Multilateralism through the WTO

Some GMS economies are pursing multilateralism directly and independently through WTO membership while others seek to join. Myanmar and Thailand have been members for some time, and Cambodia joined WTO in September 2003. The other GMS economies, Lao PDR and Viet Nam, are aggressively seeking membership.

In previous sections, we have argued that both subregionalism and regionalism can be consistent with the pursuit of multilateralism. More than that, and depending on the way in which countries go about it, both subregionalism and regionalism can actually contribute to multilateralism. If this is the case, what additional benefits, if any, will there be for members of subregional or regional cooperation arrangements in pursuing WTO membership?

WTO membership now will have less impact on Lao PDR and Viet Nam than it might have had prior to AFTA. Lao PDR conducts most of its trade with other ASEAN countries, so it already receives most favored nation (MFN) and national treatment (NT) status in these countries as a result of AFTA membership, which is what WTO membership, would have conferred. Lao PDR also already receives preferential treatment from many non-ASEAN trading partners, particularly the European Union. WTO membership will not affect that. With the recent granting of normal trade relation (NTR) status with the United States (US), Lao PDR is no longer the only Asian country to face punitive tariffs on its exports to that country. In short, many of the benefits that WTO membership would have delivered have already been realized through membership in AFTA.

Viet Nam has a comprehensive and wide-ranging bilateral trade agreement with the US and recently signed a trade and investment agreement with Japan that solidifies MFN and NT status for its trade and investment. The bilateral trade agreement with the US involves various commitments that will not only complement its push for WTO membership but will also fast track many of the benefits of that membership. In other words, the reform measures that Viet Nam is now implementing for the US bilateral agreement and the benefits that accrue from these measures plus the concessions that the US provides will lessen the net impact of WTO accession.

These are good things; they reaffirm the complementarities between regionalism and multilateralism. Perhaps the best illustration of this point is a comparison with the PRC’s accession to WTO. The benefits are expected to be substantial, mainly because the PRC has long remained relatively closed and isolated from the global community, but unlike the PRC, years of liberalization and opening up associated with participation in subregional and regional initiatives means that a significant portion of the benefits have already accrued to countries like Lao PDR and Viet Nam. Thus, although WTO membership will unambiguously deliver net benefits to these countries, the benefits at this stage will be largely incremental.

Considering this, the most significant benefit to Lao PDR and to Viet Nam from WTO membership may well be a demonstration effect. WTO membership will signal to the rest of the trading world that these countries were able to meet a demanding set of international trade and investment rules and guidelines. The returns from strong demonstration effects should not be underestimated because they can have a significant impact on forging new trading relationships and attracting FDI.

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