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The Trade Negotiations Minister On the WTO


WTO Article from Hon Jim Sutton, Minister for Trade Negotiations

International cooperation and the rule of law are fundamental to ensuring global peace and prosperity. It concerns me deeply when commentators begin to portray these as a some kind of evil, rather than as of immense benefit to all nations and their people.

Robin Corner (Dominion, 18 January) argues that the World Trade Organisation needs to be “reined in”. He has a confused and conspiratorial view of multilateral cooperation.

The WTO is an international organisation at the service of its 135 member states. The WTO itself wields no governmental authority, nor does it override the sovereignty of its member states. It is the member countries, exercising their sovereign powers collectively and by consensus, that make the WTO function as an organisation.

The rules of the WTO system are agreements resulting from negotiation among member governments. The consensus decision-making procedures followed by the organisation mean that no member country can be outvoted by others. Nor can they impose their will unilaterally on the rest of the membership. The agreements are only ratified by governments following completion of their constitutional approval processes.

It is a common misconception that the WTO prevents countries from setting their own standards or policies, whether in trade or in areas as diverse as the environment or health.

Governments are free to set their own laws and standards and adopt their own policies, provided that where these relate to the conduct of international trade they accord with the international rules that WTO members have collectively agreed to be necessary to facilitate trade - which in general means rules aimed at avoiding policies or standards that are arbitrary or discriminatory in relation to international trade.

Furthermore, the WTO provides exceptions which allow countries to impose trade barriers on the basis of national security, protection of human, animal and plant life or health, protection of the environment, public morals, and national treasures, and on other grounds such as trade in products made using prison labour.

What is not permitted is the use of these grounds as a disguise for trade protectionism, or to arbitrarily discriminate in trade with different countries. The US gasoline case cited by Corney is one such example - in that case, the US Environmental Protection Agency was imposing a more onerous environmental requirement on foreign suppliers of gasoline than it imposed on its own domestic suppliers. It was because of this discrimination that the US was successfully challenged by Brazil and Venezuela in the WTO.

The exception for national security has enabled WTO members to implement trade sanctions under the UN Charter. This is how countries were able to take trade sanctions against South Africa during the apartheid years, and against other countries responsible for terrorism or genocide.

But Corney also overlooks entirely the benefits of the WTO, or any multilateral body similarly based on consensus and rules, for a small country like New Zealand.

Because of our small population and geographical isolation, New Zealand would have no chance of enjoying a world class standard of living, except by extensive international trade.

Trade enables us to earn much of our living by producing those things, such as pastoral agricultural foodstuffs and certain forest products, where our productivity is truly world class. If forced to be self-sufficient - the opposite extreme of completely free trade - our lives would be those of peasants.

At present, we are caught between the two.

Were we able to market our dairy, meat and forest products without discrimination, we would enjoy one of the world’s highest per-capita incomes, as we did when we had unrestricted access to the British market half a century ago.

The WTO serves New Zealand’s interests well in this regard, by encouraging more open markets and providing clear rules that limit the ability of our trading partners to impose unjustifiable trade restrictions on our products and services.

Without those rules and the ability to enforce them, we would indeed be at the mercy of the rich and powerful. It would have been impossible, for example, for a developing country like Costa Rica to successfully challenge US textile restrictions - as it did a couple of years ago. In speaking at the WTO over a year ago, Mike Moore said “disputes and differences settled by negotiation based on facts, not force, is the genius of this organisation”.

Through the WTO, we have been able to resolve to our satisfaction problems with the European Union over spreadable butter and with Canada over subsidised milk exports, as well as finding mutually agreed solutions to other disputes. We expect to be similarly successful with the United States over lamb. If the WTO dispute settlement procedures did not exist, New Zealand and other small countries would have nowhere to go to get redress and remedy on trade disputes.

For 50 years, as an original signatory of the General Agreement on Trade and Tariffs, New Zealand has been active in pursuing a free and fair international trading system.

Our challenge is to manage a world of deepening interdependence. Trade is fundamental to global development and security. Protectionism and trade disputes can equally undermine those goals - as we saw 60 years ago. That is why the consensus rules-based system of the WTO is so crucially important.


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