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Analytical Studies

Issue Objectives for the Genoa Summit Meeting 2001:
International Trade Report

INTRODUCTION

The Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO) and the Quad Group of major trading partners (consisting of the United States, European Union, Japan and Canada) are important organizations endeavoring to liberalize international trade. While the G8's role amongst these groups is certainly significant, it is far from being an "agenda-dictator" for the other organizations. According to Sergio Marchi, former Canadian Minister of International Trade, the G8's role with respect to furthering international trade is best described as an "agenda-motivator." According to Marchi, the smaller size of the G8 allows it to be more effective and manageable than the 144-member WTO, and can help to ensure that the most influential countries are in agreement on common goals.

International trade issues at the 2001 G8 summit in Genoa can be broadly separated into two categories. The first is new membership in the World Trade Organization (specifically the accession of China and Russia), and the second is a new round of trade talks scheduled for Qatar in November 2001.

CHINA'S ACCESSION INTO THE WORLD TRADE ORGANIZATION

China's accession into the World Trade Organization appears to be nearing completion. China has maintained "official observer status" at WTO meetings since 1984, but has recently undertaken an aggressive series of negotiations with the Quad Group of major trading nations aimed at achieving full membership as early as late this year. These negotiations are now complete, and agreements were signed with Japan (July 1999), Canada (November 1999), the United States (March 2000) and the European Union (October 2000), which resolve many of the major obstacles obstructing China's admission.

Two questions relating to China's accession will likely be on the agenda at the G8 Summit in Genoa. First, should China be allowed to classify itself as a developing nation, which would enable it to legally pursue a wider range of protectionist policies? China is lobbying for this classification, but most current WTO members argue that their balance of trade deficits with China are already too high and object strongly to any measure that restricts exports to China and thus risks exacerbating trade deficits.

Second, should approval for China's admission to the WTO be completed at the next WTO meeting scheduled in Qatar in November 2001, or should China be forced to wait another year to join?

Germany has historically been China's strongest supporter in regards to membership in the WTO. In 1999, German Chancellor Gerhard Schroeder argued that China, due to its tremendous importance in the world community and economy, should not only be invited to join the WTO but also to join the G8. The United States conversely has historically expressed concern over China's involvement in the WTO. Earlier this year, the U.S. was critical of China's behavior in the spy plane fiasco, and more recently the Chinese navy's war games off the coast of Xiamen Island (a region selected because of its geographic similarity to the U.S. ally Taiwan). These two incidents are believed to have possible implications for China's immediate entry into the WTO, and thus may become relevant during international trade discussions at Genoa.

RUSSIA'S ACCESSION INTO THE WORLD TRADE ORGANIZATION

None of the G8 countries officially object to Russia's entry into the WTO, but there are widespread concerns that Russia's former centrally planned economy is not yet sufficiently developed to undergo the required structural changes. This concern is most apparent in Russia, where several business leaders and the Mayor of Moscow are publicly stating that Russia will "receive no benefit" from entering the WTO at this stage in time. Conversely, Russian Premier Mikhail Kasyanov and all of his senior Russian ministers argue that immediate accession is vital to "restore stability to the Russian economy."

Analysts predict that Russia will likely join the WTO in late 2002, after it completes negotiations with each individual member of the Quad Group regarding the details of its accession. Russian Premier Kasyanov has publicly stated that negotiating special arrangements for Russia is a top priority for his administration. It is therefore probable that issues relating to Russia's accession will be discussed in Genoa.

NEW ROUND OF WTO TRADE TALKS

In addition to China and Russia's accession to the WTO, there has been a great deal of pressure from WTO members to amend the current trade agreement to include provisions for developing countries. Earlier this year, the European Union voted to eliminate tariffs and quotas on all "home grown" goods made within the 49 Least Developed Countries (with the exception of weapons). Many critics of the WTO have urged it to follow suit and make protectionist measures against developing countries illegal. The four EU members of the G8 (Britain, France, Germany and Italy) will likely place pressure on the 4 non-EU G8 members to adopt similar policies, and/or will push for equivalent measures on a universal scale in the next round of WTO talks in Qatar.

Another important trade issue is exemptions for developing countries from some WTO rules in order to reduce the shock of structural adjustment. Director General of the WTO, Mike Moore, recently stated that not providing exemptions for developing countries is a bit like asking "a boa constrictor to swallow a goat." While there appears to be some support for these exemptions, none of the G8 members have officially stated their approval for such measures.

Another contentious issue is the prospect of universal labour standards that would be enforceable to all signatories of the WTO, including both developed and developing countries. The WTO has been in consultation with the International Labour Organization (ILO), and while such measures are undoubtedly controversial, it is almost certain to be on the forum for discussion in Qatar. Developing countries for the most part object to universal labour standards since they are seen as western concepts that are impractical and harmful in developing countries where they only serve to lessen competitiveness. However, there is strong public pressure being placed on the G8 countries to ensure that the WTO adopts such standards.

Since the WTO Summit in Seattle, there has been an emphasis on the need for universal labour standards and separate provisions for LDCs. Earlier this year, Director General Michael Moore made a firm commitment to include such measures. Recently however, Moore was quoted as saying that the Qatar round of trade talks is "far from a done deal yet." This heavily publicized remark conveyed that many of these changes remain uncertain, and sparked a renewed outpouring of public criticism against the WTO. No doubt, members of the G8 will feel it necessary to ensure that the next round of trade talks are successful, and accomplish the ambitious goals set out in the preliminary Qatar agenda.

Prepared by Michael Malleson and Audrey Johnson

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