Q & A

WTO spotlighted as trade chiefs gather for Tokyo meeting

by Tomoko Otake

Trade ministers from 25 nations will enter three days of intense negotiations in Tokyo on Friday as part of a new round of World Trade Organization trade liberalization talks. Here is a roundup of some basic facts on the organization and issues to be discussed.

What is the WTO?

The WTO is the only global international body governing rules of trade. Its objective is to help trade flow smoothly, freely and fairly among member states, which now number 145.

The Geneva-based body was established in 1995 as a successor to the General Agreement on Tariffs and Trade, which had been in place for half a century. Following the earlier rounds of trade liberalization talks under GATT, the Uruguay Round (1986-1994) expanded the scope of the organization to cover “almost all trade, from toothbrushes to pleasure boats, from banking to telecommunications, from the genes of wild rice to AIDS treatments,” according to the WTO.

The current talks constitute the first round under the WTO, launched in the fourth WTO Ministerial Conference in Doha, Qatar, in November 2001.

What is the purpose of this particular meeting and why are only 25 countries being represented?

The “informal” meeting is meant to deepen discussions among major WTO participants ahead of the next ministerial conference in Cancun, Mexico, scheduled for September. These informal meetings take place every two to three months, and participants are limited to around 20 industrialized and major developing countries.

The sessions are supposed to lay the groundwork for formal ministerial talks, which take place only once every two years and are attended by all members.

Will members reach any deal during the meeting?

Not officially. Since only 25 members are participating, they cannot in theory decide things that will affect all WTO members. However, delegates meet behind closed doors and no one apart from the participants themselves will know precisely what is discussed. No statements or papers will be released.

The meeting also provides a venue for bilateral talks for countries with stakes in certain issues.

What will be debated?

Officials will discuss nine areas of trade issues, including how to further liberalize trade in agriculture and services, and how to expand market access in nonagricultural goods and services. Problems related to existing rules such as antidumping measures will also be addressed. One of the most contentious issues is how to compromise on the patent rights of drugmakers.

What is so contentious about it?

At the Doha conference in 2001, members agreed to allow poor countries plagued by AIDS, malaria and other epidemics, but not able to afford patented drugs produced in industrialized nations, to produce cheaper versions of the drugs.

WTO member countries are split over how much poorer nations incapable of producing such copied drugs should be allowed to import from other developing countries. On one end of the spectrum are U.S. pharmaceutical giants, who want to limit the number of diseases subject to patent waivers. On the other, are developing countries, which now make up two-thirds of the WTO membership and want the waivers to include not just epidemics but also other diseases they consider a danger to public health. A General Council meeting in Geneva on Monday and Tuesday failed to resolve the deadlock, so negotiations will spill over to the Tokyo talks.

Another focal point is agricultural trade, on which exporters and importers are sharply divided.

How are nations divided on farm trade?

Exporters such as the U.S. and the so-called Cairns group, led by Australia, want to expand trade by imposing a 25-percent ceiling on tariffs on all products. Importers such as Japan and the EU propose a more gradual reform.

Developing countries want to expand their access to markets in other developed countries but are calling for exceptions to opening their own markets.

What is Japan’s position on farm trade? Why is it so defensive?

Japan has thrown support behind an EU proposal, which calls for an average tariff cut of 36 percent and a minimum reduction per item of 15 percent.

Japan now imposes a steep tariff rate of 490 percent for rice imports, so if the U.S.-Cairns group proposal is adopted, it would have to slash the rate by 465 percentage points, effectively pitting domestic rice growers up against foreign competition. Rice is a politically touchy subject here because farmers are a major source of organized votes for the ruling Liberal Democratic Party.

Separately, officials are discussing whether or how to expand so-called tariff quotas, or volumes of mandatory low-tariff imports of goods whose trade is heavily regulated. In the case of rice, for example, Japan is required to import 767,000 tons of rice annually, or 7.2 percent of the entire volume consumed.

The U.S. wants to raise quotas by 20 percent, while the Cairns group is pushing for an even larger increase of 20 percent of consumption volume.

Japan is the only country advocating cuts in such quotas.

Will members be able to settle their differences and meet the March 31 deadline for setting numerical targets in farm trade liberalization?

Some officials have said an agreement is unlikely by March 31.

Importers will not compromise unless they can secure concessions in other areas, such as industrial trade. But with the generic drug trade issue also in a stalemate, there is mounting skepticism on whether this huge trade watchdog can pull its members together. A failure to meet the March deadline would only deal another blow to the credibility of the WTO.