This blog is provided by our guest blogger Kristen Hopewell. Kristen Hopewell is an Assistant Professor at the University of British Columbia, Canada and has been a visitor of the Max Planck Institute for the Study of Societies in 2013.
After protracted and contentious negotiations among trade ministers in Bali last month, the WTO announced agreement on a new global trade deal. The so-called “Bali package” is being touted as an historic achievement and a victory for the WTO.
However, such claims should be met with considerable skepticism. In reality, the deal stuck at Bali is of limited consequence and the hype surrounding it is intended to mask the deeper failure of the Doha Round.
The WTO began negotiations for a new global trade agreement in 2001. Dubbed the Doha “Development” Round, it contained an ambitious and wide-ranging agenda encompassing nearly all aspects of trade, including tariffs, subsidies, non-tariff barriers, services, intellectual property, and other trade rules. The “development” label signaled its intention to prioritize the needs of developing countries.
The original deadline set for concluding the negotiations was 2004 – but that and every subsequent deadline have been missed. Instead, the negotiations have been beset by repeated breakdown and were officially declared at an impasse in 2011.
The cause of the stalemate is an ongoing conflict between the US, who has traditionally dominated the organization, and emerging economies such as China, India and Brazil. The two sides have been at loggerheads over how the costs and benefits of the round should be distributed.
The US has sought greater market-opening from the emerging economies for manufactured goods, farm products and services. China, India, and Brazil, however, contend that these demands are disproportionate to the reforms the US is willing to undertake, particularly on agricultural subsidies.
With the Doha Round at a stalemate, the WTO went into damage control mode. Negotiations shifted to a last-ditch effort to salvage a small number of issues from the round on which states appeared closer to agreement, with the goal of achieving what was optimistically referred to as an “early-harvest” at the Bali Ministerial.
The deal agreed to in Bali thus represents only a tiny fraction of the original Doha agenda, and even this limited agreement proved fractious and difficult to achieve.
Its centerpiece is an agreement on trade facilitation, which will streamline customs procedures to expedite trade flows. The estimate of the economic benefits of this deal – a figure of US$1 trillion has been widely cited – has been ridiculously inflated.
Such estimates are notoriously inaccurate and unreliable. The $1 trillion figure stems from a study funded by the International Chamber of Commerce, a business lobby group. Until now, most authoritative estimates have placed the value of a trade facilitation agreement at less than one-tenth that amount.
Moreover, implementing the new requirements will present a significant challenge for developing countries, especially the poorest. The agreement will do nothing to strengthen export capacity in poor countries. But implementation costs will distract resources from more important priorities such as health, education, and poverty eradication.
The package also includes an agreement to allow developing countries a temporary dispensation from existing WTO subsidy limits to engage in public food stockholding for food security purposes. This was one of the most contentious issues and a permanent resolution has been put off for future negotiation.
The other parts of the deal consist of various pledges to help poor countries gain greater access to rich-country markets for their exports. Yet these are limited to political statements with no force.
Despite the micro-deal represented by the Bali package, the future of the Doha Round is bleak. Divisions over the core issues in the round remain deeply entrenched. It appears highly unlikely that states will be able to conclude the round, and even if limited agreements are reached, they will be a dramatically reduced version of what was originally intended.
The WTO was created in 1995 as a successor to the much narrower and weaker General Agreement on Tariffs and Trade (GATT), which had governed international trade since the end of the Second World War. The WTO was created to push forward the liberalization of trade and the increasing integration of global markets through successive rounds of inter-state negotiations. Its raison-de-être is the negotiation and enforcement of new and more expansive international trade agreements. Yet, its first round of trade negotiations, the Doha Round, has been a failure.
To call the Bali package a victory for the WTO is entirely disingenuous. Beneath the hype, the WTO is an institution in crisis.