Because of a computer problem at Stabroek News, Dr Thomas's Sunday column was not received on time and is being published today.
Today, the Sixth WTO Ministerial Confer-ence will commence in Hong Kong. Like the two of the previous ministerial conferences held in Seattle and Cancun this one is laden with an agenda that boasts a plethora of critically important, exceedingly complex, wide ranging, and politically charged issues. All this will be taking place within the framework of the Doha Development Round of global negotiations to which the Members of the WTO committed themselves in 2001. The Round is scheduled to be completed by January 1, 2006, but this is now clearly impossible. The Doha Round was conceived as a vehicle for putting development issues at the centre stage of the WTO agenda in virtually every sphere of its operations. It has patently failed so far to achieve this. In the forthcoming weeks the news coming out of the deliberations in Hong Kong will most likely dominate news coverage in the media and shape the global discourse on international development.
Scope of the Doha Round
The Doha Round of global negotiations covers an enormous range of trade and trade-related issues. These include the thorny issues of trade in agriculture; non-agricultural market access; trade in services; trade-related concerns like competition policy, investment and intellectual property rights; capacity building to cope with the global issues for developing countries; the rules making, decision-making and management processes within the WTO; and, dispute resolution. Many of the concerns to be addressed are critical to the Region, especially those related to special and differential treatment for developing countries and small vulnerable states; preference-erosion, and, the treatment of special products and sensitive products in the global trade negotiations. In the latter regard, the ministerial treatment of sugar will be of immense importance to us in Guyana.
In order to have a fair grip on the issues at stake in the Hong Kong negotiations readers need to be familiar with the basic considerations that govern the rhythm and flow of global trade and the architectural framework under which that trade is taking place. To aid readers, this week I shall begin by introducing to some of the key features of recent global trade in the lead up to the Hong Kong Ministerial.
Global Trade: Recent Performance
The question we can begin by asking is how has global trade performed recently? During last year the global economy exhibited strong growth, with an annual increase in global GDP of four percent. Global trade however, grew more than twice as fast at nine percent for 2004. This performance is consistent with the trend that became manifest in the period of globalisation for global trade to grow much faster than global GDP. The consequence has been that the world economy has become more open and trade dependent than it has ever been in its history. Thus during the 1990s the annual growth in global trade was of the order of 6.4 percent and that of global GDP was less than half of that amount at 2.5 percent. Over the past decade 1994-2004, a similar pattern can be observed.
The strong growth in global trade has been shared across all regions of the globe. In particular as we have seen in recent weeks, the growth has been very strong in Asia. Latin America, the former states of the socialist block, and even Africa has however, also exhibited good positive growth rates.
There was also, contrary to expectations, a strong surge in commodity prices. On the whole, these grew faster than the price of manufactured goods in 2004. This unusual occurrence has not however, reversed the adverse trend in the terms of trade of primary commodities in relation to manufactures. The price gain in commodity prices owes much to the buoyant prices of oil and metals. While the price of oil has not risen exceptionally in the early period of globalisation, it has risen significantly both in nominal and real terms over the past year. The gain in the latter, which is the price in real terms (nominal price adjusted for inflation) leads to a current "real price" of just over US$35 per barrel, which is still below the "real price" of US$40 per barrel achieved as long ago as 1980.
At the end of last year the total value of global trade was just over US$11 trillion. Of this total, trade in goods (merchandise trade) accounted for 80 percent and of the value; trade in services accounted for the remaining 20 percent. The latter however, has been growing quite rapidly during the period of globalisation and will undoubtedly come to play the leading role in global trade eventually. In the services sector the data show that the fastest growing area has been transportation services. The result is a particular irony as transportation like oil did not enjoy significant price gains in the previous two decades.
The US Dollar
Another significant feature of recent trade has been the role played by movements in exchange rates. Undoubtedly the most significant of these has been the depreciation of the US dollar against other currencies and in particular the European currencies. This has contributed to the relatively weak performance of the European Union in global trade. In the face of China's burgeoning trade both the USA and the EU have accused China of artificially maintaining an undervalued currency, which gives it a competitive advantage in global markets.
This backgrounder on recent trends in global trade should help readers to situate the negotiations to take place in Hong Kong in their proper perspective. One important consideration which emerges from this review is that failure in Hong Kong could spell a deceleration of global trade. If this occurs it would have transmission effects on global production, investment and employment. And, as we are all only too well aware, if the global economy goes into recession this would add immensely to the political and strategic stresses that the global system currently faces.
In effect therefore, we can conclude by noting that more is at stake in Hong Kong than we would perhaps like to admit. The countdown, however, is already well underway.