Ministers clash over freeing up trade

TRADE TENSIONS erupted at the final day of meetings at the Organisation for Economic Co-operation and Development (OECD) yesterday. Ministers clashed over whether to go ahead with a broad set of trade liberalisation measures due to be started at the World Trade Organisation (WTO) later this year.

The US, represented in Paris by Charlene Barshefsky, would not agree the trade talks should go beyond agriculture and services. It specifically excluded from the meeting's final communique a reference to international investment. Ms Barshefsky said it was still to be determined whether "negotiations of a modest nature on investment" could take place under the auspices of the trade organisation. "Different countries have different conceptions about what the discussions will cover in scope," she said.

The UK has been among the countries backing a wide-ranging trade liberalisation round. Patricia Hewitt, the Treasury minister, spoke of UK support for a "fully comprehensive round" covering investment, public procurement and electronic commerce, among other areas.

Angel Gurria, the Mexican minister chairing the talks, said discussions about the scope of the new trade round would continue. "The mood is to be ambitious," he insisted, saying more areas than agriculture and services would eventually be covered. But he added that the new round would have to be short - less than three years. The ministers also decided to exclude labour and environmental standards from the WTO discussions. Mr Gurria said these were important questions but, he added: "The question is one of not overburdening the agenda with issues that are being taken up in other institutions."

Ms Barshefsky made it plain yesterday that there would be no attempt to renegotiate a more ambitious international deal on freer investment rules, of the sort that collapsed in Paris at this time last year.

She also reiterated the firm US support for Mike Moore, the New Zealand candidate, to become the WTO's director-general. The appointment of a head to the currently leaderless body has reached a stalemate, with a small majority of countries backing Mr Moore, but a firm minority of Asian countries supporting Supachai Panikpatchdi, a Thai candidate.

Trade spats are becoming commonplace at the annual OECD ministerial meeting as tensions and protectionist sentiments rise. This year the US has warned its burgeoning trade deficit will spur protectionism unless other countries soak up imports by boosting growth.

The communique emphasised the need for member countries outside the US to boost growth. It confirmed that the OECD will be asked to produce a report looking at what factors, especially new technologies, might strengthen long-term economic performance.

The meeting expressed concern that unemployment remained so high in some countries. These were urged to implement job market reforms. The OECD economists believe that France, Germany and Italy have a long way to go to promote flexible labour markets.

The OECD is also launching a new global forum to improve corporate governance and which will work jointly with the World Bank to include developing countries. A set of framework principles have been published, covering shareholder protection, stakeholder interest and disclosure.