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)

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.”

By Pascal Lamy
GENEVA, Aug 21 2013 (IPS)

On Aug. 31, I will be stepping down after eight years as Director-General of the World Trade Organisation (WTO).

We have lived through eight transformational years. We have seen the rise of China to number one world exporter, and significant progress in meeting the Millennium Development Goals. And developing countries now account for more than half of the world’s economic activity and more than half of global exports.

Pascal Lamy

But we have also seen challenges such as two food crises, the biggest financial and economic crisis since the 1930s, pandemics and natural catastrophes which have severely impacted the functioning of global production chains.

More than 100 years ago, the Spanish philosopher George Santayana said “those who cannot remember the past are condemned to repeat it”.

The founders of the global trading system took him at his word. They saw the merit in creating the system in part because they remembered the past so well.

They remembered U.S. congressman (Willis C.) Hawley and senator (Reed) Smoot, whose pictures I have in my office to remind me of who the real founders of the WTO were. And they remembered how their notorious protectionist act accelerated the downward spiral that led world trade to contract by two-thirds from 1929 to 1934.

A system for opening trade through international rules and within the principles of non-discrimination, transparency and predictability has provided us with an insurance policy against the kinds of policy excesses of the 1930s. And it has provided a platform for growth, development and poverty alleviation around the world.

Over time, the General Agreement on Tariffs and Trade (GATT) evolved into the World Trade Organisation, and the WTO itself has evolved in ways both large and small. Our dispute settlement system, unique in the field of international conflict resolution, has contributed to peacefully resolving trade differences.

The Aid for Trade Programme which we oversee has mobilised 200 billion dollars since it was launched in 2005. The organisation’s monitoring and surveillance capacity has helped to keep protectionism in check.

Trade has changed a great deal in the past ten years. Today, the patterns of trade, the actors involved with trade and the obstacles to trade are very different than they were a decade ago.

Global value chains have profoundly changed the way we trade. Whereas before we traded in goods, today we trade in tasks.

The fact that goods are increasingly made in the world rather than in any single country means we need to measure trade in value-added rather than gross terms to better understand how global value chains contribute to local economies and to help us devise more effective and realistic trade policies.

The actors have changed too. In 1980, China had one percent of the world’s exports; by 2011 the proportion was 11 percent. During that same time, South Korea more than tripled its share of global exports and Mexico doubled its share. For the first time in history, the South is responsible for more than half of the world’s economic activity and more than half of global exports. South-South trade now comprises 24 percent of world trade, double what it was in 2000.

Moreover, the emergence of powerful developing countries like China, Brazil, India, Mexico and Indonesia has altered the dynamics of multilateral negotiations; in trade, certainly, but elsewhere too including climate change.

These large and rapidly growing economies have also changed the way we think of developing countries. Are they rich countries with many poor people, or poor countries with many rich people?

In the past, trade negotiations were simpler: between rich countries, reciprocity was the template for negotiations while the main theme for poor countries was flexibility. Today, these lines have blurred and emerging countries have taken on greater commitments than ever before.

And the barriers that we encounter in trade today are very different from the standard tariff, the measure of choice for centuries because of its effectiveness in protecting producers. When one talks to businesses today, however, you quickly learn that tariffs are not the problem they find most onerous. Rather, they say the real difficulty is non-tariff measures.

Today, the barriers that exporters encounter are more likely to be of a regulatory nature pertaining to car emission limits, bank regulations, product and food safety standards or customs procedures.

While we can never predict anything with complete certainty, we are confident that these trends will continue into the future. As Santayana suggests, when charting a course for the future, history is among our best tools. Examination of the way that trade has changed in the last decade offers clues that can make navigating the future more manageable.

But history is a compass, not a roadmap or a GPS. History tells us what routes have been successful thoroughfares and which have been culs-de-sac. But it won’t identify every sharp turn or bump in the road.

We cannot foretell every economic shock or the impact of the next technological breakthrough. But we know there will be future economic turbulence and we know that tomorrow’s technological innovations will shape the trading environment of the future just as computer tablets, mobile telephony and satellite navigation influence the patterns of trade today.

(END/COPYRIGHT IPS)

Excerpt:

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.

By Pascal Lamy
GENEVA, Mar 4 2013 (IPS)

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)

Excerpt: