WTO must prevail over splinter groups

The Hindu Business Line, 19 December, 2014


Trade between members of a group affects the rest of the world. Hence the importance of multilateralism

After four months of multiple meetings, press releases and consultations, progress was finally made on the impasse involving trade facilitation and public stockholding.

It was announced on November 13 that the US and India had resolved their differences and the US had accepted that the so-called ‘peace clause’ for public stockholding would remain in place until a permanent solution is found. In return, India is expected to ratify the trade facilitation agreement it blocked back in July.

India has stood firm at the WTO on linking the issue of public stockholding with moving forward on trade facilitation. At the Bali Ministerial, it had already secured a temporarily halt to the WTO cap on domestic support and any dispute settlement recourse while members worked on a permanent solution.

The issue came to a head when the General Council, the WTO’s highest governing body, was set to ratify the trade facilitation agreement, intended to ease trade processes, on July 31. India was not ready to ratify the TFA without further progress on finding a solution to public stockholding and thus used the global trade body to voice its objections and forced members to address the concerns of a quarter of the world’s poor.

Stressful parleys

Prior to the breakthrough, diplomatic stress ran high. Many countries were discussing an alternative to move forward, possibly without India, and even outside the multilateral trading system. Roberto Azevêdo, Director-General of the WTO, presented options to resolve the impasse based on his many discussions with member country delegations. One of the main scenarios Mr. Azevêdo posited was the implementation of trade facilitation amongst certain partner nations that agreed to move forward. This would essentially support plurilateral agreements made within the multilateral body. Although it was acknowledged that this scenario would be open-ended to eventual full multilateralism, as is the modus operandi of the WTO, those who want to move forward implementing trade facilitation could do so through the exclusive model of plurilateralism or most favoured nation methods. Multilateralism needs more support rather than breaking it up into seemingly easier plurilateral options.

Not a new idea

The allure of countries using plurilateral agreements to progress their trade interest is not new and is, in fact, rapidly increasing with mega-regional deals making progress such as the Trans-Pacific Partnership, Transatlantic Trade and Investment Partnership, Regional Cooperation Economic Partnership, and even China’s proposed Pacific Rim trade zone (Free Trade Area of the Asia-Pacific).

The perceived failure of the Doha Round has led countries to understandably pursue alternative routes of trade with less inclusion of the WTO. India itself, while reviewing all previous FTAs, has increased its diplomatic efforts to enter into new ones, including with Canada, Australia, and RCEP.

However, the possibility of plurilateral agreements within the WTO is certainly new territory.

India’s stance in the WTO for a permanent solution to public stockholding at the international level, despite angering many members, is a case in point of the importance of a multilateral arena giving a voice to all countries. It was that exact multilateral system that provided the space for a developing country with far less diplomatic clout than rich developed countries to speak up and defend its poor population.

The relative success of the so-called Cotton-4 group of nations — Benin, Burkina Faso, Chad, and Mali — pushing for reform in cotton trade, most recently at the Bali Ministerial in 2013, is another example of a global system giving equal opportunity to those whose voices are seldom heard.

This growing trend of plurilateral and mega-trade agreements may have been acceptable if the trade between countries only affected those trade partners. However, this is not the world we currently live in. Trade has consequences for all countries, directly and indirectly.

Engaging with nations

While studies have been conducted in response to these plurilaterals on how an agreement may impact a third-party country’s economy and trade capability, the significance of these trade deals is worryingly under-appreciated.

Further, with the growth of global value chains, the global market is already becoming more integrated and thus requires a strong multilateral system of agreed standards in trade.

Thus, moving toward a system based on exclusionary agreements, where some may prosper while others are not only left behind but even impaired, is unsustainable and unacceptable.

If a global system of increased plurilateral and mega-regional trade agreements is inevitable, at a minimum those negotiating parties, recognising the potential marginalising effect their deals would have on developing and least developed countries, must include protective provisions to such eventualities, including assistance to those countries where direct yet unintended consequences are found.

Involving developing country representatives in trade negotiations, similar to the practice at the United Nations where non-Security Council members participate in discussions that concern them, is another initiative worth employing. Admittedly, the WTO, the only forum to conduct multilateral trade cooperation, has not had a stellar track record. Indeed, the current state of trade negotiations often favours members with stronger economic significance and negotiation capacity.

However, the alternative of a world with varied standards scattered across several countries is not acceptable, especially for developing and least developed countries.

As WTO members meet at the General Council this December, it is critical to focus efforts on the multilateral system and not to succumb to the ease and appeal of plurilateral agreements.

Rather, countries must strengthen the inclusivity and empowerment of the WTO system, particularly for the world’s poorest and marginalised.

The writer is an assistant policy analyst at CUTS International

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