Is the WTO heading for a failure?
FOR developing countries that have emphasized an export-led growth strategy, the multilateral trade rules, as represented by the WTO, are critical. It is, therefore, important to look back at the Bali WTO Conference and to assess why the understandings reached there are not taking concrete shape.
When the Bali WTO Ministerial Conference concluded with a bang, it was a sound heard around the globe. The WTO appeared re-energized. It is almost eleven months since the conclusion of that Conference. Perhaps, it is time to assess the progress since then.
Trade is vital for Asian countries. The world GDP, at current prices, amounted to about US$ 74 trillion in 2013; of this, Asian countries account for about US$ 22.3 trillion, or just over 30%. However, global trade was about US$ 18.8 trillion, of which Asian countries account for about US$ 6.2 trillion, or about 33%. And, looking at the trend of the last few decades, the trade of Asian countries is rising rapidly.
What did the Bali Ministerial decide?
There were two major parts to the decisions taken by the Ministers at Bali.
a. The first part relates to decisions taken on routine matters: TRIPS Violation complaints, Electronic Commerce, Small Economies, Aid for Trade, Trade & Transfer of Technology, etc. There were no fireworks in these decisions.
b. The second part comprised decisions relating to the Doha Round of Trade Negotiations. All eyes were focused on this section. Understandings were reached in several areas, including:
* An Agreement on Trade Facilitation
* Aspects of Agriculture, including on food security.
* Least Developed Countries issues, most importantly on services.
Bangladesh & WTO:
Multilateral trade agreements affect even an LDC. For example, as an LDC, Bangladesh is exempt from the implementation of the TRIPS agreement till 2016 (for pharmaceutical products) and till 2021 (for other products). This allows Bangladeshi consumers to benefit from cheap medicines. LDCs enjoy duty-free market access in many countries; Bangladesh is a major beneficiary of this scheme.
In the Bali documents, there is one area of vast potential benefit and another with considerable burden. As agreed, the LDCs filed a common request in the area of services (for Bangladesh, labour export is covered there). However, there is no response from the other countries. In the Trade Facilitation Agreement, the LDCs have taken on an onerous responsibility of notifications and aligning domestic regulations – we will find it challenging to carry out that task.
Some Perspectives on Bali:
At Bali, it was also agreed that a Protocol to give effect to the Trade Facilitation Agreement would be adopted by 31st July 2014 and open for signature until 31st July 2015. This Protocol has not been agreed to as yet, and many are blaming India for the delay.
The Trade Facilitation Agreement is mostly about changes in import procedures. The developed countries are not making significant changes in their own trade facilitation around their imports; it is the developing countries that will make the changes. It is obvious that the chief beneficiaries would be the major exporting countries.
India wants a permanent understanding in public stocktaking simultaneously with a Protocol on Trade Facilitation. In India, food subsidy is over US$ 21.5 billion. In addition, farm subsidy amounts to US$ 56 billion, of which about US$ 13.8 billion would be trade distorting under today's rules as the limit is calculated (absurdly) on 1986-88 prices and inflation since then has exceeded 650%. The practice of exporting government-subsidized agricultural produce was introduced by the developed countries.
Why, then, did developing countries agree to the Trade Facilitation Agreement at Bali? Many say that the new DG, WTO is the former Brazilian Ambassador in Geneva; his former colleagues at Geneva did not want to let him down. Moreover, no one wanted a failed Ministerial again. Finally, many developing countries felt that if they made a concession at Bali, developed countries would reciprocate later.
In multilateral trade rounds, “nothing is agreed till everything is agreed”. Even if the negotiations in one area are complete, formal approval awaits the outcome in all remaining areas. The WTO membership has deviated from this principle in approving the Trade Facilitation Agreement at Bali. No doubt, many will now regret that approach.
The LDCs are concerned that there is no progress where they are interested: services (labour movement), duty-free market access, etc. Unless their issues are given attention, LDCs will not be eager to see movement elsewhere. Hence, the concept of “single undertaking” is vital.
In the past, multilateral trade negotiations were simple. The major trading countries, that is, the developed countries would get together and provide the draft of an agreement, on which the developing countries could make some minor changes. Thereafter, the negotiations would conclude.
Gone are those days. Developing countries are now much more aware of their interests. They are beginning to take much greater interest in the rules being established.
Concluding Comments:
In the “new” WTO, both the developed and developing countries need to adjust to the changing reality. Will developed countries withdraw from the WTO? Despite all the sound and fury, it is apparent that they find the dispute settlement service of the WTO reason enough to remain members. This is the only multilateral forum to settle trade disputes; the dispute settlement procedures in regional trade agreements have not been very successful.
The WTO has been around for less than 20 years, which makes it “new” as organizations go. Agreements cannot be sustained or implemented if they are not equitable. The days of forcing one's decisions on others are over. All sides to an agreement must find some gain, and at the same time acknowledge that no one will achieve all that they wish to get. The trade facilitation agreement at Bali is not dead as yet, not until members choose to “kill” it.
The writer was Ambassador to the WTO from 2001-7, and is currently Chief Executive of the Bangladesh International Arbitration Centre (BIAC).
Comments