WTO struggles across the line in new era of policy malaise

The WTO negotiations have been plagued with irreconcilable differences from the start. Made Nagi/AAP

The WTO Multilateral Trade Negotiations in Bali almost failed. By negotiating for one day beyond the scheduled conference time, 159 exhausted nations finally concluded an agreement.

What’s at stake are the rules which govern trade among member nations in goods, services and intellectual property. They are the foundation of the present world economic order. Indeed, these negotiations are the most important to be held in any area of multilateral negotiations among the nations of the world for at least 30 years.

The negotiations were set up by the Doha Declaration in November 2001, which laid out a plan to develop new rules and improve the market access of each member nation’s exports to markets in other member nations.

At the centre of the plan is the need to improve market access for the exports of developing countries. Hence the round of negotiations has been known popularly as the Doha Development Round.

The negotiations been plagued with irreconcilable differences among members from the outset and have stalled several times. Originally the negotiations were to be concluded by 1 January 2005. Subsequently, they missed several other deadlines.

Rocky path

During this time the agenda has been narrowed in several steps. In Bali, they were focused on three areas which were regarded as “deliverables”. These are the areas of Trade Facilitation (basically customs procedures), Special and Differential Treatment for Developed and Least Developed Countries and selected areas of market access for agriculture goods.

In these three areas the concluded package has some notable gains. Most importantly, the trade facilitation measures will free up movement of goods through customs in developing countries. They also agreed to give almost all exports of the least developed countries tariff-free and quota-free access to the market in developed countries. And promises to remove most export subsidies on agricultural goods.

They also include, at Indian insistence, new rules for public stock holding of foods in developing countries for food security. But economists fear this measure may actually increase food prices in the stock holding countries and lead to dumping of excess stocks in other countries.

In a moment of euphoria, the Director-General declared: “For the first time in our history, the WTO has truly delivered.” Yet, the Bali package covers only a very small fraction of the 40 areas laid out originally in the Doha Declaration.

It is quite unclear if and when any of the remaining areas will be resolved.

Progress slowing

Why did the negotiations produce such a modest outcome after such a huge negotiation effort over 12 years? This was a much longer period of negotiation than that of any of the eight previous negotiations under the General Agreement on Trade and Tariffs (GATT), the organisation that preceded the WTO.

One reason is the huge range and complexity of the issues under negotiation. This makes the negotiations very cumbersome, but the previous GATT rounds succeeded. What has changed?

The Global Economic Crisis has made developed country members more cautious. Times of economic downturn are never good for multi-country negotiations. But the problems had emerged before the onset of this downturn in 2007. The rapid rise of China as a very competitive supplier of industrial products has exacerbated problems of unemployment and trade deficits in the US and also EU, But the problems of deindustrialisation go back to before the rise of China and other emerging economies.

The biggest change in the world economy since around the time of the start of the Doha Development Round negotiations has been the collapse of a consensus view among global policymakers.

In the last 25 years of the 20th century there was a set of common views that guided debate on global economic governance. These were known as the “Washington Consensus”. They included trade liberalisation and the belief more generally in the use of markets. Although officially applied to the World Bank and the IMF, they were in practice applied in the GATT under US and EU leadership.

Abandoning ship

The US has joined the EU in preferring improved market access through preferential trade agreements with small groups of countries over general multilateral trade liberalisation. Now in the WTO few members seem convinced of the gains from multilateral trade liberalisation. After a session of negotiations relating to industrial goods in 2009 the chair likened himself to “the captain of a boat no one seemed to want to board”.

This policy malaise affects other areas of multilateral economic governance.

The other notable example of lack of progress over 20 years is the UN climate change negotiations. We may have to learn to live with multilateral organisations of economic governance that are more divided than at any time since the Second World War and with little prospect of new binding multilateral rules.