*EPF208 03/09/2004
USTR Zoellick Warns Bigger Developing Countries to Open Markets
(WTO challenges by U.S. likely soon against Mexico, China, he says) (600)

By Bruce Odessey
Washington File Staff Writer

Washington -- U.S. Trade Representative Robert Zoellick says that more competitive developing countries such as India, China and Brazil have to open their markets in order to sustain support for open markets in the United States and elsewhere.

"If countries around the world that are emerging economic powers want to get the benefit of the system, they're going to have to contribute to the system," Zoellick said in March 9 testimony before the Senate Finance Committee.

Zoellick spoke at length about the politically controversial issue of outsourcing -- the transfer of jobs performed by U.S. workers to low-wage workers abroad.

While he described the issue as complex, he also criticized India, which is attracting some outsourced U.S. jobs, for maintaining what he called "one of the most closed economies in the world."

And he dismissed India's complaint about proposed legislation in Congress and some state legislatures that would prohibit outsourcing certain jobs.

"The Indians have absolutely no right to complain because they don't belong to the government procurement code" in the World Trade Organization (WTO), which sets obligations for making procurement deals transparent, he said, "and, frankly, they're not that liberal on the services side."

The long-stalled WTO negotiations have a chance to advance in 2004, he said, but only if all parties are willing to open agricultural markets, including elimination of export subsidies by the European Union.

And he said more competitive developing countries such as Brazil and Argentina should not expect to get the same kind of special and differential treatment -- such as longer implementation schedules -- as the poorest countries get in agriculture and other sectors.

"So that's how we're going to have to strike the balance" on special and differential treatment in the WTO, he said -- "for those that are truly in need versus those that are competitive."

Zoellick threatened to bring soon U.S. challenges in the WTO against some developing country practices, notably against Mexican barriers to rice and the sweetener high-fructose corn syrup.

He also threatened a challenge against a Chinese tax-rebate regulation he said discriminates against U.S. semiconductors. "If they don't fix it very soon," Zoellick said, "we're going to bring a case."

But he warned about the difficulty of bringing a WTO challenge to China's pegged currency. While WTO article 15 prohibits manipulating exchange rates in order to frustrate a WTO agreement, he said, China's global trade balance is in a slight deficit despite the $124 billion 2003 surplus with the United States.

"The Chinese realize that they are going to need to move to flexible exchange rates and open their capital account," Zoellick said. "They're trying to figure out ... exactly how to do it without creating a crisis in their banking system."

He said he has urged the Chinese to take some interim measure to demonstrate their willingness to resolve the currency problem.

Zoellick refrained from directly supporting proposed legislation that would give preferential U.S. tariff treatment to Middle East countries like that given to Caribbean and Andean countries. He reiterated general support for increasing trade with the Middle East.

One problem with preferential trade regimes, he said, is that at WTO negotiations some countries resist broad tariff cuts, which they view as diminishing their preferential access.

Also, he said, he would rather negotiate agreements that open trade in two directions than simply give one-way preferential entry to the U.S. market.

(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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