Can the WTO deliver on its promise to find a breakthrough for Doha Round Talks in Bali?

Beginda Pakpahan argues that despite the tough situation facing delegates to the upcoming WTO Doha round trade talks, there have been several innovative developments in global economic architectures that may provide light at the end of the tunnel.

From 3 to 6 December 2013 the WTO will have the 9th Ministerial Conference in Bali, Indonesia which aims to conclude the Doha round negotiations. The WTO has been negotiating the Doha Development Agenda since November 2001. The conclusion of the WTO Doha round negotiations has not been as simple a business as trade negotiators thought when they began. The interesting question is can the WTO deliver on its promise to find a breakthrough for Doha Round Talks in Bali?

This column argues that the WTO members face a tough situation in the WTO Doha round trade talks. There exist several challenges and implications for the future of the WTO, for example: the emergence of plurilateral and regional/bilateral trade arrangements in the world and the possible setback for WTO members to the Doha Development Agenda. This column is divided into three areas of analysis as: First, it elaborates on issues of dispute in the WTO Doha round talks. Second, it outlines recent developments in the global economic architecture. Finally, it explains the challenges and implications of the latest developments in the WTO for regional and global economic architectures as a whole.

Issues of dispute between developed and developing countries in the WTO

There have been several issues of dispute in the WTO Doha round trade talks between developed and developing countries in the last decade. These issues cocnern trade facilitation, agriculture and the development of least developed countries (Lamy, 2013, p. 1). In the context of agricultural issues, the agricultural and farm subsidies for farmers in the EU and the USA have been divisive issue. More precisely, the EU has subsidized its peasants and farmers through the Common Agricultural Policy (31.6 % of total EU budget in 2008) (European Commission, 2008, p. 1). Furthermore, the USA and the EU have not been eager to reduce their agricultural tariffs and eliminate their farm subsidies. However, for their part, developing and least developed countries do not want to liberalize their agricultural sector, industry and services.

The developed countries promoted the inclusion of the Singapore issues within the Doha Round negotiations. In 1996, they proposed the Singapore issues to all participating countries in the first WTO ministerial conference in Singapore. The Singapore issues cover competition policy, trade facilitation and transparency in government procurement. However, the Singapore issues have been heavily criticized by developing countries because they marginalize citizens of developing and least developed countries.

In the WTO Doha Round talks held in 2006 in Geneva (WTO, 2006, p. 1), WTO ministers agreed to hear the report of the Task Force on Aid for Trade which suggested the inclusion of the development dimension into the WTO Doha Development Agenda. The idea was to incorporate trade and development into a package of trade liberalization. This is known as ‘development assistance for trade’. Developed countries provide aid in building trade capacity for developing and least developed countries enabling them to provide competitive goods and services. Developing and least developed countries may benefit from developed countries’ assistance, thereby reducing the negative effects of trade liberalization for vulnerable and poor citizens. In short, the developed and developing countries still have divergent positions on the above issues of dispute in WTO Doha round negotiations. Consequently, a deadlock in the WTO Doha Round negotiations between the WTO members remains up to the present time.

Developments in the global economic/trade architecture

Against this background, there have been significant developments in the global economic architecture, including the proliferation of bilateral and regional agreements and the emergence of plurilateral trade agreements. A plurilateral trade agreement is an agreement which has a small group of signatories. There have been four plurilateral agreements negotiated in the Tokyo Round. They concern trade in civil air craft, government procurement, dairy products and bovine meat. However, In 1997 the agreements on dairy products and bovine meat were terminated, while the others remain active amongst a small group of members in the WTO (WTO, 2013a, p.1).

Following this trend, many countries and regional organizations have responded to the longstanding deadlock in the WTO Doha round negotiations by creating a range of new mechanisms and instruments. For example, the number of bilateral, regional and inter-regional economic arrangements has increased since countries and regional organizations have looked upon these arrangements as complementary modes of economic engagement. In previous publications I argued that the number of regional trade arrangements (RTAs) has doubled in recent years. I also outlined that 75 RTAs have been notified to the WTO between 1958 and 1999. Furthermore, from 2000 to the present, there were 156 additional RTAs around the globe (Pakpahan, 2012a, p.1).

During this period several WTO member states also began to employ a plurilateral approach to reach trade agreements between them within and/or outside the multilateral trading arrangement. They persuaded other countries which were interested in developing a plurilateral trade agreement (WTO, 2013b, p.1). The plurilateral Agreement on Government Procurement (GPA) is a recent example of the legally binding economic treaty in the WTO. In 1994, the old GPA was negotiated by interested parties in the WTO. These countries and regional organizations renegotiated the old GPA and concluded the new GPA on 15 December 2011 (WTO, 2013c, p.1). They formally adopted the Decision on the Outcomes of the Negotiations under Article XXIV: 7 of the GPA (WTO, 2012, p.1). They were Armenia, Canada, the European Union, Hong Kong, Iceland, Israel, Japan, Korea, Liechtenstein, the Netherlands with respect to Aruba, Norway, Singapore, Switzerland, Chinese Taiwan and the United States (WTO, 2013d, p.1).

The latest development in another on-going plurilateral talk suggests several countries may have reached tentative accords among Really Good Friends of Services for an International Services Agreement (ISA) (Raghavan, 2012, p.1). The ISA aims to liberalise most sectors in services of the signatory members. The members of Really Good Friends of Services for an ISA are Australia, Chile, Canada, Costa Rica, Colombia, the EU, Hong Kong, Israel, Japan Mexico, New Zealand, Norway, Peru, Pakistan, Singapore, Colombia, South Korea, Switzerland, the US and Taiwan. In 2012, Singapore withdrew its membership of the above group. However, most emerging economies (eg. Brazil, China, South Africa and India) and other developing countries do not show an interest in liberalising their services market (Raghavan, 2012, p.1). In short, the Really Good Friends of Services for an ISA are still talking on the conclusion of the above agreement.

Challenges and implications for the regional and the global economic/trade architecture

As discussed above, the latest developments in the global economic architecture have affected countries’ and regional organizations’ views on the WTO. There are two possible challenges which may be faced by the WTO. As mentioned above, the first challenge is that the primary objective of countries and regional organizations has gradually shifted from a multilateral trading arrangement to bilateral/regional or plurilateral arrangements. There are several supportive arguments as to why these countries select bilateral, regional and plurilateral trade arrangements as their choices rather than the WTO multilateral trade arrangement, they are as follows:

1. These arrangements are modes of economic engagement between countries within a region (regional trade arrangements) or from different parts of the world (plurilateral arrangements). The WTO member states and regional organizations have attempted to find alternative approaches in response to the absence of a multilateral trading arrangement.

2. These countries can pursue a selective approach in their economic liberalization through bilateral, regional and plurilateral economic arrangements. They want to protect several crucial economic sectors which may be politically sensitive and economically complex within their domestic economies. They attempt to provide a balance between global economic circumstances (e.g. international economic competition) and domestic constraints (e.g. national economic protection).

3. In the absence of a WTO multilateral trading system, the majority of WTO member states do not want to be left behind by their neighbours or external partners who have been actively involved in the establishment of bilateral, regional and plurilateral economic arrangements. They want to ensure that their economic interests are accommodated in the above developments (Capling and Low, 2010, pp.22-23).

4. Several WTO member states and interested parties have accelerated their economic cooperation on specific economic sectors (e.g. the plutilateral trade agreement on the government procurement). The above example demonstrates that the interested parties who have adopted the plurilateral Agreement on Government Procurement can exclusively move forward in their economic cooperation compared to other WTO member states.

The next challenge for the WTO is that development aid for developing and least developed countries is essential in order to connect these countries with global trade. The WTO focuses on assisting these countries through capacity building for government officials with regard to the WTO regulations, establishing networks of ports and roads, and providing automated equipment for customs officers (WTO, 2013e, p.1). However, the latest economic crisis has created difficulties for developing and least developed countries because of their vulnerable economies and their lack of capacity for coping with trade liberalization on a huge scale, including the implementation of the new WTO regulations (Stewart, 2013, p.1; McClanahan, 2013, p.1). Furthermore, the recent trend in the world economy is that developed and developing countries pursue trade protectionist measures in order to secure jobs and to avoid an influx of foreign goods and services (Pakpahan, 2012b, p.195). This situation challenges the main principles of the WTO which are free trade, non-discrimination and a more competitive market (WTO, 2013f, p.1).

Given the above background, the developments in bilateral, regional and pluritaleral trade arrangements have implications for the WTO multilateral trading system. These implications are: Firstly, bilateral, regional and plurilateral trade arrangements have fragmented the WTO member states in the development of a current global economic structure. More specifically, there is a possibility that the complexity of the above economic arrangements may become the dispiriting trajectory in the conclusion of the WTO Doha round negotiations.

Secondly, many interested parties (eg. business communities) within WTO member states have started to think that the WTO Doha development agenda has run out of business (Harbinson, 2013). They have questioned the relevancy of the WTO’s role as a multilateral trading system since many countries have shown their fatigue and frustration in the WTO Doha round negotiations (Rockwell, 2013). Consequently, there is a possible setback for WTO member states and non-state actors regarding the future of the multilateral trading institutions in the WTO.

In short, the task of trade negotiators between WTO member states is to respond to the global economic challenges by further developing the global economic architecture outlined above. Will they create a breakthrough and make significant progress in resolving long disputes between developed and developing countries by building a coalition of the willing for the conclusion of the WTO Doha round negotiations? The WTO Doha round negotiations remain fragile with a bumpy road ahead since the WTO members have different positions in crucial issues of dispute. At the same time, the WTO members have opportunities to resolve the above issues of dispute and to respond to the challenges for the WTO in an effective and resume their negotiations. If grasped, these opportunities will shape current and possibly future global economic structures. We will have to wait and see the outcomes of the next WTO ministerial conference in Bali, Indonesia.


Dr. Beginda Pakpahan is a political and economic analyst on global affairs at the University of Indonesia, Indonesia and the University of Edinburgh, UK.


References

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