Friday, May 4, 2012

Future of WTO - Bright?

With the failure of the Doha negotiations in December 2011, pessimists began questioning the efficacy and relevance of the multilateral trading system and the institutional framework contained in the WTO. The Doha Manar resolution, of the UNCTAD XIII, is in stark contrast in terms of producing a result, albeit theoretical and as a source of general guidance. While many argue that the WTO's relevance and significant role continues due to the monitoring and implementation of the present WTO Agreements as well as the rule based dispute settlement mechanism, there are those who believe that the multilateral institution is at the cross road due to the failure of the negotiations and rise in regional trade agreements.

In a detailed policy brief for the Peterson InstituteGary Clyde Hufbauer and Jeffrey J.Schott titled "Will the World Trade Organisation enjoy a Bright future?" provide an optimistic picture of the WTO and its future in spite of the present impasse in negotiations. Suggesting a flexible approach for looking at bargains that can be clinched on which substantial progress has been done during the last ten years (without insisting on the single undertaking approach - all or none) and focusing on plurilateral agreements that can address issues in critical areas of trade and environment, services liberalisation, currency undervaluation, zero to zero tariffs in specific sectors, digital economy and state owned enterprises.

In conclusion they recommend:
"We propose a grand bargain that couples a significant harvest from the Doha agenda with the future negotiation of plurilateral agreements among WTO members willing to take rewarding, yet challenging, steps forward. Five parts of the Doha agenda should be agreed immediately: trade facilitation, dutyfree, quota-free treatment of imports from least developed countries, phaseout of agricultural subsidies, discipline of farm export controls, and reforms to dispute settlement. These measures cause little economic pain to any WTO member while delivering benefits to all. One plurilateral agreement is already in motion. In early January 2012, a group of 16 countries—including the EU-27, the United States, Australia, Taiwan, and Singapore— met to discuss plans for a services plurilateral agreement, under Article V of the GATS but outside the Doha agenda. These talks should set the stage for plurilateral negotiations on a range of other pressing issues, several identified in this Policy Brief. 

Our analysis indicates that plurilateral agreements on services liberalization, WTO-IMF coordination on currency undervaluation, greenhouse gas and energy measures, zerofor-zero tariffs and limits on behind-the-border barriers for trade in select industrial sectors, and rules of the road for SOEs are promising next steps. While each of these topics presents unique negotiating challenges, we recommend three common features for future plurilaterals, both to promote negotiations and to give the agreements more bite. First, the plurilateral agreements should be “inside” the WTO. This increases the likelihood they will eventually become universal and meanwhile ensures access to legally binding dispute settlement procedures. Second, the plurilaterals should extend their benefits on conditional MFN basis to nonmembers. This both eliminates the “free rider” problem and provides a strong incentive for wider membership. Finally, we recommend that the trade or subject coverage of each plurilateral should extend to “substantial” portion of world commerce (a minimum of around 40 percent), not necessarily a “critical mass” (often interpreted as 90 percent coverage). The “critical mass” threshold was not articulated in the Marrakesh Agreement as a requirement for a waiver from the unconditional MFN rule; moreover, the GPA demonstrates that significant liberalization does not depend on covering a “critical mass” of countries. 

We conclude where we started. The WTO can have a bright future, but it cannot rely solely on its proven competence as a judicial body nor its acknowledged expertise in gathering statistics and analyzing trends. Crowning these strengths, the WTO must launch a new era of trade and investment negotiations. Other promising approaches may exist, but we think that plurilateral agreements on pressing global issues offer an excellent path forward."
The policy brief discusses many ways of getting out of the impasse - to step back and look at the gains and go on multiple tracks of plurilateral agreements (like the Government Procurement Agreement). The suggestions on State Owned Enterprises reinforce the ideological position of the State's limited role in development as against the role of the market and may need more critical analysis. Overall the steps suggested do offer a starting point for a fresh look at where the negotiators left off at Doha. It is one thing to say that the WTO is live and kicking because of its "crown jewel" - the DSM; it is quite an other thing to achieve fresh progress in negotiations to give a fresh lease of life to the multilateral trading system. After all,  however well the dispute settlement mechanism functions, beyond a point, it cannot exist in a vacuum where the political negotiations are not addressing realities of international trade. That would lead to a situation of judicial overreach that may threaten the system as a whole. The approach suggests a middle path - no single undertaking, work on the progress achieved and aim for plurilateral agreements.

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