Trade (GATT), have proven to be ineffective in closing the gap
between developed and developing members.
It is
dangerous therefore to perceive that an Indonesian taking the leadership
of the WTO could benefit his or her home country in achieving a more open
global market for Indonesian exports, or at least protect the Indonesian
market from heavy penetration of highly subsidized products coming from
developed countries.
Having a
prominent role as director general of the WTO, or maintaining active
participation in trade diplomacy: which role would benefit the country
most? Alternatively, a combination of active participation in trade
diplomacy and supported by an Indonesian at the helm of the WTO.
What are the
prospects? The first option puts too much faith in the “Indonesian” WTO
director general. The second option relies heavily on Indonesia’s
capacity in leading groups of countries with similar concerns and the
third, a combination of both.
The WTO
director general is sworn to impartiality, so option one is basically out
of the question. As head of the WTO, the director general must put the
interest of all parties above his home country. Which leads us to the
last two options.
Option two
actually means that Indonesia continues its current active participation
in trade diplomacy. Since the launch of the Uruguay Round of Multilateral
Trade Negotiations, which was followed by the Doha Round, Indonesia has
been playing an active role particularly in sectors pertinent to
Indonesian interests, namely the rule making, agriculture and natural
resource-based products sectors.
Notwithstanding,
the benefits of multilateral trade negotiations are hard to measure. When
an agreement is reached, it is basically a political document and hence
inherently vague and subject to multiple interpretations. For our
comfort, the agreement applies to all WTO members without exception
(non-discriminatory).
The
negotiation capacity of developed countries far exceeds that of Indonesia
and developing countries in general. Developed countries not only possess
much better human resources but also better negotiating infrastructure.
Their negotiating teams consist of experienced negotiators, who are
supported by lawyers with expertise in the legal aspects of the WTO
agreements as well as the trade policies and regulations of their
negotiating counterparts. Occasionally, industry experts also form part
of developed-country negotiating teams.
Above all,
the negotiating teams of developed countries are equipped with strategies
and tactics fully supported by their stakeholders: parliament, government
and business communities.
Objectively,
even if Indonesia is honored with the leadership of the WTO, the benefits
to the Indonesian economy of such an honor are practically next to nil,
except for public relations purposes (“global player” status). If
Indonesia wants to benefit from the WTO (in terms of better market
opening), regardless of who becomes the director general, it must focus
on developing an infrastructure that can raise the effectiveness of their
negotiators, beginning with political support, human resources and a workable
decision-making mechanism (it is imperative that at the very least, there
must be certainty on what Indonesia wishes to achieve and when). This
means: empowering the Indonesian trade negotiators.
Each
candidate has an equal opportunity to become chief of the WTO, and the
chances of the “chosen one” will depend on the extent of support from the
major trading nations, obtained less in meeting halls then in the
“corridors” of the WTO Headquarters at the Centre William Rappard.
Notwithstanding, an Indonesian as WTO chief is irrelevant when
accelerating Indonesian economic development is the yardstick. ●
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