Mike Moore and free trade

Mike Moore, who died on 2 February 2020 aged 71, was a former NZ Prime Minister (although that was short-lived at 59 days) and a former director general of the WTO. He was charming, witting and engaging and an excellent person to interview. I interviewed him in 2007 when he was in Dubai and I was at Khaleej Times. Here is what he said.

FTAs provide privileges but distort trade: Ex WTO chief Lucia Dore (Assistant Editor, Business) Filed on June 4, 2007 DUBAI — The signing of a Free Trade Agreement (FTA) between the GCC and the European Union, which could happen by the end of this month, will only "lock in and secure their interests", says Mike Moore, a former director-general of the World Trade Organisation (WTO).

"And interestingly their product base and mixture means they are not vulnerable in certain areas, like agriculture," he adds, speaking to Khaleej Times at the Middle East-Asia Leadership Forum held in Dubai recently.

The signing of FTAs across the MENA region, and the world, has become commonplace. But none of them involve agriculture and there are thousands of exemptions, says Moore. FTAs, which Moore says are really Preferential FTAs, do little more than lock-in existing conditions between trading partners. "And, really, how hard is it to do a deal when you knock off agriculture?" he asks. "And none of these agreements have a binding disputes mechanism and they are not that hard."

One of the problems is that politicians like to sign them, he says. "I loved signing them when I was a minister. You look terrific and you feel you are serving your country, and you are, because there is a cost to not doing it." Moore believes that the number of FTAs will expand "in direct relation to the lack of activity in the multilateral system. So there is even more reason to cut the deal."

Inevitably, preferential FTAs provide privileges, says Moore. They "create a moral hazard, which businesspeople and bureaucrats use. They create distortion and diversion of trade," and adds: "This is very dangerous now and in the long run."

The WTO was formed in 1995 and was born out of the General Agreement on Tariffs and Trade (GATT) which, in turn, was established in 1948 to set rules for the world trading system. When the WTO was set up the "members were all rich and white," says Moore (who was the organisation's director-general from September 1999 to the end of August 2002). "And agriculture was not even on the agenda. It took us 30 years to get it there."

The consequence has been that of all the problems the WTO is tasked with resolving, agricultural seems to be the most intractable. Says Moore: "International trade always grinds to a halt when it comes to agriculture, it is the killer. It is the dealmaker and the deal breaker. That is why the trade deal is in so much trouble because we cannot convince the Japanese, Americans, Europeans, and others, to move far enough." He applauds the stance taken by the G20. "That is why the solidarity that is shown by the G20 is superb. Brazil, India, China, South Africa and Argentina are digging their toes in and saying unless something substantial happens in agriculture there will be give nothing for anybody."

He says that if the WTO could secure a deal in agriculture, Africa would receive four or five times more than all the overseas development assistance put together. If, for example, the WTO could seal an agreement on cotton, "it would put $400 million into the poorer countries in Africa," he says. And coffee, which is the biggest export from Kenya and Ethiopia, "is a disgrace."

When developing countries add value to their agricultural products, the rich countries don't encourage it, they fight it. Moore explains: "What the rich countries do is, if you add value to the process, they escalate the tariffs up in direct relationship to the number of jobs you create at home. It doesn't get any worse than that."

The way to fix the problem however is not for governments to attack multilateralism, but for them to engage in it. Moore says: "You are not going to fix the problem with a bilateral deal. You will fix it at the WTO, however, and I got it on the agenda. It is there, being negotiated now. But you are attacking very powerful, privileged interests in the rich countries."

And although agriculture is the primary reason for the breakdown of negotiations at the Doha Development Trade Round last year, and continues to remain the main obstacle to progress, the liberalisation of financial services is also a sticking point.

Moore says not a lot is happening regarding financial services. "We tried to get investment on (the agenda) of the last round (of trade talks) and it really was shot to pieces." At the next trade round, financial services will be the "next major issue" that will have to be tackled, he says, "particularly because we have a new kind of investment issue, and that is state capitalism." State capitalism concerns the investment of state-owned, rather than privately owned, money being invested abroad.

"The system hasn't historically faced trillions of dollars sitting in places like China being invested in Wall Street. This is state-owned money and is different from Japanese investment which is privately owned. We haven't come to terms with this because this is new," he says. "If it (the investment) is transparent, if there are no cross-subsidies, and if it is real, and if there are proper bankruptcy laws and property rights, then it is probably a good thing," he adds.

The lack of progress in liberalising financial services is making the rich countries richer, says Moore. "We are all getting richer because of it." He says this is "because of all the money slopping around", and adds: "Even with the lack of transparency, money is mobile now and money regulates itself. Money is a coward and money will go where it feels safe and secure. That's why it goes to banks in London and New York and won't go to Gaza."

Even though the WTO is an intergovernmental organisation representing sovereign governments, it is often portrayed as one dominated by those with the most strength and biggest pockets. Is it?

Moore says: "There is a little bit of truth in it, but not really," and adds: "The WTO is a secretariat and can only do what governments allow it to do, and at this point governments won't allow it to go far enough. Any deal you cut is only the best deal you could get yesterday. It is yesterday's compromise."