Opinion in the Jakarta Post April 12 2013: An Indonesian as WTO Chief?

Opinion

An Indonesian as WTO chief?

Hatanto Reksodipoetro, Jakarta | Opinion | Fri, April 12 2013, 10:51 AM

The World Trade Organization (WTO) is looking for a new director general to replace Pascal Lamy. Several candidates come from developing economies, including Indonesia. What would Indonesia benefit from having an Indonesian elected the WTO chief and what are the chances?



Indonesia is certainly not a newcomer to multilateral trade diplomacy. It has gained experience in maneuvering in a world dominated by major trading nations. In the 1990s, Indonesia as WTO member went through a rough patch when its National Car Policy was challenged by three major automobile-producing countries, namely the US, EU and Japan (the big three). To explain the reasons and the basis of the policy to the countries that had been dominating the Indonesian automotive market for a very long time, the government pursued bilateral negotiations.

Just when the talks almost bore fruit one country jump-started the WTO dispute settlement panel. After heavy spending on legal consultants and sending delegations to Geneva, and lengthy debates and arguments, the WTO nevertheless decided to penalize Indonesia. Since then, Indonesia has placed a senior diplomat (including a WTO ambassador) in Geneva and sent numerous delegations to participate in the WTO negotiating rounds (Uruguay and Doha Rounds) with a view to voicing its concern for the right of developing countries to build their own industrial capacity.



The Uruguay Round of trade negotiations succeeded in establishing the WTO agreements, but still far from empowering developing countries like Indonesia to survive through immense restrictions embodied in the agreement. Then came the Doha Round, with what is popularly known as the Doha Development Agenda (DDA), supposedly looking for ways developing countries could accelerate their economic development. Until today DDA has not made much progress, however.



WTO members consist of countries from a wide range of development levels, from the most developed countries to least developed nations. They are all bound by the principle of “most favored nations” (MFN). The rules that every member has sworn to comply with are binding, so much so that if a country reneges on its commitments, it has to “compensate” each and every other member that has significant interests in the product(s) concerned.



As a country that has ratified “The Marrakesh Agreement” (The WTO Agreement), Indonesian trade policy and regulations therefore must be in line with the agreement. In other words, WTO agreements (or the multilateral trade regulations) are superior to any member countries’ trade regulations.



One fundamental issue in endeavoring to regulate global trade is the significant difference in economic development of WTO members, which ultimately created the wide gap in competitiveness among the members. The WTO Agreement recognized this phenomenon; hence developing-country members are given “special and differential treatment [S&D]”. But these S&D articles, which already existed long before the WTO Agreement came into being, as Part IV of the General Agreement on Tariff and Trade (GATT), have proven to be ineffective in closing the gap between developed and developing members.



It is dangerous therefore to perceive that an Indonesian taking the leadership of the WTO could benefit his or her home country in achieving a more open global market for Indonesian exports, or at least protect the Indonesian market from heavy penetration of highly subsidized products coming from developed countries.



Having a prominent role as director general of the WTO, or maintaining active participation in trade diplomacy: which role would benefit the country most? Alternatively, a combination of active participation in trade diplomacy and supported by an Indonesian at the helm of the WTO. 



What are the prospects? The first option puts too much faith in the “Indonesian” WTO director general. The second option relies heavily on Indonesia’s capacity in leading groups of countries with similar concerns and the third, a combination of both.



The WTO director general is sworn to impartiality, so option one is basically out of the question. As head of the WTO, the director general must put the interest of all parties above his home country. Which leads us to the last two options.



Option two actually means that Indonesia continues its current active participation in trade diplomacy. Since the launch of the Uruguay Round of Multilateral Trade Negotiations, which was followed by the Doha Round, Indonesia has been playing an active role particularly in sectors pertinent to Indonesian interests, namely the rule making, agriculture and natural resource-based products sectors.



Notwithstanding, the benefits of multilateral trade negotiations are hard to measure. When an agreement is reached, it is basically a political document and hence inherently vague and subject to multiple interpretations. For our comfort, the agreement applies to all WTO members without exception (non-discriminatory).



The negotiation capacity of developed countries far exceeds that of Indonesia and developing countries in general. Developed countries not only possess much better human resources but also better negotiating infrastructure. Their negotiating teams consist of experienced negotiators, who are supported by lawyers with expertise in the legal aspects of the WTO agreements as well as the trade policies and regulations of their negotiating counterparts. Occasionally, industry experts also form part of developed-country negotiating teams.



Above all, the negotiating teams of developed countries are equipped with strategies and tactics fully supported by their stakeholders: parliament, government and business communities.



Objectively, even if Indonesia is honored with the leadership of the WTO, the benefits to the Indonesian economy of such an honor are practically next to nil, except for public relations purposes (“global player” status). If Indonesia wants to benefit from the WTO (in terms of better market opening), regardless of who becomes the director general, it must focus on developing an infrastructure that can raise the effectiveness of their negotiators, beginning with political support, human resources and a workable decision-making mechanism (it is imperative that at the very least, there must be certainty on what Indonesia wishes to achieve and when). This means: empowering the Indonesian trade negotiators.



Each candidate has an equal opportunity to become chief of the WTO, and the chances of the “chosen one” will depend on the extent of support from the major trading nations, obtained less in meeting halls then in the “corridors” of the WTO Headquarters at the Centre William Rappard. Notwithstanding, an Indonesian as WTO chief is irrelevant when accelerating Indonesian economic development is the yardstick.



The writer is former director general of international trade cooperation at the Department of Industry and Trade (now Trade Ministry) and Indonesian ambassador to Norway and the Republic of Iceland.