By Roberto Azevêdo
GENEVA, Oct 15 2014 (IPS)

Regional trade agreements have grown very rapidly in recent years, and today the World Trade Organisation (WTO) has been notified that 253 are in force.

Clearly RTAs are not a new phenomenon.

In fact they pre-date the multilateral system because, in a sense, they were the seeds which grew into the General Agreement on Tariffs and Trade. Created in 1947, GATT was replaced in 1994 by the WTO.

WTO Director-General Roberto Azevêdo. Credit: WTO/CC BY SA-2.0

GATT was effectively a multilateralisation of the network of reciprocal trade agreements that countries had been pursuing for some years previously, so the system as we know it today has its roots in these agreements.

But of course things have changed in recent years. These agreements are not only more numerous, they are becoming increasingly complex.

While over 80 percent of RTAs notified are bilateral agreements, we are seeing more and more large regional agreements.

And we are seeing more agreements between countries in different regions, rather than between neighbours. This is very different from the pattern we saw during the GATT years.

In addition we see many more developing countries negotiating RTAs today.

This proliferation of agreements, each with their own sets of rules, has been dubbed a “spaghetti bowl” ­and I would certainly agree that we are seeing a significant increase in the level of complexity inside the agreements and in their relations with each other.

Most RTAs today make deeper and more extensive commitments, and have moved beyond commitments only in the sphere of market access for goods.“Although these initiatives [regional trade agreements] show that WTO members continue to liberalise trade, fragmentation of the trading system cannot be a substitute for the benefits of negotiating one set of rules for all”

A question which requires further consideration is how RTA provisions can be complementary to the multilateral trading system.

For some issues such as market access for goods and services, most RTAs grant their partners a higher level of market access than that available through the WTO.

For other issues, the picture is less straightforward.

Take, for example, RTA provisions on anti-dumping rules. In general, RTAs do not appear to have gone much further beyond where we are in the WTO today. Meanwhile, for issues such as investment, which is touched on by some RTAs, there are no WTO rules.

Another trend that has been noted in the past few years is negotiations that could potentially bring together a number of existing RTAs in so-called “mega-regional” negotiations.

While the trend to negotiate new RTAs continues, liberalising trade bilaterally or regionally is only a part of the picture.

As I have said many times,­ these initiatives are important for the multilateral trading system ­ but they cannot substitute it.

To start with, there are many big issues which can only be tackled in an efficient manner in the multilateral context through the WTO.

Trade facilitation was negotiated successfully in the WTO because it makes no economic sense to cut red tape or simplify trade procedures at the border for one or two countries. If you do it for
one country, in practical terms you do it for everyone.

Financial or telecommunication regulations cannot be efficiently liberalised for just one trade partner ­ so it is best to negotiate services trade-offs globally in the WTO. Nor can farming or fisheries subsides be tackled in bilateral deals.

Disciplines on trade remedies, such as the application of anti-dumping or countervailing duties, cannot significantly go beyond WTO rules.

The simple fact is that very few of the big challenges facing world trade today can be solved outside the global system. They are global problems demanding global solutions.

Another important aspect, leaving aside the content of the agreements, is their geographical scope. RTAs tend to exclude the smallest and most vulnerable countries. That is a major source of concern.

And, as our economies become more interconnected across borders and regions, RTAs do not – and probably cannot ­– fully address the gains from trade that can be obtained through global value chains.

Indeed, the strict, product-specific rules of origin that often accompany RTAs may actually be detrimental to value chains and therefore exclusionary for some. The smaller the country, the smaller the company, the smaller the trader, the bigger the likelihood that it will be excluded.

There is also concern that by creating different sets of rules and regulations, RTAs may be burdensome for traders and business. This is the point of complexity that is a concern for many.

Finally, although these initiatives show that WTO members continue to liberalise trade, fragmentation of the trading system cannot be a substitute for the benefits of negotiating one set of rules for all.

Ideally, this is where we should be putting our focus.

But in order to ensure this, one thing we clearly need to do is to deliver on what we agreed during the WTO word trade negotiations in Bali in December last year.

We are now halfway through an intensive consultation period to resolve the current impasse on this ­but, as things stand today, at this point in time we do not have a solution.

While this situation persists, I think the risk of disengagement increases exponentially. And this point is underlined by the proliferation of these other approaches.

For the sake of the multilateral system, and all those who stand to benefit from it, I think we have to find a solution to our current problems and put our work here at the WTO back on track. And we have to do it quickly. Time is not on our side. (END/IPS COLUMNIST SERVICE)

(Edited by Phil Harris)

Excerpt:

India’s decisive stand last week not to adopt the protocol of amendment of the trade facilitation agreement (TFA) unless credible rules were in place for the development issues of the South was met with  “astonishment” and “dismay” by trade diplomats from the North, who described New Delhi’s as “hostage-taking” and “suicidal”. 

It obviously came as something of a shock for representatives of Northern interests that any party should have the brass neck to place the interests of its constituents on the negotiating table.

After all, why should such banal issues as food security and poverty get in the way of a trade agenda heavily weighted in favour of the industrialised countries?New Delhi was demanding nothing more than credible global trade rules to ensure that “development,” including the challenges of poverty, in the countries of the South take precedence over the cut-throat mercantile business interests of the transnational corporations in the North

In fact, it was India’s firm stand for permanent guarantees for public stockholding programmes for food security that turned this trade agenda upside down at the World Trade Organization (WTO) last week, putting paid to the adoption of the protocol of amendment for implementation of the contested TFA for the time being.

India and the United States failed Thursday at the WTO to reach agreement on construction of a legally binding decision on a “permanent peace clause” that would further strengthen what was decided for public distribution programmes for food security in developing countries at the ninth ministerial meeting in Bali, Indonesia, last year.

The Bali decision on food security was one of the nine non-binding best endeavour outcomes agreed by trade ministers on agriculture and development.

For industrialised and leading economic tigers in the developing world, the TFA – which would harmonise customs procedures in the developing world on a par with the industrialised countries – is a major mechanism for market access into the developing and poorest countries.

The failure to reach agreement came during a closed-door meeting between India and the United States organised by WTO Director-General Roberto Azevedo in an attempt to break the impasse between the world’s two largest democracies.

New Delhi was demanding nothing more than credible global trade rules to ensure that “development,” including the challenges of poverty, in the countries of the South take precedence over the cut-throat mercantile business interests of the transnational corporations in the North.

Trade diplomats from several developing and poorest countries in Africa, South America, and Asia say India’s “uncompromising” stance will force countries of the North to return to the negotiating table to address the neglected issues in the Bali package concerning agriculture and development.

These issues are at the heart of unfinished business in the Doha Development Agenda (DDA) negotiations, the current round of trade negotiations aimed at further liberalising trade.

“It is important to keep the battle alive and India has ensured that the big boys cannot simply walk away with the trade facilitation agreement (TFA) without addressing the concerns on food security and other major issues,” one African official said.

The industrialised countries and some rising economic tigers in the developing world are unhappy that they cannot now take home the TFA without addressing the problem raised by India and other developmental issues in the Doha Development Agenda negotiations.

Many developing and poor countries in Africa and elsewhere were opposed to the TFA but they were “arm-twisted” and “muzzled” by the leading super powers over the last three months. African countries, for example, were forced to change their stand after pressure from the United States, the European Union and other countries.

The TFA was sold on false promises that it would add anywhere up 1 trillion dollars to the world economy. During the Bali meeting last year, the Economist of London, for example, gave two different estimates – 64 billion dollars and 400 billion dollars – as gains from the TFA, while the International Chamber of Commerce gave an astronomical figure of 1 trillion dollars without any rational basis.

“Those predicted gains [from TFA] evaporate when one looks at the assumptions behind them, such as the assumption that all countries in the world would gain the same amount of income from a given increase in exports,” said Timothy A. Wise and Jeronim Capaldo, two academics from the Global Environment and Development Institute at the U.S. Tufts University.

At one go, the TFA will provide market access for companies such as Apple, General Electric, Caterpillar, UPS, Pfizer, Samsung, Sony, Ericsson, e-Bay, Hyundai, Huawei and Lenova to multiply their exports to the poorest countries.

It would drive away scarce resources for addressing bread-and-butter issues in the poor countries and direct them towards creating costly trade-related infrastructure for the sake of exporters in the industrialised world.

Here are ten reasons why trade diplomats from the developing and poorest countries say India’s stand will bolster their development agenda:

1.  India’s stand on food security brings agriculture, particularly unfinished business in the DDA negotiations, back to centre-stage.

2.  The Doha trade negotiations were to have been concluded by 2005 but remain stalled because a major industrialised country put too many spanners in the negotiating wheel.

3.  Major industrialised countries have been cherry-picking issues from the DDA which are of interest to them while giving short shrift to core “developmental” issues.

4.  Issues agreed in the Doha negotiations, such as the ”July package” agreed on August 1, 2004, the Hong Kong  Ministerial Declaration of December 2005 and the un-bracketed understandings of the December 2008 Fourth Revised Draft Modalities for Agriculture, have all been pushed to the back burner because one major country does not want to live up to them.

5.  The Fourth Revised Draft Modalities for Agriculture provided an explicit footnote to enable the developing countries to continue with their public stockholding programmes for food security. That footnote was the result of sustained negotiations and a compromise solution among key WTO members such as the United States, the European Union, India, Brazil, Australia and China, but the United States refused to accept the footnote because of opposition from its powerful farm lobbies.

6.  Trade-distorting practices in cotton which are harming producers in Benin, Burkina Faso, Mali and Chad are supposed to be addressed “ambitiously”, “expeditiously” and “specifically” by the distorting countries in the North. But cotton is now being swept under carpet because a major industrialised country does not want to address the issue because of its farm programme.

7.  Trade facilitation was one of the Doha issues but not the main item of the agenda at all.  It was actually dropped from the Doha agenda in Cancun, Mexico, in 2003 and was brought back in 2004 due to pressure from the United States and the European Union. The core issues of the Doha agenda were agriculture, services and developmental flexibilities.

8.  A major industrialised country which pocketed several gains during the negotiations refuses to engage in “give-and-take” negotiations based on the above mandates and has turned the Doha Round upside down.

9.  Industrialised countries along with some developing countries have formed a coalition of countries willing to pursue what are called “plurilateral” negotiations, only to undermine the DDA negotiations which are multilateral and based on what is called a “single undertaking” (that is, nothing is agreed until everything is agreed). Currently, these countries are negotiating among themselves on services, expansion of information technology products and environmental goods even though these issues are being negotiated in the Doha Round.

10.  Delay in the adoption of protocol will pave way for a healthy debate to reinvigorate the multilateral trading system which is being undermined by those who created it in 1948. The developing and poor countries want credible and balanced multilateral trading rules to replace what was agreed over 25 years ago in order to continue their “developmental” programmes with a human face.

Herein lies the crux of the issue – are the major powers of the North prepared to go along with a global trading system that puts the interests of the majority of the world’s people before their own interests?

(Edited by Phil Harris)

A group of developing countries brought a tectonic shift at the World Trade Organization on Friday by turning the tables against the industrialised countries, when they offered a positive trade agenda to expeditiously arrive at a permanent solution for food security and other development issues, before adopting the protocol of amendment of the contested Trade Facilitation Agreement.

Bolivia, Venezuela, Cuba and India inflicted a huge blow on the dominant actors in global trade by refusing to join consensus on the protocol required for full implementation of the TFA that is being pushed through the WTO with carrots and sticks.

“This is unimaginable, that New Delhi would decide the fate of decisions at the WTO, which has been a preserve of the United States and the European Union for the last 50 years,” said a trade envoy from a Western country.The mismatch, in terms of progress, between the TFA on one side, and lack of credible movement in agriculture and development on the other, especially in arriving at a permanent solution for public stockholding programmes, has come into the open at various meeting in Africa and elsewhere

Only seven months ago, the industrialised countries were triumphant at the WTO’s ninth ministerial meeting in Bali, Indonesia, after having succeeded in clinching the TFA. At one go, that agreement would harmonise customs procedures in the developing world on a par with the industrialised countries. It would offer enhanced market access for companies in the rich and leading developing countries such as China, Korea, Hong Kong and Singapore.

According to former WTO Director-General Pascal Lamy, the TFA would cut tariffs in developing countries by 10 percent

The developing and poor countries, in return, were offered half-baked outcomes in the Bali package on agriculture and development, including an interim mechanism for public stockholding for food security with a promise of a permanent solution in four years, an agreement on general services in agriculture, transparency-related improvements in what are called tariff rate quota administration provisions, and most trade-distorting farm export subsidies and export credits.

The poorest countries, as part of the “development” dossier, secured a set of best endeavour promises concerning preferential rules of origin for exporting to industrialised countries, preferential treatment to services and services suppliers of least developed countries, duty-free and quota-free market access for least-developed countries, and a final monitoring mechanism for special and differential treatment flexibilities.

The TFA has witnessed perceptible progress since the Bali meeting, while other issues raised by developing and poor countries have taken a back seat at the WTO.  The mismatch, in terms of progress, between the TFA on one side, and lack of credible movement in agriculture and development on the other, especially in arriving at a permanent solution for public stockholding programmes, has come into the open at various meeting in Africa and elsewhere.

“Even seven months after Bali, we do not have the required confidence and trust that there will be constructive engagement on issues that impact the livelihood of a very significant part of the global population,” Indian Ambassador Anjali Prasadtold WTO’s General Council, which is the organisation’s highest decision-making body, during the ministerial meetings, on Friday.

Prasad said “the Trade Facilitation Agreement must be implemented on as part of a single undertaking including the permanent solution on food security.” Bolivia, Cuba and Venezuela took the same stand as India that all issues in the Bali package have to be implemented on the same and equal footing.

“Nothing is agreed until everything is agreed in the Bali package,” India’s trade minister Nirmala Sitaraman told the Financial Times last Friday.

Against this backdrop, India finally pulled the plug at the General Council meeting by saying that “the adoption of the trade facilitation protocol be postponed until a permanent solution on public stockholding for food security is found.”

Without the protocol, it is difficult to undertake rapid liberalisation of customs procedures as set out in the TFA.  Effectively, the Indian stand has put paid to an early adoption of the trade facilitation protocol.

“Today, we are extremely discouraged that a small handful of Members in this organization [WTO] are ready to walk away from their commitments at Bali, to kill the Bali agreement, to kill the power of that good faith and goodwill we all shared, to flip the lights in this building back to dark,” Deputy U.S. Trade Representative Ambassador Michael Punke lamented at the General Council meeting.

Trade envoys from Japan, the European Union and a group of 25 industrialised and developing countries slammed India for its move to oppose the TFA until all other issues, particularly, the permanent solution on food security, are resolved.

“But the TFA cannot be divorced from the other issues, including food security, which need to be converted into a binding agreements on a priority basis,” India’s former trade envoy Ambassador Jayant Dasgupta told IPS Saturday.

Dasgupta, who played a major role in providing the rationale for exempting public distribution programmes for food security from WTO disciplines, offered several reasons why food security must trump over the hard core mercantile trade agenda embodying the TFA.

First, he said, ” the debate on food security exposed the insensitivity of trade negotiators of some major industrialised countries (pushed by seven or eight transnational corporations that dominate global food trade) to address food security issues, arising out of static interpretations of trade rules framed many decades ago, when such problems were not conceived.”

Second, the objections raised by the United States, Canada and Australia in addressing food security  are unacceptable because they do not want to concede that there has been more than 650 percent inflation in India since 1986-88.

The WTO agreement on agriculture uses the references prices of 1986-88 for determining domestic support commitments. “Any economist worth his salt would be aghast at the idea that the calculation of subsidies should take place without reference to the current market prices but to market prices which existed twenty six to twenty eight years,” the former Indian trade official argued.

Third, the problem of public procurement and stockholding for food security purposes is resorted to by not only India, but China, Indonesia, Philippines, Pakistan, Egypt, Jordan, Nigeria, Kenya and many other developing countries.

“Because of the way the agreement on agriculture provisions is worded, most of these developing countries could be held to be in violation of the WTO rules,” said Dasgupta, pointing out that “India is articulating not only its own problems but also those of other developing countries.”

And fourth, “by seeking to push India into a corner on this extremely sensitive issue for many developing countries, the United States and its handful of supporters are seriously jeopardising the credibility of the WTO in terms of latter’s ability to correct its mistakes and to be sensitive to the needs of a majority of its developing members.”

The “fragility” of the World Trade Organization’s ‘Bali package’ was brought into the open at the weekend meeting in Sydney, Australia, of trade ministers from the world’s 20 major economies (G20).

The Bali package is a trade agreement resulting from the 9th Ministerial Conference of the WTO in Bali, Indonesia, in December last year, and forms part of the Doha Development Round, which started in 2001.

The G20 group of countries includes Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, United Kingdom, the United States, and the European Union.“… the Bali package is not just about trade facilitation and it also includes other issues ... That was the premise on which the developing countries agreed to trade facilitation and it has to be self-balancing” – South African trade minister Rob Davies

During the Sydney meeting, India and South Africa challenged the industrialised countries present to come clean on implementation of the issues concerning the poor countries in agriculture and development, according to participants present at the two-day meeting.

Ahead of the G20 leaders meeting in Brisbane, Australia, in mid-November, Sydney hosted the trade ministerial meeting to discuss implementation of the Bali package, particularly the trade facilitation agreement (TFA). The TFA has been at the heart of the industrialised countries’ trade agenda since 1996.

More importantly, Australia, as host of the November meeting, has decided to prepare the ground for pursuing the new trade agenda based on global value chains in which trade facilitation and services related to finance, information, telecommunications, and logistics play a main role.

“I said the Bali package is not just about trade facilitation and it also includes other issues,” South Africa’s trade minister Rob Davies told IPS Monday. “That was the premise on which the developing countries agreed to trade facilitation and it has to be self-balancing.”

Davies said that “the issue is that while South Africa doesn’t need any assistance, many developing and poor countries have to make investments and implement new procedures [because of the TFA]. What was there in the [TF] agreement is a series of best endeavour provisions in terms of technical and financial support together with best endeavour undertakings in terms of issues pertaining to least developed countries in agriculture and so on.”

Over the last few months, several industrialised countries, including the United States, have said that they can address issues in the Bali package concerning the poor countries as part of the Doha Single Undertaking, which implies that nothing is agreed until everything is agreed.

The specific issues that concern the interests of the least-developed countries include elimination of cotton subsidies and unimpeded market access for cotton exported by the African countries, preferential rules of origin for the poorest countries to export industrial products to the rich countries, and preferential treatment to services and services suppliers of least developed countries, among others.

“Even if there is an early harvest there has to be an outcome on other issues in the Bali package,” the South African minister argued.

There is lot of concern at the G20 meeting that if the trade facilitation protocol is not implemented by the end of this month, the WTO would be undermined.

“What we said from South Africa is to commit on the delivery of the outcomes in the Bali package,” Davies told IPS. “And a number of developing countries present at the meeting agreed with our formulation that there has to be substantial delivery of the outcomes in the Bali package.”

At the Sydney meeting, the industrialised countries pushed hard for a common stand on the protocol for implementing the Trade Facilitation Agreement by July 31. The TF protocol is a prerequisite for implementing the trade facilitation agreement by the end of July 2015.

The United States also cautioned that if there is no outcome by the end of this month, the post-Bali package would face problems. “Talking about post-Bali agenda while failing to implement the TFA isn’t just putting the cart before the horse, it’s slaughtering the horse,” U.S. Trade Representative Ambassador Michael Froman tweeted from Sydney.

The industrialised countries offered assurances that they would address the other issues in the Bali package, including public distribution programmes for food security, raised by developing countries. But they were not prepared to wait for any delay in the implementation of the TF agreement.

Over the last four months, the developing and poorest countries have realised that their issues in the Bali package are being given short shrift while all the energies are singularly focused on implementing the trade facilitation agreement.

The African countries are the first to point out the glaring mismatch between implementation of the TFA on the one hand and lack of any concerted effort to address other issues in the Bali package on the other. The African Union has suggested implementing the TFA on a provisional basis until all other issues in the Doha Development Agenda are implemented.

The industrialised countries mounted unprecedented pressure and issued dire threats to the African countries to back off from their stand on the provisional agreement. At the AU leaders meeting in Malibu, Equatorial Guinea, last month, African countries were forces to retract from their position on the provisional agreement.

However, South Africa, Tanzania, Zimbabwe and Uganda insisted on a clear linkage between the TFA and the Doha agenda.

India is fighting hard, along with other developing countries in the G33 coalition of developing countries on trade and economic issues, for a permanent solution to exempt public distribution programmes for food security from WTO rules in agriculture.

New Delhi has found out over the last six months that the industrialised countries are not only creating hurdles for finding a simple and effective solution for public distribution programmes but continue to raise extraneous issues that are well outside the purview of the mandate to arrive at an agreement on food security.

India announced on July 2 that it will not join consensus unless all issues concerning agriculture and development are addressed along with the TF protocol.

India’s new trade minister Nirmala Sitaraman, along with South Africa, made it clear in Sydney that they could only join consensus on the protocol once they have complete confidence that the remaining issues in the Bali package are fully addressed.

Against this backdrop, the G20 trade ministers on Saturday failed to bridge their differences arising from their colliding trade agendas.

The developing countries, particularly India, want firm commitment that there is a permanent solution on public distribution programmes for food security along with all other issues concerning development, an Indian official told IPS.