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Former WTO Chief says Trade Pacts are on the way out


An interesting item by Pascal Lamy, former Director-General of the WTO was recently published in the Sydney Morning Herald.

The stalled Trans Pacific Partnership trade negotiations and Australia's latest free trade agreements with Japan and Korea don't impress Pascal Lamy.

Mr Lamy has dismissed them as agreements of the past.

“Look at the US/Japan Agreement” he says “its about pork beef and rice. They are not exactly 21st century trade opening topics. The Trans Pacific Partnership Agreement Australia is negotiating with the US and 10 other countries, is a good old fashioned agreement”.

“It's about goods, services, Government procurement and a bit of intellectual property, but its the last of the big old style agreements”.

His brutal message delivered after a meeting with the Australian Treasury is that trade is no longer advanced by cutting tariffs.

“Tariffs are like dead stars. They are millions of kilometers away, they are dead, they don't emit light anymore. But you still see the light of the star because it takes so long for the light to come to your eyes. They have been dead for thousands of years but you still see the light of the star. Thats what tariffs are like, tariffs are dead”.

The trade weighted average tariff is now just 3 or 4 %, he says. What are left for the most part are nuisance tariffs. They don't much impede trade and are scarcely worth avoiding.

“Pursue the Trans Pacific Partnership if you think there is something in it for you” he says “But it is the last of the big old style trade agreements”.

“The new era starts with the Trans Atlantic Trade and Investment Partnership”.

The Trans Atlantic Agreement, known as TAIP is being negotiated between the European Union and the US. Instead of concentrating on what are by now minimal formal barriers to market access, it is concentrating on the regulations that actually make trade hard – items such as different safety standards for cars, the amount of pesticide residue allowed in cut flowers.

“Removing these would make an enormous difference to trade. Global corporations could truly take advantage of economies of scale. “It can't happen in the TPP because many of the countries negotiating it have different ideas about standards”.

It can happen between the US and Europe because views about consumer protection are similar. If it does happen – and the negotiations only started last year – what TAIP agrees on will probably become the de facto standar for the world.

The other remaining barrier to trade was felled by Australia's minister Andrew Robb and others at the WTO Bali meeting in December. It agreed to standardise and cut cross-border paperwork that restricts imports. “The cost amounts to a tariff of 10%” Mr Lamy says “Eliminating just half of it would be the same as eliminating all remaining tariffs”.

“I listen to businessmen, not trade negotiators” the former French socialist who stepped down from the WTO last year confides. “They know what's useful. Most of the time they don't even use free trade agreements. They make ambassadors feel good, but they are not worth the effort”.

Our Comment:

  1. Good to note these views by a French Socialist when those New Caledonia tariffs are effectively keeping significant volumes of NZ products out of that market.
  2. Nice to put the TPP up for closer scrutiny. Perhaps it isn't such a big deal after all – especially for Pacific traders?

Former WTO Chief says Trade Pacts are on the way out

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