by Stephen H. Dunphy, Seattle Times business columnist / The Seattle Times
WTO MEMBER NATIONS increasingly are negotiating trade deals outside the world organization, which calls into question the WTO's future.
A year after global trade talks collapsed here, a new pattern of negotiations is emerging that could pose a greater threat to the World Trade Organization than even the wildest hopes of its opponents.
Increasingly, the 140 members of the WTO are entering into smaller-scale trade accords among themselves, or are pushing ahead with plans to do so. As a result, the WTO estimates those agreements now cover as much as three-quarters of world trade, and market barriers are dropping from East Asia to Latin America.
Mike Moore, the director general of the global trading body, warned recently that there is a "growing danger" that the surge in trade agreements "could come to be seen as a substitute for multilateral liberalization rather than a complement to it."
The U.S. alone has signed accords with China, Jordan and Vietnam in recent months, and is negotiating with Chile and Singapore. It has opened its markets to sub-Saharan Africa and the Caribbean Basin, and next April will consider forming a Free Trade Area of the Americas - a tariff-free zone that would cover the entire Western Hemisphere, from Canada to Argentina.
Last week, U.S. Trade Representative Charlene Barshefsky praised the deal with Jordan, calling it a model for how bilateral accords could help protect the environment and ensure labor standards are followed.
Japan has abandoned its long-standing policy of multilateral-only trade liberalization to consider agreements with Singapore and Korea, while the European Union is in the process of establishing a Euro-Mediterranean free-trade area by 2010.
Some experts like the bilateral deals because trade is booming. The World Bank said trade will expand 12.5 percent this year - the fastest growth in more than three decades. The WTO estimates trade growth this year at more than 10 percent.
While some regional pacts can be good, they run risks. Trade economists say regional trade pacts can result in one country granting preferences to another and buying goods from it that should really be purchased elsewhere.
That could have a huge impact on big trading ports. The Port of Seattle had at least some trade with more than 150 countries or regions last year, ranging from $27.5 billion with Japan to $7 million with Moldova.
Moore and WTO officials argue that the system in place since the end of World War II has worked well and should not be abandoned. The facts seem to point that way. Trade is up 16 fold since then, growing every year since 1945.
The free movement of goods and services across borders saves the average consumer in the U.S. about $2,000 a year. Countries like South Korea have moved from poverty with per capita annual income of less than $100 to the ranks of the wealthy developed countries in a generation, largely through the ability to trade.
But these bilateral agreements - deals between two countries - are being looked at more and more by big nations, especially the U.S. and the European Union. The deals allow them to get things it wants - agreements on labor standards and the environment - which it cannot get in bigger multilateral deals.
Even disputes are moving outside the WTO.
The U.S. may challenge how Airbus uses government loans to finance its proposed A380, a super jumbo that would compete with Boeing's 747.
U.S. and EU trade officials discussed the financing during high-level meetings in Washington this week.
But both sides - and Boeing - do not want the dispute to become a full-blown trade battle.
In addition to the list of country-to-country agreements regional agreements are growing as well. Among them:
Mercosur, the free-trade area that includes Brazil, Argentina and other Latin American countries, is negotiating to add Chile to its membership.
The Association of Southeast Asian Nations has proposed an East Asia free-trade zone, while Australia and New Zealand are seeking to open Asian agriculture markets.
Mexico has signed accords with the EU and the smaller European Free Trade Area. And the Andean and Central American common markets have reaffirmed their commitments to regional free trade.
The growth in regional trade accords could help build the political case in the U.S. to push again on multilateral-trade negotiations. Starting a new round of global trade talks won't be easy.
The WTO meetings in Seattle failed partly over a U.S. proposal to include labor and environmental standards in future trade accords.
That plan was supported by many of the tens of thousands of street protesters who tried to shut down the meetings.
Yet it drew fire from developing nations, which saw it as a veiled attempt to deprive them of their chief competitive advantage: low labor costs.
China's imminent accession to the WTO might also complicate things.
China is "big enough by itself that we need some time to concentrate on it," one official said. "Integrating 1.5 billion people into the system will be a huge boost to world trade" on its own.
Negotiations under way at the WTO in two areas - agriculture and services - are likely to run into resistance early next year.
"When horse trading begins in earnest in agriculture and services, we are likely to experience a sharp slowdown," said one WTO official. "Up until now, the work of those negotiating groups has gone well, but we have largely been in a phase of both information gathering and presentation of offers. It will not be until March that the real dealing is due to start."
Meanwhile, the bilateral deal making continues. The U.S. and Singapore are near an agreement on a free-trade pact.
Information from Bloomberg News was included in this report. Dunphy traveled to WTO headquarters earlier this fall.
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