WTO AT BALI: Multilateralism versus Regionalism in Trade

Economic Times, December 23, 2013

By Pradeep S Mehta

It was touch and go over six intense days at Bali in early December. In the end, the World Trade Organization’s Ninth Ministerial Conference delivered a trade liberalisation package — the first-ever deal that the WTO could craft since it came into being in 1995. And this came after a 12-year-old Doha Development Agenda (DDA) stalemate and a spaghetti bowl of regional trade agreements. Thus, the spirit of multilateralism prevailed. The seven-year Uruguay Round Agreement (URA) negotiations ended in the establishment of the WTO in 1995.

Getting the WTO itself was a big achievement in spite of opposition from the US. The WTO included a binding dispute-resolution system, and new disciplines on services, intellectual property, agriculture, textiles and so on. The deals were done in a single undertaking manner, which means “all or nothing”. Following the WTO agreement, the first full-scale negotiation, DDA was launched in Doha in 2001. Its remit was to address problems with the URAs that were negotiated in the 1980s when the developing world had little understanding of complex issues. It was launched against the backdrop of the 9/11 tragedy to tell the world that the global community will not be cowed down by terror attacks. The DDA had to be labelled a development round as that was the only way to get poor countries to join the talks.

As negotiations on the DDA progressed, the poor countries realised that the rich wanted only better market access, while paying lip service to development. That was the reason for the stalemate. On the other hand, western agriculture subsidies turned out to be the spoiler. Europe, inter alia, wanted new deals on investment, competition and transparency in government procurement and trade facilitation as a trade-off against reforms in their farm subsidy regime. However, many in the developing world were opposed to all the four issues and the Cancun Ministerial of 2003 collapsed without a conclusion.

The Cancun collapse was salvaged in Geneva in July 2004 and it was agreed that DDA negotiations should continue, but retaining only trade facilitation among the four issues. Thus, WTO members have worked relentlessly on the DDA to arrive at a conclusion. That came close in July 2008 when members agreed on 90% of the issues, but that too failed due to US’ opposition to India and China’s stand on special safeguards on farm product imports. Thus, India and China became the spoilsports. In fact, it was the US’ reluctance to address its subsidy regime on cotton that was the deal breaker, as it affected many African countries. Among others, trade facilitation featured at the Bali Ministerial as part of the Doha Lite deal. It was a way forward to harvest the low-hanging fruits of the DDA and move forward. As expected, ambition levels between the rich and the poor are always at crossroads.

Consensus seemed elusive on the text on trade facilitation, but was finally sorted out. This was possible after the agreement on public stockholding of food grains breaching the 10% subsidy limit was crafted without tying it down to a four-year peace clause, but until a permanent solution is found. As India’s trade minister Anand Sharma said, “A historic day for the WTO.

India’s food security concerns are addressed.” The US was recalcitrant. It has little appetite for the DDA and has, therefore, been pursuing two mega regional deals. India’s hard stand made pundits feel that we would be walking into a trap and, thus, negotiators would go back empty-handed. Miraculously, a deal was struck at Bali. The US wanted the accord on trade facilitation badly. And that was the trade-off that India used for its demand on food security flexibility. However, trade facilitation — cutting down the red tape in customs procedures — is a win-win deal and has been welcomed by all. This deal is expected to generate about $1-trillion gain to all countries, of which most will accrue to the developing world. In the end, multilateralism stood its ground, and that is the best way forward for all countries. The scene will now shift to Geneva, where negotiators will work out the nuts and bolts of what they have agreed at Bali, and tackle the unfinished agenda of the DDA over 2014 and beyond.

(The writer is member, WTO’s Panel on Defining the Future of Trade.)

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