A ‘small harvest’ in Bali offers big horizons for WTO’s future

A ‘small harvest’ in Bali offers big horizons for WTO’s future

Trade ministers from 159 countries adopted a historic decision at the WTO’s (World Trade Organization) ninth Ministerial Conference held on the island of Bali in Indonesia. It is the first in time its history that the two-decade-old World Trade Organization has been able to deliver a set of rules that will be part of multilateral trade agreements. Shortly before the start of the Ministerial, Mr. Azavedo, the Director-General of the WTO himself declared cautiously that the risk of failure was still present. Dec. 7 saw a breakthrough in trade negotiations by way of a minor amelioration that discussions had brought to the table.

Being the central component of multilateral trade regimes, the WTO system has been under a massive assault for not providing a substantial improvement to trade liberalization. It is, of course, not the WTO, a member-driven inter-governmental institution, to be blamed, but the member states that bear the responsibility for not concluding the Doha Round of trade negotiations, which had commenced with great expectations under a broad agenda in November 2001.

Following its establishment, WTO has embarked upon several functions including facilitating the administration of trade agreements, reviewing trade policies of member states, providing technical assistance to developing countries, and cooperating with other international organizations. It did well in many of these areas and was even considered remarkable in settling trade disputes among its members. However, it has proved itself to be ineffective at fulfilling its most vital task, which is to provide a forum for trade negotiations and to improve trade rules.

It has been tremendously difficult to conclude the Doha Round considering that ‘consensus’ among all members is required to achieve a large-scale liberalization in world trade and to develop new rules to conform with 21st century needs. The Round was based on the principle of ‘single undertaking’ meaning ‘nothing is agreed to until everything is agreed to’ by all participating nations that negotiated for years over an ambitious agenda. To be in disagreement became the new rule of the game among developed and developing countries. Emerging economies such as Brazil, India, China and South Africa became more influential at the negotiations.

The twilight zone brought an almost end to the Doha Rounds, which had continued over a dozen years, and severely dented the credibility of the WTO. Stakeholders scaled down their expectations when they had finally understood that a comprehensive deal would not be politically feasible. However, for membership, a rational step was to continue the process to reach a consensus over a modest agenda with the harvest of low-hanging fruits. This ‘early harvest’ would indicate that the multilateral route is still open and serves well for developmental reasons.

Bali mini-package comprised three deliverable areas, namely trade facilitation, agriculture and development issues for the LDC’S. A multilateral agreement in trade facilitation is expected to cut red-tape by improving customs procedures and transparency with a view to accelerating the cross-border movement of goods. As the first ever multilateral step forward in WTO’s history, it is expected to boost world trade by $ 377 billion according to OECD estimates. In agriculture, the members agreed on a set of issues of utmost importance in developing countries like food security, export subsidies, tariff-rate quotas and cotton, although it was only a down-payment on a larger negotiation area. The package also provides preferential rules of origin and duty-free-quota-free access for the least developed countries.

A successful outcome at Bali was claimed to be the bringing of reductions in trade costs that would contribute $1 trillion to the global economy. If such figures are found to have been exaggerated, this compromise would sufficiently save the destiny of the Round.

As Neil Armstrong said following his voyage to the moon ‘that’s one small step for a man, but a giant leap for mankind’, the Bali deal is a modest development in the history of global trade negotiations, but gives the WTO a much-needed boost of confidence as a trade negotiating forum at a time when non-WTO mega deals such as the Trans Pacific Partnership and a Trans-Atlantic Trade and Investment Partnership are galloping.

Never lose your hope, but always behave cautiously when trade negotiations continue.

Dr. M. Sait Akman, Marmara University and TEPAV