Issues & concerns at WTO - What it all means

A bit confused by all that noise generated ahead of the World Trade Organization's meeting at Bali? Here's a simple explainer

The 9th Ministerial Conference of the WTO will be held in Bali, Indonesia, from 3-6th December 2013. Ahead of that gathering, there is much debate on India’s role at the meeting and hectic negotiations are underway on contentious agreements on trade facilitation and food subsidies that are likely to be inked, with far reaching implications for developing countries. 

 

According to Reuters, the crisis has been pushed to the brink with 159 members of the WTO failing to finalize on a text of the deal to be inked in Bali at their meetings in Geneva last week. 

 

Here’s a simple explainer on all the complex issues at hand and what’s expected out of the Bali round – 

 

What’s on the agenda?  
 

The Bali conference aims to push for a global trade deal and partially revive the Doha round of talks (albeit on a much narrower scale) which have been long stalled. The Doha round was launched in 2001 with an objective to lower trade barriers around the world and increase global trade, but has not progressed since 2008 over key differences between developed nations & developing countries on a variety of issues like agriculture and industrial tariffs, non-tariff barriers etc. 

 

According to Brookings Institution, the elements of the Doha Round that are likely to be finalized in Bali and will have to be considered as a package (as failure of one will lead to failure of all three) are trade facilitation, agriculture and duty free quota free market access for LDCs (least developed countries).  India will be leading talks of the G-33 on food security, seeking amendments to the WTO agreement on agriculture. Other issues on the agenda, though not formally on the talking table is the International Technology Agreement (ITA) although reports suggest that the talks on free trade in technology goods have collapsed last month with China insisting on a large list of exemptions.

 

What are the key disagreements on trade facilitation?

 

Negotiators will have to agree on a global trade facilitation agreement to reduce red tape by cutting trade barriers, costs and improve efficiencies by taking measures such as digitization of procedures etc. According to Brookings, some countries want to be paid for trade facilitation and want differential treatment to be extended to them to address “concerns that they do not possess the technical capacity to implement customs reforms.” The bone of contention is that a deal like this would force developing countries to impose excessive regulatory and technological burdens on customs and trade procedures. 

 

Why Is India key to a successful outcome at the Bali meet? 

 

Developing countries under G-33 and particularly India are at loggerheads with rich countries on the WTO’s AoA (Agreement on Agriculture) that seeks to limit market distorting subsidies at 10% of total production. With the food security bill being passed, India could be in breach of this agreement. The WTO has offered a 4 year “peace clause” that would protect India and others against penalties for breaching the agricultural subsidy limit for four years but gives no guarantee on a permanent solution. India has categorically said it will not compromise on its domestic food security proposal, so talks could end in an impasse. 

 

While many including Jagdish Bhagwati – Professor of Economics at Columbia University have called India’s position at WTO flawed, Deborah James, director – International programs at CEPR (Center for Economic and Policy Research), writing for the Huffington Post says the hypocrisy of developed countries on agriculture subsidies is ‘scandalous’. “As of now, the U.S. and European Union are refusing to reduce their own export subsidies, while refusing to allow developing countries even a bit of wriggle room in their domestic support for Food Security” according to James. 

 

Deal with LDCs (Least Developed Countries) easiest to achieve? 

 

According to Brookings “duty-free quota-free trade for least developed countries should be the easiest” as they don’t have much of an economic impact and most developed & developing countries either already provide tariff preferences for imports from LDCs or are expanding preferential access. A further reform on the restrictive rules of origin which limit exports by not covering all LDCs is also expected. “The issues that are more economically impactful have yet to be agreed. (This includes gaining Duty Free, Quota Free market access for 100 percent of LDC exports; and an agreement to abolish subsidies that vastly distort the cotton industry, wreaking havoc on the lives of millions of farmers across Africa; the U.S. cotton industry won't allow it)” according to a report in the Huffington Post

 

The monies at stake

 

Despite all the grandstanding and ideological differences, most countries have affirmed their support for making Bali a success. A failure would kill a decade of negotiations and could threaten to push the WTO’s role as a global body into insignificance given the materialization of several regional trade agreements. From a trade perspective too, a deal could boost global gross domestic product by $1 trillion, increase exports by $570 billion and create 18 million jobs for developing countries according to reports, so there is a lot riding on the success of the Bali meet.