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:

As industrialised countries celebrate the World Trade Organisation’s Bali accord, the developing and the least-developed countries are forced to carry their battle to another day after securing only half-baked results and grandiose promises, said several trade ministers.

“While the agreements reached at Bali are important, it is important to ensure balance in the agreements,” said Rob Davies, South Africa’s trade minister. “We are of the view that there is structural imbalance in which the least-developed countries secured only best endeavor solutions while there is a binding agreement on trade facilitation,” Davies told IPS.

“The developing and least-developing countries secured only promises and best endeavor outcomes while agreeing to a comprehensive trade facilitation agreement,” said Kenya’s foreign minister Amina Mohamed.
In sharp contrast, the United States, the European Union, and other industrialised countries praised the Dec. 3-7 Bali Ministerial Conference for delivering the trade facilitation agreement.

“For the first time in its almost 20-year history, the WTO reached a fully multilateral agreement,” said U.S. Trade Representative Ambassador Michael Froman. “WTO Members have demonstrated that we can come together as one to set new rules that create economic opportunity and prosperity for our nations and our peoples.”

EU Trade Commissioner Karel De Gucht said the breakthrough at Bali in wrapping up the agreement on trade facilitation, and some deliverables in agriculture, were truly significant for the trade body.

“They take the WTO from the darkness of the multilateral era to [shine] light on multilateral action,” commissioner Gucht told reporters. The EU commissioner, however, admitted that there was a lack of balance in the overall Bali agreement.

For over 15 years, the industrialised countries and some advanced developing countries such as Hong Kong, Singapore, South Korea, Chile and Mexico have pushed hard for rapid liberalisation of customs procedures as part of the trade facilitation agreement so as to enable their exports to rapidly penetrate the developing and least developed countries without many hassles.

Proponents say the TF accord is a “good governance agreement” for customs procedures that industrialised countries want the developing and the poorest countries to implement in the coming days and years on a binding basis – failing which the latter can be hauled up at the WTO’s dispute settlement body.

In return, the developing countries managed to secure only best endeavor agreements on some issues of their concern in agriculture, such as an interim mechanism for public stockholding for food security, 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 another set of best endeavor improvement 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 final monitoring mechanism for special and differential treatment flexibilities.

Ironically, the Bali accord has weakened the language on issues raised by the developing and the poorest countries as compared to what was agreed in the WTO Hong Kong Ministerial Declaration in 2005.

The Kenyan foreign minister – who was the chair of the WTO General Council at the Hong Kong meeting – spoke about this puzzling change.

“What is the guarantee that the industrialised countries will implement the promises now made in the Bali agreement, particularly the provision of financial and technical assistance to implement the trade facilitation commitments, when they did not implement the commitments that were made eight years ago?” she remarked to IPS.

The Bali package included ten agreements. They comprise a binding agreement on trade facilitation and four descriptive items in agriculture such as general services, public stockholding for food security purposes, understanding the tariff rate quota administration provisions of agriculture products, and export competition.

In the development dossier, the Bali package offered non-binding best endeavor outcomes on preferential rules of origin for least developed countries, organisation for the waiver concerning preferential treatment to services, duty-free and quota-free market access, and a monitoring mechanism on special and differential treatment.

“We have only partly accommodated the concerns of the poorest countries,” said Davies. “The priority out to be on development and implementation issues in the coming days,” the South African minister emphasised.

India steadfastly pushed hard for strong language to ensure that the public stockholding programmes for food security continued without interruption until a permanent solution was arrived at.

Despite opposition from some major industrialised countries, including the United States, and also opposition from some developing countries, India managed to secure an interim mechanism that would last for four years during which there is a commitment to find a permanent solution. If there is no outcome within four years, the interim solution will be extended till members agree to a permanent outcome.

However, there are many notification and safeguard conditions that India and other developing countries will have to implement in order to avail themselves of the interim mechanism for food security. The U.S. said these conditions are essential to ensure that public stockholding programmes for food security in one country do not cause food insecurity in other countries.

The post-Bali work programme has admitted that there are glaring asymmetrical outcomes in the “Bali Package.” “Issues in the Bali Package where legally binding outcomes could not be achieved will be prioritised… Work on issues in the package that have not been fully addressed at this Conference will resume in the relevant Committees or Negotiating Groups of the WTO,” according to the Bali Ministerial Declaration.

In short, the developing and least-developed countries will have to carry their fight as there are no “legally binding outcomes” on any of their issues. That is the message from the Bali Ministerial meeting.

Also, the Bali meeting shall be remembered for the manner in which the developing and the poorest countries remained divided thanks to a grand strategy adopted by the Northern countries.

“Unless the developing world remains united it is highly unlikely that they will make progress on their issues in the next year, and this is even more true in a period when the North is going to push hard its new trade agenda,” said a trade minister who preferred not to be identified.

Second day of the WTO's ministerial conference in Bali, Indonesia. Credit: © WTO/ANTARA

By Ravi Kanth Devarakonda
BALI, Dec 4 2013 (IPS)

The World Trade Organisation’s ninth ministerial meeting at Bali, Indonesia has morphed into a fierce battle between the countries seeking social safety nets for hundreds of millions of poor people and those insisting on having advanced import-facilitation programmes in the developing countries on par with the industrialised nations.

These two narratives openly clashed at the plenary meeting Tuesday. “Millions of people depend on food security and millions of people are going to see what will be done on this vital issue,” Kenya’s foreign minister Amina Mohamed told IPS.

“In Africa there are millions of people who need food security and they are all waiting to see if the ministers in Bali are going to be sensitive as an international community to the livelihood and survival concerns of the most vulnerable people,” she said.

She urged the trade ministers “to come up with a solution to send a message that we heard what you are saying and that we want to support your issue and we acknowledge food security is a vital issue.”

India’s trade minister Anand Sharma said at the plenary meeting that “Food security is essential for four billion people and is an important goal of the millennium development goals.

“Food security is non-negotiable,” said Sharma, maintaining that India cannot accept the current interim mechanism because it fails to provide legal certainty. Public stockholding of food grains to ensure food security must be respected, he said.

In the run-up to the Dec. 3-6 Bali meeting, India along with a group of countries including Bolivia, Cuba, Kenya, South Africa, Venezuela and Zimbabwe pressed hard for improved rules to ensure that their public stockholding programmes for food security are not undermined by flawed trade rules.

The rules in the WTO agreement on agriculture were largely crafted by the European Union and the United States during the 1986-1994 Uruguay Round of negotiations. While the rules insulate mega subsidisers from clear discipline, they are somewhat indifferent to the concerns of countries with large populations. “Dated WTO rules need to be corrected,” Sharma said

More importantly, “any trade agreement must be in harmony with our shared commitment to eliminate hunger and ensure the right to food, which we accepted as part of the MDG agenda,” the Indian minister said.

At issue is whether developing countries like India and Kenya, which have massive public stockholding programmes, particularly procuring food grains from small and poor farmers at minimum support prices, should face legal challenges due to rules that are inconsistent with current global economic realities.

Over the last 15 years, prices of essential food items have gone up by over 250 percent.

India, along with the members of the G33 coalition of 46 developing countries led by Indonesia, made a strong case for changing some parameters in the current WTO agreement on agriculture.

The G33 called for updating the external reference price in the WTO agreement to reflect current global prices. The coalition also demanded that excessive inflation be taken into consideration when assessing the commitments.

The industrialised countries, led by the U.S. and EU, vehemently opposed the G33 demand last year, saying they would never allow any change in the rules. But after sustained sabre rattling and intimidating threats, the developed countries backed down from their initial position, promising a more flexible response.

They offered what is called a “Peace Clause” as part of the Bali package, which would provide temporary respite – for no more than four years – from any trade disputes. But although they agreed to continue the discussion, they did not commit to finding a permanent solution.

In sharp contrast to their opposition to food security proposals from the developing countries led by India and Kenya, the industrialised countries pressed for a brand-new agreement on trade facilitation, which involves comprehensive changes in the customs and import procedures. The new TF agreement calls for a number of changes in the previous WTO rules.

If concluded at Bali, the trade facilitation agreement would save around 441 billion dollars for developing countries, said the EU trade commissioner Karel de Gucht. In fact, the International Chamber of Commerce claimed that a WTO trade facilitation agreement would provide gains to the tune of one trillion dollars for the developing and least developed countries.

WTO director general Roberto Azevêdo has also made similar claims over the last three days to drum up support for the Bali package.

The trade facilitation agreement, said de Gucht, is “essentially a way to help many countries cut red tape at their borders, to become more efficient and effective traders.”

Although the industrialised countries have constantly repeated the mantra that trade facilitation would deliver enormous gains, they have so far offered no conclusive evidence to that end.

“Unfortunately, these figures depend on too many unjustifiable assumptions to be relied on,” wrote Jeronim Capaldo, an academic at the Global Development and Environment Institute at Tufts University near Boston in the U.S.

Inaccurate estimates and unclear gains have become the order of the day. “It is hard to see how uncertain gains and unequal distribution of costs [underlying trade facilitation estimates] can justify diverting resources to trade facilitation from badly needed policies such as the strengthening of social safety nets,” Capaldo argued.

The Bali meeting has brought the simmering conflict into the open. Participants described it as a clash of these two narratives – a food security-plus approach as proposed by India and other developing countries versus a TF-plus approach pushed by industrialised nations and some developing countries.

South Africa’s trade minister Rob Davies cautioned against the imbalances in the Bali package, particularly the tilt towards trade facilitation.

Kenya’s foreign minister Mohamed, meanwhile, said “I agree with India, and we all want a clear solution…I’m hopeful that language will be found to move forward on this issue… I don’t think it is in anybody’s interest to allow this ministerial to send the wrong signal that we cannot come together and that we cannot find language to satisfy millions of poor people. It is important we achieve a concrete result on this at the Bali meeting.”

The fate of the Bali package now hangs in the balance. In the next 72 hours, the world will know whether a solution could be found for addressing the food security issue – or whether the Bali package will be torpedoed due to unbridgeable differences.