The three pillars of Bali

A lot more progress is needed to arrive at a consensus on critical issues on trade facilitation, agriculture and development

Director General of the World Trade Organization (WTO), Pascal Lamy, gave his farewell speech at the General Council meeting last week. Reportedly, the mood of the members before the summer break in August was positive and there was a feeling that the Bali Ministerial can deliver a substantive and balanced agenda for member countries.

While a positive outlook is a good sign for the Doha Round, which has been languishing for too long, a lot more progress has to be achieved in the interim months to the Bali Ministerial in December 2013, to arrive at a consensus on critical issues on the three pillars of the agenda for the meeting - trade facilitation, agriculture and development.

It is important to look at the three pillars and work rapidly to forge a consensus, as otherwise, the WTO, it seems, is slowly moving away from being a multilateral institution to a plurilateral (covering only a select few members) institution. Except a few areas of negotiations that are on the table, many texts that are in advanced stages of negotiation are for a plurilateral agreement. This includes negotiations for government procurement, information technology agreement-II and a services agreement. There have been indications in the past that trade facilitation could also move towards a plurilateral negotiation. This trend towards plurilateral agreements can hurt WTO since it is primarily supposed to encourage multilateral trade.

India's Chief negotiator, Rajeev Kher, while speaking at a conference organised by the Confederation of Indian Industry said that as of now a lot more work is needed to arrive a balanced outcome at Bali. India is looking to balance the outcome in the three pillars on the agenda. Besides it is also looking to balance the text on trade facilitation.

India is not averse to a trade facilitation agreement. However, what New Delhi has been wary of is accepting multilateral obligations, which will require heavy expenditure for creation of infrastructure and training officials without adequate commitments from others in terms of technical and financial support.

Industry in India supports a trade facilitation agreement at Bali. The industry is of the view that such an agreement could go a long way in bringing down transaction costs that is critical to tap markets in the current global economic environment. There are also several studies, which support the argument that a binding trade facilitation agreement can lead to a large increase in global trade.

But there is a word of caution emerging from the industry. It is clear that the burden of financing these obligations should not fall on the private sector. Any such additional cost burden on the private sector would then take away the benefit of an agreement, which is aimed at cutting costs of exports and imports.

Therefore, the industry is of the view that there is a need for negotiators to look at both the Bali and a post Bali process to ensure that an agreement on trade facilitation actually benefits business.

This point is relevant in the context of what Lamy said at a function celebrating 30 years of Consumer Unity & Trust Society at Geneva a few weeks back. He had said "trade is today less about whole products and services, and more about trade in tasks along value chains which often span not just across countries but also continents." The stakes are high too. As Lamy pointed out "in the 1980s, trade in goods measured in volume accounted for around $2 trillion. In 2012, it accounted for at least $18 trillion. Between 1982 and 2012 merchandise trade increased by an annual average of around 8 per cent."

A balanced trade facilitation agreement, the industry is certain, can lead to greater participation in global value chains. For now, Indian firms account for less than 5 per cent of the total global value chains. Industry in the country, therefore, hopes that an agreement at Bali will help the industry, especially the small and medium sector, in developing countries play a greater role in global value chains. Business in India, it seems, has huge expectations of Bali.

The writer is Principal Adviser at APJ-SLG Law Offices