T S Vishwanath: The promise of Bali

The December ministerial meeting could be a major shot in the arm for global trade that faces a challenging couple of years

Global trade is expected to clock slower growth than anticipated, according to the World Trade Organisation (WTO). Economists at the multilateral trade body have predicted a 2.5 per cent growth for 2013, which is down from the 3.3 per cent forecast in April this year and 4.5 per cent in 2014 that down from 5 per cent forecast earlier. But, they are hopeful. They are of the view that conditions for improved trade are gradually falling into place.

The new Director General, Roberto Azevêdo, is of the view that this points to the fact that the Ministerial meeting at Bali has to be successful if world trade has to witness sustained growth.

The WTO is of the view that sluggish growth in the first half of 2013 is attributable to slow pickup in imports in some leading developing countries. This hurt exports from both developed and developing countries.

WTO economists are of the view that "some short-term prospects are improving with encouraging data coming from Europe, the US, Japan and China. Reports on private sector activities from purchasing managers indices, shipping rates, automobile production and other leading indicators, suggest that the economic slowdown has bottomed out and that a tentative recovery is underway". This, they expect, will be reflected in rising quarterly growth in the months ahead.

The WTO has also said that "since the European Union (EU) consumes roughly one third of the world's traded goods (including shipments between member countries within the EU) and the EU unemployment rate is likely to remain at or near record levels for some time, growth in trade can be expected to be below average - that is, below the 20-year average of 5.4 per cent - in the coming quarters".

The WTO study shows that in case of the US, exports and imports have been flat since the beginning of 2012, held down by weak external demand and slow growth at home. However, in the second quarter of this year, exports jumped 2.2 per cent compared to the previous quarter (9 per cent when calculated as an annual rate), while imports advanced 1 per cent (4 per cent annualised), possibly indicating a turning point for US trade flows.

Finally, the study shows that trade flows of developing Asia, including China, have maintained a steady pace of growth in recent years, but exports dipped 1.4 per cent in the second quarter of 2013 compared to the first quarter that was 5.4 per cent on an annualised basis. This was due to a relatively sharp drop in China's exports, which could partly be related to weak demand in China's trading partners, but could also reflect recent Beijing's efforts to correct the misreporting of trade values, the WTO said.

As is evident from the statistics emerging from the Geneva-based multilateral trade body, the next two years would be challenging for global trade. The Bali Ministerial, therefore, provides an opportunity to identify issues that will provide a fillip to global trade. The issue of trade facilitation, which has been identified as a possible deliverable for the Ministerial, has the capability to push global trade by making the procedures more transparent and predictable.

Another issue that the Bali Ministerial will need to address to give trade a push, is to identify protectionist measures across the globe that hurt free movement of goods and services. There have been several attempts through the Organisation of Economic Cooperation and Development and the G20 to identify and tackle this problem that is growing across markets. However, there has been no clear road map that has been evolved to tackle this issue.

The WTO member countries can look at post-Bali road map that helps identify and block the growth of protectionist measures that hamper global trade flows.

As the WTO report states, things could get better if countries decide to use the next few months to hammer out a deal at Bali that is high on content. An agreement that delivers the promise made at Doha to make global trade free and fair for all member countries of the organisation.

The author is Principal Adviser at APJ-SLG Law Offices