Geneva, a city that hosts many international organisations, is an attractive place. However, its location by a lake, its views of snow-capped mountains, its calm Swiss conservatism, and the understated feeling of wealth, wellness and security, makes it seem at times almost surreal.
Much the same holds true of the World Trade Organisation (WTO). Located not far from the city centre, on the banks of Lake Geneva, it has an almost dream-like quasi-academic environment well suited to the often obscure exchanges that take place within.
There officials, and now much less frequently, ministers from around the world, continue to try to put in place the building blocks necessary to achieve a comprehensive round of global trade liberalisation. The theory is that new and more liberal rules for trade in both goods and services should increase the velocity of trade, create growth and result in a reduction in costs to consumers and end users.
The present process began in Doha in November 2001. Then it was agreed by all of the WTO’s member states, including the Caribbean, that the world needed a trade round that would comprehensively reduce tariffs and other barriers in a manner that particularly helped developing nations. Unfortunately, and despite the efforts of trade negotiators, WTO officials and diplomats, this process too has become surreal.
The latest setback for those who still believe that freer trade is what is required and possible was the collapse last Thursday, July 31 of a deal on trade facilitation that had been reached by ministers in Bali last December. What was agreed then would have made easier and less costly the basis on which cross border trade is undertaken, for example by reducing the time taken on customs clearance.
Then, the trade facilitation agreement was considered as opening up the opportunity to begin to resolve other multilateral negotiating issues. It was felt that by addressing this seemingly uncontroversial measure, trust could be built within the WTO membership; an important factor as the body reaches agreement by consensus rather than majority vote.
In Bali, ministers had said that if the trade facilitation deal could be agreed they would draft a plan to address the rest of the Doha agenda by the end of 2014 including difficult issues such as removing agricultural subsidies and tariffs on industrial goods. However, the deal collapsed this week past after India refused to drop its concerns about issues relating to food security. By suggesting late in the day that agreement on trade facilitation be postponed until issues relating to public stockholdings for food security was found, its new government made clear that it had no present desire for any movement any time soon on trade liberalisation.
In a subsequent and notably negative assessment, the WTO’s Brazilian Director General, Roberto Azevêdo, said that the failure to find a compromise meant the WTO was entering a phase full of uncertainties “with significant consequences.” For its part, the US accused what it described as a small number of WTO members of not living up to their end of the Bali deal.
Understanding what should happen next very much depends on your philosophical approach, but in essence, the latest failure of the WTO members to make even minimal progress on a relatively non-contentious issue has three fundamental causes.
Firstly, the financial and economic crisis of 2007-08, and the painfully slow global recovery since then, has meant that few nations, let alone all 160 members of the WTO, are any longer willing to make the concessions required, or accept the leap of faith that is needed to see benefit arising over time from opening their markets to all comers. This is because most governments have ceased to think multilaterally about trade and are struggling to raise revenue, preserve jobs, and maintain social programmes.
Secondly, over the period since the Doha Round was first agreed, there has been a radical change in the location of global power. Large developing economies such as China, Brazil and India have emerged as global economic powers, changing the dynamics of decision-making, and marginalising the previously unchallenged belief that the old powers alone could determine what is best for the world, its economy and global trade. Moreover there is a sense that the WTO’s approach is now outdated and that the actions of the markets are outpacing the WTO’s cumbersome decision-making structure.
And thirdly, all of the member states of the WTO have become immensely more sophisticated at negotiating and have come to understand well how it is possible to establish complex positions and overlapping groups in ways that make finding solutions on which everyone can agree politically at the same moment virtually impossible
For a number of nations, including the US and Europe, this may be politically opportune as it will enable them to concentrate on their preferred alternative: bi-regional and bilateral negotiations with those groups of nations or individual states where they see real benefit in removing trade barriers. For India, its decision may play well to a domestic audience.
An end to the round would also allow many states to set aside the difficulties of accommodating agreement with those nations that fall into the category of too difficult politically to open their markets to, or those where there is little commercial value in market opening. It would also allow all nations the time and the space required to adjust their relationships to the changed global balance of political and economic power.
For the Caribbean, if the Doha Round is abandoned what follows may be a mixed blessing. The region may well welcome the easing of pressure for opening its markets to the world at large. However, in the longer term, the Caribbean, having failed to achieve economic weight through integration, will be further marginalised by the present emphasis on bilateral and bi-regional trade agreements between more powerful economic groupings.
It may also need to reassess its future approach in Geneva in the seemingly barren years ahead and determine how to maximise its use of those parts of the WTO that have proved useful: the dispute resolution procedures, support in capacity building, and the role the body plays in global governance for small states. It will also have to decide politically how much emphasis it should now place on bi-regional or bi-lateral trade negotiations such as that with Canada, which are on the verge of collapse.
Previous columns can be found at www.caribbean-council.org