WTO candidate says Canada needs more diversified approach to trade

OTTAWA – A leading candidate for the World Trade Organization’s top job says Canada needs to diversify its trade reach, especially in the fast-growing Asian economies.

Mari Pangestu, Indonesia’s tourism minister and a candidate to replace outgoing Pascal Lamy later this summer, said in an interview that Canada has too many eggs in the U.S. basket, but also it’s efforts to diversify are too narrowly focused.

Pangestu, who met with Canadian Trade Minister Ed Fast late Monday afternoon, characterized Canada’s outreach in Southeast Asia as overly focused on China and India, the two economic giants of the region.

“I think you’ve improved your outreach to Asia, but I think you could do more,” she said. “You tend to focus more on China and India, but don’t forget Southeast Asia because we are 600 million people are we are growing.”

Canada has begun talks on an investment agreement with Indonesia, but has devoted more time and effort joining the TransPacific Partnership talks, and in improving economic ties with China and India. Bilateral trade with Indonesia, a country of 241 million, remains in its infancy at about $3 billion a year.

Pangestu was also gently critical of Finance Minister Jim Flaherty’s announcement in last week’s budget that “graduated” 72 emerging economies, including Indonesia, to the level of advanced countries for the purpose of tariff levels. The move, to be implemented in 2015, means imports from those countries will see border duties increased by about three per cent on average.

Pangestu said some countries are better positioned than others to absorb higher tariff levels, and that a more nuanced criteria needs to be adopted in determining countries should be elevated.

“Yes we have to give a bit more because we are more advanced than the lesser developed countries, but we should not give the same as an advanced country,” she said. “We are a big country and parts of it are developed but a lot of it is still underdeveloped, we still have subsistence farming.”

The government said countries designated by the World Bank as high income or upper-middle income with at least one per cent of global exports for two consecutive years would lose their discounted tariff status. Countries included by the definition vary from Hong Kong and Israel, to Jamaica and Kazakhstan.

The former trade minister, who speaks fluent English, is in Canada as part of a world-wide tour to round up support for her bid to succeed Lamy as director general of the WTO, the organization of 159 countries that sets the rules for global trade and commerce.

The new head inherits an organization that has been stalled since 2001 in its effort to reach an all-encompassing global treaty encompassing agriculture, manufacturing and services. The latest drop-dead deadline came and went over a year ago.

With agricultural subsidies the biggest sticking point, some have suggested the way out of the impasse may be to ramp down the ambition and move on sectors that have the best chance of finding compromise. Many nations, including Canada, has simply moved on in pursuit of bilateral and regional deals.

Pangestu said Canada should not give up. She is hopeful a new approach to concentrate first on small, pragmatic steps — such as increasing transparency on national border rules —will get the ball rolling toward a comprehensive deal.

But she says she doesn’t want to give up on an agriculture deal that has as a goal reducing trade-distorting subsidies in the developed world, particularly the United States, Japan, Europe and Canada, which make it difficult for emerging nations to export their products abroad and improve their economies.

“Agriculture is crucial,” she says, “because it’s the part of the Doha round that is going to be beneficial for developing countries, and you can only do that multilaterally. You can’t do it bilaterally.”