Supply chain and barriers to trade

When one thinks of reduction of barriers to international trade the usual response is tariffs ad non-tariff technical barriers. Over the years negotiations have brought down tariff barriers to considerably low levels as compared to earlier times. However, experts contend that an important aspect of trade - supply chain management has not been given enough importance.

The World Economic Forum released a report recently that suggests that "concludes that they are far more significant impediments to trade than tariffs. In fact, reducing supply chain barriers could increase world GDP over six times more than removing all tariffs."

"If every country improved just two key supply chain barriers – border administration and transport and communications infrastructure and related services – even halfway to the world’s best practices, global GDP could increase by US$ 2.6 trillion (4.7%) and exports by US$ 1.6 trillion (14.5%). For comparison, completely eliminating tariffs could increase global GDP by US$ 0.4 trillion (0.7%) and exports by US$ 1.1 trillion (10.1%). The estimates of the impact of barrier reduction are conservative; they reflect improvements in only two of four major supply chain categories."

While the report itself details out individual case studies on how supply chain efficiencies can increase trade, I found one of the recommendations interesting:

"International trade negotiations usually take a silo approach, addressing policy areas in isolation. Lowering supply chain barriers requires a more holistic approach that spans key sectors that impact trade logistics, including services such as transport and distribution, as well as policy areas that jointly determine supply chain performance – in particular those related to border protection and management, product health and safety, foreign investment, and the movement of business people and service providers. A whole of the supply chain approach can be pursued through both multilateral and regional trade agreements."

Moving away from "silo" approaches to horizontal, platform approaches is the need of the day. Will we see more thought and effort to reduce supply chain barriers in the current round of negotiations? Is the Trade Facilitation Agreement the answer?

  

 

State, private sector business, international trade and national interest

A lot has been written about the future of the Doha round of negotiations as well as the further of WTO itself. 

I found this piece by Aldo Matteucci straightforward and simple. It offers a number of solutions to the present political impasse and how the complex international trading system must be navigated. I have blogged about what constitutes "national interest" in the context of international trade, especially in the context of private businesses here and here. This question becomes all the more intriguing considering the fact that governments are the sole participants at the WTO. While internal consultation processes take into account varied domestic interests, including business or private sector interests, there is a feeling that the multilateral institution should do more to take into account "non-State" interests. 

On private sector involvement the piece comments:

"Under the main heading “WTO and you” the organization’s website recognizes journalists, students, Parliamentarians, and NGOs. It is slightly puzzling that those who are directly affected by the international trading system – firms that in one way or another trade over the border – have no dedicated portal in the organization or specified and institutional role to play. Of course contacts take place, but what is needed is a definition of the private sector’s role in managing the trading system. 

The current situation reflects the traditional approach where the state was the sole representative of the national interest. In a complex trading system, where many firms have become “transnational”, the role of the country of origin loses focus. At least in the problem-defining and the solution-shaping phase (i.e. in setting the agenda, the objectives, and a list of desirable outcomes) the voice of the private sector should be recognized directly and in a structured manner. Firms should have a choice of channel in which to voice their concerns. This would be the best way to secure their support for the process. Involving the private sector in a multilateral structure might collaterally lead to more nuanced national positions and may become a stabilizing factor (not to speak of chances of getting agreements through Parliament)."

What the choice of channel should be and to what extent non-state actors should have a role in representing "national interest" is a debatable issue. However, a state-business collaborative effort would seem the only way that a meaningful intervention can be made in the complex arena of international trade.

Trade and the fostering of peace

Does international trade reduce the risk of war amongst trading countries? Are they less likely to get involved in a political or military conflict than if they were not strong trading partners? Pavel Yakovlev seems to think so. 

Watch this video for a viewpoint that trade promote peace. 

Similarly, does protectionism amongst trading partners provoke a possibility of military conflict or political tension? 

Tobacco Plain packaging panel established at the WTO

(bbc.co.uk)

The dispute panel with respect to the Australian Tobacco Plain packaging legislation is finally constituted at the WTO. I have blogged about it earlier here, here and here.. Ukraine, Honduras and the Dominican Republic are pitted against Australia. The dispute raises intricate questions about issues of public health, domestic regulatory space, intellectual property, international trade and protectionism.

Ukraine raised these primary issues in the complaint:

"In its request for the establishment of a panel, Ukraine said that Australia’s measures “erode the protection of intellectual property rights” and “impose severe restrictions on the use of validly registered trademarks”. Ukraine’s statement also said that “Ukraine considers that governments should pursue legitimate health policies through effective measures without unnecessarily restricting international trade and without nullifying intellectual property rights as guaranteed by international trade and investment rules”. Ukraine also considers that the measures “are clearly more restrictive than necessary to achieve the stated health objectives” and thus violate the Agreement on Technical Barriers to Trade as an “unnecessary obstacle to trade”."

Australia defended the move thus:

"Australia showed surprise and disappointment that Ukraine decided to challenge Australia’s tobacco plain packaging measures since this step “is at odds with the policies being pursued within Ukraine to comply with the WHO Framework Convention on Tobacco Control”. Australia mentioned that Ukraine has also taken many measures in accordance with this Convention and said that the tobacco plain packaging “is a sound, well-considered measure designed to achieve a legitimate objective — the protection of public health”, which the WTO recognizes as a fundamental right of its members. Australia added that the measure is “clearly non-discriminatory”, “nor is [it] more restrictive than necessary to fulfil its legitimate objective”."

Interesting support for Ukraine from Zimbabwe, Honduras, Dominican Republic, Nicaragua and Indonesia.

" Zimbabwe said that 200,000 farmers and their families in the country depend on tobacco for their livelihood. Honduras said that the WHO Framework Convention is indicative and non-binding. Nicaragua said that tobacco is one of the most important items in the country’s exports."

Diverse interests and issues coalescing here:

1. Intellectual property rights of tobacco product manufacturers

2. Public health concerns

3. Domestic policy space to regulate in relation to public health

4. Restrictions on international trade

5. Right to trade in tobacco products

6. Relationship between international conventions relating to health and the multilateral trading system

7. Livelihood and employment issues

8. National business interest vis a vis public health 

With New Zealand announcing its intention of introducing plain packaging legislation, and a number of third party members, including India, Indonesia, United States,Turkey, Oman, Japan, European Union and Argentina in this dispute, it sure promises to be keenly contested dispute. Not surprisingly, Ukraine seems to have abandoned the violation of "national treatment" principle argument, unless it remains in the detailed submission. Atleast prima facie, there seems to be no less favorable treatment to imported tobacco products as compared to locally made tobacco products. Both will have to follow the plain packaging requirement.

Olympics, one last time

Now that the Olympics is behind us and the countdown to Rio 2016 has begun, introspection generally takes place in countries that have fared rather poorly at the Olympics. Why do some countries do better than the rest in the biggest sporting event in the world? Is there a co-relation between development and performance at the Olympics? Are there similarities between how a country is placed in the international trade arena and it's performance at the Olympics? I had blogged earlier about the medal count at the Olympics and it's relation to international economics here.

Project Syndicate has two extremely engaging pieces on the possible relationship between economic development in it's various facets and Olympic performance. It highlights the inextricable link between a sound economic national base and sporting prowess.

Robert Skidelsky predicts the performance at the Olympics is based on key economic indicators including GDP in his piece.

"The most striking finding is that the medal count can be predicted with great accuracy from four key variables: population, GDP per capita, past performance, and host status. Everything else – different training structures, better equipment, and so forth – is pretty much noise. 

CommentsThe impact of population and GDP is obvious: A large population increases the chance that a country will have athletes with the natural talent to win medals, and a high GDP means that it will have the money to invest in the infrastructure and training needed to develop medal-winning athletes.Comments 

Past performance is also important: the visibility and prestige of a sport increases after Olympic success, as does funding. Medals attract money; failure results in cuts."

Drawing an interesting parallel between "picking winners" in terms of encouraging a particular sport so that the chances of an Olympic medal are high and the "State" picking sectors to drive economic development, he seems to support a "State capitalism" model. China would probably fit into this description - it has done exceedingly well both in the Olympics and on the economic front.

"Nothing is more discredited in Anglo-American economics than the policy of “picking winners.” The consensus has been that it inevitably leads to the state “backing losers.” Economic success, on this view, is best left to the unfettered play of market forces. 

CommentsThis philosophy has been heavily jolted by two inconvenient facts: the financial collapse of 2007-2008 and the experience of countries like Japan, South Korea, Taiwan, Germany, and even the US, where economic success depended heavily on sustained government investment of the kind that has produced Olympic medals. As in sports, so in economic life: government commitment can start a virtuous circle of success, while government neglect can trigger a vicious circle of decline." 

Another contribution from Zaki Laidi titled "Olympolitik" highlights the role of population, economic development, a sports policy and sports traditions as the reasons for performance at the Olympics.

"There are, in fact, four factors behind Olympic power: population size, sports traditions, sports policy, and level of development. Taken separately, none of these factors can explain a country’s Olympic record. Collectively, however, their explanatory power is relatively large."

Ofcourse, there may be a variety of reasons for Olympic success and a number of countries would be proving to be counter-examples to the generalizations set forth in the two articles above. However, the analysis made above seems to be well borne out by Olympic performance in the past decades. It raises important issues about the role of the State in sports development especially as a facilitator and supporter. Like in a globalized world, while State involvement in the economy is a necessary constituent of development, it's nature, extent and motives remain as relevant to international trade as much as to sport's policy. The venue shifts, but the issues remain the same!

 And yes, this is my last piece on the Olympics till 2016!

Of coalitions and underlying motivations at the WTO

A look at the recent meeting of the Council for Trade in Goods at the WTO highlighted the nature of member coalitions that take on other members of the WTO regarding their trade measures and their possible motivations. Three main disputes caught my attention:

1. Spain's Biodiesel Ministerial Order that allegedly gave preference to EU produced biodiesel was challenged by Argentina and Indonesia. This challenge was supported by Cuba and Uruguay. Was Spain's Ministerial order motivated by Argentina's nationalisation of a Spanish held Oil company in Argentina?

2. Argentina's long standing import licensing measures were challenged by the U.S. This was supported by 14 other members, including the EU. While the EU defended an allegedly discriminatory measure of Spain (one of its members), it challenged Argentina's import licensing procedures as WTO inconsistent.

3. The U.S. expressed concern about Indonesia's alleged import restricting measures. The EU supported this challenge. Was the Cloves Cigarettes decision of the Appellate Body of the WTO a motivating factor in this U.S. challenge. In the Cloves Cigarettes Case the U.S. lost an appeal against Indonesia with respect to the ban on other flavoured cigarettes (other than menthol).

4. An ECJ decision on honey imports was challenged by Argentina and supported by Canada, Mexico and the U.S.

What motivates a member country to become a third party or interested party in a challenge? Trade interests or other motivations? Do countries use these challenges as levers in their relations when faced with challenges to their own policies? The coalitions also throw up interesting realities of trade interests overriding other groupings. Hence, the challenge by members cuts across the developed developing divide as well as other pre-existing interest groups. Thus, you would find Argentina and the U.S. on one side against the EU while a broad amalgam of developed and developing countries would be challenging the Argentinian measure. Strange world of international trade interests? Are there no permanent friends and coalitions in the world of multilateral trade disputes?

International Trade and development - Nexus?

One is often confronted with the question as to the relationship of trade and development. Does international trade lead to a country's economic growth? Does it reduce inequality and poverty? Does the liberlisation of trade and reduction of barriers to trade impact a country's economic growth? Does international trade have a bearing on providing access to a majority of people within countries to growth and opportunity? There is an abundance of economic literature on this subject. Does increasing exports and restricting imports have a bearing on inequality? Liberalisation of trade is not an end in itself. It is a means to growth and development. 

Recently, the OECD released a detailed report titled "Policy Priorities for International Trade and Jobs" on international trade and growth which has various articles on the impact of international trade on employment, growth, poverty reduction and inequality. The conclusions of the Report as summarised by the press release was as follows:

The report, a product of the International Collaborative Initiative on Trade and Employment (ICITE)*, analyses the complex interactions between globalisation, trade and labour markets. Drawing on numerous studies covering different parts of the globe and countries at very different levels of development, the report highlights the powerful role trade can play in driving growth and improving employment. 

• Of the 14 main studies undertaken since 2000 reviewed in the report, all 14 have concluded that trade plays an independent and positive role in raising incomes. 

• Through its impact on productivity, trade also raises average wages. Over the  1970-2000 period, manufacturing workers in open economies benefitted from pay rates that were between 3 and 9 times greater than those in closed economies, depending on the region. In Chile, workers in the most open sectors  earned on average 25% more in 2008 than those in low-openness sectors.

• Fears of the impact of offshoring may be exaggerated. Studies for the United Kingdom, United States, Germany and Italy  demonstrate that off-shoring of intermediate goods has either no impact or, if any, a  positive effect on both employment and wages.

The report also shows, however, that openness to trade is not enough. Complementary policies – such  as sound macroeconomic policies, a positive investment climate, flexible labour markets and adequate social safety nets – are needed to realise the full benefits of trade."

The piece on Latin America was particularly interesting. Titled "An Updated Assessment of the Trade and Poverty nexus in Latin America" it analyses the possible links between liberalisation of trade, poverty reduction and growth. Dwelling on the complexity of analysing the relationship between international trade and poverty reduction, the article concludes:

"Despite the complexity of finding a clear connection between trade liberalisation and poverty reduction in both theoretical and empirical studies, there is a nearly general consensus among academics that protectionism is not a suitable policy tool for eradicating inequality and poverty. It is also widely acknowledged that trade liberalisation is a means to achieve growth with poverty reduction and not an end in itself. Trade integration alone is in fact not sufficient to generate sustained growth, even less to promote development with equity and poverty reduction. Indeed, the literature reviewed so far very often  emphasises the fact that the distributive outcome of trade integration is inextricably intertwined with a wide array of structural and policy determinants. 

          ...

Trade openness, inequality and poverty are wide multidimensional concepts. Measuring and attributing causal relations among these variables without carefully qualifying the specific dimensions explored or the particular transmission mechanisms at play may be misleading. It is important to disentangle the specific dimension of the trade and poverty nexus from the wider debate on globalisation and financial integration, the competing concepts of relative and absolute inequality and the objective and subjective dimension of poverty and deprivation.

Despite the impossibility to rigorously and unambiguously assert that trade openness is conducive to growth and poverty reduction, the preponderance of evidence supports this conclusion. However, the majority of empirical macro studies also show that the impact of trade on growth and poverty is also generally small and that the causes of indigence are to be found elsewhere. But it is in fact extremely arduous to find evidence that supports the notion that trade protection is good for the poor. The question is therefore how to make trade and growth more pro-poor and not how to devise improbable alternatives to trade integration aiming at improving the livelihood of the poor.

          ...

Finally, considering that the trade and poverty nexus depends on a number of interconnected factors a consensus is emerging on the need to flank trade integration initiatives with a wide array of complementary policies. There is in fact increasing evidence that the outcome of trade opening may be regressive in the presence of distortions in complementary areas such macroeconomic policies, infrastructure, regulations, financial depth, labour markets, governance and human capital. 

It is therefore of the utmost importance to mainstream trade into the development agenda of Latin American countries and to align consensus, policy priorities and financial resources with the objective of making trade work for the poor. "

Can we generalise that international trade either negatively impacts poverty reduction or has a positive bearing on it? Is it a complex relationship that is far removed from sweeping generalisations? Can trade work for the poor? Can more people access opportunity by being part of the liberalised global economy? Is a liberalised trade regime only benefitting a few who can make use of the opportunities of open markets? Is protectionism the answer to the inequities of a liberalised system? What other national policies need to be in place to ensure that the benefits of international trade reach a large number of people? Is there a consensus on this? Do WTO rules facilitate the adoption of varied, multiple national strategies or do they restrict countries from adopting such policies? Is the relationship between trade and growth much more complex? While protectionism and inward looking policies may not necessarily bring about equitable growth, is there justification in having an uncritical endorsement of free trade and growth? Is there a middle path? Does the WTO rules allow, restrict or agnostic to countries taking this middle path?

Globalisation and traditional hierarchies - Some thoughts

The Becker-Posner Blog has a brilliant piece on capitalism, globalisation and its impact on social structures like class, gender and race. Titled "Profits, Competition, and Social Welfare" it argues that capitalism does help in reducing the the barriers of social inequality.

"My second example deals with the interaction between capitalism and discrimination against groups based on their race, gender, religion, or other characteristics. Capitalism and the profit motive help to erode discrimination because companies in their quest for greater profits try to hire minority group members who are getting paid less than their productivity. In addition, the successful growth in incomes and productivity induced by private enterprise raises the standard of living of minorities even when they continue to suffer from substantial discrimination.

A prime example is South Africa under apartheid that was maintained by government laws but was opposed by many private companies. South African blacks suffered immensely under apartheid, and its overthrow is one of the great events of the past several decades. Nevertheless, one main problem during the apartheid period was not to prevent many blacks from leaving South Africa, but rather to control the in migration of blacks from other parts of Africa. The explanation is obviously not that the incoming blacks liked apartheid, but rather that the private enterprise system in South Africa had raised substantially the incomes of blacks there -despite the widespread government-orchestrated discrimination against them-and blacks from other countries in Africa wanted to benefit from the higher incomes available to them in South Africa.

Something similar happened in the United States. African-Americans suffered greatly from discrimination until recent decades. Nevertheless, black incomes continued to grow along with white incomes as the US experienced sizeable and continuing economic growth after the end of the Civil War in 1865 (see my book The Economics of Discrimination, 1971)."

Does globalisation and capitalism have an impact on eroding traditional structures of inequality? Does it help in reducing gender, race and caste discrimination? Is the market "neutral" to these prejudices? Are traditional hierarchies severely challenged by the "efficiency" driven, anonymous market? I have often thought about this issue in the context of caste hierarchy in India. Is globalisation and open market more beneficial to the marginalised communities in terms of anonymizing their identity? Does it give them more opportunity to participate and rise the social and economic ladder than in a State led model of development? Will international trade provide more opportunities to members of these communities to participate and have a stake in development? Will it help reduce barriers, not of trade and tariff, but of social stigma and intolerance? Does it offer more opportunities for participation in an unhierarchical relationship thus acting as a leveller?

Chandra Bhan Prasad suggests that capitalism is more favourable to the eradication of social inequality. In his paper titled "Markets and Manu : Economic Reforms and its impact on Caste in India" he argues that capitalism does help in being emancipatory but it needs to be more egalitarian and participatory.

Can the rules of a market economy of efficiency, competition, entrepreneurship and innovation combat traditional hierarchies of caste inequality? Is it easier for people from the disadvantaged communities to rise up the social ladder in a capitalist led model as compared to a state led model? This report titled "The rise of Dalit Entrepreneurship" explains how Dalit entrepreneurs have risen in a market led economy.

"Explaining that economic standing is the only way Dalits can redefine themselves, RGICS’ Babu likens the trend to the wave of Black Capitalism in the US in the 1970s and 1980s. “There are strong similarities. Like the black capitalists of America, most of the Dalit entrepreneurs are first-generation entrepreneurs, people who were never into businesses but mostly relying on agricultural labour. To get into serious business from agriculture is a paradigm shift. And, in both cases, here as in the United States, even though there have been state interventions to promote entrepreneurship, individual motivation and community help have come first,” Babu says."

A study titled 'Caste and Entrepreneurship in India" by Harvard Business School, to the contrary, posits that representation of dalits in capitalist led entrepreneurship is still low. Explaining that the lack of  "network effects" could be one of the reasons, it concludes:

"The evidence we have presented shows that the OBCs have made progress in entrepreneurship , but SCs and STs are considerably under-represented in the entrepreneurial sphere.  That is, for SCs and STs, political gains have not manifested themselves in greater entrepreneurial prowess.   The rise of Dalit millionaires, driven in part by newer economic freedoms, does not appear representative of the broader swathes of the SC/ST population, at least until 2005.  Such under-representation appears to persist even in states with very progressive policies towards SCs and STs, in states where OBCs have made considerable progress in enterprise ownership, and in urban areas where outright discrimination is lower than in rural India."

Thus, questions remain as to to what extent globalisation and capitalism help addressing traditional hierarchies. Are these forms of development also appropriated by powerful communities? Also, is representational participation  good enough? For example, if a few entrepreneurs from a particular community do well and integrate, does it signify that the whole community has benefitted? Will small entrepreneurs and business men have more likelihood of upward mobility in a globalised world? Are markets, globalisation and international trade immune from traditional prejudices of gender, caste and race or  will it be subsumed in these traditional structures? This is an area that definitely requires more research since as developing countries integrate and questions are raised about the benefit it would have on large populations comprising of hitherto disadvantaged sections, the answers to the question of the relationship between traditional discrimination and new markets will have to be addressed.

Made in the World

(Stoyan Nenov/Reuters. An assembly line at Great Wall plant, which turns out three models, near Lovech, Bulgaria.)
The NYT had this piece on cars from China but assembled in Bulgaria.

"These were the first Chinese cars built in Bulgaria. Late in 2009, Great Wall Motor started talks with a potential Bulgarian partner for construction of an assembly plant, its first in Europe, on abandoned farmland outside Bahovitsa, a quiet village near Lovech in northern Bulgaria."

In the context of China, this is a rare occurence since one would imagine the product would be produced in China. Is this another example of a trend of what the WTO calls "Made in the World"?

Explaining the "Made in the World" Initiative, the WTO website states:

"Today, companies divide their operations across the world, from the design of the product and manufacturing of components to assembly and marketing, creating international production chains. More and more products are “Made in the World” rather than “Made in the UK” or “Made in France”. The statistical bias created by attributing the full commercial value to the last country of origin can pervert the political debate on the origin of the imbalances and lead to misguided, and hence counter-productive, decisions. The challenge is to find the right statistical bridges between the different statistical frameworks and national accounting systems to ensure that international interactions resulting from globalization are properly reflected and to facilitate cross border dialogue between national decision makers."

It is more of a statistical tool to analyse the value addition to a product in different countries and the complex nature of world trade. The interconnectedness and complex nature of global supply chains is sought to be captured by trade statistics to actually depict the nature of the product in terms of the value addition. This undoubtedly questions the notions of a product of being made in a particular country vis a vis being made in different parts of the world. Richard A Mc Cormack concluded that by this initiative the WTO is one step closer to eliminate the country of origins labelling.

Michele Nash-Hoff is severely critical of this initiative in this piece titled "Changing to WTO's 'Made in the World' Labeling Would Harm Americans" in the Huffington Post where she avers:

"This Initiative could have dire consequences for America's manufacturers and consumers. For manufacturers, it could eliminate one of the options allowed by the WTO -- filing a charge for product "dumping" against another country to have countervailing duties applied against that country. For consumers, "Made in the World" labels wouldn't allow you to protect your family from the tainted, harmful, and even life threatening products coming from China. You wouldn't be able to support saving and creating jobs for other Americans by buying "Made in USA."

Trade Diversion clarified the position of the "Made in the World" exercise in this blogpost with a clarification from the WTO. Today, a "Made in X" product at times evokes strong, domestic, protectionist views. Will the "Made in the World" label lessen this possibility? Will it be a precursor to increased international trade since the resistance to products from particular countries will reduce? It would also be interesting to see how much of products traded actually fall under this category. Is it restricted to only a certain class of products? The country of origin labelling will have to remain for the remaining products. The Agreement on Rules of Origin is not going away anywhere in a hurry.

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.