• Sunday, December 22, 2013

Revival of the multilateral trade regime

Asjadul Kibria, back from Bali
World Trade Organisation Director-General Roberto Azevedo gestures as he is congratulated by delegates after the closing ceremony of the ninth WTO Ministerial Conference in Bali on December 7. Photo: Reuters
World Trade Organisation Director-General Roberto Azevedo gestures as he is congratulated by delegates after the closing ceremony of the ninth WTO Ministerial Conference in Bali on December 7. Photo: Reuters

The conclusion of the ninth ministerial conference of the World Trade Organisation with a formal declaration and set of decisions in three areas—agricultural subsidy, trade facilitation and least developed countries—is a breakthrough in long stalled multilateral trade negotiation.
The four-day meeting that ultimately advanced to an unscheduled fifth day to come to a positive declaration in the panoramic island of Indonesia was a big challenge for the organisation as well as multilateral trade regime.
It now appears that members have to some extent become successful in overcoming the challenge. In fact, by approving the Bali declaration and adopting the Bali package, WTO members immediately reinstate the rationale and justification of the organisation, which has come under question for long.
As a governing body of the rule-based multilateral trading system, the necessity of WTO continuously comes under question and criticism, and these intensified in the last couple of years as members engaged in negotiations could not find a landing zone.
In this context, the Bali conference in Bali Nusa Dua Convention Centre on December 3-6, 2013, brought a historical opportunity for 159 member countries of the organisation.
Members also lowered their expectations as reflected in the three pillars of the Bali package, which is a small portion of the full Doha agenda.
“A minimal package has been brought into Bali for finalisation and three small parts of the overall Doha agenda are there,” said Dr Matthes Buhbe, director of Friedrich-Ebert-Stiftung Geneva office.

“WTO has a lot of things to do. So, for survival of the global institution, a breakthrough is a must in Bali.”
The Doha Development Agenda was initiated in the fourth WTO ministerial conference in the Qatari capital with high ambitions to negotiate and revise a long-range of multilateral trade rules. These included trade in agriculture, industry and services, intellectual property rights, trade facilitation and dispute settlements.
As negotiations are based on the 'single undertaking' principle, many believe that it prolongs negotiation, which is still unsettled. Under the 'single undertaking' principle, it is said that “nothing is agreed until everything is agreed”.
This means members have to conclude the Doha negotiation as a unified package and all the issues have to be settled and finalised as a single agenda. Thus, even when only one of 20 areas of trade is not negotiated, the rest 19 negotiated areas cannot be adopted.
The developing and developed nations are sharply divided on farm subsidy and tariff reduction, which are the two major areas for prolonging the Doha round trade discussion.
Developing countries, led by India, Brazil and South Africa (so called IBSA), are pressing for reduction of huge subsidies on agriculture production and export of developed nations. On the other hand, developed countries led by the US and European Union are pressing for cutting the higher level of import tariff in developing countries.
Year after year, very little progress is made on these two issues and so, many other areas do not get proper attention. Since Doha, four ministerial conferences (excluding Bali) have taken place, namely, Cancun (2003), Hong Kong (2005) and Geneva (2009 and 2011). Only the Hong Kong ministerial came up with some positive output, while the last two in Geneva were almost nothing but formalities.
On the other hand, a series of complex issues have emerged and re-emerged in the global platform over the years. The hype over climate change and its effect became more prominent in the last couple of years and countries become busier negotiating climate deals.
Preparations for the Bali conference began with a new director general for WTO. Roberto Azevedo, a Brazilian diplomat, replaced Pascal Lamy and added renewed effort in Geneva, where the WTO head office is situated. In order to avoid another collapse, Azevedo moved with small elements of the Doha agenda to ease pressures and reduce negotiation complexities.
“Even after small agendas, it is not easy to negotiate as there are some differences on areas of agriculture subsidy and trade facilitation. Although all members earlier agreed on development issues focused on least developed countries, they will not get anything until there is settlement in two other areas,” Buhbe of Friedrich-Ebert-Stiftung Geneva office said.
Tensions escalated when Indian Commerce Minister Ananda Sharma said his country would not compromise on food security. The US and EU criticised such a stance, saying that this was a place of negotiation and there should not be a non-negotiable agenda. 
Although the Indian ambassador in Geneva has agreed on an initial draft text accommodating a so-called `peace clause' for four years, the Indian government later strongly disagreed having the upcoming elections in mind.
The food security act was passed a few months back to provide greatly subsidised food to 67 percent of the Indian population. Every month, a poor Indian person will receive 5 kilograms of cereal at Rs 3 a kilogram for rice, each kilogram of wheat at Rs 2 and each kilogram of coarse cereals at Rs 1. 
To do this, the Indian government has to increase the amount of subsidy, which significantly crosses the permissible level of subsidy. 
Thus, after difficult bargaining, the Bali package offers member countries an interim mechanism to safeguard the minimum support prices for farmers against WTO limits, till a permanent solution is adopted. 
It also asks members to develop a permanent solution to the public stockholding issue in four years. Thus India, as well as other developing countries, is insulated from being challenged on its agricultural subsidies through the dispute settlement mechanism for the interim period. 
Regarding trade facilitation, developed countries have completed a lot of work and it is actually the developing countries' turn to do their work.
Bhube believes that trade facilitation would be beneficial to both developed and developing countries, as it would reduce the unnecessary cost of entry and exit at the borders of the countries.
“Bribes at customs points to move consignments faster benefit a few people financially, keeping bureaucratic ineffective and corruption in place,” Buhbe said. “This is costly for trade.”
The agreed text on trade facilitation will have binding commitments in customs procedures and regulations by the member countries. And the Bali declaration also provides assurance that developing countries and LDCs will get technical and financial support in building capacities to implement the agreement.
The LDC package needs detailed analysis and is in the greater interest of Bangladesh. It can be said that the actual development benefit is still questionable. 
Several estimates revealed that the Bali deal could produce economic gains of anywhere from $500 billion to $1 trillion. To tap the gain, it is now the members of the WTO who need to continue the intensive multilateral negotiation in the next few months. Thus revival of the multilateral trade regime has a long way to go.
The writer is the business page editor of Prothom Alo and can be reached at asjadulk@gmail.com.  

Published: 10:53 am Saturday, December 21, 2013

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