Failure of WTO could spur more bilateral deals

A failure to move towards further liberalisation of the multilateral trading system at this week?s ministerial conference in Hong Kong would encourage yet more bilateral trade deals to the detriment of global business and small trading nations, Victor Fung, a prominent business advocate of multilateralism, said Wednesday.

?Failure will give momentum to those who say the multilateral system doesn?t work,? said Mr Fung. ?The first phenomenon will be that everyone is going to rush to do a bilateral with the US. China I think will also be besieged. But how about all the smaller countries? Hong Kong is all right, and close to China. But others will be left out in the cold.?

Mr Fung, chairman of Li & Fung, the Hong Kong-based global sourcing company, has been a vocal critic of the growing ?spaghetti bowl? of discriminatory bilateral trade deals, many of them involving Asian countries.

He argues that the plethora of different rules of origin are difficult and costly for businesses to administer, and ill-suited to modern global supply chains in which products are often manufactured in stages in different countries before being assembled for export to their final destination.

Mr Fung was speaking at a lunch organised by the Evian Group, a thinktank that promotes the rules-based multilateral trading system.

Jean-Pierre Lehmann, the group?s founder, said the current trading system was ?in grave danger? as a result of the failure so far of the current Doha round of world trade negotiations to fulfil its promise of bringing together developed and developing nations. ?They are further apart four years down the road. The chasm is growing,? he said.

Mr Lehmann dismissed most bilateral deals as ?political? and said it was very disappointing that most businesses had ?shown so little guts? in supporting multilateralism. He called for greater efforts to educate people about the benefits globalisation was bringing to small companies in countries such as Vietnam as well as to multinationals such as Switzerland-based Nestle.

Mr Fung rejected the arguments of those who said the scores of bilateral deals criss-crossing the world today would somehow coalesce into a ?glorious multilateral nirvana?. If the world turned away from the multilateral system in favour of bilateral agreements, Mr Fung said, ?it?s going to be the rule of the jungle?.

He added: ?The multilateral system can obviously do a lot better. The solution to that is to fix the multilateral system, not to turn to the bilaterals.?

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