The Speech

WTO DG Roberto Azevedo's inaugural vision speech is here.

"We must be committed to deliver a deal before we get on the plane to Bali. It is vital that we succeed. All of us need the WTO. Ordinary people need it too even though they don't know it. Ultimately we should judge our performance on the difference we make to people’s lives. I believe that the multilateral trading system can be the preeminent force supporting growth and development in the world — lifting people out of poverty, improving living standards and helping to put the global economy back on track. We have a unique opportunity to restore the WTO to its proper place at the heart of this system, and to realise the mission of this organisation. 

The intermission is over: it’s time the WTO was back at the centre of the world stage. The stakes couldn’t be higher. We have to deliver. And, if we work together, I know that we will."

Over to Bali... 

Another plurilateral agreement - Now it is the International Supply Chain Agreement

One often hears about mega bilateral and regional deals marring the multilateral landscape. Sad but inevitable, others say. It is also the age of plurilateral trade agreements. 

I came across the suggestion of a latest one - International Supply Chain Agreement - ISCA (?), a la a TISA or a Government Procurement Agreement.

Writing in VoxEU, Michitaka Nakatomi suggests that the time has come for a plurilateral to address the issue of global value chains and the new reality of trade. He calls tis plurilateral the International Supply Chain Agreement. I have blogged about the issue of present day world trade rules and their inadequcy of addressing the issues of complex global supply chains here and here.

"Here, I would like to remind that the goal of the Agreement is to improve global value chains, and the key to achieving that end lies in close cooperation and coordination between governments and business communities. It is essential to select areas subject to negotiation in such a way as not to end up with an agenda that is too heavy to digest."

Well, will we the launch of plurilateral negotiations on global value chains, post Bali?

Trade facilitation and the developing world

For those following the Trade facilitation debate (I have blogged about it here and here), it's need and the latest negotiations that are on at the WTO a piece in VoxEU may throw some light. It argues that trade facilitation not only benefits the developed world but also exporting firms from the developing world.

Titled 'Who profits from trade-facilitation initiatives?' it argues that trade facilitation does have a positive impact on developing countries too.

Any counters?

What did the candidates say?

The race for the DG's position at the WTO is formally underway with the presentation and press conference made by the potential candidates in January 2013. The nominees currently vying for the WTO’s top post are Alan Kyerematen of Ghana; Anabel González of Costa Rica; Mari Elka Pangestu of Indonesia; Tim Groser of New Zealand; Amina Mohamed of Kenya; Ahmad Thougan Hindawi of Jordan; Herminio Blanco of Mexico; Taeho Bark of Korea; and Roberto Carvalho de Azevêdo of Brazil. The WTO had a webcast of the press conferences here. Sofia Alicia Balino makes a succinct analysis of the positions taken by the 9 candidates on various issues here.

Some underlying themes expressed in the press conferences of the candidates were:

1. A belief in the multilateral institution and the faith that it can be relevant to the issues facing international trade

2. The need to address the issues stalling the Doha round of trade negotiations and to confront them with heterodox and innovative solutions

3. Ensure Bali leads to a positive outcome with successful results (mini-deals), which can be extended to the Doha round

4.Recognize the need for the WTO to grapple with 21st century trade issues in order not to lose its relevance

5. Ensure that the other functions of the WTO, including monitoring of trade agreements and dispute settlement are performed more effectively

6.They were candid enough to suggest that they did not have all the answers to the impasse but were optimistic of finding a solution 

The coming months will see more debate and hope for the multilateral institution's strength of being a "member-driven" organization with the candidates having to convince member countries about their candidacy. To what extent the selection would be based on credentials and realities of political economy is another debate!

Hat tip to Pradeep Mehta, CUTS for bringing my attention to Sofia's piece.

The Rushford Report on WTO elections

I found this interesting website by Greg Rushford called "The Rushford Report" which analyses the political underpinnings of many international economic law and policy developments. A great read!

The WTO DG's election is round the corner and many commentaries on the process and likely successor to Pascal Lamy have been written. I happened to find this piece (courtesy the IELP blog) titled "The WTO's "Dangerous" Election" (part 1 of a two-part series) on the WTO DG's election a storehouse of information written in an inimitable style (rarely found in literature related to international economic law and policy) on the candidates and the likely result of the DG election. Summarizing the nature of a WTO DG's election process well, it explains:

"Whatever they want, this WTO election sure is different than what many would consider a “normal” one. There won’t be public polls. No focus groups.  No campaign rallies. No television commercials. And there will never be a recorded vote. 

The candidates will present themselves to the WTO’s General Council in Geneva on Jan. 29, in public proceedings that will be broadcast on the Internet. They will take questions, drawn from a box at random. And then they will get on the road for the next couple months, making their cases to the usual suspects in various word capital cities: trade officials, political leaders, and — horrors, if the WTO’s pesky band of vociferous anti-trade activists gets wind of this! — even corporate lobbyists. Some of the latter, to be sure, will offer enlightened perspectives in the public interest of strengthening the WTO as an institution. Others will have parochial axes to grind. But all will know how to whisper in the ears of the mighty and good in world capital cities."

The next few months will see hectic "consensus" building over the future WTO chief. Considerations will range from qualifications to nationality of the candidates, including the political economy of trading relations. May the best candidate win.

Race for the WTO DG's position

The race for the post of the WTO's DG position is all set for a close finish with 9 candidates in the fray. I have blogged about it here and here. The IELP blog had this detailed post on the implications of the race for the future of the WTO here. The Washington Post has summarized the race as a "worldwide scramble" for the post here. Indonesia's candidate's potential was highlighted in this post.The China Daily had this view on the issue.The coming months will see increased statements and posturing by the candidates on the future of the WTO, multilateral trade and the fate of Doha. Some highlights of the agenda that the discourse is taking is here:

The Mexican candidate as per this report "has pledged to "fight protectionism" amid the global economic downturn and promised efforts in concrete terms and in every sense to protect the free flow of goods in international trade".

The Brazilian candidate focussed on the Doha round when he remarked that "The impasse in Doha Round negotiations has resulted in serious and concrete differences among the member states. “Therefore, it’s fundamental that the future director general be able to move easily among the different groups of countries, regardless of their level of development, without imposing views on anyone and trying to forge all possible consensuses.”

Talking about the WTO, the Kenyan candidate, as per this report, has stated that “There is a need to protect it from the onslaught of protectionist measures that have and may be introduced and to take stock of what has happened with” the Doha Round of talks that seeks to cut farm aid and crack open markets."

Candidates seem to be espousing the virtues of free trade, less tree barriers, free flow of goods and the dangers of protectionism. The revival of the Doha round too seems to be on the agenda of a few. How critical is the Doha round to the future of the WTO itself? How critical is the choice of the next WTO chief critical to the institution of the WTO itself? A succinct analysis of the issues involved and the questions at stake is provided  from the Law offices of Stewart and Stewart which concluded:

"The direction of the WTO is only partially driven by the selection of the Director-General. Nonetheless, at the present time, it is fair to say that the choice of the Director-General can make a difference in the trajectory of change the organization will undergo over the next four years."

We will see more debate and discussion on the issues of protectionism, multilateral negotiations and the future role of the WTO in the submissions made by the various candidates canvassing for the top position. Some lessons for the future may be culled out from this discourse.

De-democratize the WTO - Is it the right step?

A lot has been written about the failure of the Doha round of multilateral negotiations. Reasons have been attributed and solutions have been offered including abandoning the single undertaking principle and concluding agreements that are low hanging fruit, including a Trade Facilitation Agreement.Developments of bilateralism and plurilateral agreements have also cast a shadow on the growth of the institution of multilateralism and the WTO.

What are the reasons for this decline of multilateral trade governance? Arvind Subramanian in this piece titled "De-democratising the WTO" in the Business Standard has argued that too much of democracy has been detrimental to the growth of the WTO. Small countries have an equal voice similar to large trading powers int he WTO. The norm is consensus and any small country can stall a big reform, even if it is in a minority. This, he feels, is undermining the effectiveness of the WTO and keeping the major trading powers (like the U.S., EU, Japan) less involved in the WTO. The lack of interest is epitomized by the growing regional trade agreements these countries are attempting to enter into as well as an absence of WTO DG contenders from these countries.

"Over time, the WTO has become an institution where smaller and poorer countries have acquired a stake. This transformation may seem a welcome sign of legitimacy. But it has gone too far. For it future effectiveness, indeed survival, the WTO needs to be de-democratized, with the large countries asserting themselves."

The solution offered is that the veto should be taken away and the consensus principle modified wherein large trading powers can negotiate themselves while "offering assurances to the smaller countries that they would receive the benefits of such negotiations and spared any undue burdens". Over the years, literature in relation to the WTO has been about how the WTO needs to be democratized and developing and least developed countries need to engage with the system more effectively. This piece reverses the debate by arguing that there is too much democracy in the WTO that is killing the institution. Should the WTO be less democratic and reflect the opinions, interests and negotiating priorities of the larger trading partners? Would it fade into oblivion if it did not? Do the realities of trading relations demand a more nuanced understanding of trade governance that recognizes inherent inequities in the system? Many developing countries argued that the conclusion of the Uruguay round of negotiations was done without their complete understanding and involvement. WIll de-democratization take us back to the "green rooms" of the WTO where mega deals were apparently struck and everyone was asked to follow? Will de-democratization lead to the beginning of the process of "de-legimization" of the WTO? On the other hand, how does one ensure that the multilateral, rule-based system is engaged with by both the major trading powers and smaller trading nations? The task is cut out for the next WTO chief to grapple with this conundrum.

Ninth WTO Ministerial Conference - Will Bali be able to deliver?

MINISTERIAL CONFERENCES Ninth WTO Ministerial Conference

The WTO website has a new page for the 9th Ministerial Conference of the WTO to be held in December 2013. It also has a record of all the eight earlier Ministerials since WTO was established in 1995.

Hopefully, more information on what is shaping up at Bali will be found here in the coming months.

Harvard Law School's IGLP Workshop 2013 - Finally there!

I am finally in Doha, Qatar!

Feel honoured and excited to be participating in Harvard Law School's Institute for Global Law and Policy (IGLP) Workshop 2013! The IGLP Workshop "is an intensive residential program designed for doctoral and post-doctoral scholars and junior faculty. This initiative aims to promote innovative ideas and alternative approaches to issues of global law, economic policy, and social justice in the aftermath of the economic crisis."

The Doha Workshop 2013 promises to be invigorating and intellectually stimulating with the stalwarts in international economic law and policy in  attendance - David Kennedy, David Trubek, Andrew Lang, Chanthal Thomas to name a few.

Looking forward to the next week of debate, discussion and a desert safari!

2013 - Would multilateralism prevail?

With the Bali Ministerial is fast approaching (in the context of trade negotiations a year is definitely 'fast approaching') calls for a reinvigoration of multilateralism have started surfacing again. The failure of the Doha round and a growth in bilateralism are seen as threats to the rule-based, non-discriminatory international legal framework.

Peter Sutherland, a former GATT and WTO Director General, called upon the US and China to take a lead in restoring the credibility of the WTO negotiation process. Writing in Livemint on the issue he stated:

"It is not too late to reverse the apparently inexorable tide of bilateralism. But the only way to do so is by proceeding with WTO negotiations. Even if the Doha Round cannot be concluded, there may be other routes, such as implementing what has already been agreed. 

Another alternative might be to advance multilateral negotiations among willing countries in specific areas, such as services, with other WTO members joining later. 

But if we are to move forward rather than revert to earlier, more dangerous times, the US, in particular, must reassert a constructive role in multilateralism. The US must lead again, as it did in the past. And now it must do so with China at its side."

WIll multilateralism prevail in 2013? WIll the low hanging fruit of multilateral negotiations be picked? Will a Trade Facilitation Agreement get a thumbs-up? Will more plurilateral agreements be entered into, to be adopted later by all members? Will it lead to the resurrection of multilateral negotiations to break the juggernaut of PTAs and FTAs? How will the impasse be broken? Which countries will take a lead? How will dispute settlement react to the progress in negotiations? How much pressure would it be able to withstand? Will it be continue to evoke the respect it does now?

One would need to see through 2013 for some of these answers, I guess.

Over to Bali, Indonesia

The serene environs of Bali will host the next Ministerial Conference (MC9) of the WTO in December 2013. I had earlier blogged about this here. Will we see some headway in the Doha rounds of negotiations here? The WTO website announced the MC9 here. The ground rules were set:

"Also resulting from her consultations, the chair proposed the following principles "to guide both the preparations for MC9 and the Conference itself":

• First, the “FIT” principle — Full participation, Inclusiveness, and Transparency;

• Second, any issue for action or decision by Ministers proposed by members should be developed by them in line with the normal consensus principle; and

• Third, issues for action or decision by Ministers should be agreed well before MC9."

Will the salubrious setting of Bali break the Doha deadlock? Will it lead to a meaningful advancement of the Doha round? Will we see the single undertaking principle given up for "low hanging fruit" agreements? Will we see a turn around in negotiations at the multilateral level? If any decisions are to culminate in Bali, the next 10 months would involve extensive negotiations to reach that goal.

Over to Bali.

WTO at cross roads

The WTO organized a WTO Public Forum on the topic "Is Multilateralism in Crisis?" recently. Pascal Lamy, the Director General of the WTO had this to say about the WTO in the present bleak scenario of the Doha impasse:

"The WTO, in many ways, is one of the most successful examples of rules-based multilateralism at work. Its capacity to administer and enforce the global trade rules, including in the present crisis, is widely recognized as a major success in international co-operation. But our members’ difficulties to agree to update our rule book also demonstrates that the WTO is not immune to the geo-economic and geo-political transformations of our time. The WTO is both an organization and an institution. And I dare say that it is in a better shape as a member-driving institution than as a member-driven organization."

Will the multilateral system overcome the pressures of economic crisis, preferential trade agreements and rising protectionism? Will it be able to weather the storm? Will the WTO survive the impasse of the Doha round of negotiations as well as steer the way for enhanced multilateralism? Are we going to see more protectionist trends both in the developed and developing worlds?

Andy Xie writing in the WSJ paints a gloomy picture for the future of the WTO. The author essentially posits that when the going is good everyone supports increased trade. however, in times of economic crisis, countries tend to become protectionist owing to domestic pressures and labour compulsions.

"The golden era of the WTO system is coming to an end. Indeed, trade disputes could multiply sufficiently to overwhelm the WTO system. 

Economists tend to blame the trade protection policies of the Western economies for causing or worsening depressions. The reality is probably more complicated. The labor market has limited capacity to cope with globalization. The political backlash against globalization is inevitable when the later moves too fast. 

Trade has grown twice as fast as GDP in the past two decades. This relationship is unlikely to continue. The best scenario is for the two to grow at the same pace. The global economy will probably be stuck around 2% to 2.5%. So would trade."

Is the future gloomy for globalization and the multilateral trading system? Will the compulsions of domestic politics, job loss, unemployment and local industry pressures override the need for opening up trade? Will the inequities of the global system outweigh the benefits that it offers? Are these just alarmist conjectures? Will the reality of global supply chains, dependence on international trade and the need to export prevail? Will countries become more dependent on the global economy or inward looking? What are the implications of these trends for the international legal system? How will it cope with it? Will it become redundant or reflect the realities of the time?

Future of the WTO

Joshua Meltzer's detailed piece on the future of trade talks and the WTO is a brilliant exposition of issues involved and the possible way forward. 

(Doha talks)

Titled "The Future of Trade", this Foreign Policy piece highlights the criticality of concluding the Doha round, the increasing threat of Free Trade Agreements undermining the multilateral system, the pressures on an already overburdened dispute settlement mechanism, role of developing countries like China and India in the global governance agenda as well as the challenges the WTO will face in the coming years.

It concludes:

"Since its establishment, the WTO has delivered significant global economic benefits through the liberalization of world trade. As a key institution for global economic governance, the WTO has also stabilized the rules on trade and provided an effective dispute settlement mechanism to manage trade conflicts. This has given businesses the confidence to engage in the type of global trading strategies that have allowed a company like Apple to have iPod components manufactured and assembled in different countries and then shipped back to the United States, generating greater profits for Apple and ultimately providing a cheaper product to consumers.

Despite its indisputable benefits, the WTO currently faces a range of serious challenges. The most obvious challenge to the WTO is that it is losing its role as the primary vehicle for liberalizing trade. This has been driven by the difficulty in concluding the Doha round and the proliferation of free trade agreements. In fact, for some countries, FTAs will deliver deeper and broader trade liberalization than would be possible, at least at the moment, within the WTO. As outlined, the proliferation of FTAs is a fact, and the Doha round has effectively stalled."

An interesting read. 

A Global Recovery Round for trade negotiations required?

A lot has been written about the Doha impasse and the way forward. How does one move forward? What are the dangers for multilateral trade if the negotiations impasse continues?

The Economist had this to offer in a recent piece titled "Goodbye Doha, hello Bali".

"Instead of allowing the Doha round to be replaced with a patchwork of regional deals, the WTO’s boss, Pascal Lamy, should close it and resurrect the best bits in a “Global Recovery Round”. He should drop the all-or-nothing “single undertaking” rule that helped kill Doha. Instead, talks would be broken up into small chunks and allowed to progress independently of one another. Negotiations would be open, so that any member could leave or join. Some deals, therefore, would not include everyone. But another of the WTO’s guiding principles—the “most-favoured-nation” clause—must apply. This rule means that any deal between a smaller group must be applied to all WTO members, even if they do not reciprocate. WTO-brokered regionalism would thus lower trade barriers for all. 

The Global Recovery Round should focus on manufacturing and services. Manufacturing represents around 55% of total trade. There is much to be gained: tariffs on cars, buses and bicycles are still high. Even low-tariff countries maintain a selection of high ones. In America ski boots attract a zero tariff, but golf shoes can face a 10% rate, and steel-toe-capped boots 37.5%. Services, which account for only 20% of world trade but are more important on a value-added basis, have hardly been liberalised at all."

Calling for a "Global Recovery Round" of multilateral trade talks, the way forward offered is:

1. Abandon the "single-undertaking" rule.

2. Move forward in specific areas independently of reach other and then apply the most-favoured nation principle. (How this would be acceptable to countries is difficult to fathom.)

3. Focus more on manufacturing and services and less on agriculture.

Pascal Lamy recently indicated that there were signs of a renewed interest n breaking the impasse.

"At this juncture, I believe we can and must explore those spaces, areas or topics on which we can make progress. We need to explore any and all options, small as they may be, for incremental progress on the negotiating agenda. Taking small steps now will be crucial for the credibility of the rule-making capacity of the WTO tomorrow. And as we take these small steps, we must also look at the wider picture, at the areas where progress has been more elusive, and start exploring and testing new approaches, including on so-called more intractable issues, to deliver results."

Whether Bali in 2013 would be the forum that where this can be achieved is debatable. A new WTO chief, a Global Recovery Round and lesser protectionism - hopeful prescriptions for 2013?

Trade Facilitation - Getting into details

How much does easy facilitation of trade impact economies? How relevant is it in the interconnected world? I have blogged about trade facilitation issues here. Does Trade Facilitation have a significant impact on the development and growth of economies? Do they play a dominant role in the ability of countries to participate in the global economy?

This piece in Vox EU argues that a slew of measures under the broad rubric of "Trade Facilitation" does matter. The authors argue that cutting transaction costs, better infrastructure, logistics has a positive impact on a country's exports and imports. Thus an environment that is conducive for trade would boost a country's participation in the world economy.

"Trade facilitation may have little of the glamour of headline-hitting trade talks, but recent research suggests that it packs a powerful economic punch. Moreover, it may be the best way and perhaps only way forward for the world trade system in today’s difficult political climate."

What stops country's from entering into a multilateral Trade Facilitation Agreement? It is obvious that the developed world is far ahead in providing infrastructure and logistics to enhance exports and imports. Procedures, infrastructure and processes in countries hitherto not part of the globalized network would require considerable churning. A country is disadvantaged if its customs procedures are archaic and time consuming. One would also have to deal with the systemic challenges of addressing inefficiencies.



The Global Trade Enabling Report 2012 of the World Economic Forum captures the essence of the issues that trade facilitation involves. It is a detailed report on what challenges a country faces in enhancing its trade competitiveness and what its benefits are. SIngapore ranks first in the Enabling Trade Index (ETI):

"Singapore remains at the head of the ETI rankings by maintaining its outstanding performance across the board. As a small country, Singapore has a very open trade policy and exporters face only a few barriers in target markets. Singapore also is rewarded for the extreme simplicity of its tariff structure, ranking 4th on this indicator, just a few places behind first-placed Hong Kong. Singapore’s border administration is second to none in terms of efficiency and is highly transparent (3rd). As in previous years, the assessment of the quality and availability of its transport infrastructure is equally excellent. Singapore leads the way for the quality of its air transport, seaport, and road infrastructure. Even more importantly, its regulatory environment is the best in the ETI sample, with well-defined property rights,little corruption and undue influence, and a high level of openness to FDI. Taken together, all these factors enable Singapore to be one of the most successful trading nations worldwide."

The Report gives a valuable insight into what is required to enable better trade facilitation int he context of global supply chains. Would trade facilitation take centre stage in the context of the failed Doha Round? Can it provide the impetus for global rule making or is too mundane and non-headline catching? Trade facilitation deals with the nuts and bolts of international trade - the way bureaucracies work at the borders, what requirements exporters and importers need to complete to trade in a country, the logistics and transportation requirements. Unless countries streamline these procedures, the tall claims of international trade benefitting countries will not be able to be realized. The devil, as always, is in the details.

Doha retreating? - Bhagwati and the future of dispute settlement

Jagdish Bhagwati writing in The American Interest narrates the reasons for the failure of the Doha round of multilateral trade negotiations inspire of more than a decade of sustained deliberations. While the reasons for the failure are many, Bhagwati narrates the various options that countries had in terms of concluding the Doha round and the main causes for the impasse. 

"Where does that leave us, however? There is great complacency that the fall of Doha is no cause for lament and that the WTO as the apex institution for trade will survive intact. It is as if loss of faith in Catholicism will not affect the Vatican. Doha has three legs: multilateral liberalization; framing of trading rules; and the Dispute Settlement Mechanism. The first is now broken. In turn, it cannot but break the other two."

This raises many concerns for the Dispute Settlement mechanism. It is considered the crown jewel of the WTO. However, what impact does the failure of the Doha round have on the existing judicial process. Some believe that the DSM would be unaffected and would continue to do what it does best - judicially interpret existing texts and adjudicate disputes systematically. Others, like Bhagwati, believe that it would have a negative impact on the DSM. When the political side of the multilateral system fails to change with changing times, the pressure is on the judicial wing to address new realities as well as address new concerns. This puts a lot of pressure on treaty interpretation as well as the judicial system. It can also lead to "judicial activism" wherein the adjudicatory bodies overstep their limits to address inadequacies of existing rules. While judicial activism in the national context is accepted by different institutions as inevitable and constitutionally mandated, how would a strong, forceful and often "judicially active" panel and Appellate Body be viewed by member countries/ Would it lead to increased compliance to international trade law or a growing discontent and non-compliance? Will the DSM be able to withstand the pressure of such non-compliance?

Another danger that is predicted with the failure of Doha is the rise of PTAs and their impact on the DSM. Bhagwati notes:

"In the absence of MTNs like Doha, these PTAs will also become the arrangements where rules such as anti-dumping and subsidies codes will be set and will then be muscled into WTO at Geneva. Similarly, the Dispute Settlement Mechanism at the WTO, a proud achievement in 1995, will also be in danger of falling into disuse as bilateral and regional dispute settlement arrangements will take over: and where the hegemons will expect that this asymmetric power will get them more favourable adjudication. None of this is cause for celebration; rather it calls for lamentation."

Thus, this would lead to the DSM gradually becoming irrelevant in multilateral trade relations. What would be the future of the DSM in the absence of a renewed successful negotiation in the coming years? Would it be strengthened or wither away into oblivion? Would it remain the crown jewel or just a disused bracelet?  Time, as usual, will tell.

A mini-package for trade possible?

I had recently blogged about the 'Trade Facilitation Agreement" that could provide a way to conclude the long drawn Doha impasse. WOuld it provide the much needed impetus to the political negotiations and provide the much needed boost and credibility to the multilateral negotiation framework?

Sungjoon Cho seems to think so. In his piece titled "A new trade pact for the 21st century" he reiterates the need to quickly finish this "mini-package" of a trade deal to save the Doha impasse. Though this agreement will not address all the vexed, intractable issues that is keeping the Doha round undecided, it would provide for the much needed reprieve it is badly in need of. Atleast, something would be agreed upon.Trade Facilitation itself has a huge potential to ease restrictions and make trade easier and less cumbersome.

"The trade-facilitation agreement is a timely response to this evolved pattern of trade characterized by global supply chains. Customs procedure paperwork amounts to 10 percent of the value of any trade transaction. According to the Organisation for Economic Co-operation and Development, the pact would cut those costs by half, which is expected to shower global businesses with an amazing $900 billion gain.

Finally, the trade-facilitation deal would be an ideal fit with the Doha Round's underappreciated "development" mandate. As WTO Deputy Director-General Valentine Rugwabiza recently highlighted, "reduced transit and transaction costs would be especially beneficial to small and medium-size enterprises operating in landlocked countries," such as those in Africa."

WiIl the WTO members tread this path of picking the low-hanging fruit or is the impasse so deep that no benefit is foreseeable in negotiations? In the context of my earlier post, I had raised these issues:

1. On a more pessimistic note, does trade facilitation impact developing countries and the developed world equally? It is seen that less developed countries and some developing countries have archaic trade procedures that impact both their exporters and importers. Trade Facilitation will help simplify non-transparent rules and procedures. Is this a way of increasing access of developing countries markets to the developed world? The developed world already has better trade procedures which may not be impacted by the Trade Facilitation Agreement.

2. One area where the Trade Facilitation Agreement will certainly help is capacity building and infrastructure support to improve trading and reducing transaction costs. If it helps a poor exporter from a developing country to access developed markets, the Trade Facilitation Agreement is a welcome relief. However, the impact should not be one sided - improving access to developing countries markets while the developed markets remain a distant reality.

Ofcourse, this Agreement may not be the most ideal solution to take multilateral trade forward. But it seems to be the only way? Can this be the "mini-light" at the end of a long dark tunnel? As Sungjoon Cho states, "Still, it could at least close the longest trade round ever negotiated, restore the WTO's trustworthiness, promote development and ready the WTO for the future."

Doha negotiations - Need to change gears?

The Doha round of multilateral negotiations has been going on for a decade now. When will it come to an end? Will the impasses continue for a few more years? A study by Christoph Moser and Andrew Rose titled "Why do trade negotiations take so long?" have articulated the view that it takes longer to conclude multilateral talks when more countries are involved. This is not good news for the Doha round. Comparing the time taken for different GATT rounds, it is interesting to note that the first three GATT rounds which had 19, 20 and 33 members in total took only 8 months to complete. Contrast that with the Uruguay Round that took 91 months with 125 members involved in the negotiations. While one third of countries in the first three rounds were developing countries, now about two third of the countries belong to the developing world.

The above study provides a graphical depiction of the survival rate of Regional Trade Agreements compared to the days of negotiation indicating that it is also inversely proportional to the time taken for their completion as indicated in this figure below:

The reasons for the delay in conclusion of the Doha Round can be attributed to a number of factors:

1. With more than 150 countries participating in the negotiations, there are bound to be divergent interests and hard positions.

2. The developing world is far more active in these negotiations as compared to the earlier rounds leading to increased possibilities of an impasse.

3. The issues themselves are becoming more complex and contentious. While the earlier rounds were more about tariff liberalisation, the present rounds touch on more complex issues of trade, development and access. 

One would have to wait and see if the Doha round of negotiations can break the direct co relation between the length of a negotiation and its poor survival rate.


Pascal Lamy recently highlighted the need to move forward in this regard:

"Those of you who believe that, as time passes, inexorably, the Round might lose all its remaining steam may be right, whether we like it or not. What is clear, in my view, is that not engaging seriously in trying to find solutions to the present impasse will increase the probability of such a disappointing outcome. Credibility lies in the capacity to produce results, not statements. We should all face up to this reality and accept that there is no individual clever escape from this collective responsibility. As we break for the summer, I would urge each of you to reflect on your individual contribution towards collectively breaking the deadlock and allowing for forward movement in our work to fully operationalize the guidance we received at MC8 from our Ministers."

Only time will tell if the gears will be changed in this regard. 

21st Century trade and WTO

The failure of the Doha negotiations has raised many issues about the future of the WTO. Will the WTO continue to remain as an effective multilateral institution playing a relevant role in 21st century trade? I have blogged here about the view that the future of the WTO is bright inspite of the current negotiation impasse. While many believe that the WTO continues to perform many functions like trade monitoring and dispute resolution which remain unaffected by the failure of the negotiations, others acknowledge that there is a dent in the the institution's credibility due to the impasse. To what extent has the failure of the Doha round affected multilateralism?

The WTO website has a public forum inviting comments on this issue titled "Is Multilateralism in Crisis?". Richard Baldwin has a well written piece titled "21st century trade and global trade governance: The WTO’s future" wherein he brings to the fore the emerging trends of 21st century trade comprising of international supply chains. Arguing that the failureof the negotiations does not reflect anti-liberalisation sentiment,  WTO's unpopularity or it's irrelevance, he attributes the failure of the WTO to address issues of 21st century trade that is the main issue.

 He characterises 21st Century trade thus:

"This essay argues that the WTO’s woes stem rather from the emergence of a new type of trade — call it 21st century trade. This new trade is intimately tied to the unbundling of production (global value chains). It has reshaped the geography of global production. And — since joining a supply chain is the fast route to industrialisation — unbundling is also at the heart of emerging market growth, which has in turned reshaped the geography of global demand.

21st century trade requires disciplines that go far beyond those in the WTO’s rulebook. To date, virtually all of the necessary governance has emerged spontaneously in regional trade agreements or via unilateral ‘pro-business’ policy reforms by developing nations. The real threat, therefore, is not failure of the WTO, but rather the erosion of its centricity in the world trade system."

He paints two scenarios for the WTO - one which addresses only 20th century trade and ignores the reality of 21st century trade and the other where the WTO plays a crucial part in shaping and engaging with new trade realities.21st Century trade is characterised by the demands for new rules and disciplines governing the nexus of trade, investment, services, intellectual property, and business mobility which are being formulated outside the WTO in Regional Trade Agreements.

"This line of reasoning suggests the WTO’s future will take one of two forms.

1) The WTO remains relevant for 20th century trade and the basic rules of the road, but irrelevant for 21st century trade; all ‘next generation’ issues are addressed elsewhere.

In the optimistic version of this scenario, which seems to be where the current trajectory is leading us, the WTO remains one of several pillars of world trade governance. This sort of outcome is familiar from the EU’s three-pillar structure, where the first pillar (basically the disciplines agreed in treaties up the 1992 Maastricht Treaty) was supplemented by two new pillars to cover new areas of cooperation.¹ In the pessimistic version of this first scenario, the lack of progress undermines political support and the WTO disciplines start to be widely flouted; the bicycle, so to speak, falls over when forward motion halts.

The second scenario involves a reinvigoration of the WTO’s centricity.

2) The WTO engages in 21st century trade issues both by crafting new multilateral disciplines — or at least general guidelines — on matters such as investment assurances and by multilateralising some of the new disciplines that have arisen in regional trade agreements. 

There are many variants of this future outlook. The engagement could take the form of plurilaterals — following the lead of agreements like the Information Technology Agreement, the Government Procurement Agreement and the like (where only a subset of WTO members sign up to the disciplines). It could also take the form of an expansion of the Doha Round agenda to include some of the new issues that are now routinely considered in regional trade agreements."

Which way will the WTO go? Will it remain an institution of the 21st century addressing trade needs of the 20th century or will it play a more pivotal role in guiding and shaping 21st century trade rules? The pressures on the dispute settlement system with the first approach would be telling. When the rule making does not reflect the new realities of trade, it is left to judicial bodies to interpret and re-interpret existing rules to reflect reality. Will this not lead to new tensions? To what extent can the judicial function reflect realities? What essentially is a political question of negotiation, concession and rule making will fall on the rule based dispute resolution system. The coming years will see the WTO either addressing this dichotomy or facing the dilemma of this dichotomy.

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 Institute, Gary 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.