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Agreement in Bali Breathes New Life into WTO

Agreement in Bali Breathes New Life into WTO

The World Trade Organisation (WTO) was jolted back to life, and to relevancy, by achieving its first comprehensive agreement in December last year. The round managed to gain agreement from all member countries in attendance, it was a mammoth task, and while some have said the outcomes didn’t go far enough, it has made strong headway in re-booting the WTO’s stalled negotiations that have seen preferential trade deals flourish.

“For the first time in our history, the WTO has truly delivered,” said WTO chief Roberto Azevedo.

The talks are part of the broader DOHA round of negotiations and they brought together Ministers from 159 countries. The broad aims of the talks are to boost global trade and reduce protectionism and the agenda for the Bali meeting focused on trade facilitation.

As has been the case in the past, the key was finding a middle ground between the rich countries focus on implementing concrete trade rules, as opposed to the needs of poor countries which demand allowances for feeding immense populations.

This pushed negotiations to breaking point when India demanded a change in the rules, proposing the right to stockpile basic foodstuffs and subsidise their production; but the US held strong claiming LDCs must reciprocate by matching the trade regimes of rich countries.

In the end a ‘peace-clause’ was agreed upon which allowed India, for the next four years, to be exempt from complaints about their breaches of subsidy limits in the name of ‘food-security’ programs.

Gains for Less Developed Countries

Further gains were made in improving the efficiency and transparency of customs procedures and new rules were set to help land-locked countries.

Another major gain for developing countries was duty-free and quote-free access to the markets of more developed countries.

Efficiency gains are forecast to add some US$500 billion to US$1 trillion to the global economy.

The Rise of Preferential and Regional Trade Agreements – TPP and TTIP

There have been suggestions that the sudden burst of productivity by the WTO has been spurred along by the US government’s proliferation of Preferential Trade Deals that circumvent the WTO process.

Two key deals are: TPP, the Trans-Pacific Partnership covers 12 countries, which make up 40% of global GDP, it includes Australia. Then there’s the TTIP, the Transatlantic Trade and Investment Partnership, includes 28 EU countries and the US, it covers 50% of global GDP.

These deals operate outside of the WTO system and they focus on reducing regulations more than tariffs. They attempt to streamline a set of rules across a diverse group of countries and they set themselves an ambitious task that runs the risk of creating economic fragmentation and regional trade factions.

(Pascal Lamy’s piece for Project Syndicate gives a good overview.)

They also tread the dangerous ground of branding a whole slew of non-tariff measures as protectionist. Australia’s restrictions on agricultural products, for example, are enforced on environmental grounds and Europe has far higher car safety standards than the US. Finding a way to balance these home-grown policies with a coherent multilateral trade policy will be challenging.

It is this problem which has given rise to one of the most controversial elements of the TPP and TTIP deals; and that is the Investor State Dispute Settlement (ISDS) process. ISDS is a legally binding dispute settlement process that enables corporations to sue sovereign states for imposing regulations that threaten their ability to trade; think plain package cigarettes or coal-seam gas drilling.

Commentators have gone as far as to say ISDS represents an attack on democracy as they operate behind closed doors and value trade above sovereignty. The stated purpose of the process is to give investors/corporations confidence to operate in countries that have less-than-stable institutions. ISDS will gives these firms security, but at what cost?

Can the DOHA Round be Finalized?

Agreement in Bali was a big step forward but there’s still a long way to go if the DOHA round as a whole is to reach some kind of resolution. The Economist suggests Roberto Azevedo will choose to tackle fresh issues, to avoid further stagnation. Issues such as investment subsidies across borders are ripe for debate as is trade in environmental goods.

It is a balancing act between making tough choices to move the global economy forward while at the same not being so ambitious that the big players leave the table. It’s progress, but it’s slow.

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