ANALYSIS-Small firms face big costs without new WTO pact
31 Mar 2008 08:55:51 GMT Source: Reuters
By Laura MacInnis GENEVA, March 31 (Reuters) - Small companies need a new World Trade Organisation pact more than larger rivals that are better equipped to bear the costs of navigating complex export rules, trade experts say. International political economy professor Jean-Pierre Lehmann said many entrepreneurs were stressed by the "agonisingly slow" pace of the WTO's Doha Round talks, whose goal was to make it easier to sell goods and services abroad. "For the established Western multinational corporation that has very deep pockets, and strong brands, and lots of lawyers, the paralysis or potential failure of the round -- at least in the short term -- does not have much significance," said Lehmann, who teaches at Switzerland's IMD business school. "If you are a Bangladeshi entrepreneur who has been building up a strong position in garments or pharmaceuticals or other areas, the failure of the round borders on the catastrophic." The WTO talks, named after the Qatari capital where they began in 2001, aim to boost international shipments of food, clothes, fuels and machinery, and to bolster the provision of cross-border services such as banking. Economists estimate a Doha accord could add $120 billion a year to the world economy. Many of the WTO's 151 members, including the United States, the European Union, India and Brazil, have been reluctant to cut the tariffs and subsidies they use to safeguard their national industries from foreign competition, fearing job losses if their producers cannot keep up. "HELLISHLY COMPLEX" As a result, the multilateral effort has largely stalled. Several governments have turned instead to smaller-scale accords to secure access for their exports in key markets. Lehmann said the resulting network of bilateral and regional free trade pacts, such as those sought between the United States and Colombia, New Zealand and China, Chile and Vietnam, and between Central American countries, have resulted in a thick web of rules for exporters to try to meet. "It is hellishly complex," he said. The head of the International Trade Centre (ITC), an agency affiliated to the United Nations and the WTO that works with the private sector in developing countries, said many businesses could not cope with increasingly splintered trade rules. "It gives them more costs, and makes them less competitive," ITC Executive Director Patricia Francis said in an interview. "It is always a question of 'what are your options'," she said. "Big business, because they have the level of flexibilities to get from A to B, they have choices. Small business doesn't have so much choice." Rajesh Aggarwal, who manages the ITC's Business in Trade Policy programme, said the enterprises he works with are keen on an over-arching WTO accord as an alternative to the current jumble of policies. "These small companies feel that a multilateral deal is a much better option for them," he said. Corporate executives are rarely seen at the WTO's Geneva headquarters, where talks on the Doha Round are expected to gather pace in the next few months as diplomats strive to scrape together the main elements of a deal by the end of the year. Lehmann, director of the IMD's Evian Group, a pro-trade coalition whose members include Nestle, Swiss Re, Caterpillar and Unilever, as well as India's Triveni Engineering and Li and Fung of Hong Kong, said the private sector had taken a mainly low-key approach to the WTO talks. Big businesses appeared most concerned with winning the same access to coveted export markets as their foreign competitors had under the bilateral and regional trade pacts being negotiated outside the WTO framework, he said. "The German company or the Danish company may genuinely prefer the multilateral system, but seeing what is happening, that company will say to its government 'make sure you don't miss out on potential (bilateral or regional) deals that would result in us being at a disadvantage'. "Companies say that they have taken a pragmatic line. The line would be that 'in an ideal world, we prefer to have an open multilateral system. But we are not in an ideal world'." (Editing by Jonathan Lynn and Andrew Dobbie)
