The global economy is facing strong headwinds that have set back world trade and output growth. Despite the measures implemented in many countries to contain the slowdown, production and employment trends continue to be negative. In the light of these developments, the World Trade Organisation (WTO) recently revised its forecast for world trade growth in 2012 to 2.5 percent, down from the previous 3.7 percent forecast. We foresee a volume of trade growth of 4.5 percent in 2013, below the long-term annual average of five to six percent that we have enjoyed for the last 20 years.

Pascal Lamy. Credit: Couresy of WTO.

In times of hardship, governments are subject to protectionist pressures. But in the present economic situation, trade opening is not part of the problem. In fact, trade could be part of the solution for recovering economic growth, promoting competitiveness, and creating jobs. Although protectionist pressures still exist, the collective vigilance exercised by WTO members is an important asset to contain them.

Unfortunately, the WTO is not yet delivering in one crucial aspect and that is in its ability to update its rulebook in order to make it more responsive to current realities and to facilitate the way in which trade can promote development.

In November 2001 in Doha, Qatar, we launched multilateral trade negotiations under a broad agenda to modernise the WTO rules. More than 11 years later, this process remains deadlocked. The goal of achieving a Doha package encompassing all of its 20 topics among the WTOs 157 members remains elusive and will not be available in the short term.

Regrettable as it is, the present deadlock in the Doha Round does not mean that we cannot advance in smaller steps in some areas of trade negotiations.

For instance, WTO members are negotiating the expansion of the Information Technology Agreement, originally drafted in 1996 among 20 members and now encompassing 97 percent of trade in IT products. It has been a win-win deal and I am confident that we may see progress on this topic in the coming months.

Another obvious area that we could advance in is trade facilitation, the task of finding a more efficient and effective way to process trade, or in other words to reduce the thickness of borders. This area of policy has a profound impact on competitiveness. The longer a producer has to wait for a needed imported component, the less competitive it becomes.

At its core, trade facilitation is about making trade easier and less costly. In a world increasingly focused on value chains and trade in intermediate products, effective trade facilitation is not just a choice – it is an essential element for any country.

The evidence is clear. The Organisation for Economic Cooperation and Development (OECD) estimates that for its members, customs procedures, paperwork and border delays constitute roughly 10 percent of the value of any trade transaction. Globally, these costs are close to two trillion dollars. A WTO deal on trade facilitation to curtail fees and paperwork, create greater transparency and reduce obstacles to goods in transit would cut those transaction costs in half.

Trade today is unlike what it was a few decades ago. World growth has become more dependent on trade: as a share of gross global product, trade has risen from 38 percent in 1980 to around 55 percent now.

The evolution of technology and transportation has greatly reduced the costs and uncertainty of distance. The rapid growth of global value chains, the preponderance of new regulatory-based, non-tariff measures and the shift in trade patterns as South-South trade grows rapidly are all elements that have accelerated since the turn of this century and which, if current trends are maintained, will continue to expand in the years ahead.

China has become the worlds second-largest economic power and the biggest exporter of goods. Many other trading powers have emerged Brazil, India, Mexico and Malaysia are all now at the table of the top 25 leading exporters, and all posted export growth of 15 percent or better in 2011. Developing countries share of trade is 47 percent today compared with a global share of around one-third in 2008.

The nature of trade has also changed. High-tech products used to be made in the U.S., Japan or Germany. Today, they are made in the world, with components and parts fabricated in many countries. The country where the final assembly takes place may contribute only a small fraction of the final value of the product. Currently, roughly 60 percent of the volume of world merchandise trade is trade in components. In Asia, the figure is closer to two-thirds. The import content of the average export is 40 percent, up from 20 percent two decades ago, and will keep growing in the future as multi-location supply chains keep extending.

These value chains have not only changed the way companies trade, they are also changing the nature of the trade debate. When products were made in a single country, the argument that exports were good and imports bad was more easily defended. This mercantilist approach was, for centuries, a driving force behind trade policy.

Value chains have turned all of this on its head. Companies that wish to be competitive in the global marketplace need access to the best possible inputs goods and services at the lowest possible prices.

To hinder companies seeking such imports is to render them less competitive globally. It is self-defeating. This factor, together with strict monitoring by the WTO, may explain why countries have by and large avoided taking massive trade-restrictive measures during the crisis.

(END/COPYRIGHT IPS)

Framing rules at the World Trade Organization for maintaining public stockholding programmes for food security in developing countries is not an easy task, and for Ambassador Jayant Dasgupta, former Indian trade envoy to the WTO, “this is even more so when countries refuse to acknowledge the real problem and hide behind legal texts and interpretations in a slanted way to suit their interests.”

“The major problem is that the WTO’s Agreement on Agriculture (AOA) was negotiated in early 1990s and there are many issues which were not taken into account then,” says Ambassador Dasgupta, who played a prominent role in articulating the developing countries’ position on food security in the run-up to the WTO’s ninth ministerial meeting in Bali, Indonesia, last year.

“If the WTO has to carry on as an institution catering for international trade and its member states, especially the developing and least-developed countries, the rules have to be modified to ensure food security and livelihood security for hundreds of millions of poor farmers,” Ambassador Dasgupta told IPS Thursday.

Ironically, the rich countries – which continue to provide tens of billions of dollars for subsidies to their farmers – are insisting on inflexible disciplines for public stockholding programmes in the developing world.“Credible disciplines for food security are vital for the survival of poor farmers in the developing countries who cannot be left to the vagaries of market forces and extortion by middlemen” – Ambassador Jayant Dasgupta, former Indian trade envoy to the WTO

The United States, a major subsidiser of farm programmes in the world and charged for distorting global cotton trade by the WTO’s Appellate Body, has called for a thorough review of farm policies of  developing countries seeking a permanent solution for public stockholding programmes to address food security.

“Food security is an enormously complex topic affected by a number of policies, including trade distorting domestic support, export subsidies, export restrictions, and high tariffs,” says a United States proposal circulated at the WTO on July 14.

“These policies [in the developing countries],” continues the proposal, “can impede the food security of food insecure peoples throughout the world.” The United States insists that food security policies must be consistent with the rules framed in the Uruguay Round of trade negotiations that came into effect in 1995.

“Public stockholding is only one tool used to address food security, and disciplines regarding its application are already addressed in the Agreement on Agriculture,” the United States maintains.

The agriculture agreement of the trade body was largely based on the understandings reached between the two largest subsidisers – the European Union and the United States – which culminated in what is called the Blair House Agreement in 1992. The major subsidisers were provided a “peace clause” for ten years (1995-2005) from facing any challenges to their farm subsidy programmes at the WTO.

The AOA also includes complex rules regarding how its members, especially industrialised countries, must reduce their most-distorting farm subsidies.

In the face of increased legal challenges at the WTO and also demands raised for steep cuts in subsidies during the current Doha trade negotiations, several industrialised countries shifted their subsidies from what are called most trade-distorting “amber box” measures to “green box” payments which are exempted from disputes. Jacques Berthelot, a French civil society activist, says that the United States has placed some of its illegal subsidies into the green box.

When it comes to disciplines on food security, however, the United States says it is important to ensure that “[food security] programmes do not distort trade or adversely affect the food security of other members.”  The United States has suggested several “elements” for a Work Programme on food security, including the issue of public stockholding programmes, for arriving at a permanent solution. Washington wants a thorough review of how countries have implemented food security in developing countries.

The U.S. proposal, says a South American farm trade official, is aimed at “frustrating” the developing countries from arriving at a simple and effective solution that would enable them to continue their public stockholding programmes without many hurdles. “The United States is interested in preserving the Uruguay Round rules but not address the issues raised by the developing countries in the Doha Round of trade negotiations that seek to address concerns raised by developing countries,” the official adds.

The G-33 group – with over 45 developing and least-developed countries – has brought the food security issue to the centre-stage at the WTO. Over the last two years, the G-33, led by Indonesia with China, India, Pakistan, the Philippines, Kenya, Nigeria, Zimbabwe, Bolivia, Cuba and Peru among others, has called for updating the external reference price based on 1986-88 prices to ensure that they can continue with their public stockholding programmes under what is called de minimis support for developing countries.

Following the G-33’s insistence on a solution for public stockholding programmes for food security, which became a make-or-break issue at the WTO’s Bali ministerial meeting, trade ministers had agreed on a decision “with the aim of making recommendations for a permanent solution.” The ministers directed their negotiators to arrive at a solution in four years.

Over the last six months, there has been little progress in addressing the core issues in the Bali package raised by developing countries, including food security. “We are deeply concerned that the Ministerial Decision on Public Stockholding for Food Security Purposes is getting side-lined,“ India told members at the WTO on July 2.

“In this and other areas, instead of engaging in meaningful discussion, certain members have been attempting to divert attention to the policies and programmes of selected developing country members,” says New Delhi, emphasising that “the issues raised are in no way relevant to the core mandate that we have been provided in the Bali Decisions.”

At a time when the industrialised countries want rapid implementation of the complex agreement on trade facilitation, their continued stonewalling tactics on the issues raised by developing countries has created serious doubts whether food security issue will be addressed in a meaningful manner at all.

“Credible disciplines for food security are vital for the survival of poor farmers in the developing countries who cannot be left to the vagaries of market forces and extortion by middlemen,” says Ambassador Dasgupta. “The delay in addressing food security will pose problems for millions of people below poverty who are dependent on public distribution programmes.”

Roberto Carvalho de Azevêdo (left) and Herminio Blanco are the two finalists in the race for WTO director-general. Credit: WTO and Pepe Ocadiz CC BY-SA 3.0

By Gustavo Capdevila
GENEVA, Apr 30 2013 (IPS)

The complicated challenge of invigorating the debilitated World Trade Organisation (WTO) and the multilateral trade system that it governs will fall, for the next four years and for the first time ever, to a Latin American.

The 159 member states of the WTO will choose between Roberto Carvalho de Azevêdo of Brazil and Herminio Blanco of Mexico, the two candidates for the post of director-general of the organisation who have weathered the complex selection process that began Dec. 1.

The decision between Azevêdo and Blanco will be known on May 8, but will not be formally announced until May 31. The current director-general, Pascal Lamy of France, will conclude his two consecutive terms of office that began in 2005, on Aug. 31, and his successor will take up the post on Sept. 1.

Lamy will be leaving unfinished the Doha Round of talks which he was instrumental in promoting in 2001, as EU Commissioner for Trade.

After eight years of leadership by Lamy, the multilateral system appears debilitated by the proliferation of bilateral and plurilateral trade agreements, encouraged mostly by industrialised nations.

Behind these failures in achieving a balanced opening of international trade flows is the reluctance of countries of the North to attend to the development needs of the countries of the South, a constant feature since the creation of the WTO in 1995.

The extent of the discord is clear at the present WTO negotiations aimed at achieving a modest agreement to keep up appearances at its next ministerial conference, to be held in Bali, Indonesia Dec. 3-6.

Industrialised countries are pushing for trade facilitation, such as increased speed and efficiency of border controls for trade goods. Developing nations fear that such an agreement will only increase their imports without benefiting their exports.

Longstanding demands, such as differential treatment for developing countries, a special trade regime for the Least Developed Countries (LDCs) and arrangements to mitigate the effects of the food crisis, have again fallen foul of stumbling blocks in the discussions on the draft Bali agreement.

The difficulties tripping up the trade negotiations have apparently not been reflected so far in the process of designating the new WTO director-general.

Seven other candidates from different countries were eliminated in earlier stages of the selection process. In the first phase, Alan John Kwadwo Kyerematen of Ghana, Anabel González of Costa Rica, Amina Mohamed of Kenya and Ahmad Hindawi of Jordan were deemed unlikely to command a consensus.

In the second stage, concluding Apr. 24, Mari Pangestu of Indonesia, Tim Groser of New Zealand and Taeho Bark of South Korea were held to have insufficient support.

But the two remaining candidates for heading up the WTO, Blanco and Azevêdo, are backed by two blocs, the industrialised and the developing countries, respectively, with opposing trade interests.

Blanco was educated at the University of Chicago, associated with the neoliberal economic ideas that predominated in a large part of the globe in the last few decades of the 20th century. He was part of the nucleus of this school of thought which governed the Institutional Revolutionary Party (PRI), and therefore Mexico, from 1985 to 2000.

But his most significant feature is his participation as chief negotiator, between 1990 and 1993, of the North American Free Trade Agreement (NAFTA), which came into effect Jan. 1, 1994.

Although he has no practical experience of WTO affairs, it is taken for granted that Blanco’s candidacy has the support of his NAFTA partners, the United States and Canada, and will benefit from the influence they can exert on the rest of the world.

For his part, Azevêdo has demonstrated his negotiating skills at the WTO, where he heads the Group of 20 developing nations, a coalition proposing the reversal of protectionist policies in agriculture applied by industrialised countries.

He won resounding victories for his country in two disputes before the WTO, one against U.S. cotton subsidies, and one against the EU for similar protectionism for sugar growers.

But above all, Azevêdo’s candidacy rests on Brazil’s foreign policy over the past decade, as an emerging nation together with Russia, India, China and South Africa in the BRICS bloc, and its openness to offering a helping hand to other developing countries on every continent.

Whoever is appointed will find a paralysed WTO, riven with dissensions that obstruct the reaching of understandings.

For instance, on Apr. 24 a panel of experts presented the report “The Future of Trade: The Challenges of Convergence”. The make-up of the panel, decided exclusively by Lamy, had been questioned by governments and NGOs.

During the presentation, Deborah James, of the Our World Is Not for Sale (OWINFS) network, objected that in spite of their WTO membership, there were not any representatives of LDCs on the panel, and only one African and one Latin American. The rest were almost all from developed countries and the business sector, while there was only one workers’ representative, she said.

“It seems that this report was actually drafted in large part by the Secretariat, and according to several panelists many of their comments were not well reflected” in the final text, James complained.

Sanya Reid Smith, also of the OWINFS network of NGOs and social movements, observed that “the report says that trade is a means, not an end, so presumably for developing countries, development is the end goal.

“So it is interesting then that the report explicitly says in a number of places that there should be ‘convergence of trade regimes,’ but it does not mention convergence of levels of development,” the activist said.

Jürgen Thumann, the president of BUSINESSEUROPE, an organisation representing 20 million companies in 35 countries, was annoyed by the interventions from the OWINFS representatives.

“These two young ladies – with blonde and black hair, I see from here – I would like to ask you to be a little bit more tolerant in the future and show a little bit more respect,” Thumann said.

James told IPS that Thumann’s comment showed BUSINESSEUROPE is intolerant of input from the public, as well as being sexist and ageist.

“His insulting tone epitomised the panel’s lack of transparency and non-inclusiveness,” she maintained.